##### Table of Contents









UNITED STATES

SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549




---

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,
2001

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:

|                           |  |                        
|-------------------------- |  | -----------------------
|                           |  | Name of each exchange  
|Title of each class        |  | 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

The aggregate market value of the voting stock
held by non-affiliates of the registrant as of March 21,
2002:

Common Stock, $1.00 Par Value 
$271,258,847

The number of shares outstanding of the
issuers class of common stock as of March 21, 2002:

Common Stock, $1.00 Par Value 
39,097,791

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive proxy statement for
the Annual Meeting of Shareholders to be held May 2, 2002
are incorporated by reference into Part III.



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TABLE OF CONTENTS



|                |                                                                                              |  |  |  |  |  |  | 
|--------------- | -------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I         
|                | Item 1.Business                                                                             
|                | Item 2.Properties                                                                           
|                | Item 3.Legal Proceedings                                                                    
|                | Item 4.Submission of Matters to a Vote of Security Holders                                  
|PART II        
|                | Item 5.Market for Registrants Common Equity and Related Stockholder Matters                
|                | Item 6.Selected Financial Data                                                              
|                | Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations
|                | Item 7A.Quantitative and Qualitative Disclosure About Market Risk                           
|                | Item 8.Financial Statements and Supplementary Data                                          
|                | Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 
|PART III       
|                | Item 10.Directors and Executive Officers of the Registrant                                  
|                | Item 11.Executive Compensation                                                              
|                | Item 12.Security Ownership of Certain Beneficial Owners and Management                      
|                | Item 13.Certain Relationships and Related Transactions                                      
|PART IV        
|                | Item 14. Financial Statement Schedules, Exhibits and Reports on Form 8-K                    
|SIGNATURES     
|EXHIBIT 10.3.1 
|EXHIBIT 10.5   
|EXHIBIT 10.6   
|EXHIBIT 10.6.1 
|EXHIBIT 10.6.2 
|EXHIBIT 10.9.2 
|EXHIBIT 10.9.3 
|EXHIBIT 10.16.1
|EXHIBIT 10.16.2
|EXHIBIT 10.16.3
|EXHIBIT 18.18.3
|EXHIBIT 10.19.1
|EXHIBIT 10.20  
|EXHIBIT 21.1   
|EXHIBIT 23.1   



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##### Table of Contents



WESTCORP AND SUBSIDIARIES

TABLE OF CONTENTS

|         |  |                                                                                         |  |      |    | 
|-------- |  | --------------------------------------------------------------------------------------- |  | ---- | -- | 
|         |  |                                                                                         |  | Page
|         |  |                                                                                         |  |     
|PART I  
|Item 1.  |  | Business                                                                                |  |      | 1  | 
|Item 2.  |  | Properties                                                                              |  |      | 34 | 
|Item 3.  |  | Legal Proceedings                                                                       |  |      | 34 | 
|Item 4.  |  | Submission of Matters to a Vote of Security
	Holders                                    |  |      | 34 | 
|PART II 
|Item 5.  |  | Market for Registrants Common Equity and
	Related Stockholder Matters                  |  |      | 35 | 
|Item 6.  |  | Selected Financial Data                                                                 |  |      | 36 | 
|Item 7.  |  | Managements Discussion and Analysis of
	Financial Condition and Results of
	Operations |  |      | 38 | 
|Item 7A. |  | Quantitative and Qualitative Disclosure About
	Market Risk                              |  |      | 65 | 
|Item 8.  |  | Financial Statements and Supplementary Data                                             |  |      | 69 | 
|Item 9.  |  | Changes in and Disagreements With Accountants on
	Accounting and Financial Disclosure   |  |      | 69 | 
|PART III
|Item 10. |  | Directors and Executive Officers of the Registrant                                      |  |      | 70 | 
|Item 11. |  | Executive Compensation                                                                  |  |      | 70 | 
|Item 12. |  | Security Ownership of Certain Beneficial Owners
	and Management                         |  |      | 70 | 
|Item 13. |  | Certain Relationships and Related Transactions                                          |  |      | 70 | 
|PART IV 
|Item 14. |  | Financial Statement Schedules, Exhibits and
	Reports on Form 8-K                        |  |      | 71 | 



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##### Table of Contents






PART I




Item 1. Business

General

We are a diversified 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, also known as the
Bank. The Bank currently owns 84% of the capital stock of WFS.

Automobile
Lending Operations

Through WFS, we are one of the nations
largest independent automobile finance companies with
29 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
$825 billion of loan and lease originations during 2001. We
originate new and pre-owned automobile installment contracts
through our relationships with over 7,500 franchised and
independent automobile dealers nationwide. We originated
$4.9 billion of contracts during 2001 and managed a
portfolio of $8.2 billion at December 31, 2001.

Approximately 25% of our automobile contract
originations are for the purchase of new automobiles and
approximately 75% of our automobile contract originations are
for the purchase of pre-owned automobiles. Approximately 76% of
our automobile contract originations are with borrowers who have
strong credit histories, otherwise generally known as prime
borrowers, and approximately 24% of our automobile contract
originations are with borrowers who have overcome past credit
difficulties, otherwise generally known as non-prime borrowers.

We underwrite automobile 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 automobile contracts
pricing and structure to maximize risk-adjusted returns. As a
result of our sophisticated credit and underwriting systems, we
are able to earn attractive risk-adjusted returns on our
automobile contracts. For the year ended December 31, 2001,
the average net interest spread was 9.61% while net credit
losses averaged 2.27% for the same period.

We structure our business to minimize operating
costs while providing high quality service to our dealers. Those
aspects that require a local market presence are performed on a
decentralized basis in our 43 offices. All other operations
are centralized. We fund our purchases of automobile 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 of the
Bank. For long-term financing, we issue automobile contract
asset-backed securities. Since 1985, we have sold or securitized
over $24 billion of automobile contracts in 54 public
offerings of asset-backed securities, making us the fourth
largest issuer of such securities in the nation. The
relationship between WFS and our banking operations gives us a
competitive advantage relative to other independent automobile
finance companies by providing a significant source of liquidity
at a low cost and affording us the ability to enter the
automobile contract asset-backed securities market on an
opportunistic basis.

1



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The following table presents a summary of our
automobile contracts purchased:

|                               |              |                                 |           |           |  |      |           |           |  |   |           |           | 
|------------------------------ | ------------ | ------------------------------- | --------- | --------- |  | ---- | --------- | --------- |  | - | --------- | --------- | 
|                               |              |                                
|                               |              | For the Year Ended December 31,
|                               |              |                                
|                               |              | 2001                            |           | 2000      |  | 1999
|                               |              |                                 |           |           |  |     
|                               |              |                                
|                               |              | (Dollars in thousands)         
|New vehicles                   |              | $                               | 1,208,753 |           |  | $    | 1,028,394 |           |  | $ | 796,339   |          
|Pre-owned vehicles             |              |                                 | 3,654,526 |           |  |      | 3,190,833 |           |  |   | 2,543,807 |          
|                               |              |                                 |           |           |  |      |           |           |  |   |           |          
|                               | Total volume |                                 | $         | 4,863,279 |  |      | $         | 4,219,227 |  |   | $         | 3,340,146 | 
|                               |              |                                 |           |           |  |      |           |           |  |   |           |          
|Prime automobile contracts     |              | $                               | 3,675,351 |           |  | $    | 2,900,960 |           |  | $ | 2,313,573 |          
|Non-prime automobile contracts |              |                                 | 1,187,928 |           |  |      | 1,318,267 |           |  |   | 1,026,573 |          
|                               |              |                                 |           |           |  |      |           |           |  |   |           |          
|                               | Total volume |                                 | $         | 4,863,279 |  |      | $         | 4,219,227 |  |   | $         | 3,340,146 | 
|                               |              |                                 |           |           |  |      |           |           |  |   |           |          

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 automobile contracts. We have 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 our retail
and commercial banking divisions. We may also raise funds by
obtaining advances from the Federal Home Loan Bank, or FHLB,
selling securities under agreements to repurchase and utilizing
other borrowings. Our retail banking division serves the needs
of individuals and small businesses by offering a broad range of
products through 24 retail branches located throughout
California. Our commercial banking division focuses on small and
medium-sized businesses in Southern California. At
December 31, 2001, the total deposits gathered by both
banking divisions were $2.0 billion. Approximately 80% of
these accounts were demand deposits, money market accounts and
certificate of deposit accounts under $100,000 in principal,
which we believe represent a stable and attractive source of
funding.

We also invest deposits generated by the 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, which provides us with additional funding security
and also affords us greater flexibility to structure
securitizations with attractive terms. Net interest income from
bank operations totaled $45.7 million, $26.3 million
and $46.0 million for the years ended December 31,
2001, 2000 and 1999, respectively. Net interest income from bank
operations represented 10%, 21% and 32% of total net interest
income for us on a consolidated basis for the same respective
periods.

In January 1999, we closed our prime mortgage
lending operations. During the third quarter of 1999, we
completed the sale of our sub-prime mortgage lending operations
and sold the remaining $1.0 billion of mortgage servicing
rights that we held. During the fourth quarter of 1999, we
closed our mortgage loan servicing department and entered into
an agreement to sell the rights to service our remaining owned
mortgage loan portfolio, thereby completing our mortgage banking
exit strategy. At December 31, 2001, we owned
$373 million in single family and multifamily mortgage
loans that were originated through previous mortgage lending
activities.

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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,
|                        |                                     |                                
|                        |                                     | 2001                            |                        | 2000    |           | 1999      |           | 1998    |           | 1997     
|                        |                                     |                                 |                        |         |           |           |           |         |           |          
|                        |                                     |                                
|                        |                                     | (Dollars in thousands)         
|Loans originated:       |                                     |                                 |                        |         |           |           |           |         |           |           |         |           |           |           |         |           |           |           |         |          
|                        | Consumer loans:                     |                                 |                        |         |           |           |           |         |           |           |         |           |           |           |         |           |           |           |         |           |          
|                        |                                     | Automobile contracts(1)         |                        | $       | 4,863,279 |           |           | $       | 4,219,227 |           |         | $         | 3,340,146 |           |         | $         | 2,670,696 |           |         | $         | 2,285,279 |          
|                        |                                     | Other                           |                        |         | 6,691     |           |           |         | 12,888    |           |         |           | 15,586    |           |         |           | 9,645     |           |         |           | 52,080    |          
|                        |                                     |                                 |                        |         |           |           |           |         |           |           |         |           |           |           |         |           |           |           |         |          
|                        |                                     |                                 | Total consumer loans   |         |           | 4,869,970 |           |         |           | 4,232,115 |         |           |           | 3,355,732 |         |           |           | 2,680,341 |         |           |           | 2,337,359 | 
|                        | Mortgage loans:                     |                                 |                        |         |           |           |           |         |           |           |         |           |           |           |         |           |           |           |         |           |          
|                        |                                     | Existing property               |                        |         | 9,714     |           |           |         | 17,382    |           |         |           | 263,019   |           |         |           | 2,725,415 |           |         |           | 2,306,251 |          
|                        |                                     | Construction                    |                        |         | 12,318    |           |           |         | 14,718    |           |         |           | 11,969    |           |         |           | 18,721    |           |         |           | 17,078    |          
|                        |                                     | Equity                          |                        |         | 969       |           |           |         | 1,024     |           |         |           | 1,948     |           |         |           | 10,262    |           |         |           | 8,177     |          
|                        |                                     |                                 |                        |         |           |           |           |         |           |           |         |           |           |           |         |           |           |           |         |          
|                        |                                     |                                 | Total mortgage loans   |         |           | 23,001    |           |         |           | 33,124    |         |           |           | 276,936   |         |           |           | 2,754,398 |         |           |           | 2,331,506 | 
|                        | Commercial loans:                   |                                 |                        | 291,944 |           |           |           | 266,342 |           |           |         | 237,316   |           |           |         | 124,259   |           |           |         | 71,399    |          
|                        |                                     |                                 |                        |         |           |           |           |         |           |           |         |           |           |           |         |           |           |           |         |          
|                        |                                     |                                 | Total loans originated |         |           | 5,184,915 |           |         |           | 4,531,581 |         |           |           | 3,869,984 |         |           |           | 5,558,998 |         |           |           | 4,740,264 | 
|Loans purchased:        |                                     |                                 |                        |         |           |           |           |         |           |           |         |           |           |           |         |           |           |           |         |          
|                        | Mortgage loans on existing property |                                 |                        | 229     |           |           |           | 488     |           |           |         | 412       |           |           |         | 450       |           |           |         | 6,166     |          
|                        |                                     |                                 |                        |         |           |           |           |         |           |           |         |           |           |           |         |           |           |           |         |          
|                        |                                     |                                 | Total loans purchased  |         |           | 229       |           |         |           | 488       |         |           |           | 412       |         |           |           | 450       |         |           |           | 6,166     | 
|Loans sold:             |                                     |                                 |                        |         |           |           |           |         |           |           |         |           |           |           |         |           |           |           |         |          
|                        | Automobile contracts                |                                 |                        |         |           |           |           | 660,000 |           |           |         | 2,500,000 |           |           |         | 1,885,000 |           |           |         | 2,190,000 |          
|                        | Mortgage loans                      |                                 |                        | 3,382   |           |           |           | 3,394   |           |           |         | 502,157   |           |           |         | 2,884,073 |           |           |         | 1,974,423 |          
|                        |                                     |                                 |                        |         |           |           |           |         |           |           |         |           |           |           |         |           |           |           |         |          
|                        |                                     |                                 | Total loans sold       |         |           | 3,382     |           |         |           | 663,394   |         |           |           | 3,002,157 |         |           |           | 4,769,073 |         |           |           | 4,164,423 | 
|Principal reductions(2) |                                     |                                 | 2,572,665              |         |           |           | 1,126,520 |         |           |           | 679,224 |           |           |           | 670,310 |           |           |           | 440,607 |          
|                        |                                     |                                 |                        |         |           |           |           |         |           |           |         |           |           |           |         |           |           |           |         |          
|Increase in total loans |                                     | $                               | 2,609,097              |         |           | $         | 2,742,155 |         |           | $         | 189,015 |           |           | $         | 120,065 |           |           | $         | 141,400 |          
|                        |                                     |                                 |                        |         |           |           |           |         |           |           |         |           |           |           |         |           |           |           |         |          




|    |                                                                                    
|--- | -----------------------------------------------------------------------------------
|(1) | Includes automobile 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, we were formed as the holding company for Western
Thrift & Loan Association under the name Western Thrift
Financial Corporation. We later changed our name to Westcorp. In
1982, we acquired Evergreen Savings and Loan Association, a
California-licensed savings and loan association, which became
our wholly owned subsidiary. The activities of Western Thrift
& Loan Association were merged into Evergreen Savings and
Loan Association in 1982, and Evergreen Savings and Loan
Associations name was changed ultimately to Western
Financial Bank.

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 automobile finance activities of Western
Thrift & Loan Association were continued by the Bank. 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, which changed
its name to WFS Financial Inc. In connection with that
restructuring, the Bank transferred to WFS all assets relating
to its automobile finance division, including the automobile
contracts held on balance sheet and all interests in the excess
spread payable from outstanding securitization transactions. The
Bank also

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transferred 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, thereby making these companies
subsidiaries of WFS. In 1995, WFS sold approximately 20% of its
shares in a public offering.


On January 22, 2002, we filed a registration
statement with the Securities and Exchange Commission, also
known as the SEC, to provide our shareholders an exclusive
opportunity to purchase additional shares of stock through a
rights offering. The registration statement for this offering
became effective on February 11, 2002. Shareholders of
record as of the close of business on February 12, 2002
were distributed rights to purchase additional shares at a price
of $15.75 per share. For each share of common stock owned, the
shareholders received one right, and for each 11 rights, the
shareholder was entitled to purchase one share of common stock.
Rights were exercisable until March 4, 2002. Ernest S.
Rady, the Chairman of the Board of Directors of Westcorp,
exercised his rights and his right to oversubscribe.
Mr. Rady is the beneficial owner of approximately 68% of
our common stock. We raised a total of $51.3 million
through the issuance of 3.3 million additional common
shares.

On January 22, 2002, WFS filed a
registration statement with the SEC to provide its shareholders
an exclusive opportunity to purchase additional shares of stock
through a rights offering. The registration statement for this
offering became effective on February 11, 2002.
Shareholders of record as of the close of business on
February 12, 2002 were distributed rights to purchase
additional shares at a price of $18.00 per share. For each share
of common stock owned, the shareholders received one right, and
for each 5.7 rights, the shareholder was entitled to
purchase one share of common stock. Rights were exercisable
until March 4, 2002. The Bank exercised its basic
subscription right and its oversubscription right as part of
this offering. WFS raised a total of $110 million through
the issuance of 6.2 million additional common shares. At
the completion of this rights offering, the Bank held 84% of WFS.

The Bank and its subsidiaries are subject to
examination and comprehensive regulation by the Office of Thrift
Supervision, also known as the OTS, and the FDIC. It is further
subject to certain regulations of the Board of Governors of the
Federal Reserve System, also known as the FRS, which governs
reserves required to be maintained against deposits and other
matters. The Bank is also 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. WFS and certain other subsidiaries of the Bank are
further regulated in part by various departments or commissions
of the states in which they do business. Federal statutes and
regulations primarily define the types of loans that the Bank
and its subsidiary may originate.

Market and Competition

The automobile finance industry is generally
segmented according to the type of car sold (new versus
pre-owned) and the credit characteristics of the borrower
(prime, non-prime or sub-prime). Based upon industry data, we
believe that during 2001, prime, non-prime and sub-prime loan
originations in the United States were $550 billion,
$150 billion and $125 billion, respectively. The
United States captive automobile finance companies, General
Motors Acceptance Corporation, Ford Motor Credit Company and
Chrysler Credit Corporation account for approximately 40% 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 4% market share. Other market participants
include the other 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 to us automobile
contracts that meet our underwriting criteria. Our relationship
is fostered by the promptness with which we process and fund
automobile contracts, as well as the flexibility and scope of
the programs we offer. We purchase the full spectrum of prime
and non-prime automobile contracts secured by both new and
pre-owned vehicles.

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

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nations largest savings and loan
associations and other depository institutions are headquartered
or have branches in 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. In general, many commercial
banks are more sizable institutions with larger lending
capacities and depository services. We have differentiated
ourselves by providing high quality service, local relationship
management, prompt credit decisions, and competitive rates on
both loans and depository products.

Our Business Strategy

Our business objective is to maximize long-term
profitability by efficiently purchasing and servicing prime and
non-prime credit quality automobile 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, measured growth through our
	strong dealer relationships;                                            
|
| |  | price automobile 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 diverse
	funding sources, including positive operating cash flows; and               
|
| |  | record high quality earnings and maintain a
	conservative, well-capitalized balance sheet.                               



| |                                                                                  
| | ---------------------------------------------------------------------------------
| | Produce Consistent, Measured Growth Through
	Our Outstanding Dealer Relationships

Over the past five years, we have experienced a
compounded annual growth rate in automobile contract purchases
of 18%. We provide a high degree of personalized service to our
dealership 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.

Growth of originations is primarily through
increased dealer penetration. We intend to increase automobile
contract purchases from our current dealer base as well as
develop new dealer relationships. Prior to 1995, we originated
automobile 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
automobile 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 automobile
contract purchases through new dealer programs targeting high
volume, multiple location dealers. These programs focus on
creating relationships with dealers to achieve higher automobile
contract originations and improving efficiencies. We also
originate loans directly from consumers and purchase loans from
other finance companies on a limited basis. Additionally, we
continue to explore other distribution channels, including the
Internet. Recently, we acquired approximately a 10% interest in
DealerTrack Holdings, Inc., also known as DealerTrack, an
Internet business to business portal that brings together
finance companies with dealers. DealerTrack has signed up nine
finance companies and 13,500 dealers, and expects to have
15,000 dealers by the end of 2002. Currently, 20% of our
applications are derived from our relationship with DealerTrack.

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| |                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------
| | Price Automobile 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 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
automobile 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 automobile
contracts and for loss mitigation. In addition, we provide
credit and profitability incentives to our associates to make
decisions consistent with our underwriting policies by offering
bonuses based both on individual and office-wide performance.

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

|                           |  |                                 |       |      |  |      |       |      |  |      |       |   |  |  |       |   |  |  |       |  
|-------------------------- |  | ------------------------------- | ----- | ---- |  | ---- | ----- | ---- |  | ---- | ----- | - |  |  | ----- | - |  |  | ----- | -
|                           |  |                                
|                           |  | For the Year Ended December 31,
|                           |  |                                
|                           |  | 2001                            |       | 2000 |  | 1999 |       | 1998 |  | 1997
|                           |  |                                 |       |      |  |      |       |      |  |     
|Weighted average coupon(1) |  |                                 | 14.37 | %    |  |      | 14.93 | %    |  |      | 14.65 | % |  |  | 14.59 | % |  |  | 15.33 | %
|Interest on borrowings(1)  |  |                                 | 4.76  |      |  |      | 7.33  |      |  |      | 6.23  |   |  |  | 5.95  |   |  |  | 6.36  |  
|                           |  |                                 |       |      |  |      |       |      |  |      |       |   |  |  |       |   |  |  |       |  
|Net interest margins       |  |                                 | 9.61  |      |  |      | 7.60  |      |  |      | 8.42  |   |  |  | 8.64  |   |  |  | 8.97  |  
|Credit losses(2)           |  |                                 | 2.27  |      |  |      | 1.91  |      |  |      | 2.13  |   |  |  | 3.42  |   |  |  | 3.02  |  
|                           |  |                                 |       |      |  |      |       |      |  |      |       |   |  |  |       |   |  |  |       |  
|Risk-adjusted margins      |  |                                 | 7.34  | %    |  |      | 5.69  | %    |  |      | 6.29  | % |  |  | 5.22  | % |  |  | 5.95  | %
|                           |  |                                 |       |      |  |      |       |      |  |      |       |   |  |  |       |   |  |  |       |  




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

Create Operating Efficiencies
Through Technology and Best Practices

Since 1997, we have spent approximately
$40 million in new technology and we have evaluated 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 origination system which
	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
	automobile contracts;
|
| |  | custom designed proprietary scoring models that
	rank order the risk of loss occurring on a particular automobile
	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 loans from a high of
4.3% during the second quarter of 1998 to 2.8% during the fourth
quarter of 2001. We have

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substantially completed the implementation of our
legacy systems and major changes to business practices. We will,
however, continue to evaluate new technology and best practices
to further improve our operating efficiencies.


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

The Bank provides diverse, low-cost funds through
its retail and commercial banking divisions as well as its
ability to obtain advances from the FHLB, sell securities under
agreements to repurchase and utilize other borrowing sources.
These significant and diverse sources of funds provide liquidity
at a low cost to fund our automobile contract purchases and
allow us to opportunistically enter the automobile contract
asset-backed securities market. Cash flows from operations
provide an additional source of liquidity for us. For the year
ended December 31, 2001, we generated $180 million in
positive cash flows from our automobile operations. We maintain
a significant liquidity portfolio of cash and mortgage-backed
securities on our balance sheet, which totaled $2.1 billion as
of December 31, 2001. This liquidity portfolio provides us
with additional funding security and also affords us greater
flexibility to structure securitizations with attractive
features.

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

Presenting high quality earnings and maintaining
a conservative and well-capitalized balance sheet has been our
focus since our founding in 1972. We believe that this strategy
ensures success over the long-term rather than providing
extraordinary short-term results and is manifested by the
success that we have enjoyed over the past 29 years.
Components of this strategy include accounting for our
automobile securitizations as secured financings rather than
sales and maintaining solid allowances for credit losses.

Since March 2000, we have structured our
securitizations as secured financings. By accounting for our
automobile securitizations as secured financings, the automobile
contracts and notes issued remain on the balance sheet and the
earnings of the automobile contracts in the trust and the
related financing costs are reflected over the life of the
underlying pool of automobile contracts as net interest 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, 2001, the
RISA (net of tax) created from asset-backed securities issued
prior to April 2000 represented 4.2% of total equity. This
compares with a high of $181 million or 30% of equity in 1997.
We expect the RISA to be fully amortized or otherwise eliminated
by the end of 2002.

We maintain an allowance for credit losses for
both on and off balance sheet loans. Our on balance sheet
allowance for credit losses as a percentage of loans receivable
was 2.3% and 2.1% as of December 31, 2001 and 2000,
respectively. Our off balance sheet allowance for credit losses
as a percentage of outstanding automobile contracts sold through
securitizations was 3.9% and 4.2%, respectively.

At December 31, 2001, the Bank had a total
risk-based capital ratio of 11.86%, a Tier 1 risk-based capital
ratio of 8.49%, and a leverage ratio of 7.29%, compared to
well-capitalized regulatory requirements of 10.0%,
6.0% and 5.0%, respectively. Because of the Banks
well-capitalized status, it has no institution
specific liquidity or regulatory constraints on its operations.

Operations

Automobile
Lending

Locations

We currently originate automobile contracts
nationwide through 43 offices. Each office manager is
accountable for the performance of automobile contracts
originated in that office throughout the life of the automobile
contracts, including acquisition, underwriting, funding and
collection. We have two national service centers located in
California and Texas with functions including data entry and
verification, records management, remittance processing,
customer service call centers and automated dialers. We maintain
three

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regional bankruptcy and remarketing centers and
have a centralized asset recovery center located in California.
Our corporate offices are located in Irvine, California.


Business
Development

The business development representatives
responsibilities include improving our relationship with
existing dealers and enrolling and educating new dealers to
increase the number of automobile contracts originated. The
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
automobile contracts the dealer will sell to us. Due to the
non-exclusive nature of our relationship with dealers, they
retain discretion to determine whether to sell automobile
contracts to us or another financial institution. The business
development representative is responsible for educating the
dealers finance managers about the types of automobile
contracts that meet our underwriting standards. This education
process ensures that we 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 automobile contracts.

After this 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 ensuring that a significant number
of approved applications received from each dealer are actually
funded by us, ensuring that the type of automobile contract
received meets our underwriting standards, monitoring the
risk-based pricing of automobile contracts acquired and
reviewing the actual performance of the automobile contracts
purchased. To the extent that a dealer does not meet minimum
conversion ratio or lending volume standards, the dealer may be
precluded from sending us applications in the future. During the
past year, our dealer base declined from approximately 8,500 to
7,500, primarily as a result of us eliminating dealers that did
not meet our standards. Our increase in volume is the result of
funding more automobile contracts from dealers that meet our
standards. 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.

Underwriting and
Purchasing of Automobile Contracts

The underwriting process begins when an
application is faxed to our centralized data entry center or
sent to us via the Internet. Our data entry group enters the
applicant information from faxed applications into our front-end
underwriting computer system. Internet applications are
automatically loaded into our front-end system. Once the
application is in the front-end system, the system automatically
obtains credit bureau information on the applicant 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, which enables us to tailor contract
pricing and structure according to this 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 automobile contracts we purchase. In
addition to a credit score, the system highlights certain
aspects of the credit application which have historically
impacted the credit worthiness of the borrowers.

Credit analysts are responsible for properly
structuring and pricing deals to meet our risk-based criteria.
They review the information, structure and price of an
application and make a determination 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s credit experience and portfolio
performance, credit manager audit results and quality control
review results. Higher levels of approvals are required for
higher

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credit risk and are controlled by system driven
parameters and limits. System driven controls include limits on
interest rates, automobile contract terms, automobile contract
advances, payment to income ratios, debt to income ratios,
collateral values and low side overrides.


Once adequate approval has been received, the
computer system automatically sends a fax back to the dealer or
through the Internet with our credit decision, specifying
approval, denial or conditional approval based upon modification
to the structure, such as increase in down payment, reduction of
term, or the addition of a co-signer. As part of the approval
process, the system or the credit analyst may require that some
of the information be verified, such as income, employment,
residence or credit history of the applicant. 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 automobile contract to the appropriate office. The
funding group audits such documents for completeness and
consistency with the application, providing final approval and
funding of the automobile contract. A direct deposit is made or
a check is prepared and is promptly sent to the dealer for
payment. The dealers proceeds may include dealer
participation for consideration of the acquisition of the
automobile contract. The completed automobile contract file is
then forwarded to the appropriate record center for imaging.

Under the direction of the Credit and Pricing
Committee, the Chief Credit Officer oversees credit risk
management, sets underwriting policy, monitors automobile
contract pricing, tracks compliance to underwriting policies and
re-underwrites select automobile contracts. If re-underwriting
statistics are unacceptable, all monthly and quarterly
incentives are forfeited by the office that originated the
automobile contracts. Our internal quality control group reviews
automobile 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.

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

|               |       |                               |           |                      |  |      |           |                   |  |                   |           |           |  |   |           |           |  |  |       |       | 
|-------------- | ----- | ----------------------------- | --------- | -------------------- |  | ---- | --------- | ----------------- |  | ----------------- | --------- | --------- |  | - | --------- | --------- |  |  | ----- | ----- | 
|               |       |                               |           |                      |  |     
|               |       | Automobile Contract Purchases |           |                      |  |     
|               |       | For the Year Ended            |           |                     
|               |       | December 31,                  |           | At December 31, 2001
|               |       |                               |           |                     
|State          |       | 2001                          |           | 2000                 |  | 1999 |           | Managed Portfolio |  | Number of Dealers
|               |       |                               |           |                      |  |      |           |                   |  |                  
|               |       |                              
|               |       | (Dollars in thousands)       
|California     |       | $                             | 1,928,371 |                      |  | $    | 1,680,814 |                   |  | $                 | 1,375,877 |           |  | $ | 3,314,200 |           |  |  | 2,053 |      
|Arizona        |       |                               | 324,299   |                      |  |      | 277,217   |                   |  |                   | 196,935   |           |  |   | 517,134   |           |  |  | 270   |      
|Washington     |       |                               | 216,003   |                      |  |      | 186,078   |                   |  |                   | 166,760   |           |  |   | 345,768   |           |  |  | 337   |      
|Oregon         |       |                               | 196,292   |                      |  |      | 158,944   |                   |  |                   | 128,154   |           |  |   | 290,018   |           |  |  | 344   |      
|Florida        |       |                               | 184,289   |                      |  |      | 175,341   |                   |  |                   | 138,981   |           |  |   | 324,321   |           |  |  | 352   |      
|Texas          |       |                               | 181,651   |                      |  |      | 158,138   |                   |  |                   | 185,795   |           |  |   | 319,491   |           |  |  | 359   |      
|Ohio           |       |                               | 174,040   |                      |  |      | 165,860   |                   |  |                   | 103,615   |           |  |   | 305,416   |           |  |  | 413   |      
|North Carolina |       |                               | 138,956   |                      |  |      | 106,664   |                   |  |                   | 84,543    |           |  |   | 225,069   |           |  |  | 272   |      
|South Carolina |       |                               | 129,963   |                      |  |      | 91,246    |                   |  |                   | 57,315    |           |  |   | 196,855   |           |  |  | 165   |      
|Colorado       |       |                               | 123,788   |                      |  |      | 130,247   |                   |  |                   | 111,486   |           |  |   | 215,054   |           |  |  | 207   |      
|Nevada         |       |                               | 105,747   |                      |  |      | 101,311   |                   |  |                   | 90,521    |           |  |   | 194,480   |           |  |  | 100   |      
|Virginia       |       |                               | 99,056    |                      |  |      | 97,997    |                   |  |                   | 61,094    |           |  |   | 177,378   |           |  |  | 230   |      
|Illinois       |       |                               | 93,709    |                      |  |      | 76,020    |                   |  |                   | 62,755    |           |  |   | 150,947   |           |  |  | 211   |      
|Tennessee      |       |                               | 83,892    |                      |  |      | 68,955    |                   |  |                   | 52,128    |           |  |   | 138,983   |           |  |  | 157   |      
|Georgia        |       |                               | 82,352    |                      |  |      | 71,341    |                   |  |                   | 39,136    |           |  |   | 135,513   |           |  |  | 229   |      
|Utah           |       |                               | 77,321    |                      |  |      | 63,531    |                   |  |                   | 45,767    |           |  |   | 113,722   |           |  |  | 144   |      
|Idaho          |       |                               | 77,184    |                      |  |      | 48,639    |                   |  |                   | 36,649    |           |  |   | 111,331   |           |  |  | 115   |      
|Michigan       |       |                               | 67,905    |                      |  |      | 52,489    |                   |  |                   | 22,472    |           |  |   | 99,044    |           |  |  | 148   |      
|Missouri       |       |                               | 57,883    |                      |  |      | 64,372    |                   |  |                   | 46,456    |           |  |   | 106,682   |           |  |  | 149   |      
|Pennsylvania   |       |                               | 46,122    |                      |  |      | 39,317    |                   |  |                   | 28,831    |           |  |   | 79,676    |           |  |  | 138   |      
|Kentucky       |       |                               | 41,526    |                      |  |      | 34,658    |                   |  |                   | 23,603    |           |  |   | 66,183    |           |  |  | 105   |      
|Maryland       |       |                               | 41,286    |                      |  |      | 36,431    |                   |  |                   | 26,279    |           |  |   | 73,819    |           |  |  | 93    |      
|Wisconsin      |       |                               | 40,826    |                      |  |      | 37,439    |                   |  |                   | 24,839    |           |  |   | 64,219    |           |  |  | 99    |      
|Indiana        |       |                               | 36,739    |                      |  |      | 26,759    |                   |  |                   | 23,951    |           |  |   | 59,094    |           |  |  | 93    |      
|Alabama        |       |                               | 31,967    |                      |  |      | 49,053    |                   |  |                   | 45,706    |           |  |   | 75,707    |           |  |  | 96    |      
|New York       |       |                               | 29,801    |                      |  |      | 5,097     |                   |  |                   | 395       |           |  |   | 30,045    |           |  |  | 104   |      
|New Jersey     |       |                               | 28,280    |                      |  |      | 26,552    |                   |  |                   | 17,690    |           |  |   | 51,383    |           |  |  | 86    |      
|Massachusetts  |       |                               | 27,778    |                      |  |      | 22,126    |                   |  |                   | 25,131    |           |  |   | 47,898    |           |  |  | 64    |      
|Delaware       |       |                               | 26,173    |                      |  |      | 23,709    |                   |  |                   | 11,326    |           |  |   | 42,971    |           |  |  | 38    |      
|Oklahoma       |       |                               | 25,065    |                      |  |      | 16,318    |                   |  |                   | 13,974    |           |  |   | 35,537    |           |  |  | 37    |      
|New Mexico     |       |                               | 24,146    |                      |  |      | 9,469     |                   |  |                   | 15,089    |           |  |   | 32,784    |           |  |  | 30    |      
|Kansas         |       |                               | 21,533    |                      |  |      | 22,683    |                   |  |                   | 12,736    |           |  |   | 38,731    |           |  |  | 58    |      
|Mississippi    |       |                               | 19,691    |                      |  |      | 17,434    |                   |  |                   | 14,901    |           |  |   | 36,847    |           |  |  | 45    |      
|Minnesota      |       |                               | 18,240    |                      |  |      | 11,156    |                   |  |                   | 446       |           |  |   | 21,140    |           |  |  | 48    |      
|West Virginia  |       |                               | 11,930    |                      |  |      | 16,763    |                   |  |                   | 7,241     |           |  |   | 23,783    |           |  |  | 28    |      
|Connecticut    |       |                               | 11,508    |                      |  |      | 13,638    |                   |  |                   | 15,799    |           |  |   | 25,451    |           |  |  | 43    |      
|New Hampshire  |       |                               | 10,563    |                      |  |      | 7,157     |                   |  |                   | 4,125     |           |  |   | 15,350    |           |  |  | 36    |      
|Iowa           |       |                               | 9,228     |                      |  |      | 13,027    |                   |  |                   | 7,334     |           |  |   | 19,593    |           |  |  | 35    |      
|Wyoming        |       |                               | 6,918     |                      |  |      | 5,114     |                   |  |                   | 4,050     |           |  |   | 10,630    |           |  |  | 21    |      
|Nebraska       |       |                               | 5,248     |                      |  |      | 5,427     |                   |  |                   | 683       |           |  |   | 8,000     |           |  |  | 17    |      
|Rhode Island   |       |                               | 2,947     |                      |  |      | 2,642     |                   |  |                   | 3,304     |           |  |   | 5,953     |           |  |  | 15    |      
|South Dakota   |       |                               | 2,078     |                      |  |      |           |                   |  |                   |           |           |  |   | 1,708     |           |  |  | 7     |      
|Maine          |       |                               | 985       |                      |  |      | 2,054     |                   |  |                   | 897       |           |  |   | 2,399     |           |  |  | 7     |      
|Hawaii         |       |                               |           |                      |  |      |           |                   |  |                   | 5,377     |           |  |   | 2,575     |           |  |  |       |      
|               |       |                               |           |                      |  |      |           |                   |  |                   |           |           |  |   |           |           |  |  |       |      
|               | Total |                               | $         | 4,863,279            |  |      | $         | 4,219,227         |  |                   | $         | 3,340,146 |  |   | $         | 8,152,882 |  |  |       | 7,598 | 
|               |       |                               |           |                      |  |      |           |                   |  |                   |           |           |  |   |           |           |  |  |       |      

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Servicing
of Automobile Contracts

We service all of the automobile contracts we
purchase, both those held by us and those sold in
securitizations. The servicing process includes the routine
collection and processing of 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, which
incorporates behavioral scoring models and allows us to
continually seek 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 remittance processing center. To expedite the
collection process, we accept payments from borrowers through
automated payment programs including PC 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 being forwarded to a regional collections office, or
directly forwarding to a collection specialist in the regional
office for accelerated collection efforts as early as 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
automobile contract. We limit deferments to a maximum of three
over the life of the contract and rarely rewrite automobile
contracts.

If 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 generally
for 15 days, or longer if required by local law, to provide
the obligor the opportunity to redeem the automobile contract.
If after the redemption period the delinquency is not cured, we
write down the vehicle to fair value and reclassify the
automobile 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, any remaining deficiency balances are
then charged off. At December 31, 2001, repossessed
automobiles outstanding managed by us was $7.6 million or
0.09% of the total managed automobile contract portfolio,
compared with $6.2 million or 0.09% of the total managed
automobile contract portfolio at December 31, 2000.

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 an automobile
contract is charged off, all accrued interest is reversed. For
those accounts that are in Chapter 13 bankruptcy and
contractually past due 120 days, all accrued interest is
reversed and income is recognized on a cash basis. Additionally,
we mark down such automobile contracts to fair value and
reclassify them as non-performing accounts. 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. We also monitor payment plans on those
obligors who have filed for bankruptcy.

Retail
Banking

Our retail banking operations are conducted
through 24 branch offices located throughout California. At
December 31, 2001, the total deposits gathered by the
retail banking division were $1.8 billion compared to

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$2.0 billion at December 31, 2000. Due
to the limited number of branch offices, we have historically
focused on certificate of deposit accounts as the primary
product offered by the retail banking division.


Demand deposits and money market accounts
obtained through our retail banking operations totaled
$618 million at December 31, 2001 compared with
$460 million at December 31, 2000. At
December 31, 2001, demand deposits and money market
accounts represented 34% of our total deposits compared with 23%
at December 31, 2000. In addition, demand deposits, money
market accounts and certificate of deposit accounts under
$100,000 in principal represented approximately 80% of our total
deposit accounts.

Commercial
Banking

We focus our commercial banking operations in the
Orange, Los Angeles and San Diego County metropolitan areas,
operating through our Irvine headquarters office. 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
the Bank. Deposit products include money market, business
checking and certificate of deposit accounts delivered either
through direct contact or through cash management services. Loan
products include term loans, lines of credit, asset-based loans,
construction 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
Offer Rate, also known as LIBOR. Fixed rates are generally
limited to a one-year term or less.

Credit quality is managed by having each loan
reviewed for approval by a credit committee comprised of the
Banks President, Chairman of the Board, Board members and
our executives. In addition, account officers are directly
assigned to specific accounts to maintain close contact with the
customer. Such contact allows for greater opportunity to cross
sell products, as well as for observing and continually
evaluating the customer for potential credit problems.

At December 31, 2001, the commercial banking
division had $161 million in deposits compared with
$444 million at December 31, 2000. Commercial loans
outstanding totaled $85.3 million and $108 million at
December 31, 2001 and 2000, respectively.

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

|                                       |  |                                 |         |      |  |      |         |   |  |   |         |  
|-------------------------------------- |  | ------------------------------- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | -
|                                       |  |                                
|                                       |  | For the Year Ended December 31,
|                                       |  |                                
|                                       |  | 2001                            |         | 2000 |  | 1999
|                                       |  |                                 |         |      |  |     
|                                       |  |                                
|                                       |  | (Dollars in thousands)         
|Average balance  loans                |  | $                               | 152,251 |      |  | $    | 156,065 |   |  | $ | 99,495  |  
|Average balance  deposits             |  |                                 | 236,136 |      |  |      | 390,227 |   |  |   | 164,682 |  
|Interest income                        |  |                                 | 11,215  |      |  |      | 14,312  |   |  |   | 8,369   |  
|Interest expense                       |  |                                 | 8,713   |      |  |      | 21,460  |   |  |   | 6,895   |  
|Average interest rate earned on loans  |  |                                 | 7.37    | %    |  |      | 9.17    | % |  |   | 8.41    | %
|Average interest rate paid on deposits |  |                                 | 3.69    | %    |  |      | 5.50    | % |  |   | 4.19    | %

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.

Construction
Loans

On a limited basis, we originate construction
loans primarily for single family owner-occupied residences and
commercial real estate. These include loans for the acquisition
and development of unimproved property to be used for
residential and commercial purposes. The construction loan
portfolio generally consists of loans

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with terms ranging from six to twelve months with
fully indexed adjustable interest rates that range between 5%
and 11%. Advances are generally made to cover actual
construction costs and include a reserve for paying the stated
interest due on the loan.


Transactions with Related Parties

We believe that the transactions described herein
under the caption Transactions with Related Parties
have been on terms no less favorable to us than could be
obtained from unaffiliated parties, notwithstanding that the
transactions were not negotiated at arms length. However,
the transactions were approved by our entire Board of Directors
and the Boards of Directors of the Bank and WFS, including their
respective independent directors. Each of these transactions
described above eliminates upon consolidation. See
Supervision and Regulation.

Intercompany
Borrowings

WFS has various borrowing arrangements with the
Bank. A $125 million note and a $135 million note are
long-term, unsecured debt, while lines of credit are designed to
provide financing for WFS and its subsidiaries. These borrowings
are the only source of liquidity utilized by WFS outside of the
asset-backed securities market. These transactions eliminate
upon consolidation. The $125 million note was paid off in
the third quarter of 2001 in connection with the retirement of
the Banks 8.5% subordinated debentures.

WFS borrowed $125 million from the Bank
under the terms of the $125 million note. 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. WFS made paydowns on the $125 million note of
$11.2 million for the year ended December 31, 2001
compared with $32.7 million and $66.1 million for the
years ended December 31, 2000 and 1999, respectively,
without prepayment penalties. There was no outstanding balance
on the $125 million note at December 31, 2001 compared
with $11.2 million outstanding at December 31, 2000.
Interest expense on this note totaled $0.5 million,
$1.5 million and $5.4 million for the years ended
December 31, 2001, 2000 and 1999, respectively.

Additionally, WFS borrowed $135 million
under the terms of the $135 million note. WFS initially
borrowed $50 million under this note in 1997, and the
amount was increased to $135 million in 1999. According to
the terms of the amendment in 1999, the $135 million note
provided for two equal principal payments of $67.5 million
per year, commencing July 31, 2001. Under its original
terms, interest payments on the $135 million note were due
quarterly, in arrears, calculated at the rate of 9.42% per
annum. On January 1, 2002, the agreement was amended to
increase the principal amount from $67.5 million to
$150 million and to decrease the interest rate from 9.42%
to 8.875% annum. The principal is now all due and payable 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.
Pursuant to the terms of this note, WFS may not incur any other
indebtedness which 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 line of credit and (iii) indebtedness for
similar types of warehouse lines of credit. There was
$67.5 million outstanding on this note at December 31,
2001 compared with $135 million at December 31, 2000.
Interest expense on this note totaled $10.1 million,
$12.7 million and $9.3 million for the years ended
December 31, 2001, 2000 and 1999, respectively.

WFS also has a secured 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 the line of credit. The line of credit terminates on
December 31, 2004, although the term may be extended by WFS
for additional periods up to 60 months. There was
$374 million and $236 million outstanding on this line
of credit at December 31, 2001 and 2000, respectively. On
November 30, 2001, WFS entered into additional unsecured
lines of credit with the Bank. These lines permit WFS to draw up
to a total of $180 million to fund its initial deposits to
spread accounts on securitizations. The unsecured lines of
credit terminate on December 1, 2006, although the terms
may be extended by WFS for additional periods up to
60 months. At December 31, 2001, the amount
outstanding was $47.3 million.

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The lines of credit carry an interest rate based
on the one-month LIBOR and an interest spread of 125 basis
points and 75 basis points for the unsecured and secured lines,
respectively. The Bank has the right under the lines of credit
to refuse to permit additional amounts to be drawn on the lines
of credit if, in the Banks discretion, the amount sought
to be drawn will not be used to finance the purchase of
automobile contracts or other working capital requirements.
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 totaled
$8.9 million, $37.9 million, and $26.0 million
for the years ended December 31, 2001, 2000 and 1999,
respectively. The weighted average interest rates for the lines
of credit were 4.43%, 7.09% and 5.33% for the years ended
December 31, 2001, 2000 and 1999, respectively.

Short-Term
Investments

WFS also invests its excess cash at the Bank
under an investment agreement. The Bank paid WFS an interest
rate equal to the federal composite commercial paper rate on
this excess cash for the year ended December 31, 2001. On
January 1, 2002, the agreement was amended to revise the
interest rate to one-month LIBOR. The weighted average interest
rate was 3.80%, 6.58% and 5.23% for the years ended
December 31, 2001, 2000 and 1999, respectively. WFS held no
excess cash with the Bank under the investment agreement at
December 31, 2001 and 2000. Interest income earned by WFS
under this agreement totaled $4.9 million,
$1.2 million and $0.1 million for the years ended
December 31, 2001, 2000 and 1999, respectively.

Reinvestment
Contracts

Pursuant to a series of agreements to which WFS,
the Bank, WFAL2, among others, are parties, WFS has access to
the cash flows of each of the outstanding securitizations,
including the cash held in each spread account. WFS is permitted
to use that cash as it determines, including in the ordinary
business activities of originating automobile contracts.

In each securitization, 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, provided
certain conditions are met, 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
automobile contracts from WFS pursuant to the terms of the sale
and servicing agreements.

In accordance with this agreement, the Bank and
WFAL2 pledge property owned by each of us for the benefit of the
trustee of each trust and the surety. WFS pays 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. WFS paid the Bank $1.1 million, $0.7 million
and $0.6 million for the years ended December 31,
2001, 2000 and 1999, 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, also 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 is an eligible
investment for its related securitization. There was
$942 million and $832 million outstanding on the trust
reinvestment contracts at December 31, 2001 and 2000,
respectively.

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Tax Sharing
Agreement

We and our subsidiaries are parties to a tax
sharing agreement with WFS, the Bank and their subsidiaries,
pursuant to which a consolidated federal tax return is filed for
all of the parties to the agreement. Under the 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 that
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 which 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 tax
sharing agreement commenced on the first day of the consolidated
return year beginning January 1, 1994 and continues in
effect until the parties to the tax sharing agreement agree in
writing to terminate it. See Consolidated Financial
Statements  Note 20  Income Taxes.

Whole Loan
Sales

We purchased $1.4 billion of automobile
contracts from WFS in whole loan sales for each of the years
ended December 31, 2001 and 2000. In these transactions, we
paid cash for the amount of the principal outstanding on the
contracts plus a premium of $44.3 million and
$41.2 million for the years ended December 31, 2001
and 2000, 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 sales and the related gains were eliminated upon
consolidation. These contracts were subsequently securitized by
us and continue to be managed by WFS under the terms of the
transactions.

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. Net amounts paid to WFS
by us and our affiliates under these agreements were
$5.9 million, $2.4 million, and $6.2 million for
the years ended December 31, 2001, 2000 and 1999,
respectively. 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

Set forth below is a discussion of laws and
regulations that have a material effect upon our business. To
the extent, however, that any of the following discussion
describes statutory or regulatory provisions, the exact language
of the statute or regulatory provision qualifies any such
discussion. Furthermore, any future changes in the applicable
law or regulation or in the policies of various regulatory
authorities may have a material effect on our business.
Accordingly, we cannot assure you that we will not be affected
by any such further changes.

Westcorp

The
Savings and Loan Holding Company Act

We, by virtue of our ownership of the Bank, are a
savings and loan holding company within the meaning of the Home
Owners Loan Act, as amended, also known as HOLA. Savings
and loan holding companies and their savings association
subsidiaries are extensively regulated by federal laws.

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We are registered with the OTS, as a savings and
loan holding company. Therefore, we are subject to the OTS
regulations, examination and reporting requirements. The OTS may
take substantive action if it determines that there is
reasonable cause to believe that the continuation by a savings
and loan holding company of any particular activity constitutes
a serious risk to the financial safety, soundness, or stability
of that holding companys subsidiary savings association.
Thus, the OTS has oversight authority for all holding company
affiliates, not just us. Specifically, the OTS may, as necessary:



| |   |                                                                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | limit the payment of dividends by the Bank;                                                                                                                              
|
| |  | limit transactions between the Bank, the holding
	company and the subsidiaries or affiliates of either; and                                                              
|
| |  | limit any activities of the holding company that
	might create a serious risk that the liabilities of the holding
	company and its affiliates may be imposed on the Bank.

Any of these limits may be issued in the form of
regulations or a directive having the effect of a cease and
desist order.

Provisions of the HOLA also limit the type of
activities and investments in which the savings association
subsidiaries of a savings and loan holding company may
participate if the investment and/or activity involves an
affiliate of that savings associations subsidiary. In
general, savings associations are subject to Sections 23A
and 23B of the Federal Reserve Act in the same manner and to the
same extent as if the savings association was a member bank of
the Federal Reserve System, as well as regulations adopted by
the OTS. Section 23A of the Federal Reserve Act places
certain quantitative limitations on certain transactions between
a bank and its subsidiaries and an affiliate. The quantitative
limitations are based upon a percentage of the savings
associations capital stock and surplus. Transactions
covered by Section 23A of the Federal Reserve Act, include
transactions involving:



| |   |                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------
| |  | loans or extensions of credit to the affiliate;                                                                      
|
| |  | the purchase of or investment in securities
	issued by an affiliate;                                                 
|
| |  | the purchase of certain assets from an affiliate;                                                                    
|
| |  | the acceptance of securities issued by an
	affiliate as security for a loan or extension of credit to any
	person; or
|
| |  | the issuance of a guarantee, acceptance or letter
	of credit on behalf of an affiliate.                              

In addition, Section 23B requires that
transactions between a savings association subsidiary or its
subsidiary and an affiliate must meet certain qualitative
limitations. Section 23B requires that such transactions be
on terms that are at least as favorable to the bank or its
subsidiary as are the terms of the transactions with
unaffiliated companies.

Section 11 of the HOLA also specifically
prohibits a savings association subsidiary of the savings and
loan holding company from:



| |   |                                                                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | making a loan or extension of credit to an
	affiliate, unless that affiliate is engaged only in activities
	permitted to bank holding companies under Section 4(c) of
	the Bank Holding Company Act, or
|
| |  | purchasing or investing in the securities of an
	affiliate, other than a subsidiary of the savings association.                                                                                        

Under most circumstances, the above prohibitions
include a purchase of assets from an affiliate of the savings
association subsidiary that is made subject to the
affiliates agreement to repurchase the assets. The OTS
regulations exclude transactions between a savings association
subsidiary and its subsidiaries from the limitations of those
sections. This exclusion is consistent with the provisions of
Sections 23A and 23B of the Federal Reserve Act. However,
the OTS regulations also define certain subsidiaries to be
affiliates of the savings association subsidiary. Therefore,
such certain subsidiaries are subject to the requirements of
those

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sections of the OTS regulation. At the present
time, none of the Banks subsidiaries are within the
definition of an affiliate for purposes of the OTS regulations.


Savings association subsidiaries of holding
companies must also comply with the requirements of Federal
Reserve Act Sections 22(g) and 22(h), and Regulation O
of the Federal Reserve System with respect to loans to executive
officers, directors and principal shareholders, in the same
manner as member banks. Loans secured by a first lien on an
executive officers residence may be made without prior
approval of the board of directors of the financial institution.
As a matter of policy, we do not make loans to executive
officers, directors or principal shareholders.

The
Gramm-Leach-Bliley Act

The Gramm-Leach-Bliley Act, or GLBA, permits
insurance, banking and securities firms to be owned by a single
owner. GLBA generally prohibits unitary savings and loan holding
companies, like us, from being acquired by commercial companies.
We are permitted under GLBA, however, to continue to engage in
any business opportunities in which we had a right to engage
prior to the enactment of GLBA. In short, GLBA does not have any
effect on our business, and we do not expect that any of its
provisions will have an adverse effect on our operations or our
financial condition.

However, because GLBA liberalizes the activities
permitted to a bank holding company from those closely related
to banking to those activities that are financial in nature,
entities which are well capitalized but previously could not own
banks can now acquire a bank and become a bank holding company.
Thus, GLBA creates the potential for well capitalized entities
to enter into the banking business. As any such entity could
have become a unitary savings and loan holding company prior to
enactment of GLBA, we do not anticipate that this change in the
laws applicable to bank holding companies will have a
significant affect upon us or the Bank.

Under GLBA, savings associations have gained the
same treatment long applicable to banks and are now exempt from
registering as an investment company when using
common or collective trust funds to offer trust and other
fiduciary services to their customers. GLBA expanded the
exemption by amending Section 2(a)(5)(A) of the Investment
Company Act to include depository institutions
within the meaning of bank. That term encompasses
savings associations insured by the FDIC. GLBA also amended
Section 3(a)(2) of the Securities Act of 1933 to exempt the
interests in common or collective trust funds from registration
as securities.

GLBA also creates additional obligations on
financial institutions, such as the Bank and its subsidiaries,
regarding the safeguarding of nonpublic personal information of
their customers and creates affirmative duties to advise
customers as to what the financial institutions do with their
customers nonpublic personal information. The Office of
the Comptroller of the Currency, Board of Governors of the
Federal Reserve System, FDIC and the OTS, collectively with the
other agencies known as the Agencies, published final Guidelines
establishing standards for safeguarding customer information
that implement sections 5.01 and 505(b) of GLBA. The
Guidelines apply to, inter alia, bank holding companies such as
us, all savings associations whose deposits are FDIC insured,
and their subsidiaries, with certain exceptions. These
institutions must implement a comprehensive written information
security program that includes administrative, technical, and
physical safeguards appropriate for the institutions size
and complexity and the nature and scope of the
institutions activities. Although all parts of the
institution are not required to implement a uniform set of
policies, all elements of the institutions security
program must be coordinated. The rule sets forth certain
objectives and directives concerning development and
implementation of the information security program, including
the requirement that an appropriate report to the board of
directors, or a board committee, be made at least annually.
While an information security program pursuant to the Guidelines
must be implemented by July 1, 2001, there is a two year
grandfathering of agreements with service providers
that were entered into on or before March 5, 2001. This
rule also rescinds previously issued guidelines establishing
Year 2000 safety and soundness standards for insured depository
institutions since the Agencies concluded that such guidelines
are no longer necessary. We do not believe that these privacy
requirements will have a

17



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significant impact on the Bank or any of its
subsidiaries, because the Bank and its subsidiaries have
historically safeguarded the personal confidential information
of their customers as required by other federal statutes.


The
Bank

USA
Patriot Act

On October 26, 2001, President Bush signed
into law H.R. 3162, the Uniting and Strengthening
America by Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism Act of 2001, also known as the USA
Patriot Act. Title III of the Patriot Act, known as
The International Money Laundering Abatement and
Anti-Terrorist Financing Act of 2001, also known as the
Act, is intended to make it more difficult for terrorists to
launder money in the United States. The Act, which generally
applies to insured depository institutions as well as to the
U.S. branches and agencies of foreign banks, codified numerous
new and enhanced requirements for financial institutions to
detect and deter money laundering. Among other things, the new
law provides for the following:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The Act prohibits covered financial institutions
	from establishing, maintaining, administering, or managing
	correspondent accounts with shell banks, which are
	foreign banks that have no physical presence in any jurisdiction.                                                                                                                                                                                             
|
| |  | The Act requires the performance of heightened
	due diligence by banks and financial institutions in specific
	lines of business, such as private banking services for
	non-citizens, doing business with institutions that operate
	under offshore licenses, and correspondent account
	services for foreign banks operating in countries that do not
	observe international anti-laundering protocols.                        
|
| |  | The Act amends the Bank Secrecy Act to require
	all financial institutions to establish anti-money laundering
	programs. These must include, at a minimum: (i) the
	development of internal policies, procedures, and controls;
	(ii) the designation of a compliance officer; (iii) an
	ongoing employee training program; and (iv) an independent
	audit function to test programs. This provision is effective
	April 24, 2002.
|
| |  | The Act requires the Secretary of the Treasury to
	promulgate regulations effective no later than October 25,
	2002 that would substantially increase the identification and
	verification requirements for customers of financial
	institutions.                                                                                                                                                                                 
|
| |  | The Act requires the Secretary of the Treasury to
	promulgate regulations by February 23, 2002 to encourage
	cooperation among financial institutions, their regulators, and
	law enforcement officials.                                                                                                                                                                                                                          

We do not anticipate that compliance with the
provisions of the Act will have a material effect on our
business.

California
Savings Association Law and the Law of Other States

As a federally chartered institution, the
Banks investments and borrowings, loans, issuance of
securities, payments of interest and dividends, establishment of
branch offices and all other aspects of its operations are
subject to the exclusive jurisdiction of the OTS. In other
words, the OTS jurisdiction preempts the jurisdiction of the
California Financial Code or regulations of the California
Commissioner of Financial Institutions. The OTS adopted
regulations preempting state laws pertaining to the operations
of federal savings associations and their operating subsidiaries.

Federal
Home Loan Bank System

The GLBA amended the Federal Home Loan Bank Act
and made FLHB System membership optional. The Bank is,
nonetheless, a member of the FHLB of San Francisco and holds the
required minimum investment in the FHLB System. Moreover, the
Federal Housing Finance Board, also known as the Board, has
recently proposed that either investment in capital stock of the
FHLB System or payment of an annual membership fee should
satisfy the membership investment requirement. The option of a
membership fee might provide more flexibility for the Bank and
once the final regulation is issued, we will consider that
option.

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Insurance
of Accounts

The FDIC administers the Savings Association
Insurance Fund, also known as SAIF. Deposits with it are insured
through the SAIF to the maximum amount permitted by law, which
is currently $100,000.

For the year ended December 31, 2001, we
were required to pay insurance premiums of $0.9 million
compared with $1.2 million for the year ended
December 31, 2000. Every insured banking institution is
classified by the FDIC as well capitalized,
adequately capitalized, or
undercapitalized. These three classifications use
definitions substantially the same as the definitions adopted
with respect to the prompt corrective action rules
adopted by the regulatory agencies. See Prompt Corrective
Regulatory Action. Within each of these three
classifications, the FDIC has created three risk categories into
which an institution may be placed based upon the supervisory
evaluations of the institutions primary federal financial
institution regulatory agency and the FDIC. These three risk
categories consist of:



| |   |                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------
| |  | those institutions deemed financially sound;                                                                                          
|
| |  | those with demonstrated weakness that could
	result in significant deterioration of the institution and risk
	of loss to the FDIC; and
|
| |  | those which pose a substantial probability of
	loss to the FDIC.                                                                      

Each of these nine assessment categories for SAIF
insured banking institutions, such as the Bank, is assigned an
assessment rate. Under the regulations, a banking institution
may not disclose the risk-based assessment category to which it
has been assigned.

The FDIC may terminate the deposit insurance of
any insured depository institution, including the Bank, if it
determines after a hearing that the institution:



| |   |                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------
| |  | either has 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.

The FDIC also may suspend deposit insurance
temporarily during the hearing process for the permanent
termination of insurance if the institution has no tangible
capital. If insurance of accounts is terminated, the accounts at
the institution at the time of the termination, less subsequent
withdrawals, shall continue to be insured for a period of six
months to two years, as determined by the FDIC. Management is
not aware of any existing circumstances that could result in
termination of the Banks deposit insurance.

Brokered
Deposits

FDIC regulations provide for differential
regulation relating to brokered deposits based on capital
adequacy. Institutions are divided into categories of well
capitalized, adequately capitalized and
undercapitalized. Only well capitalized
institutions may continue to accept brokered deposits without
restriction, as well capitalized institutions are excluded from
the definition of deposit brokers.

At December 31, 2001, the Bank met the
capital requirements of a well capitalized association as
defined by the regulation. At that date, the Bank held
$56.3 million in brokered deposits.

Regulatory
Capital Requirements

The HOLA mandates that the OTS promulgate capital
regulations that include capital standards no less stringent
than the capital standards applicable to national banks. The
Bank exceeded the current minimum requirements for core capital,
tangible capital and risk-weighted capital as of
December 31, 2001 as more fully described below.

The HOLA and the OTS regulations require savings
associations to maintain core capital in an amount
not less than 3% of adjusted total assets. However, effective
April 1, 1999, all savings associations that do not

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have a Capital, Asset Quality, Management,
Earnings, Liquidity, Sensitivity toward market risk, also known
as CAMELS, rating system composite rating of 1 must
maintain core capital in an amount of not less than 4% of
adjusted total assets. The OTS capital regulations already
permit the OTS to impose a higher individual minimum capital
requirement on a case-by-case basis. The Bank is not currently
subject to this requirement.


The Banks core capital ratio at
December 31, 2001 was 7.29%. Core capital is defined in the
OTS capital regulations as including, among other things:



| |   |                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | common shareholders equity (including
	retained earnings);                                                                                             
|
| |  | a certain portion of the associations
	qualifying supervisory goodwill;                                                                                
|
| |  | noncumulative perpetual preferred stock and
	related surplus; and                                                                                       
|
| |  | capitalized servicing rights, also known as CSRs,
	and purchased credit card relationships, also known as PCCRs
	meeting certain valuation requirements.

All CSRs and PCCRs that are includable in capital
are each subject to a 90% fair value limitation. The maximum
amount of CSRs and PCCRs which can be included in core capital
and tangible capital may not exceed, in the aggregate, an amount
equal to 100% of the institutions core capital, with nonmortgage
servicing assets and PCCRs limited to 25% of core capital. All
other intangible assets, other than qualifying PCCRs, must be
deducted from core capital. At December 31, 2001, the Bank
held no CSRs or PCCRs.

A savings association must maintain
Tangible Capital in an amount not less than 1.5% of
adjusted total assets. Tangible Capital means core
capital less any intangible assets, including supervisory
goodwill, plus CSRs and PCCRs to the extent includable in core
capital as described above. At December 31, 2001, the
Banks tangible capital was 7.29%.

As of December 31, 2001, the Banks
core capital was $602 million, exceeding the Banks
regulatory requirement by $355 million. The Banks
tangible capital at December 31, 2001 was
$602 million, exceeding the applicable regulatory
requirement by $479 million.

The risk-based component of the capital standards
requires that a savings association have total capital equal to
8.0% of risk-weighted assets. The OTS risk-based capital
regulation provides that for assets sold as to which any
recourse liability is retained, including on balance sheet
assets related to the assets sold which are at risk, a savings
association must hold capital as a part of its risk-based
capital requirement equal to the lesser of:



| |   |                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------
| |  | the amount of that recourse liability; or                                                                       
|
| |  | the risk-weighted capital requirement for assets
	sold off balance sheet as though the assets had not been sold.

In addition, in the former instance, when
calculating the Banks risk-based capital ratio
(a) the value of those on balance sheet assets which are
subject to recourse, to the extent of that recourse liability,
also known as fully capitalized assets, is deducted from the
Banks total capital and (b) neither the risk-weighted
value of the asset sold off balance sheet nor the amount of the
fully capitalized assets is included in the Banks total
risk-weighted assets. The Banks risk-based capital
requirement at December 31, 2001 included $122 million
due to its recourse liability relating to trust financings,
including fully capitalized assets.

The Banks total risk-weighted assets are
determined by taking the sum of the products obtained by
multiplying each of the Banks assets and certain off
balance sheet items by a designated risk-weight. Before an off
balance sheet item can be assigned a risk-weight, it must be
converted to an on balance sheet credit equivalent amount.

Four risk-weight categories exist for on balance
sheet assets. The four risk-weighted categories are:



| |   |                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------
| |  | zero percent, which are generally cash and
	securities issued by or backed by the full faith and credit of
	the United States;
|
| |  | twenty percent, which are generally United States
	government-backed mortgage securities;                                     

20



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| |   |                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------
| |  | fifty percent, which are generally qualifying
	mortgage loans and mortgage-backed securities not within lower
	categories; and
|
| |  | one hundred percent, which are all other assets.                                                                              

Before a risk-weight category can be applied to a
consolidated off balance sheet item, the item must be converted
into a credit-equivalent amount by multiplying its face amount
by whichever of four credit conversion factors is appropriate.
Consider the following:



| |   |                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------
| |  | there is a one hundred percent conversion of
	direct credit substitutes and net assets sold under an agreement
	to repurchase;                
|
| |  | a fifty percent conversion factor for
	transaction-related contingencies and the unused portions of
	nonexempt loan commitments;              
|
| |  | a twenty percent conversion for trade-related
	contingencies, such as commercial letters of credit; and                                       
|
| |  | a zero percent conversion for the unused portion
	of exempt loan commitments and unused, unconditionally
	cancelable retail credit card lines.

Interest rate automobile contracts have special
credit equivalent amounts equal to the sum of their current
credit exposure plus their potential credit exposure. The
risk-weight category to be applied to these amounts in
determining the credit risk component would depend on the
obligor, but in no event would be higher than fifty percent
risk-weight. As of December 31, 2001, the Banks total
risk-weighted assets equaled $7.1 billion.

Total capital, as defined by OTS regulations, is
core capital plus supplementary capital, with supplementary
capital not to exceed 100% of core capital, less:



| |   |                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------
| |  | direct equity investments not permissible to
	national banks, subject to a phase-in schedule;          
|
| |  | reciprocal holdings of depository institution
	capital investments; and                                
|
| |  | that portion of land loans and nonresidential
	construction loans in excess of 80% loan-to-value ratio.

Supplementary capital is comprised of three
elements:



| |   |                                                             
| | - | ------------------------------------------------------------
| |  | permanent capital instruments not included in
	core capital;
|
| |  | maturing capital instruments; and                           
|
| |  | general valuation loan and lease loss allowance.            

During the year, we redeemed the remaining
balance of the subordinated debentures with an interest rate of
8.5% due in 2003. At December 31, 2001, there was one
issuance remaining with an outstanding balance excluding
discounts and issuance costs of $150 million and an
interest rate of 8.875% due in 2007. It is redeemable at our
option, in whole or in part, on or after August 1, 2004, at
100% of the principal amount being redeemed plus accrued
interest as of the date of redemption. Pursuant to the approval
from the OTS to treat those debentures as supplementary capital,
the amount of those debentures which may be included as
supplementary capital may not exceed one-third of the
Banks total capital. The amount of the 8.875% debentures
which may be included as supplementary capital will decrease at
the rate of 20% of the amount originally outstanding per year,
net of redemptions, commencing on August 1, 2002. The
Banks total capital at December 31, 2001 was
$841 million and its risk-based capital ratio was 11.86%.

The OTS has adopted an interest rate risk
component to its capital rules. The rule establishes a method
for determining an appropriate level of capital to be held by
savings associations subject to the supervision of the OTS, such
as the Bank, against interest rate risk, also known as IRR. The
rule generally provides that if a savings associations
IRR, calculated in accordance with the rule, exceeds a specified
percentage, the savings association must deduct from its total
capital an IRR component when calculating its compliance with
the risk-based capital requirement.

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The OTS has postponed the effective date as of
which an IRR component will be required to be deducted from a
savings associations capital to permit the OTS to review
the interest rate risk regulations currently being promulgated
by the other federal banking agencies for their respective
institutions. Even were the rule currently being applied, the
Bank would not be required to reduce its total capital by an IRR
component. The Bank does not anticipate being required to do so
during 2002.

Any savings association that fails any of the
capital requirements is subject to possible enforcement actions
by the OTS or the FDIC. These actions could include a capital
directive, a cease and desist order, civil money penalties, the
establishment of restrictions on an associations
operations, and the appointment of a conservator or receiver.
The OTS capital regulation provides that these actions,
through enforcement proceedings or otherwise, could require one
or more of a variety of corrective actions. The OTS must
prohibit asset growth by any institution that is in violation of
the foregoing minimum capital requirements, and must require any
such institution to comply with a capital directive issued by
the OTS. See Prompt Corrective Regulatory Action.

In summary, the Bank exceeded the current minimum
requirements for core capital, tangible capital and
risk-weighted capital as of December 31, 2001.

OTS
Regulations Regarding Assessments and Fees

The OTS has amended its assessments rule to more
accurately reflect the increased cost of supervising 3,
4 and 5 rated institutions. The OTS determines the
assessment for an individual savings association by adding
together three components reflecting the size, condition and
complexity of an institution. The OTS computes the size
component on which the basic assessment is based by multiplying
an institutions total assets by the applicable assessment
rate of the association. The institutions supervisory
condition would result in percentage increases for any savings
institution with a composite rating of 3, 4 or
5 in its most recent safety and soundness examination. The
OTS imposes the complexity component for a savings association
that manages over $1 billion in trust assets, services for
others loans aggregating more than $1 billion, or has
certain off-balance sheet assets aggregating more than
$1 billion. Under the previous rule, the OTS computed the
condition component at 25% of the size component for
3 rated institutions, and 50% of the size component for
4 and 5 rated institutions. Under the new regulation,
the OTS will compute the condition component at 50% of the size
component for 3 rated institutions, and 100% of the size
component for 4 and 5 rated institutions.

Interagency
Guidance Statement Regarding Asset-Backed
Securitization

The OTS, in conjunction with the other federal
banking regulatory agencies, issued a guidance statement
regarding asset securitization activities of banks and savings
associations which applies to the Bank and its subsidiary, WFS.
The guidance states that reported values for retained interest
assets should be reasonable, conservative and supported by
objective and verifiable documentation. Furthermore,
institutions engaged in asset securitization activities should
ensure that sufficient capital is held to support the risks
associated with those activities and that appropriate management
oversight and reporting is accomplished with respect to the
institutions asset securitization activities. The agencies
noted that on a case-by-case basis, additional capital may be
required to be held by those institutions whose asset
securitization activities are not in compliance with the
guidance provisions, or the retained interests may be classified
as loss and not permitted to be included in calculating the
institutions regulatory capital. The Bank and WFS believe
that WFS valuation of its retained interest assets and its
securitization activities as an operating subsidiary of the Bank
are in compliance with the guidance provisions. Moreover, as
WFS recent securitization activities have been accounted
for as secured financings or involved a sale of contracts
servicing released, WFS has substantially reduced and does not
anticipate creating in the future any non-cash gain on sale
residual interests, the valuation of which would be subject to
the guidance statement. The Bank and WFS believe that WFS
securitization activities to date, including the creation,
valuation and monitoring of our existing non-cash gain on sale
residual interests, have been conducted in full compliance with
the guidance statement.

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OTS
Regulation Regarding Asset Securitization

The OTS, along with the other federal banking
regulatory agencies, has adopted a new regulation pertaining to
the capital treatment of recourse, direct credit substitutes and
residual interests in asset securitizations. The new regulation
combines two proposals previously published for comment by the
OTS and the other agencies. The new regulation treats recourse
obligations and direct credit substitutes more consistently than
was previously the case. More importantly, the new regulation
modifies the capital rules for residual interests arising upon
the transfer of assets, including limiting the amount of
residual interests that are credit-enhancing interest-only
strips that may be included in calculating an institutions
capital. The new regulation requires all institutions to hold
dollar-for-dollar capital against their total
contractual exposure to loss resulting from residual interest
assets arising from the transfer of assets accounted for as a
sale. The regulation also requires that all residual interest
assets which are credit-enhancing interest-only strips in excess
of 25% of an institutions Tier 1 capital be deducted from
capital. Finally, the regulation reduces the amount of
risk-based capital an institution must hold for certain
positions in asset securitizations acquired by an institution,
based upon the credit rating given to such interests by a
nationally recognized statistical rating agency (such as
Standard & Poors Ratings Services, a division of
McGraw-Hill, Inc., also known as S&P, or Moodys
Investor Service, Inc., also known as Moodys).

The new regulation became effective on
January 1, 2002 for any transaction that closes on or after
that date. For transactions closed before that date, an
institution can elect to have the regulation apply to those
earlier transactions if it will result in a reduced capital
requirement for the institution. Conversely, if application of
the new regulation to transactions closed before January 1,
2002 will result in increased capital requirements, the affected
institution may defer application of the regulation to those
transactions until December 31, 2002. As the effect of the
regulation will be to increase the Banks capital
requirements, the regulation will not become applicable to
pre-January 1, 2002 transactions until December 31,
2002. We anticipate that by that date the Bank will realize
increased capital through retained earnings and possible capital
raising transactions. In addition, by that date the residual
interests we hold, both non-cash gain on sale and amounts due
from trusts, are expected to continue to amortize. Accordingly,
the amount of additional capital that the Bank may be required
to hold as of December 31, 2002, in order to remain a well
capitalized institution, is uncertain and dependent upon its
results of operations and other capital raising transactions it
may undertake by that date.

In addition, as the new regulation also provides
that lesser amounts of capital need be held by purchasers of
asset-backed securities, based upon the ratings assigned to such
securities by the nationally-recognized statistical rating
organizations, this may have the effect of increasing the
marketability of our asset-backed securities, thereby reducing
the yields we may be required to offer to complete future
securitizations.

Finally, the new regulation will not cause any
adverse capital effect upon us as a result of our
securitizations accounted for as secured financings which we
have undertaken commencing in early 2000 and consistently since
then. The regulation only applies to residual interests arising
from the transfer of assets or participations accounted for as
sales under GAAP. We do not anticipate, at this time, of
engaging in any securitizations accounted for as sales under
GAAP. Accordingly, whatever the effect of this regulation upon
us due to the residual interests we may hold at
December 31, 2002 which arose as a result of
securitizations closed prior to January 1, 2002 which were
accounted for as sales, that effect will be reduced each quarter
thereafter as the amount of those residual interests continue to
amortize. We anticipate that all of such residual interests will
have been fully amortized or otherwise eliminated by the end of
2002.

Proposed
Rules Affecting Regulations

On October 20, 2000, the Agencies published
for comment proposed regulations implementing the provisions of
the Fair Credit Reporting Act, also known as the FCRA, that
permit institutions to communicate consumer information to their
affiliates (affiliate information sharing) without incurring the
obligations of consumer reporting agencies. To allow financial
institutions to plan for and meet the requirements of the
privacy regulations, the Agencies provided this update on the
FCRA proposal, and to advise financial

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institutions to prepare their privacy notices in
accordance with the privacy regulations and the FCRA without
delaying compliance until publication of the final FCRA rule. We
believe that our privacy notices are in compliance with the
privacy regulations and the FCRA.


Interagency
Guidance Statement Regarding Sub-prime Lending
Programs

The OTS, along with the other agencies, has
adopted guidance pertaining to sub-prime lending programs.
Pursuant to the guidance, lending programs that provide credit
to borrowers whose credit histories reflect specified negative
characteristics, such as bankruptcies or payment delinquencies,
are deemed to be sub-prime lending programs. Pursuant to the
guidance, examiners may require that an institution with a
sub-prime lending program hold additional capital which ranges
from one and one-half to three times the normal capital required
for similar loans made to borrowers who are not sub-prime
borrowers, although institutions whose sub-prime loans are well
secured and well managed may not be required to hold additional
capital.

We cannot predict whether the Bank will be
required, following its next examination, to hold additional
capital with respect to those automobile contracts on its
consolidated balance sheet as to which the borrowers are
determined to be sub-prime borrowers as defined by the agencies.
To the extent that either the regulations, if adopted, or the
guidance, as implemented, require the Bank to raise and continue
to maintain higher levels of capital, our ability to originate,
service and securitize new and pre-owned automobile installment
contracts, especially as to which the borrower is determined to
be a sub-prime borrower, may be adversely affected. Any changes
to regulations that would negatively impact us may require us to
curtail our automobile contract purchasing activities or change
the relative percentage of types of automobile contracts we
originate, either of which could have a material adverse effect
on our financial position, liquidity and results of operations.

Prompt
Corrective Regulatory Action

Federal Regulators are required to take prompt
corrective action to resolve the problems of insured depository
institutions that fall below certain capital ratios. This action
must be accomplished at the least possible long-term cost to the
appropriate deposit insurance fund.

In connection with this action, each agency must
promulgate regulations defining the following five categories in
which an insured depository institution will be placed, based on
the adequacy of its regulatory capital level:



| |   |                                    
| | - | -----------------------------------
| |  | well capitalized;                  
|
| |  | adequately capitalized;            
|
| |  | undercapitalized;                  
|
| |  | significantly undercapitalized; and
|
| |  | critically undercapitalized.       

The critically undercapitalized level cannot be
set lower than 2% of total assets or higher than 65% of the
required minimum leverage capital level. An institutions
primary federal regulatory agency may treat an institution as if
it were in the next lower category if that agency determines,
after notice and an opportunity for hearing, that the
institution is in an unsafe or unsound condition, or that the
institution is engaged in an unsafe or unsound practice.

At each successive downward level of capital,
institutions are subject to more restrictions and regulators are
given less flexibility in deciding how to deal with the bank or
thrift. For significantly undercapitalized institutions, the
appropriate agency must:



| |   |                                                                   
| | - | ------------------------------------------------------------------
| |  | require the institution to sell shares in order
	to raise capital;
|
| |  | restrict interest rates offered by the
	institution; and          
|
| |  | restrict transactions with affiliates.                            

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For critically undercapitalized institutions, the
agency must require prior agency approval for any transaction
outside the ordinary course of business and the institution must
be placed in receivership or conservatorship, unless the
appropriate agency and FDIC make certain affirmative findings
regarding the viability of the institution, which must be
reviewed every 90 days.

Any insured institution, regardless of its
capitalization category, is precluded from making capital
distributions to anyone or paying management fees to any persons
having control of the institution if, after the transaction, the
institution would be undercapitalized. Any undercapitalized
institution must submit an acceptable capital restoration plan
to the appropriate agency within 45 days of becoming
undercapitalized.

The OTS, in conjunction with the other agencies,
adopted regulations defining the five categories of
capitalization and implementing a framework of supervisory
actions, including those described above, applicable to savings
associations in each category. The regulations provide that a
savings association will be deemed to be:



| |   |                                                                                                                                                                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | well capitalized if it has a total
	risk-based capital ratio of 10% or greater, a Tier 1, or core,
	risk-based capital ratio of 6% or greater, a leverage ratio of
	5% or greater and is not subject to any OTS order or directive
	to meet and maintain a specific capital level for any capital
	measure;                               
|
| |  | adequately capitalized if it has a
	total risk-based capital ratio of 8% or greater, has a Tier 1
	risk-based capital ratio of 4% or greater and has either:                                                                                                                                                                              
|
| |  | a leverage ratio of 4% or greater; or                                                                                                                                                                                                                                                                                                       
|
| |  | a leverage ratio of 3% or greater and is rated
	composite 1 under the CAMELS rating system in the most recent
	examination of the institution;                                                                                                                                                                                              
|
| |  | undercapitalized if it has a total
	risk-based capital ratio that is less than 8%, has a Tier 1
	risk-based capital ratio that is less than 4%, has a leverage
	ratio that is less than 4% or, if rated composite 1 under the
	CAMELS rating system in the most recent examination of the
	institution, has a leverage ratio less than 3%;
|
| |  | significantly undercapitalized if it
	has a total risk-based capital ratio that is less than 6%, a
	Tier 1 risk-based capital ratio that is less than 3% or a
	leverage ratio that is less than 3%; and                                                                                                                                   
|
| |  | critically undercapitalized if it has
	a ratio of tangible equity to total assets that is equal to or
	less than 2%.                                                                                                                                                                                                                      

At December 31, 2001, the Bank met the
capital requirements of a well capitalized
institution, as its total risk-based capital ratio was 11.86%,
its Tier 1 risk-based capital ratio was 8.49% and its leverage
ratio was 7.29%.

Loans to One
Borrower

Under the HOLA, the loans to one borrower
limitations for national banks apply to all savings associations
in the same manner and to the same extent as they do to national
banks. Thus, savings associations generally are not permitted to
make loans to a single borrower in excess of 15% to 25% of the
savings associations unimpaired capital and unimpaired
surplus, depending upon the type of loan and the collateral
provided therefore. In addition, further restrictions on a
savings associations loans to one borrower authority may
be imposed by the OTS if necessary to protect the safety and
soundness of the savings association. At December 31, 2001,
15% of the Banks unimpaired capital and unimpaired surplus
for loans to one borrower purposes was $126 million. The largest
amount outstanding at December 31, 2001 to one borrower and
related entities was $16.0 million.

Equity Risk
Investment Limitations

The Bank generally is not authorized to make
equity investments other than investments in subsidiaries. A
savings association may not acquire a new subsidiary or engage
in a new activity through an existing subsidiary without giving
30 days prior notice to the OTS and the FDIC. In addition,
a savings association

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must conduct the activities of the subsidiary in
accordance with the regulations and orders of the OTS. Under
certain circumstances, the OTS also may order a savings
association to divest its interest in, terminate the activities
of, or take other corrective measures with respect to, an
existing subsidiary.


Qualified Thrift
Lender Test

A Qualified Thrift Lender, also known as QTL,
test is included in the HOLA. An association that fails to
become or remain a QTL must either:



| |   |                                                                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | convert to a bank subject to the banking
	regulations; or                                                                                                                                                                                                           
|
| |  | be subject to severe restrictions, including
	being forbidden to invest in or conduct any activity that is not
	permissible to both a savings association and a national bank,
	and certain other restrictions on branching, advances from its
	FHLB, and dividends.

For a three year period after an association
fails to meet its QTL requirements, the association is forbidden
from retaining any investment or continuing any activity not
permitted for a national bank and must repay promptly all FHLB
advances. In addition, companies that control savings
associations that fail the QTL test must, within one year of the
failure, become a bank holding company subject to the Bank
Holding Company Act.

Under the existing QTL requirements, a savings
associations qualified thrift investments must
equal not less than 65% of the associations
portfolio assets measured on a monthly basis in nine
of every twelve consecutive months. Savings associations have
the option of substituting compliance with the Internal Revenue
Code, also known as IRC, Domestic Building and Loan
Association, also known as DBLA, test for compliance with
the amended QTL requirements. Qualified thrift investments
include:



| |   |                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------
| |  | all loans or mortgage-backed securities held by
	an association which are secured or relate to domestic
	residential or manufactured housing;
|
| |  | investments in educational, small business,
	credit card, and credit card account loans; and                                                 
|
| |  | FHLB stock and certain obligations of the FDIC
	and related entities.                                                                        

Certain other investments are included as
qualified thrift investments, but are limited to 20% of an
associations portfolio assets, including:



| |   |                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------
| |  | 50% of residential mortgage loans sold by an
	association within 90 days of their origination;                                                
|
| |  | investments in subsidiaries which derive at least
	80% of their revenue from domestic residential or manufactured
	housing;                   
|
| |  | subject to certain limitations, 200% of
	investments relating to starter homes or housing and
	community facilities in credit-needy areas;
|
| |  | consumer loans in the aggregate of not more than
	20% of portfolio assets; and                                                                
|
| |  | FHLMC and FNMA stock.                                                                                                                         

Portfolio assets are total assets less goodwill
and other intangible assets, the value of the associations
facilities and the associations liquid assets, but not
over 20% of its total assets.

At December 31, 2001, the Banks
percentage of qualified thrift investments to portfolio assets
was 75.22%. We anticipate that the Bank will continue to remain
a QTL.

Dividend
Regulations

The OTS has adopted regulations for determining
if capital distributions of a savings association are permitted.
A capital distribution includes dividends to shareholders,
redemptions or repurchases of equity or debt and any transaction
charged against the Banks capital accounts if it was not
well capitalized. In general, capital distributions are limited
to the Banks net income for the year to date plus retained
net income for the

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##### Table of Contents



preceding two years. 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. The Bank needs to file prior notice
30 days before a proposed capital distribution because it
is a subsidiary of a savings and loan holding company.


However, the Bank is also subject to certain
limitations on the payment of dividends by the terms of the
indenture for its 8.875% debentures. Those limitations are more
severe than the OTS capital distribution regulations. Under the
most restrictive of those limitations, the greatest capital
distribution that the Bank could currently make is
$136 million. We received dividends from the Bank during
2001 in the aggregate amount of $57.1 million.

Community
Reinvestment Act

Congress passed the Community Reinvestment Act,
also known as CRA, to encourage each financial institution to
help meet the credit needs of the communities it serves,
including low to moderate income neighborhoods. The CRA, as
amended and supplemented by applicable regulations, establishes
certain performance standards under which the Bank is to be
examined. Periodically, the OTS reviews the Banks
performance and publishes a Community Reinvestment Act
Performance Evaluation.

Following the Banks most recent scheduled
examination in February 2001, it received an updated performance
evaluation of satisfactory.

Effective July 1, 2001, the Agencies
published final rules to implement the CRA sunshine provisions
of section 48 of the Federal Deposit Insurance Act. These
provisions require insured depository institutions, and
affiliates of insured depository institutions, among others,
that are parties to certain agreements that are in fulfillment
of the Community Reinvestment Act of 1977 to make the agreements
available to the public and the appropriate agency and file
annual reports concerning the agreements with the appropriate
agency. The rule identifies the types of written agreements that
are covered by section 48, also known as the Covered Agreements,
and defines many of the terms used in the statute. The rule also
describes how the parties to a Covered Agreement must make the
agreement available to the public and the appropriate agencies
and explains the type of information that must be included in
the annual report filed by a party to a Covered Agreement.

Classification
of Assets

Insured institutions are required to classify
their own assets and to establish general valuation allowances
(reserves) where appropriate. Assets classified as
substandard or doubtful may be reviewed by the OTS examiner and
valuation allowances may be required to be increased subject to
review by the OTS Regional Director. For the portion of assets
classified as loss, the OTS permits 100% of the amount
classified to be charged off or the establishment of a specific
valuation allowance. As of December 31, 2001, the Bank had
established allowances for loan and real estate losses of
$143 million.

Investment and
Lending Powers

Pursuant to the Interagency Guidelines for Real
Estate Lending Policies, the Bank is required to have lending
policies consistent with the guidelines. The Banks
standards are consistent with the supervisory limitations. In
addition, the OTS and the other agencies have adopted uniform
real estate appraisal guidelines. Those guidelines require the
board of directors of financial institutions to adopt appraisal
and evaluation programs, which the Bank has done.

Federal savings associations can make total loans
secured by business or agricultural real estate in amounts up to
400% of capital. They can also make additional secured and
unsecured loans to businesses and farms in total amounts up to
20% of total assets. However, amounts in excess of 10% of assets
may only be used for small business loans. The OTS
also no longer aggregates commercial loans made by a savings
associations service corporation with commercial loans
made by the savings association and its operating subsidiaries
for purposes of the statutory 10% of assets limitation.

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The OTS has also amended its regulations to
clarify that a federal savings association may act as guarantor
under Section 5(b)(2) of HOLA. In addition, the OTS
liberalized its restriction on suretyship and guaranty
agreements under Section 5(b)(2). The OTS also clarified
that a federal savings association may issue letters of credit
and may issue other independent undertakings as are approved by
the OTS subject to certain statutory restrictions. The Bank has
not engaged in any such agreements.

Pass-Through
Investments

A federal savings association may invest in
entities, such as limited partnerships and mutual funds that
hold only assets, and engage only in activities, permissible for
federal savings associations. Loans that a savings association
makes to an entity in which it has made a pass-through equity
investment will be subject to the loans to one borrower rule, as
are loans by a savings association to any third party. A
thrifts investment in its operating subsidiaries is not
subject to these restrictions. The Bank does not currently have
any pass-through investments.

Annual
Examinations

The OTS is required to conduct a full scope,
on-site examination of the Bank every twelve months. Its last
annual examination ended in March 2002.

FDIC Back-Up
Enforcement Authority

The FDIC has the statutory authority under FDICIA
to direct an insured institutions principal regulator to
take enforcement action. The FDIC can also take that action
itself either if the principal regulator fails to act timely, or
in an emergency situation.

Financial
Reporting

Insured institutions are required to submit
independently audited annual reports to the FDIC and the other
appropriate regulated agencies. These publicly available reports
must include:



| |   |                                                                                                                                                                                                                                                                                   
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | annual financial statements prepared in
	accordance with GAAP and other disclosure requirements, as
	required by the FDIC or the appropriate agencies; and                                                                                                                        
|
| |  | a report, signed by the chief executive officer
	and the chief financial officer or chief accounting officer of
	the institution which contains statements, attested to by
	independent auditors, about the adequacy of internal controls
	and procedures for financial reporting.

Insured institutions such as the Bank are
required to monitor these activities through an independent
audit committee.

Standards for
Safety and Soundness

The agencies must, either by regulation or
guidelines, provide standards for all insured depository
institutions and depository institution holding companies
relating to:



| |   |                                                           
| | - | ----------------------------------------------------------
| |  | internal controls, information systems and audit
	systems;
|
| |  | loan documentation;                                       
|
| |  | credit underwriting;                                      
|
| |  | interest rate risk exposure;                              
|
| |  | asset growth; and                                         
|
| |  | compensation, fees and benefits.                          

In addition, the federal banking regulatory
agencies are required to prescribe standards relating to asset
quality, earnings and stock valuation as they determine to be
appropriate.

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The OTS, in conjunction with the agencies, has
adopted a final regulation and Interagency Guidelines
Prescribing Standards for Safety and Soundness to meet the
amended FDICIA requirements. In general, the guidelines are
designed to identify emerging safety and soundness problems and
ensure that action is taken to address those concerns before
they pose a risk to the deposit insurance fund. The guidelines
call for each insured institution to have policies, procedures
and systems appropriate to its size and the nature of its assets
and liabilities. These policies must address the specific
criteria identified in the guidelines for each of the six items
identified above. The guidelines do not set any specific
numerical targets or minimum requirements.

If the OTS determines that a savings association
has failed to satisfy the safety and soundness standards called
for by the guidelines, the OTS may, upon requisite notice,
require the association to submit a compliance plan that sets
forth the steps it will take and the time frame required to
correct the deficiency. If the association fails to comply with
the OTS request, the OTS may then issue a notice of intent to
issue an order requiring that association to correct a safety
and soundness deficiency or to take or refrain from other
actions. In an appropriate case, the OTS may issue an immediate
order, subject to appeal by the association.

Taxation

Federal Income
Taxes

We file a calendar year consolidated federal
income tax return. 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 IRC 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. The repeal of
the reserve method is effective for tax years beginning after
December 31, 1995. Savings and loan associations are now
subject to the same tax laws regarding bad debt reserves as
banks. The Bank is considered a large bank for
federal income tax purposes and is required to use the specific
charge off method for deducting bad debts for federal income tax
purposes.

The tax reserves for bad debt which were added
after 1987 and which still exist as of the date of this change,
are required to be recaptured into income ratably over a period
of six years starting with the first taxable year after 1995.
However, savings and loan associations that meet the
residential loan requirement will be allowed to
defer the recapture of their reserves for up to two years. The
Bank met the residential loan requirement and, therefore,
deferred recapture of its reserves in 1996 and 1997. The tax
reserves related to pre-1988 additions to the reserve are not
required to be recaptured into income as a result of this
legislation. The total amount of the Banks post-1987
reserve that will be required to be recaptured into income is
$10 million. This amount differs from the amounts previously
reported in the financial statements due to the effects of
Internal Revenue Service adjustments to bad debt reserves in
their examinations of the 1993 through 1996 tax years. The
remaining balances required to be recaptured at
December 31, 2000 and 2001 are $5.0 million and
$3.3 million, respectively. We are required to recapture
$1.7 million into income for 2001 and each of the next two
years.

Prior to the new legislation discussed above, the
Bank, if it met certain criteria, was permitted to compute its
addition to its bad debt reserve on loans using one of the
following two methods: (i) the percentage of taxable income
method; or (ii) the experience method. The Bank has used
whichever method has provided the maximum tax deduction in the
past. A savings and loan association that utilized the
percentage of taxable income method is subject to recapture
taxes on such reserves if it makes certain distributions to its
shareholders. Dividends may be paid without the imposition of
any tax on the Bank if the amounts paid as dividends do not
exceed the Banks current or accumulated earnings and
profits as calculated for federal income tax purposes. Dividends
paid in excess of current and accumulated earnings and profits,
stock redemptions and other distributions with respect to stock,
are deemed to be made from the bad debt reserve for qualifying
real property loans, to the extent that this reserve exceeds the
amount that could have been accumulated under the experience
method. The amount of tax that would be payable upon any
distribution which is treated as having been made from the bad
debt reserve for qualifying real property loans is also

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deemed to have been paid from the reserve to the
extent thereof. Management does not contemplate making
distributions that will create taxable income, but assuming a
35% tax rate, distributions to shareholders which are treated as
having been made from the bad debt reserve for qualifying real
property loans could result in a federal recapture tax which is
approximately equal to one-half of the amount of such
distributions. Despite the new laws regarding tax bad debt
reserves, to the extent that the Bank has not recaptured its
reserves into income as discussed above and makes distributions
deemed to have been made from their remaining reserves, the Bank
would still be subject to the recapture tax discussed above.


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.

We and our subsidiaries are under examination by
the Internal Revenue Service for the tax years ended
December 31, 1997 through 1999. We do not anticipate any
significant changes based upon these examinations.

California Franchise Tax and
Other State Provisions

At the end of 2001, we had a tax presence in
approximately 37 states. However, we expect that over 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%.

Under California law, a financial corporation may
determine its bad debt deduction using one of two methods. The
first method allows a deduction for debts that become wholly or
partially worthless during the tax year (i.e., the specific
charge off method). The second method allows a reasonable
addition to a reserve to be deducted. A reasonable addition can
be calculated using an experience ratio, or may be determined by
management to be greater than the experience ratio, but not
greater than the amount deducted for regulatory and financial
statement purposes, and not greater than 1% of outstanding loans
at year end. California has not conformed to the federal repeal
of the reserve method of accounting for bad debts for a savings
and loan association.

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).

Subsidiaries

The following subsidiaries are included in our
Consolidated Financial Statements.

WFS Receivables Corporation
2

WFS Receivables Corporation 2, also known as
WFSRC2, is our wholly owned, Nevada based, limited purpose
service corporation. WFSRC2 was organized for the purpose of
purchasing contracts from WFS and securitizing them in the
asset-based securities market. Automobile contracts securitized
through WFSRC2 are treated as secured financings for accounting
purposes.

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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 all of our subsidiaries.
Westran does not provide a significant source of revenues or
expenses.

Western Consumer
Products

Western Consumer Products is a wholly owned,
California based subsidiary. Western Consumer Products was
created in 2001 to market non-lending related products such as
automobile warranties, maintenance agreements and vehicle
security systems. There was no activity in this subsidiary as of
December 31, 2001.

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, and WFS Web Investments, also
known as WFSWEB. Other subsidiaries of the Bank include Westfin
Insurance Agency, also known as WFIA, Westhrift Life Insurance
Company, also known as Westhrift, WestFin Securities
Corporation, also known as WestFin, Western Reconveyance
Company, Inc., also known as RECON, Western Consumer Services,
Inc., also known as WCS, Western Auto Investments, also known as
WAI, 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 subsidiary of the Bank that
is in the business of financing automobile contracts purchased
from new and pre-owned car 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 or WFSRC. See General 
Automobile Lending Operations. During 2001, WFS originated
$4.9 billion of automobile 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 automobile contract asset-backed
securities market. All sales to securitization trusts directly
from WFAL are treated as sales for accounting purposes.

WFS Financial Auto Loans 2,
Inc.

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

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.

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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, a $650 million, and a
$500 million conduit financing transaction during January
2002, November 2001 and September 1999, respectively.

WFS Receivables
Corporation

WFSRC is a wholly owned, Nevada based, limited
purpose service corporation subsidiary of WFS. WFSRC was
organized for the purpose of purchasing contracts from WFS and
securitizing them in the asset-backed securities market.
Securitizations in which contracts are sold through WFSRC are
treated as secured financings for accounting purposes.

WFS Web
Investments

WFSWEB is our wholly owned, California based,
limited purpose service corporation subsidiary. WFSWEB was
incorporated for the purpose of investing in an Internet service
company called DealerTrack. Our investment in DealerTrack
provides us with the unique 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
automobile loan 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 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 automobile 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,
subsidiary of the Bank. Westhrift is engaged in the business of
reinsuring credit life and credit disability insurance offered
to borrowers of the Bank. An independent insurer underwrites
these policies. The credit life insurance policies provide us
with full payment of the insureds financial obligation in
the event of the insureds death. The credit disability
insurance policies provide us with payment of an insureds
financial obligation during a period of disability resulting
from illness or physical injury. Westhrift has a Certificate of
Authority from the California Insurance Commissioner authorizing
it to conduct insurance business in California. At
December 31, 2001, credit life and disability insurance in
force was $3.0 million.

For Arizona statutory purposes, Westhrift is
required to maintain reserves for losses on credit life and
credit disability policies. Westhrifts aggregate reserves
for credit life and credit disability policies at
December 31, 2001 were $0.3 million.

The aggregate reserves are computed in accordance
with commonly accepted actuarial standards consistently applied
and are based on actuarial assumptions that are in accordance
with or stronger than those called for in policy provisions. The
policies reinsured are underwritten by the independent insurer
for no more than the amount that the insured owes us, not to
exceed $25 thousand per loan. Westhrift also maintains a

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$0.5 million deposit account in accordance
with California statutory deposit requirements. Westhrift does
not engage in any business except with respect to our customers.


WestFin Securities
Corporation

WestFin is a wholly owned subsidiary of the Bank.
Management decided to discontinue its operations in 2000. Prior
to discontinuing its operations, WestFin was a National
Association of Securities Dealers licensed securities
broker-dealer of the Bank.

Western
Reconveyance Company, Inc.

RECON is a wholly owned, California based,
subsidiary of the Bank. RECON acted primarily as the trustee
under trust deed loans made by the Bank. After the elimination
of all mortgage banking activities, RECON discontinued its
operations. RECON did not provide a significant source of
revenues or expenses.

Western
Consumer Services, Inc.

WCS is a wholly owned, California based,
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,
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, 2001, we had 2,111 full-time
and 145 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.

Forward-Looking Statements

This Form 10-K includes and incorporates by
reference forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. These
statements relate to analyses and other information which 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.

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;                                                       
|
| |  | our financial condition and liquidity, as well as
	future cash flows and earnings;
|
| |  | competition;                                                                      

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| |   |                                                                            
| | - | ---------------------------------------------------------------------------
| |  | our level of operating expenses;                                           
|
| |  | the effect of new 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 proved incorrect, our
actual results may vary materially from those expected,
estimated or projected.

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




Item 2. Properties

At December 31, 2001, we owned 11 properties
in California and one property in Texas and leased
61 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, 2001, the net book value of property and
leasehold improvements was approximately $50.3 million. We
lease space at two locations from a company controlled by our
major shareholder.




Item 3. Legal
Proceedings

We or our subsidiaries are parties to certain
legal proceedings incidental to our business, including consumer
class action lawsuits pertaining to our automobile finance
activities. We are vigorously defending these actions and do not
believe that the outcome of these proceedings will have a
material effect on our financial condition, results of
operations or cash flows.




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

None.

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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 2001 and 2000, as reported by the NYSE, which prices are
believed to represent actual transactions:

|               |  |      |       |      |  |      |       |     |  |   |       |  |  |   |       | 
|-------------- |  | ---- | ----- | ---- |  | ---- | ----- | --- |  | - | ----- |  |  | - | ----- | 
|               |  |      |       |     
|               |  | 2001 |       | 2000
|               |  |      |       |     
|               |  | High |       | Low  |  | High |       | Low
|               |  |      |       |      |  |      |       |    
|First Quarter  |  | $    | 18.66 |      |  | $    | 14.68 |     |  | $ | 15.00 |  |  | $ | 11.31 | 
|Second Quarter |  |      | 23.70 |      |  |      | 16.45 |     |  |   | 14.50 |  |  |   | 10.63 | 
|Third Quarter  |  |      | 23.41 |      |  |      | 16.00 |     |  |   | 16.25 |  |  |   | 11.31 | 
|Fourth Quarter |  |      | 19.45 |      |  |      | 16.05 |     |  |   | 15.69 |  |  |   | 13.56 | 

We had approximately 1,257 shareholders of our
common stock at February 28, 2002. 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 $0.43, $0.30 and $0.20
per share for the years ended December 31, 2001, 2000 and
1999, respectively. On December 18, 2001, we declared a
quarterly cash dividend of $0.11 per share for shareholders of
record as of February 6, 2002. This dividend was paid on
February 20, 2002. There are no restrictions on the payment
of dividends by Westcorp.

Our wholly owned subsidiary, the Bank, is
restricted by regulation and by the indenture relating to the
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, 2001, the
Banks restricted shareholders equity totaled
$336 million with a maximum dividend of $136 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.

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Item 6. Selected Financial
Data

The following table presents summary audited
financial data for the years ended December 31, 2001, 2000,
1999, 1998 and 1997. 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.

|                                                                                                                |                                                        |                                                  |            |         |  |      |            |         |  |      |            |         |  |   |            |         |   |   |            |         | 
|--------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------ | ------------------------------------------------ | ---------- | ------- |  | ---- | ---------- | ------- |  | ---- | ---------- | ------- |  | - | ---------- | ------- | - | - | ---------- | ------- | 
|                                                                                                                |                                                        |                                                 
|                                                                                                                |                                                        | For the Year Ended December 31,                 
|                                                                                                                |                                                        |                                                 
|                                                                                                                |                                                        | 2001                                             |            | 2000    |  | 1999 |            | 1998    |  | 1997
|                                                                                                                |                                                        |                                                  |            |         |  |      |            |         |  |     
|                                                                                                                |                                                        |                                                 
|                                                                                                                |                                                        | (Dollars in thousands, except per share amounts)
|Consolidated Statements of Operations
	Data:                                                                    |                                                        |                                                  |            |         |  |      |            |         |  |      |            |         |  |   |            |         |   |   |            |        
|Interest income                                                                                                 |                                                        | $                                                | 962,627    |         |  | $    | 583,821    |         |  | $    | 297,616    |         |  | $ | 272,166    |         |   | $ | 270,532    |        
|Interest expense                                                                                                |                                                        |                                                  | 491,944    |         |  |      | 313,872    |         |  |      | 152,788    |         |  |   | 161,713    |         |   |   | 160,892    |        
|                                                                                                                |                                                        |                                                  |            |         |  |      |            |         |  |      |            |         |  |   |            |         |   |   |            |        
|                                                                                                                | Net interest income                                    |                                                  |            | 470,683 |  |      |            | 269,949 |  |      |            | 144,828 |  |   |            | 110,453 |   |   |            | 109,640 | 
|Provision for credit losses                                                                                     |                                                        |                                                  | 196,977    |         |  |      | 82,133     |         |  |      | 38,400     |         |  |   | 18,960     |         |   |   | 12,851     |        
|                                                                                                                |                                                        |                                                  |            |         |  |      |            |         |  |      |            |         |  |   |            |         |   |   |            |        
|                                                                                                                | Net interest income after provision for credit
	losses |                                                  |            | 273,706 |  |      |            | 187,816 |  |      |            | 106,428 |  |   |            | 91,493  |   |   |            | 96,789  | 
|Noninterest income                                                                                              |                                                        |                                                  | 78,883     |         |  |      | 177,643    |         |  |      | 210,006    |         |  |   | 128,654    |         |   |   | 220,278    |        
|Noninterest expense(1)                                                                                          |                                                        |                                                  | 244,871    |         |  |      | 220,973    |         |  |      | 217,958    |         |  |   | 248,390    |         |   |   | 243,872    |        
|                                                                                                                |                                                        |                                                  |            |         |  |      |            |         |  |      |            |         |  |   |            |         |   |   |            |        
|Income (loss) before income tax
	(benefit) and extraordinary item                                               |                                                        |                                                  | 107,718    |         |  |      | 144,486    |         |  |      | 98,476     |         |  |   | (28,243    | )       |   |   | 73,195     |        
|Income tax (benefit)                                                                                            |                                                        |                                                  | 41,675     |         |  |      | 58,132     |         |  |      | 41,460     |         |  |   | (11,330    | )       |   |   | 31,287     |        
|                                                                                                                |                                                        |                                                  |            |         |  |      |            |         |  |      |            |         |  |   |            |         |   |   |            |        
|Income (loss) before minority interest                                                                          |                                                        |                                                  | 66,043     |         |  |      | 86,354     |         |  |      | 57,016     |         |  |   | (16,913    | )       |   |   | 41,908     |        
|Minority interest in earnings (loss) of
	subsidiaries                                                           |                                                        |                                                  | 10,369     |         |  |      | 11,852     |         |  |      | 6,522      |         |  |   | (2,216     | )       |   |   | 5,120      |        
|                                                                                                                |                                                        |                                                  |            |         |  |      |            |         |  |      |            |         |  |   |            |         |   |   |            |        
|Income (loss) before extraordinary item                                                                         |                                                        |                                                  | 55,674     |         |  |      | 74,502     |         |  |      | 50,494     |         |  |   | (14,697    | )       |   |   | 36,788     |        
|Extraordinary gain from early extinguishment of
	debt (net of income tax of $11, $175 and $1,546, respectively) |                                                        |                                                  | 16         |         |  |      | 241        |         |  |      | 2,132      |         |  |   |            |         |   |   |            |        
|                                                                                                                |                                                        |                                                  |            |         |  |      |            |         |  |      |            |         |  |   |            |         |   |   |            |        
|Net income (loss)                                                                                               |                                                        | $                                                | 55,690     |         |  | $    | 74,743     |         |  | $    | 52,626     |         |  | $ | (14,697    | )       |   | $ | 36,788     |        
|                                                                                                                |                                                        |                                                  |            |         |  |      |            |         |  |      |            |         |  |   |            |         |   |   |            |        
|Other Selected Financial Data:                                                                                  |                                                        |                                                  |            |         |  |      |            |         |  |      |            |         |  |   |            |         |   |   |            |        
|Book value per share(2)                                                                                         |                                                        | $                                                | 16.80      |         |  | $    | 15.72      |         |  | $    | 14.06      |         |  | $ | 12.29      |         |   | $ | 13.05      |        
|Weighted average number of shares and common
	share equivalents  diluted                                       |                                                        |                                                  | 34,485,127 |         |  |      | 29,525,677 |         |  |      | 26,505,128 |         |  |   | 26,305,117 |         |   |   | 26,351,144 |        
|Net income (loss) per common share 
	diluted:                                                                  |                                                        |                                                  |            |         |  |      |            |         |  |      |            |         |  |   |            |         |   |   |            |        
|                                                                                                                | Income (loss) before extraordinary item                |                                                  | $          | 1.61    |  |      | $          | 2.52    |  |      | $          | 1.91    |  |   | $          | (0.56   | ) |   | $          | 1.40    | 
|                                                                                                                | Extraordinary item                                     |                                                  |            |         |  |      |            | 0.01    |  |      |            | 0.08    |  |   |            |         |   |   |            |         | 
|                                                                                                                |                                                        |                                                  |            |         |  |      |            |         |  |      |            |         |  |   |            |         |   |   |            |        
|                                                                                                                | Net income (loss)                                      |                                                  | $          | 1.61    |  |      | $          | 2.53    |  |      | $          | 1.99    |  |   | $          | (0.56   | ) |   | $          | 1.40    | 
|                                                                                                                |                                                        |                                                  |            |         |  |      |            |         |  |      |            |         |  |   |            |         |   |   |            |        
|Dividends per share                                                                                             |                                                        | $                                                | 0.44       |         |  | $    | 0.30       |         |  | $    | 0.20       |         |  | $ | 0.25       |         |   | $ | 0.40       |        
|Dividend payout ratio                                                                                           |                                                        |                                                  | 27.3       | %       |  |      | 11.9       | %       |  |      | 10.1       | %       |  |   | N/A        |         |   |   | 28.6       | %      




|    |                                                                                                                                                                                                                                                                                                    
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Information for 1998 includes a one-time
	restructuring charge of $18.0 million, including
	$1.8 million for employee severance, $13.2 million for
	lease termination fees and the write-off of disposed assets, and
	$3.0 million relating to our decision to exit the mortgage
	banking business.
|   
|(2) | Accumulated other comprehensive income
	(loss) excluded from shareholders equity.                                                                                                                                                                                                                 

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##### Table of Contents



|                                                      |                                               |                                       |                                            |           |           |            |           |           |           |           |           |           |           |           |           |           |           |           |           |           |           |           | 
|----------------------------------------------------- | --------------------------------------------- | ------------------------------------- | ------------------------------------------ | --------- | --------- | ---------- | --------- | --------- | --------- | --------- | --------- | --------- | --------- | --------- | --------- | --------- | --------- | --------- | --------- | --------- | --------- | --------- | 
|                                                      |                                               |                                      
|                                                      |                                               | At or For the Year Ended December 31,
|                                                      |                                               |                                      
|                                                      |                                               | 2001                                  |                                            | 2000      |           | 1999       |           | 1998      |           | 1997     
|                                                      |                                               |                                       |                                            |           |           |            |           |           |           |          
|                                                      |                                               |                                      
|                                                      |                                               | (Dollars in thousands)               
|Consolidated Statements of Financial Condition
	Data: |                                               |                                       |                                            |           |           |            |           |           |           |           |           |           |           |           |           |           |           |           |           |          
|Assets:                                               |                                               |                                       |                                            |           |           |            |           |           |           |           |           |           |           |           |           |           |           |           |           |          
|                                                      | Cash and other assets                         |                                       | $                                          | 336,345   |           |            | $         | 611,088   |           |           | $         | 714,357   |           |           | $         | 728,476   |           |           | $         | 699,237   |          
|                                                      | Loans:                                        |                                       |                                            |           |           |            |           |           |           |           |           |           |           |           |           |           |           |           |           |           |          
|                                                      |                                               | Consumer(1)                           |                                            |           | 7,074,383 |            |           |           | 4,309,036 |           |           |           | 1,516,669 |           |           |           | 933,010   |           |           |           | 298,550   |          
|                                                      |                                               | Mortgage(2)                           |                                            |           | 373,455   |            |           |           | 507,431   |           |           |           | 598,302   |           |           |           | 1,006,933 |           |           |           | 1,536,954 |          
|                                                      |                                               | Commercial                            |                                            |           | 85,312    |            |           |           | 107,586   |           |           |           | 66,927    |           |           |           | 52,940    |           |           |           | 37,314    |          
|                                                      | Mortgage-backed
	securities                   |                                       |                                            | 2,092,225 |           |            |           | 2,230,448 |           |           |           | 1,431,376 |           |           |           | 980,044   |           |           |           | 941,448   |          
|                                                      | Investments and time deposits                 |                                       |                                            | 110,677   |           |            |           | 102,321   |           |           |           | 171,143   |           |           |           | 131,417   |           |           |           | 252,540   |          
|                                                      |                                               |                                       |                                            |           |           |            |           |           |           |           |           |           |           |           |           |           |           |           |           |          
|                                                      |                                               |                                       | Total assets                               |           | $         | 10,072,397 |           |           | $         | 7,867,910 |           |           | $         | 4,498,774 |           |           | $         | 3,832,820 |           |           | $         | 3,766,043 | 
|                                                      |                                               |                                       |                                            |           |           |            |           |           |           |           |           |           |           |           |           |           |           |           |           |          
|Liabilities:                                          |                                               |                                       |                                            |           |           |            |           |           |           |           |           |           |           |           |           |           |           |           |           |          
|                                                      | Deposits                                      |                                       | $                                          | 2,329,326 |           |            | $         | 2,478,487 |           |           | $         | 2,212,309 |           |           | $         | 2,178,735 |           |           | $         | 2,000,896 |          
|                                                      | Notes payable on automobile secured financing |                                       |                                            | 5,886,227 |           |            |           | 3,473,377 |           |           |           | 461,104   |           |           |           |           |           |           |           |           |          
|                                                      | FHLB advances and other borrowings            |                                       |                                            | 723,675   |           |            |           | 616,193   |           |           |           | 498,901   |           |           |           | 440,924   |           |           |           | 563,922   |          
|                                                      | Amounts held on behalf of trustee             |                                       |                                            | 280,496   |           |            |           | 494,858   |           |           |           | 687,274   |           |           |           | 528,092   |           |           |           | 488,653   |          
|                                                      | Subordinated debentures                       |                                       |                                            | 147,714   |           |            |           | 189,962   |           |           |           | 199,298   |           |           |           | 239,856   |           |           |           | 239,195   |          
|                                                      | Other liabilities                             |                                       |                                            | 85,994    |           |            |           | 71,221    |           |           |           | 59,140    |           |           |           | 94,311    |           |           |           | 95,088    |          
|                                                      |                                               |                                       |                                            |           |           |            |           |           |           |           |           |           |           |           |           |           |           |           |           |          
|                                                      |                                               |                                       | Total liabilities                          |           |           | 9,453,432  |           |           |           | 7,324,098 |           |           |           | 4,118,026 |           |           |           | 3,481,918 |           |           |           | 3,387,754 | 
|                                                      | Minority interest                             |                                       |                                            | 78,261    |           |            |           | 56,644    |           |           |           | 28,030    |           |           |           | 21,857    |           |           |           | 29,538    |          
|                                                      | Shareholders equity                          |                                       |                                            | 540,704   |           |            |           | 487,168   |           |           |           | 352,718   |           |           |           | 329,045   |           |           |           | 348,751   |          
|                                                      |                                               |                                       |                                            |           |           |            |           |           |           |           |           |           |           |           |           |           |           |           |           |          
|                                                      |                                               |                                       | Total liabilities and shareholders equity |           | $         | 10,072,397 |           |           | $         | 7,867,910 |           |           | $         | 4,498,774 |           |           | $         | 3,832,820 |           |           | $         | 3,766,043 | 
|                                                      |                                               |                                       |                                            |           |           |            |           |           |           |           |           |           |           |           |           |           |           |           |           |          
|                                                     
|Other Selected Financial Data:                        |                                               |                                       |                                            |           |           |            |           |           |           |           |           |           |           |           |           |           |           |           |           |          
|Average assets                                        |                                               | $                                     | 9,280,377                                  |           |           | $          | 6,242,668 |           |           | $         | 3,952,360 |           |           | $         | 3,859,202 |           |           | $         | 3,682,781 |          
|Return on average assets                              |                                               |                                       | 0.60                                       | %         |           |            | 1.20      | %         |           |           | 1.33      | %         |           |           | (0.38     | )%        |           |           | 1.00      | %        
|Average shareholders equity(3)                       |                                               | $                                     | 570,298                                    |           |           | $          | 450,323   |           |           | $         | 351,162   |           |           | $         | 327,687   |           |           | $         | 327,736   |          
|Return on average shareholders equity(3)             |                                               |                                       | 9.77                                       | %         |           |            | 16.60     | %         |           |           | 14.99     | %         |           |           | (4.49     | )%        |           |           | 11.22     | %        
|Equity to assets ratio(3)                             |                                               |                                       | 5.97                                       | %         |           |            | 6.38      | %         |           |           | 8.32      | %         |           |           | 8.49      | %         |           |           | 9.10      | %        
|Originations:                                         |                                               |                                       |                                            |           |           |            |           |           |           |           |           |           |           |           |           |           |           |           |           |          
|                                                      | Consumer loans                                |                                       | $                                          | 4,869,970 |           |            | $         | 4,232,115 |           |           | $         | 3,355,732 |           |           | $         | 2,680,341 |           |           | $         | 2,337,359 |          
|                                                      | Mortgage loans                                |                                       |                                            | 23,001    |           |            |           | 33,124    |           |           |           | 276,936   |           |           |           | 2,754,398 |           |           |           | 2,331,506 |          
|                                                      | Commercial loans                              |                                       |                                            | 291,944   |           |            |           | 266,342   |           |           |           | 237,316   |           |           |           | 124,259   |           |           |           | 71,399    |          
|                                                      |                                               |                                       |                                            |           |           |            |           |           |           |           |           |           |           |           |           |           |           |           |           |          
|                                                      |                                               |                                       | Total originations                         |           | $         | 5,184,915  |           |           | $         | 4,531,581 |           |           | $         | 3,869,984 |           |           | $         | 5,558,998 |           |           | $         | 4,740,264 | 
|                                                      |                                               |                                       |                                            |           |           |            |           |           |           |           |           |           |           |           |           |           |           |           |           |          
|Interest rate spread                                  |                                               |                                       | 4.99                                       | %         |           |            | 4.37      | %         |           |           | 3.59      | %         |           |           | 2.83      | %         |           |           | 2.65      | %        




|    |                                                                                   
|--- | ----------------------------------------------------------------------------------
|(1) | Net of unearned discounts.                                                        
|   
|(2) | Net of undisbursed loan proceeds.                                                 
|   
|(3) | Accumulated other comprehensive income
	(loss) excluded from shareholders equity.

37



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##### Table of Contents






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 automobile
contracts and mortgage loans. The primary components of
noninterest income include retained interest income on
automobile contracts sold, contractually specified servicing
fees for the servicing of loans, late charges, gain on sale of
automobile contracts and mortgage loans, and other miscellaneous
servicing fee income. Since March 2000, we have structured our
securitizations as secured financings and no longer record
non-cash gain on sale or subsequent contractual servicing and
retained interest income. Instead, the earnings of the
automobile contracts in the trust and the related financing
costs are reflected over the life of the underlying pool of
automobile contracts as net interest income. Other components of
noninterest income include gains and losses from the sale of
investment securities and mortgage-backed securities, insurance
income, fees related to the sales of investment products such as
mutual funds and annuities and fee income from depository
accounts. The primary components of noninterest expense are
salaries, credit and collection expenses, and data processing
costs.

Results of Operations

Net Interest
Income

Net interest income is affected by the difference
between the rate earned on our interest earning assets and the
rate paid on our interest bearing liabilities (interest rate
spread) and the relative amounts of our interest earning assets
and interest bearing liabilities. Net interest income totaled
$471 million in 2001 compared with $270 million and
$145 million in 2000 and 1999, respectively. Net interest
income increased in 2001 as more automobile contracts were held
on the balance sheet as we utilized our own liquidity sources
and completed public securitizations totaling $3.6 billion
and a conduit financing totaling $650 million accounted for
as secured financings.

Our decision to account for our securitizations
as secured financings by changing the structure of our
securitizations was based upon our business philosophy that we
approach our business as a portfolio lender rather than as a
seller of automobile contracts. Our securitization structure
includes a provision that provides us with the right to
repurchase automobile contracts at our option. The percentage of
automobile contracts that we may repurchase was increased from
10% to 20% as of March 2000. Not only does this change provide
greater flexibility in managing our cost of funds, we believe
that a portfolio basis presentation provides a better
understanding of our business and the inherent risks associated
with our securitizations. In addition, by accounting for our
securitizations as secured financings we no longer record a
retained interest asset upon completion of each securitization,
the valuation of which is based upon subjective assumptions. See
Business.

38



---



##### 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,      
|                                             |                                                |                                      
|                                             |                                                |                                       |                                    |           |           |          
|                                             |                                                | 2001                                  |                                    | 2000      |           | 1999     
|                                             |                                                |                                       |                                    |           |           |          
|                                             |                                                | 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            |                                    | $         | 2,245,861 |           |         | $       | 133,539 |          |      |        | 5.95  | %       |   | $         | 1,870,908 |           |         | $       | 128,231 |         |      |      | 6.85  | %     |   | $         | 1,423,655 |           |         | $       | 87,631  |         |      |      | 6.16  | %    
|                                             |                                                | Other short-term investments          |                                    |           | 159,599   |           |         |         | 7,468   |          |      |        | 4.68  |         |   |           | 246,908   |           |         |         | 15,609  |         |      |      | 6.32  |       |   |           | 251,344   |           |         |         | 12,930  |         |      |      | 5.14  |      
|                                             |                                                | Investment securities                 |                                    |           | 7,194     |           |         |         | 433     |          |      |        | 6.02  |         |   |           | 10,216    |           |         |         | 535     |         |      |      | 5.24  |       |   |           | 29,710    |           |         |         | 1,607   |         |      |      | 5.41  |      
|                                             |                                                | Interest earning deposits with others |                                    |           | 2,628     |           |         |         | 74      |          |      |        | 2.80  |         |   |           | 2,069     |           |         |         | 110     |         |      |      | 5.32  |       |   |           | 1,395     |           |         |         | 75      |         |      |      | 5.38  |      
|                                             |                                                |                                       |                                    |           |           |           |         |         |         |          |      |        |       |         |   |           |           |           |         |         |         |         |      |      |       |       |   |           |           |           |         |         |         |         |      |     
|                                             |                                                |                                       | Total investments                  |           |           | 2,415,282 |         |         |         | 141,514  |      |        |       | 5.86    | % |           |           | 2,130,101 |         |         |         | 144,485 |      |      |       | 6.78  | % |           |           | 1,706,104 |         |         |         | 102,243 |      |      |       | 5.99  | %
|                                             | Total loans:                                   |                                       |                                    |           |           |           |         |         |         |          |      |        |       |         |   |           |           |           |         |         |         |         |      |      |       |       |   |           |           |           |         |         |         |         |      |      |      
|                                             |                                                | Consumer loans                        |                                    |           | 5,746,413 |           |         |         | 779,256 |          |      |        | 13.56 | %       |   |           | 2,672,690 |           |         |         | 386,182 |         |      |      | 14.45 | %     |   |           | 883,091   |           |         |         | 138,802 |         |      |      | 15.72 | %    
|                                             |                                                | Mortgage loans(1)                     |                                    |           | 441,804   |           |         |         | 34,536  |          |      |        | 7.82  |         |   |           | 551,498   |           |         |         | 44,225  |         |      |      | 8.02  |       |   |           | 693,270   |           |         |         | 51,666  |         |      |      | 7.45  |      
|                                             |                                                | Commercial loans                      |                                    |           | 99,904    |           |         |         | 7,321   |          |      |        | 7.33  |         |   |           | 97,586    |           |         |         | 8,929   |         |      |      | 9.15  |       |   |           | 57,448    |           |         |         | 4,905   |         |      |      | 8.54  |      
|                                             |                                                |                                       |                                    |           |           |           |         |         |         |          |      |        |       |         |   |           |           |           |         |         |         |         |      |      |       |       |   |           |           |           |         |         |         |         |      |     
|                                             |                                                |                                       | Total loans                        |           |           | 6,288,121 |         |         |         | 821,113  |      |        |       | 13.06   | % |           |           | 3,321,774 |         |         |         | 439,336 |      |      |       | 13.23 | % |           |           | 1,633,809 |         |         |         | 195,373 |      |      |       | 11.96 | %
|                                             |                                                |                                       |                                    |           |           |           |         |         |         |          |      |        |       |         |   |           |           |           |         |         |         |         |      |      |       |       |   |           |           |           |         |         |         |         |      |     
|                                             |                                                |                                       | Total interest earning assets      |           |           | 8,703,403 |         |         |         | 962,627  |      |        |       | 11.06   | % |           |           | 5,451,875 |         |         |         | 583,821 |      |      |       | 10.71 | % |           |           | 3,339,913 |         |         |         | 297,616 |      |      |       | 8.91  | %
|Noninterest earning assets:                  |                                                |                                       |                                    |           |           |           |         |         |         |          |      |        |       |         |   |           |           |           |         |         |         |         |      |      |       |       |   |           |           |           |         |         |         |         |      |     
|                                             | Amounts due from trusts                        |                                       |                                    | 227,890   |           |           |         |         |         |          |      |        |       |         |   | 413,653   |           |           |         |         |         |         |      |      |       |       |   | 384,153   |           |           |         |         |         |         |      |      |      
|                                             | Retained interest in securitized assets        |                                       |                                    | 74,509    |           |           |         |         |         |          |      |        |       |         |   | 141,724   |           |           |         |         |         |         |      |      |       |       |   | 180,538   |           |           |         |         |         |         |      |      |      
|                                             | Capitalized servicing rights                   |                                       |                                    |           |           |           |         |         |         |          |      |        |       |         |   |           |           |           |         |         |         |         |      |      |       |       |   | 5,676     |           |           |         |         |         |         |      |      |      
|                                             | Premises, equipment and real estate owned      |                                       |                                    | 82,277    |           |           |         |         |         |          |      |        |       |         |   | 84,627    |           |           |         |         |         |         |      |      |       |       |   | 90,306    |           |           |         |         |         |         |      |      |      
|                                             | Other assets                                   |                                       |                                    | 318,674   |           |           |         |         |         |          |      |        |       |         |   | 227,095   |           |           |         |         |         |         |      |      |       |       |   | 177       |           |           |         |         |         |         |      |      |      
|                                             | Less: allowance for credit losses              |                                       |                                    | 126,376   |           |           |         |         |         |          |      |        |       |         |   | 76,306    |           |           |         |         |         |         |      |      |       |       |   | 48,403    |           |           |         |         |         |         |      |      |      
|                                             |                                                |                                       |                                    |           |           |           |         |         |         |          |      |        |       |         |   |           |           |           |         |         |         |         |      |      |       |       |   |           |           |           |         |         |         |         |      |     
|                                             |                                                |                                       | Total                              |           | $         | 9,280,377 |         |         |         |          |      |        |       |         |   |           | $         | 6,242,668 |         |         |         |         |      |      |       |       |   |           | $         | 3,952,360 |         |         |         |         |      |      |       |       |  
|                                             |                                                |                                       |                                    |           |           |           |         |         |         |          |      |        |       |         |   |           |           |           |         |         |         |         |      |      |       |       |   |           |           |           |         |         |         |         |      |     
|Interest bearing liabilities:                |                                                |                                       |                                    |           |           |           |         |         |         |          |      |        |       |         |   |           |           |           |         |         |         |         |      |      |       |       |   |           |           |           |         |         |         |         |      |     
|                                             | Deposits                                       |                                       | $                                  | 2,319,466 |           |           |         | 114,831 |         |          |      | 4.95   | %     |         | $ | 2,380,155 |           |           |         | 133,610 |         |         |      | 5.61 | %     |       | $ | 2,165,493 |           |           |         | 106,067 |         |         |      | 4.90 | %    
|                                             | Securities sold under agreements to repurchase |                                       |                                    | 155,387   |           |           |         | 7,014   |         |          |      | 4.51   |       |         |   | 449,778   |           |           |         | 27,950  |         |         |      | 6.21 |       |       |   | 369,999   |           |           |         | 19,102  |         |         |      | 5.16 |      
|                                             | FHLB advances and other borrowings             |                                       |                                    | 443,337   |           |           |         | 20,424  |         |          |      | 4.61   |       |         |   | 270,043   |           |           |         | 16,694  |         |         |      | 6.18 |       |       |   | 130,608   |           |           |         | 8,074   |         |         |      | 6.18 |      
|                                             | Notes payable on automobile secured financing  |                                       |                                    | 5,018,456 |           |           |         | 333,768 |         |          |      | 6.65   |       |         |   | 1,655,936 |           |           |         | 118,421 |         |         |      | 7.15 |       |       |   |           |           |           |         |         |         |         |      |      |      
|                                             | Subordinated debentures                        |                                       |                                    | 170,531   |           |           |         | 15,907  |         |          |      | 9.33   |       |         |   | 192,025   |           |           |         | 17,197  |         |         |      | 8.96 |       |       |   | 218,164   |           |           |         | 19,545  |         |         |      | 8.96 |      
|                                             |                                                |                                       |                                    |           |           |           |         |         |         |          |      |        |       |         |   |           |           |           |         |         |         |         |      |      |       |       |   |           |           |           |         |         |         |         |      |     
|                                             |                                                |                                       | Total interest bearing liabilities |           |           | 8,107,177 |         |         |         | 491,944  |      |        |       | 6.07    | % |           |           | 4,947,937 |         |         |         | 313,872 |      |      |       | 6.34  | % |           |           | 2,884,264 |         |         |         | 152,788 |      |      |       | 5.32  | %
|Noninterest bearing liabilities:             |                                                |                                       |                                    |           |           |           |         |         |         |          |      |        |       |         |   |           |           |           |         |         |         |         |      |      |       |       |   |           |           |           |         |         |         |         |      |     
|                                             | Amounts held on behalf of trustee              |                                       |                                    | 365,376   |           |           |         |         |         |          |      |        |       |         |   | 693,810   |           |           |         |         |         |         |      |      |       |       |   | 443,072   |           |           |         |         |         |         |      |      |      
|                                             | Other liabilities                              |                                       |                                    | 278,325   |           |           |         |         |         |          |      |        |       |         |   | 169,435   |           |           |         |         |         |         |      |      |       |       |   | 287,138   |           |           |         |         |         |         |      |      |      
|                                             | Shareholders equity                           |                                       |                                    | 529,499   |           |           |         |         |         |          |      |        |       |         |   | 431,486   |           |           |         |         |         |         |      |      |       |       |   | 337,886   |           |           |         |         |         |         |      |      |      
|                                             |                                                |                                       |                                    |           |           |           |         |         |         |          |      |        |       |         |   |           |           |           |         |         |         |         |      |      |       |       |   |           |           |           |         |         |         |         |      |     
|                                             |                                                |                                       | Total                              |           | $         | 9,280,377 |         |         |         |          |      |        |       |         |   |           | $         | 6,242,668 |         |         |         |         |      |      |       |       |   |           | $         | 3,952,360 |         |         |         |         |      |      |       |       |  
|                                             |                                                |                                       |                                    |           |           |           |         |         |         |          |      |        |       |         |   |           |           |           |         |         |         |         |      |      |       |       |   |           |           |           |         |         |         |         |      |     
|Net interest income and interest rate spread |                                                |                                       |                                    |           |           | $         | 470,683 |         |         |          | 4.99 | %      |       |         |   |           |           | $         | 269,949 |         |         |         | 4.37 | %    |       |       |   |           |           | $         | 144,828 |         |         |         | 3.59 | %   
|                                             |                                                |                                       |                                    |           |           |           |         |         |         |          |      |        |       |         |   |           |           |           |         |         |         |         |      |      |       |       |   |           |           |           |         |         |         |         |      |     
|Net yield on average interest earning assets |                                                |                                       |                                    |           |           |           |         |         |         |          | 5.41 | %      |       |         |   |           |           |           |         |         |         |         | 4.95 | %    |       |       |   |           |           |           |         |         |         |         | 4.34 | %   
|                                             |                                                |                                       |                                    |           |           |           |         |         |         |          |      |        |       |         |   |           |           |           |         |         |         |         |      |      |       |       |   |           |           |           |         |         |         |         |      |     




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

The total interest rate spread increased
62 basis points for 2001 compared with 2000 due to an
increase of 35 basis points in the yield on interest
earning assets combined with a decrease in the cost of funds of
27 basis points. The increase in yield on interest earning
assets for 2001 compared with 2000 and in 2000 compared with
1999 was due primarily to a higher percentage of automobile
contracts held on the balance sheet. The

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decrease in the cost of funds in 2001 compared to
2000 was due to a lower interest rate environment. The increase
in the cost of funds in 2000 compared to 1999 was due to a
higher 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):

|                                  |                                                |                                       |                                    |                          |         |         |   |         |         |         |         |         |         |         |   |         |         |         |   |        |         |        |         |         |         |         | 
|--------------------------------- | ---------------------------------------------- | ------------------------------------- | ---------------------------------- | ------------------------ | ------- | ------- | - | ------- | ------- | ------- | ------- | ------- | ------- | ------- | - | ------- | ------- | ------- | - | ------ | ------- | ------ | ------- | ------- | ------- | ------- | 
|                                  |                                                |                                       |                                    |                         
|                                  |                                                | 2001 Compared to 2000(1)              |                                    | 2000 Compared to 1999(1)
|                                  |                                                |                                       |                                    |                         
|                                  |                                                | Volume                                |                                    | Rate                     |         | Total   |   | Volume  |         | Rate    |         | Total  
|                                  |                                                |                                       |                                    |                          |         |         |   |         |         |         |         |        
|                                  |                                                |                                      
|                                  |                                                | (Dollars in thousands)               
|Interest income:                  |                                                |                                       |                                    |                          |         |         |   |         |         |         |         |         |         |         |   |         |         |         |   |        |         |        |         |        
|                                  |                                                | Mortgage-backed securities            |                                    | $                        | 23,547  |         |   | $       | (18,239 | )       |         | $       | 5,308   |         |   | $       | 29,929  |         |   | $      | 10,671  |        |         | $       | 40,600  |        
|                                  |                                                | Other short-term investments          |                                    |                          | (4,696  | )       |   |         | (3,445  | )       |         |         | (8,141  | )       |   |         | (232    | )       |   |        | 2,911   |        |         |         | 2,679   |        
|                                  |                                                | Investment securities                 |                                    |                          | (174    | )       |   |         | 72      |         |         |         | (102    | )       |   |         | (1,023  | )       |   |        | (49     | )      |         |         | (1,072  | )      
|                                  |                                                | Interest earning deposits with others |                                    |                          | 25      |         |   |         | (61     | )       |         |         | (36     | )       |   |         | 36      |         |   |        | (1      | )      |         |         | 35      |        
|Total loans:                      |                                                |                                       |                                    |                          |         |         |   |         |         |         |         |         |         |         |   |         |         |         |   |        |         |        |         |        
|                                  |                                                | Consumer loans                        |                                    |                          | 418,248 |         |   |         | (25,174 | )       |         |         | 393,074 |         |   |         | 259,466 |         |   |        | (12,086 | )      |         |         | 247,380 |        
|                                  |                                                | Mortgage loans                        |                                    |                          | (8,610  | )       |   |         | (1,079  | )       |         |         | (9,689  | )       |   |         | (11,167 | )       |   |        | 3,726   |        |         |         | (7,441  | )      
|                                  |                                                | Commercial loans                      |                                    |                          | 206     |         |   |         | (1,814  | )       |         |         | (1,608  | )       |   |         | 3,651   |         |   |        | 373     |        |         |         | 4,024   |        
|                                  |                                                |                                       |                                    |                          |         |         |   |         |         |         |         |         |         |         |   |         |         |         |   |        |         |        |         |        
|                                  |                                                |                                       | Total interest earning assets      |                          | $       | 428,546 |   |         | $       | (49,740 | )       |         | $       | 378,806 |   |         | $       | 280,660 |   |        | $       | 5,545  |         |         | $       | 286,205 | 
|                                  |                                                |                                       |                                    |                          |         |         |   |         |         |         |         |         |         |         |   |         |         |         |   |        |         |        |         |        
|Interest expense:                 |                                                |                                       |                                    |                          |         |         |   |         |         |         |         |         |         |         |   |         |         |         |   |        |         |        |         |        
|                                  | Deposits                                       |                                       | $                                  | (3,496                   | )       |         | $ | (15,283 | )       |         | $       | (18,779 | )       |         | $ | 11,189  |         |         | $ | 16,354 |         |        | $       | 27,543  |        
|                                  | Securities sold under agreements to repurchase |                                       |                                    | (9,702                   | )       |         |   | (11,234 | )       |         |         | (20,936 | )       |         |   | 4,551   |         |         |   | 4,297  |         |        |         | 8,848   |        
|                                  | FHLB advances and other borrowings             |                                       |                                    | 8,748                    |         |         |   | (5,018  | )       |         |         | 3,730   |         |         |   | 8,620   |         |         |   |        |         |        |         | 8,620   |        
|                                  | Notes payable on automobile secured financings |                                       |                                    | 224,186                  |         |         |   | (8,839  | )       |         |         | 215,347 |         |         |   | 118,421 |         |         |   |        |         |        |         | 118,421 |        
|                                  | Subordinated debentures                        |                                       |                                    | (1,980                   | )       |         |   | 690     |         |         |         | (1,290  | )       |         |   | (2,348  | )       |         |   |        |         |        |         | (2,348  | )      
|                                  |                                                |                                       |                                    |                          |         |         |   |         |         |         |         |         |         |         |   |         |         |         |   |        |         |        |         |        
|                                  |                                                |                                       | Total interest bearing liabilities |                          | $       | 217,756 |   |         | $       | (39,684 | )       |         | $       | 178,072 |   |         | $       | 140,433 |   |        | $       | 20,651 |         |         | $       | 161,084 | 
|                                  |                                                |                                       |                                    |                          |         |         |   |         |         |         |         |         |         |         |   |         |         |         |   |        |         |        |         |        
|Net change in net interest income |                                                |                                       |                                    |                          |         |         |   |         |         | $       | 200,734 |         |         |         |   |         |         |         |   |        |         | $      | 125,121 |        
|                                  |                                                |                                       |                                    |                          |         |         |   |         |         |         |         |         |         |         |   |         |         |         |   |        |         |        |         |        




|    |                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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) have been 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 the loans or reversing the
allowance for credit losses through the provision for credit
losses when the amount of loans held on balance sheet is reduced
through loan 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 totaled $197 million in 2001
compared with $82.1 million and $38.4 million in 2000
and 1999, respectively.

The increase in provision for credit losses in
2001 and 2000 was the result of a higher level of automobile
contracts held on balance sheet and chargeoffs related to such
contracts as our securitizations in those years were
predominately accounted for as secured financings. Of the total
$197 million reported in provision for credit losses in
2001, $122.8 million was for chargeoffs incurred during the
period and $74.2 million represented the increase in the
amount of automobile contracts held on the balance sheet. Of the
total $82.1 million reported in provision for credit losses
in 2000, $42.3 million was for chargeoffs incurred during
the period and $50.6 million represented the increase in
the amount of automobile contracts held on the balance sheet.
Provision for credit losses was reduced by $7.5 million due to
the lower level of allowance held for automobile contracts due
to improving asset quality and a $3.3 million reduction in
allowance for mortgage and commercial loans. The increase in
provision for credit losses in 1999 was the result of an
increase in the amount of reserves on automobile contracts held
for sale as $500 million of such automobile contracts were

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used as collateral for the issuance of notes to a
conduit facility in a transaction treated as a secured
financing. In addition, another $540 million of automobile
contracts held for sale were expected to be placed in a
securitization in the first quarter of 2000 that would also be
accounted for as a secured financing, and, therefore, the
contracts would remain on our balance sheet and higher levels of
reserves would be required for probable losses that could be
reasonably estimated. See Financial Condition 
Allowance for Credit Losses.


Noninterest
Income

Automobile
Lending Income

We regularly securitize automobile contracts in
the public asset-backed securities market and retain the
servicing rights. For accounting purposes, these transactions
are treated as either secured financings or sales to a
securitization trust. Since the first quarter of 2000, we have
not completed a securitization that has been accounted for as a
sale. For transactions treated as sales 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 automobile
contracts sold less the write-off of dealer participation
balances and the effect of hedging activities. For these
securitizations, net interest earned on the automobile contracts
sold and fees earned for servicing the automobile contract
portfolios are recognized over the life of the transactions as
contractual servicing income, retained interest income and other
fee income.

The components of automobile lending income were
as follows:

|                                                              |                                 |                                 |         |        |  |      |        |         |  |   |        |         | 
|------------------------------------------------------------- | ------------------------------- | ------------------------------- | ------- | ------ |  | ---- | ------ | ------- |  | - | ------ | ------- | 
|                                                              |                                 |                                
|                                                              |                                 | For the Year Ended December 31,
|                                                              |                                 |                                
|                                                              |                                 | 2001                            |         | 2000   |  | 1999
|                                                              |                                 |                                 |         |        |  |     
|                                                              |                                 |                                
|                                                              |                                 | (Dollars in thousands)         
|Gain on sale of automobile contracts                          |                                 |                                 |         |        |  | $    | 7,719  |         |  | $ | 51,345 |        
|Retained interest (expense) income, net of
	RISA amortization |                                 | $                               | (27,839 | )      |  |      | 51,429 |         |  |   | 47,812 |        
|Contractual servicing income                                  |                                 |                                 | 23,018  |        |  |      | 41,767 |         |  |   | 46,847 |        
|Other fee income                                              |                                 |                                 | 67,579  |        |  |      | 57,786 |         |  |   | 42,702 |        
|                                                              |                                 |                                 |         |        |  |      |        |         |  |   |        |        
|                                                              | Total automobile lending income |                                 | $       | 62,758 |  |      | $      | 158,701 |  |   | $      | 188,706 | 
|                                                              |                                 |                                 |         |        |  |      |        |         |  |   |        |        

Automobile lending income decreased primarily as
a result of lower retained interest income and contractual
servicing income, offset by an increase in other fee income.

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

|                                                               |                                |                                    |   |           |           |      |       |           |           |      |        |           |           |   |        |           |           |   |         |           |           | 
|-------------------------------------------------------------- | ------------------------------ | ---------------------------------- | - | --------- | --------- | ---- | ----- | --------- | --------- | ---- | ------ | --------- | --------- | - | ------ | --------- | --------- | - | ------- | --------- | --------- | 
|                                                               |                                |                                   
|                                                               |                                | For the Year Ended December 31,   
|                                                               |                                |                                   
|                                                               |                                | 2001                               |   | 2000      |           | 1999 |       | 1998      |           | 1997
|                                                               |                                |                                    |   |           |           |      |       |           |           |     
|                                                               |                                |                                   
|                                                               |                                | (Dollars in thousands)            
|Contract sales and secured financings:                         |                                |                                    |   |           |           |      |       |           |           |      |        |           |           |   |        |           |           |   |         |          
|                                                               | Sales to securitization trusts |                                    |   |           |           |      | $     | 660,000   |           |      | $      | 2,500,000 |           |   | $      | 1,885,000 |           |   | $       | 2,190,000 |          
|                                                               | Secured financings             |                                    | $ | 4,220,000 |           |      |       | 3,930,000 |           |      |        | 500,000   |           |   |        |           |           |   |         |           |          
|                                                               |                                |                                    |   |           |           |      |       |           |           |      |        |           |           |   |        |           |           |   |         |          
|                                                               |                                | Total sales and secured financings |   | $         | 4,220,000 |      |       | $         | 4,590,000 |      |        | $         | 3,000,000 |   |        | $         | 1,885,000 |   |         | $         | 2,190,000 | 
|                                                               |                                |                                    |   |           |           |      |       |           |           |      |        |           |           |   |        |           |           |   |         |          
|Gain on sale of automobile contracts(1)                        |                                |                                    |   |           |           | $    | 7,719 |           |           | $    | 51,345 |           |           | $ | 25,622 |           |           | $ | 39,944  |          
|Hedge gain (loss) on sale of automobile
	contracts(2)          |                                |                                    |   |           |           |      | 5,300 |           |           |      | 7,419  |           |           |   | (8,396 | )         |           |   | (10,691 | )        
|Gain on sale of automobile contracts as a % of
	total revenues |                                |                                    |   |           |           |      | 1.72  | %         |           |      | 14.47  | %         |           |   | 10.72  | %         |           |   | 12.11   | %        




|    |                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------
|(1) | Net of the write-off of outstanding dealer
	participation balances and the effect of hedging activities.
|   
|(2) | Included in gain on sale of automobile contracts.                                                       

Retained interest expense was $27.8 million
for the year ended December 31, 2001 compared with retained
interest income of $51.4 million and $47.8 million for
the years ended December 31, 2000 and 1999,

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respectively. For accounting purposes, this
income is only recognized on contracts sold through
securitizations treated as sales. Retained interest income is
dependent upon the average excess spread on the contracts sold,
credit losses and the size of the sold portfolio. The retained
interest expense recognized in 2001 is the result of higher
chargeoff experience on our sold portfolio as well as revised
estimates of future charge-offs due to continued slowing in the
economy. Net chargeoffs on the sold portfolio decreased to
$50.4 million in 2001 from $75.5 million in 2000 and
$91.8 million in 1999. The increase in retained interest
income in 2000 compared with 1999 was due to decreases in credit
losses, offset by a decrease in the average excess spread on the
contracts sold and a decrease in the size of the sold portfolio.
The outstanding sold portfolio had a weighted average gross
interest rate spread of 6.97% in 2001 compared with 7.38% and
8.34% in 2000 and 1999, respectively. The average balance of the
sold portfolio was $1.8 billion in 2001 compared with
$3.4 billion in 2000 and $4.0 billion in 1999.


According to the terms of each securitization,
contractual servicing income is generally earned at rates
ranging from 1.0% to 1.25% per annum on the outstanding balance
of contracts securitized. For accounting purposes, this income
is only recognized on contracts sold through securitizations
treated as sales. The decrease in contractual servicing income
to $23.0 million in 2001 from $41.8 million in 2000 is
due to the decrease in the average balance of the sold portfolio
from 2000 to 2001. Other fee income consists primarily of
documentation fees, late charges and deferment fees on our
managed portfolio, including loans securitized in transactions
accounted for as sales and secured financings, as well as
automobile contracts not securitized. The increase in other fee
income is due to the growth in our average managed portfolio to
$7.6 billion in 2001 from $6.1 billion in 2000 and
$4.8 billion in 1999.

Gain on sale, retained interest income and
contractual servicing income are not recognized on
securitizations accounted for as secured financings. Therefore,
we expect such income will not be recognized on our future
securitizations. Retained interest income and contractual
servicing income will continue to be recognized on existing
securitizations accounted for as sales and will decline as the
balance of those pools decreases. Even as these amounts
decrease, we expect net interest income will increase as we
retain automobile contracts on our balance sheet.

42



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##### Table of Contents



The following table lists each of our public
securitizations. The first issue in 1985 was rated AA by S&P
and Aa by Moodys. All issues since that time were rated
AAA by S&P and Aaa by Moodys, their respective highest
long-term ratings. The money market securities for each
applicable transaction were rated A-1+ by S&P and P-1 by
Moodys, their respective highest short-term ratings. All
securitizations prior to 1998-A were paid in full on or before
their contractual maturity dates.

Securitizations

|                       |        |            |  |                 |  |                      |            |                   |  |             |              |                     |  |                |       |   |  |  |       |   |  |  |       |   |  |  |       |  
|---------------------- | ------ | ---------- |  | --------------- |  | -------------------- | ---------- | ----------------- |  | ----------- | ------------ | ------------------- |  | -------------- | ----- | - |  |  | ----- | - |  |  | ----- | - |  |  | ----- | -
|                       |        |            |  |                 |  |                      |            | Remaining Balance |  | Original    |              | Original            |  |               
|Issue                  |        |            |  | Original        |  | Remaining Balance at |            | as a Percent of   |  | Weighted    |              | Weighted Average    |  | Gross Interest
|Number                 |        | Close Date |  | Balance         |  | December 31, 2001    |            | Original Balance  |  | Average APR |              | Securitization Rate |  | Rate Spread(1)
|                       |        |            |  |                 |  |                      |            |                   |  |             |              |                     |  |               
|                      
|(Dollars in thousands)
|                       | 1985-A |            |  | December, 1985  |  | $                    | 110,000    |                   |  |             | Paid in full |                     |  |                | 0     | % |  |  | 18.50 | % |  |  | 8.38  | % |  |  | 10.12 | %
|                       | 1986-A |            |  | November, 1986  |  |                      | 191,930    |                   |  |             | Paid in full |                     |  |                | 0     |   |  |  | 14.20 |   |  |  | 6.63  |   |  |  | 7.57  |  
|                       | 1987-A |            |  | March, 1987     |  |                      | 125,000    |                   |  |             | Paid in full |                     |  |                | 0     |   |  |  | 12.42 |   |  |  | 6.75  |   |  |  | 5.67  |  
|                       | 1987-B |            |  | July, 1987      |  |                      | 110,000    |                   |  |             | Paid in full |                     |  |                | 0     |   |  |  | 12.68 |   |  |  | 7.80  |   |  |  | 4.88  |  
|                       | 1988-A |            |  | February, 1988  |  |                      | 155,000    |                   |  |             | Paid in full |                     |  |                | 0     |   |  |  | 13.67 |   |  |  | 7.75  |   |  |  | 5.92  |  
|                       | 1988-B |            |  | May, 1988       |  |                      | 100,000    |                   |  |             | Paid in full |                     |  |                | 0     |   |  |  | 14.01 |   |  |  | 8.50  |   |  |  | 5.51  |  
|                       | 1988-C |            |  | July, 1988      |  |                      | 100,000    |                   |  |             | Paid in full |                     |  |                | 0     |   |  |  | 15.41 |   |  |  | 8.50  |   |  |  | 6.91  |  
|                       | 1988-D |            |  | October, 1988   |  |                      | 105,000    |                   |  |             | Paid in full |                     |  |                | 0     |   |  |  | 14.95 |   |  |  | 8.85  |   |  |  | 6.10  |  
|                       | 1989-A |            |  | March, 1989     |  |                      | 75,000     |                   |  |             | Paid in full |                     |  |                | 0     |   |  |  | 15.88 |   |  |  | 10.45 |   |  |  | 5.43  |  
|                       | 1989-B |            |  | June, 1989      |  |                      | 100,000    |                   |  |             | Paid in full |                     |  |                | 0     |   |  |  | 15.96 |   |  |  | 9.15  |   |  |  | 6.81  |  
|                       | 1990-A |            |  | August, 1990    |  |                      | 150,000    |                   |  |             | Paid in full |                     |  |                | 0     |   |  |  | 16.05 |   |  |  | 8.35  |   |  |  | 7.70  |  
|                       | 1990-1 |            |  | November, 1990  |  |                      | 150,000    |                   |  |             | Paid in full |                     |  |                | 0     |   |  |  | 15.56 |   |  |  | 8.50  |   |  |  | 7.06  |  
|                       | 1991-1 |            |  | April, 1991     |  |                      | 200,000    |                   |  |             | Paid in full |                     |  |                | 0     |   |  |  | 16.06 |   |  |  | 7.70  |   |  |  | 8.36  |  
|                       | 1991-2 |            |  | May, 1991       |  |                      | 200,000    |                   |  |             | Paid in full |                     |  |                | 0     |   |  |  | 15.75 |   |  |  | 7.30  |   |  |  | 8.45  |  
|                       | 1991-3 |            |  | August, 1991    |  |                      | 175,000    |                   |  |             | Paid in full |                     |  |                | 0     |   |  |  | 15.69 |   |  |  | 6.75  |   |  |  | 8.94  |  
|                       | 1991-4 |            |  | December, 1991  |  |                      | 150,000    |                   |  |             | Paid in full |                     |  |                | 0     |   |  |  | 15.53 |   |  |  | 5.63  |   |  |  | 9.90  |  
|                       | 1992-1 |            |  | March, 1992     |  |                      | 150,000    |                   |  |             | Paid in full |                     |  |                | 0     |   |  |  | 14.49 |   |  |  | 5.85  |   |  |  | 8.64  |  
|                       | 1992-2 |            |  | June, 1992      |  |                      | 165,000    |                   |  |             | Paid in full |                     |  |                | 0     |   |  |  | 14.94 |   |  |  | 5.50  |   |  |  | 9.44  |  
|                       | 1992-3 |            |  | September, 1992 |  |                      | 135,000    |                   |  |             | Paid in full |                     |  |                | 0     |   |  |  | 14.45 |   |  |  | 4.70  |   |  |  | 9.75  |  
|                       | 1993-1 |            |  | March, 1993     |  |                      | 250,000    |                   |  |             | Paid in full |                     |  |                | 0     |   |  |  | 13.90 |   |  |  | 4.45  |   |  |  | 9.45  |  
|                       | 1993-2 |            |  | June, 1993      |  |                      | 175,000    |                   |  |             | Paid in full |                     |  |                | 0     |   |  |  | 13.77 |   |  |  | 4.70  |   |  |  | 9.07  |  
|                       | 1993-3 |            |  | September, 1993 |  |                      | 187,500    |                   |  |             | Paid in full |                     |  |                | 0     |   |  |  | 13.97 |   |  |  | 4.25  |   |  |  | 9.72  |  
|                       | 1993-4 |            |  | December, 1993  |  |                      | 165,000    |                   |  |             | Paid in full |                     |  |                | 0     |   |  |  | 12.90 |   |  |  | 4.60  |   |  |  | 8.30  |  
|                       | 1994-1 |            |  | March, 1994     |  |                      | 200,000    |                   |  |             | Paid in full |                     |  |                | 0     |   |  |  | 13.67 |   |  |  | 5.10  |   |  |  | 8.57  |  
|                       | 1994-2 |            |  | May, 1994       |  |                      | 230,000    |                   |  |             | Paid in full |                     |  |                | 0     |   |  |  | 14.04 |   |  |  | 6.38  |   |  |  | 7.66  |  
|                       | 1994-3 |            |  | August, 1994    |  |                      | 200,000    |                   |  |             | Paid in full |                     |  |                | 0     |   |  |  | 14.59 |   |  |  | 6.65  |   |  |  | 7.94  |  
|                       | 1994-4 |            |  | October, 1994   |  |                      | 212,000    |                   |  |             | Paid in full |                     |  |                | 0     |   |  |  | 15.58 |   |  |  | 7.10  |   |  |  | 8.48  |  
|                       | 1995-1 |            |  | January, 1995   |  |                      | 190,000    |                   |  |             | Paid in full |                     |  |                | 0     |   |  |  | 15.71 |   |  |  | 8.05  |   |  |  | 7.66  |  
|                       | 1995-2 |            |  | March, 1995     |  |                      | 190,000    |                   |  |             | Paid in full |                     |  |                | 0     |   |  |  | 16.36 |   |  |  | 7.10  |   |  |  | 9.26  |  
|                       | 1995-3 |            |  | June, 1995      |  |                      | 300,000    |                   |  |             | Paid in full |                     |  |                | 0     |   |  |  | 15.05 |   |  |  | 6.05  |   |  |  | 9.00  |  
|                       | 1995-4 |            |  | September, 1995 |  |                      | 375,000    |                   |  |             | Paid in full |                     |  |                | 0     |   |  |  | 15.04 |   |  |  | 6.20  |   |  |  | 8.84  |  
|                       | 1995-5 |            |  | December, 1995  |  |                      | 425,000    |                   |  |             | Paid in full |                     |  |                | 0     |   |  |  | 15.35 |   |  |  | 5.88  |   |  |  | 9.47  |  
|                       | 1996-A |            |  | March, 1996     |  |                      | 485,000    |                   |  |             | Paid in full |                     |  |                | 0     |   |  |  | 15.46 |   |  |  | 6.13  |   |  |  | 9.33  |  
|                       | 1996-B |            |  | June, 1996      |  |                      | 525,000    |                   |  |             | Paid in full |                     |  |                | 0     |   |  |  | 15.74 |   |  |  | 6.75  |   |  |  | 8.99  |  
|                       | 1996-C |            |  | September, 1996 |  |                      | 535,000    |                   |  |             | Paid in full |                     |  |                | 0     |   |  |  | 15.83 |   |  |  | 6.60  |   |  |  | 9.23  |  
|                       | 1996-D |            |  | December, 1996  |  |                      | 545,000    |                   |  |             | Paid in full |                     |  |                | 0     |   |  |  | 15.43 |   |  |  | 6.17  |   |  |  | 9.26  |  
|                       | 1997-A |            |  | March, 1997     |  |                      | 500,000    |                   |  |             | Paid in full |                     |  |                | 0     |   |  |  | 15.33 |   |  |  | 6.60  |   |  |  | 8.73  |  
|                       | 1997-B |            |  | June, 1997      |  |                      | 590,000    |                   |  |             | Paid in full |                     |  |                | 0     |   |  |  | 15.36 |   |  |  | 6.37  |   |  |  | 8.99  |  
|                       | 1997-C |            |  | September, 1997 |  |                      | 600,000    |                   |  |             | Paid in full |                     |  |                | 0     |   |  |  | 15.43 |   |  |  | 6.17  |   |  |  | 9.26  |  
|                       | 1997-D |            |  | December, 1997  |  |                      | 500,000    |                   |  |             | Paid in full |                     |  |                | 0     |   |  |  | 15.19 |   |  |  | 6.34  |   |  |  | 8.85  |  
|                       | 1998-A |            |  | March, 1998     |  |                      | 525,000    |                   |  | $           | 49,627       |                     |  |                | 9.45  |   |  |  | 14.72 |   |  |  | 6.01  |   |  |  | 8.71  |  
|                       | 1998-B |            |  | June, 1998      |  |                      | 660,000    |                   |  |             | 94,062       |                     |  |                | 14.25 |   |  |  | 14.68 |   |  |  | 6.06  |   |  |  | 8.62  |  
|                       | 1998-C |            |  | November, 1998  |  |                      | 700,000    |                   |  |             | 135,444      |                     |  |                | 19.35 |   |  |  | 14.42 |   |  |  | 5.81  |   |  |  | 8.61  |  
|                       | 1999-A |            |  | January, 1999   |  |                      | 1,000,000  |                   |  |             | 231,712      |                     |  |                | 23.17 |   |  |  | 14.42 |   |  |  | 5.70  |   |  |  | 8.72  |  
|                       | 1999-B |            |  | July, 1999      |  |                      | 1,000,000  |                   |  |             | 343,081      |                     |  |                | 34.31 |   |  |  | 14.62 |   |  |  | 6.36  |   |  |  | 8.26  |  
|                       | 1999-C |            |  | November, 1999  |  |                      | 500,000    |                   |  |             | 209,400      |                     |  |                | 41.88 |   |  |  | 14.77 |   |  |  | 7.01  |   |  |  | 7.76  |  
|                       | 2000-A |            |  | March, 2000     |  |                      | 1,200,000  |                   |  |             | 555,202      |                     |  |                | 46.27 |   |  |  | 14.66 |   |  |  | 7.28  |   |  |  | 7.38  |  
|                       | 2000-B |            |  | May, 2000       |  |                      | 1,000,000  |                   |  |             | 521,620      |                     |  |                | 52.16 |   |  |  | 14.84 |   |  |  | 7.78  |   |  |  | 7.06  |  
|                       | 2000-C |            |  | August, 2000    |  |                      | 1,390,000  |                   |  |             | 708,094      |                     |  |                | 50.94 |   |  |  | 15.04 |   |  |  | 7.32  |   |  |  | 7.72  |  
|                       | 2000-D |            |  | November, 2000  |  |                      | 1,000,000  |                   |  |             | 766,367      |                     |  |                | 76.64 |   |  |  | 15.20 |   |  |  | 6.94  |   |  |  | 8.26  |  
|                       | 2001-A |            |  | January, 2001   |  |                      | 1,000,000  |                   |  |             | 837,369      |                     |  |                | 83.74 |   |  |  | 14.87 |   |  |  | 5.77  |   |  |  | 9.10  |  
|                       | 2001-B |            |  | May, 2001       |  |                      | 1,370,000  |                   |  |             | 1,084,218    |                     |  |                | 79.14 |   |  |  | 14.41 |   |  |  | 4.23  |   |  |  | 10.18 |  
|                       | 2001-C |            |  | August, 2001    |  |                      | 1,200,000  |                   |  |             | 1,081,034    |                     |  |                | 90.09 |   |  |  | 13.90 |   |  |  | 4.50  |   |  |  | 9.40  |  
|                       | 2002-1 |            |  | March, 2002(2)  |  |                      | 1,800,000  |                   |  |             |              |                     |  |                |       |   |  |  | 13.50 |   |  |  | 3.71  |   |  |  | 9.79  |  
|                       |        |            |  |                 |  |                      |            |                   |  |             |              |                     |  |                |       |   |  |  |       |   |  |  |       |   |  |  |       |  
|                       |        |            |  | Total           |  | $                    | 24,371,430 |                   |  | $           | 6,617,230    |                     |  |                |       |   |  |  |       |   |  |  |       |   |  |  |       |  
|                       |        |            |  |                 |  |                      |            |                   |  |             |              |                     |  |                |       |   |  |  |       |   |  |  |       |   |  |  |       |  




|    |                                                                                                                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | 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.
|   
|(2) | The 2002-1 securitization closed on
	March 20, 2002.                                                                                                                                                           

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##### Table of Contents



Mortgage
Banking Income

Mortgage banking operations included gains and
losses on the sale of loans and servicing rights, loan servicing
income net of amortization of capitalized servicing rights and
other income, primarily late charges. During 2001, mortgage
banking income totaled $1.5 million compared with
$6.9 million and $6.0 million in 2000 and 1999,
respectively. The 75% decline in mortgage banking income from
1999 to 2001 is due to our decision to exit the mortgage banking
business. This decision resulted in the sale of our remaining
mortgage banking operations in 1999.

The components of mortgage banking income were as
follows:

|                                                                     |                               |                                 |       |       |  |      |       |       |  |   |       |       | 
|-------------------------------------------------------------------- | ----------------------------- | ------------------------------- | ----- | ----- |  | ---- | ----- | ----- |  | - | ----- | ----- | 
|                                                                     |                               |                                
|                                                                     |                               | For the Year Ended December 31,
|                                                                     |                               |                                
|                                                                     |                               | 2001                            |       | 2000  |  | 1999
|                                                                     |                               |                                 |       |       |  |     
|                                                                     |                               |                                
|                                                                     |                               | (Dollars in thousands)         
|Net gains from sale of mortgage loans and
	mortgage servicing rights |                               | $                               | 1,384 |       |  | $    | 6,704 |       |  | $ | 3,184 |      
|Mortgage loan servicing income                                       |                               |                                 |       |       |  |      |       |       |  |   | 2,001 |      
|Other fee income                                                     |                               |                                 | 111   |       |  |      | 148   |       |  |   | 855   |      
|                                                                     |                               |                                 |       |       |  |      |       |       |  |   |       |      
|                                                                     | Total mortgage banking income |                                 | $     | 1,495 |  |      | $     | 6,852 |  |   | $     | 6,040 | 
|                                                                     |                               |                                 |       |       |  |      |       |       |  |   |       |      

Other
Noninterest Income

Other noninterest income consists primarily of
gains and losses on investments and mortgage-backed securities,
also known as MBS, and insurance income. There was
$0.5 million net gain on investments and MBS in 2001. This
compares with no gains or losses in 2000 and $1.3 million
net gain in 1999. The net gain in 2001 was the result of the
sale of $508 million of investment securities and MBS
during the year. The net gain in 1999 was the result of the sale
of $110 million of investment securities and MBS during the
year. Insurance income, which totaled $9.1 million,
$7.0 million and $6.1 million for the years ended
December 31, 2001, 2000 and 1999, respectively, includes
premiums and commissions earned on insurance and
insurance-related products, including collateral protection and
credit life insurance. Income from the sale of mutual funds and
annuities totaled $2.4 million, $2.4 million and
$2.1 million for the years ended December 31, 2001,
2000 and 1999, respectively. Income from the sale of mutual
funds and annuities is included in insurance income on the
Consolidated Statements of Income.

Miscellaneous income totaled $5.0 million,
$5.1 million, and $7.8 million for the years ended
December 31, 2001, 2000 and 1999, respectively.
Miscellaneous income in 2001 consisted of demand deposit fees,
income from rental operations, and other income. The decrease in
miscellaneous income from 1999 to 2001 was due to a decrease in
income from real estate activities attributable primarily to our
exit from the mortgage banking business in 1999.

Noninterest
Expense

Total noninterest expense was $245 million,
$221 million and $218 million for the years ended
December 31, 2001, 2000 and 1999, respectively. Noninterest
expense as a percentage of total revenues improved to 45% in
2001 compared to 49% in 2000 and 61% in 1999 as a result of
improved operating efficiencies. Noninterest expense increased
$23.9 million or 11% in 2001 compared with 2000 as a result
of the growth in our managed portfolio.

Income
Taxes

We file federal and certain state tax returns on
a consolidated basis. Other state tax returns are filed for each
subsidiary separately. Our effective tax rate was 39% in 2001
compared with 40% and 42% in 2000 and 1999, respectively.

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##### Table of Contents



Pro Forma
Portfolio Basis Statements of Income

During the first quarter of 2000, we changed the
structure of our securitizations so that they would no longer be
accounted for as sales but rather recorded as secured
financings. This decision is consistent with our business
strategy to record high quality earnings and to maintain a
conservative, well-capitalized balance sheet. If treated as
secured financings, no gain on sale or subsequent contractual
servicing and retained interest income is recognized. Instead,
the earnings of the automobile contracts in the trust and the
related financing costs are reflected over the life of the
underlying pool of automobile contracts as net interest income.
Additionally, no RISA is recorded on the balance sheet, which
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.

Over time, our securitizations that were recorded
as sales will mature and an increasing percentage of securitized
automobile contracts will be represented by securitizations that
are accounted for as secured financings. In the interim, we will
present pro forma portfolio basis statement of operations that
present our results under the assumption that all our
outstanding securitizations are treated as secured financings
rather than as sales. These statements provide a method by which
to gauge our year to year performance while we make this
transition.

We believe that such a presentation is an
important performance measure of our operations during this
transitory period. Differences between portfolio basis earnings
and reported earnings represent the transitional effect of
treating securitizations as secured financings rather than
sales. Ultimately, our reported earnings will approach our
portfolio basis earnings as we continue to treat future
securitizations as secured financings. We refer to these pro
forma results as portfolio basis statements of
operations since all automobile contracts sold would have
remained in our on balance sheet automobile contract portfolio
if we had accounted for the transactions as secured financings.

The following tables presents the portfolio basis
statements of income and reconciliation to net income as
reflected in our Consolidated Statements of Income:

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##### Table of Contents



PORTFOLIO BASIS STATEMENTS OF INCOME

|                                                                                        |                                                        |                                                  |           |         |  |      |           |         |  |   |         |         | 
|--------------------------------------------------------------------------------------- | ------------------------------------------------------ | ------------------------------------------------ | --------- | ------- |  | ---- | --------- | ------- |  | - | ------- | ------- | 
|                                                                                        |                                                        |                                                 
|                                                                                        |                                                        | For the Year Ended December 31,                 
|                                                                                        |                                                        |                                                 
|                                                                                        |                                                        | 2001                                             |           | 2000    |  | 1999
|                                                                                        |                                                        |                                                  |           |         |  |     
|                                                                                        |                                                        |                                                 
|                                                                                        |                                                        | (Dollars in thousands, except per share amounts)
|Interest income                                                                         |                                                        | $                                                | 1,188,074 |         |  | $    | 1,011,637 |         |  | $ | 799,587 |        
|Interest expense                                                                        |                                                        |                                                  | 628,045   |         |  |      | 549,476   |         |  |   | 411,379 |        
|                                                                                        |                                                        |                                                  |           |         |  |      |           |         |  |   |         |        
|                                                                                        | Net interest income                                    |                                                  |           | 560,029 |  |      |           | 462,161 |  |   |         | 388,208 | 
|Net chargeoffs(1)                                                                       |                                                        |                                                  | 173,201   |         |  |      | 117,807   |         |  |   | 103,638 |        
|Provision for growth(2)                                                                 |                                                        |                                                  | 19,968    |         |  |      | 23,233    |         |  |   | 20,310  |        
|                                                                                        |                                                        |                                                  |           |         |  |      |           |         |  |   |         |        
|                                                                                        | Provision for credit losses                            |                                                  |           | 193,169 |  |      |           | 141,040 |  |   |         | 123,948 | 
|                                                                                        |                                                        |                                                  |           |         |  |      |           |         |  |   |         |        
|                                                                                        | Net interest income after provision for credit
	losses |                                                  |           | 366,860 |  |      |           | 321,121 |  |   |         | 264,260 | 
|Noninterest income                                                                      |                                                        |                                                  | 83,705    |         |  |      | 76,728    |         |  |   | 64,001  |        
|Noninterest expense                                                                     |                                                        |                                                  | 244,952   |         |  |      | 222,156   |         |  |   | 224,960 |        
|                                                                                        |                                                        |                                                  |           |         |  |      |           |         |  |   |         |        
|                                                                                        | Income before income tax                               |                                                  |           | 205,613 |  |      |           | 175,693 |  |   |         | 103,301 | 
|Income tax(3)                                                                           |                                                        |                                                  | 79,071    |         |  |      | 70,572    |         |  |   | 43,491  |        
|                                                                                        |                                                        |                                                  |           |         |  |      |           |         |  |   |         |        
|                                                                                        | Income before minority interest                        |                                                  |           | 126,542 |  |      |           | 105,121 |  |   |         | 59,810  | 
|Minority interest in earnings                                                           |                                                        |                                                  | 19,970    |         |  |      | 14,963    |         |  |   | 6,614   |        
|                                                                                        |                                                        |                                                  |           |         |  |      |           |         |  |   |         |        
|                                                                                        | Income before extraordinary item                       |                                                  |           | 106,572 |  |      |           | 90,158  |  |   |         | 53,196  | 
|Extraordinary gain from early extinguishment of
	debt                                   |                                                        |                                                  | 16        |         |  |      | 241       |         |  |   | 2,132   |        
|                                                                                        |                                                        |                                                  |           |         |  |      |           |         |  |   |         |        
|                                                                                        | Portfolio basis net income                             |                                                  | $         | 106,588 |  |      | $         | 90,399  |  |   | $       | 55,328  | 
|                                                                                        |                                                        |                                                  |           |         |  |      |           |         |  |   |         |        
|Portfolio basis net income per common share
	 diluted Income before extraordinary item |                                                        | $                                                | 3.09      |         |  | $    | 3.05      |         |  | $ | 2.01    |        
|                                                                                        | Extraordinary item                                     |                                                  |           |         |  |      |           | 0.01    |  |   |         | 0.08    | 
|                                                                                        |                                                        |                                                  |           |         |  |      |           |         |  |   |         |        
|                                                                                        | Net income                                             |                                                  | $         | 3.09    |  |      | $         | 3.06    |  |   | $       | 2.09    | 
|                                                                                        |                                                        |                                                  |           |         |  |      |           |         |  |   |         |        




|    |                                                                                                                                             
|--- | --------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Represents actual chargeoffs incurred during the
	period, net of recoveries.                                                                
|   
|(2) | Represents additional allowance for credit losses
	that would be set aside due to an increase in the managed
	automobile contract portfolio.
|   
|(3) | Such tax effect is based upon our tax rate for
	the respective period.                                                                      

RECONCILIATION OF GAAP BASIS NET
INCOME

TO PORTFOLIO BASIS NET INCOME


|                             |                                    |                                   |         |         |        |      |        |         |        |   |        |         |       | 
|---------------------------- | ---------------------------------- | --------------------------------- | ------- | ------- | ------ | ---- | ------ | ------- | ------ | - | ------ | ------- | ----- | 
|                             |                                    |                                  
|                             |                                    | For the Year Ended December 31,  
|                             |                                    |                                  
|                             |                                    | 2001                              |         | 2000    |        | 1999
|                             |                                    |                                   |         |         |        |     
|                             |                                    |                                  
|                             |                                    | (Dollars in thousands)           
|GAAP basis net income        |                                    | $                                 | 55,690  |         |        | $    | 74,743 |         |        | $ | 52,626 |        
|Portfolio basis adjustments: |                                    |                                   |         |         |        |      |        |         |        |   |        |        
|                             | Gain on sale of contracts          |                                   |         |         |        |      |        | (7,719  | )      |   |        | (51,345 | )    
|                             | Retained interest expense (income) |                                   |         | 27,839  |        |      |        | (41,767 | )      |   |        | (47,812 | )    
|                             | Contractual servicing income       |                                   |         | (23,018 | )      |      |        | (51,429 | )      |   |        | (46,847 | )    
|                             | Net interest income                |                                   |         | 89,346  |        |      |        | 191,994 |        |   |        | 242,878 |      
|                             | Provision for credit losses        |                                   |         | 3,808   |        |      |        | (58,907 | )      |   |        | (85,549 | )    
|                             | Operating expenses                 |                                   |         | (80     | )      |      |        | (965    | )      |   |        | (6,500  | )    
|                             | Minority interest                  |                                   |         | (9,601  | )      |      |        | (3,111  | )      |   |        | (92     | )    
|                             |                                    |                                   |         |         |        |      |        |         |        |   |        |        
|                             |                                    | Total portfolio basis adjustments |         |         | 88,294 |      |        |         | 28,096 |   |        |         | 4,733 | 
|Net tax effect               |                                    |                                   | 37,396  |         |        |      | 12,440 |         |        |   | 2,031  |        
|                             |                                    |                                   |         |         |        |      |        |         |        |   |        |        
|Portfolio basis net income   |                                    | $                                 | 106,588 |         |        | $    | 90,399 |         |        | $ | 55,328 |        
|                             |                                    |                                   |         |         |        |      |        |         |        |   |        |        

46



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Financial Condition

Overview

We originated $4.9 billion of automobile
contracts in 2001 compared with $4.2 billion during 2000.
As a result of higher contract originations, our portfolio of
managed automobile contracts reached $8.2 billion at
December 31, 2001, up from $6.8 billion at
December 31, 2000.

Our retail banking division increased total
demand deposit and money market accounts by $151 million or
34% to $595 million at December 31, 2001. Total demand
deposit and money market accounts represented 32% of total
retail banking deposits. The commercial banking division had
deposits of $161 million and $444 million outstanding
at December 31, 2001 and 2000, respectively.

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 other assets on our Consolidated Statements
of Financial Condition. We also hold owner trust certificates
and in prior years United States Agency and Treasury securities,
which are classified as available for sale. The owner trust
certificates are recorded at cost, which approximates fair
value. The United States Agency and Treasury securities 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,          
|                                                             |                                                                                                                    |                       
|                                                             |                                                                                                                    | 2001                   |         | 2000   |  | 1999 |         | 1998   |  | 1997
|                                                             |                                                                                                                    |                        |         |        |  |      |         |        |  |     
|                                                             |                                                                                                                    |                       
|                                                             |                                                                                                                    | (Dollars in thousands)
|Interest bearing deposits with other financial
	institutions |                                                                                                                    | $                      | 720     |        |  | $    | 720     |        |  | $    | 720     |        |  | $ | 515     |        |  | $ | 15,510  |        
|Other short-term investments                                 |                                                                                                                    |                        | 35,000  |        |  |      | 66,500  |        |  |      | 137,000 |        |  |   | 22,864  |        |  |   | 84,136  |        
|Investment securities:                                       |                                                                                                                    |                        |         |        |  |      |         |        |  |      |         |        |  |   |         |        |  |   |         |        
|                                                             | U.S. Treasury securities and obligations of other
	U.S. government agencies and corporations  available
	for sale |                        |         |        |  |      |         |        |  |      |         |        |  |   |         | 75,592 |  |   |         | 121,714 | 
|                                                             | Obligations of states and political subdivisions                                                                   |                        |         | 1,549  |  |      |         | 1,533  |  |      |         | 1,506  |  |   |         | 1,572  |  |   |         | 1,532   | 
|                                                             | Owner trust certificates                                                                                           |                        |         | 4,668  |  |      |         | 6,517  |  |      |         | 7,865  |  |   |         | 5,687  |  |   |         | 3,723   | 
|                                                             | FHLB stock                                                                                                         |                        |         | 64,446 |  |      |         | 24,367 |  |      |         | 23,313 |  |   |         | 24,555 |  |   |         | 25,762  | 
|                                                             | Other                                                                                                              |                        |         | 4,294  |  |      |         | 2,684  |  |      |         | 739    |  |   |         | 632    |  |   |         | 163     | 
|                                                             |                                                                                                                    |                        |         |        |  |      |         |        |  |      |         |        |  |   |         |        |  |   |         |        
|                                                             |                                                                                                                    | $                      | 110,677 |        |  | $    | 102,321 |        |  | $    | 171,143 |        |  | $ | 131,417 |        |  | $ | 252,540 |        
|                                                             |                                                                                                                    |                        |         |        |  |      |         |        |  |      |         |        |  |   |         |        |  |   |         |        

47



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The following table sets forth the stated
maturities of our investment securities at December 31,
2001:

|                                                             |                                                  |                        |        |               |  |              |       |           |  |           |       |       |  |  |  |  |  |   |        |        | 
|------------------------------------------------------------ | ------------------------------------------------ | ---------------------- | ------ | ------------- |  | ------------ | ----- | --------- |  | --------- | ----- | ----- |  |  |  |  |  | - | ------ | ------ | 
|                                                             |                                                  | 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 |                                                  | $                      | 520    |               |  | $            | 200   |           |  |           |       |       |  |  |  |  |  |   |        |       
|Other short-term investments                                 |                                                  |                        | 35,000 |               |  |              |       |           |  |           |       |       |  |  |  |  |  |   |        |       
|Investment securities:                                       |                                                  |                        |        |               |  |              |       |           |  |           |       |       |  |  |  |  |  |   |        |       
|                                                             | Obligations of states and political subdivisions |                        |        |               |  |              |       | 492       |  |           | $     | 1,057 |  |  |  |  |  |   |        |        | 
|                                                             | Owner trust certificates                         |                        |        |               |  |              |       | 4,143     |  |           |       | 525   |  |  |  |  |  |   |        |        | 
|                                                             | FHLB stock                                       |                        |        |               |  |              |       |           |  |           |       |       |  |  |  |  |  |   | $      | 64,446 | 
|                                                             | Other                                            |                        |        |               |  |              |       |           |  |           |       |       |  |  |  |  |  |   |        | 4,294  | 
|                                                             |                                                  |                        |        |               |  |              |       |           |  |           |       |       |  |  |  |  |  |   |        |       
|                                                             |                                                  | $                      | 35,520 |               |  | $            | 4,835 |           |  | $         | 1,582 |       |  |  |  |  |  | $ | 68,740 |       
|                                                             |                                                  |                        |        |               |  |              |       |           |  |           |       |       |  |  |  |  |  |   |        |       
|Weighted average interest rate(1)                            |                                                  |                        | 1.67   | %             |  |              | 5.27  | %         |  |           | 5.45  | %     |  |  |  |  |  |   | 5.50   | %     




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

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.
See Business  Supervision and Regulation. 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,          
|                               |                                  |                       
|                               |                                  | 2001                   |           | 2000     
|                               |                                  |                        |           |          
|                               |                                  |                       
|                               |                                  | (Dollars in thousands)
|Available for sale securities: |                                  |                        |           |           |  |   |           |          
|                               | GNMA certificates                |                        | $         | 2,036,369 |  |   | $         | 2,157,076 | 
|                               | FNMA participation certificates  |                        |           | 51,894    |  |   |           | 68,870    | 
|                               | FHLMC participation certificates |                        |           | 1,692     |  |   |           | 1,938     | 
|                               | Other                            |                        |           | 2,270     |  |   |           | 2,564     | 
|                               |                                  |                        |           |           |  |   |           |          
|                               |                                  | $                      | 2,092,225 |           |  | $ | 2,230,448 |          
|                               |                                  |                        |           |           |  |   |           |          

The portfolio has a weighted average interest
rate of 5.95% at December 31, 2001. Our MBS portfolio had
maturities of ten years or greater at December 31, 2001,
although payments are generally received monthly throughout the
life of these securities.

Loan
Portfolios

At December 31, 2001, our loan portfolio
totaled $7.5 billion, of which 94% were automobile
contracts net of unearned interest, 5% were loans secured by
real property used primarily for residential purposes, and 1%
were commercial loans. Our loan portfolio totaled
$4.9 billion at December 31, 2000, of which 88% were
automobile contracts net of unearned interest, 10% were loans
secured by real property used primarily for residential
purposes, and 2% were commercial loans. Consumer loans serviced
for the benefit of others totaled $1.2 billion at
December 31, 2001 compared with $2.6 billion at
December 31, 2000.

48



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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,          
|                                |                     |                       
|                                |                     |                        |           |           |           |        |      |      |       |       
|                                |                     | 2001                   |           | 2000      |           | 1999   |      | 1998 |       | 1997  
|                                |                     |                        |           |           |           |        |      |      |       |       
|                                |                     | Amount                 |           | %         |           | Amount |      | %    |       | Amount |           | %         |           | Amount |      | %    |       | Amount |           | %        
|                                |                     |                        |           |           |           |        |      |      |       |        |           |           |           |        |      |      |       |        |           |          
|                                |                     |                       
|                                |                     | (Dollars in thousands)
|Consumer loans:                 |                     |                        |           |           |           |        |      |      |       |        |           |           |           |        |      |      |       |        |           |           |           |  |      |      |       |   |           |         |           |  |      |      |       |   |           |           |           |  |      |     
|                                | Automobile contract |                        | $         | 7,173,726 |           |        |      | 95.2 | %     |        | $         | 4,389,984 |           |        |      | 89.2 | %     |        | $         | 1,549,966 |           |  |      | 71.0 | %     |   | $         | 944,085 |           |  |      | 47.4 | %     |   | $         | 231,060   |           |  |      | 12.3 | %    
|                                | Other               |                        |           | 8,826     |           |        |      | 0.1  |       |        |           | 13,456    |           |        |      | 0.3  |       |        |           | 20,951    |           |  |      | 1.0  |       |   |           | 36,940  |           |  |      | 1.8  |       |   |           | 89,716    |           |  |      | 4.8  |      
|                                |                     |                        |           |           |           |        |      |      |       |        |           |           |           |        |      |      |       |        |           |           |           |  |      |      |       |   |           |         |           |  |      |      |       |   |           |           |           |  |      |     
|                                |                     |                        | 7,182,552 |           |           |        | 95.3 |      |       |        | 4,403,440 |           |           |        | 89.5 |      |       |        | 1,570,917 |           |           |  | 72.0 |      |       |   | 981,025   |         |           |  | 49.2 |      |       |   | 320,776   |           |           |  | 17.1 |     
|Less: unearned interest         |                     |                        | 108,169   |           |           |        | 1.4  |      |       |        | 94,404    |           |           |        | 1.9  |      |       |        | 54,248    |           |           |  | 2.5  |      |       |   | 48,015    |         |           |  | 2.4  |      |       |   | 22,226    |           |           |  | 1.2  |     
|                                |                     |                        |           |           |           |        |      |      |       |        |           |           |           |        |      |      |       |        |           |           |           |  |      |      |       |   |           |         |           |  |      |      |       |   |           |           |           |  |      |     
|                                |                     | Total consumer loans   |           |           | 7,074,383 |        |      |      | 93.9  |        |           |           | 4,309,036 |        |      |      | 87.6  |        |           |           | 1,516,669 |  |      |      | 69.5  |   |           |         | 933,010   |  |      |      | 46.8  |   |           |           | 298,550   |  |      |      | 15.9  |  
|Mortgage loans:                 |                     |                        |           |           |           |        |      |      |       |        |           |           |           |        |      |      |       |        |           |           |           |  |      |      |       |   |           |         |           |  |      |      |       |   |           |           |           |  |      |     
|                                | Existing properties |                        |           | 361,115   |           |        |      | 4.8  |       |        |           | 498,963   |           |        |      | 10.1 |       |        |           | 589,286   |           |  |      | 27.0 |       |   |           | 993,645 |           |  |      | 49.9 |       |   |           | 1,529,776 |           |  |      | 81.7 |      
|                                | Construction        |                        |           | 15,638    |           |        |      | 0.2  |       |        |           | 14,784    |           |        |      | 0.3  |       |        |           | 23,190    |           |  |      | 1.1  |       |   |           | 18,345  |           |  |      | 0.9  |       |   |           | 15,835    |           |  |      | 0.8  |      
|                                |                     |                        |           |           |           |        |      |      |       |        |           |           |           |        |      |      |       |        |           |           |           |  |      |      |       |   |           |         |           |  |      |      |       |   |           |           |           |  |      |     
|                                |                     |                        | 376,753   |           |           |        | 5.0  |      |       |        | 513,747   |           |           |        | 10.4 |      |       |        | 612,476   |           |           |  | 28.1 |      |       |   | 1,011,990 |         |           |  | 50.8 |      |       |   | 1,545,611 |           |           |  | 82.5 |     
|Less: undisbursed loan proceeds |                     |                        | 3,298     |           |           |        |      |      |       |        | 6,316     |           |           |        | 0.1  |      |       |        | 14,174    |           |           |  | 0.7  |      |       |   | 5,057     |         |           |  | 0.4  |      |       |   | 8,657     |           |           |  | 0.4  |     
|                                |                     |                        |           |           |           |        |      |      |       |        |           |           |           |        |      |      |       |        |           |           |           |  |      |      |       |   |           |         |           |  |      |      |       |   |           |           |           |  |      |     
|                                |                     | Total mortgage loans   |           |           | 373,455   |        |      |      | 5.0   |        |           |           | 507,431   |        |      |      | 10.3  |        |           |           | 598,302   |  |      |      | 27.4  |   |           |         | 1,006,933 |  |      |      | 50.4  |   |           |           | 1,536,954 |  |      |      | 82.1  |  
|Commercial loans                |                     |                        | 85,312    |           |           |        | 1.1  |      |       |        | 107,586   |           |           |        | 2.1  |      |       |        | 66,927    |           |           |  | 3.1  |      |       |   | 52,940    |         |           |  | 2.8  |      |       |   | 37,314    |           |           |  | 2.0  |     
|                                |                     |                        |           |           |           |        |      |      |       |        |           |           |           |        |      |      |       |        |           |           |           |  |      |      |       |   |           |         |           |  |      |      |       |   |           |           |           |  |      |     
|                                |                     | Total loans            |           | $         | 7,533,150 |        |      |      | 100.0 | %      |           | $         | 4,924,053 |        |      |      | 100.0 | %      |           | $         | 2,181,898 |  |      |      | 100.0 | % |           | $       | 1,992,883 |  |      |      | 100.0 | % |           | $         | 1,872,818 |  |      |      | 100.0 | %
|                                |                     |                        |           |           |           |        |      |      |       |        |           |           |           |        |      |      |       |        |           |           |           |  |      |      |       |   |           |         |           |  |      |      |       |   |           |           |           |  |      |     

The following table sets forth the composition of
loans serviced for the benefit of others:

|                                          |                      |                                                |   |           |           |        |  |       |       |        |   |           |           |        |  |       |       |        |   |           |           |  |  |      |       |   |   |           |           |  |  |      |       |   |   |           |           |  |  |      |       |  
|----------------------------------------- | -------------------- | ---------------------------------------------- | - | --------- | --------- | ------ |  | ----- | ----- | ------ | - | --------- | --------- | ------ |  | ----- | ----- | ------ | - | --------- | --------- |  |  | ---- | ----- | - | - | --------- | --------- |  |  | ---- | ----- | - | - | --------- | --------- |  |  | ---- | ----- | -
|                                          |                      |                                               
|                                          |                      | December 31,                                  
|                                          |                      |                                               
|                                          |                      |                                                |   |           |           |        |  |       |       |       
|                                          |                      | 2001                                           |   | 2000      |           | 1999   |  | 1998  |       | 1997  
|                                          |                      |                                                |   |           |           |        |  |       |       |       
|                                          |                      | Amount                                         |   | %         |           | Amount |  | %     |       | Amount |   | %         |           | Amount |  | %     |       | Amount |   | %        
|                                          |                      |                                                |   |           |           |        |  |       |       |        |   |           |           |        |  |       |       |        |   |          
|                                          |                      |                                               
|                                          |                      | (Dollars in thousands)                        
|Loans serviced for the benefit of others: |                      |                                                |   |           |           |        |  |       |       |        |   |           |           |        |  |       |       |        |   |           |           |  |  |      |       |   |   |           |           |  |  |      |       |   |   |           |           |  |  |     
|                                          | Automobile contracts |                                                | $ | 1,215,058 |           |        |  | 100.0 | %     |        | $ | 2,608,017 |           |        |  | 100.0 | %     |        | $ | 3,890,685 |           |  |  | 97.0 | %     |   | $ | 3,491,457 |           |  |  | 68.4 | %     |   | $ | 3,459,272 |           |  |  | 41.3 | %    
|                                          | Mortgage loans       |                                                |   |           |           |        |  |       |       |        |   |           |           |        |  |       |       |        |   | 120,832   |           |  |  | 3.0  |       |   |   | 1,612,103 |           |  |  | 31.6 |       |   |   | 4,917,712 |           |  |  | 58.7 |      
|                                          |                      |                                                |   |           |           |        |  |       |       |        |   |           |           |        |  |       |       |        |   |           |           |  |  |      |       |   |   |           |           |  |  |      |       |   |   |           |           |  |  |     
|                                          |                      | Total loans serviced for the benefit of others |   | $         | 1,215,058 |        |  |       | 100.0 | %      |   | $         | 2,608,017 |        |  |       | 100.0 | %      |   | $         | 4,011,517 |  |  |      | 100.0 | % |   | $         | 5,103,560 |  |  |      | 100.0 | % |   | $         | 8,376,984 |  |  |      | 100.0 | %
|                                          |                      |                                                |   |           |           |        |  |       |       |        |   |           |           |        |  |       |       |        |   |           |           |  |  |      |       |   |   |           |           |  |  |      |       |   |   |           |           |  |  |     

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 are not adding new mortgage loans to our balance sheet.

Our total mortgage loan portfolio consisted of
the following:

|                                 |                    |                        |         |         |         |        |       |      |       |   |         |         |         |  |       |      |       |  
|-------------------------------- | ------------------ | ---------------------- | ------- | ------- | ------- | ------ | ----- | ---- | ----- | - | ------- | ------- | ------- |  | ----- | ---- | ----- | -
|                                 |                    |                       
|                                 |                    | December 31,          
|                                 |                    |                       
|                                 |                    |                        |         |        
|                                 |                    | 2001                   |         | 2000   
|                                 |                    |                        |         |        
|                                 |                    | Amount                 |         | %       |         | Amount |       | %   
|                                 |                    |                        |         |         |         |        |       |     
|                                 |                    |                       
|                                 |                    | (Dollars in thousands)
|Single family residential loans: |                    |                        |         |         |         |        |       |      |       |   |         |         |         |  |       |     
|                                 | First trust deeds  |                        | $       | 146,895 |         |        |       | 39.3 | %     |   | $       | 224,798 |         |  |       | 44.3 | %    
|                                 | Second trust deeds |                        |         | 4,645   |         |        |       | 1.3  |       |   |         | 6,056   |         |  |       | 1.2  |      
|                                 |                    |                        |         |         |         |        |       |      |       |   |         |         |         |  |       |     
|                                 |                    |                        | 151,540 |         |         |        | 40.6  |      |       |   | 230,854 |         |         |  | 45.5  |     
|Multifamily residential loans    |                    |                        | 180,850 |         |         |        | 48.4  |      |       |   | 230,004 |         |         |  | 45.3  |     
|Construction loans               |                    |                        | 15,638  |         |         |        | 4.2   |      |       |   | 14,784  |         |         |  | 2.9   |     
|Other                            |                    |                        | 28,725  |         |         |        | 7.7   |      |       |   | 38,105  |         |         |  | 7.5   |     
|                                 |                    |                        |         |         |         |        |       |      |       |   |         |         |         |  |       |     
|                                 |                    |                        | 376,753 |         |         |        | 100.9 |      |       |   | 513,747 |         |         |  | 101.2 |     
|Less: undisbursed loan proceeds  |                    |                        | 3,298   |         |         |        | 0.9   |      |       |   | 6,316   |         |         |  | 1.2   |     
|                                 |                    |                        |         |         |         |        |       |      |       |   |         |         |         |  |       |     
|                                 |                    | Total mortgage loans   |         | $       | 373,455 |        |       |      | 100.0 | % |         | $       | 507,431 |  |       |      | 100.0 | %
|                                 |                    |                        |         |         |         |        |       |      |       |   |         |         |         |  |       |     

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The following table sets forth information on the
amount of fixed rate mortgage loans and adjustable rate mortgage
loans, also known as ARMs, net of undisbursed loan proceeds, in
our portfolio:

|                       |                               |                        |        |         |         |        |     |      |       |   |        |         |         |  |     |      |       |  
|---------------------- | ----------------------------- | ---------------------- | ------ | ------- | ------- | ------ | --- | ---- | ----- | - | ------ | ------- | ------- |  | --- | ---- | ----- | -
|                       |                               |                       
|                       |                               | December 31,          
|                       |                               |                       
|                       |                               |                        |        |        
|                       |                               | 2001                   |        | 2000   
|                       |                               |                        |        |        
|                       |                               | Amount                 |        | %       |         | Amount |     | %   
|                       |                               |                        |        |         |         |        |     |     
|                       |                               |                       
|                       |                               | (Dollars in thousands)
|Fixed rate loans       |                               | $                      | 21,654 |         |         |        | 5.8 | %    |       | $ | 38,843 |         |         |  | 7.6 | %   
|Adjustable rate loans: |                               |                        |        |         |         |        |     |      |       |   |        |         |         |  |     |     
|                       | With negative amortization    |                        |        | 240,462 |         |        |     | 64.4 |       |   |        | 328,109 |         |  |     | 64.7 |      
|                       | Without negative amortization |                        |        | 111,339 |         |        |     | 29.8 |       |   |        | 140,479 |         |  |     | 27.7 |      
|                       |                               |                        |        |         |         |        |     |      |       |   |        |         |         |  |     |     
|                       |                               | Total mortgage loans   |        | $       | 373,455 |        |     |      | 100.0 | % |        | $       | 507,431 |  |     |      | 100.0 | %
|                       |                               |                        |        |         |         |        |     |      |       |   |        |         |         |  |     |     

Commercial
Loan Portfolio

We had outstanding commercial loan commitments of
$141 million at December 31, 2001 compared with
$124 million at December 31, 2000. We originated
$292 million and $266 million of commercial loans for
the years ended December 31, 2001 and 2000, respectively.
Though we continue to focus on expanding our commercial banking
operation, it was not a significant source of revenues for the
year ended December 31, 2001.

Amounts Due
From Trusts

The excess cash flows generated by automobile
contracts sold to each of the securitization trusts is 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. For transactions treated as sales,
we establish a liability associated with the use of the spread
account funds, which is reduced as such funds reach
predetermined funding levels. We are released from these
obligations after the spread account reaches a predetermined
funding level. The amounts due from trusts represent amounts due
to us that are still under obligation to be held in the spread
accounts for transactions treated as sales. The amounts due from
trusts at December 31, 2001 was $136 million compared
with $357 million at December 31, 2000. The decrease
is the result of a reduction in the outstanding amount of
securitizations treated as sales for accounting purposes.

Retained
Interest in Securitized Assets

RISA is capitalized upon the sale of automobile
contracts to securitization trusts. RISA represents the present
value of the estimated future cash flows to be received by us
from the excess spread created in securitization transactions.
The determination of the value of the RISA is a critical
accounting process. Future cash flows are calculated by taking
the coupon rate of the automobile contracts securitized less the
interest rate paid to the investors less contractually specified
servicing fees and guarantor fees, after giving effect to
estimated credit losses and prepayments.

RISA is classified in a manner similar to
available for sale securities and, as such, is marked to market
each quarter. Market value changes are calculated by discounting
estimated future cash flows using a current market discount
rate. Any changes in the market value of the RISA are reported
as a separate component of shareholders equity on our
Consolidated Statements of Financial Condition as accumulated
other comprehensive income (loss), net of applicable taxes. On a
quarterly basis, we evaluate the carrying value of the RISA in
light of the actual performance of the underlying automobile
contracts and make adjustments to reduce the carrying value, if
appropriate.

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None of our securitizations in 2001 were treated
as sales. Therefore, we did not record any retained interest in
securitized assets in 2001. Selected original assumptions used
to estimate future cash flows for contracts securitized in 2000
and 1999 were as follows:

|                                                |  |                             |        |         |  |              |        |             |  |  |        |  |  |  |  | 
|----------------------------------------------- |  | --------------------------- | ------ | ------- |  | ------------ | ------ | ----------- |  |  | ------ |  |  |  |  | 
|                                                |  |                            
|                                                |  | For the Three Months Ended,
|                                                |  |                            
|                                                |  | March 31                    |        | June 30 |  | September 30 |        | December 31
|                                                |  |                             |        |         |  |              |        |            
|2000                                            |  |                             | 2000-A |         |  |              |        |             |  |  |        |  |  |  |  | 
|Cumulative net credit losses                    |  |                             | 6.1%   |         |  |              |        |             |  |  |        |  |  |  |  | 
|Average monthly ABS prepayment speed            |  |                             | 1.5%   |         |  |              |        |             |  |  |        |  |  |  |  | 
|Discount rate                                   |  |                             | 10.8%  |         |  |              |        |             |  |  |        |  |  |  |  | 
|Weighted average remaining maturity (in months) |  |                             | 61     |         |  |              |        |             |  |  |        |  |  |  |  | 
|                                               
|1999                                            |  |                             | 1999-A |         |  |              | 1999-B |             |  |  | 1999-C |  |  |  |  | 
|Cumulative net credit losses                    |  |                             | 6.2%   |         |  |              | 6.1%   |             |  |  | 6.1%   |  |  |  |  | 
|Average monthly ABS prepayment speed            |  |                             | 1.5%   |         |  |              | 1.5%   |             |  |  | 1.5%   |  |  |  |  | 
|Discount rate                                   |  |                             | 9.1%   |         |  |              | 9.7%   |             |  |  | 10.2%  |  |  |  |  | 
|Weighted average remaining maturity (in months) |  |                             | 59     |         |  |              | 59     |             |  |  | 61     |  |  |  |  | 

At December 31, 2001 and 2000, key economic
assumptions and the sensitivity of the fair value of the RISA to
immediate 10% and 20% adverse changes in assumed economics were
as follows:

|                                                                         |  |                        |              |      |  |   |              |  
|------------------------------------------------------------------------ |  | ---------------------- | ------------ | ---- |  | - | ------------ | -
|                                                                         |  |                       
|                                                                         |  | December 31,          
|                                                                         |  |                       
|                                                                         |  | 2001                   |              | 2000
|                                                                         |  |                        |              |     
|                                                                         |  |                       
|                                                                         |  | (Dollars in thousands)
|Fair value of the RISA                                                   |  | $                      | 37,392       |      |  | $ | 111,558      |  
|Weighted average remaining maturity of underlying
	contracts (in months) |  |                        | 33           |      |  |   | 41           |  
|                                                                        
|ABS prepayment speed (monthly rate)                                      |  |                        | 1.0          | %    |  |   | 1.5          | %
|Fair value after 10% adverse change                                      |  | $                      | 35,184       |      |  | $ | 107,843      |  
|Fair value after 20% adverse change                                      |  | $                      | 34,266       |      |  | $ | 103,574      |  
|                                                                        
|Cumulative net credit losses (pool life rate)                            |  |                        | 6.1% -   7.0 | %    |  |   | 6.1% -   7.6 | %
|Fair value after 10% adverse change                                      |  | $                      | 32,928       |      |  | $ | 103,880      |  
|Fair value after 20% adverse change                                      |  | $                      | 29,752       |      |  | $ | 95,925       |  
|                                                                        
|Discount rate (annual rate)                                              |  |                        | 7.28         | %    |  |   | 10.16        | %
|Fair value after 10% adverse change                                      |  | $                      | 37,135       |      |  | $ | 110,963      |  
|Fair value after 20% adverse change                                      |  | $                      | 36,880       |      |  | $ | 109,810      |  

The following table sets forth the components of
the RISA:

|                                          |  |                                 |         |      |  |      |         |   |  |   |          |  
|----------------------------------------- |  | ------------------------------- | ------- | ---- |  | ---- | ------- | - |  | - | -------- | -
|                                          |  |                                
|                                          |  | For the Year Ended December 31,
|                                          |  |                                
|                                          |  | 2001                            |         | 2000 |  | 1999
|                                          |  |                                 |         |      |  |     
|                                          |  |                                
|                                          |  | (Dollars in thousands)         
|Balance at the beginning of period        |  | $                               | 111,558 |      |  | $    | 167,277 |   |  | $ | 171,230  |  
|Additions                                 |  |                                 |         |      |  |      | 19,240  |   |  |   | 111,767  |  
|Amortization                              |  |                                 | (75,546 | )    |  |      | (75,958 | ) |  |   | (111,752 | )
|Change in unrealized gain/loss on RISA(1) |  |                                 | 1,380   |      |  |      | 999     |   |  |   | (3,968   | )
|                                          |  |                                 |         |      |  |      |         |   |  |   |          |  
|Balance at end of period(2)               |  | $                               | 37,392  |      |  | $    | 111,558 |   |  | $ | 167,277  |  
|                                          |  |                                 |         |      |  |      |         |   |  |   |          |  




|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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.
|   
|(2) | There are no restrictions on the RISA.                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

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The following table presents the estimated future
undiscounted cash flows to be received from securitizations
treated as sales:

|                                                                                                      |  |                        |           |      |  |   |           |  
|----------------------------------------------------------------------------------------------------- |  | ---------------------- | --------- | ---- |  | - | --------- | -
|                                                                                                      |  |                       
|                                                                                                      |  | December 31,          
|                                                                                                      |  |                       
|                                                                                                      |  | 2001                   |           | 2000
|                                                                                                      |  |                        |           |     
|                                                                                                      |  |                       
|                                                                                                      |  | (Dollars in thousands)
|Estimated net undiscounted cash flows                                                                 |  | $                      | 87,358    |      |  | $ | 235,270   |  
|Off balance sheet allowance for credit losses                                                         |  |                        | (47,235   | )    |  |   | (110,339  | )
|Discount to present value                                                                             |  |                        | (2,731    | )    |  |   | (13,373   | )
|                                                                                                      |  |                        |           |      |  |   |           |  
|Retained interest in securitized assets                                                               |  | $                      | 37,392    |      |  | $ | 111,558   |  
|                                                                                                      |  |                        |           |      |  |   |           |  
|Outstanding balance of contracts sold through
	securitizations                                        |  | $                      | 1,215,058 |      |  | $ | 2,608,017 |  
|Off balance sheet allowance for credit losses as
	a percent of contracts sold through securitizations |  |                        | 3.89      | %    |  |   | 4.23      | %

The decline in the off balance sheet allowance
for credit losses both on a dollar and percent basis is the
result of our securitizations no longer being treated as sales.
Older transactions treated as sales have lower losses each month
after securitization as estimated future credit losses are
realized.

We believe that the off balance sheet allowance
for credit losses is currently adequate to absorb probable
losses in the sold portfolio that can be reasonably estimated.

The following table summarizes certain cash flows
received from and paid to securitization trusts on
securitizations treated as sales:

|                                 |  |                                 |        |      |  |      |         |  |  |   |           | 
|-------------------------------- |  | ------------------------------- | ------ | ---- |  | ---- | ------- |  |  | - | --------- | 
|                                 |  |                                
|                                 |  | For the Year Ended December 31,
|                                 |  |                                
|                                 |  | 2001                            |        | 2000 |  | 1999
|                                 |  |                                 |        |      |  |     
|                                 |  |                                
|                                 |  | (Dollars in thousands)         
|Proceeds                         |  |                                 |        |      |  | $    | 660,000 |  |  | $ | 2,500,000 | 
|Excess cash flows from trusts    |  | $                               | 47,357 |      |  |      | 127,294 |  |  |   | 159,564   | 
|Servicing fees received          |  |                                 | 23,018 |      |  |      | 41,767  |  |  |   | 46,847    | 
|Servicing advances               |  |                                 | 20,203 |      |  |      | 38,060  |  |  |   | 55,593    | 
|Repayments on servicing advances |  |                                 | 23,893 |      |  |      | 49,531  |  |  |   | 63,940    | 

The balance of contracts 30 days or more
delinquent included in such securitization trusts totaled
$67.4 million and $110 million at December 31,
2001 and 2000, respectively. Net chargeoffs for these
securitization trusts totaled $50.4 million,
$75.5 million and $91.8 million for the years ended
December 31, 2001, 2000 and 1999, respectively.

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.

At December 31, 2001, the percentage of
managed accounts delinquent 30 days or greater was 3.72%
compared with 3.18% at December 31, 2000 and 2.84% at
December 31, 1999. We calculate delinquency based on the
contractual due date. Net chargeoffs on average automobile
contracts managed for the year ended December 31, 2001 were
2.27% compared with 1.91% and 2.13% for the years ended
December 31, 2000 and 1999, respectively. The increase in
delinquency and credit loss experience is primarily a result of
a slowing economy.

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The following table sets forth information with
respect to the delinquency of our portfolio of automobile
contracts managed, which includes automobile contracts that are
owned by us and automobile contracts that have been sold but are
managed by us:

|                                                                                                         |                 |                        |           |         |  |        |      |      |   |        |           |         |  |  |      |      |   |   |           |         |  |  |      |      |  
|-------------------------------------------------------------------------------------------------------- | --------------- | ---------------------- | --------- | ------- |  | ------ | ---- | ---- | - | ------ | --------- | ------- |  |  | ---- | ---- | - | - | --------- | ------- |  |  | ---- | ---- | -
|                                                                                                         |                 |                       
|                                                                                                         |                 | December 31,          
|                                                                                                         |                 |                       
|                                                                                                         |                 |                        |           |         |  |       
|                                                                                                         |                 | 2001                   |           | 2000    |  | 1999  
|                                                                                                         |                 |                        |           |         |  |       
|                                                                                                         |                 | Amount                 |           | %       |  | Amount |      | %    |   | Amount |           | %      
|                                                                                                         |                 |                        |           |         |  |        |      |      |   |        |           |        
|                                                                                                         |                 |                       
|                                                                                                         |                 | (Dollars in thousands)
|Automobile contracts managed                                                                             |                 | $                      | 8,152,882 |         |  |        |      |      |   | $      | 6,818,182 |         |  |  |      |      |   | $ | 5,354,385 |         |  |  |      |     
|                                                                                                         |                 |                        |           |         |  |        |      |      |   |        |           |         |  |  |      |      |   |   |           |         |  |  |      |     
|Period of delinquency:                                                                                   |                 |                        |           |         |  |        |      |      |   |        |           |         |  |  |      |      |   |   |           |         |  |  |      |     
|                                                                                                         | 30 - 59 days    |                        | $         | 217,873 |  |        |      | 2.67 | % |        | $         | 157,843 |  |  |      | 2.32 | % |   | $         | 107,416 |  |  |      | 2.01 | %
|                                                                                                         | 60 days or more |                        |           | 85,290  |  |        |      | 1.05 |   |        |           | 59,166  |  |  |      | 0.86 |   |   |           | 44,610  |  |  |      | 0.83 |  
|                                                                                                         |                 |                        |           |         |  |        |      |      |   |        |           |         |  |  |      |      |   |   |           |         |  |  |      |     
|Total automobile contracts delinquent and
	delinquencies as a percentage of automobile contracts managed |                 | $                      | 303,163   |         |  |        | 3.72 | %    |   | $      | 217,009   |         |  |  | 3.18 | %    |   | $ | 152,026   |         |  |  | 2.84 | %   
|                                                                                                         |                 |                        |           |         |  |        |      |      |   |        |           |         |  |  |      |      |   |   |           |         |  |  |      |     

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

|                                                                                             |  |                        |         |        |  |           |           |        |  |           |         |        |  |   |           |   |  |  |         |   |  |   |           |  
|-------------------------------------------------------------------------------------------- |  | ---------------------- | ------- | ------ |  | --------- | --------- | ------ |  | --------- | ------- | ------ |  | - | --------- | - |  |  | ------- | - |  | - | --------- | -
|                                                                                             |  |                       
|                                                                                             |  | December 31,          
|                                                                                             |  |                       
|                                                                                             |  |                        |         |        |  |          
|                                                                                             |  | 2001                   |         | 2000   |  | 1999     
|                                                                                             |  |                        |         |        |  |          
|                                                                                             |  | Number of              |         |        |  | Number of |           |        |  | Number of |         |       
|                                                                                             |  | Contracts              |         | Amount |  | Contracts |           | Amount |  | Contracts |         | Amount
|                                                                                             |  |                        |         |        |  |           |           |        |  |           |         |       
|                                                                                             |  |                       
|                                                                                             |  | (Dollars in thousands)
|Automobile contracts managed                                                                 |  |                        | 690,401 |        |  | $         | 8,152,882 |        |  |           | 616,011 |        |  | $ | 6,818,182 |   |  |  | 524,709 |   |  | $ | 5,354,385 |  
|                                                                                             |  |                        |         |        |  |           |           |        |  |           |         |        |  |   |           |   |  |  |         |   |  |   |           |  
|Repossessed vehicles                                                                         |  |                        | 1,168   |        |  | $         | 7,553     |        |  |           | 946     |        |  | $ | 6,199     |   |  |  | 559     |   |  | $ | 3,374     |  
|                                                                                             |  |                        |         |        |  |           |           |        |  |           |         |        |  |   |           |   |  |  |         |   |  |   |           |  
|Repossessed assets as a percentage of number and
	amount of automobile contracts outstanding |  |                        | 0.17    | %      |  |           | 0.09      | %      |  |           | 0.15    | %      |  |   | 0.09      | % |  |  | 0.11    | % |  |   | 0.06      | %

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

|                                                                                      |  |                                 |           |      |  |      |           |   |  |   |           |  
|------------------------------------------------------------------------------------- |  | ------------------------------- | --------- | ---- |  | ---- | --------- | - |  | - | --------- | -
|                                                                                      |  |                                
|                                                                                      |  | For the Year Ended December 31,
|                                                                                      |  |                                
|                                                                                      |  | 2001                            |           | 2000 |  | 1999
|                                                                                      |  |                                 |           |      |  |     
|                                                                                      |  |                                
|                                                                                      |  | (Dollars in thousands)         
|Automobile contracts managed at end of period                                         |  | $                               | 8,152,882 |      |  | $    | 6,818,182 |   |  | $ | 5,354,385 |  
|                                                                                      |  |                                 |           |      |  |      |           |   |  |   |           |  
|Average automobile contracts managed during period                                    |  | $                               | 7,576,681 |      |  | $    | 6,076,814 |   |  | $ | 4,840,363 |  
|                                                                                      |  |                                 |           |      |  |      |           |   |  |   |           |  
|Gross chargeoffs                                                                      |  | $                               | 236,834   |      |  | $    | 165,937   |   |  | $ | 50,518    |  
|Recoveries                                                                            |  |                                 | 64,626    |      |  |      | 49,697    |   |  |   | 47,581    |  
|                                                                                      |  |                                 |           |      |  |      |           |   |  |   |           |  
|Net chargeoffs                                                                        |  | $                               | 172,208   |      |  | $    | 116,240   |   |  | $ | 102,937   |  
|                                                                                      |  |                                 |           |      |  |      |           |   |  |   |           |  
|Net chargeoffs as a percentage of average
	automobile contracts managed during period |  |                                 | 2.27      | %    |  |      | 1.91      | % |  |   | 2.13      | %
|                                                                                      |  |                                 |           |      |  |      |           |   |  |   |           |  

53



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

CUMULATIVE STATIC POOL LOSS CURVES

At December 31, 2001


|             |    |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |      
|------------ | -- | ------ | ----- | ------ | ----- | ------ | ----- | ------ | ----- | ------ | ----- | ------ | ----- | ------ | ----- | ------ | ----- | ------ | ----- | ------ | ----- | ------ | ----- | ------ | ----- | ------ | -----
|Period(1)    |    | 1998-A |       | 1998-B |       | 1998-C |       | 1999-A |       | 1999-B |       | 1999-C |       | 2000-A |       | 2000-B |       | 2000-C |       | 2000-D |       | 2001-A |       | 2001-B |       | 2001-C
|             |    |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |       |       
|             | 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%
|             | 2  |        | 0.04% |        | 0.02% |        | 0.04% |        | 0.04% |        | 0.04% |        | 0.02% |        | 0.03% |        | 0.02% |        | 0.04% |        | 0.04% |        | 0.03% |        | 0.03% |        | 0.04%
|             | 3  |        | 0.11% |        | 0.08% |        | 0.11% |        | 0.11% |        | 0.11% |        | 0.10% |        | 0.10% |        | 0.09% |        | 0.13% |        | 0.11% |        | 0.09% |        | 0.10% |        | 0.09%
|             | 4  |        | 0.25% |        | 0.18% |        | 0.23% |        | 0.20% |        | 0.26% |        | 0.25% |        | 0.20% |        | 0.24% |        | 0.27% |        | 0.24% |        | 0.20% |        | 0.21% |        | 0.20%
|             | 5  |        | 0.44% |        | 0.38% |        | 0.39% |        | 0.33% |        | 0.47% |        | 0.40% |        | 0.36% |        | 0.39% |        | 0.46% |        | 0.39% |        | 0.33% |        | 0.33% |        | 0.35%
|             | 6  |        | 0.66% |        | 0.59% |        | 0.50% |        | 0.46% |        | 0.66% |        | 0.56% |        | 0.55% |        | 0.59% |        | 0.65% |        | 0.54% |        | 0.50% |        | 0.50% |        |      
|             | 7  |        | 0.95% |        | 0.83% |        | 0.61% |        | 0.62% |        | 0.87% |        | 0.71% |        | 0.71% |        | 0.78% |        | 0.81% |        | 0.74% |        | 0.70% |        | 0.69% |        |      
|             | 8  |        | 1.23% |        | 1.03% |        | 0.75% |        | 0.76% |        | 1.00% |        | 0.86% |        | 0.91% |        | 0.99% |        | 0.93% |        | 0.93% |        | 0.84% |        | 0.87% |        |      
|             | 9  |        | 1.50% |        | 1.21% |        | 0.86% |        | 0.92% |        | 1.13% |        | 1.01% |        | 1.10% |        | 1.17% |        | 1.07% |        | 1.13% |        | 1.04% |        |       |        |      
|             | 10 |        | 1.79% |        | 1.40% |        | 1.00% |        | 1.11% |        | 1.24% |        | 1.14% |        | 1.27% |        | 1.33% |        | 1.24% |        | 1.34% |        | 1.24% |        |       |        |      
|             | 11 |        | 2.03% |        | 1.53% |        | 1.17% |        | 1.30% |        | 1.35% |        | 1.34% |        | 1.45% |        | 1.44% |        | 1.41% |        | 1.50% |        | 1.45% |        |       |        |      
|             | 12 |        | 2.21% |        | 1.62% |        | 1.32% |        | 1.47% |        | 1.44% |        | 1.52% |        | 1.58% |        | 1.57% |        | 1.62% |        | 1.74% |        |       |        |       |        |      
|             | 13 |        | 2.39% |        | 1.74% |        | 1.48% |        | 1.61% |        | 1.58% |        | 1.74% |        | 1.73% |        | 1.72% |        | 1.86% |        | 1.95% |        |       |        |       |        |      
|             | 14 |        | 2.49% |        | 1.84% |        | 1.66% |        | 1.73% |        | 1.74% |        | 1.94% |        | 1.85% |        | 1.86% |        | 2.04% |        | 2.21% |        |       |        |       |        |      
|             | 15 |        | 2.60% |        | 1.96% |        | 1.79% |        | 1.81% |        | 1.85% |        | 2.09% |        | 2.00% |        | 2.04% |        | 2.25% |        |       |        |       |        |       |        |      
|             | 16 |        | 2.72% |        | 2.10% |        | 1.91% |        | 1.89% |        | 2.03% |        | 2.27% |        | 2.15% |        | 2.24% |        | 2.45% |        |       |        |       |        |       |        |      
|             | 17 |        | 2.85% |        | 2.22% |        | 2.01% |        | 2.00% |        | 2.16% |        | 2.39% |        | 2.37% |        | 2.39% |        | 2.68% |        |       |        |       |        |       |        |      
|             | 18 |        | 2.98% |        | 2.40% |        | 2.07% |        | 2.10% |        | 2.30% |        | 2.53% |        | 2.52% |        | 2.55% |        |       |        |       |        |       |        |       |        |      
|             | 19 |        | 3.11% |        | 2.55% |        | 2.11% |        | 2.24% |        | 2.42% |        | 2.67% |        | 2.67% |        | 2.73% |        |       |        |       |        |       |        |       |        |      
|             | 20 |        | 3.25% |        | 2.69% |        | 2.17% |        | 2.35% |        | 2.50% |        | 2.81% |        | 2.83% |        | 2.93% |        |       |        |       |        |       |        |       |        |      
|             | 21 |        | 3.35% |        | 2.79% |        | 2.24% |        | 2.46% |        | 2.58% |        | 2.92% |        | 2.99% |        |       |        |       |        |       |        |       |        |       |        |      
|             | 22 |        | 3.48% |        | 2.85% |        | 2.34% |        | 2.55% |        | 2.67% |        | 3.10% |        | 3.16% |        |       |        |       |        |       |        |       |        |       |        |      
|             | 23 |        | 3.62% |        | 2.89% |        | 2.43% |        | 2.63% |        | 2.77% |        | 3.28% |        |       |        |       |        |       |        |       |        |       |        |       |        |      
|             | 24 |        | 3.70% |        | 2.92% |        | 2.52% |        | 2.71% |        | 2.87% |        | 3.38% |        |       |        |       |        |       |        |       |        |       |        |       |        |      
|             | 25 |        | 3.75% |        | 2.97% |        | 2.62% |        | 2.77% |        | 3.01% |        | 3.55% |        |       |        |       |        |       |        |       |        |       |        |       |        |      
|             | 26 |        | 3.80% |        | 3.04% |        | 2.71% |        | 2.82% |        | 3.14% |        | 3.68% |        |       |        |       |        |       |        |       |        |       |        |       |        |      
|             | 27 |        | 3.87% |        | 3.13% |        | 2.80% |        | 2.89% |        | 3.16% |        | 3.84% |        |       |        |       |        |       |        |       |        |       |        |       |        |      
|             | 28 |        | 3.92% |        | 3.18% |        | 2.87% |        | 2.96% |        | 3.29% |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |      
|             | 29 |        | 3.98% |        | 3.24% |        | 2.90% |        | 3.02% |        | 3.40% |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |      
|             | 30 |        | 4.06% |        | 3.32% |        | 2.95% |        | 3.09% |        | 3.50% |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |      
|             | 31 |        | 4.11% |        | 3.38% |        | 3.00% |        | 3.17% |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |      
|             | 32 |        | 4.17% |        | 3.43% |        | 3.02% |        | 3.20% |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |      
|             | 33 |        | 4.22% |        | 3.47% |        | 3.08% |        | 3.27% |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |      
|             | 34 |        | 4.27% |        | 3.48% |        | 3.14% |        | 3.35% |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |      
|             | 35 |        | 4.32% |        | 3.52% |        | 3.15% |        | 3.41% |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |      
|             | 36 |        | 4.34% |        | 3.54% |        | 3.21% |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |      
|             | 37 |        | 4.35% |        | 3.58% |        | 3.25% |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |      
|             | 38 |        | 4.38% |        | 3.63% |        | 3.30% |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |      
|             | 39 |        | 4.39% |        | 3.66% |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |      
|             | 40 |        | 4.43% |        | 3.65% |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |      
|             | 41 |        | 4.45% |        | 3.69% |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |      
|             | 42 |        | 4.50% |        | 3.73% |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |      
|             | 43 |        | 4.47% |        | 3.75% |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |      
|             | 44 |        | 4.50% |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |      
|             | 45 |        | 4.52% |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |      
|             | 46 |        | 4.55% |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |      
|Prime Mix(2) |    | 57%    |       | 67%    |       | 70%    |       | 70%    |       | 70%    |       | 67%    |       | 69%    |       | 69%    |       | 68%    |       | 70%    |       | 72%    |       | 73%    |       | 76%   




|    |                                                                                                
|--- | -----------------------------------------------------------------------------------------------
|(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.

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| |                         
| | ------------------------
| | Real Estate Loan Quality

The following table of mortgage delinquencies
over 60 days by loan type highlights the fact that real
estate loan delinquencies have stabilized over the past three
years:

|              |  |                        |       |      |  |              |      |   |  |              |       |   |  |  |      |   |  |   |       |  |  |  |      |  
|------------- |  | ---------------------- | ----- | ---- |  | ------------ | ---- | - |  | ------------ | ----- | - |  |  | ---- | - |  | - | ----- |  |  |  | ---- | -
|              |  |                       
|              |  | December 31,          
|              |  |                       
|              |  |                        |       |      |  |             
|              |  | 2001                   |       | 2000 |  | 1999        
|              |  |                        |       |      |  |             
|              |  | Amount                 |       |      |  | Amount       |      |   |  | Amount       |       |  
|              |  | Past Due               |       |      |  | Past Due     |      |   |  | Past Due     |       |  
|              |  | Over 60 Days           |       | %    |  | Over 60 Days |      | % |  | Over 60 Days |       | %
|              |  |                        |       |      |  |              |      |   |  |              |       |  
|              |  |                       
|              |  | (Dollars in thousands)
|Single family |  | $                      | 7,035 |      |  |              | 3.79 | % |  | $            | 7,585 |   |  |  | 2.78 | % |  | $ | 8,508 |  |  |  | 2.64 | %
|Multifamily   |  |                        |       |      |  |              |      |   |  |              | 186   |   |  |  | 0.11 |   |  |   | 1,005 |  |  |  | 0.54 |  
|              |  |                        |       |      |  |              |      |   |  |              |       |   |  |  |      |   |  |   |       |  |  |  |      |  
|              |  | $                      | 7,035 |      |  |              | 1.85 | % |  | $            | 7,771 |   |  |  | 1.50 | % |  | $ | 9,513 |  |  |  | 1.58 | %
|              |  |                        |       |      |  |              |      |   |  |              |       |   |  |  |      |   |  |   |       |  |  |  |      |  



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

Nonperforming assets, also known as NPAs, consist
of nonperforming loans, also known as NPLs, Chapter 13
bankruptcy accounts greater than 120 days delinquent,
repossessed automobiles, and real estate owned, also known as
REO. 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. REO is carried at lower of cost or fair value. NPLs are
defined as all nonaccrual loans. This includes mortgage loans
90 days or more past due and impaired loans where full
collection of principal and interest is not reasonably assured.
NPAs increased $13.6 million to $28.3 million at
December 31, 2001 compared with $14.7 million at
December 31, 2000. At December 31, 2001, NPAs
represented 0.3% of total assets compared with 0.2% at
December 31, 2000. There were no impaired loans at either
December 31, 2001 or 2000.

When a loan is designated as nonaccrual, all
previously accrued but unpaid interest is reversed. For the
years ended December 31, 2001, 2000 and 1999, interest on
nonperforming loans excluded from interest income totaled
$0.6 million, $0.5 million and $0.6 million,
respectively.



| |                            
| | ---------------------------
| | Allowance For Credit Losses

Our allowance for credit losses was
$171 million at December 31, 2001 compared with
$104 million at December 31, 2000. Management
determines the amount of the allowance for credit losses based
on a review of various quantitative and qualitative analyses.
The methodology for determining the level of allowance for
credit losses is a critical accounting process. Quantitative
analyses include the review of chargeoff trends by loan program
and loan type on an owned and managed basis; evaluation of
cumulative loss curves on both a managed and sold basis;
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 non-performance
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.

55



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##### Table of Contents



General valuation allowances are established
based on analysis of individual assets or asset pools and other
qualitative factors. Specific valuation allowances are
established based on analysis of individual assets or asset
pools that are classified as Loss. 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. This approach allows for enhanced
analysis as it highlights the need for more allowance than would
be generally allocated if held in one classification.

All loans 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 loan 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 consumer
loan where the borrower has filed for bankruptcy or any consumer
loan 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.

Based upon the process described above, we
believe that our allowance for credit losses is currently
adequate to cover probable losses in our loan portfolios that
can be reasonably estimated. No single loan, borrower or series
of such loans comprises a significant portion of the total
portfolio. The allowance for credit losses is reduced by net
chargeoffs as well as decreases in required allowances due to
sales of loans and by lowering the level of required reserves
based upon improved loan performance. The allowance for credit
losses is increased by recording amounts to the provision for
credit losses.

The provision for credit losses was
$197 million, $82.1 million and $38.4 million for
the years ended December 31, 2001, 2000 and 1999,
respectively. Net chargeoffs were $123 million,
$42.3 million and $11.8 million for the same
respective periods. The increase in the allowance for credit
losses was the result of a higher level of automobile contracts
held on balance sheet as well as higher chargeoffs due to a
slowing economy. The increase in the percentage of allowance to
total loans at December 31, 1999 was the result of an
increase in the amount of reserves on automobile contracts held
for sale as $500 million of such contracts were used as
collateral for the issuance of notes to a conduit facility in a
transaction treated as a secured financing. In addition, another
$540 million of contracts held for sale were expected to be
placed in a securitization transaction in the first quarter of
2000 that would also be accounted for as a secured financing
and, therefore, the contracts would remain on our balance sheet
and higher levels of reserves would be required for probable
losses that could be reasonably estimated. We applied a reserve
factor that would be at a rate not less than our annualized loss
experience on automobile contracts on a managed basis.

We have increased our percentage of allowance for
credit losses from 2.11% at December 31, 2000 to 2.28% at
December 31, 2001 as we have experienced higher losses in
our owned portfolio due to a slowing economy. The reserve factor
that we applied was consistent with our annualized loss
experience of automobile contracts on a managed basis in 2001.
Credit loss experience for automobile contracts on a managed
basis increased from 1.91% in 2000 to 2.27% in 2001. We expect
our owned loss experience to ultimately be equivalent to our
managed loss experience as more of our securitizations are
accounted for as secured financings and as the average age of
our owned portfolio continues to increase.

Additionally, we reduced our reserves for
multifamily loans as we continued to experience fewer
foreclosures in this portfolio and as we have been able to
resell such foreclosed property at better prices due to higher
real estate values.

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

|                                                                                    |                |                                 |          |          |   |      |         |         |   |      |         |         |   |   |         |         |   |   |         |         |  
|----------------------------------------------------------------------------------- | -------------- | ------------------------------- | -------- | -------- | - | ---- | ------- | ------- | - | ---- | ------- | ------- | - | - | ------- | ------- | - | - | ------- | ------- | -
|                                                                                    |                |                                
|                                                                                    |                | For the Year Ended December 31,
|                                                                                    |                |                                
|                                                                                    |                | 2001                            |          | 2000     |   | 1999 |         | 1998    |   | 1997
|                                                                                    |                |                                 |          |          |   |      |         |         |   |     
|                                                                                    |                |                                
|                                                                                    |                | (Dollars in thousands)         
|Balance at beginning of period                                                      |                | $                               | 104,006  |          |   | $    | 64,217  |         |   | $    | 37,660  |         |   | $ | 33,834  |         |   | $ | 40,211  |        
|Chargeoffs:                                                                         |                |                                 |          |          |   |      |         |         |   |      |         |         |   |   |         |         |   |   |         |        
|                                                                                    | Mortgage loans |                                 |          | (1,024   | ) |      |         | (1,234  | ) |      |         | (1,230  | ) |   |         | (4,820  | ) |   |         | (6,850  | )
|                                                                                    | Consumer loans |                                 |          | (162,878 | ) |      |         | (55,892 | ) |      |         | (20,052 | ) |   |         | (14,885 | ) |   |         | (15,956 | )
|                                                                                    |                |                                 |          |          |   |      |         |         |   |      |         |         |   |   |         |         |   |   |         |        
|                                                                                    |                |                                 | (163,902 | )        |   |      | (57,126 | )       |   |      | (21,282 | )       |   |   | (19,705 | )       |   |   | (22,806 | )      
|Recoveries:                                                                         |                |                                 |          |          |   |      |         |         |   |      |         |         |   |   |         |         |   |   |         |        
|                                                                                    | Mortgage loans |                                 |          | 17       |   |      |         | 51      |   |      |         | 1,847   |   |   |         | 427     |   |   |         | 66      |  
|                                                                                    | Consumer loans |                                 |          | 41,120   |   |      |         | 14,731  |   |      |         | 7,592   |   |   |         | 4,144   |   |   |         | 4,303   |  
|                                                                                    |                |                                 |          |          |   |      |         |         |   |      |         |         |   |   |         |         |   |   |         |        
|                                                                                    |                |                                 | 41,137   |          |   |      | 14,782  |         |   |      | 9,439   |         |   |   | 4,571   |         |   |   | 4,369   |        
|                                                                                    |                |                                 |          |          |   |      |         |         |   |      |         |         |   |   |         |         |   |   |         |        
|Net chargeoffs                                                                      |                |                                 | (122,765 | )        |   |      | (42,344 | )       |   |      | (11,843 | )       |   |   | (15,134 | )       |   |   | (18,437 | )      
|Writedown on nonperforming assets                                                   |                |                                 | (6,786   | )        |   |      |         |         |   |      |         |         |   |   |         |         |   |   |         |        
|Provision for credit losses                                                         |                |                                 | 196,977  |          |   |      | 82,133  |         |   |      | 38,400  |         |   |   | 18,960  |         |   |   | 12,851  |        
|Business acquisition(1)                                                             |                |                                 |          |          |   |      |         |         |   |      |         |         |   |   |         |         |   |   | (791    | )      
|                                                                                    |                |                                 |          |          |   |      |         |         |   |      |         |         |   |   |         |         |   |   |         |        
|Balance at end of period                                                            |                | $                               | 171,432  |          |   | $    | 104,006 |         |   | $    | 64,217  |         |   | $ | 37,660  |         |   | $ | 33,834  |        
|                                                                                    |                |                                 |          |          |   |      |         |         |   |      |         |         |   |   |         |         |   |   |         |        
|Ratio of net chargeoffs during the period to
	average loans owned during the period |                |                                 | 1.95     | %        |   |      | 1.27    | %       |   |      | 0.72    | %       |   |   | 0.79    | %       |   |   | 0.93    | %      




|    |                                                                                    
|--- | -----------------------------------------------------------------------------------
|(1) | Adjustment related to the acquisition of The
	Hammond Company and its subsidiaries.

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

|                          |  |                        |           |           |  |           |       |           |  |          |         |           |  |           |     |           |  |   |           |  |  |  |       |   |  |   |         |  |  |  |     |  
|------------------------- |  | ---------------------- | --------- | --------- |  | --------- | ----- | --------- |  | -------- | ------- | --------- |  | --------- | --- | --------- |  | - | --------- |  |  |  | ----- | - |  | - | ------- |  |  |  | --- | -
|                          |  |                       
|                          |  | December 31,          
|                          |  |                       
|                          |  |                        |           |          
|                          |  | 2001                   |           | 2000     
|                          |  |                        |           |          
|                          |  |                        |           | Loans in  |  |           |       |           |  | Loans in |         |          
|                          |  |                        |           | Each      |  |           |       |           |  | Each     |         |          
|                          |  |                        |           | Category  |  |           |       |           |  | Category |         |          
|                          |  |                        |           | as a % of |  |           |       | Allowance |  |          |         | as a % of |  |           |     | Allowance
|                          |  | Loan                   |           | Total     |  |           |       | as a %    |  | Loan     |         | Total     |  |           |     | as a %   
|                          |  | Balance                |           | Loans     |  | Allowance |       | of Loans  |  | Balance  |         | Loans     |  | Allowance |     | of Loans 
|                          |  |                        |           |           |  |           |       |           |  |          |         |           |  |           |     |          
|                          |  |                       
|                          |  | (Dollars in thousands)
|Consumer loans            |  | $                      | 7,074,383 |           |  |           | 93.9  | %         |  | $        | 160,772 |           |  |           | 2.3 | %         |  | $ | 4,309,036 |  |  |  | 87.6  | % |  | $ | 83,501  |  |  |  | 1.9 | %
|Single family residential |  |                        | 151,540   |           |  |           | 2.1   |           |  |          | 4,422   |           |  |           | 2.9 |           |  |   | 230,854   |  |  |  | 4.7   |   |  |   | 8,969   |  |  |  | 3.9 |  
|Multifamily residential   |  |                        | 221,915   |           |  |           | 2.9   |           |  |          | 3,060   |           |  |           | 1.4 |           |  |   | 276,577   |  |  |  | 5.6   |   |  |   | 7,510   |  |  |  | 2.7 |  
|Commercial loans          |  |                        | 85,312    |           |  |           | 1.1   |           |  |          | 3,178   |           |  |           | 3.7 |           |  |   | 107,586   |  |  |  | 2.1   |   |  |   | 4,026   |  |  |  | 3.7 |  
|                          |  |                        |           |           |  |           |       |           |  |          |         |           |  |           |     |           |  |   |           |  |  |  |       |   |  |   |         |  |  |  |     |  
|                          |  | $                      | 7,533,150 |           |  |           | 100.0 | %         |  | $        | 171,432 |           |  |           | 2.3 | %         |  | $ | 4,924,053 |  |  |  | 100.0 | % |  | $ | 104,006 |  |  |  | 2.1 | %
|                          |  |                        |           |           |  |           |       |           |  |          |         |           |  |           |     |           |  |   |           |  |  |  |       |   |  |   |         |  |  |  |     |  

|                             |  |                        |           |           |  |           |       |           |  |          |        |             |  |           |      |           |  |   |           |  |  |  |       |   |  |   |        |  |  |  |      |  
|---------------------------- |  | ---------------------- | --------- | --------- |  | --------- | ----- | --------- |  | -------- | ------ | ----------- |  | --------- | ---- | --------- |  | - | --------- |  |  |  | ----- | - |  | - | ------ |  |  |  | ---- | -
|                             |  |                       
|                             |  | December 31,          
|                             |  |                       
|                             |  |                        |           |          
|                             |  | 1999                   |           | 1998     
|                             |  |                        |           |          
|                             |  |                        |           | Loans in  |  |           |       |          
|                             |  |                        |           | Each      |  |           |       |           |  | Loans in |        |            
|                             |  |                        |           | Category  |  |           |       |           |  | Each     |        |            
|                             |  |                        |           | as a % of |  |           |       | Allowance |  |          |        | Category    |  |           |      | Allowance
|                             |  | Loan                   |           | Total     |  |           |       | as a %    |  | Loan     |        | as a % of   |  |           |      | as a %   
|                             |  | Balance                |           | Loans     |  | Allowance |       | of Loans  |  | Balance  |        | Total Loans |  | Allowance |      | of Loans 
|                             |  |                        |           |           |  |           |       |           |  |          |        |             |  |           |      |          
|                             |  |                       
|                             |  | (Dollars in thousands)
|Consumer loans held for sale |  | $                      | 1,432,644 |           |  |           | 65.7  | %         |  | $        | 31,936 |             |  |           | 2.2  | %         |  | $ | 856,871   |  |  |  | 43.0  | % |  | $ | 6,357  |  |  |  | 0.7  | %
|Consumer loans               |  |                        | 84,025    |           |  |           | 3.8   |           |  |          | 8,403  |             |  |           | 10.0 |           |  |   | 76,139    |  |  |  | 3.8   |   |  |   | 7,614  |  |  |  | 10.0 |  
|Single family residential    |  |                        | 285,203   |           |  |           | 13.1  |           |  |          | 7,265  |             |  |           | 2.6  |           |  |   | 647,376   |  |  |  | 32.4  |   |  |   | 5,881  |  |  |  | 0.9  |  
|Multifamily residential      |  |                        | 313,099   |           |  |           | 14.3  |           |  |          | 13,760 |             |  |           | 4.4  |           |  |   | 359,557   |  |  |  | 18.0  |   |  |   | 15,467 |  |  |  | 4.3  |  
|Commercial loans             |  |                        | 66,927    |           |  |           | 3.1   |           |  |          | 2,853  |             |  |           | 4.3  |           |  |   | 52,940    |  |  |  | 2.8   |   |  |   | 2,341  |  |  |  | 4.4  |  
|                             |  |                        |           |           |  |           |       |           |  |          |        |             |  |           |      |           |  |   |           |  |  |  |       |   |  |   |        |  |  |  |      |  
|                             |  | $                      | 2,181,898 |           |  |           | 100.0 | %         |  | $        | 64,217 |             |  |           | 2.9  | %         |  | $ | 1,992,883 |  |  |  | 100.0 | % |  | $ | 37,660 |  |  |  | 1.9  | %
|                             |  |                        |           |           |  |           |       |           |  |          |        |             |  |           |      |           |  |   |           |  |  |  |       |   |  |   |        |  |  |  |      |  

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|                             |  |                        |           |             |  |           |       |           |  |   |        |  |  |  |      |  
|---------------------------- |  | ---------------------- | --------- | ----------- |  | --------- | ----- | --------- |  | - | ------ |  |  |  | ---- | -
|                             |  |                       
|                             |  | December 31, 1997     
|                             |  |                       
|                             |  |                        |           | Loans in    |  |          
|                             |  |                        |           | Each        |  |          
|                             |  |                        |           | Category    |  |           |       | Allowance
|                             |  | Loan                   |           | as a % of   |  |           |       | as a %   
|                             |  | Balance                |           | Total Loans |  | Allowance |       | of Loans 
|                             |  |                        |           |             |  |           |       |          
|                             |  |                       
|                             |  | (Dollars in thousands)
|Consumer loans held for sale |  | $                      | 247,637   |             |  |           | 13.2  | %         |  | $ | 1,696  |  |  |  | 0.7  | %
|Consumer loans               |  |                        | 50,913    |             |  |           | 2.7   |           |  |   | 5,091  |  |  |  | 10.0 |  
|Single family residential    |  |                        | 1,118,711 |             |  |           | 59.8  |           |  |   | 8,952  |  |  |  | 0.8  |  
|Multifamily residential      |  |                        | 418,243   |             |  |           | 22.3  |           |  |   | 16,111 |  |  |  | 3.9  |  
|Commercial loans             |  |                        | 37,314    |             |  |           | 2.0   |           |  |   | 1,984  |  |  |  | 5.3  |  
|                             |  |                        |           |             |  |           |       |           |  |   |        |  |  |  |      |  
|                             |  | $                      | 1,872,818 |             |  |           | 100.0 | %         |  | $ | 33,834 |  |  |  | 1.8  | %
|                             |  |                        |           |             |  |           |       |           |  |   |        |  |  |  |      |  

The allowance for real estate owned losses was
$0.3 million at both December 31, 2001 and 2000. The
allowance for real estate owned losses is charged with
writedowns of foreclosed assets or changes in estimated fair
value occurring subsequent to foreclosure. No later than at the
time of foreclosure, individual properties are written down to
estimated fair value and the allowance for credit losses is
charged. We believe that the allowance for real estate owned
losses is currently adequate to absorb probable losses in the
foreclosed portfolio that can be reasonably estimated.

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

|                                                                                       |                                |                        |           |         |   |      |           |         |   |      |           |       |   |   |           |       |   |   |           |       |  
|-------------------------------------------------------------------------------------- | ------------------------------ | ---------------------- | --------- | ------- | - | ---- | --------- | ------- | - | ---- | --------- | ----- | - | - | --------- | ----- | - | - | --------- | ----- | -
|                                                                                       |                                |                       
|                                                                                       |                                | At December 31,       
|                                                                                       |                                |                       
|                                                                                       |                                | 2001                   |           | 2000    |   | 1999 |           | 1998    |   | 1997
|                                                                                       |                                |                        |           |         |   |      |           |         |   |     
|                                                                                       |                                |                       
|                                                                                       |                                | (Dollars in thousands)
|Total loans(1)                                                                         |                                | $                      | 7,533,150 |         |   | $    | 4,924,053 |         |   | $    | 2,181,898 |       |   | $ | 1,992,833 |       |   | $ | 1,872,818 |      
|Allowance for credit losses                                                            |                                |                        | 171,432   |         |   |      | 104,006   |         |   |      | 64,217    |       |   |   | 37,660    |       |   |   | 33,834    |      
|Allowance for real estate owned losses                                                 |                                |                        | 250       |         |   |      | 250       |         |   |      | 784       |       |   |   | 784       |       |   |   | 784       |      
|Loans past due 60 days or more                                                         |                                |                        | 74,851    |         |   |      | 37,911    |         |   |      | 17,514    |       |   |   | 16,365    |       |   |   | 17,312    |      
|Nonperforming loans(2)                                                                 |                                |                        | 6,772     |         |   |      | 9,132     |         |   |      | 11,279    |       |   |   | 12,227    |       |   |   | 19,785    |      
|Nonperforming assets(3)                                                                |                                |                        | 28,341    |         |   |      | 14,683    |         |   |      | 14,034    |       |   |   | 18,088    |       |   |   | 27,552    |      
|Allowance for credit losses as a percent of:                                           |                                |                        |           |         |   |      |           |         |   |      |           |       |   |   |           |       |   |   |           |      
|                                                                                       | Total loans                    |                        |           | 2.3     | % |      |           | 2.1     | % |      |           | 2.9   | % |   |           | 1.9   | % |   |           | 1.8   | %
|                                                                                       | Loans past due 60 days or more |                        |           | 229.0   | % |      |           | 274.3   | % |      |           | 366.7 | % |   |           | 230.1 | % |   |           | 195.4 | %
|                                                                                       | Nonperforming loans            |                        |           | 2,531.5 | % |      |           | 1,138.9 | % |      |           | 569.4 | % |   |           | 308.0 | % |   |           | 171.0 | %
|Total allowance for credit losses and REO losses
	as a percent of nonperforming assets |                                |                        | 605.8     | %       |   |      | 710.0     | %       |   |      | 463.2     | %     |   |   | 212.5     | %     |   |   | 125.6     | %    
|Nonperforming loans as a percent of total loans                                        |                                |                        | 0.1       | %       |   |      | 0.2       | %       |   |      | 0.5       | %     |   |   | 0.6       | %     |   |   | 1.1       | %    
|Nonperforming assets as a percent of total assets                                      |                                |                        | 0.3       | %       |   |      | 0.2       | %       |   |      | 0.3       | %     |   |   | 0.5       | %     |   |   | 0.7       | %    




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

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 consistent managed
growth, favorable loss experience and efficient operations.

In addition to our indirect statement of cash
flows as presented under GAAP, we also analyze the key cash
flows from our automobile lending operations on a direct basis
excluding certain items such as the

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purchase or sale of loans. The following table
shows our operating cash flows from our automobile lending
operations:


|                             |  |                                 |         |      |  |      |         |  |  |   |         | 
|---------------------------- |  | ------------------------------- | ------- | ---- |  | ---- | ------- |  |  | - | ------- | 
|                             |  |                                
|                             |  | For the Year Ended December 31,
|                             |  |                                
|                             |  | 2001                            |         | 2000 |  | 1999
|                             |  |                                 |         |      |  |     
|                             |  |                                
|                             |  | (Dollars in thousands)         
|Cash flows from owned loans  |  | $                               | 364,377 |      |  | $    | 197,527 |  |  | $ | 106,058 | 
|Cash flows from trusts       |  |                                 | 47,357  |      |  |      | 127,294 |  |  |   | 159,564 | 
|Contractual servicing income |  |                                 | 23,018  |      |  |      | 41,767  |  |  |   | 46,847  | 
|Other fee income             |  |                                 | 72,820  |      |  |      | 61,772  |  |  |   | 46,121  | 
|Less:                        |  |                                 |         |      |  |      |         |  |  |   |         | 
|Dealer participation         |  |                                 | 119,715 |      |  |      | 100,300 |  |  |   | 83,435  | 
|Operating costs              |  |                                 | 207,603 |      |  |      | 186,781 |  |  |   | 173,453 | 
|                             |  |                                 |         |      |  |      |         |  |  |   |         | 
|Operating cash flows         |  | $                               | 180,254 |      |  | $    | 141,279 |  |  | $ | 101,702 | 
|                             |  |                                 |         |      |  |      |         |  |  |   |         | 

Operating cash flows from automobile lending
operations improved in 2001 compared with 2000 and 1999 as a
result of improved risk-adjusted returns on our portfolio as
well as improved operating efficiencies.

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.

Collections of Principal and
Interest from Loans

Our primary source of funds is the collection of
principal and interest from loans originated. For automobile
contracts, these monies are deposited into collection accounts
established in connection with each securitization, or into our
accounts for contracts not in a securitization. Pursuant to
reinvestment contracts entered into in connection with each
securitization, we receive access to the amounts deposited into
each collection account and the amounts held in the spread
accounts for each securitization. We use those amounts so
received in our daily operations to fund the purchase of
automobile contracts or to cover the day to day costs of our
operations. If delinquency or chargeoff rates in a
securitization exceed established triggers, amounts required to
be held in spread accounts will increase, requiring additional
pledged 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.
If we were unable to obtain additional financing, we may have to
curtail our automobile 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
automobile 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 loan and
MBS principal and interest collections totaled
$6.7 billion, $4.1 billion and $3.3 billion for
the years ended December 31, 2001, 2000 and 1999,
respectively. The increase in principal and interest collections
is primarily due to an increase in the amount of automobile
contracts managed.

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 24 retail branch locations throughout California.
Our commercial

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banking division gathers deposits by establishing
commercial relationships with businesses located throughout
Southern California.


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

|                      |                                      |                        |           |           |  |      |           |           |  |      |           |           |  |   |           |           |  |   |           |           | 
|--------------------- | ------------------------------------ | ---------------------- | --------- | --------- |  | ---- | --------- | --------- |  | ---- | --------- | --------- |  | - | --------- | --------- |  | - | --------- | --------- | 
|                      |                                      |                       
|                      |                                      | December 31,          
|                      |                                      |                       
|                      |                                      | 2001                   |           | 2000      |  | 1999 |           | 1998      |  | 1997
|                      |                                      |                        |           |           |  |      |           |           |  |     
|                      |                                      |                       
|                      |                                      | (Dollars in thousands)
|No minimum term:      |                                      |                        |           |           |  |      |           |           |  |      |           |           |  |   |           |           |  |   |           |          
|                      | Demand deposit accounts              |                        | $         | 1,124     |  |      | $         | 8,229     |  |      | $         | 60,365    |  |   | $         | 38,511    |  |   | $         | 14,179    | 
|                      | Passbook accounts                    |                        |           | 11,192    |  |      |           | 11,768    |  |      |           | 13,789    |  |   |           | 15,412    |  |   |           | 21,883    | 
|                      | Money market accounts                |                        |           | 858,371   |  |      |           | 810,169   |  |      |           | 574,589   |  |   |           | 320,160   |  |   |           | 126,956   | 
|                      | Noninterest bearing deposits         |                        |           | 100,170   |  |      |           | 67,984    |  |      |           | 47,770    |  |   |           | 75,240    |  |   |           | 94,910    | 
|Certificate accounts: |                                      |                        |           |           |  |      |           |           |  |      |           |           |  |   |           |           |  |   |           |          
|                      | Certificates (30 days to five years) |                        |           | 1,154,917 |  |      |           | 1,414,956 |  |      |           | 1,311,916 |  |   |           | 1,461,539 |  |   |           | 1,488,352 | 
|                      | IRAs                                 |                        |           | 147,250   |  |      |           | 165,381   |  |      |           | 175,286   |  |   |           | 192,473   |  |   |           | 214,640   | 
|Brokered deposits     |                                      |                        | 56,302    |           |  |      |           |           |  |      | 28,594    |           |  |   | 75,400    |           |  |   | 39,976    |          
|                      |                                      |                        |           |           |  |      |           |           |  |      |           |           |  |   |           |           |  |   |           |          
|                      |                                      | $                      | 2,329,326 |           |  | $    | 2,478,487 |           |  | $    | 2,212,309 |           |  | $ | 2,178,735 |           |  | $ | 2,000,896 |          
|                      |                                      |                        |           |           |  |      |           |           |  |      |           |           |  |   |           |           |  |   |           |          

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,
|                                                     |  |                                
|                                                     |  | 2001                            |           | 2000 |  | 1999
|                                                     |  |                                 |           |      |  |     
|                                                     |  |                                
|                                                     |  | (Dollars in thousands)         
|Average certificate accounts outstanding             |  | $                               | 1,441,256 |      |  | $    | 1,524,232 |   |  | $ | 1,568,514 |  
|Average interest rate paid on certificate accounts   |  |                                 | 5.82      | %    |  |      | 5.96      | % |  |   | 5.24      | %
|Average money market accounts outstanding            |  | $                               | 750,924   |      |  | $    | 788,603   |   |  | $ | 473,334   |  
|Average interest rate paid on money market
	accounts |  |                                 | 3.82      | %    |  |      | 5.35      | % |  |   | 4.81      | %

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,          
|                                     |  |                       
|                                     |  | 2001                   |         | 2000
|                                     |  |                        |         |     
|                                     |  |                       
|                                     |  | (Dollars in thousands)
|Three months or less                 |  | $                      | 6,007   |      |  | $ | 845     | 
|Over three months through six months |  |                        | 5,126   |      |  |   | 3,427   | 
|Over six months through one year     |  |                        | 237,831 |      |  |   | 247,768 | 
|Over one year through three years    |  |                        | 168,008 |      |  |   | 278,428 | 
|Over three years                     |  |                        | 9,522   |      |  |   | 9,883   | 
|                                     |  |                        |         |      |  |   |         | 
|                                     |  | $                      | 426,494 |      |  | $ | 540,351 | 
|                                     |  |                        |         |      |  |   |         | 

Automobile
Contract Sales and Securitizations

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

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adversely affect our earnings or ability to
purchase and resell automobile contracts on a timely basis. Such
changes could include a:




| |   |                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------
| |  | delay in the completion of a planned
	securitization;                                                                  
|
| |  | negative market perception of us; or                                                                                   
|
| |  | 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.

Since 1985, we have securitized over
$24 billion of automobile receivables in 54 public
offerings, making us the fourth largest issuer of such
securities in the nation. For the year ended December 31,
2001, we securitized $4.2 billion of contracts, as compared
to $4.6 billion for the year ended December 31, 2000
and $2.5 billion for the year ended December 31, 1999.
On March 20, 2002, we completed the issuance of
$1.8 billion of notes secured by automobile contracts. We
expect to continue to use securitizations as part of our
liquidity strategy when appropriate market conditions exist.

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.

Savings associations such as the Bank also have
authority to borrow from the FRS discount window.
FRS regulations require these institutions to exhaust all
reasonable alternative sources of funds, including FHLB sources,
before borrowing from the FRS. 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.

Subordinated
Capital Debentures

In 1993 and 1998, we issued $125 million of
8.5% and $150 million of 8.875% subordinated capital
debentures due in 2003 and 2007, respectively. We redeemed the
subordinated debentures due 2003 during July 2001. At
December 31, 2001, $150 million was outstanding on the
subordinated debentures due 2007, gross of discounts and issue
costs. In addition to providing additional liquidity, the Bank
is permitted to include $150 million of these debentures in
supplementary capital for purposes of determining compliance
with risk-based capital requirements. See
Business  Supervision and
Regulation  Regulatory Capital Requirements.

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Conduit
Financing

We enter into secured conduit financing
transactions using an automobile receivable securitization
structure for short-term financing needs. For the year ended
December 31, 2001, we issued $650 million of notes
secured by automobile contracts through a conduit facility
established in December 2001. We terminated this facility in
March 2002 in conjunction with a $1.8 billion public
automobile contract asset-backed securitization. We also
established a $500 million conduit facility secured by
automobile contracts in September 1999, which we terminated in
March 2000. On January 31, 2002, we issued
$775 million of notes through a conduit facility.

Principal
Uses of Cash

Acquisition
of Loans and Investment Securities

Our most significant use of cash is for the
acquisition of automobile contracts, MBS and other investment
securities. During 2001, loan originations totaled
$5.2 billion compared with $4.5 billion and
$3.9 billion in 2000 and 1999, respectively. We purchased
$1.2 billion of MBS and other investment securities during
2001 compared with $963 million and $845 million
during 2000 and 1999, respectively.

Payments
of Principal and Interest on Securitizations

Under the terms of our reinvestment contract, we
fund quarterly payments of interest and principal to security
holders derived from the cash flows received on the securitized
automobile contracts that we service. Payments of principal and
interest to security holders totaled $3.7 billion during
2001 compared with $2.7 billion and $2.3 billion
during 2000 and 1999, respectively.

Amounts
Paid to Dealers

Consistent with industry practice, we generally
pay dealer participation to the originating dealer for each
automobile contract purchased. Participation paid to dealers
during 2001 totaled $120 million compared with
$100 million and $83.4 million in 2000 and 1999,
respectively. Typically, the acquisition of prime quality
contracts higher up the prime credit quality spectrum requires a
higher amount of participation paid to the dealer due to
increased level of competition for such automobile contracts.

Advances
to Spread Accounts

At the time a securitization closes, we are
required to advance monies to initially fund the spread account.
Funds on deposit in each spread account increase through receipt
of excess cash flows until predetermined levels are met. The
amounts due from trusts represent funds due to us that have not
yet been disbursed from the spread account on securitizations
treated as sales. The amounts due from trusts at
December 31, 2001, including initial advances not yet
returned, was $136 million compared with $357 million
at December 31, 2000. See Business 
Transactions with Related Parties  Reinvestment
Contracts.

Advances
Due to Servicer

As the servicer of automobile contracts sold in
securitizations, we periodically make advances to the
securitization trusts to provide for temporary delays in the
receipt of required payments by borrowers in accordance with
servicing agreements. We receive reimbursement of these advances
through payments from the obligors on the automobile contracts
or from the trustee at the time a contract liquidates.

Operating
Our Business

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

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Capital
Requirements

The Bank is a federally chartered savings bank.
As such, it 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. In order to be considered well
capitalized, an institution must have a total risk-based
capital ratio of 10.0% or greater, a Tier 1 or core risk-based
capital ratio of 6.0% or greater, a leverage ratio of 5.0% or
greater and not be subject to any OTS order. The Bank currently
meets all of the requirements of a well capitalized
institution. See Supervision and Regulation 
Regulatory Capital Requirements.

The following table summarizes the Banks
actual capital and required capital as of December 31, 2001
and 2000:

|                                          |               |                        |   |         |   |            |   |            |   |  |   |         |   |  |   |         |  
|----------------------------------------- | ------------- | ---------------------- | - | ------- | - | ---------- | - | ---------- | - |  | - | ------- | - |  | - | ------- | -
|                                          |               |                        |   |         |   | Tier 1     |   |           
|                                          |               | Tangible               |   | Core    |   | Risk-Based |   | Risk-Based
|                                          |               | Capital                |   | Capital |   | Capital    |   | Capital   
|                                          |               |                        |   |         |   |            |   |           
|                                          |               |                       
|                                          |               | (Dollars in thousands)
|December 31, 2001                         |               |                        |   |         |   |            |   |            |   |  |   |         |   |  |   |        
|Actual Capital:                           |               |                        |   |         |   |            |   |            |   |  |   |         |   |  |   |        
|                                          | Amount        |                        | $ | 602,491 |   |            | $ | 602,491    |   |  | $ | 602,491 |   |  | $ | 841,144 |  
|                                          | Capital ratio |                        |   | 7.29    | % |            |   | 7.29       | % |  |   | 8.49    | % |  |   | 11.86   | %
|FIRREA minimum required capital:          |               |                        |   |         |   |            |   |            |   |  |   |         |   |  |   |        
|                                          | Amount        |                        | $ | 123,957 |   |            | $ | 247,915    |   |  |   | N/A     |   |  | $ | 567,523 |  
|                                          | Capital ratio |                        |   | 1.50    | % |            |   | 3.00       | % |  |   | N/A     |   |  |   | 8.00    | %
|                                          | Excess        |                        | $ | 478,534 |   |            | $ | 354,576    |   |  |   | N/A     |   |  | $ | 273,621 |  
|FDICIA well capitalized required capital: |               |                        |   |         |   |            |   |            |   |  |   |         |   |  |   |        
|                                          | Amount        |                        |   | N/A     |   |            | $ | 413,192    |   |  | $ | 425,642 |   |  | $ | 709,404 |  
|                                          | Capital ratio |                        |   | N/A     |   |            |   | 5.00       | % |  |   | 6.00    | % |  |   | 10.00   | %
|                                          | Excess        |                        |   | N/A     |   |            | $ | 189,299    |   |  | $ | 176,849 |   |  | $ | 131,741 |  
|December 31, 2000                         |               |                        |   |         |   |            |   |            |   |  |   |         |   |  |   |        
|Actual Capital:                           |               |                        |   |         |   |            |   |            |   |  |   |         |   |  |   |        
|                                          | Amount        |                        | $ | 533,571 |   |            | $ | 533,571    |   |  | $ | 533,571 |   |  | $ | 780,317 |  
|                                          | Capital ratio |                        |   | 8.03    | % |            |   | 8.03       | % |  |   | 8.32    | % |  |   | 12.16   | %
|FIRREA minimum required capital:          |               |                        |   |         |   |            |   |            |   |  |   |         |   |  |   |        
|                                          | Amount        |                        | $ | 99,664  |   |            | $ | 199,327    |   |  |   | N/A     |   |  | $ | 513,242 |  
|                                          | Capital ratio |                        |   | 1.50    | % |            |   | 3.00       | % |  |   | N/A     |   |  |   | 8.00    | %
|                                          | Excess        |                        | $ | 433,907 |   |            | $ | 334,244    |   |  |   | N/A     |   |  | $ | 267,075 |  
|FDICIA well capitalized required capital: |               |                        |   |         |   |            |   |            |   |  |   |         |   |  |   |        
|                                          | Amount        |                        |   | N/A     |   |            | $ | 332,212    |   |  | $ | 384,931 |   |  | $ | 641,552 |  
|                                          | Capital ratio |                        |   | N/A     |   |            |   | 5.00       | % |  |   | 6.00    | % |  |   | 10.00   | %
|                                          | Excess        |                        |   | N/A     |   |            | $ | 201,359    |   |  | $ | 148,640 |   |  | $ | 138,765 |  

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

|                                       |                                                  |                        |         |         |   |   |         |         |  
|-------------------------------------- | ------------------------------------------------ | ---------------------- | ------- | ------- | - | - | ------- | ------- | -
|                                       |                                                  |                       
|                                       |                                                  | December 31,          
|                                       |                                                  |                       
|                                       |                                                  | 2001                   |         | 2000   
|                                       |                                                  |                        |         |        
|                                       |                                                  |                       
|                                       |                                                  | (Dollars in thousands)
|Bank shareholders equity  GAAP basis |                                                  | $                      | 472,132 |         |   | $ | 462,226 |        
|                                       | Add: net unrealized losses                       |                        |         | 52,214  |   |   |         | 14,816  |  
|                                       | Add: minority interest in equity of subsidiaries |                        |         | 78,261  |   |   |         | 56,644  |  
|                                       | Less: non-permissible activities                 |                        |         | (116    | ) |   |         | (115    | )
|                                       |                                                  |                        |         |         |   |   |         |        
|Total tangible and core capital        |                                                  |                        | 602,491 |         |   |   | 533,571 |        
|Adjustments for risk-based capital:    |                                                  |                        |         |         |   |   |         |        
|                                       | Subordinated debentures(1)                       |                        |         | 149,554 |   |   |         | 166,497 |  
|                                       | General loan valuation allowance(2)              |                        |         | 89,099  |   |   |         | 80,249  |  
|                                       |                                                  |                        |         |         |   |   |         |        
|Risk-based capital                     |                                                  | $                      | 841,144 |         |   | $ | 780,317 |        
|                                       |                                                  |                        |         |         |   |   |         |        




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

Accounting Pronouncements

In June 2001, the FASB issued Statement of
Financial Accounting Standards No. 141, Accounting for
Business Combinations, also known as SFAS No. 141 and
Statement of Financial Accounting Standards No. 142,
Accounting for Goodwill and Intangible Assets, also known as
SFAS No. 142. Under SFAS No. 141 and SFAS
No. 142, companies may no longer use the
pooling-of-interest accounting method for business combinations
or account for mergers on their financial statements under the
traditional purchase method, which required companies to
amortize goodwill assets over a specific time period. Instead
purchased goodwill will remain on the balance sheet as an asset
subject to impairment reviews. We adopted SFAS No. 141 and
SFAS No. 142 on January 1, 2002, and they did not have
a material effect on our earnings or financial position.

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. If applicable,
an accounting change to adopt the standard would be made as of
the beginning of the companys fiscal year. We do not
expect SFAS No. 143 to have a material effect on our
earnings or financial position.

In August 2001, the FASB issued Statement of
Financial Accounting Standards No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, also known as SFAS
No. 144, to supercede Statement of Financial Accounting
Standards No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of,
also known as SFAS No. 121. The basic recognition and
measurement model for assets held for use and held for sale
under SFAS No. 121 has been retained, however SFAS
No. 144 removes goodwill from the scope as goodwill is now
subject to the provisions of SFAS No. 141 and SFAS
No. 142. SFAS No. 144 provides guidance on
differentiating between assets held and used, held for sale, and
held for disposal other than by sale. Assets held for
sale/disposal must be stated at the lower of the assets
carrying amounts or fair values and depreciation would no longer
be recognized. Assets to be disposed of by sale would be
classified as held for sale when management, having the
authority to approve the action, commits to a plan to sell the
assets meeting several strict criteria. The three-step approach
for recognizing and measuring impairment of assets to be held
and used under SFAS No. 121 remains applicable. SFAS
No. 144 is effective for fiscal years beginning after
December 15, 2001 and for interim periods within those
fiscal years.

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We adopted SFAS No. 144 on January 1,
2002, and it did not have a material effect on our earnings or
financial position.


Forward-Looking Statements

This Form 10-K includes and incorporates by
reference forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. These
statements relate to analyses and other information which 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.

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;                                                       
|
| |  | our financial condition and liquidity, as well as
	future cash flows and earnings;
|
| |  | competition;                                                                      
|
| |  | our level of operating expenses;                                                  
|
| |  | the effect of new 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 or risk factors to reflect future events or
circumstances.






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

The 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. The NPV ratio is the ratio of the NPV to the market
value of our

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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, 2001 based on guidance from
the OTS:

|                          |  |           |       |  
|------------------------- |  | --------- | ----- | -
|Changes in Interest Rates |  | NPV Ratio
|                          |  |          
|+100 basis points         |  |           | 11.61 | %
|Base case                 |  |           | 11.37 | %
|-100 basis points         |  |           | 10.83 | %

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.

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The following table summarizes our maturity GAP
position:

|                                                                        |                                                   |                                                         |                                    |           |         |           |            |            |         |           |            |           |         |           |           |           |       |           |          |         |       |         |         |           |           |           | 
|----------------------------------------------------------------------- | ------------------------------------------------- | ------------------------------------------------------- | ---------------------------------- | --------- | ------- | --------- | ---------- | ---------- | ------- | --------- | ---------- | --------- | ------- | --------- | --------- | --------- | ----- | --------- | -------- | ------- | ----- | ------- | ------- | --------- | --------- | --------- | 
|                                                                        |                                                   |                                                        
|                                                                        |                                                   | Interest Rate Sensitivity Analysis at December 31, 2001
|                                                                        |                                                   |                                                        
|                                                                        |                                                   | Within                                                  |                                    | 3 Months  |         | 1 Year to |            | 3 Years to |         | After     |            |          
|                                                                        |                                                   | 3 Months                                                |                                    | to 1 Year |         | 3 Years   |            | 5 Years    |         | 5 Years   |            | Total    
|                                                                        |                                                   |                                                         |                                    |           |         |           |            |            |         |           |            |          
|                                                                        |                                                   |                                                        
|                                                                        |                                                   | (Dollars in thousands)                                 
|Interest earning assets:                                                |                                                   |                                                         |                                    |           |         |           |            |            |         |           |            |           |         |           |           |           |       |           |          |         |       |         |         |          
|                                                                        | Investment securities                             |                                                         | $                                  | 9,549     |         |           |            |            |         |           | $          | 310       |         |           |           |           |       |           | $        | 652     |       |         | $       | 10,511    |          
|                                                                        | Other investments                                 |                                                         |                                    | 35,520    |         |           | $          | 200        |         |           |            |           |         |           |           |           |       |           |          |         |       |         |         | 35,720    |          
|                                                                        | Mortgage-backed securities                        |                                                         |                                    | 379,983   |         |           |            | 760,370    |         |           |            | 613,349   |         |           | $         | 218,434   |       |           |          | 120,089 |       |         |         | 2,092,225 |          
|                                                                        |                                                   |                                                         |                                    |           |         |           |            |            |         |           |            |           |         |           |           |           |       |           |          |         |       |         |         |          
|                                                                        |                                                   |                                                         | Total investments                  |           |         | 425,052   |            |            |         | 760,570   |            |           |         | 613,659   |           |           |       | 218,434   |          |         |       | 120,741 |         |           |           | 2,138,456 | 
|                                                                        | Consumer loans(1)                                 |                                                         |                                    | 467,714   |         |           |            | 1,826,751  |         |           |            | 3,365,186 |         |           |           | 1,377,921 |       |           |          | 36,812  |       |         |         | 7,074,384 |          
|                                                                        | Mortgage loans:                                   |                                                         |                                    |           |         |           |            |            |         |           |            |           |         |           |           |           |       |           |          |         |       |         |         |           |          
|                                                                        |                                                   | Adjustable rate(2)                                      |                                    |           | 290,065 |           |            |            | 49,395  |           |            |           |         |           |           |           |       |           |          |         |       |         |         |           | 339,460   |          
|                                                                        |                                                   | Fixed rate(2)                                           |                                    |           | 2,332   |           |            |            | 5,547   |           |            |           | 7,992   |           |           |           | 3,217 |           |          |         | 2,566 |         |         |           | 21,654    |          
|                                                                        | Construction loans(2)                             |                                                         |                                    | 12,340    |         |           |            |            |         |           |            |           |         |           |           |           |       |           |          |         |       |         |         | 12,340    |          
|                                                                        | Commercial loans(2)                               |                                                         |                                    | 81,585    |         |           |            | 597        |         |           |            | 1,506     |         |           |           | 462       |       |           |          | 1,162   |       |         |         | 85,312    |          
|                                                                        |                                                   |                                                         |                                    |           |         |           |            |            |         |           |            |           |         |           |           |           |       |           |          |         |       |         |         |          
|                                                                        |                                                   |                                                         | Total interest earning assets      |           |         | 1,279,088 |            |            |         | 2,642,860 |            |           |         | 3,988,343 |           |           |       | 1,600,034 |          |         |       | 161,281 |         |           |           | 9,671,606 | 
|Interest bearing liabilities:                                           |                                                   |                                                         |                                    |           |         |           |            |            |         |           |            |           |         |           |           |           |       |           |          |         |       |         |         |          
|                                                                        | Deposits:                                         |                                                         |                                    |           |         |           |            |            |         |           |            |           |         |           |           |           |       |           |          |         |       |         |         |           |          
|                                                                        |                                                   | Passbook accounts(3)                                    |                                    |           | 2,132   |           |            |            | 5,733   |           |            |           | 3,326   |           |           |           |       |           |          |         |       |         |         |           | 11,191    |          
|                                                                        |                                                   | Demand deposit and money market accounts(3)             |                                    |           | 113,309 |           |            |            | 245,402 |           |            |           | 500,785 |           |           |           |       |           |          |         |       |         |         |           | 859,496   |          
|                                                                        |                                                   | Certificate accounts(4)                                 |                                    |           | 256,899 |           |            |            | 930,008 |           |            |           | 168,055 |           |           |           | 3,409 |           |          |         | 98    |         |         |           | 1,358,469 |          
|                                                                        | FHLB advances(4)                                  |                                                         |                                    | 540,500   |         |           |            |            |         |           |            |           |         |           |           |           |       |           |          | 2,917   |       |         |         | 543,417   |          
|                                                                        | Securities sold under agreements to repurchase(4) |                                                         |                                    | 155,190   |         |           |            |            |         |           |            |           |         |           |           |           |       |           |          |         |       |         |         | 155,190   |          
|                                                                        | Notes payable on automobile secured financing(1)  |                                                         |                                    | 2,792,720 |         |           |            | 1,426,709  |         |           |            | 1,461,264 |         |           |           | 205,534   |       |           |          |         |       |         |         | 5,886,227 |          
|                                                                        | Subordinated debentures(4)                        |                                                         |                                    |           |         |           |            |            |         |           |            |           |         |           |           |           |       |           |          | 147,714 |       |         |         | 147,714   |          
|                                                                        | Other borrowings(4)                               |                                                         |                                    | 25,068    |         |           |            |            |         |           |            |           |         |           |           |           |       |           |          |         |       |         |         | 25,068    |          
|                                                                        |                                                   |                                                         |                                    |           |         |           |            |            |         |           |            |           |         |           |           |           |       |           |          |         |       |         |         |          
|                                                                        |                                                   |                                                         | Total interest bearing liabilities |           |         | 3,885,818 |            |            |         | 2,607,852 |            |           |         | 2,133,430 |           |           |       | 208,943   |          |         |       | 150,729 |         |           |           | 8,986,772 | 
|                                                                        |                                                   |                                                         |                                    |           |         |           |            |            |         |           |            |           |         |           |           |           |       |           |          |         |       |         |         |          
|Excess interest earning/bearing assets
	(liabilities)                   |                                                   |                                                         | (2,606,730                         | )         |         |           | 35,008     |            |         |           | 1,854,913  |           |         |           | 1,391,091 |           |       |           | 10,552   |         |       |         | 684,834 |          
|Effect of hedging activities(5)                                         |                                                   |                                                         | 4,408,501                          |           |         |           | (1,282,864 | )          |         |           | (1,919,841 | )         |         |           | (441,296  | )         |       |           | (764,500 | )       |       |         |         |          
|                                                                        |                                                   |                                                         |                                    |           |         |           |            |            |         |           |            |           |         |           |           |           |       |           |          |         |       |         |         |          
|Hedged excess (deficit)                                                 |                                                   | $                                                       | 1,801,771                          |           |         | $         | (1,247,856 | )          |         | $         | (64,928    | )         |         | $         | 949,795   |           |       | $         | (753,948 | )       |       | $       | 684,834 |          
|                                                                        |                                                   |                                                         |                                    |           |         |           |            |            |         |           |            |           |         |           |           |           |       |           |          |         |       |         |         |          
|Cumulative excess (deficit)                                             |                                                   | $                                                       | 1,801,771                          |           |         | $         | 553,915    |            |         | $         | 488,987    |           |         | $         | 1,438,782 |           |       | $         | 684,834  |         |       | $       | 684,834 |          
|                                                                        |                                                   |                                                         |                                    |           |         |           |            |            |         |           |            |           |         |           |           |           |       |           |          |         |       |         |         |          
|Cumulative difference as a percentage of total
	interest earning assets |                                                   |                                                         | 18.63                              | %         |         |           | 5.73       | %          |         |           | 5.06       | %         |         |           | 14.88     | %         |       |           | 7.08     | %       |       |         | 7.08    | %        




|    |                                                                                                                         
|--- | ------------------------------------------------------------------------------------------------------------------------
|(1) | Based on contractual maturities adjusted by our
	historical prepayment rate.                                            
|   
|(2) | Based on interest rate repricing adjusted for
	projected prepayments.                                                   
|   
|(3) | Based on historical retention rate.                                                                                     
|   
|(4) | Based on contractual maturity.                                                                                          
|   
|(5) | Includes effect of interest rate swaps designated
	against deposits and securities sold under agreements to
	repurchase.

The automobile 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
securitizations, we enter into various hedge agreements. We
enter into Euro-dollar swap agreements 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

67



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comprehensive income (loss). Any ineffective
portion is recognized in interest expense during that period if
the hedge is greater than 100% effective. Upon completion of the
securitization, 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 is treated as a sale or amortized on a level
yield basis over the duration of the notes issued if the
securitization is treated as a secured financing. These hedge
instruments are settled daily, and therefore, there are no
related financial instruments on the Consolidated Statements of
Financial Condition and credit risk related to these hedge
instruments is minimal.


As we issued certain variable rate notes payable
in 2001, 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 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 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. The methodology
for the determination, valuation and monitoring of our hedges is
a critical accounting process. 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, automobile
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. For Euro-dollar swap agreements,
the table presents the amount of future debt that is being
hedged by the current contracts outstanding.

Interest Rate Sensitive Instruments

|                                                  |                       |                        |           |       |   |      |           |       |   |      |           |        |   |       |          |       |   |   |         |       |   |   |          |       |   |   |           |       |   |   |           |   | 
|------------------------------------------------- | --------------------- | ---------------------- | --------- | ----- | - | ---- | --------- | ----- | - | ---- | --------- | ------ | - | ----- | -------- | ----- | - | - | ------- | ----- | - | - | -------- | ----- | - | - | --------- | ----- | - | - | --------- | - | 
|                                                  |                       |                        |           |       |   |      |           |       |   |      |           | There- |   |       |          | Fair 
|                                                  |                       | 2002                   |           | 2003  |   | 2004 |           | 2005  |   | 2006 |           | after  |   | Total |          | Value
|                                                  |                       |                        |           |       |   |      |           |       |   |      |           |        |   |       |          |      
|                                                  |                       |                       
|                                                  |                       | (Dollars in thousands)
|Rate sensitive assets:                            |                       |                        |           |       |   |      |           |       |   |      |           |        |   |       |          |       |   |   |         |       |   |   |          |       |   |   |           |       |   |   |           |  
|Fixed interest rate loans                         |                       | $                      | 2,308,795 |       |   | $    | 1,921,696 |       |   | $    | 1,452,715 |        |   | $     | 976,358  |       |   | $ | 405,242 |       |   | $ | 40,540   |       |   | $ | 7,105,619 |       |   | $ | 7,826,247 |  
|                                                  | Average interest rate |                        |           | 13.22 | % |      |           | 13.33 | % |      |           | 13.39  | % |       |          | 13.23 | % |   |         | 12.49 | % |   |          | 10.62 | % |   |           | 13.23 | % |   |           |   | 
|Variable interest rate loans                      |                       | $                      | 427,531   |       |   |      |           |       |   |      |           |        |   |       |          |       |   |   |         |       |   |   |          |       |   | $ | 427,531   |       |   | $ | 419,488   |  
|                                                  | Average interest rate |                        |           | 6.42  | % |      |           |       |   |      |           |        |   |       |          |       |   |   |         |       |   |   |          |       |   |   |           | 6.42  | % |   |           |   | 
|Fixed interest rate securities                    |                       | $                      | 706,728   |       |   | $    | 382,601   |       |   | $    | 229,001   |        |   | $     | 136,448  |       |   | $ | 81,191  |       |   | $ | 120,673  |       |   | $ | 1,656,641 |       |   | $ | 1,656,641 |  
|                                                  | Average interest rate |                        |           | 5.44  | % |      |           | 5.66  | % |      |           | 5.66   | % |       |          | 5.66  | % |   |         | 5.66  | % |   |          | 5.63  | % |   |           | 5.56  | % |   |           |   | 
|Variable interest rate securities                 |                       | $                      | 481,815   |       |   |      |           |       |   |      |           |        |   |       |          |       |   |   |         |       |   |   |          |       |   | $ | 481,815   |       |   | $ | 481,815   |  
|                                                  | Average interest rate |                        |           | 5.25  | % |      |           |       |   |      |           |        |   |       |          |       |   |   |         |       |   |   |          |       |   |   |           | 5.25  | % |   |           |   | 
|Rate sensitive liabilities:                       |                       |                        |           |       |   |      |           |       |   |      |           |        |   |       |          |       |   |   |         |       |   |   |          |       |   |   |           |       |   |   |           |  
|Passbook deposits                                 |                       | $                      | 7,864     |       |   | $    | 2,658     |       |   | $    | 669       |        |   |       |          |       |   |   |         |       |   |   |          |       |   | $ | 11,191    |       |   | $ | 10,856    |  
|                                                  | Average interest rate |                        |           | 1.07  | % |      |           | 1.07  | % |      |           | 1.07   | % |       |          |       |   |   |         |       |   |   |          |       |   |   |           | 1.07  | % |   |           |   | 
|Money market and interest bearing demand deposits |                       | $                      | 358,711   |       |   | $    | 276,537   |       |   | $    | 224,248   |        |   |       |          |       |   |   |         |       |   |   |          |       |   | $ | 859,496   |       |   | $ | 853,439   |  
|                                                  | Average interest rate |                        |           | 3.24  | % |      |           | 3.11  | % |      |           | 2.97   | % |       |          |       |   |   |         |       |   |   |          |       |   |   |           | 3.13  | % |   |           |   | 
|Certificates of deposit                           |                       | $                      | 1,186,906 |       |   | $    | 151,777   |       |   | $    | 16,278    |        |   | $     | 1,644    |       |   | $ | 1,766   |       |   | $ | 98       |       |   | $ | 1,358,469 |       |   | $ | 1,373,564 |  
|                                                  | Average interest rate |                        |           | 4.18  | % |      |           | 4.08  | % |      |           | 4.27   | % |       |          | 5.53  | % |   |         | 4.32  | % |   |          | 4.64  | % |   |           | 4.17  | % |   |           |   | 
|Notes payable under automobile secured financing  |                       | $                      | 4,219,428 |       |   | $    | 674,303   |       |   | $    | 786,961   |        |   | $     | 205,535  |       |   |   |         |       |   |   |          |       |   | $ | 5,886,227 |       |   | $ | 6,026,564 |  
|                                                  | Average interest rate |                        |           | 5.34  | % |      |           | 4.62  | % |      |           | 4.74   | % |       |          | 4.31  | % |   |         |       |   |   |          |       |   |   |           | 4.87  | % |   |           |   | 
|Other fixed interest rate borrowings              |                       | $                      | 695,690   |       |   |      |           |       |   |      |           |        |   |       |          |       |   |   |         |       |   | $ | 150,631  |       |   | $ | 846,321   |       |   | $ | 843,577   |  
|                                                  | Average interest rate |                        |           | 1.96  | % |      |           |       |   |      |           |        |   |       |          |       |   |   |         |       |   |   |          | 8.79  | % |   |           | 3.20  | % |   |           |   | 
|Variable interest rate borrowings                 |                       | $                      | 25,068    |       |   |      |           |       |   |      |           |        |   |       |          |       |   |   |         |       |   |   |          |       |   | $ | 25,068    |       |   | $ | 25,075    |  
|                                                  | Average interest rate |                        |           | 4.04  | % |      |           |       |   |      |           |        |   |       |          |       |   |   |         |       |   |   |          |       |   |   |           | 4.04  | % |   |           |   | 
|Rate sensitive derivative financial
	Instruments: |                       |                        |           |       |   |      |           |       |   |      |           |        |   |       |          |       |   |   |         |       |   |   |          |       |   |   |           |       |   |   |           |  
|Pay variable interest rate swaps                  |                       | $                      | 2,422,115 |       |   | $    | (849,114  | )     |   | $    | (599,846  | )      |   | $     | (208,655 | )     |   |   |         |       |   | $ | (764,500 | )     |   |   |           |       |   | $ | (95,984   | )
|                                                  | Average pay rate      |                        |           | 5.53  | % |      |           | 5.53  | % |      |           | 5.49   | % |       |          | 5.47  | % |   |         | 4.42  | % |   |          | 4.42  | % |   |           | 5.53  | % |   |           |   | 
|                                                  | Average receive rate  |                        |           | 2.17  | % |      |           | 2.17  | % |      |           | 2.18   | % |       |          | 2.17  | % |   |         | 2.26  | % |   |          | 2.26  | % |   |           | 2.17  | % |   |           |   | 
|Euro-dollar swap agreements                       |                       | $                      | 995,778   |       |   | $    | (522,974  | )     |   | $    | (298,300  | )      |   | $     | (152,946 | )     |   | $ | (21,558 | )     |   |   |          |       |   |   |           |       |   |   |           |  






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.

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PART III

Certain information required by Part III is
omitted from this report, as we will file a definitive proxy
statement, or 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 May 2, 2002, 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.




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 Management Directors and
Nominees in the Proxy Statement and is incorporated herein
by reference.




Item 13. Certain Relationships
and Related Transactions

None

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##### Table of Contents






PART IV




Item 14. Financial Statement
Schedules, Exhibits and Reports on Form 8-K

Our audited consolidated financial statements
incorporated herein shall modify and supersede all documents
filed prior to March 26, 2002.

(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, 2001 and 2000                                                                                                                                
|
| | Consolidated Statements of Income for the years
	ended December 31, 2001, 2000 and 1999                                                                                                                      
|
| | Consolidated Statements of Changes in
	Shareholders Equity for the years ended December 31,
	2001, 2000 and 1999                                                                                            
|
| | Consolidated Statements of Cash Flows for the
	years ended December 31, 2001, 2000 and 1999                                                                                                                  
|
| | 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                                                                                                                                                                                                 

71



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|        |         |             |  |                                                                                                                                                                                                                                             
|------- | ------- | ----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |         |            
|Number  |         | Description
|        |         |            
|        | 3.1     |             |  | Certificate of Incorporation(12)                                                                                                                                                                                                            
|        | 3.2     |             |  | Bylaws(12)                                                                                                                                                                                                                                  
|        | 4.1     |             |  | Indenture dated as of June 17, 1993 issued
	by Western Financial Bank, formerly Western Financial Savings
	Bank, F.S.B., with respect to $125,000,000 in aggregate
	principal amount of 8.5% Subordinated Capital Debentures due
	2003(13)  
|        | 4.2     |             |  | Indenture dated as of June 25, 1998 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(14)
|        | 10.1    |             |  | Westcorp Incentive Stock Option Plan(2)                                                                                                                                                                                                     
|        | 10.2    |             |  | Westcorp Employee Stock Ownership and Salary
	Savings Plan(3)                                                                                                                                                                               
|        | 10.3    |             |  | Westcorp 1991 Stock Option Plan(4)                                                                                                                                                                                                          
|        | 10.3.1  |             |  | Westcorp 2001 Stock Option Plan                                                                                                                                                                                                             
|        | 10.4    |             |  | 1985 Executive Deferral Plan(1)                                                                                                                                                                                                             
|        | 10.5    |             |  | 2000 Executive Deferral Plan V                                                                                                                                                                                                              
|        | 10.6    |             |  | Revolving Line of Credit Agreement between WFS
	Funding, Inc. and Western Financial Bank, dated
	November 30, 2001                                                                                                                          
|        | 10.6.1  |             |  | Revolving Line of Credit Agreement between WFS
	Financial Auto Loans, Inc. and Western Financial Bank, dated
	November 30, 2001                                                                                                             
|        | 10.6.2  |             |  | Revolving Line of Credit Agreement between WFS
	Receivables Corporation and Western Financial Bank, dated
	November 30, 2001                                                                                                                
|        | 10.7    |             |  | Transfer Agreement between WFS Financial Inc and
	Western Financial Bank, F.S.B., dated May 1, 1995(1)                                                                                                                                      
|        | 10.8    |             |  | Promissory Note of WFS Financial Inc in favor of
	Western Financial Bank, F.S.B., dated May 1, 1995(1)                                                                                                                                      
|        | 10.9    |             |  | Revolving Line of Credit Agreement between WFS
	Financial Inc and Western Financial Bank, dated June 15,
	1999(11)                                                                                                                          
|        | 10.9.1  |             |  | Amendment No. 1, dated as of August 1,
	1999, to the Revolving Line of Credit Agreement between WFS
	Financial Inc and Western Financial Bank(11)                                                                                           
|        | 10.9.2  |             |  | Amendment No. 2, dated May 23, 2000, to
	the Revolving Line of Credit Agreement between WFS Financial Inc
	and Western Financial Bank                                                                                                       
|        | 10.9.3  |             |  | Amendment No. 3, dated January 1, 2002,
	to the Revolving Line of Credit Agreement between WFS Financial
	Inc and Western Financial Bank                                                                                                    
|        | 10.10   |             |  | Tax Sharing Agreement between WFS Financial Inc
	and Western Financial Bank, F.S.B., dated January 1, 1994(1)                                                                                                                               
|        | 10.11   |             |  | Master Reinvestment Contract between WFS
	Financial Inc and Western Financial Bank, F.S.B., dated
	May 1, 1995(1)                                                                                                                           
|        | 10.12   |             |  | Amendment No. 1, dated as of June 1,
	1995, to the Restated Master Reinvestment Reimbursement
	Agreement(10)                                                                                                                                
|        | 10.13   |             |  | Amended and Restated Master Collateral Assignment
	Agreement, dated as of March 1, 2000(11)                                                                                                                                                 
|        | 10.14   |             |  | Form of WFS Financial Inc Dealer Agreement(5)                                                                                                                                                                                               
|        | 10.15   |             |  | Form of WFS Financial Inc Loan Application(5)                                                                                                                                                                                               
|        | 10.16   |             |  | Westcorp Employee Stock Ownership and Salary
	Savings Plan(7)                                                                                                                                                                               
|        | 10.16.1 |             |  | Amended and Restated Westcorp Employee Stock
	Ownership and Salary Savings Plan, dated January 1, 2001                                                                                                                                      

72



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|        |         |             |  |                                                                                                                                   
|------- | ------- | ----------- |  | ----------------------------------------------------------------------------------------------------------------------------------
|Exhibit |         |            
|Number  |         | Description
|        |         |            
|        | 10.16.2 |             |  | Amendment No. 1, dated as of January 1,
	2001, to Amended and Restated Westcorp Employee Stock Ownership
	and Salary Savings Plan 
|        | 10.16.3 |             |  | Amendment No. 2, dated as of January 1,
	2001, to Amended and Restated Westcorp Employee Stock Ownership
	and Salary Savings Plan 
|        | 10.17   |             |  | Amended and Restated WFS 1996 Incentive Stock
	Option Plan(6)                                                                     
|        | 10.18   |             |  | Promissory Note of WFS Financial Inc in favor of
	Western Financial Bank, F.S.B., dated August 1, 1997(10)                        
|        | 10.18.1 |             |  | Amendment No. 1, dated February 23,
	1999, to the Promissory Note of WFS Financial Inc in favor of
	Western Financial Bank(10)    
|        | 10.18.2 |             |  | Amendment No. 2, dated July 30, 1999,
	to the Promissory Note of WFS Financial Inc in favor of Western
	Financial Bank(10)        
|        | 10.18.3 |             |  | Amendment No. 3, dated January 1, 2002,
	to the Promissory Note of WFS Financial Inc in favor of Western
	Financial Bank          
|        | 10.19   |             |  | Investment Agreement between WFS Financial Inc
	and Western Financial Bank, dated January 1, 1996(10)                             
|        | 10.19.1 |             |  | Amendment No. 1, dated January 1, 2002,
	to the Investment Agreement between WFS Financial Inc and
	Western Financial Bank, F.S.B.
|        | 10.20   |             |  | Allocation Agreement between WFS Financial Inc,
	Western Financial Bank, Westcorp, and their subsidiaries dated
	January 1, 2002  
|        | 10.21   |             |  | Employment Agreement(8)(9)                                                                                                        
|        | 21.1    |             |  | Subsidiaries of Westcorp                                                                                                          
|        | 23.1    |             |  | Consent of Independent Auditors, Ernst &
	Young LLP                                                                               




|    |                                                                                                                                                                                                  
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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) | Exhibits previously filed with Westcorp
	Registration Statement on Form S-1 (File No. 33-4295),
	filed May 2, 1986 incorporated herein by reference under
	Exhibit Number indicated.             
|   
|(3) | Exhibits previously filed with Westcorp
	Registration Statement on Form S-4 (File
	No. 33-34286), filed April 11, 1990 incorporated
	herein by reference under Exhibit Number indicated.         
|   
|(4) | Exhibits previously filed with Westcorp
	Registration Statement on Form S-8 (File
	No. 33-43898), filed December 11, 1991 incorporated
	herein by reference under Exhibit Number indicated.      
|   
|(5) | Amendment No. 1, dated as of July 14,
	1995 to the WFS Financial Inc Registration Statement on
	Form S-1 (File No. 33-93068) incorporated herein by
	reference under Exhibit Number indicated.   
|   
|(6) | 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.       
|   
|(7) | Exhibits previously filed with Westcorp
	Registration Statement on Form S-8 (File
	No. 333-11039), filed August 29, 1996 incorporated
	herein by reference under Exhibit Number indicated.       
|   
|(8) | Employment Agreement dated February 27, 1998
	between WFS Financial Inc, Westcorp and Lee A. Whatcott (will be
	provided to the SEC upon request).                                               
|   
|(9) | Employment Agreement, dated November 15,
	1998 between the WFS Financial Inc, Westcorp and Mark Olson
	(will be provided to the SEC upon request).                                               



|     |                                                                                                                                                                                
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | 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.

73



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##### Table of Contents





|     |                                                                                                                                                                                                                               
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(11) | 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.
|    
|(12) | Exhibits previously filed with Westcorp
	Registration Statement on Form S-4 (File
	No. 33-34286), filed April 11, 1990, incorporated
	herein by reference under Exhibit Numbers indicated.                                    
|    
|(13) | Exhibit previously filed with, Western Financial
	Bank, formerly Western Financial Savings Bank, F.S.B., Offering
	Circular with the OTS, dated June 17, 1993 (will be
	provided to the SEC upon request).                    
|    
|(14) | Exhibit previously filed with Western Financial
	Bank, formerly Western Financial Bank, F.S.B., Offering Circular
	with the OTS, dated July 25, 1998 (will be provided to the
	SEC upon request).                             

(b) Report on Form 8-K



| |     
| | ----
| | None

74



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##### Table of Contents






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.



| |         
| | --------
| | WESTCORP

|                      |  |                                                                                                                                                  
|--------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------
|Dated: March 22, 2002 |  | By: /s/ ERNEST S. RADY
	-------------------------------------------------------
	Ernest S. RadyChairman 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 22, 2002
|                                          
|/s/ THOMAS A. WOLFEThomas A. Wolfe         |  | President and Director                                                                              |  | March 22, 2002
|                                          
|/s/ JUDITH M. BARDWICKJudith M. Bardwick   |  | Director                                                                                            |  | March 22, 2002
|                                          
|/s/ ROBERT T. BARNUMRobert T. Barnum       |  | Director                                                                                            |  | March 22, 2002
|                                          
|/s/ JIM DOWLANJim Dowlan                   |  | Director                                                                                            |  | March 22, 2002
|                                          
|/s/ CHARLES E. SCRIBNERCharles E. Scribner |  | Director                                                                                            |  | March 22, 2002
|                                          
|/s/ LEE A. WHATCOTTLee A. Whatcott         |  | Executive Vice President
	(Principal Financial and Accounting Officer) and
	Chief Financial Officer |  | March 22, 2002

75



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EXHIBIT 20


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, 2001 and 2000                                     |  |      | F-3 | 
|Consolidated Statements of Income for the years
	ended December 31, 2001, 2000 and 1999                           |  |      | F-4 | 
|Consolidated Statements of Changes in
	Shareholders Equity for the years ended December 31,
	2001, 2000 and 1999 |  |      | F-5 | 
|Consolidated Statements of Cash Flows for the
	years ended December 31, 2001, 2000 and 1999                       |  |      | F-6 | 
|Notes to Consolidated Financial Statements                                                                        |  |      | F-7 | 

F-1



---



##### Table of Contents



REPORT OF INDEPENDENT AUDITORS

Board of Directors

Westcorp


We have audited the accompanying consolidated
statements of financial condition of Westcorp and subsidiaries
as of December 31, 2001 and 2000, 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, 2001. 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, 2001 and 2000 and the
consolidated results of their operations and their cash flows
for each of the three years in the period ended
December 31, 2001 in conformity with accounting principles
generally accepted in the United States.



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

Los Angeles, California

January 22, 2002


F-2



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##### Table of Contents



WESTCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL
CONDITION

|                                                                                                                                                         |                         |                                            |           |           |            |   |           |           |           | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------- | ------------------------------------------ | --------- | --------- | ---------- | - | --------- | --------- | --------- | 
|                                                                                                                                                         |                         |                                           
|                                                                                                                                                         |                         | December 31,                              
|                                                                                                                                                         |                         |                                           
|                                                                                                                                                         |                         | 2001                                       |           | 2000     
|                                                                                                                                                         |                         |                                            |           |          
|                                                                                                                                                         |                         |                                           
|                                                                                                                                                         |                         | (Dollars in thousands)                    
|ASSETS                                                                                                                                                   |                         |                                            |           |           |            |   |           |          
|Cash                                                                                                                                                     |                         | $                                          | 68,607    |           |            | $ | 61,543    |          
|Interest bearing deposits with other financial
	institutions                                                                                             |                         |                                            | 720       |           |            |   | 720       |          
|Other short-term investments                                                                                                                             |                         |                                            | 35,000    |           |            |   | 66,500    |          
|                                                                                                                                                         |                         |                                            |           |           |            |   |           |          
|                                                                                                                                                         | Cash and due from banks |                                            |           | 104,327   |            |   |           | 128,763   |          
|Investment securities available for sale                                                                                                                 |                         |                                            | 10,511    |           |            |   | 10,734    |          
|Mortgage-backed securities available for sale                                                                                                            |                         |                                            | 2,092,225 |           |            |   | 2,230,448 |          
|Loans receivable                                                                                                                                         |                         |                                            | 7,533,150 |           |            |   | 4,924,053 |          
|Allowance for credit losses                                                                                                                              |                         |                                            | (171,432  | )         |            |   | (104,006  | )        
|                                                                                                                                                         |                         |                                            |           |           |            |   |           |          
|                                                                                                                                                         | Loans receivable, net   |                                            |           | 7,361,718 |            |   |           | 4,820,047 |          
|Amounts due from trusts                                                                                                                                  |                         |                                            | 136,131   |           |            |   | 357,051   |          
|Retained interest in securitized assets                                                                                                                  |                         |                                            | 37,392    |           |            |   | 111,558   |          
|Premises and equipment, net                                                                                                                              |                         |                                            | 79,258    |           |            |   | 83,991    |          
|Other assets                                                                                                                                             |                         |                                            | 250,835   |           |            |   | 125,318   |          
|                                                                                                                                                         |                         |                                            |           |           |            |   |           |          
|                                                                                                                                                         |                         | TOTAL ASSETS                               |           | $         | 10,072,397 |   |           | $         | 7,867,910 | 
|                                                                                                                                                         |                         |                                            |           |           |            |   |           |          
|                                                                                                                                                        
|LIABILITIES                                                                                                                                              |                         |                                            |           |           |            |   |           |          
|Deposits                                                                                                                                                 |                         | $                                          | 2,329,326 |           |            | $ | 2,478,487 |          
|Notes payable on automobile secured financing                                                                                                            |                         |                                            | 5,886,227 |           |            |   | 3,473,377 |          
|Securities sold under agreements to repurchase                                                                                                           |                         |                                            | 155,190   |           |            |   | 178,821   |          
|Federal Home Loan Bank advances                                                                                                                          |                         |                                            | 543,417   |           |            |   | 409,570   |          
|Amounts held on behalf of trustee                                                                                                                        |                         |                                            | 280,496   |           |            |   | 494,858   |          
|Subordinated debentures                                                                                                                                  |                         |                                            | 147,714   |           |            |   | 189,962   |          
|Short-term borrowings                                                                                                                                    |                         |                                            | 25,068    |           |            |   | 27,802    |          
|Other liabilities                                                                                                                                        |                         |                                            | 85,994    |           |            |   | 71,221    |          
|                                                                                                                                                         |                         |                                            |           |           |            |   |           |          
|                                                                                                                                                         |                         | TOTAL LIABILITIES                          |           |           | 9,453,432  |   |           |           | 7,324,098 | 
|Minority interest                                                                                                                                        |                         |                                            | 78,261    |           |            |   | 56,644    |          
|                                                                                                                                                        
|SHAREHOLDERS EQUITY                                                                                                                                     |                         |                                            |           |           |            |   |           |          
|Common stock (par value $1.00 per share;
	authorized 45,000,000 shares; issued and outstanding 35,802,491
	shares in 2001 and 31,931,826 shares in 2000) |                         |                                            | 35,802    |           |            |   | 31,932    |          
|Paid-in capital                                                                                                                                          |                         |                                            | 301,955   |           |            |   | 246,889   |          
|Retained earnings                                                                                                                                        |                         |                                            | 263,853   |           |            |   | 223,163   |          
|Accumulated other comprehensive loss, net of tax                                                                                                         |                         |                                            | (60,906   | )         |            |   | (14,816   | )        
|                                                                                                                                                         |                         |                                            |           |           |            |   |           |          
|                                                                                                                                                         |                         | TOTAL SHAREHOLDERS EQUITY                 |           |           | 540,704    |   |           |           | 487,168   | 
|                                                                                                                                                         |                         |                                            |           |           |            |   |           |          
|                                                                                                                                                         |                         | TOTAL LIABILITIES AND SHAREHOLDERS EQUITY |           | $         | 10,072,397 |   |           | $         | 7,867,910 | 
|                                                                                                                                                         |                         |                                            |           |           |            |   |           |          

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,                 
|                                                                                                                 |                                                          |                                                 
|                                                                                                                 |                                                          | 2001                                             |         | 2000       |         | 1999
|                                                                                                                 |                                                          |                                                  |         |            |         |     
|                                                                                                                 |                                                          |                                                 
|                                                                                                                 |                                                          | (Dollars in thousands, except per share amounts)
|Interest income:                                                                                                 |                                                          |                                                  |         |            |         |      |         |            |         |   |         |           
|                                                                                                                 | Loans, including fees                                    |                                                  | $       | 821,113    |         |      | $       | 439,336    |         |   | $       | 195,373    |        
|                                                                                                                 | Mortgage-backed securities                               |                                                  |         | 133,539    |         |      |         | 128,231    |         |   |         | 87,631     |        
|                                                                                                                 | Investment securities                                    |                                                  |         | 433        |         |      |         | 535        |         |   |         | 1,607      |        
|                                                                                                                 | Other                                                    |                                                  |         | 7,542      |         |      |         | 15,719     |         |   |         | 13,005     |        
|                                                                                                                 |                                                          |                                                  |         |            |         |      |         |            |         |   |         |           
|                                                                                                                 |                                                          | TOTAL INTEREST INCOME                            |         |            | 962,627 |      |         |            | 583,821 |   |         |            | 297,616 | 
|Interest expense:                                                                                                |                                                          |                                                  |         |            |         |      |         |            |         |   |         |           
|                                                                                                                 | Deposits                                                 |                                                  |         | 114,831    |         |      |         | 133,610    |         |   |         | 106,067    |        
|                                                                                                                 | Notes payable on automobile secured financing and
	other |                                                  |         | 350,635    |         |      |         | 136,615    |         |   |         | 20,964     |        
|                                                                                                                 | Short-term borrowings                                    |                                                  |         | 26,478     |         |      |         | 43,647     |         |   |         | 25,757     |        
|                                                                                                                 |                                                          |                                                  |         |            |         |      |         |            |         |   |         |           
|                                                                                                                 |                                                          | TOTAL INTEREST EXPENSE                           |         |            | 491,944 |      |         |            | 313,872 |   |         |            | 152,788 | 
|                                                                                                                 |                                                          |                                                  |         |            |         |      |         |            |         |   |         |           
|NET INTEREST INCOME                                                                                              |                                                          |                                                  | 470,683 |            |         |      | 269,949 |            |         |   | 144,828 |           
|Provision for credit losses                                                                                      |                                                          |                                                  | 196,977 |            |         |      | 82,133  |            |         |   | 38,400  |           
|                                                                                                                 |                                                          |                                                  |         |            |         |      |         |            |         |   |         |           
|NET INTEREST INCOME AFTER PROVISION FOR CREDIT
	LOSSES                                                           |                                                          |                                                  | 273,706 |            |         |      | 187,816 |            |         |   | 106,428 |           
|Noninterest income:                                                                                              |                                                          |                                                  |         |            |         |      |         |            |         |   |         |           
|                                                                                                                 | Automobile lending                                       |                                                  |         | 62,758     |         |      |         | 158,701    |         |   |         | 188,706    |        
|                                                                                                                 | Mortgage banking                                         |                                                  |         | 1,495      |         |      |         | 6,852      |         |   |         | 6,040      |        
|                                                                                                                 | Investment and mortgage-backed securities gains          |                                                  |         | 541        |         |      |         |            |         |   |         | 1,308      |        
|                                                                                                                 | Insurance income                                         |                                                  |         | 9,090      |         |      |         | 6,984      |         |   |         | 6,126      |        
|                                                                                                                 | Miscellaneous                                            |                                                  |         | 4,999      |         |      |         | 5,106      |         |   |         | 7,826      |        
|                                                                                                                 |                                                          |                                                  |         |            |         |      |         |            |         |   |         |           
|                                                                                                                 |                                                          | TOTAL NONINTEREST INCOME                         |         |            | 78,883  |      |         |            | 177,643 |   |         |            | 210,006 | 
|Noninterest expenses:                                                                                            |                                                          |                                                  |         |            |         |      |         |            |         |   |         |           
|                                                                                                                 | Salaries and associate benefits                          |                                                  |         | 142,322    |         |      |         | 131,677    |         |   |         | 130,103    |        
|                                                                                                                 | Credit and collections                                   |                                                  |         | 27,707     |         |      |         | 21,150     |         |   |         | 21,833     |        
|                                                                                                                 | Data processing                                          |                                                  |         | 18,396     |         |      |         | 17,019     |         |   |         | 15,206     |        
|                                                                                                                 | Occupancy                                                |                                                  |         | 14,615     |         |      |         | 12,495     |         |   |         | 12,751     |        
|                                                                                                                 | Telephone                                                |                                                  |         | 6,187      |         |      |         | 5,868      |         |   |         | 6,660      |        
|                                                                                                                 | Miscellaneous                                            |                                                  |         | 35,644     |         |      |         | 32,764     |         |   |         | 31,405     |        
|                                                                                                                 |                                                          |                                                  |         |            |         |      |         |            |         |   |         |           
|                                                                                                                 |                                                          | TOTAL NONINTEREST EXPENSES                       |         |            | 244,871 |      |         |            | 220,973 |   |         |            | 217,958 | 
|                                                                                                                 |                                                          |                                                  |         |            |         |      |         |            |         |   |         |           
|INCOME BEFORE INCOME TAX                                                                                         |                                                          |                                                  | 107,718 |            |         |      | 144,486 |            |         |   | 98,476  |           
|Income tax                                                                                                       |                                                          |                                                  | 41,675  |            |         |      | 58,132  |            |         |   | 41,460  |           
|                                                                                                                 |                                                          |                                                  |         |            |         |      |         |            |         |   |         |           
|INCOME BEFORE MINORITY INTEREST                                                                                  |                                                          |                                                  | 66,043  |            |         |      | 86,354  |            |         |   | 57,016  |           
|Minority interest in earnings of subsidiaries                                                                    |                                                          |                                                  | 10,369  |            |         |      | 11,852  |            |         |   | 6,522   |           
|                                                                                                                 |                                                          |                                                  |         |            |         |      |         |            |         |   |         |           
|INCOME BEFORE EXTRAORDINARY ITEM                                                                                 |                                                          |                                                  | 55,674  |            |         |      | 74,502  |            |         |   | 50,494  |           
|Extraordinary gain from early extinguishment of
	debt (net of income tax of $11, $175, and $1,546, respectively) |                                                          |                                                  | 16      |            |         |      | 241     |            |         |   | 2,132   |           
|                                                                                                                 |                                                          |                                                  |         |            |         |      |         |            |         |   |         |           
|NET INCOME                                                                                                       |                                                          | $                                                | 55,690  |            |         | $    | 74,743  |            |         | $ | 52,626  |           
|                                                                                                                 |                                                          |                                                  |         |            |         |      |         |            |         |   |         |           
|Net income per common
	share  basic:                                                                            |                                                          |                                                  |         |            |         |      |         |            |         |   |         |           
|                                                                                                                 | Income before extraordinary item                         |                                                  | $       | 1.62       |         |      | $       | 2.53       |         |   | $       | 1.91       |        
|                                                                                                                 | Extraordinary item                                       |                                                  |         | 0.00       |         |      |         | 0.01       |         |   |         | 0.08       |        
|                                                                                                                 |                                                          |                                                  |         |            |         |      |         |            |         |   |         |           
|                                                                                                                 | Net income                                               |                                                  | $       | 1.62       |         |      | $       | 2.54       |         |   | $       | 1.99       |        
|                                                                                                                 |                                                          |                                                  |         |            |         |      |         |            |         |   |         |           
|Net income per common
	share  diluted:                                                                          |                                                          |                                                  |         |            |         |      |         |            |         |   |         |           
|                                                                                                                 | Income before extraordinary item                         |                                                  | $       | 1.61       |         |      | $       | 2.52       |         |   | $       | 1.91       |        
|                                                                                                                 | Extraordinary item                                       |                                                  |         | 0.00       |         |      |         | 0.01       |         |   |         | 0.08       |        
|                                                                                                                 |                                                          |                                                  |         |            |         |      |         |            |         |   |         |           
|                                                                                                                 | Net income                                               |                                                  | $       | 1.61       |         |      | $       | 2.53       |         |   | $       | 1.99       |        
|                                                                                                                 |                                                          |                                                  |         |            |         |      |         |            |         |   |         |           
|Weighted average number of common shares
	outstanding:                                                           |                                                          |                                                  |         |            |         |      |         |            |         |   |         |           
|                                                                                                                 | Basic                                                    |                                                  |         | 34,277,856 |         |      |         | 29,494,497 |         |   |         | 26,503,796 |        
|                                                                                                                 |                                                          |                                                  |         |            |         |      |         |            |         |   |         |           
|                                                                                                                 | Diluted                                                  |                                                  |         | 34,485,127 |         |      |         | 29,525,677 |         |   |         | 26,505,128 |        
|                                                                                                                 |                                                          |                                                  |         |            |         |      |         |            |         |   |         |           

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, 1999   |                                                                                                                |                                              | 26,474,814 |           |  | $       | 26,475 |          |  | $              | 188,739 |        |   | $ | 110,138 |         |   | $ | 3,693   |         |   | $ | 329,045 |        
|                             | Net income                                                                                                     |                                              |            |           |  |         |        |          |  |                |         |        |   |   |         | 52,626  |   |   |         |         |   |   |         | 52,626  |  
|                             | Unrealized losses on securities available for
	sale and retained interest in securitized assets, net of tax(1) |                                              |            |           |  |         |        |          |  |                |         |        |   |   |         |         |   |   |         | (24,312 | ) |   |         | (24,312 | )
|                             | Reclassification adjustment for gains on
	securities available for sale included in net income(2)              |                                              |            |           |  |         |        |          |  |                |         |        |   |   |         |         |   |   |         | (862    | ) |   |         | (862    | )
|                             |                                                                                                                |                                              |            |           |  |         |        |          |  |                |         |        |   |   |         |         |   |   |         |         |   |   |         |        
|                             | Comprehensive income                                                                                           |                                              |            |           |  |         |        |          |  |                |         |        |   |   |         |         |   |   |         |         |   |   |         | 27,452  |  
|                             | Issuance of common stock                                                                                       |                                              |            | 122,530   |  |         |        | 122      |  |                |         | 929    |   |   |         |         |   |   |         |         |   |   |         | 1,051   |  
|                             | Cash dividends                                                                                                 |                                              |            |           |  |         |        |          |  |                |         |        |   |   |         | (5,299  | ) |   |         |         |   |   |         | (5,299  | )
|                             | Purchase of subsidiary stock                                                                                   |                                              |            |           |  |         |        |          |  |                |         | 469    |   |   |         |         |   |   |         |         |   |   |         | 469     |  
|                             |                                                                                                                |                                              |            |           |  |         |        |          |  |                |         |        |   |   |         |         |   |   |         |         |   |   |         |        
|Balance at December 31, 1999 |                                                                                                                |                                              | 26,597,344 |           |  |         | 26,597 |          |  |                | 190,137 |        |   |   | 157,465 |         |   |   | (21,481 | )       |   |   | 352,718 |        
|                             | Net income                                                                                                     |                                              |            |           |  |         |        |          |  |                |         |        |   |   |         | 74,743  |   |   |         |         |   |   |         | 74,743  |  
|                             | Unrealized gains on securities available for sale
	and retained interest in securitized assets, net of tax(1)  |                                              |            |           |  |         |        |          |  |                |         |        |   |   |         |         |   |   |         | 6,665   |   |   |         | 6,665   |  
|                             |                                                                                                                |                                              |            |           |  |         |        |          |  |                |         |        |   |   |         |         |   |   |         |         |   |   |         |        
|                             | Comprehensive income                                                                                           |                                              |            |           |  |         |        |          |  |                |         |        |   |   |         |         |   |   |         |         |   |   |         | 81,408  |  
|                             | Issuance of common stock                                                                                       |                                              |            | 5,334,482 |  |         |        | 5,335    |  |                |         | 50,349 |   |   |         |         |   |   |         |         |   |   |         | 55,684  |  
|                             | Issuance of subsidiary common stock                                                                            |                                              |            |           |  |         |        |          |  |                |         | 6,403  |   |   |         |         |   |   |         |         |   |   |         | 6,403   |  
|                             | Cash dividends                                                                                                 |                                              |            |           |  |         |        |          |  |                |         |        |   |   |         | (9,045  | ) |   |         |         |   |   |         | (9,045  | )
|                             |                                                                                                                |                                              |            |           |  |         |        |          |  |                |         |        |   |   |         |         |   |   |         |         |   |   |         |        
|Balance at December 31, 2000 |                                                                                                                |                                              | 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 hedge losses on cash flow hedges, net
	of tax(3)                                                    |                                              |            |           |  |         |        |          |  |                |         |        |   |   |         |         |   |   |         | (75,048 | ) |   |         | (75,048 | )
|                             | Reclassification adjustment for losses on
	securities available for sale included in net income(2)             |                                              |            |           |  |         |        |          |  |                |         |        |   |   |         |         |   |   |         | 1,050   |   |   |         | 1,050   |  
|                             | Reclassification adjustment for losses on cash
	flow hedges included in income(4)                              |                                              |            |           |  |         |        |          |  |                |         |        |   |   |         |         |   |   |         | 15,599  |   |   |         | 15,599  |  
|                             |                                                                                                                |                                              |            |           |  |         |        |          |  |                |         |        |   |   |         |         |   |   |         |         |   |   |         |        
|                             | Comprehensive income                                                                                           |                                              |            |           |  |         |        |          |  |                |         |        |   |   |         |         |   |   |         |         |   |   |         | 9,600   |  
|                             | Issuance of subsidiary common stock                                                                            |                                              |            |           |  |         |        |          |  |                |         | (3,205 | ) |   |         |         |   |   |         |         |   |   |         | (3,205  | )
|                             | Issuance of common stock                                                                                       |                                              |            | 3,870,665 |  |         |        | 3,870    |  |                |         | 58,271 |   |   |         |         |   |   |         |         |   |   |         | 62,141  |  
|                             | Cash dividends                                                                                                 |                                              |            |           |  |         |        |          |  |                |         |        |   |   |         | (15,000 | ) |   |         |         |   |   |         | (15,000 | )
|                             |                                                                                                                |                                              |            |           |  |         |        |          |  |                |         |        |   |   |         |         |   |   |         |         |   |   |         |        
|Balance at December 31, 2001 |                                                                                                                |                                              | 35,802,491 |           |  | $       | 35,802 |          |  | $              | 301,955 |        |   | $ | 263,853 |         |   | $ | (60,906 | )       |   | $ | 540,704 |        
|                             |                                                                                                                |                                              |            |           |  |         |        |          |  |                |         |        |   |   |         |         |   |   |         |         |   |   |         |        




|    |                                                                                                                                                                                                                                                                                         
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The pre-tax amount of unrealized gains and losses
	on securities available for sale and retained interest in
	securitized assets was $20.9 million for the year ended
	December 31, 2001 compared with $11.3 million and
	$40.4 million for the years ended December 31, 2000
	and 1999.
|   
|(2) | The pre-tax amount of unrealized gains and losses
	on securities available for sale reclassified into earnings was
	$1.8 million and $1.5 million for the years ended
	December 31, 2001 and 1999.                                                                                      
|   
|(3) | The pre-tax amount of unrealized losses on cash
	flow hedges was $127 million for the year ended
	December 31, 2001.                                                                                                                                                                    
|   
|(4) | The pre-tax amount of unrealized losses on cash
	flow hedges reclassified into earnings was $26.4 million
	for the year ended December 31, 2001.                                                                                                                                        

See accompanying notes to consolidated financial
statements.

F-5



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##### Table of Contents



WESTCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH
FLOWS

|                                                                                   |                                                          |                                 |            |            |   |      |            |            |   |   |          |            |  
|---------------------------------------------------------------------------------- | -------------------------------------------------------- | ------------------------------- | ---------- | ---------- | - | ---- | ---------- | ---------- | - | - | -------- | ---------- | -
|                                                                                   |                                                          |                                
|                                                                                   |                                                          | For the Year Ended December 31,
|                                                                                   |                                                          |                                
|                                                                                   |                                                          | 2001                            |            | 2000       |   | 1999
|                                                                                   |                                                          |                                 |            |            |   |     
|                                                                                   |                                                          |                                
|                                                                                   |                                                          | (Dollars in thousands)         
|OPERATING ACTIVITIES                                                               |                                                          |                                 |            |            |   |      |            |            |   |   |          |           
|Net income                                                                         |                                                          | $                               | 55,690     |            |   | $    | 74,743     |            |   | $ | 52,626   |           
|Adjustments to reconcile net income to net cash
	provided by operating activities: |                                                          |                                 |            |            |   |      |            |            |   |   |          |           
|                                                                                   | Provision for credit losses                              |                                 |            | 196,977    |   |      |            | 82,133     |   |   |          | 38,400     |  
|                                                                                   | Depreciation and amortization                            |                                 |            | 113,837    |   |      |            | 41,899     |   |   |          | 19,562     |  
|                                                                                   | Amortization of retained interest in securitized
	assets |                                 |            | 75,545     |   |      |            | 75,958     |   |   |          | 111,752    |  
|Loans held for sale:                                                               |                                                          |                                 |            |            |   |      |            |            |   |   |          |           
|                                                                                   | Origination of loans                                     |                                 |            |            |   |      |            |            |   |   |          | (3,655,583 | )
|                                                                                   | Proceeds from contract securitizations                   |                                 |            |            |   |      |            | 660,000    |   |   |          | 2,500,000  |  
|                                                                                   | Participation paid to dealers                            |                                 |            |            |   |      |            |            |   |   |          | (79,433    | )
|                                                                                   | Proceeds from sale of mortgage loans                     |                                 |            | 3,382      |   |      |            | 3,394      |   |   |          | 502,157    |  
|                                                                                   | Loan payments and payoffs                                |                                 |            |            |   |      |            |            |   |   |          | 700,052    |  
|(Increase) decrease in other assets                                                |                                                          |                                 | (99,584    | )          |   |      | (46,718    | )          |   |   | 18,817   |           
|Increase (decrease) in other liabilities                                           |                                                          |                                 | 14,774     |            |   |      | 12,081     |            |   |   | (6,215   | )         
|Other, net                                                                         |                                                          |                                 | 6,310      |            |   |      | 11,490     |            |   |   | 62       |           
|                                                                                   |                                                          |                                 |            |            |   |      |            |            |   |   |          |           
|NET CASH PROVIDED BY OPERATING ACTIVITIES                                          |                                                          |                                 | 366,931    |            |   |      | 914,980    |            |   |   | 202,197  |           
|INVESTING ACTIVITIES                                                               |                                                          |                                 |            |            |   |      |            |            |   |   |          |           
|Loans receivable:                                                                  |                                                          |                                 |            |            |   |      |            |            |   |   |          |           
|                                                                                   | Origination of loans                                     |                                 |            | (5,184,915 | ) |      |            | (4,531,581 | ) |   |          | (214,401   | )
|                                                                                   | Participation paid to dealers                            |                                 |            | (120,194   | ) |      |            | (100,300   | ) |   |          | (4,003     | )
|                                                                                   | Loan payments and payoffs                                |                                 |            | 2,495,987  |   |      |            | 1,153,538  |   |   |          | 41,058     |  
|Investment securities available for sale:                                          |                                                          |                                 |            |            |   |      |            |            |   |   |          |           
|                                                                                   | Purchases                                                |                                 |            | (2,917     | ) |      |            | (2,194     | ) |   |          | (244       | )
|                                                                                   | Proceeds from sale                                       |                                 |            |            |   |      |            |            |   |   |          | 75,470     |  
|                                                                                   | Proceeds from maturities                                 |                                 |            | 3,157      |   |      |            |            |   |   |          | 25         |  
|Mortgage-backed securities:                                                        |                                                          |                                 |            |            |   |      |            |            |   |   |          |           
|                                                                                   | Purchases                                                |                                 |            | (1,233,390 | ) |      |            | (960,876   | ) |   |          | (844,300   | )
|                                                                                   | Proceeds from sale                                       |                                 |            | 507,839    |   |      |            | 17         |   |   |          | 109,726    |  
|                                                                                   | Payments received                                        |                                 |            | 881,537    |   |      |            | 168,433    |   |   |          | 238,515    |  
|Increase in retained interest in securitized
	assets                               |                                                          |                                 |            |            |   |      | (19,240    | )          |   |   | (111,766 | )         
|Decrease (increase) in amounts due from
	trusts                                    |                                                          |                                 | 220,920    |            |   |      | 81,971     |            |   |   | (106,290 | )         
|Purchase of premises and equipment                                                 |                                                          |                                 | (9,993     | )          |   |      | (11,608    | )          |   |   | (24,529  | )         
|                                                                                   |                                                          |                                 |            |            |   |      |            |            |   |   |          |           
|NET CASH USED IN INVESTING ACTIVITIES                                              |                                                          |                                 | (2,441,969 | )          |   |      | (4,221,840 | )          |   |   | (840,739 | )         
|FINANCING ACTIVITIES                                                               |                                                          |                                 |            |            |   |      |            |            |   |   |          |           
|(Decrease) increase in deposits                                                    |                                                          |                                 | (194,310   | )          |   |      | 266,178    |            |   |   | 33,574   |           
|Decrease in securities sold under agreements to
	repurchase                        |                                                          |                                 | (24,931    | )          |   |      | (70,854    | )          |   |   | (15,969  | )         
|Proceeds from notes payable on automobile secured
	financing                       |                                                          |                                 | 3,519,112  |            |   |      | 3,867,220  |            |   |   | 500,000  |           
|Payments on notes payable on automobile secured
	financing                         |                                                          |                                 | (1,156,604 | )          |   |      | (854,947   | )          |   |   | (38,896  | )         
|(Decrease) increase in notes payable, net                                          |                                                          |                                 | (2,734     | )          |   |      | 19,320     |            |   |   | (5,945   | )         
|(Decrease) increase in amounts held on behalf of
	trustee                          |                                                          |                                 | (214,361   | )          |   |      | (192,416   | )          |   |   | 159,182  |           
|Increase in FHLB Advances                                                          |                                                          |                                 | 133,847    |            |   |      | 168,826    |            |   |   | 79,890   |           
|Decrease in subordinated debentures                                                |                                                          |                                 | (42,892    | )          |   |      | (8,608     | )          |   |   | (35,903  | )         
|Proceeds from issuance of common stock                                             |                                                          |                                 | 62,142     |            |   |      | 55,684     |            |   |   | 1,519    |           
|Cash dividends                                                                     |                                                          |                                 | (15,000    | )          |   |      | (9,045     | )          |   |   | (5,299   | )         
|Proceeds from issuance of subsidiary common stock                                  |                                                          |                                 | 13,973     |            |   |      | 22,900     |            |   |   |          |           
|Payments on cash flow hedges                                                       |                                                          |                                 | (27,640    | )          |   |      |            |            |   |   |          |           
|                                                                                   |                                                          |                                 |            |            |   |      |            |            |   |   |          |           
|NET CASH PROVIDED BY FINANCING ACTIVITIES                                          |                                                          |                                 | 2,050,602  |            |   |      | 3,264,258  |            |   |   | 672,153  |           
|                                                                                   |                                                          |                                 |            |            |   |      |            |            |   |   |          |           
|(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                                   |                                                          |                                 | (24,436    | )          |   |      | (42,602    | )          |   |   | 33,611   |           
|Cash and cash equivalents at beginning of year                                     |                                                          |                                 | 128,763    |            |   |      | 171,365    |            |   |   | 137,754  |           
|                                                                                   |                                                          |                                 |            |            |   |      |            |            |   |   |          |           
|CASH AND CASH EQUIVALENTS AT END OF YEAR                                           |                                                          | $                               | 104,327    |            |   | $    | 128,763    |            |   | $ | 171,365  |           
|                                                                                   |                                                          |                                 |            |            |   |      |            |            |   |   |          |           
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:                                 |                                                          |                                 |            |            |   |      |            |            |   |   |          |           
|Cash paid for:                                                                     |                                                          |                                 |            |            |   |      |            |            |   |   |          |           
|                                                                                   | Interest                                                 |                                 | $          | 484,821    |   |      | $          | 286,306    |   |   | $        | 152,987    |  
|                                                                                   | Income taxes                                             |                                 |            | 67,906     |   |      |            | 91,345     |   |   |          | 47,392     |  
|SUPPLEMENTAL DISCLOSURES OF NONCASH TRANSACTIONS:                                  |                                                          |                                 |            |            |   |      |            |            |   |   |          |           
|Acquisition of real estate acquired through
	foreclosure                           |                                                          |                                 | 3,047      |            |   |      | 5,396      |            |   |   | 6,038    |           

See accompanying notes to consolidated financial
statements.

F-6



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##### Table of Contents



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.

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. During 1999, we discontinued our
mortgage banking operations and, therefore, we have only one
reportable segment.

Cash and Cash
Equivalents

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

Investment Securities and
Mortgage-Backed Securities Available for Sale

Investments 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.

Prior to January 1, 2001, we entered into or
committed to interest rate caps and interest rate swaps as
hedges against market value changes in designated portions of
our MBS portfolio to manage interest rate risk exposure. These
financial instruments were also recorded at fair value and
included in the basis of the designated available for sale
securities. The interest rate differential to be paid or
received was accrued and included as part of interest income,
thereby adjusting the overall yield on securities for which we
hedged our exposure to interest rate risk. Unrealized gains and
losses on these contracts were deferred and amortized into
interest income over the shorter of the remaining life of the
derivative instrument or the expected life of the associated
asset. When the related MBS was sold, settled or terminated, the
deferred gains or losses from these contracts were recognized in
the Consolidated Statements of Income as a component of MBS
gains and losses.

Effective January 1, 2001, we redesignated
these existing agreements from hedges on our MBS portfolio to
cash flow hedges on future interest payments on deposits and
securities sold under agreements to repurchase as a result of
adopting Statement of Financial Accounting Standards
No. 133, Accounting for Derivative Instruments and Hedging
Activities, also known as SFAS No. 133. See further
discussion under Derivative Financial Instruments.

F-7



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##### Table of Contents



WESTCORP AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


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 automobile 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 is calculated so as to recognize retained interest
income on an effective yield basis. These amounts are reported
as servicing income on our Consolidated Statements of Income.

RISA is classified in a manner similar to
available for sale securities and as such is marked to market
each quarter. Market value changes are calculated by discounting
estimated future cash flows using a current market discount
rate. Any changes in the market value of the RISA are reported
as accumulated other comprehensive income (loss), net of tax, on
our Consolidated Statements of Financial Condition. On a
quarterly basis, we evaluate the carrying value of the RISA in
light of the actual performance of the underlying contracts and
make 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. These
amounts are valued using the cash out method.

F-8



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##### Table of Contents



WESTCORP AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


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 securitization transactions treated as sales, these amounts
are reported as amounts held on behalf of trustee on our
Consolidated Statements of Financial Condition.

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, 2001 and 2000, 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.

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 were
not material.

Nonperforming Assets

Accounts that are in Chapter 13 bankruptcy
and are contractually past due greater than 120 days are
reclassified from loans receivable to nonperforming assets at
fair value with any adjustment recorded against the allowance
for credit losses. Nonperforming assets were included in other
assets on the Consolidated Statements of Financial Condition and
were 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

F-9



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WESTCORP AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


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.

Interest Income and Fee
Income

Interest income on real estate and certain
consumer loans is earned using the effective yield method and
classified on the Consolidated Statements of Financial Condition
as part of other assets to the extent not collected. Certain
automobile contracts use the sum of the months digits
method, which approximates the effective yield method.

We defer loan origination and commitment fees and
certain loan origination costs. The net amount is amortized as
an adjustment to the related loans yield over the
contractual life of the related loans. 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 mortgage servicing rights and
other mortgage servicing related fee income. Historically, we
originated mortgage loans and sold the loans to investors on
either a servicing rights retained or servicing rights released
basis. When we sold a mortgage loan with servicing rights
retained, we would record a gain related only to the sale of the
loan. Conversely, when we sold a mortgage loan with servicing
rights released, we would record a gain related to the value of
the loan and the value of the servicing rights.

Gain on sale of mortgage loans represented the
difference between the allocated cost basis of loans sold and
the proceeds from sale, which included the carrying value of
capitalized servicing rights, also known as CSRs, created as a
result of the sale. The carrying value of the CSRs represented
an allocation of the cost basis of loans sold between the CSRs
and the loans based upon their relative fair value at the date
the loans were originated or purchased. The fair value of CSRs
was calculated by estimating future servicing revenues,
including servicing fees, late charges, other ancillary income,
and float benefit, less the actual costs to service loans. The
amortization of the CSRs was a component of mortgage banking
income over the period of, and in proportion to, the expected
repayment term of the underlying loans. CSRs were evaluated for
impairment based on the excess of the carrying amount of the
CSRs over their fair value.

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.

Income Taxes

We file consolidated federal and state tax
returns with all of our subsidiaries except for Westhrift, which
files a separate state tax return.

F-10



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##### Table of Contents



WESTCORP AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


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
represent our underlying value.

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



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Cash and cash equivalents and other short-term
	investments:The carrying amounts
	reported in the Consolidated Statements of Financial Condition
	for cash and short-term instruments approximate those
	assets fair values.                                                                                                                                                                                                                                                                                                                                                
|
| | Investment securities and MBS:Fair values for investment securities
	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 (including held for sale):The fair values for loans are
	estimated using discounted cash flow analysis, using interest
	rates currently being offered for loans with similar terms to
	borrowers of similar credit quality.                                                                                                                                                                                                                                                                                                                                 
|
| | Retained interest in securitized assets:RISA is carried at fair value. The
	fair value is determined by discounting estimated cash flows
	using a current market discount rate.                                                                                                                                                                                                                                                                                                                                                                                              
|
| | Interest rate swaps, interest rate caps,
	forward agreements and Euro dollar swap agreements:The fair value is estimated by
	obtaining market quotes from brokers.                                                                                                                                                                                                                                                                                                                                                                                                           
|
| | 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.                                                                                                                                                                                                                                                                                                                                                                                                                        

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##### Table of Contents



WESTCORP AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


Derivative Financial
Instruments

Effective January 1, 2001, we adopted SFAS
No. 133, which requires all derivatives to be recognized on
the balance sheet at fair value. Changes in the fair value of
derivatives that are hedges will be 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 will be 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 hedge instruments qualify 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 swap agreements 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). 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
in 2001, 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.

As part of the adoption of SFAS No. 133, 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-

F-12



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##### Table of Contents



WESTCORP AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


dollar swap agreements outstanding at
January 1, 2001. Of the $4.8 million,
$1.8 million was reclassified into earnings during 2001.

Accounting
Pronouncements

In June 2001, the FASB issued Statement of
Financial Accounting Standards No. 141, Accounting for
Business Combinations, also known as SFAS No. 141, and
Statement of Financial Accounting Standards No. 142,
Accounting for Goodwill and Intangible Assets, also known as
SFAS No. 142. Under SFAS No. 141 and SFAS
No. 142, companies may no longer use the
pooling-of-interest accounting method for business combinations
or account for mergers on their financial statements under the
traditional purchase method, which required companies to
amortize goodwill assets over a specific time period. Instead
purchased goodwill will remain on the balance sheet as an asset
subject to impairment reviews. We adopted SFAS No. 141 and
SFAS No. 142 on January 1, 2002, and they did not have
a material effect on our earnings or financial position.

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. If applicable, an
accounting change to adopt the standard would be made as of the
beginning of the companys fiscal year. We do not expect
SFAS No. 143 to have a material effect on our earnings or
financial position.

In August 2001, the FASB issued Statement of
Financial Accounting Standards No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, also known as SFAS
No. 144, to supercede Statement of Financial Accounting
Standards No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of,
also known as SFAS No. 121. The basic recognition and
measurement model for assets held for use and held for sale
under SFAS No. 121 has been retained, however SFAS
No. 144 removes goodwill from the scope as goodwill is now
subject to the provisions of SFAS No. 141 and SFAS
No. 142. SFAS No. 144 provides guidance on
differentiating between assets held and used, held for sale, and
held for disposal other than by sale. Assets held for
sale/disposal must be stated at the lower of the assets
carrying amounts or fair values and depreciation would no longer
be recognized. Assets to be disposed of by sale would be
classified as held for sale when management, having the
authority to approve the action, commits to a plan to sell the
assets meeting several strict criteria. The three-step approach
for recognizing and measuring impairment of assets to be held
and used under SFAS No. 121 remains applicable. SFAS
No. 144 is effective for fiscal years beginning after
December 15, 2001 and for interim periods within those
fiscal years. We adopted SFAS 144 on January 1, 2002, and
it 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, 2001     
|                                                 |  |                       
|                                                 |  |                        |        | Gross      |  | Gross      |    |      
|                                                 |  | Amortized              |        | Unrealized |  | Unrealized |    | Fair 
|                                                 |  | Cost                   |        | Gain       |  | Loss       |    | Value
|                                                 |  |                        |        |            |  |            |    |      
|                                                 |  |                       
|                                                 |  | (Dollars in thousands)
|Obligations of states and political subdivisions |  | $                      | 1,508  |            |  | $          | 41 |       |  |  |  |  |  | $ | 1,549  | 
|Owner trust certificates                         |  |                        | 4,668  |            |  |            |    |       |  |  |  |  |  |   | 4,668  | 
|Other                                            |  |                        | 4,294  |            |  |            |    |       |  |  |  |  |  |   | 4,294  | 
|                                                 |  |                        |        |            |  |            |    |       |  |  |  |  |  |   |        | 
|                                                 |  | $                      | 10,470 |            |  | $          | 41 |       |  |  |  |  |  | $ | 10,511 | 
|                                                 |  |                        |        |            |  |            |    |       |  |  |  |  |  |   |        | 

F-13



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##### Table of Contents



WESTCORP AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


|                                                 |  |                        |        |            |  |            |    |       |  |  |  |  |  |   |        | 
|------------------------------------------------ |  | ---------------------- | ------ | ---------- |  | ---------- | -- | ----- |  |  |  |  |  | - | ------ | 
|                                                 |  |                       
|                                                 |  | December 31, 2000     
|                                                 |  |                       
|                                                 |  |                        |        | Gross      |  | Gross      |    |      
|                                                 |  | Amortized              |        | Unrealized |  | Unrealized |    | Fair 
|                                                 |  | Cost                   |        | Gain       |  | Loss       |    | Value
|                                                 |  |                        |        |            |  |            |    |      
|                                                 |  |                       
|                                                 |  | (Dollars in thousands)
|Obligations of states and political subdivisions |  | $                      | 1,509  |            |  | $          | 24 |       |  |  |  |  |  | $ | 1,533  | 
|Owner trust certificates                         |  |                        | 6,517  |            |  |            |    |       |  |  |  |  |  |   | 6,517  | 
|Other                                            |  |                        | 2,684  |            |  |            |    |       |  |  |  |  |  |   | 2,684  | 
|                                                 |  |                        |        |            |  |            |    |       |  |  |  |  |  |   |        | 
|                                                 |  | $                      | 10,710 |            |  | $          | 24 |       |  |  |  |  |  | $ | 10,734 | 
|                                                 |  |                        |        |            |  |            |    |       |  |  |  |  |  |   |        | 

At December 31, 2001, the stated maturities
of our investment securities available for sale were as follows:

|                                                 |  |                        |       |               |  |              |       |       |  |           |       |       |  |   |       |  |  |   |       |  |  |   |       | 
|------------------------------------------------ |  | ---------------------- | ----- | ------------- |  | ------------ | ----- | ----- |  | --------- | ----- | ----- |  | - | ----- |  |  | - | ----- |  |  | - | ----- | 
|                                                 |  |                        |       |               |  |              |       |      
|                                                 |  |                        |       | One Year      |  | Five Years  
|                                                 |  | Up to One Year         |       | to Five Years |  | to Ten Years
|                                                 |  |                        |       |               |  |             
|                                                 |  | Amortized              |       | Fair          |  | Amortized    |       | Fair  |  | Amortized |       | Fair 
|                                                 |  | Cost                   |       | Value         |  | Cost         |       | Value |  | Cost      |       | Value
|                                                 |  |                        |       |               |  |              |       |       |  |           |       |      
|                                                 |  |                       
|                                                 |  | (Dollars in thousands)
|Obligations of states and political subdivisions |  |                        |       |               |  |              |       |       |  | $         | 485   |       |  | $ | 492   |  |  | $ | 1,023 |  |  | $ | 1,057 | 
|Owner trust certificates                         |  |                        |       |               |  |              |       |       |  |           | 4,143 |       |  |   | 4,143 |  |  |   | 525   |  |  |   | 525   | 
|Other                                            |  | $                      | 4,294 |               |  | $            | 4,294 |       |  |           |       |       |  |   |       |  |  |   |       |  |  |   |       | 
|                                                 |  |                        |       |               |  |              |       |       |  |           |       |       |  |   |       |  |  |   |       |  |  |   |       | 
|                                                 |  | $                      | 4,294 |               |  | $            | 4,294 |       |  | $         | 4,628 |       |  | $ | 4,635 |  |  | $ | 1,548 |  |  | $ | 1,582 | 
|                                                 |  |                        |       |               |  |              |       |       |  |           |       |       |  |   |       |  |  |   |       |  |  |   |       | 

Proceeds from sales of investment securities
available for sale for the years ended December 31, 2001,
2000 and 1999 were as follows:

|                                                                 |  |                                 |  |      |  |      |  |  |  |   |        |  
|---------------------------------------------------------------- |  | ------------------------------- |  | ---- |  | ---- |  |  |  | - | ------ | -
|                                                                 |  |                                
|                                                                 |  | For the Year Ended December 31,
|                                                                 |  |                                
|                                                                 |  | 2001                            |  | 2000 |  | 1999
|                                                                 |  |                                 |  |      |  |     
|                                                                 |  |                                
|                                                                 |  | (Dollars in thousands)         
|Proceeds from sales of investment securities
	available for sale |  |                                 |  |      |  |      |  |  |  | $ | 75,470 |  
|Gross realized gains                                             |  |                                 |  |      |  |      |  |  |  |   | 888    |  
|Gross realized losses                                            |  |                                 |  |      |  |      |  |  |  |   | (11    | )

Note 3  Mortgage-Backed Securities
Available for Sale

MBS available for sale consisted of the following:

|                                 |  |                        |           |            |  |            |        |       |  |   |        |  |  |   |           | 
|-------------------------------- |  | ---------------------- | --------- | ---------- |  | ---------- | ------ | ----- |  | - | ------ |  |  | - | --------- | 
|                                 |  |                       
|                                 |  | December 31, 2001     
|                                 |  |                       
|                                 |  |                        |           | Gross      |  | Gross      |        |      
|                                 |  | Amortized              |           | Unrealized |  | Unrealized |        | Fair 
|                                 |  | Cost                   |           | Gains      |  | Losses     |        | Value
|                                 |  |                        |           |            |  |            |        |      
|                                 |  |                       
|                                 |  | (Dollars in thousands)
|GNMA certificates                |  | $                      | 2,040,110 |            |  | $          | 12,527 |       |  | $ | 16,268 |  |  | $ | 2,036,369 | 
|FNMA participation certificates  |  |                        | 51,353    |            |  |            | 541    |       |  |   |        |  |  |   | 51,894    | 
|FHLMC participation certificates |  |                        | 1,679     |            |  |            | 13     |       |  |   |        |  |  |   | 1,692     | 
|Other                            |  |                        | 2,270     |            |  |            |        |       |  |   |        |  |  |   | 2,270     | 
|                                 |  |                        |           |            |  |            |        |       |  |   |        |  |  |   |           | 
|                                 |  | $                      | 2,095,412 |            |  | $          | 13,081 |       |  | $ | 16,268 |  |  | $ | 2,092,225 | 
|                                 |  |                        |           |            |  |            |        |       |  |   |        |  |  |   |           | 

F-14



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##### Table of Contents



WESTCORP AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


|                                 |  |                        |           |            |  |            |        |       |  |   |        |  |  |   |           | 
|-------------------------------- |  | ---------------------- | --------- | ---------- |  | ---------- | ------ | ----- |  | - | ------ |  |  | - | --------- | 
|                                 |  |                       
|                                 |  | December 31, 2000     
|                                 |  |                       
|                                 |  |                        |           | Gross      |  | Gross      |        |      
|                                 |  | Amortized              |           | Unrealized |  | Unrealized |        | Fair 
|                                 |  | Cost                   |           | Gains      |  | Losses     |        | Value
|                                 |  |                        |           |            |  |            |        |      
|                                 |  |                       
|                                 |  | (Dollars in thousands)
|GNMA certificates                |  | $                      | 2,181,067 |            |  | $          | 17,533 |       |  | $ | 41,524 |  |  | $ | 2,157,076 | 
|FNMA participation certificates  |  |                        | 69,278    |            |  |            | 3      |       |  |   | 411    |  |  |   | 68,870    | 
|FHLMC participation certificates |  |                        | 1,948     |            |  |            |        |       |  |   | 10     |  |  |   | 1,938     | 
|Other                            |  |                        | 2,564     |            |  |            |        |       |  |   |        |  |  |   | 2,564     | 
|                                 |  |                        |           |            |  |            |        |       |  |   |        |  |  |   |           | 
|                                 |  | $                      | 2,254,857 |            |  | $          | 17,536 |       |  | $ | 41,945 |  |  | $ | 2,230,448 | 
|                                 |  |                        |           |            |  |            |        |       |  |   |        |  |  |   |           | 

Proceeds from the sale of MBS available for sale
for the years ended December 31, 2001, 2000 and 1999 were
as follows:

|                                              |  |                                 |         |      |  |      |    |  |  |   |         |  
|--------------------------------------------- |  | ------------------------------- | ------- | ---- |  | ---- | -- |  |  | - | ------- | -
|                                              |  |                                
|                                              |  | For the Year Ended December 31,
|                                              |  |                                
|                                              |  | 2001                            |         | 2000 |  | 1999
|                                              |  |                                 |         |      |  |     
|                                              |  |                                
|                                              |  | (Dollars in thousands)         
|Proceeds from sales of MBS available for sale |  | $                               | 507,839 |      |  | $    | 17 |  |  | $ | 109,726 |  
|Gross realized gains                          |  |                                 | 4,020   |      |  |      |    |  |  |   | 885     |  
|Gross realized losses                         |  |                                 | (3,479  | )    |  |      |    |  |  |   | (454    | )

Our MBS available for sale portfolio had
maturities of ten years or more at December 31, 2001 and
2000, although payments are generally received monthly
throughout the life of these securities.

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 $63.6 million and $84.1 million
at December 31, 2001 and 2000, respectively. The maximum
remaining exposure under these recourse provisions was
$42.1 million and $49.2 million at December 31,
2001 and 2000, respectively. We have pledged approximately
$11.7 million of MBS as collateral under these recourse
provisions at both December 31, 2001 and 2000.

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 $0.8 million at both December 31, 2001
and 2000. The amount of reserves held was determined based upon
historical experience of losses on repurchased loans.

F-15



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##### Table of Contents



WESTCORP AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


Note 4  Net Loans
Receivable

Net loans receivable consisted of the following:

|                                |                                                      |                        |           |           |   |   |           |           |  
|------------------------------- | ---------------------------------------------------- | ---------------------- | --------- | --------- | - | - | --------- | --------- | -
|                                |                                                      |                       
|                                |                                                      | December 31,          
|                                |                                                      |                       
|                                |                                                      | 2001                   |           | 2000     
|                                |                                                      |                        |           |          
|                                |                                                      |                       
|                                |                                                      | (Dollars in thousands)
|Real estate:                    |                                                      |                        |           |           |   |   |           |          
|                                | Mortgage                                             |                        | $         | 361,115   |   |   | $         | 498,963   |  
|                                | Construction                                         |                        |           | 15,638    |   |   |           | 14,784    |  
|                                |                                                      |                        |           |           |   |   |           |          
|                                |                                                      |                        | 376,753   |           |   |   | 513,747   |          
|Less: undisbursed loan proceeds |                                                      |                        | 3,298     |           |   |   | 6,316     |          
|                                |                                                      |                        |           |           |   |   |           |          
|                                |                                                      |                        | 373,455   |           |   |   | 507,431   |          
|Consumer:                       |                                                      |                        |           |           |   |   |           |          
|                                | Automobile contracts                                 |                        |           | 7,045,578 |   |   |           | 4,307,267 |  
|                                | Dealer participation, net of deferred contract
	fees |                        |           | 128,148   |   |   |           | 82,717    |  
|                                | Other                                                |                        |           | 8,826     |   |   |           | 13,456    |  
|                                | Unearned discounts                                   |                        |           | (108,169  | ) |   |           | (94,404   | )
|                                |                                                      |                        |           |           |   |   |           |          
|                                |                                                      |                        | 7,074,383 |           |   |   | 4,309,036 |          
|Commercial                      |                                                      |                        | 85,312    |           |   |   | 107,586   |          
|                                |                                                      |                        |           |           |   |   |           |          
|                                |                                                      |                        | 7,533,150 |           |   |   | 4,924,053 |          
|Allowance for credit losses     |                                                      |                        | (171,432  | )         |   |   | (104,006  | )        
|                                |                                                      |                        |           |           |   |   |           |          
|                                |                                                      | $                      | 7,361,718 |           |   | $ | 4,820,047 |          
|                                |                                                      |                        |           |           |   |   |           |          

Loans managed by us totaled $8.6 billion and
$7.5 billion as of December 31, 2001 and 2000,
respectively. Of the $8.6 billion, $7.4 billion were
owned by us and $1.2 were owned by securitization trusts. Of the
$7.5 billion, $4.9 billion were owned by us and
$2.6 billion were owned by securitization trusts.

There were no impaired loans at December 31,
2001 and 2000. Average impaired loans were none and
$2.0 million at December 31, 2001 and 2000.

Note 5  Allowance for Credit
Losses

Changes in the allowance for credit losses were
as follows:

|                                  |  |                                 |          |      |  |      |         |   |  |   |         |  
|--------------------------------- |  | ------------------------------- | -------- | ---- |  | ---- | ------- | - |  | - | ------- | -
|                                  |  |                                
|                                  |  | For the Year Ended December 31,
|                                  |  |                                
|                                  |  | 2001                            |          | 2000 |  | 1999
|                                  |  |                                 |          |      |  |     
|                                  |  |                                
|                                  |  | (Dollars in thousands)         
|Balance at beginning of year      |  | $                               | 104,006  |      |  | $    | 64,217  |   |  | $ | 37,660  |  
|Provision for credit losses       |  |                                 | 196,977  |      |  |      | 82,133  |   |  |   | 38,400  |  
|Chargeoffs                        |  |                                 | (163,902 | )    |  |      | (57,126 | ) |  |   | (21,282 | )
|Writedown on nonperforming assets |  |                                 | (6,786   | )    |  |      |         |   |  |   |         |  
|Recoveries                        |  |                                 | 41,137   |      |  |      | 14,782  |   |  |   | 9,439   |  
|                                  |  |                                 |          |      |  |      |         |   |  |   |         |  
|Balance at end of year            |  | $                               | 171,432  |      |  | $    | 104,006 |   |  | $ | 64,217  |  
|                                  |  |                                 |          |      |  |      |         |   |  |   |         |  

F-16



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##### Table of Contents



WESTCORP AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


Note 6  Retained Interest in
Securitized Assets

None of our securitization transactions in 2001
were treated as sales. Therefore, we did not record any retained
interest in securitized assets in 2001. Selected original
assumptions used to estimate cash flows for contracts
securitized in 2000 and 1999 were as follows:

|                                                |  |                            |        |         |  |              |        |             |  |  |        |  |  |  |  | 
|----------------------------------------------- |  | -------------------------- | ------ | ------- |  | ------------ | ------ | ----------- |  |  | ------ |  |  |  |  | 
|                                                |  |                           
|                                                |  | For the Three Months Ended
|                                                |  |                           
|                                                |  | March 31                   |        | June 30 |  | September 30 |        | December 31
|                                                |  |                            |        |         |  |              |        |            
|2000                                            |  |                            | 2000-A |         |  |              |        |             |  |  |        |  |  |  |  | 
|Cumulative net credit losses                    |  |                            | 6.1%   |         |  |              |        |             |  |  |        |  |  |  |  | 
|Average monthly ABS prepayment speed            |  |                            | 1.5%   |         |  |              |        |             |  |  |        |  |  |  |  | 
|Discount rate                                   |  |                            | 10.8%  |         |  |              |        |             |  |  |        |  |  |  |  | 
|Weighted average remaining maturity (in months) |  |                            | 61     |         |  |              |        |             |  |  |        |  |  |  |  | 
|                                               
|1999                                            |  |                            | 1999-A |         |  |              | 1999-B |             |  |  | 1999-C |  |  |  |  | 
|Cumulative net credit losses                    |  |                            | 6.2%   |         |  |              | 6.1%   |             |  |  | 6.1%   |  |  |  |  | 
|Average monthly ABS prepayment speed            |  |                            | 1.5%   |         |  |              | 1.5%   |             |  |  | 1.5%   |  |  |  |  | 
|Discount rate                                   |  |                            | 9.1%   |         |  |              | 9.7%   |             |  |  | 10.2%  |  |  |  |  | 
|Weighted average remaining maturity (in months) |  |                            | 59     |         |  |              | 59     |             |  |  | 61     |  |  |  |  | 

At December 31, 2001 and 2000, key economic
assumptions and the sensitivity of the fair value of the RISA to
immediate 10% and 20% adverse changes in assumed economics were
as follows:

|                                                |  |                        |            |      |  |  |            |  
|----------------------------------------------- |  | ---------------------- | ---------- | ---- |  |  | ---------- | -
|                                                |  |                       
|                                                |  | December 31,          
|                                                |  |                       
|                                                |  | 2001                   |            | 2000
|                                                |  |                        |            |     
|                                                |  |                       
|                                                |  | (Dollars in thousands)
|Fair value of the RISA                          |  |                        | $37,392    |      |  |  | $111,558   |  
|Weighted average remaining maturity (in months) |  |                        | 33         |      |  |  | 41         |  
|Prepayment speed (monthly ABS)                  |  |                        | 1.0        | %    |  |  | 1.5        | %
|Fair value after 10% adverse change             |  |                        | $35,184    |      |  |  | $107,843   |  
|Fair value after 20% adverse change             |  |                        | $34,266    |      |  |  | $103,574   |  
|Cumulative net credit losses (pool life rate)   |  |                        | 6.1%  7.0 | %    |  |  | 6.1%  7.6 | %
|Fair value after 10% adverse change             |  |                        | $32,928    |      |  |  | $103,880   |  
|Fair value after 20% adverse change             |  |                        | $29,752    |      |  |  | $95,925    |  
|Discount rate (annual rate)                     |  |                        | 7.28       | %    |  |  | 10.16      | %
|Fair value after 10% adverse change             |  |                        | $37,135    |      |  |  | $110,963   |  
|Fair value after 20% adverse change             |  |                        | $36,880    |      |  |  | $109,810   |  

F-17



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##### Table of Contents



WESTCORP AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


The following table presents the activity of the
RISA:

|                                          |  |                                 |         |      |  |      |         |   |  |   |          |  
|----------------------------------------- |  | ------------------------------- | ------- | ---- |  | ---- | ------- | - |  | - | -------- | -
|                                          |  |                                
|                                          |  | For the Year Ended December 31,
|                                          |  |                                
|                                          |  | 2001                            |         | 2000 |  | 1999
|                                          |  |                                 |         |      |  |     
|                                          |  |                                
|                                          |  | (Dollars in thousands)         
|Balance at beginning of period            |  | $                               | 111,558 |      |  | $    | 167,277 |   |  | $ | 171,230  |  
|Additions                                 |  |                                 |         |      |  |      | 19,240  |   |  |   | 111,767  |  
|Amortization                              |  |                                 | (75,546 | )    |  |      | (75,958 | ) |  |   | (111,752 | )
|Change in unrealized gain/loss on RISA(1) |  |                                 | 1,380   |      |  |      | 999     |   |  |   | (3,968   | )
|                                          |  |                                 |         |      |  |      |         |   |  |   |          |  
|Balance at end of period(2)               |  | $                               | 37,392  |      |  | $    | 111,558 |   |  | $ | 167,277  |  
|                                          |  |                                 |         |      |  |      |         |   |  |   |          |  




|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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.
|   
|(2) | There are no restrictions on the RISA.                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

The following table presents the estimated future
undiscounted retained interest earnings to be received from
securitizations:

|                                                                                                                 |  |                        |           |      |  |   |           |  
|---------------------------------------------------------------------------------------------------------------- |  | ---------------------- | --------- | ---- |  | - | --------- | -
|                                                                                                                 |  |                       
|                                                                                                                 |  | December 31,          
|                                                                                                                 |  |                       
|                                                                                                                 |  | 2001                   |           | 2000
|                                                                                                                 |  |                        |           |     
|                                                                                                                 |  |                       
|                                                                                                                 |  | (Dollars in thousands)
|Estimated net undiscounted RISA earnings                                                                         |  | $                      | 87,358    |      |  | $ | 235,270   |  
|Off balance sheet allowance for credit losses                                                                    |  |                        | (47,235   | )    |  |   | (110,339  | )
|Discount to present value                                                                                        |  |                        | (2,731    | )    |  |   | (13,373   | )
|                                                                                                                 |  |                        |           |      |  |   |           |  
|Retained interest in securitized assets                                                                          |  | $                      | 37,392    |      |  | $ | 111,558   |  
|                                                                                                                 |  |                        |           |      |  |   |           |  
|Outstanding balance of automobile contracts sold
	through securitizations                                        |  | $                      | 1,215,058 |      |  | $ | 2,608,017 |  
|Off balance sheet allowance for credit losses as
	a percent of automobile contracts sold through securitizations |  |                        | 3.89      | %    |  |   | 4.23      | %

The following table summarizes certain cash flows
received from and paid to securitization trusts on
securitization transactions treated as sales:

|                                 |  |                                 |        |      |  |      |         |  |  |   |           | 
|-------------------------------- |  | ------------------------------- | ------ | ---- |  | ---- | ------- |  |  | - | --------- | 
|                                 |  |                                
|                                 |  | For the Year Ended December 31,
|                                 |  |                                
|                                 |  | 2001                            |        | 2000 |  | 1999
|                                 |  |                                 |        |      |  |     
|                                 |  |                                
|                                 |  | (Dollars in thousands)         
|Proceeds                         |  |                                 |        |      |  | $    | 660,000 |  |  | $ | 2,500,000 | 
|Excess cash flows from trust     |  | $                               | 47,357 |      |  |      | 127,294 |  |  |   | 159,564   | 
|Servicing fees received          |  |                                 | 23,018 |      |  |      | 41,767  |  |  |   | 46,847    | 
|Servicing advances               |  |                                 | 20,203 |      |  |      | 38,060  |  |  |   | 55,593    | 
|Repayments on servicing advances |  |                                 | 23,893 |      |  |      | 49,531  |  |  |   | 63,940    | 

The balance of contracts 30 days or more
delinquent included in such securitization trusts totaled
$67.4 million and $110 million at December 31,
2001 and 2000, respectively. Net chargeoffs for these
securitization trusts totaled $50.4 million,
$75.5 million and $91.8 million for the years ended
December 31, 2001, 2000 and 1999, respectively.

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##### Table of Contents



WESTCORP AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


Note 7  Premises and
Equipment

Premises and equipment consisted of the following:

|                               |  |                        |         |      |  |   |         |  
|------------------------------ |  | ---------------------- | ------- | ---- |  | - | ------- | -
|                               |  |                       
|                               |  | December 31,          
|                               |  |                       
|                               |  | 2001                   |         | 2000
|                               |  |                        |         |     
|                               |  |                       
|                               |  | (Dollars in thousands)
|Land                           |  | $                      | 16,275  |      |  | $ | 16,274  |  
|Buildings and improvements     |  |                        | 51,272  |      |  |   | 49,402  |  
|Computers and software         |  |                        | 44,519  |      |  |   | 40,631  |  
|Furniture and equipment        |  |                        | 18,757  |      |  |   | 14,551  |  
|Other                          |  |                        | 6,974   |      |  |   | 6,953   |  
|                               |  |                        |         |      |  |   |         |  
|                               |  |                        | 137,797 |      |  |   | 127,811 |  
|Less: accumulated depreciation |  |                        | (58,539 | )    |  |   | (43,820 | )
|                               |  |                        |         |      |  |   |         |  
|                               |  | $                      | 79,258  |      |  | $ | 83,991  |  
|                               |  |                        |         |      |  |   |         |  

Note 8  Accrued Interest
Receivable

Accrued interest receivable consisted of the
following:

|                             |  |                        |        |      |  |   |        | 
|---------------------------- |  | ---------------------- | ------ | ---- |  | - | ------ | 
|                             |  |                       
|                             |  | December 31,          
|                             |  |                       
|                             |  | 2001                   |        | 2000
|                             |  |                        |        |     
|                             |  |                       
|                             |  | (Dollars in thousands)
|Interest on loans receivable |  | $                      | 53,354 |      |  | $ | 36,503 | 
|Interest on securities       |  |                        | 13,388 |      |  |   | 14,507 | 
|                             |  |                        |        |      |  |   |        | 
|                             |  | $                      | 66,742 |      |  | $ | 51,010 | 
|                             |  |                        |        |      |  |   |        | 

Accrued interest receivable at December 31,
2001 and 2000 is included in other assets in the Consolidated
Statements of Financial Condition.

Note 9  Deposits

Deposits consisted of the following:

|                              |  |                        |     |              |  |      |           |  |  |   |           | 
|----------------------------- |  | ---------------------- | --- | ------------ |  | ---- | --------- |  |  | - | --------- | 
|                              |  |                        |     |             
|                              |  | Weighted               |     | December 31,
|                              |  | Average Rate           |     |             
|                              |  | 2001                   |     | 2001         |  | 2000
|                              |  |                        |     |              |  |     
|                              |  |                       
|                              |  | (Dollars in thousands)
|Noninterest bearing deposits  |  |                        |    |              |  | $    | 100,170   |  |  | $ | 67,984    | 
|Demand deposit accounts       |  |                        | 1.4 | %            |  |      | 1,124     |  |  |   | 8,229     | 
|Passbook accounts             |  |                        | 1.5 |              |  |      | 11,192    |  |  |   | 11,768    | 
|Money market deposit accounts |  |                        | 3.8 |              |  |      | 858,371   |  |  |   | 810,169   | 
|Brokered certificate accounts |  |                        | 4.8 |              |  |      | 56,302    |  |  |   |           | 
|Certificate accounts          |  |                        | 5.9 |              |  |      | 1,302,167 |  |  |   | 1,580,337 | 
|                              |  |                        |     |              |  |      |           |  |  |   |           | 
|                              |  |                        |     |              |  | $    | 2,329,326 |  |  | $ | 2,478,487 | 
|                              |  |                        |     |              |  |      |           |  |  |   |           | 

The aggregate amount of time deposits in
denominations greater than or equal to $100,000 was
$426 million and $540 million at December 31,
2001 and 2000, respectively. Deposit amounts in excess of
$100,000 are not federally insured.

F-19



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##### Table of Contents



WESTCORP AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


Scheduled maturities of certificate accounts at
December 31, 2001 were as follows:

|                                        |  |                        |      |        |  |   |           | 
|--------------------------------------- |  | ---------------------- | ---- | ------ |  | - | --------- | 
|                                        |  | Weighted               |      |       
|                                        |  | Average Rate           |      | Amount
|                                        |  |                        |      |       
|                                        |  |                       
|                                        |  | (Dollars in thousands)
|Six months or less                      |  |                        | 4.61 | %      |  | $ | 458,776   | 
|More than six months through one year   |  |                        | 3.82 |        |  |   | 680,495   | 
|More than one year through three years  |  |                        | 4.08 |        |  |   | 159,580   | 
|More than three years through ten years |  |                        | 4.90 |        |  |   | 3,316     | 
|                                        |  |                        |      |        |  |   |           | 
|                                        |  |                        |      |        |  | $ | 1,302,167 | 
|                                        |  |                        |      |        |  |   |           | 

Interest expense on deposits consisted of the
following:

|                              |  |                                 |         |      |  |      |         |  |  |   |         | 
|----------------------------- |  | ------------------------------- | ------- | ---- |  | ---- | ------- |  |  | - | ------- | 
|                              |  |                                
|                              |  | For the Year Ended December 31,
|                              |  |                                
|                              |  | 2001                            |         | 2000 |  | 1999
|                              |  |                                 |         |      |  |     
|                              |  |                                
|                              |  | (Dollars in thousands)         
|Demand deposit accounts       |  | $                               | 70      |      |  | $    | 373     |  |  | $ | 836     | 
|Passbook accounts             |  |                                 | 169     |      |  |      | 296     |  |  |   | 380     | 
|Money market deposit accounts |  |                                 | 28,648  |      |  |      | 42,160  |  |  |   | 22,745  | 
|Certificate accounts          |  |                                 | 83,859  |      |  |      | 90,460  |  |  |   | 80,471  | 
|Brokered certificate accounts |  |                                 | 2,085   |      |  |      | 321     |  |  |   | 1,635   | 
|                              |  |                                 |         |      |  |      |         |  |  |   |         | 
|                              |  | $                               | 114,831 |      |  | $    | 133,610 |  |  | $ | 106,067 | 
|                              |  |                                 |         |      |  |      |         |  |  |   |         | 

Accrued interest payable on deposits at
December 31, 2001 and 2000 was $7.0 million, including
accrued interest payable on interest rate swap agreements, and
$1.5 million, respectively, and is included in other
liabilities in the Consolidated Statements of Financial
Condition.

The following table summarizes certificate
accounts by interest rate within maturity categories at:

|              |  |                        |           |      |  |      |         |      |  |      |        |       |  |   |       |  |  |   |       |  |  |   |           | 
|------------- |  | ---------------------- | --------- | ---- |  | ---- | ------- | ---- |  | ---- | ------ | ----- |  | - | ----- |  |  | - | ----- |  |  | - | --------- | 
|              |  |                       
|              |  | December 31, 2001     
|              |  |                       
|              |  | 2002                   |           | 2003 |  | 2004 |         | 2005 |  | 2006 |        | Total
|              |  |                        |           |      |  |      |         |      |  |      |        |      
|              |  |                       
|              |  | (Dollars in thousands)
|0%  3.99%    |  | $                      | 377,482   |      |  | $    | 65,209  |      |  | $    | 2,660  |       |  |   |       |  |  | $ | 12    |  |  | $ | 445,363   | 
|4.00%  5.99% |  |                        | 728,454   |      |  |      | 78,835  |      |  |      | 12,723 |       |  | $ | 1,555 |  |  |   | 1,749 |  |  |   | 823,316   | 
|6.00%  7.99% |  |                        | 33,376    |      |  |      | 112     |      |  |      |        |       |  |   |       |  |  |   |       |  |  |   | 33,488    | 
|              |  |                        |           |      |  |      |         |      |  |      |        |       |  |   |       |  |  |   |       |  |  |   |           | 
|              |  | $                      | 1,139,312 |      |  | $    | 144,156 |      |  | $    | 15,383 |       |  | $ | 1,555 |  |  | $ | 1,761 |  |  | $ | 1,302,167 | 
|              |  |                        |           |      |  |      |         |      |  |      |        |       |  |   |       |  |  |   |       |  |  |   |           | 

|              |  |                        |           |      |  |      |        |      |  |      |       |       |  |   |     |  |  |   |       |  |  |   |           | 
|------------- |  | ---------------------- | --------- | ---- |  | ---- | ------ | ---- |  | ---- | ----- | ----- |  | - | --- |  |  | - | ----- |  |  | - | --------- | 
|              |  |                       
|              |  | December 31, 2000     
|              |  |                       
|              |  | 2001                   |           | 2002 |  | 2003 |        | 2004 |  | 2005 |       | Total
|              |  |                        |           |      |  |      |        |      |  |      |       |      
|              |  |                       
|              |  | (Dollars in thousands)
|0%  3.99%    |  | $                      | 4,351     |      |  | $    | 8      |      |  | $    | 22    |       |  |   |     |  |  |   |       |  |  | $ | 4,381     | 
|4.00%  5.99% |  |                        | 160,888   |      |  |      | 22,071 |      |  |      | 4,424 |       |  | $ | 404 |  |  | $ | 1,624 |  |  |   | 189,411   | 
|6.00%  7.99% |  |                        | 1,355,760 |      |  |      | 30,685 |      |  |      | 100   |       |  |   |     |  |  |   |       |  |  |   | 1,386,545 | 
|              |  |                        |           |      |  |      |        |      |  |      |       |       |  |   |     |  |  |   |       |  |  |   |           | 
|              |  | $                      | 1,520,999 |      |  | $    | 52,764 |      |  | $    | 4,546 |       |  | $ | 404 |  |  | $ | 1,624 |  |  | $ | 1,580,337 | 
|              |  |                        |           |      |  |      |        |      |  |      |       |       |  |   |     |  |  |   |       |  |  |   |           | 

Note 10  Notes Payable on
Automobile Secured Financing

For the year ended December 31, 2001, we
issued $4.2 billion of notes secured by automobile
contracts, of which approximately $3.6 billion was through
public transactions and $650 million was through a private
placement. The private placement was through a conduit facility
established in December 2001. We also established a
$500 million conduit facility secured by automobile
contracts in September 1999. At

F-20



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##### Table of Contents



WESTCORP AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


December 31, 2001, we had $650 million
outstanding on the conduit facility compared to no amount and
$461 million at December 31, 2000 and 1999,
respectively.

Interest payments on the public transactions are
due quarterly, in arrears, based on the respective notes
interest rate. Interest payments on the conduit facility are due
monthly, in arrears, based on the respective notes
interest rate. Interest expense on all notes payable on
automobile secured financing, including interest payments under
interest rate swap agreements, totaled $334 million for the
year ended December 31, 2001, compared with
$124 million and $11.9 million for the years ended
December 31, 2000 and 1999, respectively.

At December 31, 2001, 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:

|           |  |               |           |                 |  |  |      |  
|---------- |  | ------------- | --------- | --------------- |  |  | ---- | -
|           |  | (Dollars      |           | Weighed Average
|           |  | in thousands) |           | Interest Rate  
|           |  |               |           |                
|2002       |  | $             | 710,859   |                 |  |  | 2.29 | %
|2003       |  |               | 143,861   |                 |  |  | 6.81 |  
|2004       |  |               | 1,252,166 |                 |  |  | 5.52 |  
|2005       |  |               | 1,574,141 |                 |  |  | 6.04 |  
|2006       |  |               | 584,046   |                 |  |  | 5.56 |  
|Thereafter |  |               | 1,621,154 |                 |  |  | 6.11 |  
|           |  |               |           |                 |  |  |      |  
|           |  | $             | 5,886,227 |                 |  |  | 5.47 | %
|           |  |               |           |                 |  |  |      |  

Note 11  Securities Sold Under
Agreements to Repurchase

Securities sold under agreements to repurchase
are summarized as follows:

|                                                                     |  |                        |         |      |  |   |         |  
|-------------------------------------------------------------------- |  | ---------------------- | ------- | ---- |  | - | ------- | -
|                                                                     |  |                       
|                                                                     |  | December 31,          
|                                                                     |  |                       
|                                                                     |  | 2001                   |         | 2000
|                                                                     |  |                        |         |     
|                                                                     |  |                       
|                                                                     |  | (Dollars in thousands)
|Balance at end of period                                             |  | $                      | 155,190 |      |  | $ | 178,821 |  
|Balance at end of period, including accrued
	interest                |  |                        | 155,274 |      |  |   | 179,185 |  
|Estimated fair value at end of period                                |  |                        | 155,237 |      |  |   | 181,819 |  
|Average amount outstanding during the period                         |  |                        | 155,387 |      |  |   | 449,778 |  
|Maximum amount outstanding at any given month-end
	during the period |  |                        | 177,698 |      |  |   | 798,271 |  
|Weighted average interest rate during the period                     |  |                        | 4.5     | %    |  |   | 6.2     | %
|Weighted average interest rate at end of period                      |  |                        | 1.9     | %    |  |   | 6.6     | %

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 maturities of the
agreements. At December 31, 2001, we had $71.2 million and
$80.0 million outstanding with our counterparties, Salomon Smith
Barney and Nomura Securities Co., Ltd., respectively. At
December 31, 2000, we had $147 million and $31.6 million
outstanding with our counterparties, Merrill Lynch and Nomura
Securities Co., Ltd., respectively. The agreements at
December 31, 2001 and 2000 mature within 30 days.
Average amounts are computed based upon daily ending balances.

Note 12  Federal Home Loan
Bank Advances

Advances from the FHLB are collateralized with
eligible real estate loans and MBS. The FHLB advances were
collateralized with mortgage loans totaling $304 million
and $385 million at December 31,

F-21



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##### Table of Contents



WESTCORP AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


2001 and 2000, respectively, and MBS totaling
$1.0 billion and $942 million at December 31,
2001 and 2000, respectively.

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

|                               |            |                        |             |         |  |   |             |         | 
|------------------------------ | ---------- | ---------------------- | ----------- | ------- |  | - | ----------- | ------- | 
|                               |            |                       
|                               |            | December 31,          
|                               |            |                       
|                               |            | 2001                   |             | 2000   
|                               |            |                        |             |        
|                               |            |                       
|                               |            | (Dollars in thousands)
|Range of interest rates        |            |                        | 1.9%  8.2% |         |  |   | 5.9%  8.2% |        
|Weighted average interest rate |            |                        | 2.0%        |         |  |   | 6.5%        |        
|Year due:                      |            |                        |             |         |  |   |             |        
|                               | 2001       |                        |             |         |  |   | $           | 400,000 | 
|                               | 2002       |                        | $           | 540,500 |  |   |             | 6,500   | 
|                               | Thereafter |                        |             | 2,917   |  |   |             | 3,070   | 
|                               |            |                        |             |         |  |   |             |        
|                               |            | $                      | 543,417     |         |  | $ | 409,570     |        
|                               |            |                        |             |         |  |   |             |        

We had available credit with the FHLB of
approximately $733 million and $831 million at
December 31, 2001 and 2000, respectively.

Note 13  Short-Term
Borrowings

We have a line of credit with a bank which has a
maximum availability of $20.0 million and
$30.0 million at December 31, 2001 and 2000. There was
$20.0 million and $22.3 million outstanding at
December 31, 2001 and 2000, respectively, and amounts due
are included in short term borrowings in the Consolidated
Statements of Financial Condition. The line of credit has an
interest rate tied to either the Prime rate or the London
Interbank Offer Rate, also known as LIBOR, based on our choice.
The weighted average interest rate was 7.3%, 8.3%, and 6.8% for
the years ended December 31, 2001, 2000, and 1999,
respectively. Interest expense totaled $0.6 million,
$1.3 million, and $0.3 million for the years ended
December 31, 2001, 2000, and 1999, respectively.

Note 14  Subordinated
Debentures

Subordinated debentures consisted of the
following:

|                            |  |                        |         |      |  |   |         | 
|--------------------------- |  | ---------------------- | ------- | ---- |  | - | ------- | 
|                            |  |                       
|                            |  | December 31,          
|                            |  |                       
|                            |  | 2001                   |         | 2000
|                            |  |                        |         |     
|                            |  |                       
|                            |  | (Dollars in thousands)
|Subordinated debentures     |  | $                      | 150,000 |      |  | $ | 192,540 | 
|Discount and issuance costs |  |                        | 2,286   |      |  |   | 2,578   | 
|                            |  |                        |         |      |  |   |         | 
|Net subordinated debentures |  | $                      | 147,714 |      |  | $ | 189,962 | 
|                            |  |                        |         |      |  |   |         | 

During the year, we redeemed the remaining
balance of the subordinated debentures with an interest rate of
8.5% due in 2003. At December 31, 2001, there was one
issuance remaining with an outstanding balance of
$148 million and an interest rate of 8.875% due in 2007. It
is redeemable at our option, in whole or in part, on or after
August 1, 2004, at 100% of the principal amount being
redeemed plus accrued interest as of the date of redemption. For
regulatory purposes, the subordinated debentures are included as
part of the Banks supplementary capital, subject to
certain limitations.

F-22



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##### Table of Contents



WESTCORP AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


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, 2001     
|           |  |                       
|           |  | (Dollars in thousands)
|2002       |  | $                      | 6,034  | 
|2003       |  |                        | 5,819  | 
|2004       |  |                        | 5,366  | 
|2005       |  |                        | 4,210  | 
|2006       |  |                        | 1,922  | 
|Thereafter |  |                        | 2,658  | 
|           |  |                        |        | 
|           |  | $                      | 26,009 | 
|           |  |                        |        | 

In certain cases, these agreements include
various renewal options and contingent rental agreements. Rental
expense for premises and equipment totaled $6.9 million,
$6.0 million and $6.1 million for the years ended
December 31, 2001, 2000 and 1999, respectively.

Our commercial and mortgage loan commitments and
mortgage loans sold with recourse were as follows:

|                                                                  |                     |                        |         |         |  |   |         |        | 
|----------------------------------------------------------------- | ------------------- | ---------------------- | ------- | ------- |  | - | ------- | ------ | 
|                                                                  |                     |                       
|                                                                  |                     | December 31,          
|                                                                  |                     |                       
|                                                                  |                     | 2001                   |         | 2000   
|                                                                  |                     |                        |         |        
|                                                                  |                     |                       
|                                                                  |                     | (Dollars in thousands)
|Commercial letters of credit and unused lines of
	credit provided |                     | $                      | 147,077 |         |  | $ | 131,137 |       
|                                                                  |                     |                        |         |         |  |   |         |       
|Commitments to fund commercial and mortgage loans                 |                     |                        |         |         |  |   |         |       
|                                                                  | Fixed rate loans    |                        | $       | 21,089  |  |   | $       | 33,506 | 
|                                                                  | Variable rate loans |                        |         | 119,808 |  |   |         | 90,007 | 
|                                                                  |                     |                        |         |         |  |   |         |       
|                                                                  |                     | $                      | 140,897 |         |  | $ | 123,513 |       
|                                                                  |                     |                        |         |         |  |   |         |       
|                                                                 
|Mortgage loans sold with recourse                                 |                     | $                      | 42,136  |         |  | $ | 46,562  |       
|                                                                  |                     |                        |         |         |  |   |         |       

At December 31, 2001, we had commitments to
fund fixed rate loans at rates ranging from 3.06% to 10.50% with
loan terms ranging from one month to 223 months.

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

|                                |  |                        |           |      |  |   |           | 
|------------------------------- |  | ---------------------- | --------- | ---- |  | - | --------- | 
|                                |  |                       
|                                |  | December 31,          
|                                |  |                       
|                                |  | 2001                   |           | 2000
|                                |  |                        |           |     
|                                |  |                       
|                                |  | (Dollars in thousands)
|FNMA participation certificates |  | $                      | 38,386    |      |  | $ | 50,810    | 
|GNMA certificates               |  |                        | 637,162   |      |  |   | 798,964   | 
|Automobile contracts            |  |                        | 440,615   |      |  |   | 316,924   | 
|Multifamily first mortgages     |  |                        | 29,906    |      |  |   | 34,881    | 
|                                |  |                        |           |      |  |   |           | 
|                                |  | $                      | 1,146,069 |      |  | $ | 1,201,579 | 
|                                |  |                        |           |      |  |   |           | 

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.

F-23



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##### Table of Contents



WESTCORP AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


Note 16  Automobile Lending
Income

Automobile lending income consisted of the
following components:

|                                                              |  |                                 |         |      |  |      |         |  |  |   |         | 
|------------------------------------------------------------- |  | ------------------------------- | ------- | ---- |  | ---- | ------- |  |  | - | ------- | 
|                                                              |  |                                
|                                                              |  | For the Year Ended December 31,
|                                                              |  |                                
|                                                              |  | 2001                            |         | 2000 |  | 1999
|                                                              |  |                                 |         |      |  |     
|                                                              |  |                                
|                                                              |  | (Dollars in thousands)         
|Gain on sale of automobile contracts                          |  |                                 |         |      |  | $    | 7,719   |  |  | $ | 51,345  | 
|Retained interest (expense) income, net of
	RISA amortization |  | $                               | (27,839 | )    |  |      | 51,429  |  |  |   | 47,812  | 
|Contractual servicing income                                  |  |                                 | 23,018  |      |  |      | 41,767  |  |  |   | 46,847  | 
|Other fee income                                              |  |                                 | 67,579  |      |  |      | 57,786  |  |  |   | 42,702  | 
|                                                              |  |                                 |         |      |  |      |         |  |  |   |         | 
|Total automobile lending income                               |  | $                               | 62,758  |      |  | $    | 158,701 |  |  | $ | 188,706 | 
|                                                              |  |                                 |         |      |  |      |         |  |  |   |         | 

According to the terms of each securitization
transaction, contractual servicing income is earned at rates
ranging from 1.0% to 1.25% per annum on the outstanding balance
on contracts securitized. Other fee income consists primarily of
documentation fees, late charges, deferment fees and other
additional servicing fees.

Note 17  Employee Benefit
Plans

We have three 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 of Westcorp within limits
set forth 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. As of December 31, 2001, the plan
held 2,043,872 shares of our common stock. All ESOP shares are
considered outstanding for purposes of calculating our earnings
per share. The Salary Savings Plan, also known as the 401(k)
Plan, covers essentially all associates, excluding contract or
temporary employees, who have completed three months of service.
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
$8.4 million, $8.0 million and $7.0 million in
2001, 2000, and 1999, respectively. Compensation expense related
to the ESOP and 401(k) Plan totaled $4.8 million,
$7.3 million and $3.4 million in 2001, 2000 and 1999,
respectively.

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, 2001, expense related to the EDP for us and
our subsidiaries totaled $0.3 million compared with
$0.5 million and $0.6 million for the years ended
December 31, 2000 and 1999, 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 in 2001 and
2000 related to the LTIP.

F-24



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##### Table of Contents



WESTCORP AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


Note 18  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, 2001, a total of 2,973,000 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, 2001 was 4.82 years and the exercise
prices ranged from $9.94 to $18.69 per share.

Options outstanding and exercisable at
December 31, 2001 were as follows:

|                |               |                     |  |                     |           |                  |  |             |      |                  |  |   |       |  |  |  |         |  |  |   |       | 
|--------------- | ------------- | ------------------- |  | ------------------- | --------- | ---------------- |  | ----------- | ---- | ---------------- |  | - | ----- |  |  |  | ------- |  |  | - | ----- | 
|                |               |                     |  |                    
|                |               | Options Outstanding |  | Options Exercisable
|                |               |                     |  |                    
|Range of        |               | Number              |  | Weighted Average    |           | Weighted Average |  | Number      |      | Weighted Average
|Exercise Prices |               | Outstanding         |  | Remaining Life      |           | Exercise Price   |  | Exercisable |      | Exercise Price  
|                |               |                     |  |                     |           |                  |  |             |      |                 
|$               | 9.00  10.00  |                     |  |                     | 4,250     |                  |  |             | 3.52 |                  |  | $ | 9.94  |  |  |  | 2,250   |  |  | $ | 9.94  | 
|$               | 12.00  13.00 |                     |  |                     | 338,814   |                  |  |             | 3.94 |                  |  |   | 12.63 |  |  |  | 224,234 |  |  |   | 12.62 | 
|$               | 13.00  14.00 |                     |  |                     | 307,625   |                  |  |             | 5.05 |                  |  |   | 13.25 |  |  |  | 67,717  |  |  |   | 13.25 | 
|$               | 15.00  16.00 |                     |  |                     | 2,875     |                  |  |             | 5.76 |                  |  |   | 15.25 |  |  |  | 250     |  |  |   | 15.25 | 
|$               | 17.00  18.00 |                     |  |                     | 397,250   |                  |  |             | 6.05 |                  |  |   | 17.32 |  |  |  |         |  |  |   |       | 
|$               | 18.00  19.00 |                     |  |                     | 26,000    |                  |  |             | 6.13 |                  |  |   | 18.28 |  |  |  | 4,000   |  |  |   | 18.69 | 
|                |               |                     |  |                     |           |                  |  |             |      |                  |  |   |       |  |  |  |         |  |  |   |       | 
|$               | 9.00  19.00  |                     |  |                     | 1,076,814 |                  |  |             | 5.09 |                  |  | $ | 14.67 |  |  |  | 298,451 |  |  | $ | 12.83 | 
|                |               |                     |  |                     |           |                  |  |             |      |                  |  |   |       |  |  |  |         |  |  |   |       | 

Stock option activity is summarized as follows:

|                                 |           |        |           |                  |   |   |       |       | 
|-------------------------------- | --------- | ------ | --------- | ---------------- | - | - | ----- | ----- | 
|                                 |           |        |           | Weighted Average
|                                 |           | Shares |           | Exercise Price  
|                                 |           |        |           |                 
|Outstanding at January 1, 1999   |           |        | 490,864   |                  |   | $ | 11.73 |      
|                                 | Granted   |        |           | 270,545          |   |   |       | 12.82 | 
|                                 | Exercised |        |           | (122,530         | ) |   |       | 8.58  | 
|                                 | Cancelled |        |           | (105,060         | ) |   |       | 12.98 | 
|                                 |           |        |           |                  |   |   |       |      
|Outstanding at December 31, 1999 |           |        | 533,819   |                  |   |   | 12.76 |      
|                                 | Granted   |        |           | 363,500          |   |   |       | 13.27 | 
|                                 | Exercised |        |           | (15,013          | ) |   |       | 12.10 | 
|                                 | Cancelled |        |           | (61,591          | ) |   |       | 12.78 | 
|                                 |           |        |           |                  |   |   |       |      
|Outstanding at December 31, 2000 |           |        | 820,715   |                  |   |   | 12.94 |      
|                                 | Granted   |        |           | 444,250          |   |   |       | 17.37 | 
|                                 | Exercised |        |           | (113,834         | ) |   |       | 12.68 | 
|                                 | Cancelled |        |           | (74,317          | ) |   |       | 14.76 | 
|                                 |           |        |           |                  |   |   |       |      
|Outstanding at December 31, 2001 |           |        | 1,076,814 |                  |   | $ | 14.67 |      
|                                 |           |        |           |                  |   |   |       |      

The fair value of options granted in 2001, 2000
and 1999 was estimated at the date of grant using a
Black-Scholes option pricing model with the following
assumptions: The Black-Scholes option valuation model was
developed for use in estimating the fair value of traded options
which have no vesting restrictions and are fully transferable.
In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price
volatility. Because our stock options have characteristics
significantly different from

F-25



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##### Table of Contents



WESTCORP AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


those traded options, and because changes in the
subjective input assumptions can materially affect the fair
value estimate, in our opinion, the existing model does not
necessarily provide a reliable single measure of the fair value
of our employee stock options.

|                        |  |              |         |      |  |      |              |   |  |  |              |  
|----------------------- |  | ------------ | ------- | ---- |  | ---- | ------------ | - |  |  | ------------ | -
|                        |  |             
|                        |  | December 31,
|                        |  |             
|                        |  | 2001         |         | 2000 |  | 1999
|                        |  |              |         |      |  |     
|Risk-free interest rate |  |              | 4.7     | %    |  |      | 4.8          | % |  |  | 6.6          | %
|Volatility factor       |  |              | 0.40    |      |  |      | 0.39         |   |  |  | 0.51         |  
|Expected option life    |  |              | 7 years |      |  |      | 5 to 7 years |   |  |  | 5 to 7 years |  

The weighted average fair value of options
granted during 2001, 2000, and 1999 was $8.70, $8.28 and $7.76,
respectively.

We elected to follow Accounting Principles Board
Opinion No. 25, also known as APB No. 25, and related
Interpretations in accounting for our employee stock options.
Under APB No. 25, the exercise price of our employee stock
options equals the market price of the underlying stock on the
date of grant and, therefore, no compensation expense is
recognized. Pro forma information regarding net income and
earnings per share is required by Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based
Compensation, also known as SFAS No. 123, and has been
determined as if we had accounted for our employee stock options
under the fair value method of that statement. Pro forma net
income and diluted earnings per share for the respective periods
were as follows:

|                     |  |                                 |        |      |  |      |        |  |  |   |        | 
|-------------------- |  | ------------------------------- | ------ | ---- |  | ---- | ------ |  |  | - | ------ | 
|                     |  |                                
|                     |  | For the Year Ended December 31,
|                     |  |                                
|                     |  | 2001                            |        | 2000 |  | 1999
|                     |  |                                 |        |      |  |     
|                     |  |                                
|                     |  | (Dollars in thousands,         
|                     |  | except per share amounts)      
|Pro forma net income |  | $                               | 54,890 |      |  | $    | 74,126 |  |  | $ | 52,243 | 
|Per diluted share    |  | $                               | 1.59   |      |  | $    | 2.51   |  |  | $ | 1.97   | 

The difference between our pro forma net income
and diluted earnings per share and our reported net income and
earnings per share is immaterial.

Note 19  Dividends

We paid cash dividends of $0.43, $0.30 and $0.20
per share for the years ended December 31, 2001, 2000 and
1999, respectively. On December 18, 2001, we declared a
cash dividend of $0.11 per share for shareholders of record as
of February 6, 2002, with a payable date of
February 20, 2002. There are no restrictions on the payment
of dividends by Westcorp.

Our wholly owned subsidiary, the Bank, is
restricted by regulation and by the indenture relating to the
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, 2001, the
Banks restricted shareholders equity totaled
$336 million with a maximum dividend of $136 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.

F-26



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##### Table of Contents



WESTCORP AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


Note 20  Income Taxes

Income tax expense consisted of the following:

|          |         |                                 |         |         |   |      |         |         |   |   |        |        | 
|--------- | ------- | ------------------------------- | ------- | ------- | - | ---- | ------- | ------- | - | - | ------ | ------ | 
|          |         |                                
|          |         | For the Year Ended December 31,
|          |         |                                
|          |         | 2001                            |         | 2000    |   | 1999
|          |         |                                 |         |         |   |     
|          |         |                                
|          |         | (Dollars in thousands)         
|Current   |         |                                 |         |         |   |      |         |         |   |   |        |       
|          | Federal |                                 | $       | 72,922  |   |      | $       | 66,384  |   |   | $      | 30,162 | 
|          | State   |                                 |         | 13,296  |   |      |         | 10,896  |   |   |        | 6,696  | 
|          |         |                                 |         |         |   |      |         |         |   |   |        |       
|          |         |                                 | 86,218  |         |   |      | 77,280  |         |   |   | 36,858 |       
|Deferred: |         |                                 |         |         |   |      |         |         |   |   |        |       
|          | Federal |                                 |         | (37,153 | ) |      |         | (20,336 | ) |   |        | 2,384  | 
|          | State   |                                 |         | (7,379  | ) |      |         | 1,363   |   |   |        | 3,764  | 
|          |         |                                 |         |         |   |      |         |         |   |   |        |       
|          |         |                                 | (44,532 | )       |   |      | (18,973 | )       |   |   | 6,148  |       
|          |         |                                 |         |         |   |      |         |         |   |   |        |       
|          |         | $                               | 41,686  |         |   | $    | 58,307  |         |   | $ | 43,006 |       
|          |         |                                 |         |         |   |      |         |         |   |   |        |       

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

|                                       |  |                                 |        |      |  |      |        |   |  |   |        | 
|-------------------------------------- |  | ------------------------------- | ------ | ---- |  | ---- | ------ | - |  | - | ------ | 
|                                       |  |                                
|                                       |  | For the Year Ended December 31,
|                                       |  |                                
|                                       |  | 2001                            |        | 2000 |  | 1999
|                                       |  |                                 |        |      |  |     
|                                       |  |                                
|                                       |  | (Dollars in thousands)         
|Tax at statutory rate                  |  | $                               | 37,701 |      |  | $    | 50,570 |   |  | $ | 34,467 | 
|State tax (net of federal tax benefit) |  |                                 | 3,846  |      |  |      | 7,968  |   |  |   | 6,799  | 
|Other                                  |  |                                 | 139    |      |  |      | (231   | ) |  |   | 1,740  | 
|                                       |  |                                 |        |      |  |      |        |   |  |   |        | 
|                                       |  | $                               | 41,686 |      |  | $    | 58,307 |   |  | $ | 43,006 | 
|                                       |  |                                 |        |      |  |      |        |   |  |   |        | 

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.

F-27



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##### Table of Contents



WESTCORP AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


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

|                                                              |                                       |                        |         |         |   |   |         |         |  
|------------------------------------------------------------- | ------------------------------------- | ---------------------- | ------- | ------- | - | - | ------- | ------- | -
|                                                              |                                       |                       
|                                                              |                                       | December 31,          
|                                                              |                                       |                       
|                                                              |                                       | 2001                   |         | 2000   
|                                                              |                                       |                        |         |        
|                                                              |                                       |                       
|                                                              |                                       | (Dollars in thousands)
|Deferred tax assets:                                          |                                       |                        |         |         |   |   |         |        
|Reserves for credit losses                                    |                                       | $                      | 59,858  |         |   | $ | 34,892  |        
|State tax deferred benefit                                    |                                       |                        | 6,547   |         |   |   | 8,026   |        
|Deferred compensation accrual                                 |                                       |                        | 4,091   |         |   |   | 3,655   |        
|Tax basis difference  marketable securities
	and derivatives |                                       |                        | 40,023  |         |   |   | 10,018  |        
|Accelerated depreciation for tax purposes                     |                                       |                        |         |         |   |   | 90      |        
|Loan fee income                                               |                                       |                        | 94      |         |   |   |         |        
|Other, net                                                    |                                       |                        | 4,786   |         |   |   | 1,392   |        
|                                                              |                                       |                        |         |         |   |   |         |        
|                                                              | Total deferred tax assets             |                        |         | 115,399 |   |   |         | 58,073  |  
|Deferred tax liabilities:                                     |                                       |                        |         |         |   |   |         |        
|Loan fee income deferred for tax purposes                     |                                       |                        |         |         |   |   | (404    | )      
|FHLB dividends                                                |                                       |                        | (6,765  | )       |   |   | (6,046  | )      
|Accelerated depreciation for tax purposes                     |                                       |                        | (570    | )       |   |   | (1,296  | )      
|Loan costs                                                    |                                       |                        | (1,087  | )       |   |   | (1,123  | )      
|Deferred taxes on unrealized gains                            |                                       |                        | (10,341 | )       |   |   | (10,156 | )      
|Asset securitization income recognized for book
	purposes     |                                       |                        | (10,973 | )       |   |   | (31,189 | )      
|Tax basis difference  automobile lease                       |                                       |                        | (1,069  | )       |   |   |         |        
|Other, net                                                    |                                       |                        | (14,938 | )       |   |   | (12,736 | )      
|                                                              |                                       |                        |         |         |   |   |         |        
|                                                              | Total deferred tax liabilities        |                        |         | (45,743 | ) |   |         | (62,950 | )
|                                                              |                                       |                        |         |         |   |   |         |        
|                                                              | Net deferred tax assets (liabilities) |                        | $       | 69,656  |   |   | $       | (4,877  | )
|                                                              |                                       |                        |         |         |   |   |         |        

Note 21  Extraordinary Item

For the years ended December 31, 2001, 2000
and 1999, we acquired $1.5 million, $10.1 million, and
$41.9 million of our subordinated debentures and
subsequently retired these debentures. As a result of these
early retirements, we recorded extraordinary gains, net of tax,
of $16 thousand, $0.2 million, and $2.1 million
for the years ended December 31, 2001, 2000 and 1999,
respectively.

F-28



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##### Table of Contents



WESTCORP AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


Note 22  Fair Values of Financial
Instruments

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

|                       |                                                                        |                                        |   |           |         |          |   |           |         |   |   |           |         |   |   |           |         |  
|---------------------- | ---------------------------------------------------------------------- | -------------------------------------- | - | --------- | ------- | -------- | - | --------- | ------- | - | - | --------- | ------- | - | - | --------- | ------- | -
|                       |                                                                        |                                       
|                       |                                                                        | December 31,                          
|                       |                                                                        |                                       
|                       |                                                                        |                                        |   |          
|                       |                                                                        | 2001                                   |   | 2000     
|                       |                                                                        |                                        |   |          
|                       |                                                                        | Carrying                               |   | Fair      |         | Carrying |   | Fair     
|                       |                                                                        | Amounts                                |   | Value     |         | Amounts  |   | Value    
|                       |                                                                        |                                        |   |           |         |          |   |          
|                       |                                                                        |                                       
|                       |                                                                        | (Dollars in thousands)                
|Financial assets:      |                                                                        |                                        |   |           |         |          |   |           |         |   |   |           |         |   |   |          
|                       | Cash and cash equivalents                                              |                                        | $ | 69,327    |         |          | $ | 69,327    |         |   | $ | 62,263    |         |   | $ | 62,263    |        
|                       | Other short-term investments                                           |                                        |   | 35,000    |         |          |   | 35,000    |         |   |   | 66,500    |         |   |   | 66,500    |        
|                       | Investment securities and MBS                                          |                                        |   | 2,102,736 |         |          |   | 2,102,736 |         |   |   | 2,241,182 |         |   |   | 2,241,182 |        
|                       | Loans receivable (including held for sale)                             |                                        |   | 7,533,150 |         |          |   | 8,245,735 |         |   |   | 4,924,053 |         |   |   | 5,291,474 |        
|                       | Retained interest in securitized assets                                |                                        |   | 37,392    |         |          |   | 37,392    |         |   |   | 111,558   |         |   |   | 111,558   |        
|                       | Financial instrument agreements held for purposes
	other than trading: |                                        |   |           |         |          |   |           |         |   |   |           |         |   |   |           |        
|                       |                                                                        | Interest rate swaps                    |   |           | (95,984 | )        |   |           | (95,984 | ) |   |           | (28,711 | ) |   |           | (28,711 | )
|                       |                                                                        | Interest rate options, floors and caps |   |           |         |          |   |           |         |   |   |           | 4,278   |   |   |           | 4,278   |  
|                       |                                                                        | Forward agreements                     |   |           |         |          |   |           |         |   |   |           |         |   |   |           |         |  
|                       |                                                                        | Euro-dollar swap agreements            |   |           |         |          |   |           |         |   |   |           |         |   |   |           |         |  
|Financial liabilities: |                                                                        |                                        |   |           |         |          |   |           |         |   |   |           |         |   |   |          
|                       | Deposits                                                               |                                        |   | 2,329,326 |         |          |   | 2,339,154 |         |   |   | 2,478,487 |         |   |   | 2,480,853 |        
|                       | Securities sold under agreements to repurchase                         |                                        |   | 155,190   |         |          |   | 155,237   |         |   |   | 178,821   |         |   |   | 181,819   |        
|                       | Short-term borrowings                                                  |                                        |   | 25,068    |         |          |   | 25,075    |         |   |   | 27,802    |         |   |   | 27,802    |        
|                       | Notes payable on automobile secured financing                          |                                        |   | 5,886,227 |         |          |   | 6,026,564 |         |   |   | 3,473,377 |         |   |   | 3,552,053 |        
|                       | Federal Home Loan Bank advances                                        |                                        |   | 543,417   |         |          |   | 543,580   |         |   |   | 409,570   |         |   |   | 416,437   |        
|                       | Amounts held on behalf of trustee                                      |                                        |   | 280,496   |         |          |   | 280,496   |         |   |   | 494,858   |         |   |   | 494,858   |        
|                       | Subordinated debentures                                                |                                        |   | 147,714   |         |          |   | 144,760   |         |   |   | 189,962   |         |   |   | 193,147   |        

Note 23  Financial Instrument
Agreements

Our portfolio of such agreements consisted of the
following:

|                            |  |                        |           |          |  |  |  | 
|--------------------------- |  | ---------------------- | --------- | -------- |  |  |  | 
|                            |  |                       
|                            |  | December 31, 2001     
|                            |  |                       
|                            |  | Notional               |           | Credit  
|                            |  | Amount                 |           | Exposure
|                            |  |                        |           |         
|                            |  |                       
|                            |  | (Dollars in thousands)
|Interest rate swaps         |  | $                      | 2,608,500 |          |  |  |  | 
|Interest rate caps          |  |                        |           |          |  |  |  | 
|Euro-dollar swap agreements |  |                        | 1,850,000 |          |  |  |  | 
|                            |  |                        |           |          |  |  |  | 
|                            |  | $                      | 4,458,500 |          |  |  |  | 
|                            |  |                        |           |          |  |  |  | 

F-29



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##### Table of Contents



WESTCORP AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


|                            |  |                        |           |          |  |   |       | 
|--------------------------- |  | ---------------------- | --------- | -------- |  | - | ----- | 
|                            |  |                       
|                            |  | December 31, 2000     
|                            |  |                       
|                            |  | Notional               |           | Credit  
|                            |  | Amount                 |           | Exposure
|                            |  |                        |           |         
|                            |  |                       
|                            |  | (Dollars in thousands)
|Interest rate swaps         |  | $                      | 674,500   |          |  |   |       | 
|Interest rate caps          |  |                        | 500,000   |          |  | $ | 4,278 | 
|Euro-dollar swap agreements |  |                        | 795,000   |          |  |   |       | 
|                            |  |                        |           |          |  |   |       | 
|                            |  | $                      | 1,969,500 |          |  | $ | 4,278 | 
|                            |  |                        |           |          |  |   |       | 

Our interest rate swap agreements are with other
parties 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, 2001 and 2000, the terms of our interest rate
swaps were to pay a weighted average fixed rate of 5.5% and 6.6%
in each year and to receive a weighted average variable rate of
2.3% and 6.7%, respectively, with expiration dates ranging from
2002 to 2011 and collateral requirements generally ranging from
3% to 4%. Variable interest rates may change in the future.

There were no interest rate cap agreements
outstanding on December 31, 2001. The interest rate cap
agreements outstanding of December 31, 2000 had strike
rates ranging from 6.0% to 8.0% with expiration dates ranging
from 2001 to 2008.

Notional amounts do not represent amounts
exchanged by parties and, thus, 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, 2001, the
unrealized loss on hedges was $75.0 million, net of taxes
of $52.2 million. Of the $75.0 million,
$3.4 million relates to forecasted secured financing
transactions. We amortized $15.6 million, net of tax, into
earnings 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 $28 million of the
unrealized loss on these instruments that was recorded in
accumulated other comprehensive income (loss) as of
December 31, 2001.

F-30



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##### Table of Contents



WESTCORP AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


Note 24  Earnings Per
Share

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

|                                          |  |                                                  |            |      |  |      |            |  |  |   |            | 
|----------------------------------------- |  | ------------------------------------------------ | ---------- | ---- |  | ---- | ---------- |  |  | - | ---------- | 
|                                          |  |                                                 
|                                          |  | For the Year Ended December 31,                 
|                                          |  |                                                 
|                                          |  | 2001                                             |            | 2000 |  | 1999
|                                          |  |                                                  |            |      |  |     
|                                          |  |                                                 
|                                          |  | (Dollars in thousands, except per share amounts)
|Basic:                                    |  |                                                  |            |      |  |      |            |  |  |   |            | 
|Net income                                |  | $                                                | 55,690     |      |  | $    | 74,743     |  |  | $ | 52,626     | 
|Average basic common shares outstanding   |  |                                                  | 34,277,856 |      |  |      | 29,494,497 |  |  |   | 26,503,796 | 
|Net income per common share  basic       |  | $                                                | 1.62       |      |  | $    | 2.54       |  |  | $ | 1.99       | 
|                                         
|Diluted:                                  |  |                                                  |            |      |  |      |            |  |  |   |            | 
|Net income                                |  | $                                                | 55,690     |      |  | $    | 74,743     |  |  | $ | 52,626     | 
|Average basic common shares outstanding   |  |                                                  | 34,277,856 |      |  |      | 29,494,497 |  |  |   | 26,503,796 | 
|Stock option adjustment                   |  |                                                  | 207,271    |      |  |      | 31,180     |  |  |   | 1,332      | 
|Average diluted common shares outstanding |  |                                                  | 34,485,127 |      |  |      | 29,525,677 |  |  |   | 26,505,128 | 
|Net income per common share  diluted     |  | $                                                | 1.61       |      |  | $    | 2.53       |  |  | $ | 1.99       | 

Options to purchase 26,000, 12,700, and 525,319
share of common stock at prices ranging from $15.25 to $18.69
per share were outstanding at December 31, 2001, 2000, and
1999, respectively, 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.

Note 25  Regulatory
Capital

At December 31, 2001 and 2000, the OTS
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, 2001 that we believe have changed
the Banks category.

F-31



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##### Table of Contents



WESTCORP AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


The following table summarizes the Banks
actual capital and required capital as of December 31, 2001
and 2000:

|                                          |               |                        |   |         |   |            |   |            |   |  |   |         |   |  |   |         |  
|----------------------------------------- | ------------- | ---------------------- | - | ------- | - | ---------- | - | ---------- | - |  | - | ------- | - |  | - | ------- | -
|                                          |               |                        |   |         |   | Tier 1     |   |           
|                                          |               | Tangible               |   | Core    |   | Risk-Based |   | Risk-Based
|                                          |               | Capital                |   | Capital |   | Capital    |   | Capital   
|                                          |               |                        |   |         |   |            |   |           
|                                          |               |                       
|                                          |               | (Dollars in thousands)
|December 31, 2001                         |               |                        |   |         |   |            |   |            |   |  |   |         |   |  |   |        
|Actual Capital:                           |               |                        |   |         |   |            |   |            |   |  |   |         |   |  |   |        
|                                          | Amount        |                        | $ | 602,491 |   |            | $ | 602,491    |   |  | $ | 602,491 |   |  | $ | 841,144 |  
|                                          | Capital ratio |                        |   | 7.29    | % |            |   | 7.29       | % |  |   | 8.49    | % |  |   | 11.86   | %
|FIRREA minimum required capital:          |               |                        |   |         |   |            |   |            |   |  |   |         |   |  |   |        
|                                          | Amount        |                        | $ | 123,957 |   |            | $ | 247,915    |   |  |   | N/A     |   |  | $ | 567,523 |  
|                                          | Capital ratio |                        |   | 1.50    | % |            |   | 3.00       | % |  |   | N/A     |   |  |   | 8.00    | %
|                                          | Excess        |                        | $ | 478,534 |   |            | $ | 354,576    |   |  |   | N/A     |   |  | $ | 273,621 |  
|FDICIA well capitalized required capital: |               |                        |   |         |   |            |   |            |   |  |   |         |   |  |   |        
|                                          | Amount        |                        |   | N/A     |   |            | $ | 413,192    |   |  | $ | 425,642 |   |  | $ | 709,404 |  
|                                          | Capital ratio |                        |   | N/A     |   |            |   | 5.00       | % |  |   | 6.00    | % |  |   | 10.00   | %
|                                          | Excess        |                        |   | N/A     |   |            | $ | 189,299    |   |  | $ | 176,849 |   |  | $ | 131,741 |  
|                                         
|December 31, 2000                         |               |                        |   |         |   |            |   |            |   |  |   |         |   |  |   |        
|Actual Capital:                           |               |                        |   |         |   |            |   |            |   |  |   |         |   |  |   |        
|                                          | Amount        |                        | $ | 533,571 |   |            | $ | 533,571    |   |  | $ | 533,571 |   |  | $ | 780,317 |  
|                                          | Capital ratio |                        |   | 8.03    | % |            |   | 8.03       | % |  |   | 8.32    | % |  |   | 12.16   | %
|FIRREA minimum required capital:          |               |                        |   |         |   |            |   |            |   |  |   |         |   |  |   |        
|                                          | Amount        |                        | $ | 99,664  |   |            | $ | 199,327    |   |  |   | N/A     |   |  | $ | 513,242 |  
|                                          | Capital ratio |                        |   | 1.50    | % |            |   | 3.00       | % |  |   | N/A     |   |  |   | 8.00    | %
|                                          | Excess        |                        | $ | 433,907 |   |            | $ | 334,244    |   |  |   | N/A     |   |  | $ | 267,075 |  
|FDICIA well capitalized required capital: |               |                        |   |         |   |            |   |            |   |  |   |         |   |  |   |        
|                                          | Amount        |                        |   | N/A     |   |            | $ | 332,212    |   |  | $ | 384,931 |   |  | $ | 641,552 |  
|                                          | Capital ratio |                        |   | N/A     |   |            |   | 5.00       | % |  |   | 6.00    | % |  |   | 10.00   | %
|                                          | Excess        |                        |   | N/A     |   |            | $ | 201,359    |   |  | $ | 148,640 |   |  | $ | 138,765 |  

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

|                                        |                                                  |                        |         |         |   |   |         |         |  
|--------------------------------------- | ------------------------------------------------ | ---------------------- | ------- | ------- | - | - | ------- | ------- | -
|                                        |                                                  |                       
|                                        |                                                  | December 31,          
|                                        |                                                  |                       
|                                        |                                                  | 2001                   |         | 2000   
|                                        |                                                  |                        |         |        
|                                        |                                                  |                       
|                                        |                                                  | (Dollars in thousands)
|Bank shareholders equity  GAAP
	basis |                                                  | $                      | 472,132 |         |   | $ | 462,226 |        
|                                        | Add: net unrealized losses                       |                        |         | 52,214  |   |   |         | 14,816  |  
|                                        | Add: minority interest in equity of subsidiaries |                        |         | 78,261  |   |   |         | 56,644  |  
|                                        | Less: non-permissible activities                 |                        |         | (116    | ) |   |         | (115    | )
|                                        |                                                  |                        |         |         |   |   |         |        
|Total tangible and core capital         |                                                  |                        | 602,491 |         |   |   | 533,571 |        
|Adjustments for risk-based capital:     |                                                  |                        |         |         |   |   |         |        
|                                        | Subordinated debentures(1)                       |                        |         | 149,554 |   |   |         | 166,497 |  
|                                        | General loan valuation allowance(2)              |                        |         | 89,099  |   |   |         | 80,249  |  
|                                        |                                                  |                        |         |         |   |   |         |        
|Risk-based capital                      |                                                  | $                      | 841,144 |         |   | $ | 780,317 |        
|                                        |                                                  |                        |         |         |   |   |         |        




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

F-32



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##### Table of Contents



WESTCORP AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


Note 26  Westcorp (Parent Company
Only) Financial Information

STATEMENTS OF FINANCIAL CONDITION

|                     |                            |                                            |         |         |         |  |         |         |         | 
|-------------------- | -------------------------- | ------------------------------------------ | ------- | ------- | ------- |  | ------- | ------- | ------- | 
|                     |                            |                                           
|                     |                            | December 31,                              
|                     |                            |                                           
|                     |                            | 2001                                       |         | 2000   
|                     |                            |                                            |         |        
|                     |                            |                                           
|                     |                            | (Dollars in thousands)                    
|Assets               |                            |                                            |         |         |         |  |         |        
|                     | Cash                       |                                            | $       | 11,245  |         |  | $       | 4,964   |        
|                     | Investment in subsidiaries |                                            |         | 563,514 |         |  |         | 505,293 |        
|                     | Other                      |                                            |         | 3,414   |         |  |         | 1,476   |        
|                     |                            |                                            |         |         |         |  |         |        
|                     |                            | Total assets                               |         | $       | 578,173 |  |         | $       | 511,733 | 
|                     |                            |                                            |         |         |         |  |         |        
|Liabilities          |                            |                                            |         |         |         |  |         |        
|                     | Other liabilities          |                                            | $       | 23,579  |         |  | $       | 26,068  |        
|                     |                            |                                            |         |         |         |  |         |        
|                     |                            | Total liabilities                          |         |         | 23,579  |  |         |         | 26,068  | 
|Shareholders equity |                            |                                            | 554,594 |         |         |  | 485,665 |        
|                     |                            |                                            |         |         |         |  |         |        
|                     |                            | Total liabilities and shareholders equity |         | $       | 578,173 |  |         | $       | 511,733 | 
|                     |                            |                                            |         |         |         |  |         |        

STATEMENTS OF INCOME

|                                                                     |               |                                 |        |        |  |      |        |       |  |   |        |        | 
|-------------------------------------------------------------------- | ------------- | ------------------------------- | ------ | ------ |  | ---- | ------ | ----- |  | - | ------ | ------ | 
|                                                                     |               |                                
|                                                                     |               | For the Year Ended December 31,
|                                                                     |               |                                
|                                                                     |               | 2001                            |        | 2000   |  | 1999
|                                                                     |               |                                 |        |        |  |     
|                                                                     |               |                                
|                                                                     |               | (Dollars in thousands)         
|Income:                                                              |               |                                 |        |        |  |      |        |       |  |   |        |       
|Dividends from subsidiaries                                          |               | $                               | 60,100 |        |  | $    | 3,500  |       |  | $ | 12,000 |       
|                                                                     |               |                                 |        |        |  |      |        |       |  |   |        |       
|                                                                     | Total income  |                                 |        | 60,100 |  |      |        | 3,500 |  |   |        | 12,000 | 
|Expense:                                                             |               |                                 |        |        |  |      |        |       |  |   |        |       
|Net interest expense                                                 |               |                                 | 620    |        |  |      | 1,328  |       |  |   | 470    |       
|Net noninterest expenses                                             |               |                                 | 3,536  |        |  |      | 2,341  |       |  |   | 2,085  |       
|                                                                     |               |                                 |        |        |  |      |        |       |  |   |        |       
|                                                                     | Total expense |                                 |        | 4,156  |  |      |        | 3,669 |  |   |        | 2,555  | 
|Income before income taxes and equity in net
	income of subsidiaries |               |                                 | 55,944 |        |  |      | (169   | )     |  |   | 9,445  |       
|Income tax benefit                                                   |               |                                 | (1,623 | )      |  |      | (1,507 | )     |  |   | (780   | )     
|                                                                     |               |                                 |        |        |  |      |        |       |  |   |        |       
|Income before equity in net income of subsidiaries                   |               |                                 | 57,567 |        |  |      | 1,338  |       |  |   | 10,225 |       
|Equity in undistributed net income of subsidiaries                   |               |                                 | 10,860 |        |  |      | 71,902 |       |  |   | 42,401 |       
|                                                                     |               |                                 |        |        |  |      |        |       |  |   |        |       
|Net income                                                           |               | $                               | 68,427 |        |  | $    | 73,240 |       |  | $ | 52,626 |       
|                                                                     |               |                                 |        |        |  |      |        |       |  |   |        |       

F-33



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##### Table of Contents



WESTCORP AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


STATEMENTS OF CASH FLOWS

|                                                                                   |                                                    |                                 |         |         |   |      |         |         |   |   |        |         |  
|---------------------------------------------------------------------------------- | -------------------------------------------------- | ------------------------------- | ------- | ------- | - | ---- | ------- | ------- | - | - | ------ | ------- | -
|                                                                                   |                                                    |                                
|                                                                                   |                                                    | For the Year Ended December 31,
|                                                                                   |                                                    |                                
|                                                                                   |                                                    | 2001                            |         | 2000    |   | 1999
|                                                                                   |                                                    |                                 |         |         |   |     
|                                                                                   |                                                    |                                
|                                                                                   |                                                    | (Dollars in thousands)         
|OPERATING ACTIVITIES                                                               |                                                    |                                 |         |         |   |      |         |         |   |   |        |        
|Net income                                                                         |                                                    | $                               | 68,427  |         |   | $    | 73,240  |         |   | $ | 52,626 |        
|Adjustments to reconcile net income to net cash
	provided by operating activities: |                                                    |                                 |         |         |   |      |         |         |   |   |        |        
|                                                                                   | Depreciation and amortization                      |                                 |         |         |   |      |         | 14      |   |   |        |         |  
|                                                                                   | Equity in undistributed net income of subsidiaries |                                 |         | (10,860 | ) |      |         | (71,902 | ) |   |        | (42,401 | )
|                                                                                   | Other, net                                         |                                 |         | (2,127  | ) |      |         | 4,958   |   |   |        | (2,026  | )
|                                                                                   |                                                    |                                 |         |         |   |      |         |         |   |   |        |        
|NET CASH PROVIDED BY OPERATING ACTIVITIES                                          |                                                    |                                 | 55,440  |         |   |      | 6,310   |         |   |   | 8,199  |        
|INVESTING ACTIVITIES                                                               |                                                    |                                 |         |         |   |      |         |         |   |   |        |        
|Infusion of capital to subsidiary                                                  |                                                    |                                 | (94,000 | )       |   |      | (69,848 | )       |   |   | (533   | )      
|                                                                                   |                                                    |                                 |         |         |   |      |         |         |   |   |        |        
|NET CASH USED IN INVESTING ACTIVITIES                                              |                                                    |                                 | (94,000 | )       |   |      | (69,848 | )       |   |   | (533   | )      
|FINANCING ACTIVITIES                                                               |                                                    |                                 |         |         |   |      |         |         |   |   |        |        
|(Decrease) increase in short-term borrowings                                       |                                                    |                                 | (2,300  | )       |   |      | 19,800  |         |   |   | (2,718 | )      
|Dividends paid                                                                     |                                                    |                                 | (15,000 | )       |   |      | (9,045  | )       |   |   | (5,299 | )      
|Issuance of common stock                                                           |                                                    |                                 | 62,141  |         |   |      | 55,684  |         |   |   |        |        
|Other, net                                                                         |                                                    |                                 |         |         |   |      | 52      |         |   |   | 1,520  |        
|                                                                                   |                                                    |                                 |         |         |   |      |         |         |   |   |        |        
|NET CASH PROVIDED BY (USED IN) FINANCING
	ACTIVITIES                               |                                                    |                                 | 44,841  |         |   |      | 66,491  |         |   |   | (6,497 | )      
|                                                                                   |                                                    |                                 |         |         |   |      |         |         |   |   |        |        
|INCREASE IN CASH AND CASH EQUIVALENTS                                              |                                                    |                                 | 6,281   |         |   |      | 2,953   |         |   |   | 1,169  |        
|Cash and Cash equivalents at beginning of year                                     |                                                    |                                 | 4,964   |         |   |      | 2,011   |         |   |   | 842    |        
|                                                                                   |                                                    |                                 |         |         |   |      |         |         |   |   |        |        
|CASH AND CASH EQUIVALENTS AT END OF YEAR                                           |                                                    | $                               | 11,245  |         |   | $    | 4,964   |         |   | $ | 2,011  |        
|                                                                                   |                                                    |                                 |         |         |   |      |         |         |   |   |        |        

Note 27  Subsequent Event
(Unaudited)

On January 22, 2002, we filed a registration
statement with the Securities and Exchange Commission, also
known as the SEC to provide our shareholders an exclusive
opportunity to purchase additional shares of stock through a
rights offering. The registration statement has not yet become
effective. The number of shares to be offered and the price per
share has not yet been determined. Our Board of Directors will
make this determination immediately prior to the time at which
the registration statement becomes effective. We expect to raise
approximately $50.0 million in new capital from this
transaction. Ernest S. Rady, the Chairman of the Board of
Directors of Westcorp, has informed us that he will exercise his
rights and that he expects to also exercise his right to
oversubscribe. Mr. Rady is the beneficial owner of
approximately 68% of our common stock.

On January 22, 2002, our 83% owned
subsidiary, WFS Financial Inc, filed a registration statement
with the SEC to provide its shareholders an exclusive
opportunity to purchase additional shares of stock through a
rights offering. The registration statement for this offering
has not yet become effective. The number of shares to be offered
and the price per share has not yet been determined. The Board
of Directors will make this determination immediately prior to
the time at which the registration statement becomes effective.
The Board of Directors of the Bank has informed us that they
intend to exercise the Banks basic subscription right and
expect to exercise its oversubscription right as part of this
offering. WFS expects that this transaction will provide
approximately $110 million in new capital.

F-34



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##### Table of Contents



WESTCORP AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)


On January 31, 2002, we issued
$775 million of notes secured by automobile contracts
through a private placement. The private placement was through a
conduit facility established in January 2002.

Note 28  Quarterly Results of
Operations (Unaudited)

The following is a summary of unaudited quarterly
results of operations for the years ended December 31, 2001
and 2000. 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)
|2001                                                        |  |                                                  |         |         |  |              |         |             |  |   |         |  |  |   |         | 
|Interest income                                             |  | $                                                | 212,667 |         |  | $            | 235,600 |             |  | $ | 253,041 |  |  | $ | 261,319 | 
|Interest expense                                            |  |                                                  | 119,427 |         |  |              | 126,650 |             |  |   | 125,398 |  |  |   | 120,469 | 
|                                                            |  |                                                  |         |         |  |              |         |             |  |   |         |  |  |   |         | 
|Net interest income                                         |  |                                                  | 93,240  |         |  |              | 108,950 |             |  |   | 127,643 |  |  |   | 140,850 | 
|Provision for credit losses                                 |  |                                                  | 26,982  |         |  |              | 39,640  |             |  |   | 60,501  |  |  |   | 69,854  | 
|Noninterest income                                          |  |                                                  | 30,468  |         |  |              | 26,472  |             |  |   | 8,326   |  |  |   | 13,617  | 
|Noninterest expense                                         |  |                                                  | 61,325  |         |  |              | 62,957  |             |  |   | 59,880  |  |  |   | 60,709  | 
|                                                            |  |                                                  |         |         |  |              |         |             |  |   |         |  |  |   |         | 
|Income before income taxes                                  |  |                                                  | 35,401  |         |  |              | 32,825  |             |  |   | 15,588  |  |  |   | 23,904  | 
|Income taxes                                                |  |                                                  | 14,333  |         |  |              | 12,515  |             |  |   | 6,119   |  |  |   | 8,708   | 
|                                                            |  |                                                  |         |         |  |              |         |             |  |   |         |  |  |   |         | 
|Income before minority interest                             |  |                                                  | 21,068  |         |  |              | 20,310  |             |  |   | 9,469   |  |  |   | 15,196  | 
|Minority interest in earnings of subsidiaries               |  |                                                  | 3,360   |         |  |              | 3,421   |             |  |   | 1,255   |  |  |   | 2,333   | 
|                                                            |  |                                                  |         |         |  |              |         |             |  |   |         |  |  |   |         | 
|Income before extraordinary item                            |  |                                                  | 17,708  |         |  |              | 16,889  |             |  |   | 8,214   |  |  |   | 12,863  | 
|Extraordinary gain from extinguishment of debt,
	net of tax |  |                                                  | 8       |         |  |              | 8       |             |  |   |         |  |  |   |         | 
|                                                            |  |                                                  |         |         |  |              |         |             |  |   |         |  |  |   |         | 
|Net income                                                  |  | $                                                | 17,716  |         |  | $            | 16,897  |             |  | $ | 8,214   |  |  | $ | 12,863  | 
|                                                            |  |                                                  |         |         |  |              |         |             |  |   |         |  |  |   |         | 
|Net income per common share  basic                         |  | $                                                | 0.55    |         |  | $            | 0.50    |             |  | $ | 0.23    |  |  | $ | 0.36    | 
|                                                            |  |                                                  |         |         |  |              |         |             |  |   |         |  |  |   |         | 
|Net income per common share  diluted                       |  | $                                                | 0.55    |         |  | $            | 0.50    |             |  | $ | 0.23    |  |  | $ | 0.36    | 
|                                                            |  |                                                  |         |         |  |              |         |             |  |   |         |  |  |   |         | 
|                                                           
|2000                                                        |  |                                                  |         |         |  |              |         |             |  |   |         |  |  |   |         | 
|Interest income                                             |  | $                                                | 100,889 |         |  | $            | 126,041 |             |  | $ | 164,655 |  |  | $ | 192,236 | 
|Interest expense                                            |  |                                                  | 50,112  |         |  |              | 66,533  |             |  |   | 90,895  |  |  |   | 106,114 | 
|                                                            |  |                                                  |         |         |  |              |         |             |  |   |         |  |  |   |         | 
|Net interest income                                         |  |                                                  | 50,777  |         |  |              | 59,508  |             |  |   | 73,760  |  |  |   | 86,122  | 
|Provision for credit losses                                 |  |                                                  | 11,945  |         |  |              | 15,246  |             |  |   | 24,906  |  |  |   | 30,036  | 
|Noninterest income                                          |  |                                                  | 55,781  |         |  |              | 45,738  |             |  |   | 41,179  |  |  |   | 34,945  | 
|Noninterest expense                                         |  |                                                  | 55,997  |         |  |              | 56,029  |             |  |   | 53,891  |  |  |   | 55,274  | 
|                                                            |  |                                                  |         |         |  |              |         |             |  |   |         |  |  |   |         | 
|Income before income taxes                                  |  |                                                  | 38,616  |         |  |              | 33,971  |             |  |   | 36,142  |  |  |   | 35,757  | 
|Income taxes                                                |  |                                                  | 16,148  |         |  |              | 13,541  |             |  |   | 14,911  |  |  |   | 13,532  | 
|                                                            |  |                                                  |         |         |  |              |         |             |  |   |         |  |  |   |         | 
|Income before minority interest                             |  |                                                  | 22,468  |         |  |              | 20,430  |             |  |   | 21,231  |  |  |   | 22,225  | 
|Minority interest in earnings of subsidiaries               |  |                                                  | 2,627   |         |  |              | 2,873   |             |  |   | 3,082   |  |  |   | 3,270   | 
|                                                            |  |                                                  |         |         |  |              |         |             |  |   |         |  |  |   |         | 
|Income before extraordinary item                            |  |                                                  | 19,841  |         |  |              | 17,557  |             |  |   | 18,149  |  |  |   | 18,955  | 
|Extraordinary gain from extinguishment of debt,
	net of tax |  |                                                  | 158     |         |  |              | 61      |             |  |   | 16      |  |  |   | 6       | 
|                                                            |  |                                                  |         |         |  |              |         |             |  |   |         |  |  |   |         | 
|Net income                                                  |  | $                                                | 19,999  |         |  | $            | 17,618  |             |  | $ | 18,165  |  |  | $ | 18,961  | 
|                                                            |  |                                                  |         |         |  |              |         |             |  |   |         |  |  |   |         | 
|Net income per common share  basic                         |  | $                                                | 0.75    |         |  | $            | 0.64    |             |  | $ | 0.57    |  |  | $ | 0.59    | 
|                                                            |  |                                                  |         |         |  |              |         |             |  |   |         |  |  |   |         | 
|Net income per common share  diluted                       |  | $                                                | 0.75    |         |  | $            | 0.64    |             |  | $ | 0.57    |  |  | $ | 0.59    | 
|                                                            |  |                                                  |         |         |  |              |         |             |  |   |         |  |  |   |         | 

F-35



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##### Table of Contents



EXHIBIT INDEX

|        |        |             |  |                                                                                                                                                                                                                                             
|------- | ------ | ----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |        |            
|Number  |        | Description
|        |        |            
|        | 3.1    |             |  | Certificate of Incorporation(12)                                                                                                                                                                                                            
|        | 3.2    |             |  | Bylaws(12)                                                                                                                                                                                                                                  
|        | 4.1    |             |  | Indenture dated as of June 17, 1993 issued
	by Western Financial Bank, formerly Western Financial Savings
	Bank, F.S.B., with respect to $125,000,000 in aggregate
	principal amount of 8.5% Subordinated Capital Debentures due
	2003(13)  
|        | 4.2    |             |  | Indenture dated as of June 25, 1998 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(14)
|        | 10.1   |             |  | Westcorp Incentive Stock Option Plan(2)                                                                                                                                                                                                     
|        | 10.2   |             |  | Westcorp Employee Stock Ownership and Salary
	Savings Plan(3)                                                                                                                                                                               
|        | 10.3   |             |  | Westcorp 1991 Stock Option Plan(4)                                                                                                                                                                                                          
|        | 10.3.1 |             |  | Westcorp 2001 Stock Option Plan                                                                                                                                                                                                             
|        | 10.4   |             |  | 1985 Executive Deferral Plan(1)                                                                                                                                                                                                             
|        | 10.5   |             |  | 2000 Executive Deferral Plan V                                                                                                                                                                                                              
|        | 10.6   |             |  | Revolving Line of Credit Agreement between WFS
	Funding, Inc. and Western Financial Bank, dated
	November 30, 2001                                                                                                                          
|        | 10.6.1 |             |  | Revolving Line of Credit Agreement between WFS
	Financial Auto Loans, Inc. and Western Financial Bank, dated
	November 30, 2001                                                                                                             
|        | 10.6.2 |             |  | Revolving Line of Credit Agreement between WFS
	Receivables Corporation and Western Financial Bank, dated
	November 30, 2001                                                                                                                
|        | 10.7   |             |  | Transfer Agreement between WFS Financial Inc and
	Western Financial Bank, F.S.B., dated May 1, 1995(1)                                                                                                                                      
|        | 10.8   |             |  | Promissory Note of WFS Financial Inc in favor of
	Western Financial Bank, F.S.B., dated May 1, 1995(1)                                                                                                                                      
|        | 10.9   |             |  | Revolving Line of Credit Agreement between WFS
	Financial Inc and Western Financial Bank, dated June 15,
	1999(11)                                                                                                                          
|        | 10.9.1 |             |  | Amendment No. 1, dated as of August 1,
	1999, to the Revolving Line of Credit Agreement between WFS
	Financial Inc and Western Financial Bank(11)                                                                                           
|        | 10.9.2 |             |  | Amendment No. 2, dated May 23, 2000, to
	the Revolving Line of Credit Agreement between WFS Financial Inc
	and Western Financial Bank                                                                                                       
|        | 10.9.3 |             |  | Amendment No. 3, dated January 1, 2002,
	to the Revolving Line of Credit Agreement between WFS Financial
	Inc and Western Financial Bank                                                                                                    
|        | 10.10  |             |  | Tax Sharing Agreement between WFS Financial Inc
	and Western Financial Bank, F.S.B., dated January 1, 1994(1)                                                                                                                               
|        | 10.11  |             |  | Master Reinvestment Contract between WFS
	Financial Inc and Western Financial Bank, F.S.B., dated
	May 1, 1995(1)                                                                                                                           
|        | 10.12  |             |  | Amendment No. 1, dated as of June 1,
	1995, to the Restated Master Reinvestment Reimbursement
	Agreement(10)                                                                                                                                
|        | 10.13  |             |  | Amended and Restated Master Collateral Assignment
	Agreement, dated as of March 1, 2000(11)                                                                                                                                                 
|        | 10.14  |             |  | Form of WFS Financial Inc Dealer Agreement(5)                                                                                                                                                                                               
|        | 10.15  |             |  | Form of WFS Financial Inc Loan Application(5)                                                                                                                                                                                               
|        | 10.16  |             |  | Westcorp Employee Stock Ownership and Salary
	Savings Plan(7)                                                                                                                                                                               



---



##### Table of Contents



|        |         |             |  |                                                                                                                                   
|------- | ------- | ----------- |  | ----------------------------------------------------------------------------------------------------------------------------------
|Exhibit |         |            
|Number  |         | Description
|        |         |            
|        | 10.16.1 |             |  | Amended and Restated Westcorp Employee Stock
	Ownership and Salary Savings Plan, dated January 1, 2001                            
|        | 10.16.2 |             |  | Amendment No. 1, dated as of January 1,
	2001, to Amended and Restated Westcorp Employee Stock Ownership
	and Salary Savings Plan 
|        | 10.16.3 |             |  | Amendment No. 2, dated as of January 1,
	2001, to Amended and Restated Westcorp Employee Stock Ownership
	and Salary Savings Plan 
|        | 10.17   |             |  | Amended and Restated WFS 1996 Incentive Stock
	Option Plan(6)                                                                     
|        | 10.18   |             |  | Promissory Note of WFS Financial Inc in favor of
	Western Financial Bank, F.S.B., dated August 1, 1997(10)                        
|        | 10.18.1 |             |  | Amendment No. 1, dated February 23,
	1999, to the Promissory Note of WFS Financial Inc in favor of
	Western Financial Bank(10)    
|        | 10.18.2 |             |  | Amendment No. 2, dated July 30, 1999,
	to the Promissory Note of WFS Financial Inc in favor of Western
	Financial Bank(10)        
|        | 10.18.3 |             |  | Amendment No. 3, dated January 1, 2002,
	to the Promissory Note of WFS Financial Inc in favor of Western
	Financial Bank          
|        | 10.19   |             |  | Investment Agreement between WFS Financial Inc
	and Western Financial Bank, dated January 1, 1996(10)                             
|        | 10.19.1 |             |  | Amendment No. 1, dated January 1, 2002,
	to the Investment Agreement between WFS Financial Inc and
	Western Financial Bank, F.S.B.
|        | 10.20   |             |  | Allocation Agreement between WFS Financial Inc,
	Western Financial Bank, Westcorp, and their subsidiaries dated
	January 1, 2002  
|        | 10.21   |             |  | Employment Agreement(8)(9)                                                                                                        
|        | 21.1    |             |  | Subsidiaries of Westcorp                                                                                                          
|        | 23.1    |             |  | Consent of Independent Auditors, Ernst &
	Young LLP                                                                               




|    |                                                                                                                                                                                                  
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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) | Exhibits previously filed with Westcorp
	Registration Statement on Form S-1 (File No. 33-4295),
	filed May 2, 1986 incorporated herein by reference under
	Exhibit Number indicated.             
|   
|(3) | Exhibits previously filed with Westcorp
	Registration Statement on Form S-4 (File
	No. 33-34286), filed April 11, 1990 incorporated
	herein by reference under Exhibit Number indicated.         
|   
|(4) | Exhibits previously filed with Westcorp
	Registration Statement on Form S-8 (File
	No. 33-43898), filed December 11, 1991 incorporated
	herein by reference under Exhibit Number indicated.      
|   
|(5) | Amendment No. 1, dated as of July 14,
	1995 to the WFS Financial Inc Registration Statement on
	Form S-1 (File No. 33-93068) incorporated herein by
	reference under Exhibit Number indicated.   
|   
|(6) | 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.       
|   
|(7) | Exhibits previously filed with Westcorp
	Registration Statement on Form S-8 (File
	No. 333-11039), filed August 29, 1996 incorporated
	herein by reference under Exhibit Number indicated.       
|   
|(8) | Employment Agreement dated February 27, 1998
	between WFS Financial Inc, Westcorp and Lee A. Whatcott (will be
	provided to the SEC upon request).                                               
|   
|(9) | Employment Agreement, dated November 15,
	1998 between the WFS Financial Inc, Westcorp and Mark Olson
	(will be provided to the SEC upon request).                                               



|     |                                                                                                                                                                                
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | 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.



---



##### Table of Contents





|     |                                                                                                                                                                                                                               
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(11) | 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.
|    
|(12) | Exhibits previously filed with Westcorp
	Registration Statement on Form S-4 (File
	No. 33-34286), filed April 11, 1990, incorporated
	herein by reference under Exhibit Numbers indicated.                                    
|    
|(13) | Exhibit previously filed with, Western Financial
	Bank, formerly Western Financial Savings Bank, F.S.B., Offering
	Circular with the OTS, dated June 17, 1993 (will be
	provided to the SEC upon request).                    
|    
|(14) | Exhibit previously filed with Western Financial
	Bank, formerly Western Financial Bank, F.S.B., Offering Circular
	with the OTS, dated July 25, 1998 (will be provided to the
	SEC upon request).                             

(b) Report on Form 8-K



| |     
| | ----
| | None