IMPERIAL FINANCIAL GROUP INC, 10-12B/A, 1998-01-21

IMPERIAL FINANCIAL GROUP INC
10-12B/A, 1998-01-21
STATE COMMERCIAL BANKS

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 21, 1998
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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AMENDMENT NO. 1

TO
FORM 10

GENERAL FORM FOR REGISTRATION OF SECURITIES

PURSUANT TO SECTION 12(b) OR 12(g) OF
THE SECURITIES EXCHANGE ACT OF 1934

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IMPERIAL FINANCIAL GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

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DELAWARE 911817448
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
1840 CENTURY PARK EAST, 10TH FLOOR
LOS ANGELES, CALIFORNIA 90067
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:

(310) 712-8600

SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH
TO BE SO REGISTERED EACH CLASS IS TO BE REGISTERED
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CLASS A COMMON STOCK, PAR VALUE $0.01 PER SHARE NEW YORK STOCK EXCHANGE
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SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE

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IMPERIAL FINANCIAL GROUP, INC.

I. INFORMATION INCLUDED IN INFORMATION STATEMENT AND INCORPORATED IN FORM 10
BY REFERENCE

CROSS REFERENCE SHEET BETWEEN INFORMATION STATEMENT AND ITEMS OF FORM 10

ITEM 1. BUSINESS

The information required by this item is contained in the sections "Summary
of Certain Information," "Introduction," "The Transactions" and "Business" of
the Information Statement (the "Information Statement").

ITEM 2. FINANCIAL INFORMATION

The information required by this item is contained in the sections "Summary
of Certain Information--Summary Historical Combined Financial Data" and "--
Summary Unaudited Pro Forma Combined Financial Data," "Capitalization,"
"Selected Combined Financial Data," "Unaudited Pro Forma Combined Financial
Data" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" of the Information Statement.

ITEM 3. PROPERTIES

The information required by this item is contained in the section
"Business--Properties" of the Information Statement.

ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this item is contained in the sections "Security
Ownership of Certain Beneficial Owners of Common Stock" and "Executive
Compensation" of the Information Statement.

ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS

The information required by this item is contained in the section
"Management" of the Information Statement.

ITEM 6. EXECUTIVE COMPENSATION

The information required by this item is contained in the section "Executive
Compensation" of the Information Statement.

ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this item is contained in the section
"Relationship and Agreements Among the Company, the Bank and Bancorp After the
Distribution" of the Information Statement.

ITEM 8. LEGAL PROCEEDINGS

The information required by this item is contained in the section
"Business--Legal Proceedings" of the Information Statement.

ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS

The information required by this item is contained in the sections "The
Transactions--Manner of Effecting the Distribution," "Security Ownership of
Certain Beneficial Owners of Common Stock" and "Description of Capital Stock"
of the Information Statement.

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ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED

The information required by this item is contained in the sections
"Description of Capital Stock" and "Purposes and Effects of Certain Provisions
of the Company's Certificate of Incorporation, Bylaws and Delaware Law" of the
Information Statement.

ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The information required by this item is contained in the sections
"Limitation on Liability and Indemnification of Officers and Directors" and
"Purposes and Effects of Certain Provisions of the Company's Certificate of
Incorporation, Bylaws and Delaware Law" of the Information Statement.

ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by this item is identified in "Index to Financial
Information" of the Information Statement.

ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS

(A) FINANCIAL INFORMATION

See Index to Financial Statements on page F-1 of the Information
Statement.

(B) EXHIBITS

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*2 Information Statement (attached to this Registration Statement as Annex A)
**3.1 Form of Amended and Restated Certificate of Incorporation of Imperial Financial Group,
Inc.
**3.2 Form of Amended and Restated Bylaws of Imperial Financial Group, Inc.
**4 Specimen form of certificate representing Class A Common Stock of Imperial Financial
Group, Inc.
***10.1 Form of Capital Contribution and Distribution Agreement to be entered into among
Imperial Bancorp, Imperial Bank, Imperial Financial Group, Inc. and Crown American
Bank
***10.2 Form of Transition Services Agreement to be entered into between Imperial Bank and
Imperial Financial Group, Inc.
***10.3 Form of Tax Sharing Agreement to be entered into between Imperial Bancorp and Imperial
Financial Group, Inc.
***10.4 Form of Imperial Financial Group, Inc. Credit Agreement
*10.5 Imperial Financial Group, Inc. 1997 Share Incentive Plan
***10.6 Form of Imperial Financial Group, Inc. Deferred Compensation Plan
***10.7 Employment Agreement of G. Louis Graziadio, III
***10.8 Employment Agreement of Robert M. Franko
**10.9 Employment Agreement dated as of July 23, 1997 between Imperial Bank and Lewis P.
Horwitz
***10.10 Consulting Agreement dated as of November 1, 1991 between Imperial Bank and Second
Southern Corp.
*11 Computation of per share earnings
**21 Subsidiaries of Imperial Financial Group, Inc.
**27 Financial Data Schedule
***99.1 Private letter ruling from the Internal Revenue Service
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*Filed herewith

**Previously filed

***To be filed by amendment

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II. INFORMATION NOT INCLUDED IN INFORMATION STATEMENT

ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES

On March 20, 1997, Imperial Financial Group, Inc. (the "Company") issued 100
shares of its common stock, for a total consideration of $100, to Imperial
Bank, which is and will be the Company's sole stockholder until the
Distribution (as defined in the Information Statement) has been completed. The
issuance of such shares was made in a transaction exempt from the registration
requirements of the Securities Act of 1933 pursuant to Section 4(2) thereof.

ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

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SIGNATURE

Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant has duly caused this Amendment to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized.

IMPERIAL FINANCIAL GROUP, INC.

By:/s/ Robert M. Franko
---------------------------------
Name: Robert M. Franko
Title: President

January 21, 1998

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ANNEX A

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT ON FORM 10 RELATING TO THESE SECURITIES HAS BEEN FILED +
+WITH THE SECURITIES AND EXCHANGE COMMISSION. THIS PRELIMINARY INFORMATION +
+STATEMENT SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN +
+OFFER TO BUY THESE SECURITIES. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

PRELIMINARY COPY, DATED JANUARY 21, 1998

-- FOR INFORMATION ONLY --

INFORMATION STATEMENT

OF IMPERIAL BANCORP

[LOGO] IMPERIAL FINANCIAL GROUP, INC.

CLASS A COMMON STOCK
(PAR VALUE $0.01 PER SHARE)

This Information Statement is being furnished by Imperial Bancorp, a
California corporation ("Bancorp"), in connection with the distribution (the
"Distribution") by Bancorp to its shareholders of all the outstanding shares of
Class A common stock, par value $0.01 per share (the "Company Class A Common
Stock"), of Imperial Financial Group, Inc., a Delaware corporation (the
"Company"). The Company is currently a wholly-owned subsidiary of Imperial Bank
(the "Bank"), which in turn is a wholly-owned subsidiary of Bancorp. As a
result of the Distribution, each holder of record as of , 1998
(the "Distribution Record Date") of common stock, no par value, of Bancorp (the
"Bancorp Common Stock") will receive one share of Company Class A Common Stock
for each share of Bancorp Common Stock owned as of the Distribution Record Date
(the "Distribution Ratio").

In connection with the Distribution, the Bank will contribute to the Company
(i) all of the assets and liabilities relating to The Lewis Horwitz
Organization, a division of the Bank that provides motion picture and
television financing, (ii) all of the common stock of Crown American Bank, a
newly formed thrift and loan company that will conduct, among other businesses,
the Bank's small business lending, (iii) all of the common stock of Imperial
Trust Company, a California licensed trust company that offers a wide range of
trust and investment management services, and (iv) all of the common stock
owned by the Bank (representing approximately 23.5% of all outstanding common
stock as of September 30, 1997) in Imperial Credit Industries, Inc., a publicly
traded, diversified specialty finance company.

Subject to the satisfaction of certain conditions, the Distribution will be
effective on or about , 1998 (the "Distribution Date"). No
consideration will be paid by Bancorp's shareholders for Company Class A Common
Stock received by them in the Distribution, nor will they be required to
surrender or exchange Bancorp Common Stock in order to receive Company Class A
Common Stock. There is no current public market for the Company Class A Common
Stock, although it is expected that a "when-issued" trading market will develop
prior to the Distribution Date. Application will be made to list the Company
Class A Common Stock on the New York Stock Exchange under the symbol "IFG."

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NO VOTE OF SHAREHOLDERS IS REQUIRED IN CONNECTION WITH THIS DISTRIBUTION, NO
PROXIES ARE BEING SOLICITED, AND YOU ARE REQUESTED NOT TO SEND US A PROXY.

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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS INFORMATION STATEMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

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THE SHARES OF CLASS A COMMON STOCK BEING DISTRIBUTED HEREBY ARE NOT SAVINGS
OR DEPOSIT ACCOUNTS AND ARE NOT INSURED BY ANY GOVERNMENTAL AUTHORITY OR
OTHER PERSON OR ENTITY.

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THIS INFORMATION STATEMENT DOES NOT CONSTITUTE AN OFFER TO
SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES.

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Shareholders of Bancorp with inquiries related to the Distribution should
contact American Stock Transfer and Trust Co., the Distribution Agent for the
Distribution. After the Distribution Date, shareholders of the Company with
inquiries relating to the Distribution or their investment should contact the
Company's Investor Relations Department.

The date of this Information Statement is , 1998.
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TABLE OF CONTENTS

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ITEM PAGE
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SUMMARY OF CERTAIN INFORMATION............................................ 1

INTRODUCTION.............................................................. 10

THE TRANSACTIONS.......................................................... 11

RISK FACTORS.............................................................. 14

CERTAIN FEDERAL INCOME TAX CONSIDERATIONS................................. 21

LISTING AND TRADING OF THE COMMON STOCK................................... 22

DISTRIBUTION CONDITIONS AND TERMINATION................................... 23

REGULATORY APPROVALS AND CONSIDERATIONS................................... 24

RELATIONSHIP AND AGREEMENTS AMONG THE COMPANY, THE BANK AND BANCORP AFTER
THE DISTRIBUTION......................................................... 28

DIVIDEND POLICY........................................................... 30

CAPITALIZATION............................................................ 31

SELECTED COMBINED FINANCIAL DATA.......................................... 32

UNAUDITED PRO FORMA COMBINED FINANCIAL DATA............................... 34

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS............................................................... 38

BUSINESS.................................................................. 56

MANAGEMENT................................................................ 87

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS OF COMMON STOCK........... 90

EXECUTIVE COMPENSATION.................................................... 91

DESCRIPTION OF CAPITAL STOCK.............................................. 97

CREDIT FACILITIES......................................................... 98

PURPOSES AND EFFECTS OF CERTAIN PROVISIONS OF THE COMPANY'S CERTIFICATE OF
INCORPORATION, BYLAWS AND DELAWARE LAW................................... 99

LIMITATION ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS..... 103

ADDITIONAL INFORMATION.................................................... 104

INDEX TO FINANCIAL INFORMATION............................................ F-1
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SUMMARY OF CERTAIN INFORMATION

The following is a summary of certain information contained elsewhere in this
Information Statement. Reference is made to, and this summary is qualified by,
the more detailed information and financial statements, including the notes
thereto, set forth in this Information Statement, which should be read in its
entirety. In this Information Statement, (i) all financial information is
presented in accordance with accounting principles generally accepted in the
United States ("GAAP"); (ii) references to the activities of, and financial
information with respect to, the Company prior to the Distribution are to
historical activities and combined historical financial information of the IFG
Business (as defined herein) as if the Company existed as a stand alone entity
that owned the IFG Business during the periods presented; and (iii) all
references to the Company include Imperial Financial Group, Inc. and its
consolidated subsidiaries, unless otherwise expressly set forth herein. The
Contribution (as defined herein), the Distribution and the other transactions
contemplated thereby are sometimes collectively referred to herein as the
"Transactions."

THE COMPANY'S BUSINESS

The Company is a diversified financial services company primarily engaged in
three business segments: (i) motion picture and television production finance,
through the Company's division, The Lewis Horwitz Organization ("LHO"), (ii)
small business lending, primarily in conjunction with Small Business
Administration (the "SBA") sponsored programs, through the Company's
subsidiary, Crown American Bank ("CAB"), a recently formed industrial loan
company, and (iii) a wide range of trust and investment management services,
through the Company's subsidiary, Imperial Trust Company ("ITC"), a California
licensed trust company. In addition, the Company owned, as of September 30,
1997, approximately 23.5% of the common stock of Imperial Credit Industries,
Inc. ("ICII"), a publicly traded, diversified specialty finance company.

The Company's LHO division is a leading provider of senior, secured financing
for independent motion picture and television production. During the nine
months ended September 30, 1997 and the year ended December 31, 1996, the
Company originated 45 loans and 39 loans, respectively, in an aggregate
principal amount of approximately $79 million and $56 million, respectively.
During the same periods, the LHO division, through Imperial Bank, issued
letters of credit totalling approximately $15 million and $39 million,
respectively. Total revenue for the LHO division for the nine months ended
September 30, 1997 and the year ended December 31, 1996 was $4.4 million and
$4.0 million, respectively, representing 13.9% and 4.9%, respectively, of the
Company's total revenue for such periods. Net income for the LHO division for
the nine months ended September 30, 1997 and the year ended December 31, 1996
was $0.6 million and $1.3 million, respectively, representing 9.9% and 3.3%,
respectively, of the Company's net income for such periods.

The Company also is a provider of secured small business loans, the majority
of which are guaranteed in part by the SBA. The Company offers small business
loans to a wide variety of businesses located in California, Nevada and
Arizona, including hotels, residential care facilities, beauty salons and
restaurants. The Company's small business lending activities are conducted
through CAB, a recently formed industrial loan company. As of September 30,
1997 and December 31, 1996, the aggregate outstanding principal amount of the
Company's small business loans was approximately $41 million and $28 million,
respectively. The aggregate principal amount of loans originated for both the
nine months ended September 30, 1997 and the year ended December 31, 1996 was
approximately $39 million. Total revenue for CAB for the nine months ended
September 30, 1997 and the year ended December 31, 1996 was $4.4 million and
$5.0 million, respectively, representing 14.0% and 6.1%, respectively, of the
Company's total revenue for such periods. Net income for CAB for the nine
months ended September 30, 1997 and the year ended December 31, 1996 was $0.6
million and $1.2 million, respectively, representing 9.1% and 3.2%,
respectively, of the Company's net income for such periods.

The Company, through ITC, provides a full array of investment management and
fiduciary services to individual investors, corporations, benefit plans and
foundations. These services include investment management,

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personal trust services, custody services and trust administration of employee
benefit plans. Total revenue for ITC for the nine months ended September 30,
1997 and the year ended December 31, 1996 was $6.2 million and $8.1 million,
respectively, representing 19.5% and 10.0%, respectively, of the Company's
total revenue for such periods. Net income for ITC for the nine months ended
September 30, 1997 and the year ended December 31, 1996 was $0.7 million and
$1.1 million, respectively, representing 11.0% and 2.8%, respectively, of the
Company's net income for such periods. At September 30, 1997 and December 31,
1996, the Company maintained total assets under administration of approximately
$8.8 billion and $7.5 billion, respectively. ITC was the fourteenth largest
licensed trust company in California at September 30, 1997 based on assets
under administration.

ICII is a diversified specialty finance company and offers, principally
through its subsidiaries, financial products such as non-conforming residential
mortgage banking (non-conforming single family mortgage loans), commercial
mortgage banking (franchise loans and income property loans), business lending
(equipment leasing, asset-based financing and loan participations) and consumer
loans (sub-prime auto loans, home improvement loans and other consumer credit).
The majority of ICII's loans and leases are sold in the secondary market
through securitizations and whole loan sales. During the nine months ended
September 30, 1997 and the year ended December 31, 1996, ICII generated total
revenues of $163.3 million and $256.9 million, respectively. The Company is
currently the largest shareholder of ICII. In addition, three members of the
Board of Directors of the Company (the "Company Board") are also officers
and/or directors of ICII and, as such, are in a position to significantly
influence the management and policies of ICII. Total revenue related to the
Company's ownership of ICII stock for the nine months ended September 30, 1997
and the year ended December 31, 1996 was $16.6 million and $64.1 million,
respectively, representing 52.6% and 79.0%, respectively, of the Company's
total revenue for such periods. Net income related to the Company's ownership
of ICII stock for the nine months ended September 30, 1997 and the year ended
December 31, 1996 was $4.5 million and $35.1 million, respectively,
representing 70.0% and 90.7%, respectively, of the Company's net income for
such periods.

The Company's business strategy emphasizes (i) opportunistic expansion of
businesses in niche segments of the financial services industry, (ii) hiring
management experienced in a wide array of financial services businesses to
operate and grow the Company's businesses, (iii) conservative and disciplined
underwriting and credit risk management, (iv) sale in secondary markets of
Company SBA loans where the Company expects to receive a premium over the
principal amount of the loan and (v) maintaining business and financial
flexibility to take advantage of changing market conditions with respect to
specific financial services businesses.

The Company's principal executive offices are located at 1840 Century Park
East, 10th Floor, Los Angeles, California 90067, and its telephone number is
(310) 712-8600.

THE DISTRIBUTION

Distributing Company............ Imperial Bancorp, a California
corporation ("Bancorp").

Distributed Company............. Imperial Financial Group, Inc., a
Delaware corporation (the "Company") and
currently a wholly owned subsidiary of
Imperial Bank (the "Bank"), which is in
turn a wholly owned subsidiary of
Bancorp.

Reasons for the Distribution.... The boards of directors of Bancorp and
the Bank selected the businesses of LHO,
CAB and ITC to be contributed to the
Company because (i) each business has
been operating with a separate management
structure as a stand-alone operation and
with an entrepreneurial management
philosophy, (ii) each business has
demonstrated high return on equity in
recent years and (iii) none of the three
businesses requires demand banking
deposits for its funding. In addition,
the boards of

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Bancorp and the Bank believe the
businesses of LHO, CAB and ITC, as well
as the business of ICII, complement each
other and that many cross-referral
opportunities exist between such
businesses, including with respect to
lending and private banking products
offered to the clients of LHO, CAB and
ITC. The boards of directors of Bancorp
and the Bank also believe that the
Transactions will provide the Company
with increased access to capital markets,
which should allow the Company to expand
its businesses. The Company intends to
initially raise capital to promote this
expansion by conducting a public or
private offering of its equity securities
that it expects to complete during the
first half of 1998. The Federal Reserve
Board has advised Bancorp that it
considers the retention by the Bank of
its shares of ICII stock to be in
violation of the Bank Holding Company Act
of 1956 (the "BHCA"). In addition, the
Federal Deposit Insurance Corporation
(the "FDIC") has advised the Bank that it
considers the retention of its shares of
ICII stock to be in violation of the
Federal Deposit Insurance Act. The boards
of Bancorp and the Bank believe that
contributing the stock of ICII to the
Company in connection with the
Transactions will satisfy these concerns
of the Federal Reserve Board and the FDIC
and allow Bancorp to continue to be in
compliance with the requirements of the
BHCA and the Bank to continue to be in
compliance with the Federal Deposit
Insurance Act, while the ICII stock
simultaneously will provide the Company
with additional financing flexibility to
expand its operations and operate as a
separate publicly traded company, without
any assistance from either Bancorp or the
Bank. Moreover, the Company intends to
expand the specialty lending and finance
businesses contributed to it by the Bank
by operating as a separate publicly
traded company that is not subject to the
same federal and state banking laws and
regulations applicable to Bancorp and the
Bank and their respective subsidiaries.
See "The Transactions--Background and
Reasons for the Distribution."

Shares to be Distributed........
Approximately 25,966,307 million shares
of Company Class A Common Stock (based on
25,966,307 million shares of Bancorp
Common Stock outstanding on September 30,
1997). The shares to be distributed will
constitute 100% of the outstanding shares
of Company Class A Common Stock. The
Company's Amended and Restated
Certificate of Incorporation also
authorizes preferred stock and Class B
Common Stock, par value $.01 per share
(the "Company Class B Common Stock"). The
Company Class B Common Stock may only be
issued pursuant to the terms of, or upon
the exercise of, outstanding options
granted under any of the Company's
employee benefit plans or as stock
dividends to holders of Company Class B
Common Stock. Holders of Company Class B
Common Stock are entitled to one-tenth of
one vote for each share on all matters
voted on by stockholders and will vote
together as a single class with the
holders of Company Class

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A Common Stock. The Company Class B
Common Stock is convertible into Company
Class A Common Stock under certain
circumstances. See "Description of
Capital Stock." No capital stock of the
Company other than the Company Class A
Common Stock will be outstanding on the
Distribution Date.

Distribution Ratio.............. One share of Company Class A Common Stock
for every share of Bancorp Common Stock
held on the Distribution Record Date. See
"The Transactions--Manner of Effecting
the Distribution."

Distribution Record Date........ Close of business on , 1998.

Distribution Date............... , 1998. On, or as soon as
practicable after, the Distribution Date,
the Distribution Agent will commence
mailing share certificates representing
the Company Class A Common Stock to
Bancorp shareholders. Bancorp
shareholders will not be required to make
any payment or to take any other action
to receive their Company Class A Common
Stock. See "The Transactions--Manner of
Effecting the Distribution."

Federal Income Tax Consequences
of the Distribution............ Bancorp has requested a ruling (the
"Ruling") from the Internal Revenue
Service ("IRS") to the effect, among
other things, that receipt of shares of
Company Class A Common Stock will be tax-
free for federal income tax purposes to
Bancorp and to the shareholders of
Bancorp, and that neither Bancorp nor the
Bank will recognize income, gain or loss
as a result of the Distribution. It is a
condition to completion of the
Distribution that Bancorp obtain the
Ruling. Bancorp shareholders are urged to
consult their own tax advisors as to the
specific tax consequences to them of the
Distribution. See "Certain Federal Income
Tax Considerations."

Financing of IFG Business....... Prior to the Distribution, the Company's
lending activities were financed by the
Bank. In connection with the
Distribution, the Company will enter into
credit facilities with a syndicate of
lenders not affiliated with the Bank (the
"Credit Facilities") that will finance
The Lewis Horwitz Organization's lending
activities after the Distribution Date
and initially finance CAB's small
business lending activities. Following
the initial financing arrangements, the
Company expects that CAB's primary source
of funding for its lending activities
will be through deposits. The Company
expects that the Credit Facilities will
be composed of revolving credit
facilities in the aggregate amount of
$170 million, including a letter of
credit sub-facility in the amount of $40
million. See "Risk Factors" and "Credit
Facilities."

Dividend Policy................. It is currently contemplated that the
Company will not pay cash dividends on
Company Class A Common Stock for the
immediately foreseeable future following
the Distribution. The declaration of
dividends by the Company will be at the
discretion of the Company Board and will
depend upon the

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Company's future earnings, financial
condition, capital requirements and other
factors, including any limitations under
then existing credit agreements. See
"Dividend Policy."

Anti-takeover Provisions........ The Company's Amended and Restated
Certificate of Incorporation, Amended and
Restated Bylaws and the Delaware General
Corporation Law (the "DGCL") contain
provisions which may have the effect of
discouraging unsolicited takeover bids
from third parties. See "Purposes and
Effects of Certain Provisions of the
Company's Certificate of Incorporation,
Bylaws and Delaware Law."

Relationship among the Company,
the Bank and Bancorp after the
Distribution................... The Company, the Bank and Bancorp and
certain of the Company's subsidiaries
will enter into agreements to effect the
Contribution and the Distribution and to
define their ongoing relationship after
the Distribution Date. These agreements
will include a capital contribution and
distribution agreement providing for the
transfer of designated assets to, and the
assumption of designated liabilities by,
the Company and certain of its
subsidiaries and providing for the
payment of the Distribution by Bancorp
(the "Contribution Agreement") and an
interim services agreement relating to
human resources support and internal
audit and loan review to be provided by
the Bank to the Company. In addition,
certain directors and officers of Bancorp
serve as directors and/or officers of the
Company. See "Management." Other than the
agreements described above and
overlapping directors and officers, it is
expected that Bancorp and the Bank, on
the one hand, and the Company, on the
other, will cease to have any material
contractual or other material
relationships with each other, other than
on an arm's-length basis. See
"Relationship and Agreements Among the
Company, the Bank and Bancorp After the
Distribution."

Trading Market and Symbol for
the Common Stock............... Currently, there is no public trading
market for the Company Class A Common
Stock, although a "when-issued" trading
market (as described herein) is expected
to develop prior to the Distribution
Date. Application will be made to list
the Company Class A Common Stock on the
New York Stock Exchange (the "NYSE")
under the symbol "IFG." See "Listing and
Trading of the Common Stock."

Bancorp Common Stock will continue to be
listed and traded on the NYSE after the
Distribution Date.

Distribution Agent.............. American Stock Transfer and Trust Co. The
address and telephone number of the
Distribution Agent are 40 Wall Street,
New York, New York 10005, (800) 937-5449.

Conditions to the Distribution.. The Distribution is conditioned upon,
among other things, (i) Bancorp obtaining
the Ruling, (ii) the Company Class A

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Common Stock having been approved for
listing on the NYSE subject to official
notice of issuance, (iii) the Company's
Registration Statement on Form 10, of
which this Information Statement is a
part (the "Registration Statement"),
having been declared effective by the
Securities and Exchange Commission (the
"Commission"), (iv) receipt of regulatory
consents and approvals from various state
and federal banking and trust authorities
and (v) the Credit Facilities being in
place and all conditions to borrowing
thereunder having been satisfied or
waived. Any condition to the Distribution
may be waived, at any time prior to the
Distribution Date, for any reason, in the
sole discretion of the Bancorp Board of
Directors (the "Bancorp Board"). Even if
all conditions are satisfied, the Bancorp
Board has reserved the right to abandon,
defer or modify the Distribution and the
related transactions described herein at
any time prior to the Distribution Date.
See "Introduction" and "Distribution
Conditions and Termination."

Risk Factors.................... Bancorp shareholders should carefully
consider the matters discussed under
"Risk Factors" in this Information
Statement.

FORWARD-LOOKING STATEMENTS

Certain statements in this Information Statement, including those under the
captions "Summary of Certain Information," "The Transactions," "Business" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," constitute "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors
that may cause the actual results, performance or achievements of the Company
to be materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. When used in this
Information Statement, the words "estimate", "project," "intend," "expect,"
"anticipate," and similar expressions are intended to identify forward-looking
statements. These forward-looking statements are based on various factors, many
of which are beyond the Company's control, and were derived utilizing numerous
assumptions and other important factors that could cause actual results to
differ materially from those in the forward-looking statements including, but
not limited to, the following: matters described herein under "Risk Factors";
uncertainty as to the Company's future profitability after the Distribution;
the effectiveness of the Company's growth strategy; competition in the
Company's existing and potential future lines of business; and the accuracy of
the Company's estimates of its funding requirements for the performance of
certain lending activities. Other factors and assumptions not identified above
were also involved in the derivation of these forward-looking statements, and
the failure of such other assumptions to be realized as well as other factors
may also cause actual results to differ materially from those projected. The
Company assumes no obligation to update these forward-looking statements to
reflect actual results, changes in assumptions or changes in other factors
affecting such forward-looking statements.

6
<PAGE>

SUMMARY HISTORICAL COMBINED FINANCIAL DATA

The combined summary income statement data for the years ended December 31,
1994, 1995 and 1996 and the combined summary balance sheet data as of December
31, 1995 and 1996 have been derived from the Company's audited combined
financial statements and notes thereto included elsewhere in the Information
Statement. The combined summary income statement data for the nine months ended
September 30, 1996 and 1997 and the years ended December 31, 1992 and 1993 and
the combined summary balance sheet data at September 30, 1997 and December 31,
1992, 1993 and 1994 have been derived from the unaudited combined financial
statements of the Company not included herein, and include all adjustments,
consisting solely of normal recurring accruals, which management considers
necessary for a fair presentation of such financial information for those
periods. Results for the nine months ended September 30, 1996 and 1997 are not
necessarily indicative of results for a full year. Historical combined
financial information may not be indicative of the Company's future performance
as an independent company. See also "Selected Combined Financial Data,"
"Summary Unaudited Pro Forma Combined Financial Data," "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and "Business."

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------------ ---------------------
1992 1993 1994 1995 1996 1996 1997
---------- ---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net interest income
after provision for
loan losses........... $ 16,537 $ 2,682 $ 4,103 $ 4,100 $ 7,033 $ 4,811 $ 7,107
Equity in net income
of Imperial Credit
Industries, Inc.
("ICII").............. -- 7,898 2,388 5,652 21,444 16,555 8,362
Gain on sale of ICII
stock ................ 5,033 14,538 -- -- 25,650 25,650 2,429
Gain from sale of
stock by ICII......... -- -- -- -- 10,761 10,761 --
Other income........... 38,087 6,549 9,011 10,875 16,263 13,074 13,645
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total revenue........ 59,657 31,667 15,502 20,627 81,151 70,851 31,543
---------- ---------- ---------- ---------- ---------- ---------- ----------
Personnel expense...... 18,734 3,388 4,338 4,827 6,153 4,519 7,003
Other expenses......... 15,415 4,357 4,515 5,568 10,680 8,961 14,981
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total expenses....... 34,149 7,745 8,853 10,395 16,833 13,480 21,984
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income
taxes and
extraordinary item.. 25,508 23,922 6,649 10,232 64,318 57,371 9,559
Income taxes........... 17,760 10,129 2,821 4,313 25,674 22,766 3,141
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before
extraordinary item.. 7,748 13,793 3,828 5,919 38,644 34,605 6,418
Extraordinary item--
gain on
extinguishment of
ICII debt, net of
taxes................. -- -- 370 -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income........... $ 7,748 $ 13,793 $ 4,198 $ 5,919 $ 38,644 $ 34,605 $ 6,418
========== ========== ========== ========== ========== ========== ==========
Earnings per share(1)
.................... $ 0.33 $ 0.59 $ 0.17 $ 0.24 $ 1.48 $ 1.34 $ 0.24
Weighted average
number of shares
outstanding(1) ....... 23,304,714 23,431,464 24,200,733 25,168,985 26,116,767 25,908,277 26,826,935
</TABLE>

7
<PAGE>

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------- -------------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- ------- -------- ---------
(IN THOUSANDS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING AND FINANCIAL
DATA:
Loans originated:
LHO.................. $41,527 $40,206 $25,857 $70,224 $55,951 $39,239 $ 79,313
SBA.................. -- 11,164 21,204 21,533 38,792 28,830 39,028
------- ------- ------- ------- ------- -------- ---------
Total.............. $41,527 $51,370 $47,061 $91,757 $94,743 $68,069 $118,341
======= ======= ======= ======= ======= ======== =========
Trust assets under
administration (in
millions)............. $ 5,911 $ 6,617 $ 5,704 $ 6,781 $ 7,532 $ 7,237 $ 8,784
SELECTED RATIOS(2):
Average equity to
average assets........ 7.43% 16.56% 70.74% 63.37% 56.02% 52.19% 57.07%
Return on average
common equity......... 19.70% 30.00% 8.02% 10.32% 49.51% 60.93% 8.28%
Return on average
assets................ 1.46% 4.97% 5.67% 6.54% 27.74% 31.80% 4.73%
ASSET QUALITY RATIOS (AT
END OF PERIOD):
Non-performing assets
as a percentage of
total assets.......... 1.27% 4.30% 3.27% 2.96% 3.32% 3.81% 1.21%
Allowance for loan
losses as a
percentage of non-
performing loans...... 64.74% 37.48% 47.79% 56.89% 53.42% 47.33% 234.65%
Net charge-offs as a
percentage of average
total loans held for
investment............ (3) 0.62% 0.26% 1.21% 0.87% 0.58% 0.59%
</TABLE>
- --------

(1) Share amounts are based on a distribution ratio of one share of Company
Class A Common Stock for each share of outstanding Bancorp Common Stock.

(2) Annualized for the nine months ended September 30, 1996 and 1997.

(3) Information not available.

8
<PAGE>

SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL DATA

The summary unaudited pro forma combined income statement data reflect the
Transactions as if they occurred at the beginning of each of the periods
presented. The summary unaudited pro forma balance sheet data reflect the
Transactions as if they occurred at December 31, 1995 and 1996 and at September
30, 1997. The summary unaudited pro forma combined financial data reflect the
expected capitalization of the Company as a result of the Distribution, the
incurrence by the Company of approximately $113 million of indebtedness under
the Credit Facilities (which is identified below as "Line of credit"), an
assumed interest expense relating to such borrowings, amortization of
capitalized costs incurred in connection with the Credit Facilities and
retention of certain assets and liabilities by Bancorp. This pro forma
information does not necessarily reflect the results of operation or financial
position of the Company which would have been achieved had the Transactions
actually been consummated as of such dates. Also, this pro forma information is
not indicative of the future results of operations or future financial position
of the Company. See "Capitalization" and "Unaudited Pro Forma Combined
Financial Data."
<TABLE>
<CAPTION>
NINE
MONTHS
YEARS ENDED DECEMBER 31, ENDED
-------------------------------- SEPTEMBER
1994 1995 1996 30, 1997
---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net interest income after
provision for loan losses....... $ 3,673 $ 4,019 $ 6,667 $ 4,721
Equity in net income of ICII..... 2,388 5,652 21,444 8,362
Gain on sale of ICII stock....... -- -- 25,650 2,429
Gain from sale of stock by ICII.. -- -- 10,761 --
Other income..................... 9,011 10,875 16,263 13,645
---------- ---------- ---------- ----------
Total revenue.................. 15,072 20,546 80,785 29,157
---------- ---------- ---------- ----------
Personnel expense................ 4,338 4,827 6,153 7,003
Other expenses................... 4,515 5,568 10,680 14,981
---------- ---------- ---------- ----------
Total expenses................. 8,853 10,395 16,833 21,984
---------- ---------- ---------- ----------
Income before income taxes..... 6,219 10,151 63,952 7,173
Income taxes..................... 2,641 4,279 25,518 2,139
---------- ---------- ---------- ----------
Income before extraordinary item. 3,578 5,872 38,434 5,034
Extraordinary item, net of taxes. 370 -- -- --
---------- ---------- ---------- ----------
Net income..................... $ 3,948 $ 5,872 $ 38,434 $ 5,034
========== ========== ========== ==========
Weighted average number of shares
outstanding(1).................. 24,200,733 25,168,985 26,116,767 26,826,935
</TABLE>

<TABLE>
<CAPTION>
AT AT AT
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1995 1996 1997
------------ ------------ -------------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............ $ 2,272 $ 5,245 $ 2,522
Securities available for sale, at
fair value.......................... 1,437 1,179 6,987
Loans held for sale.................. 2,648 5,531 4,855
Loans held for investment, net....... 64,803 63,304 116,847
Investment in stock of ICII ......... 36,126 57,736 64,192
Other assets......................... 6,024 11,457 7,670
-------- -------- --------
Total assets....................... $113,310 $144,452 $203,073
======== ======== ========
Line of credit ...................... $ 56,419 $ 43,622 $112,898
Income taxes payable................. 12,507 39,728 25,023
Other liabilities.................... 4,056 10,550 11,241
-------- -------- --------
Total liabilities.................... 72,982 93,900 149,162
Stockholder's equity............... 40,328 50,552 53,911
-------- -------- --------
Total liabilities and stockholder's
equity............................ $113,310 $144,452 $203,073
======== ======== ========
</TABLE>
- --------

(1) Share amounts are based on a distribution ratio of one share of Company
Class A Common Stock for each share of outstanding Bancorp Common Stock.

9
<PAGE>

INTRODUCTION

On February 20, 1997, the Bancorp Board approved a plan to spin off to its
shareholders in a tax-free distribution a portion of its specialty lending and
finance businesses that focuses on the entertainment industry, loans to small
businesses (a majority of which are guaranteed in part by the SBA), and trust
services. On March 13, 1997, the Company was incorporated in Delaware to own
and operate these businesses.

These businesses will be contributed to the Company on or prior to the
Distribution Date. The Bank will contribute to CAB all of the assets relating
to the Bank's small business lending division and CAB will assume all of the
liabilities relating thereto. After the contribution of such assets to, and
the assumption of such liabilities by, CAB, the Bank will contribute to the
Company (i) all of the assets relating to LHO, a division of the Bank that
provides motion picture and television production financing, and the Company
will assume all of the liabilities relating thereto, (ii) all of the common
stock of CAB, (iii) all of the common stock of ITC, a California licensed
trust company that offers a wide range of trust and investment management
services, and (iv) all of the common stock owned by the Bank (which, as of
September 30, 1997, was 9,094,842 shares, which represented approximately
23.5% of all outstanding common stock as of such date) in ICII, a publicly
traded, diversified specialty finance company. The foregoing businesses are
collectively referred to herein as the "IFG Business" and the asset
contributions and related assumptions of liabilities are collectively referred
to herein as the "Contribution."

Bancorp has requested rulings from the IRS to the effect, among other
things, that receipt of shares of Company Class A Common Stock will be tax
free for federal income tax purposes to Bancorp and the shareholders of
Bancorp and that neither Bancorp nor the Bank will recognize income, gain or
loss as a result of the Distribution (the "Ruling"). The Distribution is
subject to, among other things, (i) the receipt of the Ruling, (ii) the
Company Class A Common Stock being approved for listing on the NYSE subject to
official notice of issuance, (iii) the Registration Statement having been
declared effective by the Commission, (iv) receipt of regulatory consents and
approvals from various state and federal banking and trust authorities and (v)
the Credit Facilities being in place and all conditions to borrowing
thereunder having been satisfied or waived. Any condition to the Distribution
may be waived, at any time prior to the Distribution Date, for any reason, in
the sole discretion of the Bancorp Board. However, even if all the conditions
to the Distribution are satisfied, the Bancorp Board has reserved the right to
abandon, defer or modify the Contribution and the Distribution at any time
prior to the Distribution Date. See "Distribution Conditions and Termination."
References to the "Company" herein for time periods prior to the Distribution
mean the IFG Business as conducted by the Bank and, for time periods following
the Distribution, mean the Company as capitalized pursuant to the
Contribution.

The Distribution will be effected by a dividend of all of the outstanding
shares of Company Class A Common Stock to holders of record of Bancorp Common
Stock on the Distribution Record Date. The Distribution will occur on
, 1998.

NO ACTION IS REQUIRED BY BANCORP SHAREHOLDERS IN ORDER TO RECEIVE COMPANY
CLASS A COMMON STOCK TO WHICH THEY WILL BE ENTITLED IN THE DISTRIBUTION UPON
PAYMENT OF THE DIVIDEND.

Shareholders of Bancorp with inquiries related to the Distribution should
contact American Stock Transfer and Trust Co., the Distribution Agent for the
Distribution. After the Distribution Date, stockholders of the Company with
inquiries related to the Distribution or their investment should contact the
Company's Investor Relations Department.

This Information Statement is being furnished by Bancorp solely to provide
information to holders of Bancorp Common Stock in connection with the
Contribution and the Distribution and, subject to the satisfaction of the
conditions to the Distribution, the receipt of Company Class A Common Stock
pursuant to the Distribution. This Information Statement is not, and should
not be construed as, an inducement or encouragement to buy or sell any
securities of Bancorp or the Company. The information contained in this
Information Statement is believed by Bancorp and the Company to be accurate as
of the date set forth on its front cover. Changes may occur after that date,
and neither Bancorp nor the Company will update the information except that,
after the Distribution, the Company will be subject to the information
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith will file quarterly, annual and certain
other periodic reports that will contain updated information.

10
<PAGE>

THE TRANSACTIONS

BACKGROUND AND REASONS FOR THE DISTRIBUTION

The Bancorp Board has determined, subject to satisfaction of certain
conditions, that it is in the best interests of Bancorp and its shareholders,
for the reasons set forth below, to distribute to Bancorp shareholders in the
Distribution the IFG Business as a separate publicly traded company to be
known as Imperial Financial Group, Inc.

Bancorp's management and the Bancorp Board have regularly looked for ways in
which to improve Bancorp's operations and thereby provide value to Bancorp's
shareholders. Beginning in the fourth quarter of 1996, as part of its regular
review process, Bancorp's management re-examined various strategies for
enhancing Bancorp's value through both internal operating initiatives and
restructuring strategies. On January 23, 1997, the Bank retained NationsBanc
Montgomery Securities, Inc. ("NationsBanc Montgomery") as its financial
advisor for the purpose of advising Bancorp and the Bank concerning the
possible sale of common stock in a registered public offering of a newly
formed company that would hold the IFG Business and/or the possible
distribution of all of the capital stock of such entity to the shareholders of
Bancorp. On February 20, 1997, NationsBanc Montgomery presented its analysis
of the benefits of such a distribution to the Bancorp Board. The Bancorp Board
unanimously determined, after review and discussions, that the Contribution
and the Distribution provided an excellent opportunity to enhance shareholder
value. The boards of directors of Bancorp and the Bank determined not to
engage in an initial public offering of the Company's capital stock because,
among other things, the boards did not believe that adequate value would be
received in a public offering and also believed that the contribution of all
of the common stock of ICII to the Company would address the concerns of
regulators and provide the Company with operating benefits, each of which is
described below.

The boards of directors of Bancorp and the Bank selected the businesses of
LHO, CAB and ITC to be contributed to the Company because (i) each business
has been operating with a separate management structure as a stand-alone
operation and with an entrepreneurial management philosophy, (ii) each
business has demonstrated high return on equity in recent years and (iii) none
of the three businesses requires demand banking deposits for its funding. In
addition, the boards of Bancorp and the Bank believe the businesses of LHO,
CAB and ITC, as well as the business of ICII, complement each other and that
many cross-referral opportunities exist between such businesses, including
with respect to lending and private banking products offered to the clients of
LHO, CAB and ITC.

The boards of directors of Bancorp and the Bank believe that the
Transactions will provide the Company with increased access to capital
markets, which should allow the Company to expand its businesses. One business
the Company is considering engaging in is the broker/dealer business, although
the Company has not determined whether it would seek to establish its own
broker/dealer or seek to acquire an existing broker/dealer. The Company
intends to initially raise capital to promote this expansion by conducting a
public or private offering of its equity securities that it expects to
complete during the first half of 1998. There can be no assurance if this
offering will be consummated, and if the offering is consummated, there can be
no assurance in what manner the Company will attempt to expand its business
with the proceeds therefrom.

The boards of Bancorp and the Bank believe that the ICII stock will provide
the Company with additional financing flexibility to expand its operations and
operate as a separate publicly traded company, without any assistance from
either Bancorp or the Bank, while the disposition of the ICII stock by Bancorp
will satisfy the concerns of the Federal Reserve Board and allow Bancorp to
continue to be in compliance with certain regulatory requirements described
below. Moreover, the Company will be able to expand the specialty lending and
finance businesses contributed to it by the Bank by operating as a separate
publicly traded company that is not subject to the same federal and state
banking laws and regulations applicable to Bancorp and the Bank. See
"Business--Regulatory Matters." The separation of the businesses will also
allow each of Bancorp and the Company to provide its employees with incentive
compensation linked solely to the financial performance of his or her
employer.

11
<PAGE>

As the holder of all of the issued and outstanding shares of capital stock
of the Bank, Bancorp is subject to the BHCA and Regulation Y promulgated
thereunder ("Regulation Y"). The BHCA and Regulation Y provide that a bank
holding company may not acquire or retain direct or indirect ownership or
control of any company which is not a bank or bank holding company or which
engages in any nonbanking activities except such activities as are determined
by order or regulation by the Federal Reserve Board to be so closely related
to banking or managing or controlling banks as to be a proper incident thereto
(a "closely related activity"). Certain activities which have been determined
by the Federal Reserve Board to be closely related activities are set forth in
Regulation Y. To the extent a bank holding company wishes to engage de novo in
a nonbanking activity or to acquire an entity engaged in such activity,
Regulation Y provides for prior notice to and/or approval by the Federal
Reserve Board for the conduct of such activity.

The Federal Reserve Board has advised Bancorp that it considers the
retention by the Bank of its shares of ICII stock to be in violation of the
BHCA. This position is apparently a consequence of the Federal Reserve Board's
view that ICII is engaged in activities which are not determined by regulation
to be a closely related activity and that Bancorp did not file or obtain a
notice or approval to engage in such activities in accordance with Regulation
Y. The Bank believes that the BHCA should not be interpreted to limit the
investment activities of a California-chartered non-member bank which is
subject to the regulation of the Federal Deposit Insurance Corporation
("FDIC") and not the Federal Reserve Board. However, the provisions of the
BHCA are clearly applicable to direct investments by Bancorp and accordingly
the Federal Reserve Board is likely to take the position that the retention of
such shares by Bancorp violates the BHCA absent prior approval by the Federal
Reserve Board. Bancorp believes that such approval, if sought, would not be
granted.

The FDIC does not regulate the activities of bank holding companies, and
accordingly has not taken a position on Bancorp's indirect ownership of the
shares of ICII currently held by the Bank. However, the FDIC has expressed the
view that the retention of ICII shares by the Bank is not permitted by Section
24 of the Federal Deposit Insurance Act (the "FDIA"). Section 24 of the FDIA
limits the investments of state-chartered banks, such as the Bank, to
investments which are permitted investments for national banks or are
otherwise permitted under Section 24. See "Business--Regulatory Matters." On
June 10, 1996, the Bank filed an application for approval of retention of its
ownership of ICII stock. The Bank has submitted additional information to the
FDIC in response to FDIC requests. Subsequently, the FDIC requested that the
Bank submit a divestiture plan with respect to its investment in ICII. In
response to this request, the Bank has advised the FDIC of its intention to
effect the Contribution and Distribution. No action has been taken by the FDIC
on the application in contemplation of consummation of the Contribution and
Distribution.

Due to the perceived existence of significant issues as to whether approval
by the Federal Reserve Board of an application to retain Bancorp's ownership
in ICII or approval of the FDIC of the application to retain the Bank's
ownership in ICII would be forthcoming, and for the additional business
reasons discussed above, the Bancorp Board has determined not to seek Federal
Reserve Board approval at this time of its ownership of ICII stock, but rather
to address these regulatory concerns through the Contribution and
Distribution. The boards of directors of Bancorp and the Bank also considered
selling the ICII stock to address these concerns but believed (i) the block of
ICII stock held by the Bank represents a "control block" which should have
value in excess of the market value of the stock, (ii) the value of ICII stock
would increase in the near future from current levels, (iii) the costs of
selling the ICII stock would include an underwriting fee and the proceeds of
the sale would be subject to an immediate and significant cash tax payment,
(iv) the sale of such a large block of ICII stock would likely depress the
market value of such stock, further decreasing the proceeds to be realized by
the Company from the sale, (v) the ICII stock would provide the Company with
financing flexibility as described above and herein under "Credit Facilities"
and (vi) the ICII stock would benefit the Company's earnings. See "Risk
Factors--Negative Impact on Earnings Should Ownership Level of ICII Stock be
Reduced; Substantial Dependence on ICII-Related Revenue."

12
<PAGE>

MANNER OF EFFECTING THE DISTRIBUTION

Following completion of the Contribution and subject to the satisfaction of
the conditions to the Distribution, the Board of Directors of the Bank will
declare a dividend on its common stock payable in Company Class A Common Stock
to its sole shareholder, Bancorp. Immediately thereafter, the Bancorp Board
will formally authorize the Distribution by declaring a dividend on the
Bancorp Common Stock payable in Company Class A Common Stock to holders of
record of Bancorp Common Stock on the Distribution Record Date. Only
shareholders of record as of the Distribution Record Date will receive the
Company Class A Common Stock in the Distribution. No cash will be paid to
Bancorp in connection with the Transactions.

Bancorp will effect the Distribution by delivering share certificates for
Company Class A Common Stock to the Distribution Agent, for delivery to the
holders of Bancorp Common Stock at the close of business on the Distribution
Record Date, without further action by such holders. It is expected that the
Distribution Agent will begin mailing share certificates representing Company
Class A Common Stock as soon as practicable after the Distribution Date. The
Distribution will be deemed effective upon notification by Bancorp to the
Distribution Agent that the Distribution has been declared and that the
Distribution Agent is authorized to proceed with the distribution of Company
Class A Common Stock. All shares of Company Class A Common Stock to be
distributed in the Distribution will be fully paid and nonassessable. See
"Description of Capital Stock."

No holder of Bancorp Common Stock on the Distribution Record Date will be
required to pay any cash or other consideration for the shares of Company
Class A Common Stock to be received in the Distribution or to surrender or
exchange shares of Bancorp Common Stock or take any other action in order to
receive shares of Company Class A Common Stock.

13
<PAGE>

RISK FACTORS

Readers should be aware of the following risk factors to which the Company
has been subject in the past, is currently and may in the future be subject,
and which could materially adversely affect the performance of the Company.

LACK OF OPERATING HISTORY AS AN INDEPENDENT COMPANY

The Company does not have an operating history as an independent public
company. The historical combined and pro forma combined financial information
included herein may not necessarily reflect the results of operations,
financial condition and cash flows of the Company in the future or what the
results of operations, financial condition and cash flows would have been had
the Company been a separate, stand-alone entity during the periods presented.
There can be no assurance that the Company can be operated profitably as a
stand-alone enterprise. See "Unaudited Pro Forma Combined Financial Data,"
including the discussion of the assumptions reflected therein, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

NEGATIVE IMPACT ON EARNINGS SHOULD OWNERSHIP LEVEL OF ICII STOCK BE REDUCED;
SUBSTANTIAL DEPENDENCE ON ICII-RELATED REVENUE

As of September 30, 1997, the Company owned 9,094,842 shares of common stock
of ICII, which represented approximately 23.5% of the outstanding shares as of
such date. The Company intends to sell an additional 153,736 shares in the
fourth quarter of 1997, which would reduce the Company's ownership to
approximately 23.1% of the outstanding shares as of September 30, 1997, in
satisfaction of the Company's obligation relating to a consulting agreement
with an executive of the Bank. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations." The Company accounts for its
investment in ICII in the Company's combined financial statements as an equity
investment. This accounting treatment has allowed the Company to include in
its net income a portion of the net income generated by ICII based upon the
Company's percentage ownership of ICII stock.

If the Company's ownership of ICII common stock is reduced to less than 20%,
the Company may no longer be able to account for its ownership of ICII common
stock as an equity investment. If the Company had not been able to account for
its ownership in ICII common stock as an equity investment, the Company's net
income for the nine months ended September 30, 1997 and for the year ended
December 31, 1996 would have been reduced by approximately 76% and 32%,
respectively. Although the Company intends to continue to own in excess of 20%
of the common stock of ICII, there can be no assurance that the Company's
ownership will not be diluted by future stock issuances by ICII (including
stock issued upon exercise of outstanding stock options), or that the Company
will not be required, due to presently unforeseen circumstances, to sell
shares of ICII common stock to raise capital.

In addition to the ownership of ICII stock accounting for a significant
portion of the Company's net income, the Company's level of revenues has been
substantially dependent upon the Company's net equity in gains recognized by
ICII on sales of subsidiary stock and upon gains from sale of ICII stock held
by the Company. ICII-related revenues constituted 15.4%, 27.4%, 75.9% and
43.1%, respectively, of the Company's total revenues for the years ended
December 31, 1994, 1995 and 1996 and the nine months ended September 30, 1997.
Although the Company is a significant stockholder of ICII and certain members
of the Company Board serve on ICII's board of directors as described herein in
"Business--Imperial Credit Industries, Inc." and as such are in a position to
significantly influence the management and policies of ICII, the Company
cannot predict the terms or nature of future transactions by ICII that may
generate revenues or expenses reflected in part in the Company's financial
statements. In addition, it is unlikely that the Company will sell a
significant amount of its ICII shares for the reasons noted above. ICII-
related revenues recognized by the Company have been highly variable and may
remain variable in the future.

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INVESTMENT COMPANY ACT

The Company believes that it is not an investment company as defined in the
Investment Company Act of 1940, as amended (the "Investment Company Act"). The
Investment Company Act and the rules and regulations thereunder require the
registration of, and impose various substantive restrictions on, companies
that engage primarily in the business of investing, reinvesting or trading in
securities or engage in the business of investing, reinvesting, owning,
holding or trading in securities and own or propose to acquire investment
securities having a value in excess of 40% of a company's total assets. After
the Distribution, the Company intends to continue its financial services
businesses and conduct its operations so as not to become regulated under the
Investment Company Act. If the Commission or its staff were to take the
position that the Company was an investment company, the Company could be
subject to a number of substantive restrictions on its operations, capital
structure and management. In addition, registration under the Investment
Company Act by the Company would constitute a violation of the Credit
Facilities. See "Credit Facilities."

LIMITED AVAILABILITY OF FUNDING SOURCES; NEGATIVE IMPACT SHOULD VALUE OF ICII
STOCK DECLINE

Prior to the Distribution, the Bank financed the Company's loan origination
activities. The Company has a continuing need for capital to finance its
lending activities. In connection with the Distribution, the Company will
enter into the Credit Facilities with a syndicate of banks not affiliated with
the Bank in order to finance a portion of its lending activities. See "Credit
Facilities." The Company intends to secure a portion of these borrowings with
all of the common stock of ICII owned by the Company. If the value of the ICII
stock were to be reduced, or if the Company were to dispose of ICII stock, the
amount of available funds to the Company under the Credit Facilities also
would be reduced. If the Company's available funds under the Credit Facilities
were reduced or its borrowing needs increase, there can be no assurance that
such financing will be obtainable on favorable terms. To the extent that the
Company is unable to arrange new lines of credit, the Company may have to
curtail its loan origination activities, which could have a material adverse
effect on the Company's operations and financial position. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources."

DEPENDENCE ON KEY PERSONNEL

The success of the Company's business is highly dependent upon the members
of the senior management of the Company. The loss of the services of one or
more of them could have a material adverse effect upon the Company's business
and development. In addition, the Company conducts its business through
subsidiaries and divisions operated by individual management teams. In each
subsidiary and division, there are key personnel, the loss of whom may have an
adverse effect on that subsidiary or division including, with respect to the
Company's LHO division, Lewis P. Horwitz, the President and Chief Executive
Officer of LHO. Although the Company has established incentive compensation
plans and entered into employment agreements to retain certain key personnel,
including Mr. Horwitz, no assurances can be made that key personnel will not
depart, or that their departure would not have adverse consequences to the
operations of the Company or any of its subsidiaries and divisions. See
"Executive Compensation--Employment Agreements."

COMPETITION AND CONFLICTS OF INTEREST BETWEEN THE COMPANY AND THE BANK

The Company's competitors include banks and other financial institutions,
many of which are substantially larger and have significantly greater
resources than the Company. A significant competitor of the Company's LHO
division is the Bank's Entertainment Industries Group. No agreement between
the Company and the Bank will exist that restricts the activities of the
Bank's Entertainment Industries Group and the Company following the
Distribution. In addition, the Bank and the Company will not be prohibited
from using confidential information of the other party for its own internal
purposes that may have been obtained prior to the Distribution. Moreover,
there recently has been a significant increase in the number of competitors
providing financing for film and television production. There can be no
assurance that the Company will be able to compete successfully with such
other companies.

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The small business lending and trust services businesses are also highly
competitive and CAB and ITC compete with a variety of banks and non-bank
lending institutions, many of which are larger than the Company and have
greater financial and other resources, and, with respect to CAB, many of which
also participate in SBA sponsored programs. These other banks maintain larger
marketing and sales staff and use a wide variety of marketing strategies, some
of which may be too expensive for the Company to conduct. See "Business."

RISKS PARTICULAR TO COMPANY'S LOAN PORTFOLIO

The Company's lending business is subject to various risks, including, but
not limited to, the risk that borrowers will not satisfy their debt service
obligations, the risk that the value of the collateral securing a liquidated
loan is less than the principal amount of such loan and the risk of the
narrowing of the interest rate spread between the Company's yield on its loans
and the cost of the Company's borrowings. In addition, significant changes in
interest rates could accelerate the rate of loan repayments from existing
borrowers. All or any one of the foregoing lending risks could have a material
adverse effect on the Company's results of operations and financial position.

As of September 30, 1997, approximately $6.6 million in aggregate principal
amount of loans in the Company's portfolio were 30 days or more delinquent,
including $1.7 million of which were no longer accruing interest.
Additionally, as of September 30, 1997, the Company was in the process of
liquidating other assets with a net book value of approximately $1 million
which previously constituted collateral for certain of the Company's loans.
Any increase in delinquent loans could result in an increase in the Company's
provision for loan losses or a reduction of the Company's interest income,
each of which could have a material adverse effect on the Company's results of
operations and financial position. See "Business" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations."

LHO Lending. The LHO business is dependent on the production of independent
films and television shows and series. If the number of productions were to
decline in the future, the need for financing would decrease as well. Any such
decline in these industries could have a material adverse effect on the
Company's results of operations. In addition, borrowers are generally single-
purpose corporations whose sole function is to produce a motion picture or
television film and, accordingly, have no meaningful financial assets prior to
distribution of the production. In addition, as described herein under
"Business--LHO," these loans are secured principally by the revenues to be
received from the worldwide distribution of the production. The distributors
are in many instances privately held small businesses that do not provide the
Company with financial information and have limited assets. If the
distributors fail to make the minimum guaranteed payment, the borrower could
attempt to license the distribution rights to another distributor but there
can be no assurance as to whether a new distributor would be engaged or if
such new distributor would be able to make the minimum guaranteed payment. As
a result, this could adversely affect the Company's ability to proceed against
the collateral if the borrower fails to repay the loan. In addition, the LHO
business is subject to risks relating to potential economic and political
instability in certain foreign countries where such distributors have agreed
to license production rights. An occurrence of an event such as war or
currency devaluation in such a country could cause such distributors to
default on their agreements to provide distribution revenue, which is LHO's
primary source of collateral securing repayment. This could have a material
adverse effect on the Company's results of operations and financial condition.

In addition, a substantial percentage of the Company's financings made in
1997 and 1996 through LHO have been "gap" financings (for a description of gap
financing, see "Business--LHO--Loan Types"), which are riskier than
traditional entertainment lending because certain rights available for
distribution not sold at time of funding may not be sold thereafter. As a
result, the aggregate principal amount of such loans may exceed the value of
the collateral at time of funding. Prior to 1995, the LHO division of the
Company did not provide "gap" financing and, as a result, many of the loans in
the Company's loan portfolio have not been outstanding for a sufficient period
of time to determine whether there are material adverse credit, delinquency,
loss, prepayment or other issues associated with "gap" loans.

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CAB Lending. The Company's small business lending segment commenced
operations within the Bank in 1993. As a result, many of the loans in the
Company's small business loan portfolio have not been outstanding for a
sufficient period of time to determine whether there are material adverse
credit, delinquency, loss, prepayment or other issues associated with these
loans. There can be no assurance that the delinquency, prepayment and loss
experience of these loans will be consistent with management's assumptions and
estimates. Any material change in delinquencies, prepayments and losses from
management's assumptions and estimates may adversely affect the Company's
financial condition and results of operations. See "Business--CAB."

Moreover, with respect to loans guaranteed by the SBA, if the SBA
establishes that any loss resulting from a borrower default is attributable to
significant technical deficiencies in the manner in which the loan was
originated, documented or funded by the Company, the SBA may refuse to make
payment on its guarantee or may seek recovery from the Company of any funds
advanced by the SBA. CAB could also be subject to risk if a particular
industry in which it has developed a concentration of loans were to suffer an
economic downturn. As of September 30, 1997, approximately 27% of the
Company's small business loan portfolio consisted of loans made to owners of
motels. If the motel industry were to suffer an economic downturn, the
Company's financing to this industry likely would similarly decline.

ASSETS SUBJECT TO PREPAYMENT RISK

At September 30, 1997, the Company's combined balance sheet reflected
approximately $4.4 million in interest only strips and servicing assets
subject to prepayment risk. Realization of these assets in cash is subject to
the prepayment and loss characteristics of the underlying loans and to the
timing and ultimate realization of the stream of cash flows associated
therewith. The Company estimates future cash flows from these assets and
values them utilizing assumptions that it believes are consistent with those
that would be utilized by an unaffiliated third party purchaser. If actual
experience differs from the assumptions used in the determination of asset
value, future cash flows and earnings could be negatively impacted and the
Company could be required to write down the value of the assets. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."

DEPENDENCE OF SMALL BUSINESS LENDING OPERATIONS ON SBA PROGRAMS

Approximately 99% of the SBA loan origination and servicing activity engaged
in by the Company through CAB is in connection with the SBA Section 7(a)
program. See "Business--CAB--The SBA Guaranteed Loan Program."
Discontinuation, elimination or a significant reduction of this program would
have a material adverse effect on the Company. The SBA lending program is a
federal government program, instituted through legislation. Uncertainties
exist surrounding government programs, including the SBA, due to scrutiny by
the United States Congress. There can be no assurance that the SBA lending
program will continue in its present manner.

There have also been significant attempts in previous years to eliminate the
SBA or to curtail its activities or funding by Congress. In 1995, the SBA
temporarily ceased guaranteeing small business loans after Congress determined
that the appropriations in the federal budget for such guarantees had been
fully utilized. Although Congress later determined that it had incorrectly
calculated the amount of such appropriations and the SBA was able to continue
guaranteeing appropriate small business loans, any future utilization of such
appropriations and subsequent cessation of SBA guarantees would have a
material adverse effect on the Company's results of operations and financial
position.

In recent years, Congress has enacted legislation that reduced the maximum
amount of SBA guarantees on certain types of loans from 85% to 75%, required
the payment of a fee to the SBA by the lender equal to half of the proceeds
from the sale of a loan that exceeds 110% of the outstanding balance of the
SBA guaranteed portion of the loan and required that the SBA be paid a portion
of the annual servicing fee. There can be no assurance that additional
legislation relating to the SBA will not adversely affect the Company's
results of operations and financial position.

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<PAGE>

The SBA has the right to cease guaranteeing new loan origination by the
Company upon ten days' prior written notice. The occurrence of such an event
would have a significant adverse impact on the liquidity and earnings of the
Company but would not affect guarantees on outstanding loans. The Company's
income from the SBA lending business is materially dependent upon the premium
at which the SBA guaranteed portions of loans are sold in the secondary
market. In addition, in the event that CAB were to lose its status as a
"Preferred Lender," CAB could be materially and adversely affected. See
"Business--CAB."

CONCENTRATION OF OPERATIONS IN CALIFORNIA

Approximately 69% and 78% of the aggregate principal amount of loans
originated by the Company through LHO and CAB during the nine months ended
September 30, 1997 and the year ended December 31, 1996, respectively, were
originated in California and secured by assets located in California. Although
the Company anticipates further expansion in these businesses outside
California in the future, the Company's loan originations may remain
concentrated in California for the foreseeable future. Consequently, the
Company's results of operations, financial condition and business prospects
are dependent on the California economy. In the early 1990s, the California
economy experienced an economic slowdown or recession. Although the California
economy has improved over the last few years, any economic decline would
adversely affect the value of the collateral securing the loans. A decline in
the value of the loan collateral may result in the principal balances of such
loans, together with any other financing by such borrowers, equaling or
exceeding the value of the collateral. In addition, California is vulnerable
to certain natural disaster risks, such as earthquakes and floods. These
disasters are not typically covered by the standard hazard insurance policies
maintained by borrowers and may adversely impact borrowers' ability to repay
loans made by the Company. The existence of adverse economic conditions or the
occurrence of such natural disasters in California could have a material
adverse effect on the Company's results of operations, financial condition and
business prospects. See "Business--LHO" and "--CAB."

ASSUMED LIABILITIES AND OBLIGATIONS

Pursuant to the Contribution, the Company will assume responsibility for all
liabilities and obligations related to the IFG Business, whether such
liabilities and obligations arose prior to the Contribution or arise on or
after the Contribution. See "Relationship and Agreements Among the Company,
the Bank and Bancorp After the Distribution." The Company believes that it has
provided for these liabilities and obligations in accordance with GAAP. Actual
results, however, could differ from these estimates, and changes in facts and
circumstances may result in revised estimates and assumptions. For a
description of certain of these liabilities and obligations, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

Some assignments and transfers may require prior consent by third parties
and various filings or recordings with governmental entities. See "Business--
Regulatory Matters."

CHANGES IN INTEREST RATES

The Company's profitability may be directly affected by the level of and
fluctuations in interest rates because they affect the Company's ability to
earn a spread between interest received on its loans and the costs of its
liabilities. While the Company monitors the interest rate environment and
employs a strategy designed to reduce the impact of changes in interest rates,
there can be no assurance that the profitability of the Company would not be
adversely affected during any period of changes in interest rates. A
substantial and sustained increase in interest rates could adversely affect
the Company's ability to originate or sell loans, reduce the average size of
loans underwritten by the Company and reduce the gains recognized by the
Company upon their sale. Fluctuating interest rates also may affect the net
income earned by the Company resulting from the difference between the yield
to the Company on loans held pending sale and funds borrowed by the Company to
finance the origination of such loans. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business--
CAB--Funding."

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ECONOMIC SLOWDOWN OR RECESSION

The risks associated with the Company's businesses become more acute in any
economic slowdown or recession. Periods of economic slowdown or recession may
be accompanied by decreased demand for consumer or commercial credit and
declining real estate and other asset values. In the secured lending business,
any material decline in collateral values increases the loan-to-value ratios
of loans previously made by the Company, thereby weakening collateral coverage
and increasing the possibility of a loss in the event of a default.
Delinquencies, foreclosures and losses generally increase during economic
slowdowns or recessions. In addition, in an economic slowdown or recession,
the Company's servicing costs will increase. Any sustained period of increased
delinquencies, foreclosures, losses or increased costs could adversely affect
the Company's ability to sell loans and could increase the cost of selling
loans, which in either case could adversely affect the Company's financial
condition and results of operations.

ENVIRONMENTAL LIABILITY

In the course of its business, the Company may foreclose on properties
securing loans that are in default. There is a risk that hazardous or toxic
substances or petroleum constituents could be on such properties. In such
event, it is possible that the Company could be held responsible for the cost
of cleaning up or removing such waste depending upon the lender's activities,
and such cost could exceed the value of the underlying properties. In
addition, there can be no assurance that the cost of such removal would not
substantially exceed the value of the affected properties or the loans secured
by such properties, or that the Company would have adequate remedies against
the prior owners or other responsible parties, or that the Company would not
find it difficult or impossible to sell the affected real properties either
prior to or following any such removal. Moreover, in the course of the
Company's trust business, the Company, as trustee, may be considered the
record owner of property for which it acts as trustee. As a result, it would
be held responsible for the cost of cleanup or removal of any hazardous or
toxic substances on these properties.

Under the laws of certain states, contaminated property may be subject to a
lien on the property to assure payment for cleanup costs. In several states,
such a lien has priority over the lien of an existing mortgage or owner's
interest. In addition, under the laws of some states and under the federal
Comprehensive Environmental Response, Compensation, and Liability Act of 1980
("CERCLA"), a lender may be liable for cleanup of a property and adjacent
properties that are contaminated by releases from the mortgaged property if
the lender engages in certain activities. These activities include foreclosure
on the property and participation in the management or operational aspects of
such property. In 1996 CERCLA was amended to eliminate federal lender
liability under CERCLA in certain circumstances, including foreclosure if the
lender resells the property at the earliest practicable, commercially
reasonable time on commercially reasonable terms. In addition, the amendments
defined the term participation in management, which provided some guidance to
lenders about the nature of activities that would and would not give rise to
liability under CERCLA. These amendments do not apply to state Superfund laws.
Also, foreclosure and other activities on contaminated property may subject a
lender to state tort liability.

GOVERNMENT REGULATION

The Company and its subsidiaries are subject to extensive regulation and
oversight by federal and state regulators administering applicable federal and
state laws and regulations, including, among others, the following: the Small
Business Act, the Small Business Investment Act of 1958, the California
Finance Lenders Law, the California Industrial Loan Law, the Community
Reinvestment Act, the Federal Deposit Insurance Act, portions of the
California Banking Law and the Federal Reserve Act and certain regulations of
the Federal Reserve Board. Such laws and regulations materially impact the
business operations of the Company and its subsidiaries, including, among
other areas, rate of growth, ability to pay dividends, rates payable on
deposits, permissible sources of financing, terms and structure of loans,
competition, reporting of their financial condition, operations from branches
and other locations and internal controls. See "Dividend Policy" and
"Business-- Regulatory Matters." Although management of the Company believes
that it can operate within the parameters

19
<PAGE>

defined by currently applicable law and regulation, it is not possible to
predict with certainty the extent or nature of future changes to applicable
law and regulation, government policies or judicial interpretations, nor their
impact, whether adverse or beneficial, on the business operations, financial
condition or prospects of the Company and its subsidiaries.

ABSENCE OF TRADING HISTORY FOR THE COMMON STOCK

Application will be made to list the Company Class A Common Stock on the
NYSE under the symbol "IFG." There has been no prior trading market for
Company Class A Common Stock and there can be no assurance as to the prices at
which Company Class A Common Stock will trade or the degree of volatility in
the trading price. The prices at which Company Class A Common Stock trades
will be determined in the public trading market and may be influenced by many
factors, including the depth and liquidity of the market for Company Class A
Common Stock, investor perceptions of the Company and its businesses, general
economic and market conditions and, at least in the short-term, the investment
preferences of Bancorp shareholders who will receive shares of Company Class A
Common Stock in the Distribution.

CERTAIN ANTI-TAKEOVER PROVISIONS

The Company's Amended and Restated Certificate of Incorporation (the
"Certificate of Incorporation"), Amended and Restated Bylaws (the "Bylaws")
and the DGCL contain certain provisions that may discourage other persons from
attempting to acquire control of the Company. These provisions include, but
are not limited to, a staggered Board of Directors, the authorization of the
Board to issue shares of undesignated preferred stock in one or more series
without the specific approval of the holders of Company Class A Common Stock,
the establishment of advance notice requirements for director nominations and
actions to be taken at annual meetings and the requirement that 80% of the
shareholder votes are required to approve any change to the Bylaws or certain
provisions of the Certificate of Incorporation. In addition, the Certificate
of Incorporation and the Bylaws permit special meetings of the shareholders to
be called only by the Chairman of the Board or upon the request of a majority
of the Board of Directors, and deny shareholders the ability to call such
meetings. In certain circumstances, the fact that corporate devices are in
place that will inhibit or discourage takeover attempts could reduce the
market value of Company Class A Common Stock. See "Purposes and Effects of
Certain Provisions of the Company's Certificate of Incorporation, Bylaws and
Delaware Law."

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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS

The Distribution is conditioned upon receipt by Bancorp of the Ruling from
the IRS substantially to the effect that, among other things, the Distribution
will qualify as a tax-free spin-off to Bancorp, the Bank and Bancorp
shareholders under Section 355 of the Internal Revenue Code of 1986, as
amended (the "Code"). The following is a summary of the material federal
income tax consequences to Bancorp, the Bank and Bancorp shareholders expected
to result from the Distribution:

(i) A Bancorp shareholder will not recognize any income, gain or loss as
a result of the Distribution;

(ii) A Bancorp shareholder will be required to apportion the tax basis
for such shareholder's Bancorp Common Stock on which Company Class A Common
Stock is distributed between the Bancorp Common Stock and Company Class A
Common Stock received in the Distribution in proportion to the relative
fair market values of such Bancorp Common Stock and Company Class A Common
Stock on the Distribution Date;

(iii) A Bancorp shareholder's holding period for the Company Class A
Common Stock received in the Distribution will include the period during
which such shareholder held the Bancorp Common Stock on which Company Class
A Common Stock is distributed, provided that such Bancorp Common Stock is
held as a capital asset by such shareholder on the Distribution Date; and

(iv) Neither Bancorp nor the Bank will recognize any income, gain or loss
as a result of the Distribution or the Contribution.

Current Treasury regulations require each Bancorp shareholder who receives
Company Class A Common Stock pursuant to the Distribution to attach to such
shareholder's federal income tax return for the year in which the Distribution
occurs a detailed statement setting forth such data as may be appropriate in
order to show the applicability of Section 355 of the Code to the
Distribution. Bancorp will provide the appropriate information to each
shareholder of record as of the Distribution Record Date.

THE SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES SET FORTH ABOVE IS FOR
GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE TO SHAREHOLDERS WHO
RECEIVED THEIR SHARES OF BANCORP COMMON STOCK THROUGH THE EXERCISE OF AN
EMPLOYEE STOCK OPTION OR OTHERWISE AS COMPENSATION OR WHO ARE NOT CITIZENS OR
RESIDENTS OF THE UNITED STATES OR WHO ARE OTHERWISE SUBJECT TO SPECIAL
TREATMENT UNDER THE CODE. ALL SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX
ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES AS OF THE DISTRIBUTION TO THEM,
INCLUDING THE APPLICABILITY AND EFFECT OF STATE, LOCAL AND FOREIGN TAX LAWS.

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LISTING AND TRADING OF THE COMMON STOCK

Application will be made to list the Company Class A Common Stock on the
NYSE under the symbol "IFG." There is no current public trading market for the
Company Class A Common Stock, although it is expected that a "when-issued"
trading market will develop prior to the Distribution Date. The term "when-
issued" means trading in shares prior to the time certificates are actually
available or issued. If the conditions to the Distribution are not satisfied
and the Distribution is not paid, any such when-issued trading will become
null and void. If the conditions to the Distribution are satisfied and the
Distribution is paid on the Distribution Date, it is expected that regular way
trading in the Company Class A Common Stock on the NYSE will commence at 9:30
a.m. (New York time) on , 1998, subject to official notice of
issuance.

Bancorp Common Stock will continue to be listed and traded on the NYSE after
the Distribution.

The Company Class A Common Stock issued to shareholders of Bancorp Common
Stock will be freely transferable, except for shares received by persons who
may be deemed to be "affiliates" of the Company under the Securities Act of
1933, as amended (the "Securities Act"). Persons who may be deemed to be
affiliates of the Company after the Distribution generally include individuals
or entities that control, are controlled by, or are under common control with,
the Company and may include certain officers and directors of the Company.
Persons who are affiliates of the Company will be permitted to sell their
Company Class A Common Stock only pursuant to an effective registration
statement under the Securities Act or an exemption from the registration
requirements of the Securities Act, such as the exemptions afforded by Section
4(1) of the Securities Act and Rule 144 thereunder.

For a discussion of certain uncertainties that should be considered in
trading in the Company Class A Common Stock, see "Risk Factors--Absence of
Trading History for the Common Stock."

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<PAGE>

DISTRIBUTION CONDITIONS AND TERMINATION

The consummation of the Distribution is conditioned upon fulfillment of each
of the following conditions: (i) the receipt from the IRS of the Ruling; (ii)
the Contribution (including transfers of certain assets and liabilities to the
Company contemplated by the Contribution Agreement) having been consummated
(see "Relationship and Agreements Among the Company, the Bank and Bancorp
After the Distribution--Contribution Agreement"); (iii) the Company Class A
Common Stock having been approved for listing on the NYSE subject to official
notice of issuance; (iv) the Registration Statement having been declared
effective by the Commission; (v) all authorizations, consents, approvals and
clearances from all federal and state governmental agencies required to permit
the valid consummation of the transactions contemplated by the Contribution
and the Distribution having been obtained, without any conditions being
imposed that would have a material adverse effect, and all statutory
requirements for such valid consummation having been fulfilled (see
"Business--Regulatory Matters"); (vi) Bancorp having provided the NYSE with
prior written notice of the Distribution Record Date as required by the
Exchange Act, and the rules and regulations of the NYSE; (vii) no preliminary
or permanent injunction or other order, decree or ruling issued by a court of
competent jurisdiction or by a government, regulatory or administrative agency
or commission, and no statute, rule, regulation or executive order promulgated
or enacted by any governmental authority, being in effect preventing the
payment of the Distribution; (viii) the Credit Facilities being in place, with
all conditions to borrowing thereunder being satisfied or waived; and (ix) the
Bancorp Board being satisfied that, after giving effect to the Contribution
and the Distribution, (A) neither Bancorp nor the Company will be insolvent or
will have unreasonably small capital with which to engage in its respective
business and (B) Bancorp and the Bank will be able to make the Distribution in
accordance with applicable law.

Any condition to the Distribution may be waived at any time prior to the
Distribution Date, for any reason, in the sole discretion of the Bancorp
Board. In addition, even if all the above conditions are satisfied, the
Contribution Agreement may be amended or terminated, and the Distribution may
be abandoned, at any time prior to the Distribution Date for any reason, in
the sole discretion of the Bancorp Board.

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<PAGE>

REGULATORY APPROVALS AND CONSIDERATIONS

FEDERAL LAWS AND REGULATIONS

Federal Deposit Insurance of Accounts. On January 9, 1998, the FDIC approved
the Company's Application for Federal Deposit Insurance for CAB, subject to,
among other things, satisfaction of various conditions, including CAB's
capitalization as part of the Contribution. Upon being capitalized, CAB will
be a member of the FDIC and its deposit accounts will be insured by the Bank
Insurance Fund of the FDIC. Among the factors considered by the FDIC in
reviewing such application were the following: the qualifications and
background of management and the board of directors, the proposed plan of
business, including the nature and extent of CAB's lending and deposit-
gathering activities, the adequacy of CAB's policies and operating procedures,
the adequacy of its premises, economic and demographic considerations and the
need for an additional depository financial institution in the market areas to
be served by CAB, the projected financial condition of CAB and its earnings
prospects and the adequacy of CAB's capital structure. See "Business--
Regulatory Matters--CAB--Federal Law."

The Change in Bank Control Act. California-licensed industrial loan
companies are insured depository institutions under the Federal Deposit
Insurance Act. Accordingly, such industrial loan companies and their holding
companies are subject to the Change in Bank Control Act (the "Change in Bank
Control Act") and regulations promulgated by the FDIC thereunder. The Change
in Bank Control Act provides in part that no person, acting directly or
indirectly or through or in concert with one or more persons, may acquire
control of an insured depositary institution through a purchase, assignment,
transfer, pledge or other disposition of voting stock unless the appropriate
Federal banking agency has been given 60 days' prior written notice of, and
has not issued a notice disapproving, the acquisition. The FDIC is the
appropriate federal banking agency administering the Change in Bank Control
Act with respect to industrial loan companies.

The Change in Bank Control Act defines control as the power, directly or
indirectly, to direct the management or policies of the insured depository
institution or to vote 25% of any class of its voting securities. The FDIC has
established regulations that provide that an acquisition which results in the
ownership or control of, or power to vote, 10% or more of a class of voting
securities will be presumed to result in an acquisition of control if the
insured depository institution has issued any class of securities subject to
the registration requirements of Section 12 of the Exchange Act or, if
immediately after the transaction, no other person will own a greater
proportion of that class of voting securities. After giving effect to the
Distribution the Company will have, and ICII currently has, a class of
securities subject to registration under Section 12 of the Exchange Act.

As a result of the Contribution, all of the issued and outstanding shares of
CAB will be acquired by the Company, constituting an acquisition of control of
CAB by the Company. Additionally, the Contribution contemplates that the
shares of common stock of ICII currently owned by the Bank, which represented
approximately 23.5% of the issued and outstanding shares of ICII as of
September 30, 1997, will likewise be transferred to the Company, which
transaction will constitute a transfer of indirect control of Southern Pacific
Bank, a wholly-owned subsidiary of ICII ("SPB"). Accordingly, the contribution
of 100% of the issued and outstanding shares of common stock of CAB to the
Company and the contribution of the shares in ICII to the Company will require
notice to, and nondisapproval of, the FDIC under the Change in Bank Control
Act. Any persons or groups of affiliated persons who are deemed to control
Bancorp or may be deemed to control the Company by virtue of their ownership
of a sufficient amount of the common stock of Bancorp or the Class A Common
Stock of the Company may also be required to file a notice under the Change in
Bank Control Act either as a consequence of the Contribution or on the basis
that such persons or groups are deemed to have acquired control as a result of
the Distribution.

A notice under the Change in Bank Control Act and regulations promulgated
thereunder ("Notice") must contain information on the identity, history,
business background and experience of each acquiror; a statement of each
acquiror's assets and liabilities; the terms and conditions of the proposed
acquisition and the manner in

24
<PAGE>

which the acquisition is to be made; the identity, source and amount of the
consideration used or to be used in making the acquisition; any plans or
proposals to liquidate the bank, sell its assets or merge or to make any other
major change in its business or corporate structure or management; the
identification of any person employed, retained or to be compensated by the
acquiring party or on his behalf to make solicitations or recommendations to
stockholders, copies of all invitations or tenders, and any additional
information.

Upon receiving any Notice, the FDIC is required to conduct an investigation
of the competence, experience, integrity and financial ability of each person
named in the Notice and to make an independent determination of the accuracy
and completeness of the information supplied in the Notice with respect to any
such person.

The FDIC is also required to forward a copy of the Notice to the California
Department of Financial Institutions (the "DFI"), which is the appropriate
state depository institution supervisory agency, and to allow 30 days within
which the views and recommendations of such state agency may be submitted. The
FDIC is required to give due consideration to the views of such state agency
in determining whether to disapprove any proposed acquisition. The FDIC is
also required to publish, or cause the publication of, the name of the insured
depository institution and the proposed acquiror and to solicit public comment
on the proposed acquisition, particularly from persons in the geographic area
where the depository institution proposed to be acquired is located, before
final consideration of such notice by the agency.

In considering a Notice, the FDIC is empowered to disapprove any proposed
acquisition if it concludes that the proposed acquisition would have certain
anticompetitive effects, if the financial condition of any acquiring person is
such as might jeopardize the financial stability of the depository institution
or prejudice the interests of the depositors of the depository institution, if
the competence, experience or integrity of any acquiring person or of any of
the proposed management personnel indicates that it would not be in the
interest of the depositors of the depository institution or in the interest of
the public, if any acquiring person fails to furnish required information or
if the FDIC determines that the proposed transaction would result in an
adverse effect on the Bank Insurance Fund.

The 60-day period for action on a Notice may be extended once for a 30-day
period in the FDIC discretion and, in addition, under certain circumstances
set forth in the statute, for up to two additional 45-day periods. The 60-day
period for action commences upon the FDIC's determination that a Notice is
complete.

Effectiveness of Divestiture of ICII Stock. Previously effective provisions
of the BHCA, and provisions of Regulation Y promulgated thereunder, required a
determination of the Federal Reserve Board upon the divestiture by a bank
holding company of a subsidiary engaged in nonbanking activities. These
provisions have been repealed, and the Company has been advised that the
effectiveness of a divestiture of the shares of a subsidiary engaged in
nonbanking activities is now customarily determined following a divestiture as
part of the bank holding company examination process. In order to avoid the
uncertainty inherent in such an after-the-fact determination, it is the
Company's and Bancorp's intention to seek written confirmation from the
Federal Reserve Board prior to the Distribution that the divestiture by the
Bank of its investment in ICII in accordance with the Distribution will be
considered an effective divestiture.

Safety and Soundness Considerations. The Bank and the Company intend to
formally advise the FDIC and the DFI of the terms and conditions of the
transfer of the assets of the Bank's small business lending division and LHO
and of the transfer of the investment in ICII. Both the FDIC and the DFI have
responsibility over the safety and soundness of the Bank and the adequacy of
the Bank's capital in light of its business activities. In order to minimize
any uncertainty about how each of these agencies would view the effect of
these transfers on the Bank in a subsequent examination, the Bank and the
Company intend to make a formal submission and to seek the non-objection of
each of the foregoing regulatory agencies to such transfers.

SBA Lender Approvals. The SBA Division of the Bank has approvals from the
SBA to originate SBA loans under the Guaranteed Participant, Certified Lender
and Preferred Lender programs. Application has been made to the SBA on behalf
of CAB to secure such approvals as are necessary for CAB to offer SBA loans
under all three of the foregoing levels of lender participation. The Company
expects to receive these SBA approvals on or prior to the capitalization of
CAB.

25
<PAGE>

CALIFORNIA LAWS AND REGULATIONS

The California Industrial Loan Law. The Company determined that the business
of CAB should be conducted as a California industrial loan company operating
under the California Industrial Loan Law. On November 12, 1997, the DFI
approved the issuance to CAB of an industrial loan company license, subject
to, among other things, completion of the capitalization of CAB, which will
permit CAB to conduct its industrial loan business as described below. Prior
to approving this issuance, the DFI, which was created effective as of July 1,
1997 and which succeeded to the California Department of Corporations'
regulatory authority over industrial loan companies, reviewed, among other
factors, CAB's plan of business, including its proposed lending and deposit-
generating activities, the adequacy of its capital, its proposed operating
policies, the qualifications of management and the need for an additional
depository financial institution to serve the designated market area. See
"Business--Regulatory Matters--CAB--California Law."

The California Finance Lenders Law. The California Usury Law, Article XV of
the California Constitution (the "Usury Law"), generally limits the rates of
interest lenders may charge borrowers in California. It exempts, however,
certain licensed lenders from such interest rate limitations, including a
holder of a license under the California Finance Lenders Law (a "CFL
License"). On , 1998, the DOC, the administrator of the California Finance
Lenders Law, issued a CFL License to the Company. Accordingly, the Company is
exempt from the Usury Law and the LHO division may conduct its entertainment
finance business free of the interest rate restrictions of the Usury Law,
subject to the terms of the California Finance Lenders Law. The CFL License
permits the LHO division of the Company to conduct its entertainment and
motion picture finance business from its office located at 1840 Century Park
East, 10th Floor, Los Angeles, California 90067. See "Business--LHO."

Change in Ownership. CAB and SPB, as industrial loan companies, are subject
to the California Industrial Loan Law, certain provisions of which are
applicable to holding companies of industrial loan companies. The California
Industrial Loan Law provides that no person may acquire in the aggregate 10%
or more of the capital stock of an industrial loan company without the written
consent of the DFI. In addition, the California Industrial Loan Law provides
that no person may acquire in the aggregate 10% or more of the capital stock
or other securities that have voting power or control over the management of a
holding company of an industrial loan company such as ICII (or the Company
after the Contribution), without the written consent of the DFI. Accordingly,
the contribution of all of the issued and outstanding shares of common stock
of CAB to the Company will require the written consent of the DFI under the
California Industrial Loan Law. In addition, because the investment of the
Bank in ICII shares is likely to be considered by the DFI as possessing voting
power or control over the management of ICII, the acquisition of such shares
by the Company will also require the written consent of the DFI under the
California Industrial Loan Law.

The California Industrial Loan Law provides that the DFI is required to
consent or decline to do so within 60 days of the filing of a completed
application. The determination as to whether an application is completed is
based on a determination by the regulatory agency involved.

The California Acquisition of Control Law. ITC is considered a bank for
purposes of, and as a result is subject to, Sections 700 et seq. of the
California Financial Code (the "California Acquisition of Control Law"). The
California Acquisition of Control Law provides that no person may acquire
control of a bank organized under the laws of the state of California, or a
person who directly or indirectly controls a bank organized under the laws of
the state of California, without the approval of the DFI. Control is defined
for purposes of the California Acquisition of Control Law as the possession,
direct or indirect, of the power to vote 25% or more of any class of voting
securities or to direct or cause the direction of the management and policies
of a person, whether through the ownership of voting securities, by contract
(other than a commercial contract for goods or nonmanagement services) or
otherwise. The California Acquisition of Control Law further provides that a
person who, directly or indirectly, owns, controls, holds with power to vote,
or holds proxies representing, 10% or more of the then outstanding voting
securities issued by another person is presumed to control such other person.

26
<PAGE>

In considering an application filed under the California Acquisition of
Control Law, the DFI is required to disapprove any proposed acquisition if it
concludes that the proposed acquisition would have certain anticompetitive
effects, if the financial condition of any acquiring person might jeopardize
the financial stability of the bank or controlling person or prejudice the
interests of the depositors, creditors or shareholders of the bank or the
controlling person, if plans or proposals to liquidate the bank or the
controlling person, to sell the assets of the bank or the controlling person,
to merge or consolidate the bank or the controlling person or to make any
other major change in the business, corporation structure or management of the
bank or the controlling person are not fair and reasonable to the depositors,
creditors and shareholders of the bank or controlling person, if the
competence, experience or integrity of any acquiring person or of any of the
proposed management personnel indicates that it would not be in the interest
of the depositors, creditors or shareholders of the bank or controlling person
or in the interest of the public, if any acquiring person fails to furnish
required information or if the DFI determines that the proposed transaction is
unfair or unjust or inequitable to the bank or the controlling person or to
the depositors, creditors or shareholders of the bank or the controlling
person. If the DFI finds that the foregoing factors are not present, the DFI
must approve the proposed acquisition of control.

Any application for approval to acquire control of a bank or of a
controlling person which is not denied or approved within a period of 60 days
after such application is filed shall be deemed to be approved on the first
day thereafter. An application for such approval is deemed filed with the DFI
at the time when the complete application, including any amendments or
supplements, containing all the information in the form required by the DFI,
is received. On December 29, 1997, the Company filed an application for the
approval of the DFI for the acquisition of control of ITC by the Company.

Restrictions on Dividends. The provisions of the California Financial Code
which are applicable to California-chartered banks, such as the Bank, restrict
its ability to make distributions to its shareholders. Generally, a
California-chartered bank may not make any distribution to the shareholder of
such bank in an amount which exceeds the lesser of (i) the retained earnings
of the bank or (ii) the net income of the bank for its last three fiscal
years, less the amount of any distributions made by the bank or by any
majority-owned subsidiary of the bank to the shareholders of the bank during
such period. However, a bank may, with the approval of the DFI, make a
distribution to its shareholder in an amount not exceeding the greatest of (i)
the retained earnings of the bank, (ii) the net income of the bank for its
last fiscal year or (iii) the current income of the bank for its current
fiscal year. It is a condition to the Distribution that the DFI approve the
Distribution. See "Distribution Conditions and Termination."

27
<PAGE>

RELATIONSHIP AND AGREEMENTS AMONG THE COMPANY,
THE BANK AND BANCORP AFTER THE DISTRIBUTION

GENERAL

In connection with the Distribution, the Company, Bancorp, the Bank and
certain subsidiaries of the Company will enter into prior to the Distribution
Date agreements for the purpose of giving effect to certain transactions
necessary for the Distribution and defining their ongoing relationship.
Certain of these agreements will not be the result of arm's-length
negotiations. The Company, Bancorp and the Bank, however, intend to negotiate
such agreements on terms at least as favorable to the Company or to Bancorp as
could have been obtained from unaffiliated third parties.

Following the Distribution, additional or modified agreements, arrangements
and transactions may be entered into by the Company, Bancorp and/or their
respective subsidiaries. Any such future agreements, arrangements and
transactions will be determined, at such time, through arm's-length
negotiations between the parties.

The following is a summary of certain agreements, arrangements and
transactions to be entered into as of the Distribution Date among the Company,
Bancorp, the Bank and certain subsidiaries of the Company. Certain of these
agreements have been filed as exhibits to the Registration Statement and,
although the following descriptions address all of the material aspects of the
exhibits, they do not purport to be complete and are qualified in their
entirety by reference to such exhibits.

CONTRIBUTION AGREEMENT

Bancorp, the Bank, the Company and CAB will enter into the Contribution
Agreement providing for, among other things, certain corporate transactions
required to effect the Contribution, the Distribution and other arrangements
between Bancorp and the Company subsequent to the Distribution as described
below.

The Contribution Agreement provides that prior to the Distribution, the Bank
will contribute to the Company the IFG Business. This will be accomplished by
the Bank contributing to CAB all of the assets relating to the Bank's small
business lending division and the assumption by CAB of all of the liabilities
relating thereto. After the contribution of such assets to, and assumption of
such liabilities by, CAB, the Bank will contribute to the Company (i) all of
the assets relating to the LHO division (and the Company will assume all
liabilities relating thereto), (ii) all of the outstanding capital stock of
CAB and ITC and (iii) all of the common stock of ICII owned by the Bank. In
consideration for transferring the IFG Business, the Company and CAB will
assume all liabilities, whether arising prior to, on or after the Distribution
Date, relating to such assets. See "Risk Factors--Assumed Liabilities and
Obligations" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations." All assets will be transferred without any
representation or warranty, "as is", "with all faults." Bancorp, the Bank and
the Company each will agree to execute and deliver such further assignments,
documents of transfer, deeds and instruments as may be necessary for the more
effective implementation of such transfers.

The Contribution Agreement also will provide that the Bank will retain
certain loans secured by mortgages on single family residential properties
(and the Company will not assume the liabilities relating thereto) which were
retained by the Bank in connection with the formation of ICII in 1992. See
"Unaudited Pro Forma Combined Financial Data." In addition, the Company will
assume the Bank's obligations under a consulting agreement with a company
wholly owned by G. Louis Graziadio, III. See "Executive Compensation--
Employment Agreements."

The Contribution Agreement also will provide for the consummation of certain
corporate transactions required to effect the Distribution after completion of
the Contribution. These transactions will include effecting a dividend of all
of the Company Class A Common Stock from the Bank to Bancorp, and then from
Bancorp to the Bancorp shareholders as of the Distribution Record Date. In
addition, the Contribution Agreement assigns between Bancorp and the Company
responsibility for and rights to control any litigation pending as of the
Distribution Date. The Distribution is subject to a number of conditions. See
"Distribution Conditions and Termination."

28
<PAGE>

The Company and the Bank will each make certain representations and
warranties in the Contribution Agreement with respect to, among other things,
the authority of such entities to consummate the transactions contemplated
thereby and the consents and approvals necessary to consummate such
transactions. These representations and warranties will survive after the
Distribution. The Bank and the Company also will agree in the Contribution
Agreement that the IFG Business will have a net book value, as described
therein, as of the Distribution Date of approximately $15 million plus the
after-tax book value of the ICII stock held by the Company.

The balances that exist as of the Distribution Date under the benefit plans
established for those Bancorp employees who are becoming Company employees in
connection with the Distribution (the "Transferred Employees") will be
transferred to the Company pursuant to the Contribution Agreement. The Company
intends to establish benefit plans for the Transferred Employees that will
mirror the benefit plans such employees had as Bancorp employees. See
"Executive Compensation--Treatment of Bancorp Options and Other Benefits
Following the Distribution."

The Company and the Bank will agree in the Contribution Agreement to pay its
own expenses in connection with consummating the transactions contemplated
thereby.

TAX SHARING AGREEMENT

Bancorp and the Company will enter into a tax sharing agreement (the "Tax
Sharing Agreement") that will govern the allocation between Bancorp and the
Company of federal, state, local and foreign tax liabilities for taxable
periods before and after the Distribution, and related matters such as the
preparation and filing of tax returns and the conduct of audits and other tax
proceedings. Generally, the Tax Sharing Agreement will provide that the
Company will be responsible for, and will indemnify Bancorp against, tax
liabilities relating to the IFG Business for taxable periods commencing after
the Distribution and Bancorp will be responsible for, and will indemnify the
Company against, tax liabilities relating to the IFG Business for taxable
periods prior to Distribution and for transaction taxes resulting from the
Contribution and the Distribution.

In addition, the Tax Sharing Agreement will provide that if, as a result of
any event that is within the control of the Company or any of its subsidiaries
or any other event related to the acquisition of the Company Class A Common
Stock, any taxes or other liability, costs or expenses are imposed on Bancorp,
any of its subsidiaries (other than the Company or its subsidiaries) or any
Bancorp shareholder who receives Company Class A Common Stock pursuant to the
Distribution, which in either case, arises from the Distribution or
transactions related to the Distribution, then the Company will be obligated
to indemnify and hold harmless, on an after-tax basis, Bancorp and the Bancorp
shareholders, as the case may be, with respect to any such taxes or other
liability, costs or expenses. The Tax Sharing Agreement also will provide that
if, as a result of any event that is within the control of the Bank, Bancorp
or any of their subsidiaries (other than the Company or its subsidiaries) or
any other event related to the acquisition of Bancorp Common Stock, any taxes
or other liability, costs or expenses are imposed on the Company or any of its
subsidiaries or shareholders which arise from the Distribution or transactions
related to the Distribution then the Bank and Bancorp will be obligated to
indemnify and hold harmless, on an after-tax basis, the Company and Bancorp's
shareholders, as the case may be, with respect to any such taxes or other
liability, costs or expenses.

OTHER AGREEMENTS

The Bank and the Company will enter into an interim services agreement under
which the Bank will provide certain services to the Company for specified fees
for a one year term beginning on the Distribution Date. The agreement will
automatically renew for additional one-year terms unless either party delivers
written notice to the other party of its intention not to renew within 60 days
at the end of the then current term. The principal services to be provided by
the Bank to the Company will include human resources support in payroll,
record keeping and other employee benefit areas, audit services and
correspondent banking services. The Company will have the right to terminate
the agreement or any service provided thereunder upon 60 days written notice
to the Bank. In addition, the Company expects to enter into certain subleases
with the Bank for the use of certain of its facilities after the Distribution
Date.

29
<PAGE>

RELATIONSHIP AMONG THE COMPANY, THE BANK AND BANCORP AFTER THE DISTRIBUTION

After the Contribution and Distribution, the Company and Bancorp will
operate independently of each other as separate public companies, and will
compete against each other in certain businesses. See "Risk Factors--
Competition and Conflicts of Interest Between the Company and the Bank."
Neither the Company nor Bancorp will have any beneficial stock ownership
interest in the other (although employee benefit plan trusts sponsored by the
Company and Bancorp and/or certain of their respective subsidiaries will hold
certain of the other company's shares). Each of Bancorp and the Company has an
independent Board of Directors and management with no overlaps except George
L. Graziadio, Jr., the chairman, president and chief executive officer of
Bancorp, who serves as the chairman of the Company Board; G. Louis Graziadio,
III, a director of Bancorp, who serves as chief executive officer of the
Company and as co-chairman of the Company Board; and Lee E. Mikles, Paul A.
Novelly and H. Wayne Snavely, each of whom serves on the boards of Bancorp
and/or the Bank and serves on the Company Board. The service by directors and
officers of Bancorp and the Bank as directors and/or officers of the Company
could create conflicts of interest when those directors and officers are faced
with decisions that could have different implications for Bancorp and the
Company. The Company has not instituted any formal plan or arrangement to
address potential conflicts of interest that may arise between Bancorp and the
Company. However, under Delaware corporate law, officers and directors of the
Company owe fiduciary duties to the Company and its stockholders.

DIVIDEND POLICY

It is currently contemplated that the Company will not pay cash dividends on
Company Class A Common Stock for the immediately foreseeable future following
the Distribution. The payment and amount of future dividends will be at the
discretion of the Company Board and will depend upon the Company's future
earnings, financial condition, capital requirements and other factors,
including any limitations under then existing credit facilities. The Credit
Facilities will contain restrictions on the Company's ability to pay
dividends. See "Credit Facilities." In addition, CAB and ITC are restricted in
their ability to make dividends to the Company by applicable California law.
See "Regulatory Approvals and Considerations" and "Business--Regulatory
Matters--Federal Law--Prompt Corrective Action Requirements."

30
<PAGE>

CAPITALIZATION

The following table, which is unaudited, sets forth, as of September 30,
1997, the capitalization of the Company, as adjusted to reflect the
Distribution and the incurrence by the Company of approximately $113 million
of indebtedness under the Credit Facilities, the repayment of borrowings from
the Bank and the adjusted net book value of the Company in accordance with the
Contribution Agreement, as if such transactions occurred as of that date. This
data should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the Combined Financial
Statements and notes thereto of the Company included elsewhere in this
Information Statement.

<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1997
------------------------------------
PRO FORMA PRO FORMA
ACTUAL ADJUSTMENTS (2) AS ADJUSTED
-------- --------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Credit Facilities......................... $ -- $112,898 $112,898
Borrowings from Imperial Bank............. 68,813 (68,813) --
-------- -------- --------
Total borrowings........................ 68,813 44,085 112,898
-------- -------- --------
Stockholder's equity
Class A common stock, par value $0.01
per share, 50 million shares
authorized, 25,966,307 shares issued
and outstanding (as adjusted)(1)....... -- -- --
Class B common stock, par value $0.01
per share, 10 million shares
authorized, shares issued and
outstanding(1) ........................ -- -- --
Contribution by Imperial Bank........... 1,597 -- 1,597
Unrealized gain on securities available
for sale, net of taxes................. 172 -- 172
Retained earnings....................... 101,668 (49,526) 52,142
-------- -------- --------
Total stockholder's equity............ 103,437 (49,526) 53,911
-------- -------- --------
Total capitalization.................. $172,250 $ (5,441) $166,809
======== ======== ========
</TABLE>
- --------
(1) See "Description of Capital Stock--Authorized Capital Stock."

(2) Reflects borrowings under the proposed Credit Facilities and repayment of
borrowings from the Bank. Reduction in retained earnings represents the
amount of net book value of the IFG Business reflected in the Company's
historical financial statements in excess of the Company's net book value
as of September 30, 1997 in accordance with the Contribution Agreement.
See "Relationship and Agreements Among the Company, the Bank and Bancorp
After the Distribution" and "Credit Facilities."

31
<PAGE>

SELECTED COMBINED FINANCIAL DATA

The selected combined income statement data for the years ended December 31,
1994, 1995 and 1996 and selected combined balance sheet data as of December
31, 1995 and 1996 have been derived from the Company's audited combined
financial statements and notes thereto included elsewhere in the Information
Statement. The combined selected income statement data for the nine months
ended September 30, 1996 and 1997 and the years ended December 31, 1992 and
1993 and the selected combined balance sheet data at December 31, 1992, 1993
and 1994 and September 30, 1997 have been derived from the unaudited combined
financial statements of the Company not included herein, and include all
adjustments, consisting solely of normal recurring accruals, which management
considers necessary for a fair presentation of such financial information for
those periods. Results for the nine months ended September 30, 1996 and 1997
are not necessarily indicative of results for a full year. Historical combined
financial information may not be indicative of the Company's future
performance as an independent company. See also "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business."

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------------ ---------------------
1992 1993 1994 1995 1996 1996 1997
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue:
Interest on loans.... $ 41,090 $ 4,408 $ 4,228 $ 6,726 $ 10,629 $ 8,062 $ 10,478
Other interest
income.............. 101 102 131 153 158 114 143
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total interest
income............ 41,191 4,510 4,359 6,879 10,787 8,176 10,621
Interest expense .... 21,978 1,195 256 1,287 1,973 1,784 1,648
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest
income............ 19,213 3,315 4,103 5,592 8,814 6,392 8,973
Provision for loan
losses.............. 2,676 633 -- 1,492 1,781 1,581 1,866
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income
after provision
for loan losses... 16,537 2,682 4,103 4,100 7,033 4,811 7,107
---------- ---------- ---------- ---------- ---------- ---------- ----------
Trust fees........... 4,890 5,667 6,857 8,385 7,744 5,819 5,842
Gain on sale of SBA
loans............... 20,606 411 1,724 1,813 3,561 2,503 2,980
Equity in net income
of ICII ............ -- 7,898 2,388 5,652 21,444 16,555 8,362
Gain on sale of ICII
stock .............. 5,033 14,538 -- -- 25,650 25,650 2,429
Gain from sale of
stock by ICII....... -- -- -- -- 10,761 10,761 --
Other income......... 12,591 471 430 677 4,958 4,752 4,823
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total revenue...... 59,657 31,667 15,502 20,627 81,151 70,851 31,543
---------- ---------- ---------- ---------- ---------- ---------- ----------
Expenses:
Personnel expense.... 18,734 3,388 4,338 4,827 6,153 4,519 7,003
Other expenses....... 15,415 4,357 4,515 5,568 10,680 8,961 14,981
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total expenses..... 34,149 7,745 8,853 10,395 16,833 13,480 21,984
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before
income taxes and
extraordinary
item.............. 25,508 23,922 6,649 10,232 64,318 57,371 9,559
Income taxes......... 17,760 10,129 2,821 4,313 25,674 22,766 3,141
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before
extraordinary
item.............. 7,748 13,793 3,828 5,919 38,644 34,605 6,418
Extraordinary item--
gain on
extinguishment of
ICII debt, net of
taxes............... -- -- 370 -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income......... $ 7,748 $ 13,793 $ 4,198 $ 5,919 $ 38,644 $ 34,605 $ 6,418
========== ========== ========== ========== ========== ========== ==========
Earnings per share(1)
...................... $ 0.33 $ 0.59 $ 0.17 $ 0.24 $ 1.48 $ 1.34 $ 0.24
Weighted average
number of shares
outstanding(1) ....... 23,304,714 23,431,464 24,200,733 25,168,985 26,116,767 25,908,277 26,826,935
</TABLE>

32
<PAGE>

<TABLE>
<CAPTION>
AT DECEMBER 31, AT SEPTEMBER 30,
------------------------------------------ ----------------
1992 1993 1994 1995 1996 1997
-------- ------- ------- -------- -------- ----------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents........... $ 339 $ 1,002 $ 1,896 $ 2,272 $ 5,245 $ 2,522
Securities available
for sale, at fair
value................. 6,784 2,005 1,753 1,437 1,179 6,987
Receivable from
Imperial Bank......... -- -- 2,236 -- -- --
Loans held for sale.... 328,576 2,579 1,648 2,648 5,531 4,855
Loans held for
investment, net....... 134,043 36,847 26,369 75,518 72,528 123,296
Investment in stock of
ICII ................. -- 27,445 30,934 36,126 57,736 64,192
Other assets........... 16,438 5,578 4,814 7,029 11,701 7,913
-------- ------- ------- -------- -------- --------
Total assets.......... $486,180 $75,456 $69,650 $125,030 $153,920 $209,765
======== ======= ======= ======== ======== ========
Deposits............... $403,340 $ -- $ -- $ -- $ -- $ --
Borrowings from
Imperial Bank......... 12,257 13,889 -- 49,897 6,184 68,813
Income taxes payable... 11,032 7,722 9,996 12,876 40,340 26,240
Other liabilities...... 23,258 3,759 5,410 4,056 10,550 11,275
-------- ------- ------- -------- -------- --------
Total liabilities..... 449,887 25,370 15,406 66,829 57,074 106,328
Stockholder's equity... 36,293 50,086 54,244 58,201 96,846 103,437
-------- ------- ------- -------- -------- --------
Total liabilities and
stockholder's equity.. $486,180 $75,456 $69,650 $125,030 $153,920 $209,765
======== ======= ======= ======== ======== ========
</TABLE>

<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------- -----------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- ------- ------- --------
(IN THOUSANDS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING AND FINANCIAL
DATA:
Loans originated:
LHO.................. $41,527 $40,206 $25,857 $70,224 $55,951 $39,239 $ 79,313
SBA.................. -- 11,164 21,204 21,533 38,792 28,830 39,028
------- ------- ------- ------- ------- ------- --------
Total.............. $41,527 $51,370 $47,061 $91,757 $94,743 $68,069 $118,341
======= ======= ======= ======= ======= ======= ========
Trust assets under
administration (in
millions)............. $ 5,911 $ 6,617 $ 5,704 $ 6,781 $ 7,532 $ 7,237 $ 8,784
SELECTED RATIOS(2):
Average equity to
average assets........ 7.43% 16.56% 70.74% 63.37% 56.02% 52.19% 57.07%
Return on average
common equity......... 19.70% 30.00% 8.02% 10.32% 49.51% 60.93% 8.28%
Return on average
assets................ 1.46% 4.97% 5.67% 6.54% 27.74% 31.80% 4.73%
ASSET QUALITY RATIOS (AT
END OF PERIOD):
Non-performing assets
as a percentage of
total assets.......... 1.27% 4.30% 3.27% 2.96% 3.32% 3.81% 1.21%
Allowance for loan
losses as a
percentage of non-
performing loans...... 64.74% 37.48% 47.79% 56.89% 53.42% 47.33% 234.65%
Net charge-offs as a
percentage of average
total loans held for
investment............ (3) 0.62% 0.26% 1.21% 0.87% 0.58% 0.59%
</TABLE>
- --------

(1) Share amounts are based on a distribution ratio of one share of Company
Class A Common Stock for each share of outstanding Bancorp Common Stock.

(2) Annualized for the nine months ended September 30, 1996 and 1997.

(3) Information not available.

33
<PAGE>

UNAUDITED PRO FORMA COMBINED FINANCIAL DATA

In connection with the Distribution, the Bank will contribute to the Company
(i) all of the assets and liabilities relating to LHO, a division of the Bank
that provides motion picture and television financing, (ii) all of the common
stock of CAB, a newly formed thrift and loan company that will conduct, among
other businesses, the Company's small business lending, (iii) all of the
common stock of ITC, a California licensed trust company that offers a wide
range of trust and investment management services, and (iv) all of the common
stock owned by the Bank (representing approximately 23.5% of all outstanding
common stock as of September 30, 1997) in ICII, a publicly traded, diversified
specialty finance company. No cash will be paid to Bancorp in connection with
the Transactions.

The unaudited pro forma combined statements of income reflect the
Transactions as if they occurred at the beginning of each of the periods
presented. The unaudited pro forma combined balance sheets reflect the
Transactions as if they occurred at the dates indicated. The unaudited pro
forma combined financial data reflect the expected capitalization of the
Company as a result of the Distribution, the incurrence of debt by the Company
under the Credit Facilities (which is identified below as "Line of Credit"),
an assumed interest expense relating to such borrowings, amortization of
capitalized costs incurred in connection with the Credit Facilities and
retention of certain assets and liabilities by Bancorp. This pro forma
information does not necessarily reflect the results of operations or
financial position of the Company which would have been achieved had the
Transactions actually been consummated as of such dates. Also, this pro forma
financial information is not indicative of the future results of operations or
future financial position of the Company. See "Capitalization."

34
<PAGE>

PRO FORMA COMBINED STATEMENTS OF INCOME
(UNAUDITED)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
---------------------------------
ACTUAL ADJUSTMENTS PRO FORMA
------ ----------- ----------
<S> <C> <C> <C>
REVENUE
Interest on
loans............. $4,228 $(802)(1) $ 3,426
Other interest
income............ 131 210 (1) 341
------ ----- ----------
Total interest
income.......... 4,359 (592) 3,767
Interest expense.. 256 (256)(1)(2) --
------ ----- ----------
Net interest
income.......... 4,103 (336) 3,767
Provision for
loan losses....... -- 94 (1) 94
------ ----- ----------
Net interest
income after
provision for
loan losses..... 4,103 (430) 3,673
------ ----- ----------
Trust fees........ 6,857 -- 6,857
Gain on sale of
SBA loans......... 1,724 -- 1,724
Equity in net
income of ICII.... 2,388 -- 2,388
Gain on sale of
ICII stock ....... -- -- --
Gain from sale of
stock by ICII..... -- -- --
Other income...... 430 -- 430
------ ----- ----------
Total other
income.......... 11,399 -- 11,399
------ ----- ----------
Total revenue... 15,502 (430) 15,072
------ ----- ----------
EXPENSE
Personnel
expense........... 4,338 -- 4,338
Other expenses.... 4,515 -- 4,515
------ ----- ----------
Total expenses.. 8,853 -- 8,853
------ ----- ----------
Income before
income taxes.... 6,649 (430) 6,219
Income taxes...... 2,821 (180)(3) 2,641
------ ----- ----------
Income before
extraordinary
item.............. 3,828 (250) 3,578
Extraordinary
item-gain on
extinguishment of
ICII debt, net of
taxes............. 370 -- 370
------ ----- ----------
Net income...... $4,198 $(250) $ 3,948
====== ===== ==========
Net income per
share........... $ 0.16
==========
Weighted average
number of shares
outstanding....... 24,200,733(7)
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, 1995 YEAR ENDED DECEMBER 31, 1996 SEPTEMBER 30, 1997
------------------------------------ ------------------------------------- --------------------------------------
ACTUAL ADJUSTMENTS PRO FORMA ACTUAL ADJUSTMENTS PRO FORMA ACTUAL ADJUSTMENTS PRO FORMA
------ --------------- ------------- ------- --------------- ------------- ------- ---------------- -------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUE
Interest on
loans............. $6,726 $(749)(1) $ 5,977 $10,629 $(868)(1) $ 9,761 $10,478 $ (503)(1) $ 9,975
Other interest
income............ 153 -- 153 158 -- 158 143 -- 143
------ --------------- ------------- ------- --------------- ------------- ------- ---------------- -------------
Total interest
income.......... 6,879 (749) 6,130 10,787 (868) 9,919 10,621 (503) 10,118
Interest expense.. 1,287 (224)(1)(2) 1,063 1,973 (72)(1)(2) 2,045 1,648 1,919 (1)(2) 3,567
------ --------------- ------------- ------- --------------- ------------- ------- ---------------- -------------
Net interest
income.......... 5,592 (525) 5,067 8,814 (940) 7,874 8,973 (2,422) 6,551
Provision for
loan losses....... 1,492 (444)(1) 1,048 1,781 (574)(1) 1,207 1,866 (36)(1) 1,830
------ --------------- ------------- ------- --------------- ------------- ------- ---------------- ------------
Net interest
income after
provision for
loan losses..... 4,100 (81) 4,019 7,033 (366) 6,667 7,107 (2,386) 4,721
------ --------------- ------------- ------- --------------- ------------- ------- ---------------- ------------
Trust fees........ 8,385 -- 8,385 7,744 -- 7,744 5,842 -- 5,842
Gain on sale of
SBA loans......... 1,813 -- 1,813 3,561 -- 3,561 2,980 -- 2,980
Equity in net
income of ICII.... 5,652 -- 5,652 21,444 -- 21,444 8,362 -- 8,362
Gain on sale of
ICII stock ....... -- -- -- 25,650 -- 25,650 2,429 -- 2,429
Gain from sale of
stock by ICII..... -- -- -- 10,761 -- 10,761 -- -- --
Other income...... 677 -- 677 4,958 -- 4,958 4,823 -- 4,823
------ --------------- ------------- ------- --------------- ------------- ------- ---------------- ------------
Total other
income.......... 16,527 0 16,527 74,118 -- 74,118 24,436 -- 24,436
------ --------------- ------------- ------- --------------- ------------- ------- ---------------- ------------
Total revenue... 20,627 (81) 20,546 81,151 (366) 80,785 31,543 (2,386) 29,157
------ --------------- ------------- ------- --------------- ------------- ------- ---------------- ------------
EXPENSE
Personnel
expense........... 4,827 -- 4,827 6,153 -- 6,153 7,003 -- 7,003
Other expenses.... 5,568 -- 5,568 10,680 -- 10,680 14,981 -- 14,981
------ --------------- ------------- ------- --------------- ------------- ------- ---------------- ------------
Total expenses.. 10,395 -- 10,395 16,833 -- 16,833 21,984 -- 21,984
------ --------------- ------------- ------- --------------- ------------- ------- ---------------- ------------
Income before
income taxes.... 10,232 (81) 10,151 64,318 (366) 63,952 9,559 (2,386) 7,173
Income taxes...... 4,313 (34)(3) 4,279 25,674 (156)(3) 25,518 3,141 (1,002)(3) 2,139
------ --------------- ------------- ------- --------------- ------------- ------- ---------------- ------------
Income before
extraordinary
item.............. 5,919 (47) 5,872 38,644 (210) 38,434 -- (1,384) 5,034
Extraordinary
item-gain on
extinguishment of
ICII debt, net of
taxes............. -- -- -- -- -- -- -- -- --
------ --------------- ------------- ------- --------------- ------------- ------- ---------------- ------------
Net income...... $5,919 $ (47) $ 5,872 $38,644 $(210) $ 38,434 $ 6,418 $(1,384) $ 5,034
====== =============== ============= ======= =============== ============= ======= ================ ============
Net income per
share........... $ 0.23 $ 1.47 $ 0.17
============= ============= =============
Weighted average
number of shares
outstanding....... 25,168,985(7) 26,116,767(7) 26,826,935(7)
</TABLE>

See accompanying notes to unaudited pro forma combined financial data.

35
<PAGE>

UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
PRO FORMA COMBINED BALANCE SHEET
(UNAUDITED)

<TABLE>
<CAPTION>
AT DECEMBER 31, 1995 AT DECEMBER 31, 1996 AT SEPTEMBER 30, 1997
--------------------------------- -------------------------------- --------------------------------
PRO PRO PRO
ACTUAL ADJUSTMENTS FORMA ACTUAL ADJUSTMENTS FORMA ACTUAL ADJUSTMENTS FORMA
-------- ----------- -------- -------- ----------- -------- -------- ----------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and cash
equivalents......... $ 2,272 $ -- $ 2,272 $ 5,245 $ -- $ 5,245 $ 2,522 $ -- $ 2,522
Securities available
for sale, at fair
value............... 1,437 -- 1,437 1,179 -- 1,179 6,987 -- 6,987
Loans held for sale.. 2,648 -- 2,648 5,531 -- 5,531 4,855 -- 4,855
Loans held for
investment, net..... 75,518 (10,715)(4) 64,803 72,528 (9,224)(4) 63,304 123,296 (6,449)(4) 116,847
Investment in stock
of ICII............. 36,126 -- 36,126 57,736 -- 57,736 64,192 -- 64,192
Premises and
equipment, net...... 290 -- 290 306 -- 306 364 -- 364
Excess servicing fees
receivable.......... 1,407 -- 1,407 3,294 -- 3,294
Mortgage servicing
rights.............. -- -- -- -- -- -- 1,955 -- 1,955
Other assets......... 5,332 (1,005)(4) 4,327 8,101 (244)(4) 7,857 5,594 (243)(4) 5,351
-------- -------- -------- -------- ------- -------- -------- -------- --------
Total assets........ $125,030 $(11,720) $113,310 $153,920 $(9,468) $144,452 $209,765 $ (6,692) $203,073
======== ======== ======== ======== ======= ======== ======== ======== ========
LIABILITIES AND
STOCKHOLDER'S EQUITY
Line of credit....... $ -- $ 56,419 (5) $ 56,419 $ -- $43,622 (5) $ 43,622 $ -- $112,898 (5) $112,898
Borrowings from
Imperial Bank....... 49,897 (49,897)(5) -- 6,184 (6,184)(5) -- 68,813 (68,813)(5) --
Income taxes payable. 12,876 (369)(4) 12,507 40,340 (612)(4) 39,728 26,240 (1,217)(4) 25,023
Other liabilities.... 4,056 -- 4,056 10,550 -- 10,550 11,275 (34)(4) 11,241
-------- -------- -------- -------- ------- -------- -------- -------- --------
Total liabilities... 66,829 6,153 72,982 57,074 36,826 93,900 106,328 42,834 149,162
STOCKHOLDER'S EQUITY
Common stock......... -- -- -- -- -- -- -- -- --
Contribution by
Imperial Bank....... 1,597 -- 1,597 1,597 -- 1,597 1,597 -- 1,597
Unrealized gain on
securities available
for sale, net of
taxes............... (2) -- (2) (1) -- (1) 172 -- 172
Retained earnings.... 56,606 (17,873)(6) 38,733 95,250 (46,294)(6) 48,956 101,668 (49,526)(6) 52,142
-------- -------- -------- -------- ------- -------- -------- -------- --------
Total stockholder's
equity............. 58,201 (17,873) 40,328 96,846 (46,294) 50,552 103,437 (49,526) 53,911
-------- -------- -------- -------- ------- -------- -------- -------- --------
Total liabilities
and stockholder's
equity............. $125,030 $(11,720) $113,310 $153,920 $(9,468) $144,452 $209,765 $ (6,692) $203,073
======== ======== ======== ======== ======= ======== ======== ======== ========
</TABLE>

See accompanying notes to unaudited pro forma combined financial data.

36
<PAGE>

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL DATA

The unaudited pro forma combined financial data presented reflect the
elimination of certain assets and liabilities and the related revenues and
expenses which will be retained by the Bank after the Distribution and to
which the Company will have no future rights to, or receive economic benefit
from, and to reflect an increase in interest expense as if the Company had
operated using its proposed Credit Facilities during all periods presented.

(1) Reflects the retention of ICII related mortgage loans by the Bank pursuant
to the Contribution Agreement and the impact on interest income, interest
expense and the provision for loan losses. See "Relationship and
Agreements Among the Company, the Bank and Bancorp After the
Distribution--Contribution Agreement."

(2) Reflects the inclusion of estimated additional interest expense related to
the additional borrowings and interest expense which would have been
incurred had the Company financed its borrowings on the proposed Credit
Facilities terms rather than the Bank's average 90 day certificate of
deposit rate plus 100 basis points. Assumes that the Credit Facilities
will provide for an interest rate of LIBOR (as defined herein) plus 95
basis points plus loan and other fees for the $140 million credit facility
and LIBOR plus 60 basis points plus loan and other fees for the $30
million credit facility. The estimated effective interest rate for the
years ended December 31, 1994, 1995 and 1996 and for the nine months ended
September 30, 1997 was 6.25%, 7.69%, 7.20% and 7.34%, respectively, as
compared to 5.08%, 6.93%, 6.46% and 6.60% reflected in the historical
combined financial statements for the same periods.

(3) Reflects the tax impact of pro forma adjustments to income before taxes as
discussed above.

(4) Reflects the retention of certain assets, including ICII related mortgage
loans, and liabilities by the Bank pursuant to the Contribution Agreement.
See "Relationship and Agreements Among the Company, the Bank and Bancorp
After the Distribution--Contribution Agreement."

(5) Reflects borrowings under the proposed Credit Facilities and repayment of
borrowings from the Bank. See "Credit Facilities."

(6) Represents the amount of net book value of the IFG Business reflected in
the Company's historical financial statements in excess of the Company's
net book value as of September 30, 1997, December 31, 1996 and December
31, 1995 in accordance with the Contribution Agreement. See "Relationship
and Agreements Among the Company, the Bank and Bancorp After the
Distribution--Contribution Agreement" and "Credit Facilities."

(7) Represents the weighted average number of shares of Bancorp Common Stock
outstanding during the period.

37
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion is intended to provide information to facilitate
the understanding and assessment of significant changes in trends related to
the financial condition of the Company and its results of operations. It
should be read in conjunction with the Company's Combined Financial Statements
and Notes thereto included elsewhere in this Information Statement.

The Combined Financial Statements and Notes thereto reflect the historical
operation of the Company together with all of its assets and liabilities as if
the Company existed as a stand alone entity during the periods presented.
These historical operations of the Company have been adjusted to reflect the
Company as a stand-alone company, including the adjustments to reflect the
borrowings, equity, taxes, various overhead costs related to the Company and
necessary deconsolidating entries.

RESULTS OF OPERATIONS

Nine Months Ended September 30, 1997 Compared to the Nine Months Ended
September 30, 1996

Total revenues for the nine months ended September 30, 1997 decreased 55% to
$31.5 million as compared to $70.9 million for the same period of the previous
year. Expenses for the nine months ended September 30, 1997 increased 63% to
$22.0 million as compared to $13.5 million for the same period of the previous
year. Net income for the nine months ended September 30, 1997 decreased 81% to
$6.4 million as compared to $34.6 million for the same period of the previous
year. Total revenues and net income decreased primarily due to a reduction in
the level of gains and income associated with the Company's stock ownership of
ICII as compared to that recorded during the nine months ended September 30,
1996. Partially offsetting the decrease were increased revenues from net
interest income and gain on sale of SBA loans. Net income decreased primarily
due to the aforementioned decrease in total revenues in addition to increases
in personnel expense and the settlement of a consulting agreement with an
executive officer of the Bank which resulted in a $3.0 million charge net of a
$2.4 million gain on the sale of ICII stock during the third quarter of 1997.

Net income, excluding gains from the sale of ICII stock, income associated
with the sale of subsidiary stock by ICII and income associated with the
appreciation in value of ICII stock subsequently donated to not-for-profit
organizations and settlement of a consulting agreement ("core net income") for
the nine months ended September 30, 1997 decreased to $7.7 million from $7.8
million for the same period of the previous year.

The annualized return on average stockholder's equity for the nine months
ended September 30, 1997 was 8.28%, a decrease from 60.93% for the same period
of the previous year. The annualized return on average total assets was 4.73%
for the nine months ended September 30, 1997, a decrease from 31.80% for the
same period of the previous year. Annualized core net income as a percentage
of average stockholder's equity for the nine months ended September 30, 1997
was 9.94%, a decrease from 13.69% for the same period of the previous year.
Annualized core net income as a percentage of average assets for the nine
months ended September 30, 1997 was 5.67%, a decrease from 7.14% for the same
period of the previous year.

The increase in interest income for the nine months ended September 30, 1997
to $10.6 million from $8.2 million for the same period of 1996 resulted from
the $16.2 million, or 18% increase in average loans for 1997 from 1996. The
increase in interest income was also impacted by an increase in the yield from
interest earning assets to 13.15% from 11.94% for the same period of the
previous year. The decrease in interest expense to $1.6 million in 1997 from
$1.8 million in 1996 was directly related to a $3.2 million decrease in
average borrowings from the Bank in 1997 and was partially offset by an
increase in the cost of borrowings from the Bank to 6.60% for 1997 from 6.46%
for 1996. The Company's borrowing costs have been tied to the Bank's average
90-day certificate of deposit rate plus 1%.

Net interest income amounted to $9.0 million for the nine months ended
September 30, 1997, up from $6.4 million for the same period in 1996, an
increase of 40%. The Company's interest rate margin for the nine months ended
September 30, 1997 and 1996 was 11.11% and 9.33%, respectively, reflecting the
Company's relatively low level of interest-bearing liabilities compared to
interest-earning assets.

38
<PAGE>

The provision for loan losses for the nine months ended September 30, 1997
was $1.9 million as compared to $1.6 million for the same period of 1996. The
increase in the provision for loan losses was primarily related to the growth
in the Company's loan portfolio, an increased concentration of LHO Gap Loans
and an increase in the level of criticized loans, charge-offs and
delinquencies. At September 30, 1996 and 1997, the allowance for loan losses
as a percentage of total loans was 3.26% and 2.97%, respectively. The
allowance for loan losses as a percentage of non-performing loans at September
30, 1996 and 1997 was 47.33% and 234.65%, respectively. This increase was
mainly due to a 66% decrease in non-performing loans from $4.9 million at
September 30, 1996 to $1.7 million at September 30, 1997.

Trust fee income amounted to $5.8 million for each of the nine months ended
September 30, 1997 and September 30, 1996, while trust assets under
administration increased 18% to $8.8 billion at September 30, 1997 from $7.2
billion at September 30, 1996. Trust fee income remained level while trust
assets under administration increased due to a reduction in fees to offer more
competitive pricing. Trust fees, as a percent of average fiduciary assets
managed for the nine months ended September 30, 1997, were 0.07% compared to
0.08% for the same period of the previous year.

Gain on sale of SBA loans increased 19% to $3.0 million for the nine months
ended September 30, 1997 as compared to $2.5 million for the same period of
the previous year. Gain on sale of SBA loans primarily consists of the cash
gains recorded from the sale of the guaranteed portion of SBA loans and the
present value of future cash flows of loans sold over a base fee. The increase
for the nine months ended September 30, 1997 compared to the same period of
the previous year was due to an increase in the volume of SBA loans sold.

The Company realized a significant increase in equity in the net income of
ICII for the nine months ended September 30, 1996. In June 1996, ICII sold 2.3
million shares of its subsidiary, Southern Pacific Funding Corporation
("SPFC"), in connection with SPFC's initial public offering of 5.7 million
shares. The Company's net equity in this pretax gain realized by ICII
approximated $8.6 million and is included in the Consolidated Statement of
Income as a component of "Equity in net income of Imperial Credit Industries,
Inc." Excluding gains from the SPFC transaction, the equity in net income of
ICII amounted to $7.9 million for the nine months ended September 30, 1997,
compared to $8.0 million for the same period of the previous year. For further
information on ICII, see Note 10 of the Notes to the Company's Combined
Financial Statements.

On September 30, 1997, the fair value of ICII common stock was $26.50 per
share, representing a pre-tax unrealized gain of the Company's investment of
over $176 million. The Company currently has no plans to realize such gains in
the future except to fund the satisfaction of the balance of its obligations
under the consulting agreement referred to below.

During the third quarter of 1997, the Company sold 166,264 shares of ICII
stock. The proceeds from the sale of 115,764 of these shares were paid to a
senior executive of the Bank in partial satisfaction of the Company's
obligation pursuant to the terms of a consulting agreement with the senior
executive. The sale of the 166,264 shares resulted in a gain of $2.4 million.
The Company recorded a corresponding consulting expense of $2.4 million. In
April 1996, the Company sold 1.5 million shares of ICII as a part of an
offering which included the sale of approximately 2.2 million new ICII shares
by ICII to the public. An additional 0.5 million shares were sold by ICII to
the public in May 1996. The Company recorded a $25.6 million pre-tax gain on
the sale of its ICII shares. After the sales of ICII shares, the book value of
ICII common stock approximated $8.72 per share. As such, the Company recorded
a $10.8 million pre-tax gain which approximated the excess of ICII's book
value per share over the book value of the Company's remaining investment in
ICII.

The Company recognized $2.8 million in appreciation of donated ICII stock
for the nine months ended September 30, 1997 compared to $3.8 million for the
same period the previous year. The appreciation represents the difference
between the market value and book value of the ICII shares on the date they
were donated. The Company recorded a corresponding charitable donation expense
of $3.6 million for the nine months ended September 30, 1997 compared to $4.9
million for the same period the previous year.

Excluding the gain on sale of ICII stock, income associated with the sale of
subsidiary stock by ICII and the appreciation of donated ICII stock, total
revenue increased 18% to $26.3 million for the nine months ended September 30,
1997 from $22.2 million for the same period of the previous year.

39
<PAGE>

Total expenses increased 63% to $22.0 million for the nine months ended
September 30, 1997, from $13.5 million for nine months ended September 30,
1996. The table below shows the major components of expenses at the dates
indicated:

<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1997
------------- -------------
(IN THOUSANDS)
<S> <C> <C>
Personnel........................................ $ 4,519 $ 7,003
Occupancy, net................................... 744 894
Data processing.................................. 470 465
Donation of ICII stock........................... 4,742 3,632
Other............................................ 3,005 9,990
------- -------
Total............................................ $13,480 $21,984
======= =======
</TABLE>

The primary factors for the increase in total expenses for the nine months
ended September 30, 1997 were increased personnel and other expenses.
Personnel expense rose 55% to $7.0 million for the nine months ended
September 30, 1997 from $4.5 million for the same period of 1996. The number
of employees increased 18% to 106 at the September 30, 1997 from 90 at
September 30, 1996. In addition, the Company entered into a new employment
agreement with Lewis Horwitz, president and chief executive officer of the LHO
division, effective January 1, 1997, which contributed to the increase in
personnel expenses. Also, the cost of the Company's deferred compensation
plans increased 456% to $1.0 million for the nine months ended September 30,
1997 from $0.2 million for the same period of the previous year.

Other expense, including supplies, professional services and business
development expenses, increased 230% to $10.0 million for the nine months
ended September 30, 1997 from $3.0 million for the same period of the previous
year mainly due to increased consulting expense described below.

In accordance with two consulting agreements, one with a senior executive of
the Bank and the second with Second Southern Corp., an entity wholly-owned by
the chief executive officer of the Company ("Southern"), the Company is
obligated to pay commissions upon the sale of ICII shares. Each consultant is
entitled thereunder to receive an incentive fee of 2.5% of the realized pre-
tax gains received by the Company, when and if realized, from the disposition
of the remaining ICII shares held by the Company. If such sale by the Company
has not occurred prior to certain specified dates, the agreements require that
the Company will have considered to have sold an amount equal to 20% of any
such security as of January 1 of each year from 1997 through 2001, at a price
equal to the arithmetic average of the daily average stock price of ICII
common stock as reported by NASD during the preceding year. These agreements
have been accrued for over the vesting periods and remeasured quarterly for
changes in the average market price of ICII stock.

In August 1997, in partial satisfaction of the Company's obligation related
to the consulting agreement with the senior executive of the Bank, the Company
agreed to pay to the executive the proceeds received from selling 115,764
shares of ICII stock in the third quarter of 1997. This resulted in the
Company recording a corresponding consulting expense of $2.4 million. In
addition, the Company has agreed to pay the executive the proceeds from the
sale of an additional 115,764 shares of ICII stock in the fourth quarter of
1997 and has accrued approximately $3.0 million in additional consulting
expense in the third quarter of 1997 as a result of this obligation.

Based on the daily average market price for the nine months ended September
30, 1997 of $20.74 per share, less Southern's basis of $0.88 per share as of
September 30, 1997, as adjusted for stock splits and dividends, the deferred
charge and associated liability relating to this consulting agreement
approximated $2.3 million and $4.5 million, respectively, at September 30,
1997. The expense relating to this remaining consulting agreement is being
accrued over the vesting period and will be remeasured quarterly for changes
in the average market price. During the nine months ended September 30, 1997
and 1996, the Company recorded an expense relating to this remaining agreement
of $0.4 million and $0.3 million, respectively, to its combined statements of
income for this agreement.

40
<PAGE>

The Company recorded income tax expense of $3.1 million for the nine months
ended September 30, 1997 representing an effective tax rate of approximately
32.7%, compared to tax expense of $22.8 million for the nine months ended
September 30, 1996 representing an effective tax rate of approximately 39.1%.
The decrease in the effective tax rate was primarily due to the exclusion of
the $2.8 million appreciation of donated ICII stock from taxable income for
the nine months ended September 30, 1997.

Year ended December 31, 1996 Compared to the Year Ended December 31, 1995

Total revenues for the year ended December 31, 1996 increased 293% to $81.2
million, compared to $20.6 million for the same period of the previous year.
Expenses for the year ended December 31, 1996 increased 62% to $16.8 million,
compared to $10.4 million for the same period of the previous year. Net income
for the year ended December 31, 1996 increased 553% from $5.9 million in 1995
to $38.6 million for 1996. Net income increased primarily due to increased
revenues from net interest income, gain on sale of loans, and gains related to
the Company's stock ownership of ICII, partially offset by lower trust fee
income and increased total expenses.

Core net income for the year ended December 31, 1996 increased 82% to $10.4
million from $5.9 million for the same period of the previous year.

The return on average stockholder's equity for the year ended December 31,
1996 was 49.51%, an increase from 10.32% for the same period of the previous
year. The return on average total assets was 27.74% for the year ended
December 31, 1996, an increase from 6.54% for the same period of the previous
year. Core net income as a percentage of average stockholder's equity for the
year ended December 31, 1996 was 13.30%, an increase from 10.32% for the same
period of the previous year. Core net income as a percentage of average assets
for the year ended December 31, 1996 was 7.45%, an increase from 6.54% for the
same period of the previous year.

The increase in interest income for the year ended December 31, 1996 to
$10.8 million from $6.9 million for the same period of 1995 primarily resulted
from the $34 million, or 66% increase, in average loans, for 1996 from 1995
and was partially offset by the decline in the yield on interest-earning
assets to 12.38% in 1996 from 12.85% in 1995. The increase in interest income
was partially offset by an increase in interest expense for 1996. The increase
in interest expense from $1.3 million in 1995 to $2.0 million in 1996 was due
to a $12 million increase in average borrowings from the Bank in 1996 and was
offset by the decline in the cost of borrowings from the Bank to 6.46% for
1996 from 6.93% for 1995.

Net interest income amounted to $8.8 million for the year ended December 31,
1996, up from $5.6 million for the same period of 1995, an increase of 58%.
The Company's net interest rate margin for the years ended December 31, 1996
and 1995 was 10.11% and 10.45%, respectively.

The provision for loan losses for the year ended December 31, 1996 was $1.8
million, compared to $1.5 million for the same period of 1995. The increase in
the loan loss provision was mainly due to an increase in nonaccrual loans to
$4.9 million at December 31, 1996, compared to $2.7 million at December 31,
1995. At December 31, 1995 and 1996, the allowance for loan losses as a
percentage of total loans was 1.93% and 3.26%, respectively.

Trust fee income decreased 8% from $8.4 million for the year ended December
31, 1995 to $7.7 million for the year ended December 31, 1996, while trust
assets under administration increased 10% from $6.8 billion to $7.5 billion at
December 31, 1995 and 1996, respectively. The primary reasons for the decline
in trust fee income while trust assets under administration increased were a
decline in ITC's certificate of deposit custodial balances and a reduction in
fees to offer more competitive pricing. In late 1994, ITC purchased from the
Federal Deposit Insurance Corporation, in its capacity as Receiver of
CommerceBank, the custody of approximately $193 million in certificates of
deposit. The fees related to the custody of these deposits have decreased
since the purchase as the related certificates of deposit matured. These fees
decreased from $1.5 million in 1995 to $0.8 million for 1996. Trust fees, as a
percentage of average fiduciary assets managed for the year ended December 31,
1996, were 0.10% compared to 0.13% for the same period of the previous year.

41
<PAGE>

Gain on sale of SBA loans increased 96% to $3.6 million for the year ended
December 31, 1996, compared to $1.8 million for the same period of the
previous year. The increase was a result of the growth in the volume of SBA
loans sold. 111 SBA loans were sold during the year ended December 31, 1996 as
compared to 90 SBA loans during the same period of 1995.

The Company realized a significant increase in equity in the net income of
ICII in 1996. In June 1996, ICII sold 2.3 million shares of SPFC in connection
with SPFC's initial public offering of 5.7 million shares. In the fourth
quarter of 1996, ICII sold an additional 1.0 million shares of SPFC to the
public. ICII's sale of its SPFC stock resulted in a pre-tax gain to ICII of
$82.7 million. The Company's net equity in this pre-tax gain realized by ICII
approximated $11.8 million and is included in the Combined Statement of Income
as "Equity in net income of Imperial Credit Industries, Inc." Excluding gains
from the SPFC transaction, the equity in net income of ICII increased $4.4
million in 1996 despite the reduction in ownership percentage to approximately
24.5%. The improvement was due to ICII's greater volume and higher
profitability on loan sales executed through securitization transactions as
well as a full year of income realized by ICII from new businesses acquired by
ICII in 1995.

In April 1996, the Company sold 1.5 million shares of ICII as a part of an
offering which included the sale of approximately 2.2 million new ICII shares
by ICII to the public. An additional 0.5 million shares were sold by ICII to
the public in May 1996. The Company recorded a $25.6 million pre-tax gain on
the sale of its ICII shares. After the sales of ICII shares, the book value of
ICII common stock approximated $8.72 per share. As such, the Company recorded
a $10.8 million pre-tax gain which approximated the excess of ICII's book
value per share over the book value of the Company's remaining investment in
ICII.

The principal reason for the increase in other income for the year ended
December 31, 1996 was $3.7 million in appreciation of ICII stock which was
donated to not-for-profit organizations. The appreciation represents the
difference between the fair value and book value of the ICII shares on the
date they were donated. The Company recorded a corresponding charitable
donation expense of $4.9 million which is included in total expenses specified
above in "Selected Combined Financial Data."

Excluding the gain on sale of ICII stock, income associated with the sale of
subsidiary stock by ICII and the appreciation of donated ICII stock, total
revenues for the Company increased from $20.6 million for the year ended
December 31, 1995 to $29.2 million for the same period of 1996, an increase of
42%.

Total expenses increased 62% to $16.8 million for the year ended December
31, 1996, compared to $10.4 million for the year ended December 31, 1995. The
table below shows the major components of expenses:

<TABLE>
<CAPTION>
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Personnel.................................................... $ 4,827 $ 6,153
Occupancy, net............................................... 887 1,024
Data processing.............................................. 518 562
Donation of ICII stock....................................... -- 4,866
Other........................................................ 4,163 4,228
------- -------
Total........................................................ $10,395 $16,833
======= =======
</TABLE>

The primary reason for the increase in total expenses for the year ended
December 31, 1996 was the donation of ICII stock to not-for-profit
organizations. Excluding the donation of ICII stock, total expenses for the
year ended December 31, 1996 increased 15% as compared to the same period of
the previous year, mainly due to increased personnel expenses. Personnel
expenses rose 27% to $6.2 million for the year ended December 31, 1996 from
$4.8 million for the same period of 1995. In addition to expanding its SBA
operations from four lending offices in 1995 to eight lending offices in 1996,
which caused net occupancy expense to increase 15% in 1996, the Company's
focus on growth has centered around an investment in its people. The number of
employees increased 12% from 86 at the end of 1995 to 96 at the end of 1996.
Also, the cost of the

42
<PAGE>

Company's profit sharing plan, employee stock ownership plan, 401(k) plan and
deferred compensation plans increased 109% from $0.2 million for the year
ended December 31, 1995 to $0.5 million for the year ended December 31, 1996.

Other expense, including supplies, professional services and business
development expenses, was $4.2 million for both the year ended December 31,
1996 and the year ended December 31, 1995.

The Company recorded income tax expense of $25.7 million for the year ended
December 31, 1996 representing an effective tax rate of approximately 40.0%,
compared to tax expense of $4.3 million for the year ended December 31, 1995,
representing an effective tax rate of approximately 42.1%.

Year ended December 31, 1995 Compared to the Year Ended December 31, 1994

Total revenues for the year ended December 31, 1995 increased 33% to $20.6
million, compared to $15.5 million for the same period of the previous year.
Expenses for the year ended December 31, 1995 increased 17% to $10.4 million,
compared to $8.9 million for the same period of the previous year. Net income
for the year ended December 31, 1995 increased 41% from $4.2 million in 1994
to $5.9 million for 1995. Net income increased primarily due to increased
revenues from net interest income, trust fee income and income related to the
Company's stock ownership of ICII, partially offset by an increase in the
provision for loan losses and total expenses.

The return on average stockholder's equity for the year ended December 31,
1995 was 10.32%, an increase from 8.02% for the same period of the previous
year. The return on average total assets was 6.54% for the year ended December
31, 1995, an increase from 5.67% for the same period of the previous year.

The increase in interest income for the year ended December 31, 1995 to $6.9
million, from $4.4 million for the same period of 1994, resulted from the
$13.1 million or 35% increase in average loans for 1995 from 1994 and an
increase in the yield on interest-earning assets to 12.85% for 1995 from
10.78% for 1994. The increase in the yield on interest-earning assets was due
to an increase in the Company's base lending rate. The Company's average base
lending rate for the year ended December 31, 1995 was 8.83%, compared to 7.14%
for the same period of the previous year. The increase in interest income was
partially offset by an increase in interest expense for 1995. The increase in
interest expense from $0.3 million in 1994, to $1.3 million in 1995, was due
to a $13.5 million increase in average borrowings from the Bank and an
increase in the cost of borrowings from the Bank to 6.93% for 1995 from 5.08%
for 1994.

Net interest income amounted to $5.6 million for the year ended December 31,
1995, up from $4.1 million for the same period of 1994, an increase of 36%.
The Company's net interest rate margin for the year ended December 31, 1995
increased to 5.9%, compared to 5.7% for the same period the previous year.

The Provision for loan losses for the year ended December 31, 1995 was $1.5
million, compared to no provision for the same period of 1994. The increase in
the provision for loan losses was primarily related to the 35% growth in the
Company's average loan portfolio and an increase in nonaccrual loans to $2.7
million at December 31, 1995 from $1.3 million at December 31, 1994. At
December 31, 1994 and 1995, the allowance for loan losses as a percentage of
total loans was 2.19% and 1.93%, respectively.

Trust fee income increased 22%, from $6.9 million for the year ended
December 31, 1994, to $8.4 million for the year ended December 31, 1995, while
trust assets under administration increased 19% from $5.7 billion to $6.8
billion at December 31, 1994 and 1995, respectively. While the trust assets
under administration at year end 1995 increased 19%, the average trust assets
under administration during 1994 and 1995 remained at approximately $6.2
billion for each year. The increase in trust fee income was primarily due to
the September 1994 purchase by ITC from the Federal Deposit Insurance
Corporation, in its capacity as Receiver of CommerceBank, of the custody of
approximately $193 million in certificates of deposit. These fees increased
from $0.2 million in 1994 to $1.5 million for 1995. Trust fees, as a
percentage of average fiduciary assets

43
<PAGE>

managed for the year ended December 31, 1995, were 0.13%, compared to 0.11%
for the same period of the previous year.

Gain on sale of SBA loans increased 5% to $1.8 million for the year ended
December 31, 1995 as compared to $1.7 million for the same period of the
previous year.

The increase in the Company's equity in the net income of ICII was another
factor contributing to the Company's total revenue growth. For the year ended
December 31, 1995, equity in the net income of ICII was $5.7 million, compared
to $2.4 million for the year ended December 31, 1994.

Total expenses increased 17% to $10.4 million for the year ended December
31, 1995, compared to $8.9 million for the year ended December 31, 1994. The
table below shows the major components of expenses:

<TABLE>
<CAPTION>
1994 1995
------ -------
(IN THOUSANDS)
<S> <C> <C>
Personnel..................................................... $4,338 $ 4,827
Occupancy, net................................................ 757 887
Data processing............................................... 795 518
Other......................................................... 2,963 4,163
------ -------
Total......................................................... $8,853 $10,395
====== =======
</TABLE>

Personnel expenses increased 11%, from $4.3 million for the year ended
December 31, 1994 to $4.8 million for the year ended December 31, 1995, and
was primarily a result of an increase in the number of employees from 77 at
the end of 1994 to 86 at the end of 1995.

Other expenses increased 40%, to $4.2 million for the year ended December
31, 1995 from $2.9 million for the same period the previous year. This
increase was due to the recording of a $1.6 million charge for mortgage
repurchase obligations related to the initial sale of stock of ICII in 1992.

The Company recorded income tax expense of $4.3 million for the year ended
December 31, 1995 representing an effective tax rate of approximately 42.1%,
compared to tax expense of $2.8 million for the year ended December 31, 1994,
representing an effective tax rate of approximately 42.4%.

44
<PAGE>

SEGMENT REPORTING

The Company operates in three principal business segments: the origination
and sale of SBA loans (CAB), the origination of entertainment loans (LHO) and
the provision of trust services (ITC). Certain financial information with
respect to these business segments, as well as such financial information
related to other operations of the Company, primarily ICII (ICII and Other),
are summarized in the following tables:

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, ICII AND
1994 CAB LHO ITC OTHER COMBINED
- ------------------------------- ------- ------- ------ -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net interest income.............. $ 346 $ 2,136 $ 130 $ 1,491 $ 4,103
Provision for loan losses........ (139) 45 -- 94 --
Noninterest income............... 1,841 140 7,051 2,367 11,399
------- ------- ------ ------- --------
Total revenue.................. 2,048 2,321 7,181 3,952 15,502
Noninterest expense.............. 976 1,129 5,547 1,201 8,853
------- ------- ------ ------- --------
Income before income taxes..... 1,072 1,192 1,634 2,751 6,649
Income tax expense............... 454 505 699 1,163 2,821
Extraordinary gain, net of taxes. -- -- -- 370 370
------- ------- ------ ------- --------
Net income..................... $ 618 $ 687 $ 935 $ 1,958 $ 4,198
======= ======= ====== ======= ========
Average assets................... $ 6,770 $20,355 $5,298 $41,604 $ 74,027
------- ------- ------ ------- --------
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, ICII AND
1995 CAB LHO ITC OTHER COMBINED
- ------------------------------- ------- ------- ------ -------- --------
<S> <C> <C> <C> <C> <C>
Net interest income.............. $ 870 $ 2,821 $ 144 $ 1,757 $ 5,592
Provision for loan losses........ (281) (767) -- (444) (1,492)
Noninterest income............... 1,932 379 8,680 5,536 16,527
------- ------- ------ ------- --------
Total revenue.................. 2,521 2,433 8,824 6,849 20,627
Noninterest expense.............. 1,862 696 5,769 2,068 10,395
------- ------- ------ ------- --------
Income before income taxes..... 659 1,737 3,055 4,781 10,232
Income tax expense............... 279 736 1,302 1,996 4,313
------- ------- ------ ------- --------
Net income..................... $ 380 $ 1,001 $1,753 $ 2,785 $ 5,919
======= ======= ====== ======= ========
Average assets................... $16,895 $24,235 $6,846 $42,551 $ 90,527
------- ------- ------ ------- --------
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, ICII AND
1996 CAB LHO ITC OTHER COMBINED
- ------------------------------- ------- ------- ------ -------- --------
<S> <C> <C> <C> <C> <C>
Net interest income.............. $ 1,488 $ 4,086 $ 138 $ 3,102 $ 8,814
Provision for loan losses........ (348) (859) -- (574) (1,781)
Noninterest income............... 3,844 746 7,975 61,553 74,118
------- ------- ------ ------- --------
Total revenue.................. 4,984 3,973 8,113 64,081 81,151
Noninterest expense.............. 2,851 1,776 6,258 5,948 16,833
------- ------- ------ ------- --------
Income before income taxes..... 2,133 2,197 1,855 58,133 64,318
Income tax expense............... 903 930 790 23,051 25,674
------- ------- ------ ------- --------
Net income..................... $ 1,230 $ 1,267 $1,065 $35,082 $ 38,644
======= ======= ====== ======= ========
Average assets................... $27,593 $47,122 $7,034 $57,571 $139,320
------- ------- ------ ------- --------
</TABLE>

45
<PAGE>

<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED ICII AND
SEPTEMBER 30, 1996 CAB LHO ITC OTHER COMBINED
- ------------------------- ------- ------- ------ -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net interest income............... $ 865 $ 3,104 $ 100 $ 2,323 $ 6,392
Provision for loan losses......... (405) (706) -- (470) (1,581)
Noninterest income................ 2,640 783 6,024 56,593 66,040
------- ------- ------ ------- --------
Total revenue................... 3,100 3,181 6,124 58,446 70,851
Noninterest expense............... 2,013 1,309 4,599 5,559 13,480
------- ------- ------ ------- --------
Income before income taxes...... 1,087 1,872 1,525 52,887 57,371
Income tax expense................ 461 793 649 20,863 22,766
------- ------- ------ ------- --------
Net income...................... $ 626 $ 1,079 $ 876 $32,024 $ 34,605
======= ======= ====== ======= ========
Average assets.................... $31,352 $47,644 $7,418 $58,690 $145,104
------- ------- ------ ------- --------
<CAPTION>
FOR THE NINE MONTHS ENDED ICII AND
SEPTEMBER 30, 1997 CAB LHO ITC OTHER COMBINED
- ------------------------- ------- ------- ------ -------- --------
<S> <C> <C> <C> <C> <C>
Net interest income............... $ 1,406 $ 4,447 $ 127 $ 2,993 $ 8,973
Provision for loan losses......... (483) (1,347) -- (36) (1,866)
Noninterest income................ 3,508 1,284 6,034 13,610 24,436
------- ------- ------ ------- --------
Total revenue................... 4,431 4,384 6,161 16,567 31,543
Noninterest expense............... 3,423 3,284 4,939 10,338 21,984
------- ------- ------ ------- --------
Income before income taxes...... 1,008 1,100 1,222 6,229 9,559
Income tax expense................ 427 465 518 1,731 3,141
------- ------- ------ ------- --------
Net income...................... $ 581 $ 635 $ 704 $ 4,498 $ 6,418
======= ======= ====== ======= ========
Average assets.................... $37,449 $62,058 $8,269 $73,238 $181,014
------- ------- ------ ------- --------
</TABLE>

46
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

General

The table below summarizes cash flows generated by and used in operating
activities:

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------- ------------------
1994 1995 1996 1996 1997
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
OPERATING CASH INCOME
Interest received............ $ 4,448 $ 6,553 $ 10,781 $ 8,241 $ 10,373
Trust fees received.......... 6,866 7,937 7,856 5,838 6,141
Other income................. 1,180 655 1,371 1,288 11,781
-------- -------- -------- -------- --------
Total........................ 12,494 15,145 20,008 15,367 28,295
-------- -------- -------- -------- --------
OPERATING CASH EXPENSE
Cash operating expenses...... 8,726 10,219 11,803 8,615 18,221
Taxes paid................... 849 680 -- -- 1,100
Interest paid................ -- -- -- -- --
-------- -------- -------- -------- --------
Total........................ 9,575 10,899 11,803 8,615 19,321
-------- -------- -------- -------- --------
Net operating cash flow...... 2,919 4,246 8,205 6,752 8,974
Cash provided by (used in)
other payables and
receivables................. 3,832 (3,105) 4,918 2,983 (22,381)
Cash provided by (used in)
loans held for sale......... 931 (1,000) (2,883) (3,013) 676
-------- -------- -------- -------- --------
Net cash provided by (used
in) operating activities.... $ 7,682 $ 141 $ 10,240 $ 6,722 $(12,731)
======== ======== ======== ======== ========
Net cash provided by (used
in) investing activities.... $ 10,438 $(50,358) $ 36,446 $ 34,476 $(52,621)
======== ======== ======== ======== ========
Net cash (used in) provided
by financing activities..... $(17,226) $ 50,593 $(43,713) $(41,105) $ 62,629
======== ======== ======== ======== ========
</TABLE>

The Company's ownership of ICII stock has not been a source of cash flow
other than through the sale of such stock. ICII has not paid any cash
dividends on shares owned by the Company and there can be no assurance that
ICII will pay cash dividends in the future.

Net operating cash flow does not include income taxes or interest paid since
divisions of the Bank were not required to pay certain income taxes or
interest on borrowings, which was included in borrowings from the Bank. If the
Company had been required to make interest payments on its borrowings and pay
all taxes, net operating cash flow would have been $7.3 million for the nine
months ended September 30, 1997. After the Distribution, the Company will make
tax and interest payments which will affect its operating cash flow.

For the nine months ended September 30, 1997, the Company experienced a net
cash outflow in operating activities of $12.7 million. The Company experienced
a net cash outflow in investing activities of $52.6 million mainly to fund its
lending activity. The net outflow in operating and investing activities was
partially offset by the $62.6 million inflow in financing activities
consisting of borrowings from the Bank and an increase in deposits.

For the nine months ended September 30, 1996, the Company experienced a net
cash inflow in operating activities of $6.7 million. The Company experienced a
net cash inflow in investing activities of $34.5 million, primarily due to the
proceeds from the sale of ICII stock. The net inflow from operating and
investing activities was partially offset by an outflow of $41.1 million in
financing activities to reduce borrowings from the Bank.

For the year ended December 31, 1996, the Company experienced a net cash
inflow in operating activities of $10.2 million. The Company experienced a net
cash inflow in investing activities of $36.4 million, primarily due to the
proceeds from the sale of ICII stock. The net inflow in operating and
investing activities was partially offset by the $43.7 million outflow in
financing activities to reduce borrowings from the Bank.

47
<PAGE>

For the year ended December 31, 1995, the Company experienced a net cash
inflow in operating activities of $0.1 million. The Company experienced a net
cash outflow in investing activities of $50.4 million, primarily to fund its
lending activity. The net outflow in operating and investing activities was
offset by the $50.6 million inflow in financing activities consisting mainly
of borrowings from the Bank.

For the year ended December 31, 1994, the Company experienced a net cash
inflow in operating activities of $7.7 million. The Company experienced a net
cash inflow in investing activities of $10.4 million, primarily from payments
of principal and interest on loans. The net inflow in operating and investing
activities was partially offset by the $17.2 million outflow in financing
activities to reduce borrowings from the Bank.

The Company has an ongoing need for capital to finance its lending
activities. This need is expected to increase as the volume of the Company's
lending activity increases. The Company's primary cash requirements include
(i) the funding of loans held for investment and loans held pending their
sale, (ii) ongoing administrative and other operating expenses and (iii) the
cost of funds borrowed. Prior to the Distribution, the Company has financed
its activities exclusively through borrowings from the Bank and operating and
investing cash flows. The Company believes that the availability of borrowings
of the Credit Facilities and proceeds from a future public or private offering
of stock will be sufficient to fund the Company's liquidity requirements for
the foreseeable future. However, there can be no assurance that the Company
will have access to the capital markets in the future or that financing will
be available to satisfy the Company's operating and debt service requirements
or to fund its future growth.

Credit Facilities

The Company is in the process of establishing the Credit Facilities with a
syndicate of third party financial institutions. In order for the Bank to
replace certain deposit liabilities used to fund the IFG Business, the Bank,
along with the Company, will be party to the Credit Facilities. The Company
anticipates that these facilities will consist of a $140 million two-year
revolving credit facility for the Company's operations other than CAB and a
$30 million one-year revolving credit facility for CAB operations. The $140
million facility will include a $40 million sublimit for the issuance of
standby and commercial letters of credit. The Company anticipates that the
lenders under the Credit Facilities will require that the lenders be granted,
among other things, a first priority security interest in (a) all of the
common stock of the Company's subsidiaries, (b) the common stock of ICII owned
by the Company and (c) all payments under LHO and SBA loans included in the
facility's borrowing base. The borrowing base will be comprised of a
percentage of the current market value of the Company's investment in ICII
stock, eligible LHO loans and eligible SBA loans. It is expected that the $140
million credit facility will bear interest at an annual rate equal to .95%
over the London Interbank Offering Rate for dollar deposits ("LIBOR") or the
lead lender's base rate and the $30 million credit facility will bear interest
at an annual rate of .60% over LIBOR or the lead lender's base rate. The
Company will also be charged loan and other fees under the Credit Facilities.

It is also expected that the Credit Facilities will include financial
covenants such as maintenance of a minimum tangible net worth, maintenance of
maximum indebtedness, minimum interest coverage ratio and minimum capital
ratio levels for CAB. The Credit Facilities will also require the Company to
make customary representations and warranties prior to each borrowing and will
include customary affirmative and negative operating covenants and events of
default.

Prior to the Distribution, the Bank will borrow approximately $113 million
(as determined at September 30, 1997) under the Credit Facilities in order to
replace certain deposit liabilities used to fund loans made through LHO and
CAB. In connection with the Contribution, these loans, along with the other
assets of the IFG Business, will be transferred to the Company, the Bank will
be released from all liabilities under the Credit Facilities and the Company
will remain responsible for all liabilities under the Credit Facilities.

48
<PAGE>

Sales of Loans

The Company currently sells all of the guaranteed portion of loans originated
by CAB to institutional investors while retaining the unguaranteed portion for
investment. CAB then services the loans on behalf of the institutional
investors, passing on principal and interest received from the borrowers less a
servicing fee. Accordingly, adverse changes in the market for these loans or
the ability to obtain the SBA guarantees could impair the Company's ability to
originate and sell loans on a favorable or timely basis. Any such impairment
could have an adverse effect upon the Company's business and results of
operations. Also, any delay in the sale of loans could cause the Company's
earnings to fluctuate from quarter to quarter. Finally, the Company may be
required to repurchase loans that do not conform to the representations and
warranties made by the Company in loan sale or servicing agreements entered
into with institutional investors. See "Risk Factors--CAB Lending" and "--
Dependence of Small Business Lending Operations on SBA Programs."

Through December 31, 1996 the Company recognized excess servicing fees
receivable as a result of the sale of SBA loans. Excess servicing fees
receivable on the sale of SBA loans are determined by computing the present
value of the excess of the coupon on the loans over the sum of (i) the coupon
of the loans sold to purchasers and (ii) a base servicing fee paid to the loan
servicer, considering prepayment assumptions.

INFLATION

The Combined Financial Statements and Notes thereto presented herein have
been prepared in accordance with GAAP, which require the measurement of
financial position and operating results in terms of historical dollars without
considering the changes in the relative purchasing power of money over time due
to inflation. Inflation affects the Company as follows:

(i) The impact of inflation is reflected in the increased cost of the
Company's operations.

(ii) To the extent that inflation influences the stock and bond markets,
ITC's trust fees are based, in part, on the market values of its customers'
accounts under administration. Normally, the stock market values and bond
values decrease during periods of high inflation and increase during
periods of low inflation.

(iii) Most of the Company's assets and liabilities are monetary in
nature. As a result, interest rates have a greater impact on their
performance than do the effects of general levels of inflation. However,
inflation affects the Company and its LHO and SBA lending operations, as
well as its ownership of ICII, through its effect on interest rates, since
interest rates normally increase during periods of high inflation and
decrease during periods of low inflation. During periods of high inflation,
higher interest rate costs may dissuade borrowers from obtaining new loans,
reducing loan production and positively impacting the value of any loan
servicing assets. During periods of low inflation more borrowers can afford
to borrow and refinance higher cost debt, increasing loan production and
negatively impacting the value of any loan servicing assets.

49
<PAGE>

ASSET QUALITY

Loans Held for Investment. Loans held for investment generally have included
loans originated by LHO, the unguaranteed portions of loans originated and
sold by CAB (CAB sells the guaranteed portion of its originations while
retaining the unguaranteed portion for investment), and ICII related mortgage
loans. As part of the Contribution Agreement, the Bank will retain the ICII
related mortgage loans. The amounts outstanding and related allowances for
loan losses by type are as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------------
AT
SEPTEMBER 30,
1994 1995 1996 1997
------- ------- ------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Loans held for investment by
type:
LHO....................... $10,605 $47,691 $44,906 $ 83,742
CAB....................... 7,057 18,259 20,277 36,406
ICII related mortgage
loans (1)................ 9,334 11,104 9,974 7,069
------- ------- ------- --------
Total loans............. 26,996 77,054 75,157 127,217
------- ------- ------- --------
Allowance for loan losses by
type:
LHO....................... (161) (727) (1,163) (2,176)
CAB....................... (139) (420) (716) (1,125)
ICII related mortgage
loans (1)................ (327) (389) (750) (620)
------- ------- ------- --------
Total allowance for loan
losses................. (627) (1,536) (2,629) (3,921)
------- ------- ------- --------
Net loans held for invest-
ment by type:
LHO....................... 10,444 46,964 43,743 81,566
CAB....................... 6,918 17,839 19,561 35,281
ICII related mortgage
loans (1)................ 9,007 10,715 9,224 6,449
------- ------- ------- --------
Net loans held for
investment............. $26,369 $75,518 $72,528 $123,296
======= ======= ======= ========
</TABLE>
- --------
(1) As part of the Contribution Agreement, the Bank will retain these loans.

Although the Company generally evaluates the adequacy of its allowance on an
overall basis rather than by specific categories of loans, the following table
reflects the Company's allocation of the allowance for loan losses by loan
category and the ratio of each loan category to total loans for the periods
presented.

<TABLE>
<CAPTION>
AT DECEMBER 31, AT SEPTEMBER 30,
---------------------- ----------------
1995 1996 1997
---------- ---------- ----------------
AMOUNT % AMOUNT % AMOUNT %
------ --- ------ --- ----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Entertainment loans..... $ 727 47% $1,162 44% $ 2,175 55%
Small business loans.... 421 28% 717 27% 1,126 29%
Residential mortgage
loans(1)............... 388 25% 750 29% 620 16%
------ --- ------ --- --------- ------
Total................. $1,536 100% $2,629 100% $ 3,921 100%
====== === ====== === ========= ======
</TABLE>
- --------

(1) As part of the Contribution Agreement, the Bank will retain these loans.

50
<PAGE>

The following table presents the contractual maturities of the Company's
loan portfolio as of September 30, 1997. Expected maturities will differ from
contractual maturities because borrowers may have the right to prepay
obligations without prepayment penalties. As of September 30, 1997, all of the
Company's loans with a maturity of more than one year were tied to interest
rate indices (e.g., Prime or LIBOR).

<TABLE>
<CAPTION>
DUE AFTER
DUE IN ONE ONE THROUGH DUE AFTER
YEAR OR LESS FIVE YEARS FIVE YEARS
------------ ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Entertainment loans......................... $77,363 $ 7,989 $ --
Small business loans........................ 3,169 17,801 18,274
ICII related mortgage loans (1)............. 2,350 632 4,087
------- ------- -------
Total..................................... $82,882 $26,422 $22,361
======= ======= =======
</TABLE>
- --------

(1) As part of the Contribution Agreement, the Bank will retain these loans.

A loan is impaired when it is "probable" that a creditor will be unable to
collect all amounts due (i.e., both principal and interest) according to the
contractual terms of the loan agreements. The measurement of impairment may be
based on (1) the present value of the expected future cash flows of the
impaired loan discounted at the loan's original effective interest rate, (2)
the observable market price of the impaired loan or (3) the fair value of the
collateral of a collateral-dependent loan. The amount by which the recorded
investment of the loan exceeds the measure of the impaired loan is recognized
by recording a valuation allowance with a corresponding charge to the
provision for loan losses.

At September 30, 1997, the recorded investment in loans for which impairment
has been recognized totaled $1.7 million, all of which was on nonaccrual
status. All of the impaired loans were secured by real estate. The $1.7
million of impaired loans did not require a specific allowance for potential
losses. Impaired loans averaged $3.0 million for the nine months ended
September 30, 1997.

At December 31, 1996, the recorded investment in loans for which impairment
had been recognized totaled $4.9 million, all of which was on nonaccrual
status. A significant portion, $3.7 million, of the impaired loans was secured
by real estate. Of the $4.9 million of impaired loans, $1.0 million required a
specific allowance of $175,000 for potential losses. Impaired loans averaged
$3.6 million in 1996.

At December 31, 1995, the recorded investment in loans for which impairment
had been recognized totaled $2.7 million, all of which was on nonaccrual
status. A significant portion, $2.2 million, of the impaired loans was secured
by real estate. The $2.7 million of impaired loans did not require a specific
allowance for potential losses. Impaired loans averaged $1.8 million in 1995.

At December 31, 1994, the recorded investment in loans for which impairment
had been recognized totaled $1.3 million, all of which was on nonaccrual
status. A significant portion, $0.8 million, of the impaired loans was secured
by real estate. The $1.3 million of impaired loans did not require a specific
allowance for potential losses. Impaired loans averaged $2.2 million in 1994.

During the nine months ended September 30, 1997 and the years ended December
31, 1996, 1995 and 1994, no interest was recognized on impaired loans.

At September 30, 1997 and December 31, 1996, 1995 and 1994, there were no
restructured loans.

Nonaccrual loans totaled $1.7 million, $4.9 million, $2.7 million and $1.3
million at September 30, 1997, December 31, 1996, 1995 and 1994, respectively.
There was no recorded interest receivable on nonaccrual loans at September 30,
1997, December 31, 1996, 1995 and 1994. Interest income foregone on nonaccrual
loans approximated $307,000 for the nine months ended September 30, 1997 and
$375,000, $232,000 and $200,000 for the years ended December 31, 1996, 1995
and 1994, respectively.

51
<PAGE>

At September 30, 1997, December 31, 1996, 1995 and 1994, approximately 66%,
60%, 62% and 39%, respectively, of the Company's loan portfolio was issued to
customers in the movie production industry.

At September 30, 1997, December 31, 1996, 1995 and 1994, a majority of the
Company's loan portfolio was issued to customers geographically located in
California.

Detailed information regarding nonaccrual loans and real estate and other
assets owned, net is presented below:
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------------
AT SEPTEMBER 30,
1994 1995 1996 1997
------ ------ ------ ----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Nonaccrual loans:
LHO................................. $ 432 $ 488 $1,193 $ --
CAB................................. 59 -- 914 628
ICII related mortgage loans (1)..... 819 2,212 2,814 1,043
------ ------ ------ ------
Total nonaccrual loans............ 1,310 2,700 4,921 1,671
------ ------ ------ ------
Real estate and other assets owned:
LHO................................. -- -- -- 666
CAB................................. -- 57 -- 45
ICII related mortgage loans (1)..... 1,069 1,083 187 162
------ ------ ------ ------
Less: valuation allowance............. (191) (145) -- --
------ ------ ------ ------
Real estate and other assets owned,
net.................................. 878 995 187 873
------ ------ ------ ------
Total nonperforming assets............ $2,188 $3,695 $5,108 $2,544
====== ====== ====== ======
Allowance for loan losses as a per-
centage of total nonaccrual loans.... 47.79% 56.89% 53.42% 234.65%
Total nonaccrual loans as a percentage
of total loans outstanding........... 4.57% 3.39% 6.10% 1.27%
Total nonperforming assets as a per-
centage of total assets.............. 3.27% 2.96% 3.32% 1.21%
</TABLE>
- --------
(1) As part of the Contribution Agreement, the Bank will retain these loans.

The allowance for loan losses is maintained at a level considered
appropriate by management and is based on an ongoing assessment of the risks
inherent in the loan portfolio. The allowance for loan losses is increased by
the provision for loan losses which is charged against current period
operating results, and is decreased by the amount of net charge-offs during
the period. The Company's determination of the level of the allowance for loan
losses and, correspondingly, the provision for loan losses, rests upon various
judgments and assumptions, including general economic conditions (especially
in California), loan portfolio composition and concentrations, prior loan loss
experience, collateral value, identification of problem and potential problem
loans and other relevant data to identify the risks in the loan portfolio.
While management believes that the allowance for loan losses is adequate at
September 30, 1997, future additions to the allowance will be subject to
continuing evaluation of inherent risk in the loan portfolio.

52
<PAGE>

The following table summarizes changes in the allowance for loan losses at
the dates indicated:

<TABLE>
<CAPTION>
FOR THE NINE
FOR THE YEARS MONTHS ENDED
ENDED DECEMBER 31, SEPTEMBER 30,
-------------------- --------------
1994 1995 1996 1996 1997
---- ------ ------ ------ ------
(DOLLARS IN THOUSANDS, EXCEPT
RATIOS)
<S> <C> <C> <C> <C> <C>
Balance, beginning of year............... $717 $ 626 $1,536 $1,536 $2,629
Loans charged off:
LHO.................................... 267 209 561 384 359
CAB.................................... -- -- 60 45 126
ICII related mortgage loans (1) ....... -- 404 212 106 201
---- ------ ------ ------ ------
Total loans charged off.............. 267 613 833 535 686
---- ------ ------ ------ ------
Recoveries of loans previously charged
off:
LHO.................................... 108 8 137 52 25
CAB.................................... 68 1 8 2 53
ICII related mortgage loans (1) ....... -- 22 -- -- 34
---- ------ ------ ------ ------
Total loan recoveries................ 176 31 145 54 112
---- ------ ------ ------ ------
Net loans charged off.................... 91 582 688 481 574
---- ------ ------ ------ ------
Provision (reversal) for loan losses:
LHO.................................... (45) 767 859 707 1,347
CAB.................................... 139 281 348 404 483
ICII related mortgage loans (1)........ (94) 444 574 470 36
---- ------ ------ ------ ------
Total provision for loan losses...... -- 1,492 1,781 1,581 1,866
---- ------ ------ ------ ------
Balance, end of year..................... $626 $1,536 $2,629 $2,636 $3,921
==== ====== ====== ====== ======
Ratio of net charge-offs to average
loans................................... 0.24% 1.15% 0.82% 0.55% 0.55%
Ratio of allowance for loan losses to
gross loans outstanding at end of peri-
od...................................... 2.19 1.93 3.26 3.26 2.97
Ratio of provision for loan losses to net
charge-offs............................. 0.00 256.36 258.87 328.69 324.52
</TABLE>
- --------
(1) As part of the Contribution Agreement, the Bank will retain these loans.

Loans Held for Sale. Loans held for sale are carried at the lower of aggregate
cost or fair value. The amount of loans held for sale at September 30, 1997,
December 31, 1996, 1995 and 1994 was $4.9 million, $5.5 million, $2.6 million
and $1.6 million, respectively.

ASSET/LIABILITY MANAGEMENT

The matching of assets and liabilities may be analyzed by examining the
extent to which such assets and liabilities are "interest rate sensitive" and
by monitoring an institution's interest rate sensitivity "gap." An asset or
liability is said to be interest rate sensitive within a specific time period
if it will mature or reprice within that time period. The interest rate
sensitivity gap is defined as the difference between the amount of interest-
earning assets maturing or repricing within a specific time period and the
amount of interest-bearing liabilities maturing or repricing within that time
period. A gap is considered positive when the amount of interest rate
sensitive assets exceeds the amount of interest rate sensitive liabilities. A
gap is considered negative when the amount of interest rate sensitive
liabilities exceeds the amount of interest rate sensitive assets. During a
period of falling interest rates, the net earnings of an institution with a
positive gap theoretically may be adversely affected due to its interest-
earning assets repricing to a greater extent than its interest-bearing
liabilities. Conversely, during a period of rising interest rates,
theoretically, the net earnings of an institution with a positive gap position
may increase as it is able to invest in higher yielding interest-earning
assets at a more rapid rate than that at which its interest-bearing
liabilities reprice.

The Company has managed interest rate risk through the marketing and funding
of primarily adjustable rate loans generally indexed to the Prime Rate. Since
the Company's borrowing costs have been tied to the Bank's

53
<PAGE>

90-day certificate of deposit rate plus 1%, an adjustable borrowing cost, the
Company's interest-earning asset pricing generally matches the increases and
decreases in the pricing of its borrowing costs and therefore maintains a
positive gap position. However, there can be no assurances that the Company
will be able to maintain its positive gap position or that its strategies will
not result in a negative gap position in the future. The level of the movement
of interest rates, up or down, is an uncertainty and could have a negative
impact on the earnings of the Company. The Company expects that its future
funding costs will be tied to LIBOR. See "Credit Facilities."

Hedging. The SBA loans originated and held for sale and loans held for
investment are primarily adjustable rate loans indexed to the Prime Rate. As
such, there is minimal risk of increasing or decreasing interest rates between
the time the Company commits to fund a loan and the time the loan is sold or
paid-off. Therefore, the Company does not enter into interest rate hedging
vehicles or speculative trading activities, such as forward commitments,
options, futures, derivatives or synthetic instruments.

AVERAGE BALANCE SHEET

The following tables set forth certain information relating to the Company
for the years ended December 31, 1994, 1995 and 1996 and for the nine months
ended September 30, 1996 and 1997. The yields and costs are derived by
dividing income or expense by the average balance of assets or liabilities,
respectively, for the periods shown except where noted otherwise. Average
balances are derived from average month-end balances. Management does not
believe that the use of average monthly balances instead of average daily
balances has caused any material differences in the information presented for
any of these periods. The average balance of loans receivable includes loans
on which the Company has discontinued accruing interest. The yields and costs
include fees which are considered adjustments to yields.

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 1994 DECEMBER 31, 1995 DECEMBER 31, 1996
------------------------ ------------------------ -------------------------
INTEREST YIELD/ INTEREST YIELD/ INTEREST YIELD/
AVERAGE INCOME/ AVERAGE AVERAGE INCOME/ AVERAGE AVERAGE INCOME/ AVERAGE
BALANCE EXPENSE COST BALANCE EXPENSE COST BALANCE EXPENSE COST
------- -------- ------- ------- -------- ------- -------- -------- -------
(IN THOUSANDS, EXCEPT PERCENTAGES AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Interest-earning assets:
Loans held for
investment............ $35,030 $4,002 11.42% $48,118 $6,459 13.42% $ 79,202 $10,116 12.77%
Loans held for sale.... 2,316 226 9.76 2,316 267 11.53 4,708 513 10.90
Securities available
for sale.............. 3,077 131 4.76 3,084 153 4.26 3,229 158 4.89
------- ------ ------ ------- ------ ------ -------- ------- ------
Total interest-
earning assets...... 40,423 4,359 10.78 53,518 6,879 12.85 87,139 10,787 12.38
------- ------ ------ ------- ------ ------ -------- ------- ------
Non-interest-earning
assets................. 33,604 37,009 52,181
------- ------- --------
Total assets......... $74,027 $90,527 $139,320
======= ======= ========
LIABILITIES AND
STOCKHOLDER'S EQUITY:
Interest-bearing
liabilities:
Borrowings from
Imperial Bank......... 5,039 256 5.08 18,571 1,287 6.93 30,542 1,973 6.46
------- ------ ------ ------- ------ ------ -------- ------- ------
Total interest-
bearing liabilities. 5,039 256 5.08 18,571 1,287 6.93 30,542 1,973 6.46
------- ------ ------ ------- ------ ------ -------- ------- ------
Non-interest-bearing
liabilities............ 16,619 14,591 30,728
Stockholder's equity.... 52,369 57,365 78,050
------- ------- --------
Total liabilities and
stockholder's
equity.............. $74,027 $90,527 $139,320
======= ======= ========
Net interest rate
spread................. $4,103 5.70 $5,592 5.92 $ 8,814 5.92
====== ====== =======
Net interest margin..... 10.15 10.45 10.11
Ratio of average
interest-earning assets
to average interest-
bearing liabilities.... 802.26 288.18 285.31
</TABLE>

(Continued on next page)

54
<PAGE>

<TABLE>
<CAPTION>
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1996 SEPTEMBER 30, 1997
-------------------------- --------------------------
INTEREST YIELD/ INTEREST YIELD/
AVERAGE INCOME/ AVERAGE AVERAGE INCOME/ AVERAGE
BALANCE EXPENSE COST (1) BALANCE EXPENSE COST (1)
-------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PERCENTAGES AND RATIOS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Interest-earning assets:
Loans held for
investment............ $ 83,546 $7,689 12.27% $ 97,575 $9,922 13.56%
Loans held for sale.... 4,545 373 10.93 6,739 556 11.00
Securities available
for sale.............. 3,213 114 4.73 3,384 143 5.63
-------- ------ ------ -------- ------ ------
Total interest-
earning assets...... 91,304 8,176 11.94 107,698 10,621 13.15
-------- ------ ------ -------- ------ ------
Non-interest-earning
assets................. 53,800 73,316
-------- --------
Total assets......... $145,104 $181,014
======== ========
LIABILITIES AND
STOCKHOLDER'S EQUITY:
Interest-bearing
liabilities:
Borrowings from
Imperial Bank......... 36,821 1,784 6.46 33,281 1,648 6.60
-------- ------ ------ -------- ------ ------
Total interest-
bearing liabilities. 36,821 1,784 6.46 33,281 1,648 6.60
-------- ------ ------ -------- ------ ------
Non-interest-bearing
liabilities............ 32,557 44,427
Stockholder's equity.... 75,726 103,306
-------- --------
Total liabilities and
stockholder's
equity.............. $145,104 $181,014
======== ========
Net interest rate
spread................. $6,392 5.48 $8,973 7.07
====== ======
Net interest margin..... 9.33 11.11
Ratio of average
interest-earning assets
to average interest-
bearing liabilities.... 247.97 298.08
</TABLE>
- --------
(1) Ratios are annualized

ANALYSIS OF NET INTEREST INCOME

Net interest income represents the difference between income on interest-
earning assets and expense on interest-bearing liabilities. Net interest
income also depends upon the relative amounts of interest-earning assets and
interest-bearing liabilities and the interest rate earned or paid on them,
respectively.

RECENT ACCOUNTING PRONOUNCEMENTS

For recent accounting pronouncements, please refer to Note 4 of the notes to
the combined financial statements.

55
<PAGE>

BUSINESS

The following Business section contains forward-looking statements which
involve risks and uncertainties. The following description, unless otherwise
provided, assumes the completion of the Contribution. The Company's actual
results could differ materially from those anticipated in these forward-
looking statements as a result of certain factors, including those set forth
under "Risk Factors" and elsewhere in this Information Statement. See "Summary
of Certain Information--Forward-Looking Statements."

GENERAL

The Company is a diversified financial services company primarily engaged in
three business segments: (i) motion picture and television production finance,
through the Company's division, The Lewis Horwitz Organization ("LHO"), (ii)
small business lending, primarily in conjunction with SBA sponsored programs,
through the Company's subsidiary, Crown American Bank ("CAB"), a recently
formed industrial loan company, and (iii) a wide range of trust and investment
management services, through the Company's subsidiary, Imperial Trust Company
("ITC"), a California licensed trust company. In addition, the Company owned,
as of September 30, 1997, approximately 23.5% of the common stock of Imperial
Credit Industries, Inc. ("ICII").

For the nine months ended September 30, 1997 and the year ended December 31,
1996, LHO originated $79.3 million and $56.0 million in loans, respectively.
During the same periods, LHO, through the Bank, issued letters of credit
totalling $15.4 million and $39.2 million, respectively. For the nine months
ended September 30, 1997 and for the year ended December 31, 1996, CAB
originated $39.0 million and $38.8 million in loans, respectively; and at
September 30, 1997 and December 31, 1996, ITC had trust assets under
administration of $8.8 billion and $7.5 billion, respectively.

LHO

GENERAL

The Company's LHO division, formed in 1980 by Lewis P. Horwitz, the
division's President and Chief Executive Officer, was acquired by the Bank in
1989. The LHO division is a leading provider of senior, secured financing for
independent motion picture and television production. During the nine months
ending September 30, 1997 and the year ended December 31, 1996, the Company
originated 45 loans and 39 loans, respectively, in an aggregate principal
amount of approximately $79 million and $56 million, respectively. During the
same periods, the LHO division, through the Bank, issued letters of credit
totalling approximately $15 million and $39 million, respectively. Total
revenue for the LHO division for the nine months ended September 30, 1997 and
the year ended December 31, 1996 was $4.4 million and $4.0 million,
respectively, representing 13.9% and 4.9%, respectively, of the Company's
total revenue for such periods. Net income for the LHO division for the nine
months ended September 30, 1997 and the year ended December 31, 1996 was $0.6
million and $1.3 million, respectively, representing 9.9% and 3.3%,
respectively, of the Company's net income for such periods.

The Company seeks to provide loans (with a typical term of 12 to 18 months)
and letters of credit for the production of motion pictures and television
shows or series that have a predictable market worldwide, and therefore, a
predictable level of payments arising from selling the production distribution
rights. The LHO division is guided by Mr. Horwitz, a widely-recognized leader
in film financing with nearly 30 years of experience. Each of LHO's lending
officers has at least five years of entertainment financing experience,
including LHO's Executive Vice President Arthur Stribley, who has over 25
years of experience. The Company believes that its experience has enabled it
to have a competitive advantage due to its extensive worldwide

56
<PAGE>

contacts among sales agents, distributors and independent producers in an
industry where name recognition and personal contacts are crucial to success.
The Company also believes that this experience has allowed it to rapidly adapt
to changing industry standards in order to maintain its competitive position.
See "--Loan Types" below.

The Company lends to "independent" producers of film and television, the
majority of which are located in California. The Company considers
"independent" producers to be those producers that do not have captive
distribution outlets for their product and need outside financing. Large film
and television studios generally maintain their own distribution outlets and
finance their projects with internally generated financing.

Several risks are inherent in the type of lending conducted by LHO,
including the noncompletion of the production, poor box office appeal of the
finished product, failure to perform on the part of the distributors and
political and currency risks. The Company attempts to mitigate these risks in
various ways. To hedge against the risk of film incompletion, the Company
obtains completion bonds from established completion bonding companies for
each loan and insists on direct recourse to the re-insurers, who are major
insurance companies, in the event the completion bonding company defaults
under its obligation. See "--Completion Bonds." In order to avoid incurring
risk as a result of poor box office receipts, the Company bases its credit
decisions on the credit-worthiness of the distributors who have signed pre-
sold contracts. In the event existing pre-sales do not cover the amount of the
loan (see "--Loan Types"), the Company considers the sales, the reputation of
the cast, the director, the genre and the overall budget of the film in
question. See "--Underwriting." LHO maintains credit and other information on
most distributors in the major worldwide territories, and this information is
supplemented by credit reports obtained through the American Film Marketing
Association, an association of 120 Sales Agents (defined below) throughout the
world that license film and television rights ("AFMA"). Should a distributor
fail to perform its obligations, it would be prohibited from participating in
future AFMA events, where most new releases are exhibited and sold. See "--
Underwriting." In the event of non-performance by the distributor, the
borrower has the right to replace the distributor and make another sale in
that territory. In addition, the initial distributor would forfeit its deposit
(generally 20% of the contract price). The Company attempts to lessen
political risk by only relying on distribution contracts from politically
stable territories. See "--Loan Types." With regards to currency risk, all
international contracts are made in U.S. dollars, and most of the distributors
do not hedge this risk. As a result, if the local currency falls in value in
relation to the dollar, the actual price of the film to the distributor at
time of delivery is higher than such distributor had anticipated. This
situation has occurred recently in South Korea and Thailand, where both
currencies have undergone devaluations, and it could continue to be a threat
throughout much of Asia. As a result, the Company has removed South Korea from
its list of "primary" territories, and has discounted the value of contracts
emanating from other Asian countries which the Company deems to have unstable
currency. See "Risk Factors--Risks Particular to Company's Loan Portfolio."

Distribution Revenue. The revenue received by independent producers from
licensing distribution rights are critical to the financial success of a
production and can include licensing rights relating to any form of
distribution of the product, including film, television and video
distribution. Producers engage a sales agent ("Sales Agent") to arrange for
the distribution of their product throughout the world by various
distributors. The Sales Agent receives from the producer a commission for
their services, customarily ranging from 5-25% of the revenues generated from
distribution. Distributors generally are independent, privately-held entities
and, in some territories (principally with respect to television production),
may have affiliations with the local government. Under the contract entered
into with producers, distributors agree to provide a producer with a minimum
guarantee on the revenue anticipated to be generated by distributing the
production. In many instances, distributors provide downpayments of 20% of
this minimum guarantee to the producer at the time of execution of the
contract entered into with respect to such distribution and the balance of the
minimum guarantee is paid upon notice to the distributor that the production
is available for delivery to the distributor. The Company's loans are secured
by, among other assets, a first priority lien on the revenue received by the
producers from the global distribution of the production by its distributors.

Completion Bonds. It is customary in the entertainment industry for bonding
companies to issue to the production lender a completion guaranty to ensure
the completion and delivery of a television show or series or motion picture.
A completion guaranty ensures that the film or television show or series will
be completed and

57
<PAGE>

delivered based on a pre-approved script, with, in certain instances, specific
actors, and by a certain date, and that the film will be suitable for
worldwide distribution by industry technical standards. The completion bond
does not guarantee the repayment of the Company's loan but rather it
guarantees the delivery of the film, on time, on budget and pursuant to the
production's distribution contracts. The bond is not effective until a lender,
such as the Company, funds the entire loan. Bonding companies customarily
employ experts in film and television production to audit the cost reports
they receive and receive a fee based on the approved budget of the production.
The bonding company closely monitors production and is entitled, under the
terms of most bonding guaranties, to take corrective action where the film
goes over budget or falls behind schedule, including replacing personnel and
taking over production. The bonding guaranty provides that the lender of the
production will receive notice of any such action. If the bonding company
elects to abandon production, it will reimburse the lender for its outstanding
loan. The Company has made only one claim against a bonding company in its
history as a result of termination of production and the loan relating to such
claim was repaid in full by the bonding company.

STRATEGY

The Company's growth strategy in the entertainment lending industry is based
on the following key elements:

Expansion of borrower base. The Company believes that significant expansion
in the independent film industry within the United States and abroad will
allow the Company to expand its borrower base. According to data gathered by
AFMA, worldwide sales of independent film productions, other than in the
United States, rose from approximately $375 million in 1984 to approximately
$1.6 billion in 1996. The Company has developed significant contacts in
California with independent producers and Sales Agents, and plans to continue
its expansion within the state. The Company also intends to expand its
presence in New York City, the second largest U.S. metropolitan area in terms
of revenue for film and television production, and in Canada and England. The
Company believes that the expertise and contacts it has developed in
entertainment lending in California will be invaluable in soliciting clients
in these other markets. In order to implement this strategy, the Company
intends to open additional sales offices in these areas and, with respect to
its expansion in England, seek strategic alliances with European lenders that
have developed a local presence in the independent film and television
production industry.

Increase loans to television producers. Although the Company historically
has provided the majority of its loans to motion picture producers, it intends
to actively seek to expand its lending to additional television producers. The
television production industry, previously predominantly located in the United
States and other well-developed industrialized countries, has changed
dramatically in recent years. Television recently has become more prevalent in
several countries not previously exposed to it on a country-wide basis. In
addition, the advent of digital programming and the rapidly expanding cable
industry in the United States has resulted in a significant increase in the
number of channels, which results in a significant increase in programming
needs for these new channels. As a result, the Company anticipates that the
demand for new television shows and series will increase, which will result in
a corresponding need for television financing. The Company has participated in
several recent television festivals, increased its efforts to locate top Sales
Agents in television production and increased advertising in television trade
publications.

Entertainment fund. The Company intends to diversify its presence in
entertainment finance by forming a limited partnership fund that will provide
equity or debt financing of a type not historically provided by LHO. The
Company believes this will increase its margins and add a new client base to
grow LHO's business. These transactions may include:

. "Pay or Play" financings, where an actor is advanced monies for
performance prior to the financing of the production, the borrowed funds
are attributed to the production entity and the Company receives a fee
or a portion of gross distribution proceeds of the production, or both;

. Super GapSM transactions, which involve lending against the "gap" in
unsold distribution rights at a level in excess of LHO's lending
policies; and

. library purchases, where rights to copyright and distribute a film in
all territories are acquired.

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<PAGE>

It is contemplated that the fund would initially raise $1 to $5 million on a
private placement basis. If the fund is satisfied with its financial results
after a period of time following this initial capital infusion, the fund
intends to increase the fund's capital to $100 million. The Company
anticipates that a subsidiary would manage the fund, receive a management fee
therefor, and retain a carried equity interest of approximately 20% of the
fund's profits.

Strategic acquisitions. The Company intends to make selective acquisitions
of businesses that would be complementary to LHO's business. The Company has
no current agreement to effect such an acquisition and there can be no
assurance that suitable acquisition candidates will be located or that the
Company will be able to finance such acquisitions.

LOAN TYPES

The Company believes that its significant experience in the entertainment
lending industry has enabled it to provide superior customer service through
the creation of flexible lending products designed to meet the changing needs
of the industry. The Company currently provides two different types of loans,
traditional ("Traditional Loans") and gap ("Gap Loans"). With Traditional
Loans, the Company requires that the anticipated revenue to be received under
existing contracts from approved distributors in "primary" territories ("Pre-
sold Primary Contracts") at the time of funding exceed the entire amount of
the loan (net of withholding taxes), including loan fees, interest charges and
legal costs. "Primary" territories include countries such as the United
States, Canada, Germany, France and the United Kingdom. Distribution contracts
from outside the Primary Territories ("Pre-sold Secondary Contracts" and,
collectively, with Pre-sold Primary Contracts, "Pre-sold Contracts"), which
generally represent between 15% and 20% of a production's total distribution
revenues, are not considered by the Company in determining whether to provide
the loan, but do serve as additional collateral underlying the loan.

The primary distinction between Traditional Loans and GAP Loans is the
amount of the Pre-sold Primary Contracts required by the Company to have been
sold prior to the funding of the loan. Gap Loans have become a popular method
of lending in today's competitive financing environment. With Gap Loans, the
amount of revenue to be received from the Pre-sold Primary Contracts at the
time of funding is less than 100% of the entire loan amount. The difference
between the amount of Pre-sold Primary Contracts and the loan amount is the
"gap" that future sales of distribution rights must fill in order for the loan
to become fully collateralized. From a producer's perspective, Gap Loans have
an advantage over Traditional Loans because a producer can arrange financing
prior to licensing all of the production's distribution rights. This has
allowed producers to determine the time to commence production with more
precision and, if the production is perceived favorably after completion but
prior to distribution, the producer may be able to generate higher
distribution revenues. In connection with evaluating Gap Loans, the Company,
after consulting with the applicable Sales Agent, determines what it believes
to be the conservative value of the unsold distribution rights in Primary
Territories, which generally must exceed the amount of the Gap Loans by 175-
200%. As with Traditional Loans, Pre-sold Secondary Contracts relating to Gap
Loans are not given any credit by the Company in determining whether to
provide a loan, but are used to provide additional collateral.

The average principal amount of loans made through LHO during the nine
months ended September 30, 1997 and the year ended December 31, 1996 was
approximately $1.76 million and $1.45 million, respectively.

In addition to the Company's traditional entertainment lending, the Company
also enters into a joint lending agreement in certain instances with a large
European bank. In a typical transaction of this type, the Company agrees to
provide the loan to a borrower, but the European bank agrees to participate in
50% of the loan, and provides the full amount of the loan at funding. The
Company agrees with this bank to buy back 50% of the loan at its maturity and
arrange for the issuance of a letter of credit to the bank to support the
Company's obligation. The lending bank remits a standby commitment fee to the
Company, as well as a percentage of the loan origination fees, interest
received on the loan and other fees relating to the Company's 50% interest in
the loan.

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<PAGE>

The Company also arranges in certain instances for the issuance of letters
of credit to third-party lenders located outside the United States. Such
letters of credit are secured by, among other assets, rights under the
borrowers' Pre-sold Contracts and any unsold distribution rights. The Company
receives letter of credit fees and other fees in these transactions. Prior to
the Distribution, the Bank issued these letters of credit on behalf of LHO.
After the Distribution, these letters of credit are expected to be issued
under the Credit Facilities.

The following sets forth by type of loan the number of loans made by, and
letters of credits issued on behalf of, the Company, the aggregate principal
amount of such loans at origination and the percentage of gap at origination
for such loans, in LHO's portfolio during 1996 and during the first nine
months of 1996 and 1997.

<TABLE>
<CAPTION>
AGGREGATE PERCENTAGE OF
PRINCIPAL GAP AT
NUMBER AMOUNT ORIGINATION
OF LOANS AT ORIGINATION DATE
-------- -------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Traditional Loans
Year ended December 31, 1996............ 18 $20,216 N/A
Nine months ended September 30, 1996.... 14 13,348 N/A
Nine months ended September 30, 1997.... 16 20,141 N/A
Gap Loans
Year ended December 31, 1996............ 21 $35,735 35.7%
Nine months ended September 30, 1996.... 17 25,891 32.9
Nine months ended September 30, 1997.... 29 59,172 46.1
Letters of Credit for Traditional Loans
Year ended December 31, 1996............ 4 $ 2,194 N/A
Nine months ended September 30, 1996.... 4 2,194 N/A
Nine months ended September 30, 1997.... 2 2,254 N/A
Letters of Credit for Gap Loans
Year ended December 31, 1996............ 9 $36,965 30.2%
Nine months ended September 30, 1996.... 7 26,164 22.5
Nine months ended September 30, 1997.... 5 13,208 35.0
</TABLE>

The interest rate charged on most loans made through LHO are variable rates
tied to published prime rates. The average margin on such loans during the
periods presented above was prime plus 2%. The Company generally does not
impose different interest rates for Traditional Loans and Gap Loans. See "--
Fees" below. In certain instances at the request of a borrower, the interest
rate is fixed. The average yield on outstanding loans originated through LHO
for the year ended December 31, 1996 and for the first nine months of 1996 and
1997 was 14.2%, 14.2% and 15.3%, respectively.

FEES

At the time of closing of a loan, the Company is paid a fee by the borrower
based on the amount of the loan. For the nine months ended September 30, 1997,
the average origination fee on Traditional Loans and Gap Loans was 2.2% and
5.0%, respectively, of the aggregate principal amount of such loans. In
certain transactions where extraordinary effort or special creative expertise
is required, additional fees are collected from the borrower based on all
revenues generated by the particular film or television series. For accounting
purposes, fees, net of direct origination costs, are deferred and the
resulting revenue is recorded over the life of the loan. Where a transaction
includes the issuance of a letter of credit, the borrower is charged an
additional fee.

UNDERWRITING

The Company's Traditional Loans are based on Pre-sold Primary Contracts from
approved distributors in Primary Territories. Primary Territories are
principally North American and European industrialized countries, where
distributors in such countries have historically complied with the terms of
the Pre-sold Primary Contracts. The Company generally lends against 100% of
the value of the Pre-sold Primary Contracts and none of the value

60
<PAGE>

from Pre-sold Secondary Contracts. Each distributor is also rated on a primary
and secondary basis based upon the same criteria used for determining
territory status. With respect to Gap Loans, the Company also evaluates the
ability of the Sales Agent to sell the borrower's production to distributors.

The Company's five loan officers, with an aggregate of approximately 65
years of experience in entertainment lending, utilize a variety of criteria to
determine whether to make a loan to a potential borrower. The Company does not
consider the anticipated success of the production or, for the reasons
described below, the creditworthiness of the borrower. Its officers primarily
evaluate the risks relating to the ability of the Sales Agent to sell the
borrower's product to distributors and the ability of distributors to pay the
minimum guarantees relating to distribution rights. The success of the Sales
Agents' marketing efforts will ultimately determine the value of the
distribution rights through arranging for the execution of the Pre-sold
Primary Contracts and the Pre-sold Secondary Contracts. Accordingly, the Sales
Agents have a significant influence on the amount of revenue generated from
licensing the production and it is this cash flow stream that the Company
primarily focuses on when making its lending decision. Sales Agents are
particularly important for Gap Loans because Sales Agents work in conjunction
with the Company to determine the value of unsold distribution rights. Sales
Agents provide the Company with the Pre-sold Primary Contracts prior to
execution of loan documentation. The Company's officers examine these
contracts in order to ensure that the contract will be sufficient to grant to
the Company a first priority security interest with respect to the borrower's
rights thereunder, review the payment history to the Company of distributors
identified, review the Credit Watch publication of AFMA and its own databases
to confirm creditworthiness of the distributor and discuss the selection of
the distributors with other Sales Agents. In order to encourage Sales Agents
to continue to provide marketing efforts until completion of distribution and
to protect the value of the Company's collateral, the Company's loan
documentation typically prohibits the payment of any commissions or
reimbursements of expenses to the Sales Agents until the Company's loan is
repaid in full.

The Company requires each borrower to produce certain information in
determining whether to make a loan. The borrower is typically required to
provide the Company, among other things, with (i) a budget identifying all
known expenses and costs necessary for production, including salaries of
production executives and actors and the cost of the completion bond (which
ensures completion of production and licensing rights), (ii) the name of the
bonding company, (iii) a drawdown schedule, which describes the production's
monetary needs on a weekly basis from pre-production through principal
photography, post-production and delivery of the completed product, (iv) the
name of the Sales Agent, (v) copies of all existing domestic and international
Pre-sold Primary Contracts and Pre-sold Secondary Contracts, (vi) with respect
to Gap Loans, the Sales Agent's estimates for all unsold rights and the names
of the actors, directors and genre of the production in order to help
determine the salability of the production and (vii) the organizational
documents of the borrower. The Company typically requires that a borrower be a
newly formed corporation established for the sole purpose of producing and
distributing a single production in order to limit the potential existing
liabilities of such entity and mitigate the circumstances under which the
borrower's assets could be combined with an affiliate's assets in the event of
a bankruptcy of such other entity. Prior to funding of any loan, the Company
requires that a completion guaranty be issued in its favor by the bonding
company. See "--General--Completion Bonds."

The Company does not obtain financial information of the borrower because,
as described above, the borrower is a special purpose entity created for
production of a particular project. In addition, except with respect to
certain U.S. distributors and publicly traded distributors, consistent with
customary industry practice, no financial information is obtained with respect
to the distributors. The Company attempts to minimize the risk relating to the
financial stability of the distributor by providing in its loan documentation
that rights to distribute a production are not granted in favor of a
distributor until the rights are fully paid for. Accordingly, if a distributor
fails to pay to LHO on behalf of the borrower the minimum guarantee of the
distribution revenue, any down-payment made by the distributor may be retained
by the Company as a loan repayment and the production may be licensed to
another distributor approved by the Company in the same territory. In
addition, if the distributor defaults on payment and the Company obtains an
arbitration ruling to that effect, the distributor will not be allowed to
participate in the American Film Market for two years, one of the largest
sales markets for motion pictures in the world.

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<PAGE>

The Company generally approves loans within 75 days from initial contact
with the borrower. All potential loans in excess of $250,000 are submitted to
the Loan Administration Committee of the Company for final approval. Loans are
initially funded after the loan is approved in approximately one month
following completion of loan documentation. Thereafter, loans are funded
pursuant to agreed-upon schedules.

COLLATERAL

As security for the loan, the borrower grants the Company, among other
rights, a first priority security interest in and to the copyright and
distribution rights to the film or television production, all rights and
property pertaining thereto, all trademarks and trade names, all accounts
relating to the production, all cash and cash equivalents derived from or
relating to the production and all general intangibles, including all rights
under the account receivables on global distributions rights to Primary
Territories and Secondary Territories, whether under Pre-sold Contracts or
unsold distribution rights. If the Company determines that such collateral is
insufficient, the Company may also require additional collateral such as
certificates of deposit or require that a letter of credit be issued in its
favor. The Company also requires third-party guarantees in limited instances.
In certain jurisdictions, in lieu of a loan, the Company arranges for the
issuance of a letter of credit in favor of a third-party lender. This letter
of credit is similarly secured by, among other assets, Pre-sold Contracts.

Security interests are perfected by, among other actions, (i) recording with
the U.S. Copyright Office and any applicable international jurisdiction
mortgages of Copyright and Security Agreements with respect to the underlying
literary, musical and dramatic material upon which the production is based
and, upon completion of production, the production itself, (ii) filing
financing statements in the appropriate jurisdiction, (iii) obtaining notices
of assignment and acceptance from account debtors and licensees of the
production, including distributors, and (iv) taking possession of certain
collateral, such as letters of credit or money.

All loans are made pursuant to written loan and security agreements. The
typical loan and security agreement includes covenants with respect to (i) the
establishment of certain reserves for payments to be made to the borrower or
third parties, such as the completion bonding company, (ii) restrictions on
the use of loan proceeds, (iii) the grant of first priority security interest
in and to the assets described above, (iv) the grant to the Company of the
right to take over the production of the film or television production and
renegotiate distribution agreements upon the occurrence of an event of
default, (v) obtaining by a specified date subsequent distribution agreements
with acceptable distributors, (vi) restrictions on asset sales, (vii)
maintaining proper books and records and (viii) providing the Company with
notice of litigation or claims against the borrower.

If the borrower has debt from other third-party lenders, the Company enters
into an intercreditor agreement with such lender which sets forth the relative
priority of the lenders to the borrower's assets under certain circumstances
and the priority of loan repayment.

Pursuant to the collective bargaining agreements of the Screen Actors Guild
and Directors Guild of America, security interests in the film and its
proceeds are customarily granted in the guild's favor to secure the employer's
obligations thereunder, including the obligation to make residual payments
based on film revenues derived from the designated media. The guilds typically
agree to subordinate their liens to the security interests granted to the
Company. In addition, if the borrower has pre-existing obligations to third-
party creditors which are secured by the assets of the borrower that are being
pledged to the Company, the Company obtains a subordination agreement pursuant
to which the third-party creditor agrees to subordinate its rights and
security interests in the shared collateral to the Company's rights and to not
take any action that would interfere with the rights of the Company.

LOAN SERVICING AND MONITORING

The Company's lending officers generally review every advance requested on a
weekly basis to ensure that the Company is not advancing ahead of the agreed-
upon cash flow schedule. The bonding company generally reviews and approves
every advance as well. The applicable lending officer also periodically speaks
with the producer, bonding company and Sales Agent regarding the progress of
the film. The Company's loan documents

62
<PAGE>

provide that the Company is not obligated to fund if agreed upon progress on
the production has not been achieved by the borrower.

The Company's officers perform extensive follow-up on every Gap Loan to
ensure that the gap is filled (i.e., distribution contracts are generated by
the Sales Agent) prior to delivery of the film or television production.
Generally, a lending officer will speak to the Sales Agent at least monthly
regarding the agent's progress on covering the gap. The loan documentation
grants the Company the right to impose certain penalties on the borrower and
exercise certain other rights, including replacing the Sales Agent, if sales
are not consummated within the appropriate time.

Loans are repaid principally from revenue received from distribution
contracts. In many instances, the distribution contracts provide for multiple
payments payable at certain milestones (such as execution of contract,
commencement of principal photography or completion of principal photography).
The maturity date of the loan generally is three to four months after
production in order to permit all payments from distributors to be received
within the maturity of the loan. Delivery of the completed production is made
to the various distributors that provide minimum guarantees within a short
period of time after completion of the production but only after the minimum
guarantees have been paid in full.

MARKETING

In addition to Mr. Horwitz, five other lending officers of the Company seek
new business opportunities. The Company primarily markets its services by
soliciting Sales Agents and responding to inquiries from Sales Agents and
producers. A significant source of business has been generated from attending
film festivals, including three major festivals--the Cannes Film Festival, the
Milan Film Festival and the American Film Market, a sales conference sponsored
by the AFMA. Representatives of the Company have attended these festivals for
the last 16 years. The Company also obtains business from referrals from
accountants, lawyers and other professionals in the entertainment industry,
advertisement in trade publications and calls to producers and Sales Agents.

COMPETITION

The Company faces significant competition in the business of originating
entertainment production loans. A significant competitor of the Company's LHO
division is the Bank's Entertainment Industries Group. No agreement between
the Bank and the Company will exist that restricts the activities of the
Bank's Entertainment Industries Group and the Company following the
Distribution. In addition, the Bank and the Company will not be prohibited
from using confidential information of the other party for its own internal
purposes that may have been obtained prior to the Distribution. Several
international banks, including Banque Paribas, Films Limited and Coutts Bank,
also compete against the Company. Many of these competitors are substantially
larger and have considerably greater financial resources than the Company.
Competition among industry participants can take many forms, including
convenience in obtaining a loan, customer service, marketing and distribution
channels, amount and term of the loan, loan origination fees and interest
rates.

DELINQUENCY AND LOSS

Loans made through LHO typically provide for periodic repayment at specified
intervals throughout the life of a loan. A principal source of repayment is
the amounts received under the Pre-sold Contracts, and, as a result, the
Company periodically monitors the status of each Pre-sold Contract prior to
the maturity of the loan.

The Company maintains a standard procedure for the collection of the amounts
under Pre-sold Contracts. Each lending officer is required to keep a separate
file with the standard credit file containing information regarding each Pre-
sold Contract, correspondence thereto and any other information necessary for
follow-up on the contract's status. Two employees assigned to assist the
lending officer use this information to send notices and make telephone calls
to obtain payment. If a payment from a particular Pre-sold Contract is late, a
lending officer contacts the distributor. If the Company remains in dispute
with the distributor, it is subrogated to the

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<PAGE>

rights of the borrower to receive distribution payments and can arbitrate the
dispute. If the Company receives a favorable judgment, as mentioned above in
"--Underwriting," the distributor would not be permitted to participate at the
American Film Market for a period of two years. If necessary for collection,
an action to enforce an arbitrator's judgment is to be brought in the country
in which the distributor resides.

The following table sets forth information relating to delinquency levels,
charge-off experience and loan loss allowances of LHO with respect to its loan
portfolio for the periods indicated below:

<TABLE>
<CAPTION>
AS OF AND FOR
THE NINE
AS OF AND FOR THE MONTH PERIOD
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
---------------------- --------------
1994 1995 1996 1996 1997
------ ------ ------ ------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
30-59 days past due................. $ -- $ -- $ 538 $ -- $ 632
60-89 days past due................. -- 10 -- -- --
90 or more days past due............ 432 488 1,193 1,575 --
Gross loans outstanding at period
end................................ 10,717 48,461 45,608 43,184 85,352
Average loans outstanding for the
period............................. 20,578 24,469 47,716 48,253 61,407
Loans charged-off, net.............. 160 201 424 332 334
Allowance for loan losses........... 161 727 1,163 1,101 2,176
Ratio of loans charged-off, net, to
average loans outstanding.......... 0.78% 0.82% 0.89% 0.69% 0.54%
Ratio of allowance for loan losses
to gross loans outstanding
at period end...................... 1.50% 1.50% 2.55% 2.55% 2.55%
</TABLE>

Until 1995, the Company made no Gap Loans. During the first nine months of
1997, approximately 75% of loans made by the Company were Gap Loans. As a
result of a change in the type of loan primarily made by the LHO division of
the Company, the above information may not be indicative of future loan loss
experience. See "Risk Factors--LHO Lending."

CAB

GENERAL

The Company is a provider of secured small business loans, the majority of
which are guaranteed in part by the Small Business Administration (the "SBA").
The Company offers small business loans to a wide variety of businesses
located in California, Nevada and Arizona, including hotels, residential care
facilities, beauty salons and restaurants. The Company's small business
lending activities are conducted through CAB, a recently formed industrial
loan company. As of September 30, 1997 and December 31, 1996, the aggregate
outstanding principal amount of the Company's small business loans was
approximately $41 million and $28 million, respectively. The aggregate
principal amount of loans originated for the nine months ended September 30,
1997 and the year ended December 31, 1996 was approximately $39.0 million and
$38.8 million, respectively. CAB's lending activities were previously
conducted through the Small Business Lending Division of the Bank, which
division began operating in 1993. See "--The SBA Guaranteed Loan Program"
below.

Of loans originated by the Company during the first nine months of 1997,
$24.0 million in aggregate principal amount (61%) consisted of the loans
guaranteed by the SBA that have been sold in the secondary market, and $15.0
million in aggregate principal amount (39%) consisted of the unguaranteed
portion of loans maintained by CAB for its own account. Of these unguaranteed
portions of loans, $11.3 million are "companion loans." "Companion loans" are
loans made by CAB in conjunction with SBA loans. The companion loans are
secured by a first lien on the borrower's assets while the SBA-guaranteed
portion of the loan is secured by a second lien on the borrower's assets. As
of September 30, 1997, approximately 90% of the Company's SBA loans and
companion loans are secured by a first or second mortgage on the real property
relating to such loan. Similar to SBA loans, there is an active market for
companion loans and the Company generally sells its

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companion loans for a premium in those markets. For the nine months ended
September 30, 1997, the principal amount of loans originated by CAB ranged
from $30,000 to $1,130,000, the average principal amount was approximately
$450,000, and the maturities ranged from seven years to 25 years. The interest
rates of these loans are typically adjustable at some fixed percentage over
the prime rate. The weighted average yield of CAB's loans for the nine months
ended September 30, 1997 was 12.23%. Total revenue for CAB for the nine months
ended September 30, 1997 and the year ended December 31, 1996 was $4.4 million
and $5.0 million, respectively, representing 14.0% and 6.1%, respectively, of
the Company's total revenue for such periods. Net income for CAB for the nine
months ended September 30, 1997 and the year ended December 31, 1996 was $0.6
million and $1.2 million, respectively, representing 9.1% and 3.2%,
respectively, of the Company's net income for such periods.

STRATEGY

The principal element in the Company's small business lending strategy is to
increase the amount of loan originations by continuing to market itself as a
leading provider of SBA loans on an expedited basis. The Company also plans to
expand its SBA lending business outside of the three states in which it
currently operates to additional states with growing economies by establishing
additional lending offices in these new states. The Company seeks to notify
small business borrowers of its lending decision within two days of receipt of
a completed loan application. The Company believes that, in a highly
competitive small business lending industry, its efficient and expedited
approval process will distinguish the Company from some of its competitors and
has attracted referrals from mortgage brokers and others that participate in
this industry. Despite its expedited review process, the Company maintains
strict underwriting guidelines designed to ensure that potential borrowers are
eligible under SBA guidelines and meet the Company's credit approval
guidelines. See "--Underwriting."

The Company also believes that significant cross-marketing opportunities
exist with clients of ITC and intends to build a private banking business with
these clients. The Company intends to offer investment products and expand its
non-SBA lending business by offering loans and equity lines to clients of ITC
(typically high net worth individuals) secured by the equity in their
residences or secured by certain securities held in custody by ITC.

COMPETITION

The small business lending business is highly competitive and CAB competes
with a variety of banks and non-bank lending institutions, many of which are
larger than the Company and have greater financial and other resources, and
many of which also participate in SBA-sponsored programs. These other banks
maintain larger marketing and sales staff and use a wide variety of marketing
strategies, some of which may be too expensive for the Company to conduct.
These banks also compete by lowering interest rates and by offering additional
credit facilities to small business borrowers, which tactics the Company may
not be able to use. CAB will also face significant competition in its private
banking business, which may impede its ability to profitably engage in such
activities.

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<PAGE>

LOAN INFORMATION

The following table sets forth certain information relating to small
business loans originated by the Company during 1996 and during the first nine
months of 1996 and 1997:

<TABLE>
<CAPTION>
AVERAGE
AGGREGATE AMOUNT
NUMBER PRINCIPAL PER
OF LOANS AMOUNT LOAN
-------- --------- -------
(IN THOUSANDS EXCEPT
FOR NUMBER OF LOANS)
<S> <C> <C> <C>
SBA Loans:
"7A" Loans (1)
Year ended December 31, 1996.................... 110 $30,280 $275
Nine months ended September 30, 1996............ 85 21,318 251
Nine months ended September 30, 1997............ 74 27,706 374
"504" Loans (1)
Year ended December 31, 1996.................... 1 $ 700 $700
Nine months ended September 30, 1996............ 1 700 700
Nine months ended September 30, 1997............ 2 1,461 731
Companion Loans
Year ended December 31, 1996.................... 10 $ 7,812 $781
Nine months ended September 30, 1996............ 9 6,812 757
Nine months ended September 30, 1997............ 12 9,861 822
</TABLE>
- --------
(1) See "--The SBA Guaranteed Loan Program" below for a description of "7A"
and "504" Loans.

SALES IN THE SECONDARY MARKET

CAB sells the guaranteed portion of all of its SBA loans to financial
institutions or broker-dealers for their investment or resale. CAB generally
retains the unguaranteed portion of the SBA loans, including its companion
loans. SBA guidelines also require that the Company maintain at least 10% in
aggregate principal amount of SBA loans. During 1996 and the first nine months
of 1997, of the SBA loans sold, the Company sold 100% of the guaranteed
portion of such loans. Investors in the guaranteed and unguaranteed portions
of SBA loans and CAB (with respect to the unguaranteed portion retained) share
ratably in all principal collected from the borrowers with respect to the
loans. In order to facilitate the sale of the guaranteed portions of the SBA
loans, the SBA has contracted with Colson Services Corp. to serve as the
exclusive Fiscal and Transfer Agent (the "FTA") for the guaranteed portion of
SBA Loans sold in the secondary market. The guaranteed portions of SBA loans
are converted by the FTA to registered government-guaranteed certificates and
the certificates are sold by CAB to investors to yield a variable rate that
adjusts relative to the prime rate. CAB collects payments from borrowers and
remits to the FTA amounts due to investors. The FTA then remits such amounts
to the investors and administers the transfer of SBA-guaranteed interests of
SBA Loans from one investor to another.

CAB is generally able to sell the SBA-guaranteed portions of its loans at a
premium due to the term of the underlying loan and the normally superior rate
of return as compared to other investment paper backed by the full faith and
credit of the United States Government. The amount of the premium obtained by
CAB is based upon the interest rate and term of the loan, and the service fee
to be received by CAB from the purchaser. Because CAB typically charges the
maximum allowable adjustable interest rate and, historically, has received a
1% servicing fee, the amount of the premium obtained by CAB varies directly as
a function of a loan's term. The secondary market for the SBA-guaranteed
portion of loans is active and provides an immediate source of funding for
CAB's loan origination activities. Normally, immediately prior to or upon
closing a loan, CAB solicits bids from several or more investors who create
and maintain the secondary market. There are numerous investors in this market
and CAB's ability to sell in the secondary market is not dependent on any one
or several

66
<PAGE>

of such investors. The SBA-guaranteed portions of CAB's loans are generally
sold within five to ten days following the closing of a loan. For the year
ended December 31, 1996 and the first nine months of 1997, CAB has obtained an
average premium of approximately 9% upon the sale of the SBA-guaranteed
portion of their loans. CAB is required under the SBA guidelines to pay to the
SBA one-half of any premium in excess of 10% upon the sale of the SBA-
guaranteed portion of the loans. The premium received in connection with the
sale of loans is deemed completely earned once the borrower has made its first
three monthly payments. Subsequent default and/or liquidation of the loan
would not require CAB to return to the purchaser any premium paid. The premium
paid on loans that default prior to the third monthly payment must be repaid
to the purchaser of the loan and cannot be recouped from the liquidation
proceeds of the defaulted loan.

After CAB sells the SBA-guaranteed portion of the loan in the secondary
market, CAB generally services the SBA-guaranteed portion of the loan for an
annual fee. Although the fee is subject to negotiation, the regulatory minimum
and the typical fee received by CAB for servicing these loans is equal to 1%
of the principal amount of the SBA-guaranteed portion of the loan. CAB is
required to pay to the SBA a portion of the annual servicing fee it receives
equal to 4/10 of 1% of the outstanding principal amount of the SBA-guaranteed
portion of loans closed subsequent to August 31, 1993.

FUNDING

The initial source of funding for CAB's lending operations will be secured
borrowings made under the Credit Facilities. On a longer-term basis, the
primary source of funding for CAB's lending operations and any other
investments is expected to be CAB investment certificates, which are insured
by the FDIC to the extent permitted by law, and are hereinafter referred to as
"deposits." CAB intends to obtain the majority of its deposits in the form of
term investment certificates (functionally equivalent to certificates of
deposit) that pay fixed rates of interest for periods ranging from three
months to five years. CAB intends to emphasize certificates with terms of
three months to one year as part of its asset liability management efforts.
The rates a depository institution must pay for the acquisition of deposit
accounts generally are affected by prevailing interest rates and economic
conditions, and by competitive forces applicable to banks and other depository
institutions as well as nondepository financial institutions such as stock
brokerage firms. Deposit accounts reprice on a frequent basis; however,
certificates of deposit, because they are issued for a fixed term, reprice
less frequently than many other deposit accounts. Nevertheless, the
certificates of deposit and other deposit accounts issued by the Company
through CAB may be more interest-rate sensitive than the Company's assets.
Because of the high level of competition between banks and other depository
institutions for deposit accounts, including certificates of deposit, these
funding sources are considered volatile funding sources. When interest-bearing
liabilities such as deposit accounts reprice more quickly than interest-
earning assets, a significant increase in market rates of interest could
result in a corresponding decline in the Company's net interest income. CAB
will also offer variable rate passbook accounts. CAB's strategy with all
deposit accounts will be to offer rates above those customarily offered by
competing banks and savings and loans. CAB expects to initially build its
deposit base by participating in deposit rate surveys which list the higher
rate paying insured institutions, periodically advertising in various local
market newspapers and other media, and selectively using a limited network of
deposit brokers. In addition to these strategies, CAB expects to maintain and
expand its deposits by relying on renewals of term accounts by existing
depositors as it builds its deposit base. CAB intends to open few branches and
will not provide demand checking accounts, ATM service, safe deposit boxes,
money orders, trust services and various other retail banking services. CAB
believes that the higher cost associated with increased interest rates on its
products will be offset by the reduced staffing and overhead costs resulting
from maintaining fewer branches and offering fewer products and services than
the majority of competing depository institutions. CAB believes that
implementation of this deposit-gathering strategy will produce a stable and
reliable funding source, and that the costs of funds resulting from CAB's
deposit-gathering strategy will be comparable to those of other industrial
loan companies pursuing a similar strategy. CAB expects, however, to compete
for deposits primarily on the basis of rates and, accordingly, CAB could
experience difficulties in attracting deposits if it could not continue to
offer deposit rates at levels above those of competing banks and savings
institutions.

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<PAGE>

CAB also expects to use advances from the Federal Home Loan Bank of San
Francisco ("FHLB") and other lines of credit as funding sources. CAB has
applied to become a member of the FHLB System and expects to be approved for
borrowings from the FHLB pursuant to a secured line of credit, the available
amount of which will be adjusted pursuant to FHLB regulations based on
collateral eligible and available for pledge.

UNDERWRITING

The lending process typically includes five stages: (i) CAB analyzes and
approves or denies a loan application, (ii) if the loan is to be made under
the SBA's Certified Lender program, the loan application is forwarded by CAB
to the SBA, (iii) the loan is closed, (iv) with respect to SBA loans, the SBA-
guaranteed portion of the loan is sold in the secondary market by CAB while
the unguaranteed portion of the loan generally is retained by CAB and (v) CAB
services the loan for its stated duration unless the loan is paid in full or
foreclosed at an earlier date.

Generally, the loan application process begins with an initial telephone
call or meeting between the potential borrower and a CAB officer. CAB
currently has no formal marketing, promotion or advertising program. Its
business is generally developed through the individual marketing efforts of
its personnel and referrals from mortgage brokers and real estate agents. The
potential borrower is preliminarily screened for eligibility and
creditworthiness. If the loan officer determines that the potential borrower
possesses certain minimum criteria, a detailed application is submitted by the
applicant and reviewed on an expedited basis by CAB. In most instances, the
applicant is informed of the lending decision within two days of receipt of
the application. The Company believes that this expedited review process
provides it with a competitive advantage over other SBA lenders. CAB requires
a loan-to-value ratio ranging from 70% to 100%. After acceptance of the
application, a loan officer is assigned to perform an underwriting analysis of
the loan and a field visit is arranged. Depending on the size of the loan, it
may then be reviewed by a second loan officer for approval. If approved, a
commitment letter is issued to the applicant. If the loan is made under the
SBA's Preferred Lender program, CAB does not need to seek SBA approval. If the
loan is made under the SBA's Certified Lender program, the potential loan is
forwarded to the SBA for its approval. A loan guaranty authorization and
certain proposed closing documents, including the form of note and SBA
guaranty, are forwarded to CAB by the SBA.

After the SBA has issued its loan guaranty authorization, relevant loan
materials are prepared and the closing is scheduled. Loan documents include
all appropriate security instruments, including deeds of trusts, and contain
affirmative covenants that require submission to CAB of periodic financial
information of the borrower and negative covenants that impose limitations on
certain activities of the borrower (i.e., asset sales, debt incurrence,
dividends).

SERVICING

CAB services substantially all of the SBA loans it originates. Servicing
includes collecting payments from borrowers and remitting payments to
investors including, with respect to the guaranteed interests, to the FTA
(after deducting applicable servicing fees), accounting for principal and
interest, contacting delinquent borrowers and supervising loan liquidations.
CAB's loan operation center in Inglewood, California processes all loan
collections. CAB's quality control staff members review loan files to confirm
that the loans are originated and maintained in accordance with its
requirements and applicable SBA regulations.

If an SBA-guaranteed loan becomes more than 60 days past due, the FTA, on
behalf of the purchasers of the SBA-guaranteed portion of the loan, serves
notice on the SBA to purchase from the holders the SBA-guaranteed portion of
such loan. Thereafter, the SBA may elect to service the loan for its own
account or, more typically, will elect to continue to retain CAB to service
the loan, usually at a service fee less than that received by CAB from the
purchaser in the secondary market.

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<PAGE>

The following table sets forth certain information relating to SBA loans
serviced by CAB:

<TABLE>
<CAPTION>
AS OF DECEMBER AS OF SEPTEMBER
31, 30,
--------------- ----------------
1995 1996 1996 1997
------- ------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Number of loans serviced................... 198 293 266 363
Total principal amount of Company's loan
portfolio................................. $22,563 $28,084 $30,583 $ 43,959
Total principal amount of loans sold....... $36,005 $57,362 $46,094 $ 75,151
Total principal amount of loans serviced... $58,568 $85,446 $76,677 $119,110
</TABLE>

DELINQUENCY, LOSS AND PREPAYMENTS

If payment is not received within ten days of the due date, the Company
sends a delinquency notice. Servicing personnel begin contacting delinquent
borrowers approximately 30 days after the due date, depending on the size, age
and past history of the loan. Loans that are chronically delinquent receive
additional attention, either with multiple telephone calls or in-person
communication. When the loan becomes approximately 60 days past due, the
Company sends a demand notice requiring payment in full within ten days of the
date of such notice. When the loan becomes 90 days past due or prior to that
time if loan officers so determine, the loan file is transferred to a loan
collection/workout specialist. This specialist reviews the Company's
collateral and updates appraisals, credit reports and property profiles to
determine, among other things, if there are lenders junior to the Company and
to prepare a workout strategy. If possible, this specialist will work out a
payment program with the borrower and/or restructure the loan. The Company
commences foreclosure proceedings as a last resort. In these proceedings,
collateral is repossessed and sold, and a claim is made to the SBA for any
shortfall.

The SBA will pay the guaranteed portion of the principal balance, together
with accrued interest covering a period generally not to exceed 120 days. The
liquidation of a defaulted loan is governed by an agreement among the SBA, CAB
and the borrower. The proceeds of any liquidation of collateral securing the
loan or other collections made on the loan are shared by the SBA and CAB in
accordance with their respective interest in the loan. With the approval of
the SBA, CAB normally proceeds to liquidate the loan, and the SBA and CAB bear
the costs of collection efforts in accordance with their respective interests
in the loan.

The following table sets forth information relating to delinquency levels,
charge-off experience and loan loss allowance of CAB with respect to its loans
held for investment for the periods indicated (1):

<TABLE>
<CAPTION>
AS OF AND FOR
THE NINE-
AS OF AND FOR THE MONTH PERIOD
YEARS ENDED
ENDED DECEMBER 31, SEPTEMBER 30,
----------------------- --------------
1994 1995 1996 1996 1997
----- ------ ------ ------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
30-59 days past due................ $ 262 $1,731 $1,369 $ 810 $ 513
60-89 days past due................ -- 336 350 85 1,367
90-119 days past due (2)........... -- 223 -- 608 44
120 days or more past due (2)...... -- -- 914 1,037 428
Gross loans held for investment at
period end........................ 7,726 19,915 22,553 24,922 39,244
Average loans held for investment.. 4,133 13,649 21,632 20,477 29,093
Allowance for loan losses.......... 139 421 575 636 1,001
Loans charged-off (recoveries),
net............................... (68) (1) 52 43 73
Ratio of loans charged-off
(recoveries), net, to average
loans held for investment......... (1.65)% (0.01)% 0.24% 0.21% 0.25%
Ratio of allowance for loan losses
to unguaranteed portion of SBA
loans at period end............... 1.80 % 2.11 % 2.55% 2.55% 2.55%
</TABLE>

69
<PAGE>

- --------
(1) Because the Company's small business lending segment commenced operations
within the Bank in 1993, many of the loans in the Company's small business
loan portfolio have not been outstanding for a sufficient period of time
to determine whether there are material adverse credit, delinquency, loss,
prepayment or other issues associated with these loans. See "Risk
Factors--CAB Lending."

(2) The Company discontinues accruing interest on loans, other than SBA
guaranteed loans, whenever the payment of interest or principal thereof is
90 days past due or earlier if such interest is deemed uncollectible. The
Company discontinues accruing interest on SBA guaranteed loans whenever
the payment of interest or principal thereof is 120 days past due or
earlier if such interest is deemed uncollectible.

Due to a variety of circumstances relating to the borrower's business or
personal matters, certain loans made by CAB are repaid, in part or in their
entirety, on an accelerated basis. These prepayments generally arise from
excess cash generated by the borrower's operations, cash from the proceeds of
the sale of the borrower's business or personal real estate or the liquidation
of other business assets. During the year ended December 31, 1996, and for the
nine months ended September 30, 1997, CAB collected approximately $0.5 million
and $0.7 million respectively, in partial or complete loan prepayments, which
approximates the normal rate of historical prepayments that CAB has
experienced in recent years.

THE SBA GUARANTEED LOAN PROGRAM

The SBA, headquartered in Washington, D.C. and operating through 10 regions
throughout the United States, offers financial assistance to eligible small
businesses in the form of partial government guarantees on loans made to such
businesses by qualified participating lenders such as CAB under the SBA's
guaranteed loan program. In order to be eligible for an SBA loan, a business
generally must be operated for profit and, depending on the industry of the
potential borrower, must maintain specified limitations on numbers of
employees or annual revenues.

The SBA administers three levels of lender participation in its general
business loan program, pursuant to Section 7(a) of the Small Business Act of
1953, as amended, and the rules and regulations promulgated thereunder. Under
the first level of "Section 7(a)" lender participation, commonly known as the
Guaranteed Participant Program, the lender gathers and processes data from
applicants and forwards it, along with its request for the SBA's guaranty, to
the local SBA office. The SBA then completes an independent analysis, and
makes its decision on the loan application. SBA turnaround time on such
applications can vary greatly, depending on its backlog of loan applications.

Under the second level of lender participation, known as the Certified
Lender Program, the "Certified Lender" gathers and processes the application
and makes its request to the SBA, as in the Guaranteed Participant Program
procedure. The SBA then performs a review of the lender's credit analysis on
an expedited basis, which review is generally completed within three working
days. The SBA generally requires that lenders originate loans meeting certain
portfolio quality and volume criteria before authorizing lenders to
participate as Certified Lenders. Authorization is granted on an SBA district-
by-district basis.

Under the third level of lender participation, known as the Preferred Lender
Program, the lender has the authority to approve a loan and to obligate the
SBA to guarantee the loan without submitting an application to the SBA for
credit review. The lender is required to notify the SBA of the approved loan,
along with the submission of pertinent SBA documents. The standards
established for participants in the Preferred Lender Program, the SBA's
highest designation, are more stringent than those for participants in the
Certified Lender Program. CAB has been named a Preferred Lender by the SBA in
all of the SBA loan markets in which it competes. Most of CAB's SBA Loans are
currently originated under the Preferred Lender Program. The Company, however,
is required by SBA guidelines to originate loans made to certain borrowers,
including loans being used to finance a nursing home, under the Certified
Lender program.

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<PAGE>

With respect to loans made prior to October 12, 1995, under the Guaranteed
Participant and the Certified Lender Programs, the SBA guaranteed loans of
$155,000 or less up to 90%, and loans in excess of $155,000 with terms of less
than 10 years up to 85%. For loans in excess of $155,000 with terms greater
than 10 years, the maximum guaranty was 75%. Under the Preferred Lender
Program, the maximum guaranty was 70%. With respect to loans made on or after
October 12, 1995, under the Guaranteed Participant and the Certified Lender
Programs, the SBA guarantees loans of $100,000 or less up to 80% and all other
loans have a maximum guaranty of 75%. The SBA's maximum guaranty per borrower
under all three programs is $750,000, with certain exceptions. In the event of
a default by the borrower, any losses resulting therefrom are shared pari
passu between CAB and the SBA. If the SBA establishes that any resulting loss
is attributable to substantial deficiencies in the manner in which the loan
was originated, documented or funded by CAB, the SBA may seek recovery of
funds from CAB.

Approximately 99% of SBA loans originated by CAB as of September 30, 1997
are "7A" loans for purposes of the SBA programs described above. The remaining
SBA loans made by CAB are "504" loans for purposes of SBA guidelines. "504"
loans are loans made for fixed-asset projects, such as purchasing land and
improvements, construction, modernizing or converting existing facilities and
purchasing machinery and equipment. Loans under this program cannot be used
for working capital or inventory or repaying debt. The borrower must provide
at least 10% of the equity for the financing. Under a typical "504" loan, CAB
makes a loan for 50% of the principal amount, which is secured by, among other
assets, a first priority mortgage on the underlying property (the "Base Loan")
and the remaining amount of the loan is provided by CAB as a short-term loan
with a maturity of up to 90 days (the "Bridge Loan"). The Bridge Loan is
typically repaid by the borrower with proceeds received from a bond issuance
by a certified development company, a not-for-profit corporation established
to create and issue debt securities that are fully guaranteed by the SBA. The
debt securities are sold to institutional investors. CAB generally sells Base
Loans to institutional investors in private transactions. Those loans may be
sold in their entirety with servicing released, or they may be sold with
servicing retained by CAB.

SBA loans are written at variable rates of interest which generally are
limited by SBA guidelines. With respect to loans with maturities under seven
years, the maximum rate is 225 basis points over the lowest prime lending rate
published in The Wall Street Journal, and with respect to loans with
maturities in excess of seven years, the maximum rate is 275 basis points over
the lowest prime lending rate published in The Wall Street Journal, in each
case as adjusted on the first day of each calendar quarter. In general, SBA
loans made by CAB bear the maximum interest rate allowed within SBA
guidelines, and adjust on a quarterly basis.

GOVERNMENT REGULATIONS

The level of SBA funding for the Guaranteed Loan Program is subject to the
Federal budgeting process for each fiscal year ending September 30 ("Federal
Fiscal Year"). Accordingly, the availability of funds for SBA guarantees could
increase or decrease each year. The actual usage of funds for the 11 months
ended August 31, 1997 was $8.4 billion for the Preferred Lender Program in
which CAB principally participates as compared to $7.3 billion and $7.8
billion of actual usage of funds for the Federal Fiscal Years ended September
30, 1996 and 1995, respectively. In 1995, SBA funding was temporarily halted
after Congress failed to approve a new federal budget. See "Risk Factors--
Dependence of Small Business Lending Operations on SBA Programs."

The qualification of a lender to participate in the SBA Preferred Lender
Program is subject to termination by the SBA based on objective criteria, at
its election, on ten days' notice. Management of CAB has no reason to believe
that its license to participate in the program will be terminated (and
management is not aware of any such termination by the SBA of the
qualification of any other similar small business lending company).

See "--Regulatory Matters" below for additional information relating to
state and federal regulations applicable to CAB's operations.

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<PAGE>

TRUST SERVICES

GENERAL

The Company, through its wholly owned subsidiary, Imperial Trust Company
("ITC"), provides a full array of investment management and fiduciary services
to individual investors, corporations, benefit plans and foundations. These
services include investment management, personal trust services, custody
services and trust administration of employee benefit plans. At September 30,
1997 and December 31, 1996, the Company maintained total assets under
administration of approximately $8.8 billion and $7.5 billion, respectively.
ITC was the fourteenth largest licensed trust company in California at
September 30, 1997 based on assets under administration. ITC is headquartered
in Los Angeles and maintains branch offices in Costa Mesa and San Francisco.
Total revenue for ITC for the nine months ended September 30, 1997 and the
year ended December 31, 1996 was $6.2 million and $8.1 million, respectively,
representing 19.5% and 10.0%, respectively, of the Company's total revenue for
such periods. Net income for ITC for the nine months ended September 30, 1997
and the year ended December 31, 1996 was $0.7 million and $1.1 million,
respectively, representing 11.0% and 2.8%, respectively, of the Company's net
income for such periods.

The Bank purchased ITC's trust business in 1981 and formerly operated under
the name "Trust Company of California." Since 1986, the Company's assets under
administration have increased ten-fold from $790 million at December 31, 1986
to $8.8 billion at September 30, 1997. The Company's growth has been derived
primarily from the development of long-term relationships with clients and
increasing referrals from attorneys and financial advisors specializing in
trust services, as well as selective acquisitions.

The following table sets forth certain financial and asset information
relating to ITC's trust businesses:

<TABLE>
<CAPTION>
FOR THE NINE
FOR THE YEAR ENDED MONTHS ENDED
DECEMBER 31, 1996 SEPTEMBER 30, 1997
------------------------------ ------------------------------
(DOLLARS IN THOUSANDS)
GROSS REVENUE GROSS REVENUE % GROSS REVENUE GROSS REVENUE %
-------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Custodial............... $ 2,631 34% $ 2,176 37%
Multi-Employer.......... 1,578 20 1,144 20
Employee Benefit........ 1,496 19 1,164 20
Personal Trusts......... 1,251 16 887 15
CD Custodial............ 788 11 471 8
---------- --- ---------- ---
Total................... $ 7,744 100% $ 5,842 100%
========== === ========== ===
<CAPTION>
AT DECEMBER 31, 1996 AT SEPTEMBER 30, 1997
------------------------------ ------------------------------
ASSETS UNDER ASSETS UNDER
ADMINISTRATION ASSET % ADMINISTRATION ASSET %
-------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Custodial............... $2,953,022 39% $3,537,214 40%
Multi-Employer.......... 3,420,178 45 3,986,322 45
Employee Benefit........ 690,278 9 769,617 9
Personal Trusts......... 418,689 6 462,467 5
CD Custodial............ 50,187 1 28,825 1
---------- --- ---------- ---
Total................... $7,532,354 100% $8,784,445 100%
========== === ========== ===
</TABLE>

STRATEGY

The principal element of the Company's growth strategy for its trust
business is to increase market share by identifying and developing
competencies in market niches, such as targeting "middle market" money
managers that manage assets in the $50 million to $1 billion range. The
Company believes that its size relative to some of its larger competitors
allows it to provide a high level of customer service by tailoring accounts to
individual needs, and this added flexibility allows it to readily adapt to new
market niches. In addition, this high level of customer service has enabled it
to develop strong, long-term relationships with its clients.

The Company typically solicits clients who fall in a "middle-market"
category. The Company believes the assets of these clients generally are too
small to be serviced properly by the large trust companies, but too large

72
<PAGE>

for mutual funds and other providers of limited investment services. The
Company also intends to develop business by targeting potential clients that
frequently require an independent third party, such as clients that use escrow
agents and shareholder recordkeeping services.

The Company also intends to expand significantly its personal trust area,
which provides private banking and trust services to high net-worth
individuals in rapidly growing areas of wealth concentration. The Company
believes that there is a significant untapped market among aging baby boomers
and their parents who, following significant wealth-accumulation during the
1990's, are in need of estate planning and asset management services. The
Company intends to solicit these potential clients and others, including small
regional banks that do not provide trust or asset management services to their
clients, by organizing a new California chartered trust company to be named
the Crown Private Trust Company ("CPT") that will act principally as a
marketing arm to develop trust accounts. The Company intends to have the staff
members of CPT develop relationships by actively soliciting potential clients
and their advisors, such as attorneys and accountants. The Company expects
that CPT will employ asset managers that will provide asset management
services for a fee based on the amount of assets managed. The Company also
intends to offer CPT's clients private banking services in conjunction with
CAB.

In addition to internal growth as described above, the Company intends to
make selective acquisitions that would complement the Company's existing trust
services and provide additional profit opportunities and support services. The
Company has no current arrangements for such an acquisition and there can be
no assurance that suitable acquisition candidates will be located or that
financing for such acquisitions will be available.

CUSTODIAL SERVICES AND EMPLOYEE BENEFIT TRUST SERVICES

The Company provides custodial services to individual clients of money
managers by holding their securities and cash and performing administrative
services relating thereto, including wire transfer and settlement procedures
for securities transactions. Most of the Company's clients are located in
California and include trustees of personal trusts, foundations, IRA holders
and escrow parties. These clients are typically referred to the Company by
money management institutions whose assets range from less than $100 million
to over $2.5 billion in assets under management. Due to regulatory
constraints, money managers typically do not maintain custody of their
client's securities. The Company and the money manager each generate separate
periodic reports to the client.

The Company also provides trust and custody services to labor unions and
employee stock ownership plans ("ESOPs") and employee benefit plans. Account
sizes of these clients are typically larger than individual clients. The
average account size for union clients and employee benefit plan clients as of
September 30, 1997 was approximately $30 million and $1.5 million,
respectively. Although the margin for custodial services to labor unions is
lower than the margin for custodial services for individuals, the Company's
operating and processing systems are well-suited for handling larger-sized
accounts at a small incremental cost, which allows the Company to profitably
compete for this business. In addition to the services described above,
services provided to employee benefit plans include issuing checks to
employees representing distributions from the plan accounts and acting as
fiduciaries for ESOPs.

The Company typically charges custodial service clients annual fees based on
the market value of the assets under administration and a fee per security
transaction processed on their behalf. These fees generally are deducted from
the client's account on a quarterly basis. Union clients generally receive a
guarantee from the Company not to raise its fees for a specified period of
years.

The Company also provides certificate of deposit ("CD") custody services for
a variety of clients of CD brokers. The Company purchased this business under
very favorable terms in 1994 from the FDIC. A CD broker acts on behalf of
credit unions, trustees of IRAs and individuals and attempts to locate the
most favorable CD interest rates then available at financial institutions
throughout the United States. A CD broker then aggregates

73
<PAGE>

monies invested by its clients and purchases a jumbo CD on their behalf. The
Company receives a fee of between 1% and 2% of the return on the CD. The
Company does not intend to expand this line of business and does not accept
new accounts.

The Company believes that its processing systems enable it to provide a high
quality and extremely reliable product. The Company uses a processing system
and several additional optional modules that have been customized by SEI
Investments for the Company's trust services business. The system interfaces
include the Depository Trust Company, a securities clearing agency,
correspondent banks for foreign securities settlements and several pricing
vendors and portfolio management systems.

PERSONAL TRUST SERVICES

The Company's personal trust business includes general trust services,
private banking, estate administration and asset management. The Company also
provides certain other demand services to its clients, such as the preparation
of trust tax returns. Clients typically engage the Company as trustee for an
inter vivos (living) trust, as agent for managing their individual portfolios,
as executor of estates or as escrow agent. In addition, the Company may be
engaged as trustee or asset manager for various types of assets, including
real estate.

The Company offers a variety of accounts tailored to the needs of its
clients. These accounts include managed account services, which are full
service trust accounts with investment discretion, directed trust accounts,
where the Company has no investment discretion and acts only upon the
direction of the client, investment management agency accounts, where the
Company acts only in agency capacity, and distribution trust accounts, where
the Company distributes assets of inter vivos trusts to beneficiaries upon the
death of the creator of the trust. For each of the accounts, the Company
charges annual fees based on the amount of assets under administration. For
its real estate management services, the Company receives a monthly fee. The
Company also charges a fee for certain ancillary services, including
securities transactions, purchases of insurance and wire transfers.

MARKETING

The Company generates most of ITC's business through referrals from existing
clients, attorneys, money managers, investment consultants and personnel of
the Bank. The Company pays a referral fee to such persons based on the new
client's first-year fees to ITC.

COMPETITION

There are a significant number of competitors in each of the principal trust
service areas engaged in by the Company. Competitors include regional and
national banks and discount brokerage houses, many of which are larger
organizations than the Company and have greater resources. As described above,
the Company attempts to gain a competitive advantage over its larger
competitors by providing high-quality customer service and customizing
services for individual relationships.

IMPERIAL CREDIT INDUSTRIES, INC.

As of September 30, 1997, the Company owned approximately 23.5% of the
common stock of ICII, a diversified specialty finance company whose businesses
complement those of the Company. ICII offers, principally through its
subsidiaries, financial products such as non-conforming residential mortgage
banking (non-conforming single family mortgage loans), commercial mortgage
banking (franchise loans and income property loans), business lending
(equipment leasing, asset-based financing and loan participations) and
consumer loans (sub-prime auto loans, home improvement loans and other
consumer credit). The majority of ICII's loans and leases are sold in the
secondary market through securitizations and whole loan sales. During the nine
months ended September 30, 1997 and the year ended December 31, 1996, ICII
generated total revenues of $163.3 million and $256.9 million, respectively.
Total revenue related to the Company's ownership of ICII stock for the nine
months ended September 30, 1997 and the year ended December 31, 1996 was $16.6
million and $64.1 million, respectively, representing 52.6% and 79.0%,
respectively, of the Company's total revenue for such periods. Net income
related to the Company's ownership of ICII stock for the nine months ended
September 30, 1997 and the year ended December 31, 1996 was $4.5 million and
$35.1 million, respectively, representing 70.0% and 90.7%, respectively, of
the Company's net income for such periods.

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ICII was capitalized in January 1992 when the Bank contributed to ICII the
assets and certain liabilities of its mortgage banking division and all of the
outstanding stock of Southern Pacific Bank, formerly known as Southern Pacific
Thrift and Loan Association ("SPB"). In May 1992, ICII completed an initial
public offering of its common stock, thereby reducing the Bank's ownership of
ICII common stock from 100% to 72.4%. As a result of public and private
dispositions of ICII common stock by the Bank, an underwritten primary
offering by ICII of additional shares of its common stock and the exercise of
ICII employee stock options, the Bank's ownership interest in ICII was reduced
to approximately 23.5% of the outstanding ICII common stock as of September
30, 1997.

The Company is currently the largest shareholder of ICII. It is the present
intention of the Company to maintain its ownership interest in ICII at or
about current levels, although the Company cannot prevent additional issuances
of common stock of ICII that could dilute the Company's ownership. If the
Company's ownership were to fall below 20%, the Company would no longer be
able to account for its ownership under the equity method. This could
adversely affect the Company's results of operations. See "Risk Factors--
Negative Impact on Earnings Should Ownership Level of ICII Stock Be Reduced;
Substantial Dependence on ICII-Related Revenue" and Note 11 to the Company's
Historical Combined Financial Statements included elsewhere in this
Information Statement. According to ICII's 1997 proxy statement for its annual
meeting of shareholders, no other shareholder beneficially owns in excess of
7.5% of the ICII common stock.

Three members of the Company Board are also officers and/or directors of
ICII and, as such, are in a position to significantly influence the management
and policies of ICII. H. Wayne Snavely is the Chairman of the Board, President
and Chief Executive Officer of ICII. Mr. Snavely was associated with Bancorp
and the Bank from 1975 through 1992 in a variety of senior management
positions, and currently serves as a director of the Bank and Bancorp. G.
Louis Graziadio, III, the Co-Chairman of the Company Board, Chief Executive
Officer of the Company and a director of Bancorp, and Perry Lerner have been
directors of ICII since 1992. See "Management."

The Company acquired its ownership interest in ICII as a capital
contribution from the Bank. The Bank contributed the ICII stock to the Company
in order to address concerns expressed by the Federal Reserve Board with
respect to the permissibility of Bancorp's continued ownership of such stock
under the BHCA (see "--Regulatory Matters" and "The Transactions--Background
and Reasons for the Distribution") and to provide the Company with financing
flexibility for its ongoing operations. The Company believes its ownership of
the ICII common stock will provide the Company with financing flexibility by
enabling the Company to obtain financing at attractive rates that would not
otherwise be available to the Company. The Company intends to pledge its ICII
shares as collateral for margin loans under the Credit Facilities. The Company
intends to use the proceeds of such loans for working capital purposes. See
"Credit Facilities" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."

ICII has not historically paid, and has publicly reported that it does not
anticipate paying, cash dividends on ICII common stock. Accordingly, the
Company does not, and does not expect to, derive any dividend income from its
ownership interest in ICII.

Potential Applicability of the Bank Holding Company Act. ICII has advised
the Company that the business operations of SPB are such that it is not a bank
for purposes of the BHCA. The Company, however, does not control the business
operations of SPB. In the event of changes in the business operations of SPB,
such as the issuance by SPB of demand deposit accounts, the Company could
become a bank holding company subject to the BHCA. In the event the Company
were determined to be a bank holding company, it would be prohibited by the
BHCA, except in certain statutorily prescribed instances, from retaining or
acquiring direct or indirect ownership or control of more than 5% of the
outstanding voting shares of any company that is not a bank or bank holding
company, and from engaging directly or indirectly in activities other than
those of banking, managing or controlling banks or furnishing services to its
subsidiaries. The Company, subject to the prior approval of the Federal
Reserve Board, would be permitted to engage in any, or acquire shares of
companies

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engaged in, activities that are deemed by the Federal Reserve Board to be so
closely related to banking or managing or controlling banks as to be a proper
incident thereto. In making any such determination, the Federal Reserve Board
would be required to consider whether the performance of such activities by
the Company or its affiliate could reasonably be expected to produce benefits
to the public, such as greater convenience, increased competition or gains in
efficiency, that outweigh possible adverse effects, such as undue
concentration of resources, decreased or unfair competition, conflicts of
interest or unsound banking practices. The Federal Reserve Board is also
empowered to differentiate between activities commenced de novo and activities
commenced by acquisition, in whole or in part, of a going concern.

The Federal Reserve Board may require that a bank holding company terminate
an activity or terminate control of or divest certain subsidiaries or
affiliates when the Federal Reserve Board believes the activity or the control
of the subsidiary or affiliate constitutes a significant risk to the financial
safety, soundness or stability of any of its banking subsidiaries. The Federal
Reserve Board also has the authority to regulate certain provisions of certain
bank holding company debt, including authority to impose interest ceilings and
reserve requirements on such debt. Under certain circumstances, the Company
would be required to file written notice and obtain approval from the Federal
Reserve Board prior to purchasing or redeeming its equity securities. Further,
the Company would be required by the Federal Reserve Board to maintain certain
levels of capital.

Under Federal Reserve Board regulations, a bank holding company is required
to serve as a source of financial and managerial strength to its subsidiaries,
including, when necessary, the use of its resources to assist its subsidiary
banks, and may not conduct its operations in an unsafe or unsound manner. A
bank holding company's failure to meet the foregoing obligations may be
considered an unsafe and unsound banking practice or a violation of the
Federal Reserve Board's regulations or both.

REGULATORY MATTERS

LHO

The California Usury Law. The Usuary Law limits the rate of interest at
which loans may be made. However, the Usury Law also identifies a number of
persons who, by virtue of licensing by federal or state authorities, are
exempt from its interest rate limitations. Such exempt lenders include, among
others, commercial banks, industrial loan companies and certain other licensed
persons designated by state law. The CFL Law expressly states that it is the
intent of the legislature that CFL licensees be included within the class of
lenders exempt from the Usury Law. As a CFL licensee, the Company, acting
through the LHO division, is exempt from the application of the Usury Law,
subject to the CFL Law.

California Finance Lender License. CFL licensees are lenders who are
commonly known as "finance companies." Their sources of funds to conduct
lending activities generally come from their own capital and earnings and from
lines of credit and other borrowings. CFL licensees do not take deposits or
sell or issue insured or guaranteed debt instruments, such as certificates of
deposit or thrift certificates.

Under the CFL Law, "charges" include the aggregate interest, fees, bonuses,
commissions, brokerage, discounts, expenses and other forms of costs charged,
contracted for, or received by a CFL licensee or any other person in
connection with the investigating, arranging, negotiating, procuring,
guaranteeing, making, servicing, collecting and enforcing of a loan. The CFL
Law imposes no limits on the "charges" that a licensee may receive on
commercial purpose loans, provided that the loan is in the amount of $5,000 or
more and further provided that the terms of the loan are not otherwise
unconscionable. All of the loans made through LHO will be commercial purpose
loans in excess of $5,000 and the Company expects that all of such loans will
be made at interest rates and on terms which are competitive and permissible
under the CFL Law. The CFL Law does not attempt to restrict or regulate the
structure or terms of commercial loans, such as rate of amortization, duration
or term of the loan, interest rates, loan fees or collateral. The CFL Law
provides that commercial loans may be secured by either real or personal
property, or both, or they may be unsecured. Moreover, because the loans made
through LHO are commercial purpose loans in excess of $5,000, several
provisions of the CFL Law and the regulations of the DOC thereunder will not
be applicable to the lending operations of LHO. Commercial purpose

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loans are not subject to many consumer-protection oriented laws and
regulations, such as the federal Truth in Lending Act and Regulation Z of the
Federal Reserve Board promulgated thereunder.

CFL licensees are expressly permitted to sell the loans they make and any
loans they may purchase from other CFL licensees to institutional investors,
which include governmental entities and instrumentalities, banks, trust
companies, savings and loan associations, industrial loan companies, finance
companies, insurance companies, pension and profit-sharing funds, any
corporation with outstanding securities registered under Section 12 of the
Exchange Act or any wholly owned subsidiary thereof and any syndication or
combination of the foregoing organized to purchase such loans. Any of such
institutional investors may also establish a trust or other business entity
for the purpose of issuing undivided interests in, the right to receive
payments from, or that are payable primarily from, a pool of financial assets
held by the trust, subject to certain requirements.

Pursuant to broad regulatory powers granted under the CFL Law, the DOC
periodically conducts on-site examinations of CFL licensees' books, records
and operations to insure continuing compliance with the CFL Law and
regulations. The DOC also has powers to investigate possible violations of the
CFL Law and enforcement powers to ensure compliance with the CFL Law,
including the power to revoke or suspend licenses, issue cease and desist
orders and take other remedial actions against CFL licensees and others
violating the CFL Law. Certain proposed changes subsequent to the issuance of
the CFL license, such as changes in management personnel and ownership, may
require the prior consent of or notice to the DOC. The cost of regular or
special examinations by the DOC are charged to the licensee. The overall costs
of the DOC to administer the CFL Law are charged to the industry through an
annual assessment which is proportionally charged to each licensee based on
volume of business.

CAB

GENERAL

CAB is subject to supervision and regulation by the DFI and, as a federally
insured depository institution, by the FDIC. CAB is not regulated or
supervised by the Office of Thrift Supervision, which regulates savings and
loan institutions, the Office of the Comptroller of the Currency, which
regulates national banks, or the Federal Reserve Board, which regulates member
banks of the Federal Reserve System and bank holding companies.

CALIFORNIA LAW

The thrift and loan business to be conducted by CAB will be governed by the
California Industrial Loan Law and the rules and regulations of the DFI which,
among other things, regulate the issuance of certain thrift deposits as well
as the collateral requirements, maximum maturities and other loan terms of the
various type of loans that are permitted to be made by California-chartered
industrial loan companies (also known as "thrift and loan companies").

Subject to restrictions imposed by applicable California law, CAB will be
permitted to make secured and unsecured business and consumer loans. The
maximum term for repayment for loans made by thrift and loan companies ranges
up to 40 years and 30 days depending upon the type of collateral and priority
of secured position, if any. Although nonconsumer secured loans of fewer than
10 years may generally be repaid in unequal periodic payments, consumer loans
must generally be repaid in substantially equal periodic payments. California
law limits lending activities outside of California by thrift and loan
companies to no more than 20% of total assets, or up to 40% of total assets
with DFI approval. CAB has been granted permission to hold up to 40% of its
total assets in obligations from non-residents.

California law contains extensive requirements for the diversification of
the loan portfolios of thrift and loan companies. A thrift and loan company
with outstanding investment certificates may not, among other things, place
more than 25% of its loans or other obligations in loans or obligations which
are secured only partially, but not primarily, by real property; may not make
any one loan secured primarily by improved real property which exceeds 20% of
its paid-up and unimpaired capital stock and surplus not available for
dividends (5% for

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unimproved property); may not lend an amount in excess of 5% of its paid-up and
unimpaired capital stock and surplus not available for dividends upon the
security of the stock of any one corporation; may not make loans to, or hold
the obligations of, any one person as primary obligor in an aggregate principal
amount exceeding 20% of its paid-up and unimpaired capital stock and surplus
not available for dividends (50% if the loans are unsecured); may not have
outstanding leases which exceed 20% of the thrift's aggregate receivables; and
may have no more than 70% of its total assets in loans which have remaining
terms to maturity in excess of seven years and are secured solely or primarily
by real property. From and after the licensing of CAB as an industrial loan
company, CAB is expected to satisfy all of such requirements. Management
believes that CAB will be able to maintain compliance with such regulatory
requirements by managing the mix of its assets and loans without any material
adverse impact on earnings or liquidity.

A thrift and loan company generally may not make any loan to, or hold an
obligation of, any of its directors or officers or any director or officer of
its holding company or affiliates, except in specified cases and subject to
regulation by the DFL. A thrift and loan company also may not make any loan to,
or hold any obligation of, any of its shareholders or any shareholder of its
holding company or affiliates, except that this prohibition does not apply to
persons who own less than 10% of the stock of a holding company or affiliates
which are listed on a national securities exchange. A thrift and loan company
may not make a loan to, or hold any obligation of, any person in which any of
its directors, officers or shareholders has a financial interest, directly or
indirectly. Any person who wishes to acquire 10% or more of the capital stock
or capital of a California thrift and loan company or 10% or more of the voting
capital stock or other securities giving control over management of its parent
company must obtain the prior written approval of the DFI.

Under the Industrial Loan Law, a thrift and loan company is subject to
certain leverage limitations which are different than those applicable to
commercial banks or savings and loan associations. In particular, thrift and
loan companies may not have outstanding at any time investment certificates
that exceed 20 times their paid-up and unimpaired capital and surplus. Under
California law, thrift and loan companies that desire to increase their
leverage (or deposit-to-capital ratio) must meet specified minimum standards
for liquidity reserves in cash, loan loss reserves, minimum capital stock
levels and minimum unimpaired paid-in surplus levels. For example, in order for
a thrift and loan company to increase its deposits to more than 15 times the
aggregate amount of its paid-up and unimpaired capital and unimpaired surplus
not available for dividends, the thrift must, among other things, maintain a
liquidity reserve in cash or cash equivalents equal to 12% of its total
deposits outstanding and maintain a special allowance for losses as required by
the DFI.

As a newly chartered thrift and loan company, CAB will not be permitted to
operate immediately at such levels of leverage on its capital and surplus. The
Industrial Loan Law permits newly chartered companies to accept up to six times
their capital and surplus during the first 12 months of operations. Subject to
DFI approval, after 12 months and for the next 12 months of operation, a thrift
and loan company may accept thrift deposits in amounts up to eight times its
capital and surplus. After 24 months of operation and for the next 24 months,
thrift and loan companies may increase their acceptance of deposits to amounts
up to 12 times their capital and surplus, again subject to DFI approval.
However, after 36 months of operation, a thrift and loan company may apply to
the DFI for permission to have its leverage requirements governed by the FDIC
capital-adequacy requirements. As a practical matter, although the Industrial
Loan Law permits thrift and loan companies to leverage their deposits in
amounts of up to 15-20 times capital and surplus, the concurrent requirements
of the FDIC capital-adequacy regulations discourage, if not prohibit in some
circumstances, leveraging to such an extent. See
"--Federal Law--Regulatory Capital Requirements."

Thrift and loan companies are not permitted to borrow, except by the sale of
investment or thrift certificates, in an amount exceeding 300% of tangible net
worth, surplus and undivided profits, without the DFI's prior consent. All sums
borrowed in excess of 150% of tangible net worth, surplus and undivided profits
must be unsecured borrowings or, if secured, approved in advance by the DFI,
and be included as investment or thrift certificates for purposes of computing
the maximum amount of certificates a thrift and loan may issue. However,
collateralized Federal Home Loan Bank advances are excluded for this test of
secured borrowings and are not specifically limited by California law. As part
of the plan of financing the transfer of the SBA business from the

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Bank to CAB, CAB will assume approximately $24 million in debt to a third-
party lender. Such amount will equal approximately 2.4 times CAB's projected
tangible net worth.

Thrift and loan companies are generally limited to investments, other than
loans, that are legal investments for commercial banks. California commercial
banks are prohibited from investing an amount exceeding 15% of shareholders'
equity in the securities of any one issuer, except for specified obligations
of the United States, California, and local governments and agencies thereof.
A thrift and loan company may acquire real property only in satisfaction of
debts previously contracted, pursuant to certain foreclosure transactions or
as may be necessary for the transaction of its business, in which case such
investment is limited to one-third of a thrift and loan's paid-in capital
stock and surplus not available for dividends. CAB will be in compliance with
these requirements upon its licensing.

The California Industrial Loan Law allows a thrift and loan company to
increase its secondary capital by issuing interest bearing capital notes in
the form of subordinated notes and debentures. Such notes are not deposits and
are not insured by the FDIC or any other governmental agency, generally are
required to have a maturity of at least seven years, and are subordinated to
deposit holders, general creditors and secured creditors of the issuing thrift
and loan company.

Although investment authority and other activities that may be engaged in by
CAB generally are prescribed under the California Industrial Loan Law, certain
provisions of the FDIA may limit CAB's ability to engage in certain activities
that otherwise are authorized under the California Industrial Loan Law. See
"--Federal Law--Restrictions on CAB's Activities and Investments."

A thrift and loan company is not permitted to declare dividends with respect
to its capital stock unless it has at least $750,000 of unimpaired capital
plus additional capital of $50,000 for each branch office maintained. In
addition, as with all California corporations, no distribution of dividends is
permitted unless: (i) such distribution would not exceed a thrift and loan
company's retained earnings, or (ii) in the alternative, after giving effect
to the distributions the sum of a thrift and loan company's assets (net of
goodwill, capitalized research and development expenses and deferred charges)
would not be less than 125% of its liabilities (net of deferred taxes, income
and other credits).

A thrift and loan company is likewise prohibited from paying dividends from
that portion of capital that has been restricted for dividend payment purposes
by its bylaws or by resolution of its board of directors. The amount of
restricted capital maintained by a thrift and loan company provides the basis
for establishing the maximum amount that a thrift and loan company may lend to
one single borrower and the aggregate volume of thrift deposits that may be
accepted. Accordingly, a thrift and loan company typically restricts as much
capital as necessary to achieve its desired loan to one borrower limit and its
maximum leverage ratio, which in turn restricts the funds available for the
payment of dividends. CAB's bylaws contain a provision restricting all of its
capital, paid-in surplus, earned surplus and retained earnings for dividend
payment purposes, subject to a resolution of the board releasing a specific
amount of capital for the payment of dividends. DFI regulations require that a
thrift and loan company set aside loan loss reserves and other reserves in
accordance with GAAP.

Industrial loan companies are permitted to establish one or more branch
offices within California, subject to approval of the DFI and the FDIC. In
determining whether to approve an application for a branch, the DFI evaluates
whether the proposed branch makes banking more convenient for the public and
any other public advantage served by such proposed branch, whether the
applicant has the additional $50,000 in paid-in capital as required by the
Industrial Loan Law, whether the applicant has acceptable branch operational
controls and whether the overall financial condition of the applicant
justifies the branch office. CAB is commencing operations from two branches:
the main branch located at 2121 Rosecrans Avenue, Suite 1350, El Segundo,
California, and an administrative branch located at
. CAB may exercise all powers available to it as an industrial loan
company from each of its branches.

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In addition to branches, thrift and loan companies may, subject to
regulatory approval, open and operate loan production offices ("LPOs"). LPOs
are limited service locations, which may be located in California and outside
of California, from which licensees may solicit and make loans and acquire
receivable obligations. However, a licensee may not accept deposits at an LPO,
nor may a licensee pay on instruments, such as checks, at an LPO. In order to
establish an LPO, a licensee must submit an application disclosing the address
of the LPO, the plan of business for such LPO, the identity and qualifications
of the management to be located at the LPO and, if the LPO is located outside
of California, certain information regarding the laws, regulations and state
agency regulating the LPO in such jurisdiction. CAB is commencing operations
with LPOs located in Phoenix, Arizona, Las Vegas, Nevada, Sacramento,
California, Newport Beach, California, Emeryville, California and San Diego,
California.

FEDERAL LAW

CAB's deposits will be insured by the Bank Insurance Fund (the "BIF") of the
FDIC, to the full extent permissible by law and in the same manner as
commercial banks. As an insurer of deposits, the FDIC issues regulations,
conducts examinations, requires the filing of reports and generally supervises
the operations of institutions to which it provides deposit insurance. The
FDIC is also the federal agency charged with regulating state-chartered banks
that are not members of the Federal Reserve System. For this purpose, CAB is
considered to be a state-chartered nonmember bank. CAB is subject to the rules
and regulations of the FDIC to the same extent as FDIC-insured state-chartered
commercial banks. The approval of the FDIC is required prior to any merger,
consolidation or acquisition of control of CAB, and prior to the establishment
or relocation of a branch office facility of CAB. An acquiror may be deemed to
control CAB if it holds, directly or indirectly or acting in concert with
others, 25% or more of a class of voting stock of CAB. This supervision and
regulation is intended primarily for the protection of depositors. Any person
who wishes to acquire such control must obtain the consent of the FDIC.

Regulatory Capital Requirements. Federally insured, state-chartered
depository institutions, including thrift and loan companies such as CAB, will
be required to maintain minimum levels of regulatory capital. The FDIC also is
authorized to impose capital requirements in excess of these standards on
individual banks on a case-by-case basis.

CAB will be required to comply with three separate minimum capital
requirements: a "Tier 1 capital ratio" or Leverage Ratio and two "risk-based"
capital requirements. "Tier 1 capital" generally includes common shareholders'
equity (including retained earnings), qualifying noncumulative perpetual
preferred stock and any related surplus, and minority interest in the equity
accounts of fully consolidated subsidiaries, minus intangible assets, other
than properly valued purchased mortgage servicing rights up to certain
specified limits and minus net deferred tax assets in excess of certain
specified limits.

Tier 1 Capital Ratio (Leverage Ratio). FDIC regulations establish a minimum
3.0% ratio of Tier 1 capital to total average quarterly assets for the most
highly-rated state-chartered, FDIC-supervised banks, with an additional
cushion of at least 100 to 200 basis points for all other state-chartered,
FDIC-supervised banks, which effectively imposes a minimum Tier 1 capital
ratio for such other banks of between 4.0% to 5.0%. Under FDIC regulations,
highly-rated banks are those that the FDIC determines are not anticipating or
experiencing significant growth and have well diversified risk, including no
undue interest rate risk exposure, excellent asset quality, high liquidity and
good earnings. Upon licensing and capitalization, CAB's Leverage Ratio is
projected to be approximately 28.5%.

Risk-Based Capital Requirements. The risk-based capital requirements
contained in FDIC regulations generally require CAB to maintain a ratio of
Tier 1 capital to risk-weighted assets ("Tier 1 Risk-Based Ratio") of at least
4.00% and a ratio of total risk-based capital to risk-weighted assets ("Total
Capital Ratio") of at least 8.00%. To calculate the amount of capital
required, assets are placed in one of four categories and given a percentage
weight (0%, 20%, 50% or 100%) based on the relative risk of the category. For
example, U.S. Treasury Bills and GNMA securities are placed in the 0% risk
category. FNMA and FHLMC securities are placed in the 20% risk category, loans
secured by one-to-four family residential properties and certain privately

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issued mortgage-backed securities are generally placed in the 50% risk
category, and commercial and consumer loans and other assets are generally
placed in the 100% risk category. In addition, certain off-balance sheet items
are converted to balance sheet credit equivalent amounts and each amount is
then assigned to one of the four categories.

For purposes of the risk-based capital requirements, "total capital" means
Tier 1 capital plus supplementary or Tier 2 capital, so long as the amount of
supplementary or Tier 2 capital that is used to satisfy the requirement does
not exceed the amount of Tier 1 capital. Supplementary or Tier 2 capital
includes, among other things, so-called permanent capital instruments
(cumulative or other perpetual preferred stock, mandatory convertible
subordinated debt and perpetual subordinated debt), so-called maturing capital
instruments (mandatory redeemable preferred stock, intermediate-term preferred
stock, mandatory convertible subordinated debt and subordinated debt), and the
allowance for loan losses up to a maximum of 1.25% of risk-weighted assets.

The federal banking agencies also adopted final regulations specifying that
the agencies will include, in their evaluations of a bank's capital adequacy,
an assessment of the exposure to declines in the economic value of the bank's
capital due to changes in interest rates. The final regulations, however, do
not include a measurement framework for assessing the level of a bank's
exposure to interest rate risk, which is the subject of a policy statement
issued by the federal banking agencies in June 1996. This policy statement
suggests that management measure interest rate risk in relation to the effect
of a probable range of potential interest rate changes on the economic value
of the bank. Banks with high levels of exposure or weak management systems
generally will be required to hold additional capital for interest rate risk.
The specific amount of capital that may be needed and the adequacy of a bank's
interest rate risk management program will be determined on a case-by-base
basis by the examiner and the appropriate federal banking agency. CAB
currently is unable to predict the impact of the policy statement on CAB
because of the number of variables which may be considered by a bank examiner.

The FDIC and the other federal banking agencies have also promulgated final
amendments to their respective risk-based capital requirements which would
explicitly identify concentration of credit risk and certain risks arising
from nontraditional activities, and the management of such risk, as important
factors to consider in assessing an institution's overall capital adequacy.
The FDIC may now require higher minimum capital ratios based on certain
circumstances, including where the institution has significant risks from
concentration of credit or certain risks arising from nontraditional
activities.

The federal banking agencies have adopted for regulatory purposes Statement
of Financial Accounting Standards No. 115, which among other things, generally
adds a new element to shareholders' equity under GAAP by including net
unrealized gains and losses on certain securities. In December 1994, the FDIC
issued final amendments to its regulatory capital requirements which require
that the net amount of unrealized losses from available for sale equity
securities with readily determinable fair values be deducted for purposes of
calculating the Tier 1 capital ratio. All other net unrealized holding gains
(losses) on available for sale securities are excluded from the definition of
Tier 1 capital. Upon its licensing, CAB will not have available for sale any
equity securities in its investment portfolio.

Prompt Corrective Action Requirements. The FDIC has implemented a system
requiring regulatory sanctions against state-chartered banks that are not
adequately capitalized, with the sanctions growing more severe depending the
institution's reduced capital. The FDIC has established specific capital
ratios for five separate capital categories: "well capitalized", "adequately
capitalized", "undercapitalized", "significantly undercapitalized", and
"critically undercapitalized".

An institution is treated as well capitalized if its ratio of Total Capital
Ratio is 10.0% or more, its Tier 1 Risk-Based Ratio is 6.0% or more, its
Leverage Ratio is 5.0% or greater, and it is not subject to any order or
directive by the FDIC to meet a specific capital level. An institution will be
undercapitalized if its Total Capital Ratio is less than 8.0%, Tier 1 Risk-
Based Ratio is less than 4.0%, or if its Leverage Ratio is less than 4.0%
(3.0% if the institution receives the highest rating on the MACRO financial
institutions rating system). An institution whose capital falls between the
well capitalized and undercapitalized levels will be treated as

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adequately capitalized. An institution will be treated as significantly
undercapitalized if the above capital ratios are less than 6.0%, 3.0%, or
3.0%, respectively. An institution will be treated as critically
undercapitalized if its ratio of tangible equity (Tier 1 capital plus
cumulative preferred stock minus intangible assets other than purchased
mortgage servicing rights) to adjusted total assets is equal to or less than
2.0%. Upon licensing, such ratio for CAB will be approximately 28.5% and,
therefore, CAB's capital will qualify it for the well capitalized category.

The FDIC is authorized and, under certain circumstances required, to take
certain actions against institutions that fail to meet their capital
requirements. The FDIC is generally required to take action to restrict the
activities of an "undercapitalized institution". Any such institution must
submit a capital restoration plan and until such plan is approved by the FDIC
may not increase its assets, acquire another institution, establish a branch
or engage in any new activities, and generally may not make capital
distributions. The FDIC is authorized to impose the additional restrictions
that are applicable to significantly undercapitalized institutions.

As a condition to the approval of the capital restoration plan, any company
controlling an undercapitalized institution must agree that it will enter into
a limited capital maintenance guarantee with respect to the institution's
achievement of its capital requirements.

Any institution that fails to comply with its capital plan or is
"significantly undercapitalized" must be made subject to one or more of
additional specified actions and operating restrictions which may cover all
aspects of its operations and include a forced merger or acquisition of the
institution. A "critically undercapitalized" institution is subject to further
mandatory restrictions on its activities in addition to those applicable to
significantly undercapitalized associations. In addition, the FDIC must
appoint a receiver or conservator for an institution, with certain limited
exceptions, within 90 days after it becomes critically undercapitalized. Any
undercapitalized institution is also subject to the general enforcement
authority of the FDIC, including the appointment of a conservator or a
receiver.

The FDIC is also generally authorized to reclassify a supervised institution
into a lower capital category and impose the restrictions applicable to such
category if the institution is engaged in unsafe or unsound practices or is in
an unsafe or unsound condition.

The imposition by the FDIC of any of these prompt corrective action measures
on an insured institution, if and when warranted, may have a substantial
adverse effect on such insured institution's operations and profitability.

Safety and Soundness Standards. On August 9, 1995, the federal banking
agencies adopted final guidelines establishing standards for safety and
soundness. The guidelines set forth operational and managerial standards
relating to internal controls, information systems and internal audit systems,
loan documentation, credit underwriting, interest rate exposure, asset growth
and compensation, fees and benefits. Guidelines for asset quality and earnings
standards will be adopted in the future. The guidelines establish the safety
and soundness standards that the agencies will use to identify and address
problems at insured depository institutions before capital becomes impaired.
If an institution fails to comply with a safety and soundness standard, the
appropriate federal banking agency may require the institution to submit a
compliance plan. Failure to submit a compliance plan or to implement an
accepted plan may result in enforcement action.

Internal Controls Adequacy. Each depository institution with assets greater
than $500 million must prepare an annual report, signed by the chief executive
officer and the chief financial officer, on the effectiveness of the
institution's internal control structures and procedures for financial
reporting, and on the institution's compliance with laws and regulations
relating to safety and soundness. The institution's independent auditors must
attest to, and report separately on, management's assertions in the annual
report. The report and the attestation, along with financial statements and
such other disclosure requirements as the FDIC may prescribe, must be
submitted to the FDIC and will be available to the public. Every such
institution must also have an audit committee of its Board of Directors made
up entirely of directors who are independent of the management of the
institution. Although

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CAB will not be subject to such requirements upon its licensing, it is
expected that CAB will nonetheless comply with substantially all of such
requirements.

FDIC Insurance Assessments. The FDIC assesses deposit insurance premiums
under a risk-based assessment system, which is based on the probability that
the deposit insurance fund will incur a loss with respect to the institution,
the likely amount of any such loss, and the revenue needs of the deposit
insurance fund. Under the risk-based assessment system, a BIF member
institution such as CAB is categorized into one of three capital categories
(well capitalized, adequately capitalized, and undercapitalized) and one of
three categories based on supervisory evaluations by its primary federal
regulator (in CAB's case, the FDIC).

As long as the BIF's reserve ratio is less than a specified "designated
reserve ratio," 1.25%, the total amount raised from BIF members by the risk-
based assessment system may not be less than the amount that would be raised
if the assessment rate for all BIF members were 0.23% of deposits. The FDIC
determined that the designated reserve ratio of 1.25% was achieved as of May
31, 1995. Accordingly, on August 16, 1995, the FDIC published final
regulations adopting an assessment rate schedule for BIF members of four to 31
basis points that became effective as of June 1, 1995. In addition, effective
January 1996, the schedule was further revised to provide a range of zero to
27 basis points with a minimum annual assessment of $2,000. As a result of
these changes, CAB's assessment is expected to be the minimum.

Restrictions on CAB's Activities and Investments. Under the FDIA, a state-
chartered bank (which includes CAB) and its subsidiaries may not engage as
principal in any activities that are not permissible for national banks and
their subsidiaries unless (1) the bank meets the applicable FDIC capital
standards described above, and (2) the FDIC has determined that the activity
would pose no significant risk to the BIF. With limited exceptions, the FDIC
may not use this authority to permit a state-chartered bank to engage in
equity investments (other than investments in subsidiaries to the extent
permissible under California law) or in insurance underwriting. CAB's
projected activities, including business finance and real property lending,
have been stated by the Office of the Comptroller of the Currency to be
permissible activities for national banks.

The FDIC regulations which implement the FDIA limitation on state bank
activities require a state bank to abide by any conditions or restrictions
applicable to national banks if the state bank wishes to conduct the activity
without first obtaining the FDIC's consent. These regulations could limit
CAB's ability to expand into new activities that might otherwise be available
under California law, or to invest in equity securities of corporations, which
is permissible under certain circumstances for California-chartered commercial
banks but not for national banks.

CAB will be prohibited from engaging in certain tying arrangements in
connection with an extension of credit, sale or lease of property or provision
of services. For example, with certain exceptions, CAB may not require a
customer to obtain other services provided by CAB, and may not require the
customer to promise not to obtain other services from a competitor, as a
condition to an extension of credit or reduced consideration for credit to the
customer.

In addition, federal law imposes restrictions on transactions between CAB
and its affiliates. All such transactions, including leases and service
contracts, must be on terms and under circumstances that are substantially the
same, or at least as favorable to CAB, as those prevailing at the time for
comparable transactions involving nonaffiliated companies. In the absence of
comparable transactions, the affiliate transaction must be on terms and under
circumstances that in good faith would be offered by CAB to nonaffiliated
companies. Extensions of credit by CAB to an affiliate must be fully
collateralized or over collateralized, depending on the type of collateral.
CAB may not extend credit to any one affiliate in an amount that exceeds 10%
of its capital (20% for all affiliates in the aggregate). Any purchase of
assets by CAB from an affiliate is also subject to these limits, as are
certain other transactions, including any guarantee of an affiliate's
obligations or any investment in securities issued by an affiliate. As
discussed above, the California Industrial Loan Law also applies certain
restrictions on transactions with affiliates, including CAB's directors,
officers and shareholders. Moreover, federal law also places limitations on
loans by CAB to its directors, officers and controlling persons. Among

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other things, such loans, if and when permitted, generally must be made on
terms substantially the same as for loans to unaffiliated persons.

The FDIC has enforcement authority over CAB with respect to the restrictions
on tying arrangements and affiliate transactions but the FRB, as well as the
FDIC, has interpretive and exemptive authority.

Limitations on Dividends. In policy statements, the FDIC has advised insured
institutions that the payment of cash dividends in excess of current earnings
from operations is inappropriate and may be cause for supervisory action. As a
result of this policy, CAB may find it difficult to pay dividends out of
retained earnings from historical periods prior to the most recent fiscal year
or to take advantage of earnings generated by extraordinary items. The FDIC
has authority to prohibit financial institutions from engaging in business
practices which are considered to be unsafe or unsound. It is possible,
depending upon the financial condition of CAB and other factors, that such
regulators could in some circumstances assert that the payment of dividends
constitutes an unsafe or unsound practice and could prohibit payment of
dividends even though such payment is otherwise permissible. In addition,
federal law prohibits any insured institution from paying dividends if after
such payment the institution would be undercapitalized. CAB currently expects
to retain its earnings and not to make dividends to the Company. See "--Prompt
Corrective Action Requirements."

Community Reinvestment Act and Fair Lending Developments. CAB will be
subject to certain fair lending requirements and reporting obligations
involving home mortgage lending operations and Community Reinvestment Act
("CRA") activities. The CRA generally requires the federal banking agencies to
evaluate the record of financial institutions in meeting the credit needs of
their local communities, including low and moderate income neighborhoods. In
addition to substantial penalties and corrective measures that may be required
for a violation of certain fair lending laws, the federal banking agencies may
take compliance with such laws and CRA into account when regulating and
supervising other activities. CAB expects to be in compliance with its CRA
requirements due to the nature of its projected lending activities.

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

POTENTIAL ENFORCEMENT ACTIONS

Insured depository institutions, such as CAB and their affiliates, may be
subject to potential enforcement actions by the FDIC and the DFI for unsafe or
unsound practices in conducting their business or for violations of any law,
rule, regulation or any condition imposed in writing by the agency or any
written agreement with the agency. Enforcement actions may include the
imposition of a conservator or receiver, the issuance of a cease-and-desist
order that can be judicially enforced, the termination of insurance of
deposits, the imposition of civil money penalties, the issuance of directives
to increase capital, the issuance of formal and informal agreements, the
issuance of removal and prohibition orders against institution-affiliated
parties, and the imposition of restrictions and sanctions under the FDIC's
prompt corrective action provisions. Management knows of no pending or
threatened enforcement actions against or relating to current SBA operations
of the Bank.

HOLDING COMPANY REGULATION

The BHCA generally provides that companies which own or control banks must
register as bank holding companies. Bank holding companies are subject to
regulation by the Federal Reserve Board and to limitations on their operating
activities and holdings. While the Competitive Equality Banking Act of 1987
("CEBA")

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subjected certain types of previously unregulated companies to the BHCA, it
also contained a specific exemption from the definition of "bank" for
industrial loan companies which meet certain criteria relating to size, the
offering of demand deposits, the nature of activities conducted and the
occurrence of a change of control.

Based on its size and the activities to be conducted, upon its licensing as
an industrial loan company, CAB will be exempt from the definition of "bank"
and therefore the Company will not be a bank holding company subject to the
BHCA. CAB has no plans to operate in any way that would cause it to lose the
exemption from the definition of "bank" under CEBA or the current rules,
regulations and interpretations thereunder of the Federal Reserve Board.
Although the Company is not aware of any proposed changes to or amendment of
such law, rules and regulations and interpretations, changes or amendments may
occur in the future and CAB and the Company may be limited in their ability to
influence the extent or nature of any such changes or amendments. Even though
the Company will not be subject to the BHCA, the Company and its affiliates
will be subject to certain Federal Reserve Board regulations and federal law
by virtue of CAB being a federally insured depository institution, including
Sections 23A and 23B of the Federal Reserve Act, governing transactions with
affiliates, and Section 4(h) of the BHCA relating to anti-tying restrictions.

ITC

Regulation of ITC. ITC operates as a trust company under a charter granted
by the DFI pursuant to authority of the California Financial Code. As such,
ITC is subject to regulation and supervision by the DFI. ITC does not issue
insured deposits, and therefore it is not considered an insured bank and is
accordingly not regulated by the Federal Deposit Insurance Corporation or the
Federal Reserve Board.

Examination and Reporting. California-chartered trust companies are subject
to examination by the DFI. Applicable law requires that the DFI must examine a
California trust company's court trust business every two years and must
examine such company's private trust fund business as often as the DFI deems
necessary.

Every California-chartered trust company must make and file with the DFI
periodic reports showing the trust company's financial condition and such
other information as the DFI requires. Periodic reports are required to be
filed at least three times per year. In addition, the DFI may require a trust
company to file special reports with the DFI from time to time. At the time of
the filing of each periodic report, each trust company is required to publish
a condensed financial statement in a newspaper of record at least one time.

Minimum Capital Requirements. California-chartered trust companies must
adhere to minimum capital requirements established by the DFI. The DFI is
empowered to determine the required minimum capital for a California trust
company based on various considerations, including the following: (1) the
nature and volume of its business; (2) the amount, nature, quality and
liquidity of its assets; (3) the amount and nature of its liabilities
(including but not limited to any capital notes or debentures in any
contingent liabilities); (4) the amount and nature of its fixed charges; (5)
the history of, and prospects for, the trust company to earn and retain
income; (6) the quality of its operations; (7) the quality of its management;
and (8) the nature and quality of its ownership.

As a California-chartered trust company, ITC may not make any distributions
to its shareholder in any amount that exceeds the lesser of (i) its retained
earnings, or (ii) its net income for its last three fiscal years, less the
amount of any distributions made by ITC or any majority-owned subsidiary of
ITC to its shareholder during such period. A California-chartered trust
company may, however, with the approval of the DFI, make a distribution to its
shareholder in an amount not exceeding the greatest of (i) its retained
earnings, (ii) its net income for its last fiscal year or (iii) its income for
its current fiscal year.

Whenever it appears that the capital of a California-chartered trust company
is impaired, the DFI is required to order the company to correct such
impairment within 60 days. The trust company to which such an order is issued
is required to levy and collect an assessment upon its common shares as
permitted under the California Corporations Code, unless the deficiency is
otherwise corrected.

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Permitted Investments. The California Banking Law provides for certain
limitations on investments of contributed capital by California-chartered
trust companies. Generally, trust companies are limited to investment in
securities and loans in which a California-chartered commercial bank is
permitted to invest. In addition, California-chartered trust companies are
permitted to invest in certain other investments which are permitted
investments for trusts under the California Probate Code. Notwithstanding the
foregoing, California trust companies are permitted to deposit funds awaiting
investment with a state or national bank which is independent of the trust
company.

Deposit with State Treasurer. California-chartered trust companies are
required to deposit with the California State Treasurer money or securities in
a minimum amount of $100,000 if the trust company maintains any court trusts,
and an additional $100,000 if the trust company maintains private trusts. In
addition, if the trust company receives trust funds or property, other than
real property, for court trusts in excess of $1,000,000, the trust company is
required to provide 30 days written notice to the DFI and must, within a
specified time thereafter, deposit an additional $50,000 of money and/or
securities. Each additional $500,000 of deposits requires a similar notice and
the deposit with the California State Treasurer of an additional $25,000 of
money and/or securities until the total deposit value reaches $500,000.

The types of securities permitted to be deposited include notes or
obligations of the United States or those for which the full faith and credit
of the United States is pledged for the payment of principal and interest,
bonds of the state of California or those for which the faith and credit of
the State of California is pledged for the payment the principal and interest
thereof, bonds and revenue securities of political subdivisions of the State
of California, bonds of any state of the United States that are legal
investments for commercial banks, and loans secured by first liens on real
estate that are permitted investments for California-chartered commercial
banks, as well as certain other similar obligations.

LEGAL PROCEEDINGS

The Company is currently not a party to any material litigation. From time
to time, however, the Company is involved in routine litigation incidental to
its business.

EMPLOYEES

As of September 30, 1997, the Company employed 105 full-time employees. Of
these employees, approximately 13 were employed by LHO, 55 were employed by
ITC, 6 were employed at the Corporate headquarters and 31 were employed by
CAB. The Company believes that its relations with employees are good.

PROPERTIES

The Company does not own any of its facilities. The Company leases its
principal executive offices at 1840 Century Park East, Los Angeles,
California, currently consisting of 9,210 square feet. The initial lease term
expires in November 2002 with one five-year extension at the Company's option.
The Company's offices devoted to the LHO division are located at the Company's
executive offices. CAB's principal offices are at ,
consisting of square feet. The lease expires , . CAB's initial
deposit branch will be located at 2121 Rosecrans Avenue, El Segundo,
California, and will consist of 671 square feet. The lease expires August 31,
2007, with two five-year extensions at the Company's option. CAB also operates
seven business development offices for its SBA lending business in Sacramento,
California; Newport Beach, California; Emeryville, California; San Diego,
California; Phoenix, Arizona (two offices); and Las Vegas, Nevada, all of
which are leased. ITC's principal office is located at 201 N. Figueroa Street,
Los Angeles, California, and occupies 13,462 square feet. The lease expires
October 31, 2007, with one five-year Company option to extend. ITC also has
branch offices in Costa Mesa, California and San Francisco, California, both
of which are leased. The principal office of ICII is located in Torrance,
California, and is leased.

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MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The Company Board consists of nine persons. Upon completion of the
Distribution, the members will be divided into three equal classes with each
class serving a three-year term after an initial transitional period. The
following table sets forth information as to the directors and executive
officers of the Company.

<TABLE>
<CAPTION>
INITIAL
TERM
NAME AGE EXPIRES POSITION
---- --- ------- --------
<C> <C> <C> <S>
George L. Graziadio, Jr. 78 Chairman of the Board of Directors
G. Louis Graziadio, III 47 Co-Chairman of the Board of Directors and
Chief Executive Officer
Lee E. Mikles 41 Director
Paul A. Novelly 54 Director
H. Wayne Snavely 55 Director
Robert M. Franko 50 President and Director
Perry A. Lerner 54 Director
Robert L. Harris II 39 Director
Clinton W. Bliss 63 Senior Vice President and Chief Credit
Officer
Lewis P. Horwitz 62 President and Chief Executive Officer of
LHO and Director
</TABLE>

George L. Graziadio, Jr. Mr. Graziadio is chairman of the Company Board. Mr.
Graziadio is also chairman of the board, president and chief executive officer
of Bancorp and has been a member of the Bancorp Board since 1969. Mr.
Graziadio is also chairman of the board of the Bank and a director of various
other subsidiaries of Bancorp. In addition, he is engaged as an owner or
partner in many other business activities, primarily in the real estate
industry. He is also a director of Coastcast Corp., a company manufacturing
metal-casted products. Mr. Graziadio is the father of G. Louis Graziadio, III
and the uncle of Lee E. Mikles.

G. Louis Graziadio, III. Mr. Graziadio is co-chairman of the Company Board
and has been chief executive officer since October 1997. Mr. Graziadio is also
a director of Bancorp, ITC and ICII. He has been a member of the Bancorp Board
since 1984. Mr. Graziadio is president of Ginarra Holdings, Inc. and its
subsidiaries, a California corporation engaged in investments. He is also
chairman of the board of Lynx Golf, Inc., a golf club manufacturer, and the
chairman of the board of Vista 2000, Inc., a manufacturer of gloves, balloons
and pet products. Mr. Graziadio is also a director of Franchise Mortgage
Acceptance Corp., a specialty lender to franchise businesses. He has been
engaged in and has extensive experience with real estate development and
construction, with which he has been involved since 1972. He is the son of
George L. Graziadio, Jr., chairman of the Company Board.

Lee E. Mikles. Mr. Mikles is a director of the Company. Mr. Mikles has been
a director of Bancorp since 1996 and of the Bank since 1994. Mr. Mikles is a
principal of Mikles/Miller Management Inc., an investment advisor. He is also
a director of Coastcast Corp. and Vista 2000, Inc. Mr. Mikles is the nephew of
George L. Graziadio, Jr., chairman of the Company Board.

Paul A. Novelly. Mr. Novelly is a director of the Company and has been a
director of the Bank since April 1996. Since 1979, Mr. Novelly has been the
president and chief executive officer of Apex Holding Co. and its
subsidiaries, a wholesale marketer and storer of petroleum products. Mr.
Novelly is a director and/or officer of numerous other corporations, including
Coastcast Corp. and Vista 2000 Inc.

H. Wayne Snavely. Mr. Snavely is a director of the Company and has been a
director of Bancorp since 1994. He is also chairman, chief executive officer
and a director of ICII. Mr. Snavely also serves as a director of the Bank,
ITC, Franchise Mortgage Acceptance Corp., Imperial Credit Mortgage Holdings,
Inc., a real estate investment trust, Southern Pacific Funding Corporation, a
mortgage lender, and Imperial Commercial Mortgage Investment Corp., a real
estate investment trust.

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Robert M. Franko. Mr. Franko has been president of the Company since its
formation and is also a director of the Company. From 1995 and until April
1997, Mr. Franko was an executive vice president and chief financial officer
of Bancorp. Before joining Bancorp in 1995, he was president and chief
executive officer of Springfield Bank & Trust Limited, a commercial bank. Mr.
Franko is also chairman of the board of ITC, a principal of Imperial
Securities Corporation, an NASD-registered broker/dealer, and a director of
Monarch Mutual Funds, a registered investment company.

Perry A. Lerner. Mr. Lerner is a director of the Company and has been a
director of ICII since 1992. He is also a principal in Crown Capital Group,
Inc., an investment firm. Mr. Lerner was associated with the law firm of
O'Melveny & Myers from 1982 through 1996. Mr. Lerner was an Attorney-Advisor
of the International Tax Counsel of the United States Treasury Department from
1973 to 1976. Mr. Lerner is also a director of Vista 2000, Inc.

Robert L. Harris II. Mr. Harris is a director of the Company. Since
September 1992, Mr. Harris has been the senior vice president, International
Business Development, for AMC Entertainment Inc., an operator of motion
picture theaters. He is also the president and a director of Entertainment
Properties Trust, a publicly traded real estate investment trust. Mr. Harris
is also a member of the American Film Institute.

Clinton W. Bliss. Mr. Bliss has been a senior vice president and chief
credit officer of the Company since April 1997. He is also chief credit
officer of CAB. Prior to April 1997, he was a senior vice president and
manager for Commercial Loan Administration for the Bank and was employed in
various positions by the Bank since 1980. Prior to joining the Bank, Mr. Bliss
was a vice president and commercial loan officer for Union Bank and he held a
variety of management positions with Morris Plan Co. of California, which was
an industrial loan company.

Lewis P. Horwitz. Mr. Horwitz is a director of the Company and has been the
president and chief executive officer of the LHO division of the Company since
the Bank acquired LHO in 1989. Mr. Horwitz founded The Lewis Horwitz
Organization in 1980. Mr. Horwitz has over 38 years of banking experience and
27 years of experience in entertainment-related finance. He is a member of the
Board of Directors of AFMA, the Chairman of The Affiliated Financial
Institutions Committee of AFMA, a past member of the Independent Film Industry
Export Finance Task Force, an advisor to Banco Popular (Puerto Rico) on film
production loans and an adviser to the Film Fund Management Corporation.

DIRECTORS' MEETINGS, COMMITTEES AND FEES

The Company Board has established a Compensation Committee and, following
the Distribution, the Company Board is also expected to maintain an Audit
Committee. Directors who are also officers or employees of the Company will
not be permitted to serve on any of these committees. The current members of
the Compensation Committee are Messrs. Mikles and Lerner. The functions of
these committees will be as follows:

AUDIT COMMITTEE. The Audit Committee will assist the Company Board in
fulfilling its responsibilities concerning the Company's accounting and
financial reporting practices and the ethical conduct of the Company and
its employees. This committee will make recommendations to the Company
Board regarding the selection, retention or termination of the Company's
independent accountants and review the professional services, proposed fees
and independence of such accountants. This committee also will review with
management and the independent accountants both the controls established to
protect the integrity of the quarterly reporting process and the Company's
annual financial statements.

COMPENSATION COMMITTEE. The Compensation Committee will assist the
Company Board in the establishment of appropriate compensation and benefits
for the Company's directors, officers and employees. This committee's
general responsibilities will include advising the Company Board on certain
compensation matters, evaluating and approving the chief executive
officer's compensation, reporting to shareholders on executive
compensation, and evaluating new and existing executive compensation and
benefit programs. This committee will also review and make recommendations
concerning outside director

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compensation and administer annual incentives for key employees and the
Company's long-term incentive plans. All of the members of the Compensation
Committee are, and after the Distribution will be, "disinterested" within
the meaning of Rule 16b-3 under the Exchange Act and "outside directors"
within the meaning of Section 162(m) of the Code.

DIRECTOR COMPENSATION

Each director of the Company, other than those directors that are also
executive officers, receives annual compensation of $12,000 and is paid $1,000
for each meeting attended. Each member of a committee of the Board receives
additional annual compensation of $3,000 and is paid $500 per meeting
attended. Directors who are also executive officers receive no additional
compensation for being a director of the Company.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS OF COMMON STOCK

The following table sets forth the projected beneficial ownership of Company
Class A Common Stock immediately following the Distribution Date by (i) each
of the Company's directors, (ii) the Company's chief executive officer and
other officers identified under "Executive Compensation" below, (iii) all
directors and executive officers as a group and (iv) those persons that will
own more than 5% of the Company Class A Common Stock, in each case based upon
information available to Bancorp concerning ownership of shares of Bancorp
Common Stock at September 30, 1997. The projections do not take into account
any shares of Company Common Stock (as defined herein) that may be issued
pursuant to the exercise of options granted under the Imperial Financial
Group, Inc. 1997 Share Incentive Plan or otherwise. The information regarding
the projected 5% owners has been obtained by Bancorp's records and reviews of
statements filed with the Commission pursuant to Sections 13(d) and 13(g) of
the Exchange Act. See "Executive Compensation."

<TABLE>
<CAPTION>
NUMBER OF SHARES PROJECTED % OF SHARES
NAME(1) TO BE BENEFICIALLY OWNED(4) OUTSTANDING
- ------- --------------------------- -----------
<S> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS(3)
George L. Graziadio, Jr. 2,822,062 (2)(6) 10.86
G. Louis Graziadio, III 343,776 (5)(6) 1.32
Robert M. Franko 18,074 *
Robert L. Harris II 0 --
Perry A. Lerner 0 --
Lee E. Mikles 59,500 *
Paul A. Novelly 44,000 *
H. Wayne Snavely 1,336 (2) *
Clinton W. Bliss 16,125 *
Lewis P. Horwitz 12,562 *
--------- -----
All directors and executive officers
as a group (10 persons) 3,317,435 12.24

5% OWNERS

Imperial Trust Company, as trustee for
Bancorp Profit Sharing Plan, Employee
Stock Ownership Plan and 401(k) Plans 1,842,034 7.09%
Graziadio Family Trust 1,401,354 5.39%
Novelly Investment Group 1,340,435 5.16%
</TABLE>
- -------
* Less than 1%.

(1) The address of each of the beneficial owners other than Novelly Investment
Group is c/o the Company, 1840 Century Park East, 10th Floor, Los Angeles,
California 90067. The address for the Novelly Investment Group is 8182
Maryland Avenue, 15th Floor, Clayton, Missouri 63105.

(2) George L. Graziadio, Jr. and H. Wayne Snavely serve as members of
Bancorp's Salary Investment, Profit Sharing and Employee Stock Ownership
Plans Administrative Committee (the "Committee"), which is a committee of
the Bancorp Board. The Committee has the power, pursuant to Bancorp's
Salary Investment, Profit Sharing and Employee Stock Ownership Plans, to
direct the Plan Trustee as to the manner in which it shall vote the shares
of common stock held by the Trustee, other than allocated shares held in
the Employee Stock Ownership Plan. The Committee acts by a majority vote.
The Bancorp Board also has the right to act as a committee of the
entirety. The shares held by the Trustee for others are not included in
the number of shares shown to be beneficially held by each of Messrs.
George L. Graziadio, Jr. and H. Wayne Snavely and each of them disclaims
beneficial ownership of the shares so held.

(3) Pursuant to California law, personal property held in the name of a
married person may be community property as to which either spouse has the
power and ability to manage and control in its entirety. The Company has
no information pertaining to whether these shares are or are not community
property or whether any arrangement exists between the spouses pertaining
to voting or disposing of these shares and has thus assumed that, in the
absence of information to the contrary, married persons share investment
and voting power with their spouse.

(4) Holdings attributable to multiple parties have been adjusted to avoid
duplications.

(5) Includes 69,094 shares held by G. Louis Graziadio, III, as
custodian/trustee for his minor children, which are reported in his total,
as to which Mr. Graziadio disclaims beneficial ownership.

(6) The Graziadio Investment Co. ("GIC") is a limited partnership of which the
Graziadio Investment Corp. ("GI Corp.") is the General Partner. George L.
Graziadio, Jr. is the controlling shareholder of GI Corp. and a Class A
Limited Partner of GIC. The other limited partners of GIC include the
George L. & Reva M. Graziadio Grandchildren's Trust No. 1 ("Trust No. 1")
and George & Reva Graziadio Trust (the "Trust"). G. Louis Graziadio, III
is a trustee of Trust No. 1 and trustee and beneficiary of the Trust and
disclaims beneficial ownership except as to his beneficial interest,
4.058% of GIC.

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EXECUTIVE COMPENSATION

HISTORICAL COMPENSATION

The following table sets forth certain information with respect to the
annual and long-term compensation of the Company's chief executive officer and
the Company's other executive officers for fiscal 1996 and 1997. During the
periods presented, the individuals were compensated by and in accordance with
Bancorp's plans and policies. All references in the following tables to stock
options relate to awards of options to purchase shares of Bancorp Common
Stock. See "--Employment Agreements" for a description of additional
compensation arrangements with certain of these officers.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
-------------------- ----------------------------------
AWARDS PAYOUTS
------ -----------
RESTRICTED SECURITIES
NAME AND PRINCIPAL OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
POSITION YEAR SALARY ($) BONUS ($) COMPENSATION($)(1) AWARD(S) OPTIONS (#) PAYOUTS ($) COMPENSATION ($)
- ------------------ ---- ---------- --------- ------------------ ---------- ----------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
G. Louis Graziadio,
III--Chief............ 1997
Executive Officer 1996 0 0 0 0 11,000 0 966,814(2)
Robert M. Franko--
President............. 1997
1996 185,000 192,475 92,160 0 0 0 12,218(3)
Clinton W. Bliss--
Senior Vice........... 1997
President and Chief
Credit Officer 1996 140,000 60,000 37,484 0 8,250 0 15,770(3)
Lewis P. Horwitz--
President,............ 1997
LHO 1996 250,607 295,328 49,146 0 11,550 0 16,968(3)
</TABLE>
- --------
(1) Includes automobile allowances, life insurance, tax services, employer
contributions to deferred compensation plans and below market interest on
loans.

(2) Represents consulting fees paid to Second Southern Corp. under consulting
agreement with the Bank. See "--Employment Agreements" and "Management's
Discussion and Analysis of Financial Condition and Results of Operation."

(3) These amounts represent contributions to Bancorp's Profit Sharing Plan,
401(k) Plan and Employee Stock Ownership Plan.

OPTION GRANTS IN FISCAL 1997

No options to purchase Bancorp Common Stock were granted to the Company's
executive officers during fiscal 1997.

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OPTION EXERCISES IN FISCAL 1997

The following table sets forth the number of shares of Bancorp Common Stock
covered by both exercisable and unexercisable stock options held by each of
the individuals named in the Summary Compensation Table on December 31, 1997.
Also reported are the values for "in-the-money" options, calculated as the
excess of the value of shares of Bancorp Common Stock as of December 31, 1997
over the respective exercise prices of outstanding stock options. All of the
options described below are currently exercisable in whole or in part. The
options granted to G. Louis Graziadio, III expire five years from date of
grant. All other options described below expire 10 years from date of grant.

<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
BANCORP OPTIONS AT IN-THE-MONEY BANCORP
SHARES VALUE 12/31/97 (#) OPTIONS AT 12/31/97 ($)
ACQUIRED ON REALIZED ------------------------- -------------------------
NAME EXERCISE (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------ -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
G. Louis Graziadio, III. 16,501 363,022 20,820 0 796,702 0
Robert M. Franko........ 36,999 927,977 420 37,420 17,905 1,595,287
Clinton W. Bliss........ 22,412 593,918 5,500 9,626 226,747 374,571
Lewis P. Horwitz........ 2,887 139,478 0 8,663 0 310,374
</TABLE>

COMPANY COMPENSATION AND BENEFIT PLANS

It is anticipated that total compensation for the Company's executive
officers after the Distribution will include base salary, annual incentives
and other benefits as described below. The Company's executive compensation
program is expected to be a performance and rewards compensation system that
pays executives for the achievement of levels of performance designed to
increase the shareholder value of the Company and that enables the Company to
hire, retain and motivate high-quality executives who meet the immediate
business challenges and improve the long-term performance of the Company. It
is anticipated that base salaries and total compensation opportunities will be
competitive as measured against industry norms.

Set forth below is a summary of the components of executive compensation
following the Distribution that will be made to those individuals who will be
executive officers or directors of the Company following the Distribution.

Base Salary. Each executive's performance will be evaluated annually, and it
is anticipated that any base salary adjustments will be based on an evaluation
of competitive market adjustments and the individual's performance and
contribution.

Share Incentive Plan. The Company has adopted the Imperial Financial Group,
Inc. 1997 Share Incentive Plan (the "Plan") in order to provide incentives to
attract, retain and motivate highly competent persons as executive management,
employees and directors of the Company and of any affiliate thereof (other
than Bancorp or the Bank). The Plan, which is, and will be after the
Distribution, administered by the Compensation Committee, provides such
persons with opportunities to acquire shares of Company Class A Common Stock
or Company Class B Common Stock, or to receive monetary payments based on the
value of such shares pursuant to certain Benefits (as defined below). Benefits
under the Plan may be granted in any one or a combination of stock options,
stock appreciation rights, stock awards, performance awards and stock units
(collectively, the "Benefits"). The Company has authorized 1 million shares of
Company Class A Common Stock and 3.7 million shares of Company Class B Common
Stock that may be granted under the Plan, subject to certain adjustments under
certain circumstances.

Deferred Compensation. The Company plans to adopt after the Distribution two
non-qualified deferred compensation plans for management and highly
compensated employees ("Company Plan I" and "Company Plan II") that will
mirror current plans for Bancorp employees ("Bancorp Plan I" and "Bancorp Plan
II"). Current participants in Bancorp Plan I have elected to receive a payout
of plan balances effective January 1999, allow their Bancorp Plan I balances
to be governed by the provisions of Bancorp Plan II, or receive a distribution

92
<PAGE>

from Bancorp Plan II on a certain date in the future. Participation in Company
Plan I and Company Plan II will be restricted to employees titled Senior Vice
President and above and will be voluntary. Participants may elect to defer up
to 100% of their annual base salary and/or bonus. The Company will match
participant contributions to their plan. The matched amount will equal between
10% and 50% (depending on the Company's return on equity performance for that
year) of any amount contributed by the participant up to 20% of such
participant's base salary and bonus. Participants are fully vested at all
times with respect to the amounts they have personally contributed and
interest thereon. Participants are vested with respect to Company
contributions at the end of the year after the Company contribution was made.

Qualified Retirement Plans. The Company plans to establish after the
Distribution two qualified defined contribution retirement plans which will
mirror current retirement plans maintained by Bancorp. See "--Treatment of
Bancorp Options and Other Benefits Following the Distribution."

Other Compensation Arrangements. It is anticipated that the Company may from
time to time enter into employment contracts or other compensation
arrangements with executives when appropriate for competitive or other
business reasons, for example, in connection with attracting new executives.
See "--Employment Agreements."

TREATMENT OF BANCORP OPTIONS AND OTHER BENEFITS FOLLOWING THE DISTRIBUTION

Set forth below is a summary of adjustments of the compensation and benefit
plans of the Transferred Employees following the Distribution.

Stock Options.

Conversion of Bancorp Options. Upon consummation of the Distribution,
certain employees of the Bank will cease to be employees of the Bank and will
become employees of the Company. To the extent any of these Transferred
Employees hold nonqualified stock options or incentive stock options to
purchase Bancorp Common Stock immediately prior to the Distribution, all
options held by such Transferred Employees will be automatically converted
into options to purchase Company Class A Common Stock. In connection with this
conversion of options to purchase Bancorp Common Stock (the "Bancorp Options")
for options to purchase Company Class A Common Stock (the "Company Options"),
the number of shares that were formerly underlying the Bancorp Options and/or
the exercise price of such options will be appropriately adjusted to allow
Transferred Employees to retain an equivalent economic position in Company
Common Stock following the Distribution. The Company will attempt to establish
the terms of the Company Options of these Transferred Employees by applying
the following analyses: (i) the excess of (a) the aggregate fair market value
of Company Class A Common Stock subject to the Company Options (determined
immediately after the proposed transaction based on the average closing price
of Company Class A Common Stock for a period of five trading days after the
Distribution Date), over (b) the aggregate exercise price of such options,
will not be greater than the excess of (a) the aggregate fair market value of
Bancorp Common Stock subject to the Bancorp Options (determined immediately
before the proposed transaction based on the average closing price of Bancorp
Common Stock for a period of five trading days before and including the
Distribution Date), over (b) the aggregate exercise price of such options; and
(ii) the ratio of (A) the option exercise price of the Company Options
immediately following the exchange to (B) the fair market value of the Company
Class A Common Stock immediately following the Distribution will not be more
favorable to the optionee on a share by share comparison than the ratio of the
option exercise price of the Bancorp Options immediately prior to the exchange
to the fair market value of Bancorp Common Stock immediately preceding the
Distribution.

Tax Consequences. The substitution of Company Options for Bancorp Options
for Transferred Employees will not result in the recognition of income, gain
or loss to the Company or to an optionee. The Company will be entitled to a
tax deduction upon the exercise of a non-qualified stock option to acquire
Company Class A Common Stock, or a disqualifying disposition of an incentive
stock option, in an amount equal to the amount of ordinary income recognized
by the optionee upon the exercise or disqualifying disposition, as applicable.

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<PAGE>

Deferred Compensation. The Company will adopt deferred compensation plans
mirroring Bancorp Plan I and Bancorp Plan II. As of the Distribution Date,
subject to applicable law, Bancorp's employer liability for the balances of
Transferred Employees will be transferred to the Company. The plan balances
will be calculated after the Distribution to include a pro-rated portion of
the participants' planned contribution prior to the Distribution, together
with interest thereon, and any pro-rated matching contributions by the
Company. This amount will become a general liability of the Company and will
be subject to claim by any creditors of the Company.

Qualified Retirement Plans.

General. The Company will establish for its employees two qualified defined
contribution retirement plans (the "Company Qualified Plans"): (i) a 401(k)
plan and (ii) a profit sharing plan. See "--Plan Provisions." A portion of the
profit sharing plan will constitute an employee stock ownership plan. Both
plans will mirror the comparable plans currently maintained by the Bank. The
entire account balance of each Transferred Employee who is a participant in
the Bank qualified plans will be transferred to the respective Company
Qualified Plan. Within a reasonable period of time following the Distribution,
Bancorp Common Stock held by the Company Qualified Plans will be exchanged for
securities of an equivalent value (the "Exchange"), unless the participant has
separately elected to establish a self-directed brokerage account within the
Company Qualified Plans to hold Bancorp Common Stock.

Tax Consequences. No gain or loss will be recognized by any participant in
either of the Company Qualified Plans, and no gain or loss will be recognized
by either of the Company Qualified Plans in connection with the Exchange. The
Exchange will not adversely affect the status of the Company Qualified Plans
as qualified within the meaning of Section 401(a) of the Code and that part of
the Company profit sharing plan that is an employee stock ownership plan will
satisfy the requirements of Section 4975(e) of the Code.

Plan Provisions. The following is a current description of the material
terms of each plan. These provisions are subject to change at any time.

SALARY INVESTMENT PLAN OF IMPERIAL FINANCIAL GROUP. The Salary Investment
Plan of Imperial Financial Group (the "401(k) Plan") is a qualified defined
contribution plan with a cash or deferred arrangement under Section 401(k)
of the Code. The 401(k) Plan operates on a calendar year. Employees are
eligible to participate in the 401(k) Plan upon the completion of 183 days
(six months) of service. Entry into the plan will occur on the January 1 or
July 1 next following the date the eligibility requirements are first met
provided the participant is employed on such date. Generally, all Company
employees are eligible to participate in the plan other than employees
covered by a collective bargaining agreement and nonresident aliens. Under
the plan, a participant may elect to defer (in whole percentages) from 2%
to 14% of a portion of his or her compensation for each pay period. A
participant may cease deferrals as of any business day or may change the
amount of his deferral election as of the first day of any quarter. The
Company will make matching contributions to the 401(k) Plan equal to 50% of
the deferral made by a participant up to the first 8% of a participant's
deferral. Only active employees at December 31 of any given year are
eligible to receive matching contributions for the year. Employer matching
contributions will be invested in Company Class A Common Stock. At all
times, a participant's deferrals and employer matching contributions are
100% vested. A participant may self-direct the investment of his or her
account, except that all matching contributions will be invested in Company
Class A Common Stock. Changes in the investment elections may be made
daily. All distributions will be made in a single lump sum. Participant
loans and hardship withdrawals are permitted within the limits prescribed
by the Code. Additionally, in-service distributions upon the attainment of
age 59 1/2 are also permitted.

PROFIT SHARING AND EMPLOYEE STOCK OWNERSHIP PLAN OF IMPERIAL FINANCIAL
GROUP. The Profit Sharing Plan and Employee Stock Ownership Plan (the
"PSP/ESOP") combines two types of plans, a profit sharing plan and a stock
bonus plan. Employees may participate upon completion of 183 days (6
months) of service during the year. Entry to the PSP/ESOP occurs on the
January 1 following the date the eligibility requirements are first met
provided the participant is employed on such date. Profit sharing
contributions

94
<PAGE>

and ESOP contributions by the Company are determined by the Company Board,
in its sole discretion, on an annual basis. Contributions by the Company
under the PSP/ESOP are allocated to the individual profit sharing or ESOP
account of each participant who has completed 1,000 hours of service and is
an employee on the last day of the plan year and is allocated in proportion
to compensation. Both the profit sharing contributions and the ESOP
contributions are subject to a vesting schedule which provides for full
vesting upon the completion of five years of service, the attainment of age
65, disability or death. A year of service for vesting purposes will occur
upon the completion of 1,000 hours of service during a plan year. Unvested
amounts are forfeited upon distribution and the resulting forfeitures are
reallocated to the remaining plan participants who have completed 1,000
hours of service and are employees on the last day of the plan year. A
participant may direct that his or her account balance, except
contributions by the Company to the participant's ESOP account, may be
invested in only Company Class A Common Stock. Permitted changes in the
investment elections may be made daily.

EMPLOYMENT AGREEMENTS

Agreements with G. Louis Graziadio, III. [EMPLOYMENT AGREEMENT SUMMARY TO BE
PROVIDED]

[Pursuant to the Contribution Agreement, the Company has agreed to assume
all of the Bank's obligations under that certain Consulting Agreement dated
November 1, 1991 between the Bank and Second Southern Corp., a company wholly
owned by G. Louis Graziadio, III ("Southern"). As a consultant, Southern
provided the Bank with an analysis of information, preparation of marketing
materials and coordination of appropriate professionals in connection with
possible securities offerings on behalf of the Bank. Southern is entitled
thereunder to receive an incentive fee of 2.5% of the realized pre-tax gains
received by the Company, when and if realized, from the disposition of the
remaining ICII shares held by the Company. If such sale by the Company has not
occurred prior to certain specified dates, the agreement provides that the
Company will have considered to have sold an amount equal to 20% of any such
security as of January 1 of each year from 1997 through 2001, at a price equal
to the arithmetic average of the daily average stock price of ICII common
stock as reported by NASD during the preceding year. As of December 31, 1997,
the liability relating to this consulting agreement approximated
$4.6 million.]

Agreement with Robert Franko. [TO BE PROVIDED]

Agreement with Lewis Horwitz. The Bank and Lewis Horwitz entered into an
Employment Agreement, dated as of July 23, 1997 (the "Horwitz Agreement"),
which will be assigned from the Bank to the Company as part of the
Contribution, pursuant to which Mr. Horwitz serves as president and chief
executive officer of LHO. The initial term of the Horwitz Agreement expires on
December 31, 2001, subject to early termination at Mr. Horwitz's option after
December 31, 1999.

Pursuant to the Horwitz Agreement, Mr. Horwitz receives a base salary of
$250,000 and a guaranteed annual bonus of $500,000 and is entitled to an
annual incentive bonus based on the pre-tax earnings of LHO. Mr. Horwitz also
receives a monthly car allowance and is entitled to additional payments
aggregating $60,000 payable between 1997 and 2001. Mr. Horwitz was also
granted options to purchase up to three percent of the outstanding Company
Common Stock as of April 23, 1997 at an exercise price of $10.37, which is
equal to 80% of the fair value per share as determined in a report by
NationsBanc Montgomery dated as of April 23, 1997. Based on these terms, the
Company will accrue compensation expense of $181,000 per year over the vesting
period. These options vest after five years, subject to earlier vesting in
certain circumstances.

The Horwitz Agreement provides that Mr. Horwitz may be terminated for
permanent disability or cause. Upon such termination, he would be entitled to
receive all accrued compensation and bonuses described above, except that no
incentive bonus will be paid upon termination for cause. Mr. Horwitz is also
entitled to a severance payment on termination (in lieu of receiving a signing
bonus at the time of execution of the Horwitz Agreement) of up to $1,250,000,
which amount will be reduced annually by 50% of the guaranteed bonus paid
prior to such termination.

95
<PAGE>

The Horwitz Agreement also provides that, following the initial term, Mr.
Horwitz will provide consulting services for the Company for an additional
three years for annual compensation of $200,000 (or an additional two years if
he retires prior to December 31, 2001). The Horwitz Agreement also contains a
non-compete provision that provides that during the term of employment and for
two years following termination, Mr. Horwitz will not solicit employees or
customers of the Company or any of its affiliates and he may not work in a
business directly or indirectly in competition with LHO.

96
<PAGE>

DESCRIPTION OF CAPITAL STOCK

AUTHORIZED CAPITAL STOCK

Under the Certificate of Incorporation that will be in effect on the
Distribution Date, the Company will have authority to issue a total of
shares of all classes of stock, of which may be
shares of preferred stock ("Preferred Stock"), 50 million may be shares of
Company Class A Common Stock, and 10 million may be shares of Company Class B
Common Stock. Company Class A Common Stock and Company Class B Common Stock
are collectively referred to herein as "Company Common Stock."

Based on the number of shares of Bancorp Common Stock outstanding as of
September 30, 1997 and the Distribution Ratio, it is expected that 25,966,307
shares of Company Class A Common Stock will be distributed to Bancorp
Shareholders in the Distribution. All the shares of Company Class A Common
Stock to be distributed to Bancorp Shareholders in the Distribution will be
fully paid and non-assessable. The Company Class A Common Stock to be
distributed will constitute all the shares of capital stock of the Company
that will be outstanding immediately after the Distribution.

COMPANY CLASS A COMMON STOCK

Holders of Company Class A Common Stock are entitled to one vote for each
share on all matters voted on by shareholders. Holders of Company Class A
Common Stock do not have cumulative voting rights in the election of
directors. The first annual meeting of shareholders is expected to be held
during 1998.

Holders of Company Class A Common Stock do not have subscription, redemption
or conversion privileges. Subject to the preferences or other rights of any
Preferred Stock that may be issued from time to time, holders of Company Class
A Common Stock are entitled to participate ratably in dividends on the Company
Class A Common Stock as declared by the Company Board. Holders of Company
Class A Common Stock are entitled to share ratably in all assets available for
distribution to shareholders in the event of liquidation or dissolution of the
Company, subject to distribution of the preferential amount, if any, to be
distributed to holders of Preferred Stock.

COMPANY CLASS B COMMON STOCK

Company Class B Common Stock may only be issued pursuant to the terms of, or
upon the exercise of outstanding options granted under any of, the Company's
employee benefit plans or as stock dividends to holders of Company Class B
Common Stock. Holders of Company Class B Common Stock are entitled to one-
tenth of one vote for each share on all matters voted on by stockholders and
will vote together as a single class with holders of Company Class A Common
Stock.

Company Class B Common Stock may not be converted to Company Class A Common
Stock prior to the fifth anniversary of the Distribution Date (the "Conversion
Date"). After the Conversion Date, each share of Company Class B Common Stock
will be automatically converted into one share of Company Class A Common Stock
upon any transfer, assignment or similar disposition of such Company Class B
Common Stock. All shares of Company Class B Common Stock that were transferred
or assigned prior to the Conversion Date will automatically convert into an
equivalent number of shares of Company Class A Common Stock on the Conversion
Date. No holder of Company Class B Common Stock has the right to convert his
or her shares into Company Class A Common Stock except in the event of an
automatic conversion under the circumstances described above.

In all other respects, the rights of the holders of Company Class B Common
Stock will be identical to the rights of holders of Company Class A Common
Stock.

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<PAGE>

PREFERRED STOCK

The Certificate of Incorporation that will be in effect on the Distribution
Date will authorize the Company Board, without any vote or action by the
holders of Company Class A Common Stock or Company Class B Common Stock, to
issue up to shares of Preferred Stock from time to time in one or
more series. The Company Board is authorized to determine the number of shares
and designation of any series of Preferred Stock and the dividend rights,
dividend rate, conversion rights and terms, voting rights (full or limited, if
any), redemption rights and terms, liquidation preferences and sinking fund
terms of any series of Preferred Stock. Issuances of Preferred Stock would be
subject to the applicable rules of the NYSE or other organizations on whose
systems the stock of the Company may then be quoted or listed. Depending upon
the terms of Preferred Stock established by the Company Board, any or all
series of Preferred Stock could have preference over the Company Class A
Common Stock with respect to dividends and other distributions and upon
liquidation of the Company. Issuance of any such shares with voting powers, or
issuance of additional shares of Company Class A Common Stock, would dilute
the voting power of the outstanding Company Class A Common Stock. The Company
has no present plans to issue any Preferred Stock.

NO PREEMPTIVE RIGHTS

No holder of any capital stock of the Company authorized at the Distribution
Date will have any preemptive right to subscribe for or purchase any
securities of any class or kind of the Company.

TRANSFER AGENT AND REGISTRAR

American Stock Transfer & Trust Co. will be the transfer agent and registrar
for the Company Class A Common Stock commencing upon the Distribution Date.

CREDIT FACILITIES

Prior to the Distribution, the Company intends to enter into two separate
credit facilities (the "Credit Facilities"), one to finance the Company's
operations other than CAB, and a separate facility to initially finance CAB's
activities. These Credit Facilities will be entered into with a syndicate of
third party financial institutions not affiliated with the Bank. In order for
the Bank to replace certain deposit liabilities used to fund the IFG Business,
the Bank, along with the Company and CAB, will be party to the Credit
Facilities. The Company anticipates that these facilities will consist of a
$140 million two-year revolving credit facility for the Company's operations
other than CAB and a $30 million one-year revolving credit facility for CAB
operations. The $140 million credit facility will include a $40 million
sublimit for the issuance of standby and commercial letters of credit. The
Company anticipates that the lenders under the Credit Facilities will require
that the lenders be granted, among other things, a first priority security
interest in (a) all of the common stock of the Company's subsidiaries, (b) the
common stock of ICII owned by the Company and (c) all payments under LHO and
SBA loans included in the facility's borrowing base. The borrowing bases
thereunder will be comprised of a percentage of the current market value of
the Company's investment in ICII stock, eligible LHO loans and eligible SBA
loans. It is expected that the $140 million credit facility will bear interest
at an annual rate equal to .95% over LIBOR or the lead lender's base rate and
the $30 million credit facility will bear interest at an annual rate of .60%
over LIBOR or the lead lender's base rate. The Company will also be charged
loan and other fees under the Credit Facilities.

For a description of all of the Company's financing arrangements, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."

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<PAGE>

PURPOSES AND EFFECTS OF CERTAIN PROVISIONS OF THE COMPANY'S
CERTIFICATE OF INCORPORATION, BYLAWS AND DELAWARE LAW

GENERAL

The provisions of the Certificate of Incorporation, the Company's Bylaws and
Delaware statutory law described in this section may delay or make more
difficult acquisitions or changes of control of the Company not approved by
the Company Board. Such provisions could have the effect of discouraging third
parties from making proposals involving an acquisition or change of control of
the Company, although such proposals, if made, might be considered desirable
by a majority of the Company's shareholders. Such provisions may also have the
effect of making it more difficult for third parties to cause the replacement
of the current management of the Company without the concurrence of the
Company Board. See "Relationship and Agreements Among the Company, the Bank
and Bancorp After the Distribution--Contribution Agreement."

Copies of the Certificate of Incorporation and Bylaws have been filed as
exhibits to the Registration Statement, of which this Information Statement is
a part. The following description of certain provisions of the Certificate of
Incorporation and the Bylaws does not purport to be complete and is subject
to, and is qualified in its entirety by reference to, the Certificate of
Incorporation and the Bylaws.

CLASSIFIED BOARD OF DIRECTORS

The Certificate of Incorporation provides for the Company Board, effective
upon completion of the Distribution, to be divided into three classes of
directors serving staggered three-year terms. As a result, approximately one-
third of the Company Board will be elected each year. See "Management--
Directors and Executive Officers."

The Company believes that a classified board will help to assure the
continuity and stability of the Company Board, and its business strategies and
policies as determined by the Company Board, because a majority of the
directors at any given time will have prior experience as directors of the
Company. This provision should also help to ensure that the Company Board, if
confronted with an unsolicited proposal from a third party that has acquired a
block of Company Class A Common Stock, will have sufficient time to review the
proposal, to consider appropriate alternatives and to seek the best available
result for all shareholders.

This provision could prevent a party who acquires control of a majority of
the outstanding Company Class A Common Stock from obtaining control of the
Company Board until the second annual stockholders' meeting following the date
the acquiror obtains the controlling stock interest, could have the effect of
discouraging a potential acquiror from making a tender offer or otherwise
attempting to obtain control of the Company and could thus increase the
likelihood that incumbent directors will retain their positions.

NUMBER OF DIRECTORS; REMOVAL; VACANCIES

The Certificate of Incorporation and the Bylaws provide that the number of
directors shall not be less than three and shall be determined from time to
time exclusively by a vote of a majority of the Company Board then in office.
The Certificate of Incorporation also provides that the Company Board shall
have the exclusive right to fill vacancies, including vacancies created by
expansion of the Company Board. Furthermore, except as may be provided in a
resolution or resolutions of the Company Board providing for any class or
series of Preferred Stock with respect to any directors elected by the holders
of such class or series, directors may be removed by shareholders for cause
and only by the affirmative vote of at least 80% of the voting power of all of
the shares of the Company's capital stock then entitled to vote generally in
the election of directors, voting together as a single class. These
provisions, in conjunction with the provision of the Certificate of
Incorporation authorizing the Company Board to fill vacant directorships,
could prevent shareholders from removing incumbent directors without cause and
filling the resulting vacancies with their own nominees.

99
<PAGE>

NO STOCKHOLDER ACTION BY WRITTEN CONSENT; SPECIAL MEETINGS

The Certificate of Incorporation provides that, except as may be provided in
a resolution or resolutions of the Company Board providing for any class or
series of Preferred Stock, stockholder action can be taken only at an annual
or special meeting of shareholders and cannot be taken by written consent in
lieu of a meeting. The Certificate of Incorporation also provides that special
meetings of the shareholders can only be called pursuant to a resolution
approved by a majority of the Company Board then in office. Shareholders of
the Company are not permitted to call a special meeting of shareholders.

ADVANCE NOTICE FOR RAISING BUSINESS OR MAKING NOMINATIONS AT MEETINGS

The Bylaws establish an advance notice procedure for stockholder proposals
to be brought before a meeting of shareholders of the Company and for
nominations by shareholders of candidates for election as directors at an
annual meeting or a special meeting at which directors are to be elected.
Subject to any other applicable requirements, including, without limitation,
Rule 14a-8 under the Exchange Act, only such business may be conducted at a
meeting of shareholders as has been brought before the meeting by, or at the
direction of, the Company Board, or by a stockholder who has given to the
Secretary of the Company timely written notice, in proper form, of the
stockholder's intention to bring that business before the meeting. The
presiding officer at such meeting has the authority to make such
determinations. Only persons who are nominated by, or at the direction of, the
Company Board, or who are nominated by a stockholder who has given timely
written notice, in proper form, to the Secretary prior to a meeting at which
directors are to be elected will be eligible for election as directors of the
Company.

To be timely, notice of nominations or other business to be brought before
an annual meeting must be received by the Secretary of the Company at the
principal executive office of the Company no later than 90 days prior to the
date of such annual meeting. Similarly, notice of nominations or other
business to be brought before a special meeting must be delivered to the
Secretary at the principal executive office of the Company no later than the
close of business on the 10th day following the day on which notice of the
date of a special meeting of shareholders was given.

The notice of any nomination for election as a director must set forth the
name, date of birth, business and residence address of the person or persons
to be nominated; the business experience during the past five years of such
person or persons; whether such person or persons are or have ever been at any
time directors, officers or owners of 5% or more of any class of capital
stock, partnership interest or other equity interest of any corporation,
partnership or other entity; any directorships held by such person or persons
in any company with a class of securities registered pursuant to Section 12 of
the Exchange Act or subject to the requirements of Section 15(d) of such Act
or any company registered as an investment company under the Investment
Company Act of 1940, as amended; and whether in the last five years, such
person or persons are or have been convicted in a criminal proceeding or have
been subject to a judgment, order, finding or decree of any federal, state or
other governmental entity, concerning any violation of federal, state or other
law, or any proceeding in bankruptcy, which conviction, order, finding, decree
or proceeding may be material to an evaluation of the ability or integrity of
the nominee; and the consent of each such person to serve as a director if
elected. The person submitting the notice of nomination, and any person acting
in concert with such person, must provide their name and business addresses,
the name and address under which they appear on the Company's books (if they
so appear), and the class and number of shares of the Company's capital stock
that are beneficially owned by them.

AMENDMENTS TO BYLAWS

The Certificate of Incorporation provides that the Company Board or the
holders of at least 80% of the voting power of all shares of the Company's
capital stock then entitled to vote generally in the election of directors,
voting together as a single class, have the power to amend or repeal the
Company's Bylaws.

100
<PAGE>

AMENDMENT OF THE CERTIFICATE OF INCORPORATION

Any proposal to amend, alter, change or repeal any provision of the
Certificate of Incorporation except as may be provided in a resolution or
resolutions of the Company Board providing for any class or series of
Preferred Stock and which relate to such class or series of Preferred Stock,
requires approval by the affirmative vote of both a majority of the members of
the Company Board then in office and a majority vote of the voting power of
all of the shares of the company's capital stock entitled to vote generally in
the election of directors, voting together as a single class. Notwithstanding
the foregoing, any proposal to amend, alter, change or repeal the provisions
of the Certificate of Incorporation relating to (i) the classification of the
Company Board, (ii) removal of Directors, (iii) the prohibition of stockholder
action by written consent or stockholder calls for special meetings, (iv)
amendment of Bylaws, or (v) amendment of the Certificate of Incorporation
requires approval by the affirmative vote of 80% of the voting power of all of
the shares of the Company's capital stock entitled to vote generally in the
election of directors, voting together as a single class.

PREFERRED STOCK AND ADDITIONAL COMMON STOCK

Under the Certificate of Incorporation, the Company Board will have the
authority to provide by Board resolution for the issuance of shares of one or
more series of Preferred Stock. The Company Board is authorized to fix by
resolution the terms and conditions of each such other series. See
"Description of Capital Stock--Preferred Stock."

The Company believes that the availability of the Company's Preferred Stock,
in each case issuable in series, and additional shares of Common Stock could
facilitate certain financings and acquisitions and provide a means for meeting
other corporate needs which might arise. The authorized shares of the
Company's Preferred Stock, as well as authorized but unissued shares of
Company Class A Common Stock and Company Class B Common Stock, will be
available for issuance without further action by the Company's stockholders,
unless stockholder action is required by applicable law or the rules of any
stock exchange on which any series of the Company's capital stock may then be
listed.

These provisions give the Company Board the power to approve the issuance of
a series of Preferred Stock, or an additional series of Company Class A Common
Stock or Company Class B Common Stock, of the Company that could, depending on
its terms, either impede or facilitate the completion of a merger, tender
offer or other takeover attempt. For example, the issuance of new shares of
Preferred Stock might impede a business combination if the terms of those
shares include voting rights which would enable a holder to block business
combinations and the issuance of new shares might facilitate a business
combination if those shares have general voting rights sufficient to cause an
applicable percentage vote requirement to be satisfied.

DELAWARE TAKEOVER STATUTE

Section 203 of the DGCL provides that, subject to certain exceptions
specified therein, a corporation shall not engage in any business combination
with any "interested stockholder" for a three-year period following the time
that such stockholder becomes an interested stockholder unless (1) prior to
such time, the board of directors of the corporation approved either the
business combination or the transaction which resulted in the stockholder
becoming an interested stockholder, (2) upon consummation of the transaction
which resulted in the stockholder becoming an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced (excluding
certain shares), or (3) on or subsequent to such time, the business
combination is approved by the board of directors of the corporation and by
the affirmative vote of at least 66 2/3% of the outstanding voting stock which
is not owned by the interested stockholder. Except as specified in Section 203
of the DGCL, an interested stockholder is defined to include (a) any person
that is the owner of 15% or more of the outstanding voting stock of the
corporation, or is an affiliate or associate of the corporation and was the
owner of 15% or more of the outstanding voting stock of the corporation, at
any time within three years immediately prior to the relevant date and (b) the
affiliates and associates of any such person.

101
<PAGE>

Under certain circumstances, Section 203 of the DGCL makes it more difficult
for a person who would be an "interested stockholder" to effect various
business combinations with a corporation for a three-year period, although the
shareholders may elect to exclude a corporation from the restrictions imposed
thereunder. The Certificate of Incorporation does not exclude the Company from
the restrictions imposed under Section 203 of the DGCL. It is anticipated that
the provisions of Section 203 of the DGCL may encourage companies interested
in acquiring the Company to negotiate in advance with the Company Board, since
the stockholder approval requirement would be avoided if a majority of the
directors then in office approve either the business combination or the
transaction which results in the stockholder becoming an interested
stockholder.

102
<PAGE>

LIMITATION ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS

Certain provisions of the DGCL and the Company's Certificate of
Incorporation and Bylaws relate to the limitation of liability and
indemnification of directors and officers of the Company. These various
provisions are described below.

The Certificate of Incorporation provides that the Company's directors are
not personally liable to the Company or its shareholders for monetary damages
for breach of their fiduciary duties as a director to the fullest extent
permitted by Delaware law. Under existing Delaware law, directors would not be
personally liable to the Company or its shareholders for monetary damages for
breach of their fiduciary duties as a director, except for (i) any breach of
the director's duty of loyalty to the Company or its shareholders, (ii) acts
or omissions not in good faith or involving intentional misconduct or a
knowing violation of law, (iii) any transaction from which the director
derived improper personal benefit or (iv) the unlawful payment of dividends or
unlawful stock repurchases or redemptions. This indemnification provision may
have the effect of reducing the likelihood of derivative litigation against
directors and may discourage or deter shareholders or the Company from
bringing a lawsuit against directors of the Company for breach of their
fiduciary duties as directors. However, the provision does not affect the
availability of equitable remedies such as an injunction or rescission.

The Certificate of Incorporation also provides that each person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed civil or criminal action or proceeding by reason of the fact that
such person is or was a director of the Company or is or was serving at the
request of the Company as a director of another corporation, partnership,
joint venture, trust or other enterprise, shall be indemnified and held
harmless by the Corporation to the fullest extent permitted by Delaware law.
This right to indemnification shall also include the right to be paid by the
Company the expenses incurred in connection with any such proceeding in
advance of its final disposition to the fullest extent authorized by Delaware
law. This right to indemnification shall be a contract right. The Company may,
by action of the Company Board, provide indemnification to such of the
officers, employees and agents of the Company to such extent and to such
effect as the Company Board determines to be appropriate and authorized by
Delaware law.

The Company's Bylaws authorize the Company to purchase insurance for
directors, officers and employees of the Company, and persons who serve at the
request of the Company as directors, officers, members, employees, fiduciaries
or agents of other enterprises, against any expense, liability or loss
incurred in such capacity, whether or not the Company would have the power to
indemnify such persons against such expense or liability under the Bylaws. The
Company intends to maintain insurance coverage for its officers and directors
as well as insurance coverage to reimburse the Company for potential costs of
its corporate indemnification of directors and officers.

103
<PAGE>

ADDITIONAL INFORMATION

The Company has filed with the Commission the Registration Statement under
the Exchange Act with respect to the Company Class A Common Stock being
received by the shareholders of Bancorp Common Stock in the Distribution. This
Information Statement does not contain all of the information set forth in the
Registration Statement and the exhibits thereto, to which reference is hereby
made. Statements made in this Information Statement as to the contents of any
contract, agreement or other documents referred to herein are not necessarily
complete. With respect to each such contract, agreement or other documents
filed as an exhibit to the Registration Statement, reference is made to such
exhibit for a more complete description of the matter involved, and each such
statement shall be deemed qualified in its entirety by such reference. The
Registration Statement and the exhibits thereto filed by the Company with the
Commission may be inspected at the public reference facilities of the
Commission listed below.

After the Distribution, the Company will be subject to the information
requirements of the Exchange Act, and in accordance therewith, will file
reports, proxy statements and other information with the Commission. Such
reports, proxy statements and other information can be inspected and copied at
the public reference facilities maintained by the Commission at its principal
offices at 450 Fifth Street, N.W., Washington, D.C. 10549, and at its regional
offices at Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 and 7 World Trade Center, 13th Floor, New York, New
York 10048. Copies of such material may be obtained at prescribed rates from
the Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Such material may also be accessed electronically by
means of the Commission's home page on the Internet at http://www.sec.gov.
Application has been made to list the shares of Company Class A Common Stock
on the NYSE and, if and when such shares of Company Class A Common Stock
commence trading on the NYSE, such reports, proxy statements and other
information concerning the Company will be available for inspection at the
NYSE, 20 Broad Street, New York, New York 10005.

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

The Company intends to furnish its stockholders with annual reports
containing consolidated financial statements audited by independent
accountants.

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

NO PERSON IS AUTHORIZED BY BANCORP, THE BANK OR THE COMPANY TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
INFORMATION STATEMENT, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.

104
<PAGE>

INDEX TO FINANCIAL INFORMATION

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Imperial Financial Group, Inc.
Independent Auditors' Report............................................. F-2
Combined Balance Sheets.................................................. F-3
Combined Statements of Income............................................ F-4
Combined Statements of Changes in Stockholder's Equity................... F-5
Combined Statements of Cash Flows........................................ F-6
Notes to Combined Financial Statements................................... F-7
</TABLE>

F-1
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Imperial Financial Group, Inc.

We have audited the accompanying combined balance sheets of Imperial Financial
Group, Inc. as of December 31, 1995 and 1996, and the related combined
statements of income, changes in stockholder's equity and cash flows for each
of the years in the three-year period ended December 31, 1996. These combined
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these combined financial statements
based on our audits.

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

In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Imperial Financial
Group, Inc. as of December 31, 1995 and 1996, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1996 in conformity with generally accepted accounting
principles.

KPMG Peat Marwick LLP

Los Angeles, California
October 31, 1997

F-2
<PAGE>

IMPERIAL FINANCIAL GROUP, INC.
COMBINED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
PRO FORMA
SEPTEMBER 30, SEPTEMBER 30,
DECEMBER 31, DECEMBER 31, 1997 1997
1995 1996 (UNAUDITED) (UNAUDITED)
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equiva-
lents.................. $ 2,272 $ 5,245 $ 2,522 $ 2,522
Securities available for
sale, at fair value.... 1,437 1,179 6,987 6,987
Loans held for sale..... 2,648 5,531 4,855 4,855
Loans held for invest-
ment, net.............. 75,518 72,528 123,296 116,847
Investment in stock of
Imperial Credit Indus-
tries, Inc. ("ICII")... 36,126 57,736 64,192 64,192
Premises and equipment,
net.................... 290 306 364 364
Excess servicing fees
receivable............. 1,407 3,294 -- --
Mortgage servicing
rights................. -- -- 1,955 1,955
Other assets............ 5,332 8,101 5,594 5,351
-------- -------- -------- --------
$125,030 $153,920 $209,765 203,073
======== ======== ======== ========
LIABILITIES
Borrowings from Imperial
Bank................... $ 49,897 $ 6,184 $ 68,813 $ --
Line of credit.......... -- -- -- 112,898
Income taxes payable.... 12,876 40,340 26,240 25,023
Other liabilities....... 4,056 10,550 11,275 11,241
-------- -------- -------- --------
66,829 57,074 106,328 149,162
-------- -------- -------- --------
STOCKHOLDER'S EQUITY
Common stock--$.01 par,
1,000 shares autho-
rized; 100 shares is-
sued or outstanding at
September 30, 1997 (un-
audited)............... -- -- -- --
Contribution by Imperial
Bank................... 1,597 1,597 1,597 1,597
Unrealized (loss) gain
on securities available
for sale, net of taxes. (2) (1) 172 172
Retained earnings....... 56,606 95,250 101,668 52,142
-------- -------- -------- --------
Total stockholder's eq-
uity................... 58,201 96,846 103,437 53,911
-------- -------- -------- --------
Total liabilities and
stockholder's equity... $125,030 $153,920 $209,765 $203,073
======== ======== ======== ========
</TABLE>

See accompanying notes to combined financial statements.

F-3
<PAGE>

IMPERIAL FINANCIAL GROUP, INC.
COMBINED STATEMENTS OF INCOME
(IN THOUSANDS)

<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA NINE MONTHS NINE MONTHS NINE MONTHS
YEAR ENDED ENDED ENDED ENDED
YEAR ENDED DECEMBER 31, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
----------------------- 1996 1996 1997 1997
1994 1995 1996 (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
------- ------- ------- ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUE
Interest on loans....... $ 4,228 $ 6,726 $10,629 $ 9,761 $ 8,062 $10,478 $ 9,975
Interest on securities
available for sale..... 131 153 158 158 114 143 143
------- ------- ------- ------- ------- ------- -------
Total interest income... 4,359 6,879 10,787 9,919 8,176 10,621 10,118
Interest expense........ 256 1,287 1,973 1,860 1,784 1,648 3,312
------- ------- ------- ------- ------- ------- -------
Net interest income..... 4,103 5,592 8,814 8,059 6,392 8,973 6,806
Provision for loan
losses................. -- 1,492 1,781 1,207 1,581 1,866 1,830
------- ------- ------- ------- ------- ------- -------
Net interest income
after provision for
loan losses............ 4,103 4,100 7,033 6,852 4,811 7,107 4,976
------- ------- ------- ------- ------- ------- -------
Trust fees.............. 6,857 8,385 7,744 7,744 5,819 5,842 5,842
Gain on sale of SBA
loans.................. 1,724 1,813 3,561 3,561 2,503 2,980 2,980
Equity in net income of
ICII................... 2,388 5,652 21,444 21,444 16,555 8,362 8,362
Gain on sale of ICII
stock.................. -- -- 25,650 25,650 25,650 2,429 2,429
Gain from sale of stock
by ICII................ -- -- 10,761 10,761 10,761 -- --
Appreciation on donated
ICII stock............. -- -- 3,698 3,698 3,617 2,816 2,816
Other income............ 430 677 1,260 1,260 1,135 2,007 2,007
------- ------- ------- ------- ------- ------- -------
TOTAL REVENUE........... 15,502 20,627 81,151 80,970 70,851 31,543 29,412
------- ------- ------- ------- ------- ------- -------
EXPENSES
Personnel............... 4,338 4,827 6,153 6,153 4,519 7,003 7,003
Occupancy, net.......... 757 887 1,024 1,024 743 894 894
Data processing......... 795 518 562 562 470 465 465
Real estate owned
(income) expenses, net. 514 129 (11) (11) (21) 142 142
Donation of ICII stock.. -- -- 4,866 4,866 4,742 3,632 3,632
Consulting Expense...... 133 286 914 914 686 5,748 5,748
Other................... 2,316 3,748 3,325 3,325 2,341 4,100 4,100
------- ------- ------- ------- ------- ------- -------
TOTAL EXPENSES.......... 8,853 10,395 16,833 16,833 13,480 21,984 21,984
------- ------- ------- ------- ------- ------- -------
Income before income
taxes and extraordinary
item................... 6,649 10,232 64,318 64,137 57,371 9,559 7,428
Income taxes............ 2,821 4,313 25,674 25,597 22,766 3,141 2,246
------- ------- ------- ------- ------- ------- -------
Income before
extraordinary item 3,828 5,919 38,644 38,540 34,605 6,418 5,182
Extraordinary item--gain
on extinguishment of
ICII debt, net of
taxes.................. 370 -- -- -- -- -- --
------- ------- ------- ------- ------- ------- -------
NET INCOME.............. $ 4,198 $ 5,919 $38,644 $38,540 $34,605 $ 6,418 $ 5,182
======= ======= ======= ======= ======= ======= =======
</TABLE>

See accompanying notes to combined financial statements.

F-4
<PAGE>

IMPERIAL FINANCIAL GROUP, INC.
COMBINED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
(IN THOUSANDS)

<TABLE>
<CAPTION>
UNREALIZED
GAIN
(LOSS) ON
SECURITIES
AVAILABLE
CONTRIBUTION FOR SALE, TOTAL
COMMON BY IMPERIAL NET OF RETAINED STOCKHOLDER'S
STOCK BANK TAXES EARNINGS EQUITY
------- ------------ ---------- -------- -------------
<S> <C> <C> <C> <C> <C>
Balance, December 31,
1993................... $ -- $1,597 $-- $ 48,489 $ 50,086
------- ------ ---- -------- --------
Net income, 1994........ 4,198 4,198
Net change in unrealized
loss on securities
available for sale, net
of taxes .............. (40) (40)
------- ------ ---- -------- --------
Balance, December 31,
1994................... -- 1,597 (40) 52,687 54,244
------- ------ ---- -------- --------
Net income, 1995........ 5,919 5,919
Dividend to Imperial
Bank................... (2,000) (2,000)
Net change in unrealized
loss on securities
available for sale, net
of taxes .............. 38 38
------- ------ ---- -------- --------
Balance, December 31,
1995................... -- 1,597 (2) 56,606 58,201
------- ------ ---- -------- --------
Net income, 1996........ 38,644 38,644
Net change in unrealized
loss on securities
available for sale, net
of taxes .............. 1 1
------- ------ ---- -------- --------
Balance, December 31,
1996................... -- 1,597 (1) 95,250 96,846
------- ------ ---- -------- --------
Net income, nine months
ended September 30,
1997 (unaudited) ...... 6,418 6,418
Net change in unrealized
gain on securities
available for sale, net
of taxes (unaudited)... 173 173
------- ------ ---- -------- --------
Balance, September 30,
1997 (unaudited)....... $ -- $1,597 $172 $101,668 $103,437
======= ====== ==== ======== ========
</TABLE>

See accompanying notes to combined financial statements.

F-5
<PAGE>

IMPERIAL FINANCIAL GROUP, INC.
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
------------------------- 1996 1997
1994 1995 1996 (UNAUDITED) (UNAUDITED)
------- ------- ------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Cash flows from
operating activities
Net income.............. $ 4,198 $ 5,919 $38,644 $34,605 $ 6,418
Adjustments for non-cash
items:
Depreciation and
amortization.......... 127 176 164 123 132
Accretion of security
discount, net......... (19) (26) (9) (7) (4)
Provision for loan
losses................ -- 1,492 1,781 1,581 1,866
Equity in net income of
ICII.................. (2,388) (5,652) (21,444) (16,555) (8,362)
Gains--ICII stock...... -- -- (36,411) (36,411) (2,429)
Appreciation of donated
ICII stock............ -- -- (3,698) (3,616) (2,816)
Donated ICII stock..... -- -- 4,866 4,742 3,632
Provision for deferred
taxes................. 1,329 1,985 8,310 6,297 2,186
Net decrease (increase)
in loans held for
sale.................. 931 (1,000) (2,883) (3,013) 676
Net increase (decrease)
in income taxes
payable............... 975 867 19,156 17,487 (16,286)
Net (increase) decrease
in excess servicing
fees receivable....... (699) (522) (1,887) (1,186) 3,294
Net increase in
mortgage servicing
rights................ -- -- -- -- (1,955)
Net decrease (increase)
in other assets....... 1,577 (1,744) (2,843) (2,321) 316
Net increase (decrease)
in other liabilities.. 1,651 (1,354) 6,494 4,996 601
------- ------- ------- ------- -------
Net cash provided by
(used in) operating
activities............. 7,682 141 10,240 6,722 (12,731)
------- ------- ------- ------- -------
Cash flows from
investing activities:
Proceeds from maturity
of securities
available for sale,
net................... 201 408 800 189 650
Purchase of securities
available for sale.... -- -- (533) (2,017) (4,000)
Net decrease (increase)
in loans held for
investment............ 10,478 (50,641) 1,209 1,305 (52,634)
Proceeds from sale of
ICII common stock..... -- -- 35,079 35,079 3,519
Purchase of custodial
business.............. (121) -- -- -- --
Purchase of premises
and equipment......... (120) (125) (109) (80) (156)
------- ------- ------- ------- -------
Net cash provided by
(used in) investing
activities............. 10,438 (50,358) 36,446 34,476 (52,621)
------- ------- ------- ------- -------
Cash flow from financing
activities:
Net (decrease) increase
in borrowings from
Imperial Bank......... (17,226) 52,593 (43,713) (41,105) 62,629
Dividend to Imperial
Bank.................. -- (2,000) -- -- --
------- ------- ------- ------- -------
Net cash (used in)
provided by financing
activities............. (17,226) 50,593 (43,713) (41,105) 62,629
Net change in cash and
cash equivalents....... 894 376 2,973 93 (2,723)
Cash and cash
equivalents at
beginning of period.... 1,002 1,896 2,272 2,272 5,245
------- ------- ------- ------- -------
Cash and cash
equivalents at end of
period................. $ 1,896 $ 2,272 $ 5,245 $ 2,365 $ 2,522

Supplementary
Information:
Interest paid.......... -- -- -- -- --
Taxes paid............. $ 849 $ 680 $ -- $ -- $ 1,100
Transfer of interest
only strip to
securities available
for sale.............. -- -- -- -- $ 2,161
</TABLE>

See accompanying notes to combined financial statements.

F-6
<PAGE>

IMPERIAL FINANCIAL GROUP, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS

DECEMBER 31, 1994, 1995 AND 1996 AND SEPTEMBER 30, 1996 (UNAUDITED) AND 1997
(UNAUDITED)

NOTE 1. ORGANIZATION

Imperial Financial Group, Inc. (the "Company"), incorporated in the State of
Delaware in 1997, is a wholly-owned subsidiary of Imperial Bank (the "Bank"),
which is itself a wholly owned subsidiary of Imperial Bancorp, a diversified
financial services organization. On February 20, 1997, the Board of Directors
of Imperial Bancorp approved a plan to spin off to its shareholders in a tax-
free distribution the shares of the Company's Class A Common Stock (the
"Distribution"). After consummation of the Distribution, the Company will be
comprised of The Lewis Horwitz Organization ("LHO"), currently a division of
the Bank specializing in entertainment industry lending; Crown American Bank
("CAB"), a thrift and loan company that will conduct, among other businesses,
the Bank's small business lending group that specializes in originating and
selling Small Business Administration ("SBA") government guaranteed loans;
Imperial Trust Company ("ITC"), a wholly owned subsidiary of the Bank, which
is a California-licensed trust company and provides investment management and
fiduciary services to individual investors, corporations and foundations; and
its investment in Imperial Credit Industries, Inc. ("ICII"), a diversified
finance company which as of September 30, 1997 (unaudited) totalled
approximately 9.1 million shares of stock.

The Company, CAB, the Bank and Imperial Bancorp will enter into the
Contribution Agreement in connection with the Distribution, pursuant to which
the Bank will contribute to the Company (i) all of the assets and liabilities
relating to LHO, (ii) all of the common stock of ITC, (iii) all of the common
stock of CAB and (iv) all of the ICII common stock owned by the Bank
(representing approximately 23.5% of all outstanding common stock as of
September 30, 1997 (unaudited)) (the "Contribution").

The Contribution Agreement also will provide that the Bank will retain
certain loans secured by mortgages on single family residential properties
(and the Company will not assume the liabilities relating thereto) which were
transferred to the Bank in connection with the initial public offering of ICII
in 1992. In addition, the Company will assume the Bank's obligations under a
consulting agreement with an entity wholly-owned by the chief executive
officer of the Company.

The Distribution is subject to, among other conditions, receipt of a private
letter ruling from the Internal Revenue Service to the effect that the receipt
of shares of Company Class A Common Stock will be tax-free for federal income
tax purposes to Imperial Bancorp and to shareholders of Imperial Bancorp and
that neither Imperial Bancorp nor the Bank will recognize income, gain or loss
as a result of the Distribution, as well as any necessary approval from
Imperial Bancorp's regulators. It is anticipated that the Distribution will
occur in early 1998.

NOTE 2. BASIS OF PRESENTATION

The operations of the divisions, companies and investment that will make up
the Company after the Distribution have been combined in the accompanying
combined financial statements and notes, reflecting the historical operations
for those periods presented as if the Company existed as a stand alone entity
during such periods. All material intercompany transactions have been
eliminated. Certain adjustments, as described below, have been made to
historical operations in order to provide fair presentation of the financial
operations of the combined entity.

The combined financial statements have been prepared in conformity with
generally accepted accounting principles. In preparing the combined financial
statements, management is required to make estimates and assumptions that
affect the reported amounts of assets and liabilities as of the dates of the
balance sheets and the results of operations for the periods presented. Actual
results could differ significantly from those estimates.

Material estimates that are particularly susceptible to significant change
in the near term relate to the allowance for loan losses. While management
believes that the allowance is currently adequate, future additions may be
necessary based on changes in economic conditions.

F-7
<PAGE>

IMPERIAL FINANCIAL GROUP, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

BORROWING COST

Historical operations of the Company have been adjusted to reflect the
funding of net assets by the Bank. The adjustments have been disclosed in the
accompanying combined financial statements as "Borrowings from Imperial Bank".
Additionally, the historical operations of the Company have been adjusted to
reflect the estimated interest charges on these borrowings. In order to
reflect all costs of doing business in the combined financial statements,
interest charges have been allocated to the Company in the accompanying
combined statements of income.

The interest charges allocated are based upon estimated average borrowing
balances and Imperial Bank's average interest rates for short-term
certificates of deposit plus one hundred basis points in order to approximate
the cost of funds management believes is representative of the cost the
Company would have had to pay in the past as a "stand alone" company. The
estimated average borrowings from the Bank and estimated interest rates used
to determine the estimated interest expense recorded for the periods indicated
are as follows:

<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED SEPTEMBER
DECEMBER 31, 30, (UNAUDITED)
------------------------ ----------------
1994 1995 1996 1996 1997
------ ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Estimated average borrowings........ $5,039 $18,571 $30,542 $36,821 $33,281
Estimated interest rate............. 5.08% 6.93% 6.46% 6.46% 6.60%
Estimated interest expense.......... $ 256 $ 1,287 $ 1,973 $ 1,784 $ 1,648
</TABLE>

INCOME TAXES

The SBA and LHO divisions did not record income taxes in their historical
operations. Additionally, no income taxes have historically been recorded on
the Company's investment in ICII. Consistent with a tax sharing agreement with
Imperial Bancorp, the combined financial statements reflect income taxes for
the Company as if it had been a subsidiary of the Bank for all periods
presented. The combined tax provisions are disclosed in note 9 to the combined
financial statements.

NOTE 3. PRO FORMA INFORMATION

The unaudited pro forma combined statements of income reflect the
Contribution and the Distribution as if they occurred at the beginning of each
of the periods presented. The unaudited pro forma combined balance sheet
reflects the Contribution and the Distribution as if they occurred at
September 30, 1997. The unaudited pro forma information reflects the expected
capitalization of the Company as a result of the Distribution, the incurrence
by the Company of approximately $113 million of indebtedness under the Credit
Facilities, interest expense relating to such borrowings, amortization of
capitalized costs incurred in connection with the Credit Facilities and
retention of certain assets and liabilities by Imperial Bancorp. This
unaudited pro forma information does not necessarily reflect the results of
operations or financial position of the Company which would have been achieved
had the Contribution and Distribution actually been consummated as of such
dates. Also, this unaudited pro forma information is not indicative of the
future results of operations or future financial position of the Company.

NOTE 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies of the Company are summarized below.

(A) PRINCIPLES OF CONSOLIDATION

The combined financial statements include the accounts of the Company. All
material intercompany balances and transactions have been eliminated.

F-8
<PAGE>

IMPERIAL FINANCIAL GROUP, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

At December 31, 1995, December 31, 1996 and September 30, 1997 (unaudited),
respectively, the Company owned approximately 11.6 million, 9.4 million and
9.1 million shares of ICII at a book value per share of $6.23, $6.16 and $7.06
representing approximately 40%, 25% and 24% of all outstanding ICII shares.
The Company exercises significant influence over the operating and financial
policies of ICII, and therefore, the results of ICII operations are accounted
for in the Company's combined financial statements as an equity investment.
The results of operations of ICII are reflected as "Equity in net income of
ICII" in the combined statements of income.

(B) CASH AND CASH EQUIVALENTS

For purposes of the combined statements of cash flows, the Company considers
all investments having a maturity of three months or less at the date of
purchase to be cash equivalents.

The Company holds certain securities, primarily U.S. Treasury and federal
agency securities, to manage its overall liquidity. These securities are
carried at fair value. Unrealized gains and losses are excluded from income
and reported as a separate component of stockholder's equity, net of taxes.
Fair value impairment that is determined to be other than temporary is
recorded as an unrealized loss in the combined statements of income. Purchases
and sales of securities available for sale are recorded on the trade date.
Amortization of premiums and accretion of discounts are recognized in other
interest income in the combined statements of income using the interest
method. Realized gains and losses on securities available for sale are
computed using the specific identification method.

(D) LOANS HELD FOR SALE

The Company currently designates its SBA loans originated as held for sale.
These loans are carried at the lower of aggregate cost or fair value.
Origination fees on loans held for sale, net of certain costs of processing
and closing the loans, are deferred until the time of sale and are included in
the computation of the gain or loss from the sale of the related loans. The
gains or losses on the sale of SBA loans are recorded as "Gain on sale of SBA
loans" in the combined statements of income.

(E) LOANS HELD FOR INVESTMENT, NET

Loans held for investment are stated at the amount of principal outstanding.
Non-refundable loan fees and related direct costs associated with the
origination or purchase of loans are deferred and netted against outstanding
loan balances. The net deferred fees and costs are recognized into interest
income over the loan term using the interest method.

Interest income on loans is accrued as earned. Interest accruals on
commercial and real estate loans are generally discontinued whenever the
payment of interest or principal is 90 days past due. When a loan is placed on
nonaccrual status, the accrued and unpaid interest is charged against current
income and recognition of net deferred fees and costs into income is
discontinued. Future collections of interest are included in interest income
or applied to the loan balance based on an assessment of the likelihood that
the principal will be collected.

A loan is impaired when it is "probable" that a creditor will be unable to
collect all amounts due (i.e., both principal and interest) according to the
contractual terms of the loan agreement. The measurement of impairment may be
based on (1) the present value of the expected future cash flows of the
impaired loan discounted at the loan's original effective interest rate, (2)
the observable market price of the impaired loan or (3) the fair value of the
collateral of a collateral-dependent loan. The amount by which the recorded
investment of the loan exceeds the measure of the impaired loan is recognized
by recording a valuation allowance with a corresponding charge to the
provision for loan losses.

F-9
<PAGE>

IMPERIAL FINANCIAL GROUP, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

Loans deemed by management to be uncollectible are charged to the allowance
for loan losses. Recoveries on loans previously charged off are credited to
the allowance. Provisions for loan losses are charged to expense and added to
the allowance in amounts deemed appropriate by management. In evaluating the
adequacy of the allowance, management considers numerous factors including
economic conditions, loan portfolio composition and risk, loan loss
experience, ongoing review of specific loans and the review by the Company's
regulators. While management uses available information to recognize losses on
loans, future additions to the allowance may be necessary based on changes in
the aforementioned factors.

(F) PREMISES AND EQUIPMENT, NET

Premises and equipment are carried at cost, less accumulated depreciation.
Depreciation on equipment is calculated using the straight-line method over
the estimated useful lives of the assets (five to seven years). Leasehold
improvements are amortized using the straight-line method over the terms of
the respective leases or the estimated useful lives of the leasehold
improvements, whichever is shorter.

(G) EXCESS SERVICING FEES RECEIVABLE

The Company has created excess servicing fees receivable as a result of the
sale of SBA loans. Excess servicing fees receivable on the sale of SBA loans
are determined by computing the present value of the future cash flows of
loans sold over a base fee (0.40%) for the servicing of the loan. The excess
servicing fees receivable is amortized over the expected life of the loan
using the straight line method. Prepayment assumptions are based on market
prepayment rates.

(H) INCOME TAXES

The Company is currently included in the consolidated tax returns of
Imperial Bancorp. The Company accounts for income taxes as though they file
taxes on a separate company basis using an asset and liability approach, the
objective of which is to recognize the amount of taxes payable or refundable
for the current year, and deferred tax assets and liabilities for the future
tax consequences that have been recognized in the combined financial
statements or tax returns. The measurement of tax assets and liabilities is
based on enacted tax laws. Deferred tax assets are reduced, if necessary, by
the amounts of such benefits that are not expected to be realized based on
available evidence.

(I) TRUST FEE INCOME

Trust fees include fees received for investment and management services,
custodial services, and trust services and are recognized on an accrual basis
as earned.

(J) SALE OF INVESTMENT IN EQUITY INVESTEE

The sale of shares of the Company's equity investment in ICII to the public
is recorded as "Gain on sale of ICII stock" in the combined statements of
income. This gain represents actual proceeds from the sale of stock reduced by
the Company's recorded investment in those shares and expenses related to the
stock sale.

(K) GAIN RESULTING FROM SALE OF STOCK BY EQUITY INVESTEE

The impact on the Company's investment in ICII for the sales of previously
unissued stock by ICII to the public is recorded as "Gain from sale of stock
by ICII" in the combined statements of income. This gain results from ICII's
sales of previously unissued stock in a public offering at a per share
offering price that exceeds the Company's per share carrying amount for its
equity investment in the common stock of ICII.

(L) STOCK BASED COMPENSATION

Certain employees of the Company participate in Imperial Bancorp's stock
option plan. On January 1, 1996, the Company adopted Financial Accounting
Standards No. 123, "Accounting for Stock Based Compensation" ("FAS 123"). FAS
123 applies to all transactions in which Imperial Bancorp acquires goods or
services by issuing equity instruments or by incurring liabilities where the
payment amounts are based on Imperial Bancorp's common stock price, except for
the Employee Stock Ownership Plan. A new method of accounting for stock

F-10
<PAGE>

IMPERIAL FINANCIAL GROUP, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

based compensation arrangements is established by FAS 123. The new method is
based on the fair value method rather than the intrinsic value method
prescribed by APB Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB 25"). FAS 123 does not require companies to adopt the new fair value
method for purposes of preparing their basic financial statements. Entities
are allowed to either continue to use the APB 25 method or adopt the fair
value method set forth in FAS 123. Companies that do not adopt the new fair
value method in FAS 123 for purposes of preparing their basic financial
statements are required to include certain pro forma disclosures in the notes
to the financial statements. Imperial Bancorp and the Company did not adopt
the fair value standards set forth in FAS 123 for purposes of preparing their
consolidated and combined financial statements. Pro forma net income that
includes the impact of the fair value method on the Company's net income for
Imperial Bancorp options granted to Company personnel during 1996 and 1995 is
not materially different than the net income amounts shown on the combined
statements of income for all periods presented.

(M) RECENT ACCOUNTING PRONOUNCEMENTS

FAS 125--ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND
EXTINGUISHMENTS OF LIABILITIES--In June 1996, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards
No. 125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities," ("FAS 125") which establishes accounting for
transfers and servicing of financial assets and extinguishment of liabilities.
This statement specifies the following: (i) when financial assets and
liabilities are to be removed from an entity's financial statements; (ii) the
accounting for servicing assets and liabilities; and (iii) the accounting for
assets that can be contractually prepaid in such a way that the holder would
not recover substantially all of its recorded investment. Under FAS 125, an
entity recognizes only assets it controls and liabilities it has incurred,
discontinues recognition of assets only when control has been surrendered, and
discontinues recognition of liabilities only when they have been extinguished.
FAS 125 requires that the selling entity continue to carry retained interests
relating to assets it no longer recognizes. Such retained interests are based
on the relative fair values of the retained interests of the subject assets at
the date of transfer. Transfers not meeting the criteria for sale recognition
are accounted for as a secured borrowing with a pledge of collateral. Under
FAS 125, certain collateralized borrowings may result in assets no longer
being recognized if the assets are provided as collateral and the secured
party takes control of the collateral. This determination is based upon
whether: (i) the secured party is permitted to repledge or sell the collateral
and (ii) the debtor does not have the right to redeem the collateral on short
notice. Extinguishments of liabilities are recognized only when the debtor
pays the creditor and is relieved of its obligation for the liability, or when
the debtor is legally released from being the primary obligor under the
liability, either judicially or by the creditor. FAS 125 requires an entity to
recognize its obligation to service financial assets that are retained in a
transfer of assets in the form of a servicing asset or liability. The
servicing asset is to be amortized in proportion to, and over the period of,
net servicing income. Servicing assets and liabilities are to be assessed for
impairment based on their fair value. FAS 125 modifies the accounting for
interest-only strips or retained interests in securitizations, such as
capitalized servicing fees receivable, that can be contractually prepaid or
otherwise settled in such a way that the holder would not recover
substantially all of its recorded investment. In this case, it requires that
they be classified as available for sale or as trading securities. Interest-
only strips and retained interests are to be recorded at fair value. Changes
in fair value are included in operations, if classified as trading securities,
or in stockholders' equity as unrealized holding gains or losses, net of the
related tax effect, if classified as available for sale.

During 1996, the FASB issued Statement of Financial Accounting Standards No.
127, "Deferral of the Effective Date of Certain Provisions of FASB Statement
No 125" ("FAS 127"). FAS 127 defers for one year the effective date (a) of
paragraph 15 of FAS 125 and (b) of paragraphs 9-12 and 237 (b) of FAS 125 for
repurchase agreement, dollar-roll, securities lending, and similar
transactions. FAS 127 provides additional guidance on the types of
transactions for which the effective date of FAS 125 has been deferred. It is
required that if it is not possible to determine whether a transfer occurring
during calendar-year 1997 is part of a repurchase agreement, dollar-roll,
securities lending or similar transaction, then paragraphs 9-12 of FAS 125
should be applied to that transfer.

F-11
<PAGE>

IMPERIAL FINANCIAL GROUP, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

The Small Business Administration lending group, a division of the Company,
provides loans to small businesses, sells the guaranteed portion of the loans,
and retains the servicing rights and interest-only strips relating to those
loans. Under FAS 125, the portion of the contractually specified servicing fee
that exceeds the fee that a substitute servicer would demand to assume the
servicing (which is deemed to be 40 basis points based on the 1993 National
Association for Government Guaranteed Loans survey), on SBA loans sold after
January 1, 1997, should be recorded as a servicing asset and amortized in
proportion to and over the period of the servicing income. The Company adopted
the applicable provisions of FAS 125 effective January 1, 1997. At
September 30, 1997 (unaudited), as a result of the adoption, approximately
$2.2 million representing the value of the interest-only strip was
reclassified from excess servicing fees receivable to securities available for
sale. The unrealized gain on the interest-only strip was approximately $0.3
million at September 30, 1997 (unaudited). Additionally, approximately $2.0
million was recorded as mortgage servicing rights during the nine months ended
September 30, 1997 (unaudited).

FAS 128--EARNINGS PER SHARE--The FASB issued Statement of Financial
Accounting Standards No. 128, "Earnings Per Share," ("FAS 128") which requires
all entities with publicly held common stock or potential common stock to
report earnings per share ("EPS") according to the statement. FAS 128
simplifies the standards for computing and presenting earnings per share as
previously prescribed by Accounting Principles Board Opinion No. 15, "Earnings
per Share." FAS 128 replaces primary EPS with basic EPS and fully diluted EPS
with diluted EPS. Basic EPS excludes dilution and is computed by dividing
income available to common stockholders by the weighted average number of
common shares outstanding for the period. Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common
stock were exercised or converted into common stock or resulted from issuance
of common stock that then share in earnings. FAS 128 also requires dual
presentation of basic and diluted EPS on the face of the income statement and
a reconciliation of the numerator and denominator of the basic EPS computation
to the numerator and denominator of the diluted EPS computation. FAS 128 is
effective for financial statements issued for periods ending after December
15, 1997, and earlier application is not permitted. Management has determined
that the implementation of FAS 128 will not have a material impact on the
Company's financial condition or results of operations.

FAS 129--DISCLOSURE OF INFORMATION ABOUT CAPITAL STRUCTURE--The FASB issued
Statement of Financial Accounting Standards No. 129, "Disclosure of
Information about Capital Structure," ("FAS 129") which consolidates existing
pronouncements on required disclosures about a company's capital structure.
FAS 129 also supersedes specific requirements found in previously issued
accounting statements. FAS 129 must be adopted for financial statements for
periods ending after December 15, 1997. Management has determined that the
implementation of FAS 129 will not have a material impact on the Company's
financial condition or results of operations.

FAS 130--REPORTING COMPREHENSIVE INCOME--The FASB issued Statement of
Financial Accounting Standards No. 130 "Reporting Comprehensive Income," ("FAS
130") which establishes standards for reporting and display of comprehensive
income and its components in a full set of general-purpose financial
statements. Comprehensive income represents the change in equity of a business
enterprise during a period from transactions and other events and
circumstances from non-owner sources. FAS 130 requires that all items that are
required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed
with the same prominence as other financial statements. FAS 130 does not
require a specific format for that financial statement but requires that an
enterprise display an amount representing total comprehensive income for the
period in that financial statement.

FAS 130 requires that an enterprise (a) classify items of other
comprehensive income by their nature in a financial statement and (b) display
the accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of a statement
of financial position. FAS 130 is effective for fiscal years beginning after
December 15, 1997. Reclassification of financial statements for earlier
periods provided for comparative purposes is required. Management has
determined that the implementation of FAS 130 will not have a material impact
on the Company's financial condition or results of operations.

F-12
<PAGE>

IMPERIAL FINANCIAL GROUP, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

FAS 131--DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED
INFORMATION--The FASB issued Statement of Financial Accounting Standards No.
131 "Disclosures about Segments of an Enterprise and Related Information,"
("FAS 131") which establishes standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information
about operating segments in interim financial reports issued to stockholders.
It also establishes standards for related disclosures about products and
services, geographic areas and major customers. FAS 131 supersedes FASB
Statement No. 14, "Financial Reporting for Segments of a Business Enterprise,"
but retains the requirement to report information about major customers. It
amends FASB Statement No. 94, "Consolidation of All Majority-Owned
Subsidiaries," to remove the special disclosure requirements for previously
unconsolidated subsidiaries.

FAS 131 requires that a public business enterprise report financial and
descriptive information about its reportable operating segments. Operating
segments are components of an enterprise about which separate financial
information is available that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance. Generally, financial information is required to be reported on
the basis that it is used internally for evaluating segment performance and
deciding how to allocate resources to segments.

FAS 131 requires that a public business enterprise report a measure of
segment profit or loss, certain specific revenue and expense items, and
segment assets. It requires reconciliations of total segment revenues, total
segment profit or loss, total segment assets, and other amounts disclosed for
segments to corresponding amounts in the enterprise's general-purpose
financial statements. It requires that all public business enterprises report
information about the revenues derived from the enterprise's products or
services (or groups of similar products and services), about the countries in
which the enterprise earns revenues and holds assets, and about major
customers regardless of whether that information is used in making operating
decisions. However, FAS 131 does not require an enterprise to report
information that is not prepared for internal use if reporting it would be
impracticable.

FAS 131 also requires that a public business enterprise report descriptive
information about the way that the operating segments were determined, the
products and services provided by the operating segments, differences between
the measurements used in reporting segment information and those used in the
enterprise's general-purpose financial statements, and changes in the
measurement of segment amounts from period to period.

FAS 131 is effective for financial statements for periods beginning after
December 15, 1997. In the initial year of application, comparative information
for earlier years is to be restated. This statement need not be applied to
interim financial statements in the initial year of its application, but
comparative information for interim periods in the initial year of application
is to be reported in financial statements for interim periods in the second
year of application. Management has determined that the implementation of FAS
131 will not have a material impact on the Company's financial condition or
results of operations.

SECURITIES AND EXCHANGE COMMISSION--SEC RULE ON DISCLOSURE ABOUT DERIVATIVES
AND OTHER FINANCIAL INSTRUMENTS

The Securities and Exchange Commission has approved rule amendments to
clarify and expand existing disclosure requirements for derivative financial
instruments. The amendments require enhanced disclosure of accounting policies
for derivative financial instruments in the footnotes to the financial
statements. In addition, the amendments expand existing disclosure
requirements to include quantitative and qualitative information about market
risk inherent in market risk sensitive instruments. The required quantitative
and qualitative information should be disclosed outside the financial
statements and related notes. The enhanced accounting policy disclosure
requirements are effective for the quarter ended June 30, 1997. As the Company
believes that the derivative financial instrument disclosures contained within
the notes to the combined financial statements of the Company substantially
conform with the accounting policy requirements of these amendments, no
further disclosure has been provided.

F-13
<PAGE>

IMPERIAL FINANCIAL GROUP, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 5. SECURITIES AVAILABLE FOR SALE

The following is a summary of securities available for sale.

<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- ------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
December 31, 1995 U.S. Treasury securi-
ties................................... $1,441 $ 1 $ (5) $1,437
====== ==== ==== ======
December 31, 1996 U.S. Treasury securi-
ties................................... $1,180 $ 2 $ (3) $1,179
====== ==== ==== ======
September 30, 1997 (unaudited):
U.S. Treasury and federal agency securi-
ties................................... $4,528 $ 5 $-- $4,533
Interest only strip receivable.......... 2,161 293 -- 2,454
------ ---- ---- ------
Total................................. $6,689 $298 $-- $6,987
====== ==== ==== ======
</TABLE>

The Company is required to pledge money or securities for the California
State Treasurer for the faithful performance and execution of court and
private trusts accepted by the Company. The fair value amounts of the pledged
securities included in "Securities available for sale" are $205,000, $336,000
and $335,000 at, December 31, 1995, December 31, 1996 and September 30, 1997
(unaudited), respectively. There were no gross realized gains or gross
realized losses for the years ended December 31, 1995 and 1996 or for the nine
months ended September 30, 1997 (unaudited).

The amortized cost and fair value of securities available for sale at
September 30, 1997 (unaudited), by contractual maturity, are shown below.

<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
--------- ------
(IN THOUSANDS)
<S> <C> <C>
Due in one year or less.................................. $2,945 $2,945
Due after one year through five years.................... 1,583 1,588
Due after five years..................................... 2,161 2,454
------ ------
Total.................................................... $6,689 $6,987
====== ======
</TABLE>

NOTE 6. LOANS HELD FOR INVESTMENT, NET

The carrying amount of loans, net of unearned income, deferred loan fees and
allowance for loan losses, consisted of the following:

<TABLE>
<CAPTION>
AT
AT AT SEPTEMBER 30,
DECEMBER 31, DECEMBER 31, 1997
1995 1996 (UNAUDITED)
------------ ------------ -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Entertainment loans.................... $47,691 $44,906 $ 83,742
Small business loans................... 18,259 20,277 36,406
Residential loans secured by real es-
tate.................................. 11,104 9,974 7,069
------- ------- --------
Total loans............................ 77,054 75,157 127,217
Less allowance for loan losses......... (1,536) (2,629) (3,921)
------- ------- --------
Total loans held for investment, net. $75,518 $72,528 $123,296
======= ======= ========
</TABLE>

Net deferred loan fees and costs, included in total loans, approximated $0.8
million, $0.7 million and $1.6 million at December 31, 1995 and 1996 and
September 30, 1997 (unaudited), respectively.

F-14
<PAGE>

IMPERIAL FINANCIAL GROUP, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

At December 31, 1995, the recorded investment in loans for which impairment
has been recognized totaled $2.7 million. All such loans were on nonaccrual
status as of that date. A significant portion, $2.2 million, of the impaired
loans was secured by real estate. The $2.7 million of impaired loans did not
require a specific allowance for impairment. At December 31, 1996, the
recorded investment in loans for which impairment has been recognized totaled
$4.9 million, all of which were on nonaccrual status. A significant portion,
$3.7 million, of the impaired loans was secured by real estate. Of the $4.9
million of impaired loans, $1.0 million required a specific allowance of
$175,000 for impairment. At September 30, 1997 (unaudited), the recorded
investment in loans for which impairment has been recognized totaled $1.7
million. All such loans were on nonaccrual status as of that date. All of the
impaired loans were secured by real estate. The $1.7 million of impaired loans
did not require a specific allowance for impairment. Impaired loans averaged
$1.8 million, $3.6 million and $3.0 million, respectively for the years ended
December 31, 1995 and 1996 and the nine months ended September 30, 1997
(unaudited). During the years ended December 31, 1995 and 1996 and the nine
months ended September 30, 1997 (unaudited), no interest was recognized on the
impaired loans.

At December 31, 1995 and 1996 and September 30, 1997 (unaudited), there were
no restructured loans.

Nonaccrual loans totaled $2.7 million, $4.9 million and $1.7 million at
December 31, 1995, 1996 and September 30, 1997 (unaudited), respectively.
There was no recorded interest receivable on nonaccrual loans at December 31,
1995, 1996 or September 30, 1997 (unaudited). Interest income foregone on
nonaccrual loans approximated $245,000, $232,000, and $375,000 for the years
ended December 31, 1994, 1995, and 1996, and $307,000 for the nine months
ended September 30, 1997 (unaudited), respectively.

At December 31, 1995, 1996 and September 30, 1997 (unaudited), approximately
62%, 60% and 66%, respectively, of the Company's loan portfolio were issued to
customers in the movie production industry.

At December 31, 1995, 1996 and September 30, 1997 (unaudited), a majority of
the Company's loan portfolio was issued to customers geographically located in
California.

NOTE 7. ALLOWANCE FOR LOAN LOSSES

Activity in the allowance for loan losses is summarized below:

<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER SEPTEMBER 30,
31, (UNAUDITED)
--------------------- --------------
1994 1995 1996 1996 1997
----- ------ ------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance, beginning of year.............. $ 717 $ 626 $1,536 $1,536 $2,629
Loans charged off....................... (267) (613) (833) (535) (686)
Recoveries on loans previously charged
off.................................... 176 31 145 54 112
----- ------ ------ ------ ------
Net loans charged off................... (91) (582) (688) (481) (574)
Provision for loan losses............... -- 1,492 1,781 1,581 1,866
----- ------ ------ ------ ------
Balance, end of year.................... $ 626 $1,536 $2,629 $2,636 $3,921
===== ====== ====== ====== ======
</TABLE>

NOTE 8. ACQUISITION

On September 30, 1994, the Company purchased from the Federal Deposit
Insurance Corporation, in its capacity as Receiver of CommerceBank, a
certificate of deposit custodial services business. The price paid, net of
assets acquired, amounted to $121,000. In return, the Company acquired custody
of $193 million in certificates of deposit and retained three employees who
were maintaining the certificates of deposit for the Receiver. The

F-15
<PAGE>

IMPERIAL FINANCIAL GROUP, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

Company has received $203,000, $1,476,000, $788,000, $671,000 and $596,000 in
fees from this business for the years ended December 31, 1994, 1995 and 1996
and the nine months ended September 30, 1996 (unaudited) and 1997 (unaudited),
respectively. These amounts are included in "Trust fees" in the combined
statements of income. At December 31, 1995 and 1996, the amount paid in excess
of assets acquired, included in intangible assets, was $38,000 and $0,
respectively. The amortization expense amounted to $22,000, $61,000 and
$38,000 in 1994, 1995 and 1996, respectively, and is included in "Other
expense" in the combined statements of income. The fees related to this
business are expected to diminish over time and correspond to the certificates
of deposit in the related custodial accounts. The amount of certificates of
deposit remaining at each year end after considering maturities, is summarized
as follows:

<TABLE>
<CAPTION>
AMOUNTS
--------------
(IN THOUSANDS)
<S> <C>
1997...................................................... $21,704
1998...................................................... 18,007
1999...................................................... 9,961
2000...................................................... 8,056
2001 and thereafter....................................... 4,965
</TABLE>

NOTE 9. INCOME TAXES

The income tax provision in the combined statements of income is comprised
of the following current and deferred amounts:

<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER SEPTEMBER 30,
31, (UNAUDITED)
---------------------- --------------
1994 1995 1996 1996 1997
------ ------ ------- ------- ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Current
Federal.............................. $1,105 $1,809 $13,009 $12,329 $ 746
State................................ 357 547 4,356 4,137 333
------ ------ ------- ------- ------
Total.............................. 1,462 2,356 17,365 16,466 1,079
------ ------ ------- ------- ------
Deferred
Federal.............................. 941 1,391 5,814 4,360 1,675
State................................ 388 594 2,496 1,937 511
Taxes (charged) credited to
stockholder's equity................ 30 (28) (1) 3 (124)
------ ------ ------- ------- ------
Total.............................. 1,359 1,957 8,309 6,300 2,062
------ ------ ------- ------- ------
Total
Federal.............................. 2,046 3,200 18,823 16,689 2,421
State................................ 745 1,141 6,852 6,074 844
Taxes (charged) credited to
stockholder's equity................ 30 (28) (1) 3 (124)
------ ------ ------- ------- ------
Total.............................. $2,821 $4,313 $25,674 22,766 $3,141
====== ====== ======= ======= ======
</TABLE>

The Company had current income taxes payable of $9.6 million, $28.7 million,
and $12.6 million at December 31, 1995 and 1996 and September 30, 1997
(unaudited), respectively.

F-16
<PAGE>

IMPERIAL FINANCIAL GROUP, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

Deferred income taxes arise from differences in the timing of recognition of
income and expense for tax and financial reporting purposes. The following
table shows the primary components of the Company's net deferred tax
liability.

<TABLE>
<CAPTION>
AT
AT DECEMBER 31, SEPTEMBER 30,
---------------- 1997
1995 1996 (UNAUDITED)
------- ------- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Components of the deferred tax asset:
Deferred compensation........................ $ (53) $ (168) $ (642)
Bad debt deduction........................... (379) (885) (1,477)
Unrealized loss on securities available for
sale........................................ (2) (1) --
Amortization of intangible assets............ (46) (65) (65)
State franchise taxes........................ (545) (2,752) (1,522)
Charitable contribution limitation........... (149) (149) (1,365)
Valuation allowance.......................... -- -- --
------- ------- -------
Total deferred tax asset, net of valuation
allowance................................. (1,174) (4,020) (5,071)
------- ------- -------
Components of the deferred tax liability:
Investment in Imperial Credit Industries,
Inc......................................... 4,019 15,636 18,737
Unrealized gain on securities available for
sale........................................ -- -- 135
Other........................................ 469 7 (116)
------- ------- -------
Total deferred tax liability............... 4,488 15,643 18,756
------- ------- -------
Net deferred tax liability................. $ 3,314 $11,623 $13,685
======= ======= =======
</TABLE>

The Company's total deferred tax asset, net of valuation allowance, is
supported by carryback and carryforward provisions of tax laws as well as
certain tax strategies which create future taxable income.

The total income tax provision differs from the amount computed by applying
the statutory federal income tax rate for the following reasons:

<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER
30,
YEAR ENDED DECEMBER 31, (UNAUDITED)
------------------------------------------- ------------------------------
1994 1995 1996 1996 1997
------------- ------------- --------------- --------------- --------------
% OF % OF % OF % OF % OF
PRETAX PRETAX PRETAX PRETAX PRETAX
AMOUNT INCOME AMOUNT INCOME AMOUNT INCOME AMOUNT INCOME AMOUNT INCOME
------ ------ ------ ------ ------- ------ ------- ------ ------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income tax at statutory
rate................... $2,327 35.0% $3,581 35.0% $22,511 35.0% $20,080 35.0% $3,346 35.0%
Appreciation of donated
ICII stock............. -- -- -- -- (1,294) (2.0) (1,266) (2.0) (739) (7.7)
State taxes, net of
federal tax benefit.... 492 7.4 725 7.1 4,454 7.0 3,949 6.1 515 5.4
Other, net.............. 2 0.0 7 0.0 3 0.0 3 0.0 19 0.2
------ ---- ------ ---- ------- ---- ------- ---- ------ ----
Total................... $2,821 42.4% $4,313 42.1% $25,674 40.0% $22,766 39.1% $3,141 32.7%
====== ==== ====== ==== ======= ==== ======= ==== ====== ====
</TABLE>

NOTE 10. STOCKHOLDER'S EQUITY

On March 20, 1997, the Company authorized 1,000 shares of common stock of
which 100 shares were issued to the Bank.

F-17
<PAGE>

IMPERIAL FINANCIAL GROUP, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 11. INVESTMENT IN STOCK OF IMPERIAL CREDIT INDUSTRIES, INC.

The sale of shares of the Company's equity investment in ICII to the public
is recorded as "Gain on sale of ICII stock" in the combined statements of
income. The $25.7 million gain recorded for the year ended December 31, 1996
and the $2.4 gain recorded during the nine months ended September 30, 1997
(unaudited) represent the proceeds from the sale of stock by the Company
reduced by the Company's recorded investment in those shares and expenses
related to the stock sale. The $10.8 million gain for the year ended December
31, 1996 resulted from ICII's sale of previously unissued stock in a public
offering at a per share offering price that exceeds the Company's per share
carrying amount for its equity investment in the common stock of ICII.

At September 30, 1997 (unaudited), the Company owned approximately 9.1
million shares of ICII at an equivalent book value of $7.06 per share,
representing approximately 23.5% of all outstanding ICII shares as of such
date. The following table illustrates the changes in the Company's investment
in ICII for the years ended December 31, 1995 and 1996 and for the nine months
ended September 30, 1997 (unaudited).

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER NINE MONTHS ENDED
31, SEPTEMBER 30,
-------------------- 1997
1995 1996 (UNAUDITED)
--------- ---------- -----------------
(IN THOUSANDS)
<S> <C> <C> <C>
Shares owned, beginning of year......... 3,867,368 5,801,052 9,396,106
Stock splits and stock dividends........ 1,933,684 5,281,658 --
Sale of shares.......................... -- (1,500,000) (166,264)
Charitable donation of shares........... -- (186,604) (135,000)
--------- ---------- ---------
Shares owned, end of year............... 5,801,052 9,396,106 9,094,842
========= ========== =========
</TABLE>

The following tables contain summarized financial information for ICII:

<TABLE>
<CAPTION>
AT
AT AT SEPTEMBER 30,
DECEMBER 31, DECEMBER 31, 1997
1995 1996 (UNAUDITED)
------------ ------------ -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Total assets............................ $2,510,635 $2,470,639 $2,448,440
Total liabilities....................... 2,416,533 2,231,131 2,176,115
Shareholders' equity.................... 94,102 239,508 272,325
</TABLE>

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
YEAR ENDED DECEMBER 31, (UNAUDITED)
------------------------- -----------------
1995 1996 1997 1996 1997
------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Interest income.................... $82,783 $129,482 $207,471 $149,072 $168,857
Interest expense................... 61,674 95,728 135,036 100,767 95,145
Net interest income after provision
for loan losses................... 15,959 28,304 62,662 42,163 55,547
Total revenue...................... 72,804 85,309 256,933 191,529 163,339
Total expenses..................... 61,514 61,180 99,049 72,744 85,288
Income before extraordinary item... 6,605 14,193 75,984 61,090 39,694
Net income......................... 7,524 14,193 75,984 61,090 35,699
</TABLE>

F-18
<PAGE>

IMPERIAL FINANCIAL GROUP, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

In accordance with two consulting agreements, one with a senior executive of
the Bank, and the second with Second Southern Corp., an entity wholly-owned by
the chief executive officer of the Company ("Southern"), the Company is
obligated to pay commissions upon the sale of ICII shares. Each consultant is
entitled thereunder to receive an incentive fee of 2.5% of the realized pre-
tax gains received by the Company, when and if realized, from the disposition
of the remaining ICII shares held by the Company. If such sale by the Company
has not occurred by a specified date, the agreements require that the Company
will have considered to have sold an amount equal to 20% of any such security
as of January 1 of each year from 1997 through 2001, at a price equal to the
arithmetic average of the daily average stock price of ICII common stock as
reported by NASD during the preceding year. These agreements have been accrued
for over the vesting periods and remeasured quarterly for changes in the
average market price of ICII stock.

In August 1997, in partial satisfaction of the Company's obligation related
to the consulting agreement with the senior executive of the Bank, the Company
agreed to pay to the executive the proceeds received from selling 115,764
shares of ICII stock in the third quarter of 1997. This resulted in the
Company recording a corresponding consulting expense of $2.4 million. In
addition, the Company has agreed to pay the executive the proceeds from the
sale of an additional 115,764 shares of ICII stock in the fourth quarter of
1997. The Company has recorded approximately $3.0 million in additional
consulting expense in the third quarter of 1997 as a result of this
obligation.

Based on the daily average market price for the nine months ended September
30, 1997 of $20.74 per share, less Southern's basis of $0.88 per share as of
September 30, 1997 (unaudited), as adjusted for stock splits and dividends,
the deferred charge and associated liability relating to this consulting
agreement approximated $2.3 million and $4.5 million, respectively, at
September 30, 1997 (unaudited). The expense relating to this remaining
consulting agreement is being accrued over the vesting period and will be
remeasured quarterly for changes in the average market price. During the nine
months ended September 30, 1996 (unaudited) and 1997 (unaudited), the Company
recorded an expense relating to this remaining agreement of $0.3 million and
$0.4 million, respectively, to its combined statements of income. During the
years ended December 31, 1994, 1995 and 1996, the Company recorded an expense
of $0.1 million, $0.3 million, and $0.9 million respectively, to its combined
statements of income.

At December 31, 1995, December 31, 1996 and September 30, 1997 (unaudited),
respectively, the Company owned approximately 11.6 million, 9.4 million and
9.1 million shares of ICII at an equivalent book value per share of $6.23,
$6.16 and $7.06, representing approximately 40%, 25% and 24% of all
outstanding ICII shares. On September 30, 1997 (unaudited), the fair value of
ICII common stock was $26.50, representing a pre-tax unrealized gain of the
Company's investment of over $176 million.

The Company exercises significant influence over the operating and financial
policies of ICII. As a result, the results of ICII operations are accounted
for in the Company's financial statements as an equity investment. The equity
investment in ICII is carried at cost adjusted for equity in undistributed
income.

NOTE 12. EMPLOYEE BENEFIT PLANS

The Company participates in the following Imperial Bancorp employee benefit
plans:

(A) IMPERIAL BANCORP PROFIT-SHARING AND EMPLOYEE STOCK OWNERSHIP PLAN

The Company participates in Imperial Bancorp's Profit Sharing and Employee
Stock Ownership Plan. Effective December 31, 1996 the Employee Stock Ownership
Plan (ESOP) was merged with the Profit Sharing Plan and all assets of the ESOP
were transferred to the Profit Sharing Plan. The amounts allocated to eligible
employees included in "Personnel expense" in the accompanying combined
statements of income are $113,000, $194,000, $252,000, $189,000 and $311,000
for the years ended 1994, 1995, and 1996 and for the nine months ended
September 30, 1996 (unaudited) and 1997, (unaudited), respectively.

F-19
<PAGE>

IMPERIAL FINANCIAL GROUP, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

(B) IMPERIAL BANCORP 401-K PLAN

Imperial Bancorp has a 401-K Plan in which all employees of the Company may
elect to enroll each January 1 or July 1 of every year provided that they have
been employed for at least six months prior to the semi-annual enrollment
date. Employees may contribute up to 14% of their salaries with Imperial
Bancorp matching 50% of any contribution, not to exceed 4% of the employee's
salary. The Company's 401-K matching expenses included in "Personnel expense"
in the accompanying combined statements of income are $44,000, $50,000,
$135,000, $104,000 and $105,000 for the years ended December 31, 1994, 1995,
and 1996 and for the nine months ended September 30, 1996 (unaudited) and 1997
(unaudited), respectively.

Imperial Bancorp has two Deferred Compensation Plans in order to provide
specified benefits to certain key employees and directors. Participants are
allowed to defer portions of their compensation each plan year, subject to a
minimum and a maximum dollar amount of deferral. In any plan year, Imperial
Bancorp will make a matching contribution of not less than 10% or more than
50% of the participants' deferral for that year. The exact ratio will be
determined by a formula based on Imperial Bancorp's return on stockholder's
equity. The amounts allocated to eligible employees included in "Personnel
expense" in the accompanying combined statements of income are $41,000,
$72,000, $248,000, $158,000 and $1,035,000 for the years ended December 31,
1994, 1995 and 1996 and for the nine months ended September 30, 1996
(unaudited) and 1997 (unaudited), respectively. The deferred amounts are also
included in "Borrowings from Imperial Bank" in the accompanying combined
balance sheets.

NOTE 13. STOCK OPTION PLANS

(A) SHARE INCENTIVE PLAN

The Company has adopted the Imperial Financial Group, Inc. 1997 Share
Incentive Plan (the "Plan") in order to provide incentives to attract, retain
and motivate highly competent persons as executive management, employees and
directors of the Company and of any affiliate thereof (other than Imperial
Bancorp or the Bank). The Plan, which is, and will be after the Distribution,
administered by the Compensation Committee, provides such persons with
opportunities to acquire shares of Company Class A Common Stock or Company
Class B Common Stock, or to receive monetary payments based on the value of
such shares pursuant to certain Benefits (as defined below). Benefits under
the Plan may be granted in any one or a combination of stock options, stock
appreciation rights, stock awards, performance awards and stock units
(collectively, the "Benefits"). The Company has authorized 1.0 million shares
of Company Class A Common Stock and 3.7 million shares of Company Class B
Common Stock that may be granted under the Plan, subject to certain
adjustments under certain circumstances.

Incentive Stock Options

During the nine months ended September 30, 1997 (unaudited), certain
employees and directors of the Company were granted ten-year incentive stock
options to purchase shares of common stock. The number of shares subject to
option, the grant dates, the weighted average exercise prices and the vesting
schedule are as follows as of September 30, 1997 (unaudited):
<TABLE>
<CAPTION>
WEIGHTED
NUMBER OF AVERAGE
SHARES EXERCISE
DATE OF GRANT GRANTED PRICE VESTING
------------- --------- -------- ----------------------
<S> <C> <C> <C>
April 23, 1997................... 400,000 $6.48 Five Years
September 22, 1997............... 1,000,000 $9.63 (see discussion below)
</TABLE>

Non-Qualified Stock Options

During the nine months ended September 30, 1997 (unaudited), certain
employees and directors of the Company were granted ten-year non-qualified
stock options to purchase shares of common stock. The number of

F-20
<PAGE>

IMPERIAL FINANCIAL GROUP, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

shares subject to option, the grant dates, the weighted average exercise
prices and the vesting schedule are as follows as of September 30, 1997
(unaudited):
<TABLE>
<CAPTION>
WEIGHTED
NUMBER OF AVERAGE
SHARES EXERCISE
DATE OF GRANT GRANTED PRICE VESTING
------------- --------- -------- ----------------------
<S> <C> <C> <C>
April 23, 1997................... 1,050,000 $5.61 Five Years
September 22, 1997............... 250,000 $9.63 (see discussion below)
</TABLE>

The stock options granted on September 22, 1997, are scheduled to vest as
noted below:

<TABLE>
<CAPTION>
PERCENTAGE
OF
SHARES PERCENTAGE BY WHICH STOCK PRICE
VESTED EXCEEDS EXERCISE PRICE
---------- -------------------------------
<S> <C>
25% 150%
25% 175%
50% 200%
</TABLE>

Under the terms of the Plan, and for purposes of determining the performance
vesting percentages noted above, the stock price shall mean the publicly
traded price of the stock on a national securities exchange. Moreover, the
shares will not vest until such stock price exceeds the exercise price (by at
least the percentages noted above) for a period of 20 consecutive days.

To the extent vesting has not occurred pursuant to the above schedule, 100%
of the shares granted on September 22, 1997 will vest after five years or
sooner upon a change of control of the Company (as defined in the Plan); upon
the death or disability of the optionee; or upon other such conditions as
provided in the Plan.

The exercise price for all incentive stock options granted was equal to the
estimated fair value of such shares on the date of grant. 700,000 of the 1.3
million non-qualified stock options granted had an exercise price equal to 80%
of the estimated fair value of the shares on the date of grant. The estimated
fair value of all shares granted was determined by an independent third party
source.

The Company is accruing compensation expense of approximately $181,000
annually over the vesting period on those options where the estimated fair
value of the options exceeds the exercise price on the grant date.

(B) IMPERIAL BANCORP STOCK OPTION PLAN

Upon consummation of the Distribution, certain employees of the Bank will
cease to be employees of the Bank and will become employees of the Company. To
the extent any of these transferred employees holds nonqualified stock options
or incentive stock options to purchase Imperial Bancorp common stock
immediately prior to the Distribution, all such options will be automatically
converted into options to purchase Company Class A Common Stock. In connection
with this conversion of options, the number of shares that were formerly
underlying the Imperial Bancorp options and the exercise price of such options
will be appropriately adjusted to allow the transferred employees to retain an
equivalent economic position in the Company's common stock following the
Distribution. The Distribution will not be more favorable to the optionee on a
share by share comparison than the ratio of the option exercise price of the
Imperial Bancorp options immediately prior to the exchange to the fair value
of Imperial Bancorp common stock immediately preceding the Distribution.

NOTE 14. DONATION

During the nine months ended September 30, 1996 (unaudited) and 1997
(unaudited), the Company donated shares of ICII stock with a fair value of
$4.7 million and $3.6 million, respectively to not-for-profit organizations.
Offsetting this expense, $3.6 million and $2.8 million in appreciation gains
were recognized for the nine months ended September 30, 1996 and 1997,
respectively, on the donated stock at the time of the donation. During 1996,
the Company donated shares of ICII stock with a fair value of $4.9 million to
not-for-profit organizations. Offsetting this expense, $3.7 million in
appreciation gains were recognized on the donated stock at the time of the
donation. For the years ended December 31, 1994 and 1995, there were no
donations of ICII stock.

F-21
<PAGE>

IMPERIAL FINANCIAL GROUP, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 15. EXTRAORDINARY ITEM

In January 1994, ICII issued $90 million of Senior Notes with a stated
interest rate of 9.75% which mature on January 15, 2004. In October 1994, ICII
repurchased $8.5 million of these Senior Notes, recognizing a pre-tax gain of
$1,538,000, and recorded an extraordinary gain, net of taxes of $919,000. At
the time of this gain the Company owned 40.0% of all outstanding shares of
ICII. As a result, the Company's share of this gain, net of taxes, is $370,000
and is included in the combined statements of income for the year ended
December 31, 1994.

NOTE 16. TRUST ASSETS

The Company has trust assets under administration amounting to $5.7 billion
representing 3,936 accounts, $6.8 billion representing 3,758 accounts, $7.5
billion representing 4,223 accounts, and $8.8 billion representing 3,925
accounts, at fair value, as of December 31, 1994, 1995 and 1996 and September
30, 1997 (unaudited), respectively. The amounts are not included in the
accompanying combined balance sheets.

NOTE 17. RELATED PARTY TRANSACTIONS

The Company and Imperial Bancorp provide each other services in the ordinary
course of business. Although these services are not conducted at "arm's
length," the Company and Imperial Bancorp attempt to negotiate market terms
for these services.

The Company provides trust services to Imperial Bancorp. The approximate
fair value of Imperial Bancorp's assets under administration and the
approximate fees received by the Company from Imperial Bancorp for trust
services are as follows:

<TABLE>
<CAPTION>
FAIR VALUE
OF ASSETS FEES
---------- ----
(IN THOUSANDS)
<S> <C> <C>
At December 31, 1994 and for the year ended December 31, 1994.. $23,740 $118
At December 31, 1995 and for the year ended December 31, 1995.. 37,600 118
At December 31, 1996 and for the year ended December 31, 1996.. 55,909 123
At September 30, 1997 and for the nine months ended September
30, 1997 (unaudited).......................................... 82,026 93
</TABLE>

The Company receives fees for trust assets held in Monarch Funds (a family
of three money market mutual funds). As of September 1, 1995, each Monarch
Fund had invested substantially all of its assets in a corresponding portfolio
of Core Trust (Delaware) in an arrangement commonly known as a "master-feeder"
structure. Of the five trustees of the Monarch Funds, two are members of
Imperial Bancorp's management, one of whom is also a director of Imperial
Trust Company. As of December 31, 1996, Imperial Bancorp's investment in the
Monarch Funds represented approximately 4.6% of the net asset value of all
Monarch Funds. Trust assets under administration invested in Monarch Funds and
fees received by the Company from Monarch are as follows:

<TABLE>
<CAPTION>
FAIR
VALUE OF
ASSETS FEES
-------- ----
(IN THOUSANDS)
<S> <C> <C>
At December 31, 1994 and for the year ended December 31, 1994.... $296,675 $382
At December 31, 1995 and for the year ended December 31, 1995.... 604,795 475
At December 31, 1996 and for the year ended December 31, 1996.... 629,755 567
At September 30, 1997 and for the nine months ended September 30,
1997 (unaudited)................................................ 929,317 506
</TABLE>

The Bank provides the Company banking services, human resource services,
employee benefit plans, insurance, accounting assistance, accounting software,
legal services, computer support, other office services, and

F-22
<PAGE>

IMPERIAL FINANCIAL GROUP, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

subleases all office space to the Company. The costs for these services are
billed to the Company on a specific identification basis or on an allocation
based either on the number of employees, square feet of occupancy, number of
officers, or estimates. The Bank also reimburses the Company for outside data
processing services. The amounts paid to the Bank and the amount received by
the Company are as follows:

<TABLE>
<CAPTION>
AMOUNTS
AMOUNTS RECEIVED
PAID TO FROM
IMPERIAL IMPERIAL
BANK BANK
-------- --------
(IN THOUSANDS)
<S> <C> <C>
For the year ended December 31, 1994.......................... $797 $174
For the year ended December 31, 1995.......................... 757 481
For the year ended December 31, 1996.......................... 832 534
For the nine months ended September 30, 1997 (unaudited)...... 697 409
</TABLE>

Management believes that the methods used to allocate cost and determine
billing for the services provided by the Bank are reasonable.

The Bank provides funds to the Company to fund its operations. The amounts
outstanding are shown as "Borrowings from Imperial Bank" in the accompanying
combined balance sheets. The Bank charges for the use of those funds based on
average balances outstanding and the average interest rate for short-term
certificates of deposit plus one hundred basis points. The average interest
rate charged by the Company for the years ended December 31, 1994, 1995 and
1996 and for the nine months ended September 30, 1996 (unaudited) and 1997
(unaudited) was 5.08%, 6.93%, 6.46%, 6.46% and 6.60% respectively. The costs
of the funds are recorded as "Interest expense" in the combined statements of
income.

NOTE 18. COMMITMENTS AND CONTINGENT LIABILITIES

(A) FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK: The Company is a
party to financial instruments with off-balance sheet risk in the normal
course of business to meet the financing needs of its customers. These
financial instruments include commitments to extend credit and standby letters
of credit, which involve, to varying degrees, elements of credit and interest
rate risk in excess of the amount recognized in the combined balance sheet.
The contract amounts of those instruments reflect the extent of involvement
the Company has in particular classes of financial instruments.

Commitments to extend credit only represent exposure to off-balance sheet
risk in the event the contract is drawn upon and the other party to the
contract defaults. The Company uses the same credit policies in making
commitments and conditional obligations as it does for on-balance sheet
instruments. The amount of collateral obtained, if deemed necessary by the
Company upon extension of credit, is based on management's credit evaluation
of the counter party. The Company does not anticipate any material losses as a
result of these transactions.

At December 31, 1995 and 1996 and September 30, 1997 (unaudited), the
Company's contracted balances of commitments to extend credit were $11.4
million, $16.6 million and $26.1 million, respectively.

At December 31, 1995 and 1996 and September 30, 1997 (unaudited), the
balances of standby letters of credit issued by Imperial Bank on behalf of the
Company were $13.4 million, $37.5 million and $44.4 million.

(B) LEGAL ACTION: The Company is a defendant in various lawsuits arising
from the normal course of business. Management believes, based upon the
opinion of legal counsel, that the ultimate resolution of the pending
litigation will not have a material effect upon the financial position or
future results of operations of the Company.

F-23
<PAGE>

IMPERIAL FINANCIAL GROUP, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

In the ordinary course of business the Company is subject to fiduciary
responsibilities relating to the trust assets. These duties are specifically
described in each trust agreement with the Company's customers. As a result,
the Company has a fiduciary responsibility to perform based on agreed
standards and to exercise prudent judgment. It is the opinion of management
that these duties have been met and no material contingent liability exists to
its knowledge.

(C) LEASE COMMITMENTS: The Company leases space for all its premises from
the Bank under noncancelable operating leases which expire in various years.
Lease payments charged to "Occupancy, net" in the accompanying combined
statements of income for the years ended December 31, 1994, 1995 and 1996 and
the nine months ended September 30, 1996 (unaudited) and 1997 (unaudited)
amounted to $504,000, $580,000, $769,000, $563,000 and $627,000, respectively.

Aggregate minimum rental commitments under these leases are as follows:

<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1997...................................................... $ 702
1998...................................................... 782
1999...................................................... 330
2000...................................................... 264
2001...................................................... 267
Thereafter................................................ 437
------
Total..................................................... $2,782
======
</TABLE>

NOTE 19. FAIR VALUE OF FINANCIAL INSTRUMENTS

Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Values of Financial Instruments" ("FAS 107") requires disclosures of fair
value information about financial instruments, whether or not recognized in
the consolidated balance sheet, for which it is practical to estimate. Such
instruments include securities, loans receivable, time deposits, borrowings
and various off-balance sheet items. Because no market exists for a
significant portion of the Company's loan portfolio, fair value estimates are
based on judgments regarding credit risk, investor expectations of future
economic conditions, normal cost of administration of these instruments and
other risk characteristics, including interest rate and prepayment risk. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment and therefore cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.

The fair value estimates presented do not include the value of anticipated
future business and the value of assets and liabilities that are not
considered financial instruments. For example, the value of the Company's
fiduciary contracts for trust services are not considered financial
instruments; therefore, their values are not incorporated into the fair value
estimates.

The following methods and assumptions were used by the Company in estimating
its fair value disclosures for financial instruments.

(A) CASH AND CASH EQUIVALENTS: The carrying values reported in the combined
balance sheet approximate fair values due to the short term nature of these
assets.

(B) SECURITIES AVAILABLE FOR SALE: Fair values are based on bid prices and
quotations published and/or received from securities dealers.

F-24
<PAGE>

IMPERIAL FINANCIAL GROUP, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

(D) LOANS HELD FOR INVESTMENT: The fair value of the loan portfolio is
generally estimated by discounting expected future cash flows at an estimated
market rate of interest. A market rate of interest is estimated based on the
AAA Corporate Bond Rate, adjusted for credit risk and the Company's cost to
administer such instruments. Expected future cash flows are estimated using
maturity dates for performing loans, with cash flows on nonaccrual loans
estimated on an individual basis. For nonaccrual and potential problem loans
secured by real property, estimated fair value has been determined on an
individual basis, considering the value of the collateral as determined by a
current third party appraisal and estimated foreclosure, holding and selling
costs.

(E) EXCESS SERVICING FEES RECEIVABLE: The carrying value reported in the
combined balance sheet approximate fair values. The fair value was estimated
by discounting future cash flows using rates and prepayment speeds that an
unaffiliated third-party purchaser would require on instruments with similar
terms and remaining maturities.

(F) MORTGAGE SERVICING RIGHTS: The carrying value reported in the combined
balance sheet approximate fair values. The fair value was estimated by
discounting future cash flows using rates and prepayment speeds that an
unaffiliated third-party purchaser would require on instruments with similar
terms and remaining maturities.

(G) BORROWINGS FROM IMPERIAL BANK: The carrying amounts approximate their
fair values due to the short-term nature of the borrowings.

(H) OFF-BALANCE SHEET INSTRUMENTS: Fair values of commitments to extend
credit are based on fees currently charged to enter into similar agreements.

<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------------------------
1995 1996
------------------ ------------------
ESTIMATED ESTIMATED
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- --------- -------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
FINANCIAL ASSETS:
Cash and cash equivalents.......... $ 2,272 $ 2,272 $ 5,245 $ 5,245
Securities available for sale, at
fair value........................ 1,437 1,437 1,179 1,179
Loans held for sale................ 2,648 2,842 5,531 6,058
Loans held for investment.......... 75,518 69,555 72,528 67,424
Excess servicing fees receivable... 1,407 1,407 3,294 3,294
FINANCIAL LIABILITIES:
Borrowings from the Bank........... 49,897 49,897 6,184 6,184
OFF-BALANCE SHEET FINANCIAL INSTRU-
MENTS:
Commitments to extend credit....... -- 497 -- 721
Standby letters of credit.......... -- 269 -- 750
</TABLE>

NOTE 20. SEGMENT REPORTING

The Company operates in three principal business segments: the origination
and sale of SBA loans, the origination of entertainment loans, and providing
trust services. Information for these business segments are summarized in the
following tables ("Other" consists of information related to ICII and the
Company's residual residential mortgage loan portfolio). As part of the
Contribution Agreement, the Bank will retain certain ICII related mortgage
loans. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

F-25
<PAGE>

IMPERIAL FINANCIAL GROUP, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

<TABLE>
<CAPTION>
TRUST ICII
CAB LHO SERVICES RELATED COMBINED
------- ------- -------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31,
1994
Net interest income.............. $ 346 $ 2,136 $ 130 $ 1,491 $ 4,103
Provision for loan losses........ (139) 45 -- 94 --
Noninterest income............... 1,841 140 7,051 2,367 11,399
------- ------- ------ ------- --------
Total revenue................... 2,048 2,321 7,181 3,952 15,502
Noninterest expense.............. 976 1,129 5,547 1,201 8,853
------- ------- ------ ------- --------
Income before income taxes...... 1,072 1,192 1,634 2,751 6,649
Income tax expense............... 454 505 699 1,163 2,821
Extraordinary gain, net of taxes. -- -- -- 370 370
------- ------- ------ ------- --------
Net income...................... $ 618 $ 687 $ 935 $ 1,958 $ 4,198
======= ======= ====== ======= ========
Average assets................... $ 6,770 $20,355 $5,298 $41,604 $ 74,027
------- ------- ------ ------- --------
FOR THE YEAR ENDED DECEMBER 31,
1995
Net interest income.............. $ 870 $ 2,821 $ 144 $ 1,757 $ 5,592
Provision for loan losses........ (281) (767) -- (444) (1,492)
Noninterest income............... 1,932 379 8,680 5,536 16,527
------- ------- ------ ------- --------
Total revenue................... 2,521 2,433 8,824 6,849 20,627
Noninterest expense.............. 1,862 696 5,769 2,068 10,395
------- ------- ------ ------- --------
Income before income taxes...... 659 1,737 3,055 4,781 10,232
Income tax expense............... 279 736 1,302 1,996 4,313
------- ------- ------ ------- --------
Net income...................... $ 380 $ 1,001 $1,753 $ 2,785 $ 5,919
======= ======= ====== ======= ========
Average assets................... $16,895 $24,235 $6,846 $42,551 $ 90,527
------- ------- ------ ------- --------
FOR THE YEAR ENDED DECEMBER 31,
1996
Net interest income.............. $ 1,488 $ 4,086 $ 138 $ 3,102 $ 8,814
Provision for loan losses........ (348) (859) -- (574) (1,781)
Noninterest income............... 3,844 746 7,975 61,553 74,118
------- ------- ------ ------- --------
Total revenue................... 4,984 3,973 8,113 64,081 81,151
Noninterest expense.............. 2,851 1,776 6,258 5,948 16,833
------- ------- ------ ------- --------
Income before income taxes...... 2,133 2,197 1,855 58,133 64,318
Income tax expense............... 903 930 790 23,051 25,674
------- ------- ------ ------- --------
Net income...................... $ 1,230 $ 1,267 $1,065 $35,082 $ 38,644
======= ======= ====== ======= ========
Average assets................... $27,593 $47,122 $7,034 $57,571 $139,320
------- ------- ------ ------- --------
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 (UNAUDITED)
Net interest income.............. $ 865 $ 3,104 $ 100 $ 2,323 $ 6,392
Provision for loan losses........ (405) (706) -- (470) (1,581)
Noninterest income............... 2,640 783 6,024 56,593 66,040
------- ------- ------ ------- --------
Total revenue................... 3,100 3,181 6,124 58,446 70,851
Noninterest expense.............. 2,013 1,309 4,599 5,559 13,480
------- ------- ------ ------- --------
Income before income taxes...... 1,087 1,872 1,525 52,887 57,371
Income tax expense............... 461 793 649 20,863 22,766
------- ------- ------ ------- --------
Net income...................... $ 626 $ 1,079 $ 876 $32,024 $ 34,605
======= ======= ====== ======= ========
Average assets................... $31,352 $47,644 $7,418 $58,690 $145,104
------- ------- ------ ------- --------
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1997 (UNAUDITED)
Net interest income.............. $ 1,406 $ 4,447 $ 127 $ 2,993 $ 8,973
Provision for loan losses........ (483) (1,347) -- (36) (1,866)
Noninterest income............... 3,508 1,284 6,034 13,610 24,436
------- ------- ------ ------- --------
Total revenue................... 4,431 4,384 6,161 16,567 31,543
Noninterest expense.............. 3,423 3,284 4,939 10,338 21,984
------- ------- ------ ------- --------
Income before income taxes...... 1,008 1,100 1,222 6,229 9,559
Income tax expense............... 427 465 518 1,731 3,141
------- ------- ------ ------- --------
Net income...................... $ 581 $ 635 $ 704 $ 4,498 $ 6,418
======= ======= ====== ======= ========
Average assets................... $37,449 $62,058 $8,269 $73,238 $181,014
------- ------- ------ ------- --------
</TABLE>

F-26

<PAGE>

EXHIBIT 10.5

IMPERIAL FINANCIAL GROUP, INC.
1997 SHARE INCENTIVE PLAN

1. Purpose. The Imperial Financial Group, Inc. 1997 Share Incentive Plan
-------
(the "Plan") is intended to provide incentives which will attract, retain and
motivate highly competent persons as executive management, employees and
directors of Imperial Financial Group, Inc. (the "Company") and of any parent
(other than Imperial Bancorp and Imperial Bank) or subsidiary now existing or
hereafter formed or acquired, by providing them opportunities to acquire shares
of Common Stock, par value $.01 per share, of the Company (or if the Company
amends its certificate of incorporation, shares of its Class A Common Stock, par
value $.01 per share ("Class A Common Stock"), or Class B Common Stock, par
value $.01 per share ("Class B Common Stock"), or any other class of its common
stock) or to receive monetary payments based on the value of such shares
pursuant to the Benefits (as defined below) described herein. Any common stock
of the Company which may from time to time be authorized by the Company's
certificate of incorporation is referred to herein as the "Common Stock".
Furthermore, the Plan is intended to assist in aligning the interests of the
Company's executive management employees and directors to those of its
stockholders.

2. Administration.
--------------

(a) The Plan will be administered by the Board of Directors of the Company
(the "Board of Directors") or, if the Board of Directors so determines, by a
committee appointed by the Board of Directors from among its members (such
committee administering the Plan being hereinafter referred to as the
"Committee"; and the Board of Directors or the Committee administering the Plan,
as the case may be, being hereinafter referred to as the "Plan Administrator").
If the Board of Directors designates a Committee to administer the Plan, the
Committee (which may include members of the compensation committee of the Board
of Directors, if any) shall be comprised solely of not less than two members who
shall be (i) "Non-Employee Directors" within the meaning of Rule 16b-3(b)(3) (or
any successor rule) promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and (ii) unless otherwise determined by the Board
of Directors, "outside directors" within the meaning of Section 162(m) of the
Internal Revenue

<PAGE>

Code of 1986, as amended (the "Code"). The Plan Administrator is authorized,
subject to the provisions of the Plan, to establish such rules and regulations
as it deems necessary for the proper administration of the Plan and to make such
determinations and interpretations and to take such action in connection with
the Plan and any Benefits (as defined below) granted hereunder as it deems
necessary or advisable. All determinations and interpretations made by the Plan
Administrator shall be binding and conclusive on all participants and their
legal representatives. No member of the Board of the Directors, no member of
the Committee and no employee of the Company shall be liable for any act or
failure to act hereunder, except in circumstances involving his or her bad
faith, gross negligence or willful misconduct, or for any act or failure to act
hereunder by any other member or employee or by any agent to whom duties in
connection with the administration of this Plan have been delegated. The
Company shall indemnify members of the Plan Administrator and any agent of the
Plan Administrator who is an employee of the Company, against any and all
liabilities or expenses to which they may be subjected by reason of any act or
failure to act with respect to their duties on behalf of the Plan, except in
circumstances involving such person's bad faith, gross negligence or willful
misconduct.

(b) The Plan Administrator may delegate to one or more of its members,
or to one or more agents, such administrative duties as it may deem advisable,
and the Plan Administrator, or any person to whom it has delegated duties as
aforesaid, may employ one or more persons to render advice with respect to any
responsibility the Plan Administrator or such person may have under the Plan.
The Plan Administrator may employ such legal or other counsel, consultants and
agents as it may deem desirable for the administration of the Plan and may rely
upon any opinion or computation received from any such counsel, consultant or
agent. Expenses incurred by the Plan Administrator in the engagement of such
counsel, consultant or agent shall be paid by the Company, or the subsidiary
whose employees have benefited from the Plan as determined by the Plan
Administrator.

3. Participants. Participants will consist of such executive management,
------------
employees and directors of the Company and of any parent (other than Imperial
Bancorp and Imperial Bank) or subsidiary of the Company as the Plan
Administrator in its sole discretion determines to be significantly responsible
for the success and future growth

<PAGE>

and profitability of the Company and whom the Plan Administrator may designate
from time to time to receive Benefits under the Plan. Designation of a
participant in any year shall not require the Plan Administrator to designate
such person to receive a Benefit in any other year or, once designated, to
receive the same type or amount of Benefit as granted to the participant in any
other year. The Plan Administrator shall consider such factors as it deems
pertinent in selecting participants and in determining the type and amount of
their respective Benefits.

4. Type of Benefits. Benefits under the Plan may be granted in any one or a
----------------
combination of (a) Stock Options, (b) Stock Appreciation Rights, (c) Stock
Awards, (d) Performance Awards and (e) Stock Units (each as described below, and
collectively, the "Benefits"). Stock Awards, Performance Awards and Stock Units
may, as determined by the Plan Administrator in its discretion, constitute
Performance-Based Awards, as described in Section 11 below. Benefits shall be
evidenced by agreements (which need not be identical) in such forms as the Plan
Administrator may from time to time approve; provided, however, that in the
event of any conflict between the provisions of the Plan and any such
agreements, the provisions of the Plan shall prevail.

5. Common Stock Available under the Plan. The aggregate number of shares of
-------------------------------------
Common Stock that may be subject to Benefits, including Stock Options, granted
under this Plan shall be 4,700,000 shares of Common Stock, which may be
authorized and unissued or treasury shares, subject to any adjustments made in
accordance with Section 12 hereof; provided however, that if the Company amends
its certificate of incorporation to permit the issuance of Class A Common Stock
and Class B Common Stock, the aggregate number of shares that may be subject to
Benefits shall be 1,000,000 shares of Class A Common Stock and 3,700,000 shares
of Class B Common Stock, which may be authorized and unissued or treasury shares
subject to any adjustments made in accordance with Section 12 hereof.
Participants may be issued Benefits that relate to any or all classes of Common
Stock, in the sole discretion of the Plan Administrator. The maximum number of
shares of Common Stock of any class with respect to which Benefits may be
granted to any individual participant under the Plan shall be 800,000. Any
shares of Common Stock subject to a Stock Option or Stock Appreciation Right
which for any reason is cancelled or terminated without having been exercised,
any shares subject

<PAGE>

to Stock Awards, Performance Awards or Stock Units which are forfeited, any
shares subject to Performance Awards settled in cash or any shares delivered to
the Company as part of full payment for the exercise of a Stock Option or Stock
Appreciation Right shall again be available for grant as Benefits under the
Plan. The preceding sentence shall apply only for purposes of determining the
aggregate number of shares of Common Stock subject to Benefits.

6. Stock Options. Stock Options will consist of awards from the Company
-------------
that will enable the holder to purchase a specific number of shares of one or
more classes of Common Stock, at set terms and at a fixed purchase price. Stock
Options may be "incentive stock options" ("Incentive Stock Options"), within the
meaning of Section 422 of the Code, or Stock Options which do not constitute
Incentive Stock Options ("Nonqualified Stock Options"). The Plan Administrator
will have the authority to grant to any participant one or more Incentive Stock
Options, Nonqualified Stock Options, or both types of Stock Options (in each
case with or without Stock Appreciation Rights). Each Stock Option shall be
subject to such terms and conditions consistent with the Plan as the Committee
may impose from time to time, subject to the following limitations:

(a) Exercise Price. Each Stock Option granted hereunder shall have
--------------
such per-share exercise price as the Plan Administrator may determine at
the date of grant; provided, however, that, except with respect to Stock
-------- -------
Options granted as of the Effective Date (as defined herein) and subject to
subsection (d) below, the per-share exercise price shall not be less than
100% of the Fair Market Value (as defined below) of the Common Stock on the
date the option is granted.

(b) Payment of Exercise Price. The option exercise price may be paid
-------------------------
in cash or, in the discretion of the Plan Administrator determined at the
date of grant and set forth in the option agreement, by the delivery of
shares of Common Stock of the Company then owned by the participant, by the
withholding of shares of Common Stock for which a Stock Option is
exercisable, or by a combination of these methods. In the discretion of the
Plan Administrator determined at the date of grant and set forth in

4
<PAGE>

such option agreement, payment may also be made by delivering a properly
executed exercise notice to the Company together with a copy of irrevocable
instructions to a broker to deliver promptly to the Company the amount of sale
or loan proceeds to pay the exercise price. To facilitate the foregoing, the
Company may enter into agreements for coordinated procedures with one or more
brokerage firms. The Plan Administrator may prescribe any other method of paying
the exercise price that it determines to be consistent with applicable law and
the purpose of the Plan, including, without limitation, in lieu of the exercise
of a Stock Option by delivery of shares of Common Stock of the Company then
owned by a participant, providing the Company with a notarized statement
attesting to the number of shares owned, where upon verification by the Company,
the Company would issue to the participant only the number of incremental shares
to which the participant is entitled upon exercise of the Stock Option. In
determining which methods a participant may utilize to pay the exercise price,
the Plan Administrator may consider such factors as it determines are
appropriate.

(c) Exercise Period. Stock Options granted under the Plan shall be
---------------
exercisable at such time or times and subject to such terms and conditions as
shall be determined by the Plan Administrator; provided, however, that no Stock
-------- -------
Option shall be exercisable later than ten years after the date it is granted.
All Stock Options shall terminate at such earlier times and upon such conditions
or circumstances as the Plan Administrator shall in its discretion set forth in
such option agreement at the date of grant.

(d) Limitations on Incentive Stock Options. Incentive Stock Options may be
--------------------------------------
granted only to participants who are employees of the Company or a parent (other
than Imperial Bancorp and Imperial Bank) or subsidiary of the Company at the
date of grant. The aggregate market value (determined as of the time the option
is granted) of the Common Stock with respect to which Incentive Stock Options
are exercisable for the first time by a participant during any calendar year
(under all

5
<PAGE>

option plans of the Company) shall not exceed $100,000. For purposes of the
preceding sentence, Incentive Stock Options will be taken into account in
the order in which they are granted. Incentive Stock Options may not be
granted to any participant who, at the time of grant, owns stock possessing
(after the application of the attribution rules of Section 424(d) of the
Code) more than 10% of the total combined voting power of all outstanding
classes of stock of the Company or any subsidiary of the Company, unless
the option price is fixed at not less than 110% of the Fair Market Value of
the Common Stock on the date of grant and the exercise of such option is
prohibited by its terms after the expiration of five years from the date
of grant of such option. Notwithstanding anything to the contrary contained
herein, no Incentive Stock Option may be exercised later than ten years
after the date it is granted.

7. Stock Appreciation Rights. The Plan Administrator may, in its
-------------------------
discretion, grant Stock Appreciation Rights to the holders of any Stock Options
granted hereunder. In addition, Stock Appreciation Rights may be granted
independently of, and without relation to, options. A Stock Appreciation Right
means a right to receive a payment, in cash, Common Stock (of either or both
classes) or a combination thereof, in an amount equal to the excess of (x) the
Fair Market Value, or other specified valuation, of a specified number of shares
of Common Stock on the date the right is exercised over (y) the Fair Market
Value, or other specified valuation (which shall be no less than the Fair Market
Value), of such shares of Common Stock on the date the right is granted, all as
determined by the Plan Administrator; provided, however, that if a Stock
-------- -------
Appreciation Right is granted retroactively in tandem with or in substitution
for a Stock Option, the designated Fair Market Value in the award agreement may
be the Fair Market Value on the date such Stock Option was granted. Each Stock
Appreciation Right shall be subject to such terms and conditions as the
Committee shall impose from time to time.

8. Stock Awards. The Plan Administrator may, in its discretion, grant Stock
------------
Awards (which may include mandatory payment of bonus incentive compensation in
stock) consisting of any or all classes of Common Stock issued or transferred to
participants with or without other payments therefor as additional compensation
for services to the

<PAGE>

Company. Stock Awards may be subject to such terms and conditions as the Plan
Administrator determines are appropriate, including, without limitation,
restrictions on the sale or other disposition of such shares, and the right of
the Company to reacquire such shares for no consideration upon termination of
the participant's employment within specified periods, and may constitute
Performance-Based Awards, as described below. The Plan Administrator may require
the participant to deliver a duly signed stock power, endorsed in blank,
relating to the Common Stock covered by such an Award. The Plan Administrator
may also require that the stock certificates evidencing such shares be held in
custody or bear restrictive legends until the restrictions thereon shall have
lapsed. The Stock Award shall specify whether the participant shall have, with
respect to the shares of Common Stock subject to a Stock Award, all of the
rights of a holder of shares of Common Stock of the Company, including the right
to receive dividends and to vote the shares.

9. Performance Awards.
------------------

(a) Performance Awards may be granted to participants at any time and from
time to time, as shall be determined by the Plan Administrator. Performance
Awards may, as determined by the Plan Administrator in its sole discretion,
constitute Performance-Based Awards. The Plan Administrator shall have complete
discretion in determining the number, amount and timing of awards granted to
each participant. Such Performance Awards may be in the form of shares of Common
Stock or Stock Units. Performance Awards may be awarded as short-term or
long-term incentives. With respect to those Performance Awards that are intended
to constitute Performance-Based Awards, the Plan Administrator shall set
performance targets at its discretion which, depending on the extent to which
they are met, will determine the number and/or value of Performance Awards that
will be paid out to the participants, and may attach to such Performance Awards
one or more restrictions. Performance targets may be based upon, without
limitation, Company-wide, divisional and/or individual performance.

(b) With respect to those Performance Awards that are not intended to
constitute Performance-Based Awards, the Plan Administrator shall have the
authority at any time to make adjustments to performance targets for any
outstanding Performance Awards which the Plan Administrator deems necessary or
desirable unless at the time of establishment

7
<PAGE>

of goals the Plan Administrator shall have precluded its authority to make such
adjustments.

(c) Payment of earned Performance Awards shall be made in accordance
with terms and conditions prescribed or authorized by the Plan Administrator.
The participant may elect to defer, or the Plan Administrator may require or
permit the deferral of, the receipt of Performance Awards upon such terms as the
Plan Administrator deems appropriate.

10. Stock Units.
-----------

(a) The Plan Administrator may, in its discretion, grant Stock Units
to participants hereunder. Stock Units may, as determined by the Plan
Administrator in its sole discretion, constitute Performance-Based Awards. The
Plan Administrator shall determine the criteria for the vesting of Stock Units.
A Stock Unit granted by the Plan Administrator shall provide for payment in
shares of any or all classes of Common Stock at such time as the award agreement
shall specify. Shares of Common Stock issued pursuant to this Section 10 may be
issued with or without other payments therefor as may be required by applicable
law or such other consideration as may be determined by the Committee. The Plan
Administrator shall determine whether a participant granted a Stock Unit shall
be entitled to a Dividend Equivalent Right (as defined below).

(b) Upon vesting of a Stock Unit, unless the Plan Administrator has
determined to defer payment with respect to such unit or a Participant has
elected to defer payment under subsection (c) below, shares of Common Stock
representing the Stock Units shall be distributed to the participant unless the
Plan Administrator, with the consent of the participant, provides for the
payment of the Stock Units in cash or partly in cash and partly in shares of
Common Stock equal to the value of the shares of Common Stock which would
otherwise be distributed to the participant.

(c) Prior to the year with respect to which a Stock Unit may vest,
the participant may elect not to receive Common Stock upon the vesting of such
Stock Unit and for the Company to continue to maintain the Stock Unit on its
books of account. In such event, the value of a Stock Unit shall be payable in
shares of Common Stock pursuant to the agreement of deferral.

8
<PAGE>

(d) A "Stock Unit" means an account representing one share of a
specified class of Common Stock. A "Dividend Equivalent Right" means the right
to receive the amount of any dividend paid on the share of Common Stock
underlying a Stock Unit, which shall be payable in cash or in the form of
additional Stock Units.

11. Performance-Based Awards. Certain Benefits granted under the
------------------------
Plan may be granted in a manner such that the Benefits qualify for the
performance-based compensation exemption of Section 162(m) of the Code
("Performance-Based Awards"). As determined by the Plan Administrator in its
sole discretion, either the granting or vesting of such Performance-Based Awards
are to be based upon one or more of the following factors: net sales, pretax
income before allocation of corporate overhead and bonus, budget, earnings per
share, net income (calculated with such adjustments to gross income as are
determined by the Plan Administrator), division, group or corporate financial
goals, return on stockholders' equity, return on assets, attainment of strategic
and operational initiatives, appreciation in and/or maintenance of the price of
the Common Stock or any other publicly-traded securities of the Company, market
share, gross profits, earnings before interest and taxes, earnings before
interest, taxes, dividends and amortization, economic value-added models and
comparisons with various stock market indices, reductions in costs or any
combination of the foregoing. With respect to Performance-Based Awards, (i) the
Plan Administrator shall establish in writing (x) the objective performance-
based goals applicable to a given period and (y) the individual employees or
class of employees to which such performance-based goals apply, in each case no
later than 90 days after the commencement of such fiscal period (but in no event
after 25% of such period has elapsed) and (ii) no Performance-Based Awards shall
be payable to or vest with respect to, as the case may be, any participant for a
given fiscal period until the Plan Administrator certifies in writing that the
objective performance goals (and any other material terms) applicable to such
period have been satisfied. With respect to any Benefits intended to qualify as
Performance-Based Awards, after establishment of a performance goal, the Plan
Administrator shall not revise such performance goal or increase the amount of
compensation payable thereunder (as determined in accordance with Section 162(m)
of the Code) upon the attainment of such performance goal. Notwithstanding the
preceding sentence, the Plan Administrator may reduce or eliminate the number of
shares of Common Stock

9
<PAGE>

or cash granted or the number of shares of Common Stock vested upon the
attainment of such performance goal.

12. Adjustment Provisions; Change in Control.
----------------------------------------

(a) If there shall be any change in the Common Stock of the Company,
through merger, consolidation, reorganization, recapitalization, stock dividend,
stock split, reverse stock split, split up, spinoff, combination of shares,
exchange of shares, dividend in kind or other like change in capital structure
or distribution (other than normal cash dividends) to stockholders of the
Company, an adjustment shall be made to each outstanding Stock Option and Stock
Appreciation Right such that each such Stock Option and Stock Appreciation Right
shall thereafter be exercisable for such securities, cash and/or other property
as would have been received in respect of the Common Stock subject to such Stock
Option or Stock Appreciation Right had such Stock Option or Stock Appreciation
Right been exercised in full immediately prior to such change or distribution,
and such an adjustment shall be made successively each time any such change
shall occur. In addition, in the event of any such change or distribution, in
order to prevent dilution or enlargement of participants' rights under the Plan,
the Plan Administrator will have authority to adjust, in an equitable manner,
the number and kind of shares that may be issued under the Plan, the number and
kind of shares subject to outstanding Benefits, the exercise price applicable to
outstanding Benefits, and the Fair Market Value of the Common Stock and other
value determinations applicable to outstanding Benefits. Appropriate adjustments
may also be made by the Plan Administrator with respect to the terms of any
Benefits under the Plan to reflect such changes or distributions and to modify
any other terms of outstanding Benefits on an equitable basis, including
modifications of performance targets and changes in the length of performance
periods. In addition, other than with respect to Stock Options, Stock
Appreciation Rights and other awards intended to constitute Performance-Based
Awards, the Plan Administrator is authorized to make adjustments to the terms
and conditions of, and the criteria included in, Benefits in recognition of
unusual or nonrecurring events affecting the Company or the financial statements
of the Company, or in response to changes in applicable laws, regulations, or
accounting principles. Notwithstanding the foregoing, (i) each such adjustment
with respect to an Incentive Stock Option shall comply with the rules of Section
424(a) of the Code and (ii) in no event

10
<PAGE>

shall any adjustment be made which would render any Incentive Stock Option
granted hereunder other than an incentive stock option for purposes of Section
422 of the Code.

(b) Notwithstanding any other provision of this Plan, if there is a
Change in Control of the Company, all then outstanding Stock Options and Stock
Appreciation Rights shall immediately become exercisable. For purposes of this
Section 12(b), a "Change in Control" of the Company shall be deemed to have
occurred upon any of the following events:

(i) A person or entity or group of persons or entities, acting
in concert, shall become the direct or indirect beneficial
owner (within the meaning of Rule 13d-3 of the Exchange
Act) of securities of the Company representing fifty
percent (50%) or more of the combined voting power of the
issued and outstanding common stock of the Company (a
"Significant Owner"), unless such shares are originally
issued to such Significant Owner by the Company and other
than any changes in beneficial ownership resulting from the
consummation of the spinoff of the Common Stock of the
Company (the "Spin Off") as contemplated in that certain
request for rulings dated April 11, 1997 submitted to the
Internal Revenue Service; or

(ii) The majority of the Company's Board of Directors is no
longer comprised of the incumbent directors who constitute
the Board of Directors on the Effective Date (as
hereinafter defined) and any other individual(s) who
becomes a director subsequent to the Effective Date whose
initial election or nomination for election as a director,
as the case may be, was approved by at least a majority of
the directors who comprised the incumbent directors as of
the date of such election or nomination; or

(iii) The Company's Class A Common Stock shall cease to be
publicly traded from and after Spin Off; or

(iv) A sale of all or substantially all of the assets of the
Company; or

11
<PAGE>

(v) The Board of Directors shall approve any merger,
consolidation, or like business combination or reorganization of the
Company, the consummation of which would result in the occurrence of
any event described above in this Section 12(b), and such transaction
shall have been consummated.

The Plan Administrator, in its discretion, may determine that, upon
the occurrence of a Change in Control of the Company, each Stock Option and
Stock Appreciation Right outstanding hereunder shall terminate within a
specified number of days after notice to the holder, and such holder shall
receive, with respect to each share of Common Stock subject to such Stock Option
or Stock Appreciation Right, an amount equal to the excess of the Fair Market
Value of such shares of Common Stock immediately prior to the occurrence of such
Change in Control over the exercise price per share of such Stock Option or
Stock Appreciation Right; such amount to be payable in cash, in one or more
kinds of property (including the property, if any, payable in the transaction)
or in a combination thereof, as the Plan Administrator, in its discretion, shall
determine.

13. Transferability. Each Benefit granted under the Plan to a
---------------
participant shall not be transferable otherwise than by will or the laws of
descent and distribution, and shall be exercisable, during the participant's
lifetime, only by the participant. In the event of the death of a participant,
each Stock Option or Stock Appreciation Right theretofore granted to him or her
shall be exercisable during such period after his or her death as the Plan
Administrator shall in its discretion set forth in such option agreement or
right agreement at the date of grant and then only by the executor or
administrator of the estate of the deceased participant or the person or persons
to whom the deceased participant's rights under the Stock Option or Stock
Appreciation Right shall pass by will or the laws of descent and distribution.
Notwithstanding the foregoing, at the discretion of the Plan Administrator, an
award of a Benefit other than an Incentive Stock Option may permit the
transferability of a Benefit by a participant solely to members of the
participant's immediate family or trusts or family partnerships for the benefit
of such persons, subject to any restriction included in the award of the
Benefit.

<PAGE>

14. Other Provisions. The award of any Benefit under the Plan may also be
----------------
subject to such other provisions (whether or not applicable to the Benefit
awarded to any other participant) as the Plan Administrator determines at the
date of grant, appropriate, including, without limitation, for the installment
purchase of Common Stock under Stock Options, for the installment exercise of
Stock Appreciation Rights, to assist the participant in financing the
acquisition of Common Stock, for the forfeiture of, or restrictions on resale or
other disposition of, Common Stock acquired under any form of Benefit, for the
acceleration of exercisability or vesting of Benefits in the event of a Change
in Control of the Company, for the payment of the value of Benefits to
participants in the event of a Change in Control of the Company, or to comply
with federal and state securities laws, or understandings or conditions as to
the participant's relationship with the Company in addition to those
specifically provided for under the Plan.

15. Fair Market Value. For purposes of this Plan and any Benefits awarded
-----------------
hereunder, Fair Market Value shall be, if the applicable class of Common Stock
is readily tradeable on a national securities exchange or other market system,
the closing price of the applicable class of Common Stock on the date of
calculation (or on the last preceding trading date if Common Stock was not
traded on such date) of the Company, and if the Company's Common Stock is not
readily tradeable, Fair Market Value shall mean the amount determined in good
faith by the Plan Administrator as the fair market value of the Common Stock of
the Company.

16. Withholding. All payments or distributions of Benefits made pursuant
-----------
to the Plan shall be net of any amounts required to be withheld pursuant to
applicable federal, state or local tax withholding requirements. If the Company
proposes or is required to distribute Common Stock pursuant to the Plan, it may
require the recipient to remit to it or to the corporation that employs such
recipient an amount sufficient to satisfy such tax withholding requirements
prior to the delivery of any certificates for such Common Stock. In lieu
thereof, the Company or the employing corporation shall have the right to
withhold the amount of such taxes from any other sums due or to become due from
such corporation to the recipient as the Plan Administrator shall prescribe. The
Plan Administrator may, in its discretion and subject to such rules as it may
adopt (including any as may be required to satisfy applicable tax and/or non-tax
regulatory requirements),

13
<PAGE>

permit a holder of a Benefit to pay all or a portion of the federal, state and
local withholding taxes arising in connection with any Benefit consisting of
shares of Common Stock by electing to have the Company withhold shares of Common
Stock having a Fair Market Value equal to the amount of tax to be withheld, such
tax calculated at rates required by statute or regulation.

17. Tenure. A participant's right, if any, to continue to serve the Company
------
as a director, officer, employee, or otherwise, shall not be enlarged or
otherwise affected by his or her designation as a participant under the Plan.

18. Unfunded Plan. Participants shall have no right, title or interest
-------------
whatsoever in or to any investments which the Company may make to aid it in
meeting its obligations under the Plan. Nothing contained in the Plan, and no
action taken pursuant to its provisions, shall create or be construed to create
a trust of any kind, or a fiduciary relationship between the Company and any
participant, beneficiary, legal representative or any other person. To the
extent that any person acquires a right to receive payments from the
Company under the Plan, such right shall be no greater than the right of an
unsecured general creditor of the Company. All payments to be made hereunder
shall be paid from the general funds of the Company and no special or separate
fund shall be established and no segregation of assets shall be made to assure
payment of such amounts except as expressly set forth in the Plan. The Plan is
not intended to be subject to the Employee Retirement Income security Act of
1974, as amended.

19. No Fractional Shares. No fractional shares of Common Stock shall be
--------------------
issued or delivered pursuant to the Plan or any Benefit. The Plan Administrator
shall determine whether cash, or Benefits, or other property shall be issued or
paid in lieu of fractional shares or whether such fractional shares or any
rights thereto shall be forfeited or otherwise eliminated.

20. Duration, Amendment and Termination. No Benefit shall be granted more
-----------------------------------
than ten years after the Effective Date; provided, however, that the terms and
-------- -------
conditions applicable to any Benefit granted prior to such date may thereafter
be amended or modified by mutual agreement between the Company and the
participant or such other persons as may then have an interest therein. Also,

<PAGE>

by mutual agreement between the Company and a participant hereunder, under this
Plan or under any other present or future plan of the Company, Benefits may be
granted to such participant in substitution and exchange for, and in
cancellation of, any Benefits previously granted such participant under this
Plan, or any other present or future plan of the Company. The Board of Directors
may amend the Plan from time to time or suspend or terminate the Plan at any
time. However, no action authorized by this Section 20 shall reduce the amount
of any existing Benefit or change the terms and conditions thereof without the
Participant's consent. No amendment of the Plan shall, without approval of the
stockholders of the Company, (i) increase the total number of shares which may
be issued under the Plan or the maximum number of shares with respect to Stock
Options, Stock Appreciation Rights and other Benefits that may be granted to
any individual under the Plan or (ii) modify the requirements as to eligibility
for Benefits under the Plan; provided, however, that no amendment may be made
-------- -------
without approval of the stockholders of the Company if the amendment will
disqualify any Incentive Stock Options granted hereunder.

21. Governing Law. This Plan, Benefits granted hereunder and actions
-------------
taken in connection herewith shall be governed and construed in accordance with
the laws of the State of Delaware (regardless of the law that might otherwise
govern under applicable Delaware principles of conflict of laws).

22. Effective Date. (a) The Plan shall be effective as of April 23, 1997
--------------
(the "Effective Date").

(b) This Plan shall terminate on April 22, 2007 (unless sooner terminated
by the Board of Directors).

<PAGE>

EXHIBIT 11

STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE

<TABLE>
<CAPTION>
NINE
MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------- -------------
1994 1995 1996 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Primary net income per share:
Net income $ 4,198,000 $ 5,919,000 $38,644,000 $ 6,418,000
=========== =========== =========== ===========
Weighted average number of shares outstanding 23,216,308 24,072,338 24,959,376 25,508,574
Net effect of dilutive stock options-Based on
treasury stock method using average or end of
period market price 984,281 1,011,622 1,084,433 1,233,010
----------- ----------- ----------- -----------
Total average 24,200,589 25,083,960 26,043,809 26,741,584
=========== =========== =========== ===========
Primary net income per share $ 0.17 $ 0.24 $ 1.48 $ 0.24
=========== =========== =========== ===========

Fully diluted net income per share:
Net income $ 4,198,000 $ 5,919,000 $38,644,000 $ 6,418,000
Weighted average number of shares outstanding 23,216,308 24,072,338 24,959,376 25,508,574
Net effect of dilutive stock options-Based on
treasury stock method using average or end of
period market price 984,425 1,096,647 1,157,391 1,318,361
----------- ----------- ----------- -----------
Total average 24,200,733 25,168,985 26,116,767 26,826,935
=========== =========== =========== ===========
Fully diluted net income per share $ 0.17 $ 0.24 $ 1.48 $ 0.24
=========== =========== =========== ===========
</TABLE>