10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the Quarterly Period Ended September 30, 2003

OR

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

For the Transition Period from _____ to _____
Commission File Number 0-26960

ITLA CAPITAL CORPORATION

(Exact Name of Registrant as Specified in its Charter)

Delaware	95-4596322
(State or Other Jurisdiction of Incorporation or Organization)	(IRS Employer Identification No.)

888 Prospect St., Suite 110, La Jolla, California	92037
(Address of Principal Executive Offices)	(Zip Code)

(858) 551-0511

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o.

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

Number of shares of common stock of the registrant: 6,053,669 outstanding as of November 4, 2003.

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION
		CONSOLIDATED BALANCE SHEETS
		CONSOLIDATED STATEMENTS OF INCOME
		CONSOLIDATED STATEMENTS OF CASH FLOWS
		NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3. Quantitative and Qualitative Disclosures About Market Risk
	Item 4. Controls and Procedures
PART II - OTHER INFORMATION
	Item 1 Legal Proceedings
	Item 2 Changes in Securities
	Item 3 Defaults Upon Senior Securities
	Item 4 Submission of Matters to a Vote of Security Holders
	Item 5 Other Information
	Item 6 Exhibits and Reports on Form 8-K
SIGNATURES
EXHIBIT INDEX
EXHIBIT 10.3A
EXHIBIT 10.3B
EXHIBIT 10.10
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32

ITLA CAPITAL CORPORATION
FORM 10-Q
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2003

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements		3
		Consolidated Balance Sheets – September 30, 2003 (Unaudited) and December 31, 2002	3
		Consolidated Statements of Income – Three and Nine Months Ended September 30, 2003 and 2002 (Unaudited)	4
		Consolidated Statements of Cash Flows – Nine Months Ended September 30, 2003 and 2002 (Unaudited)	5
		Notes to Unaudited Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		14
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		29
Item 4.	Controls and Procedures		29
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings		30
Item 2.	Changes in Securities		30
Item 3.	Defaults Upon Senior Securities		30
Item 4.	Submission of Matters to a Vote of Security Holders		30
Item 5.	Other Information		30
Item 6.	Exhibits and Reports on Form 8-K		30
	Signatures		31
	Certifications		33

Forward Looking Statements

     “Safe Harbor” statement under the Private Securities Litigation Reform Act of 1995: This Form 10-Q contains forward-looking statements that are subject to risks and uncertainties, including, but not limited to, changes in economic conditions in our market areas, changes in policies by regulatory agencies, the impact of competitive loan products, loan demand risks, the quality or composition of our loan or investment portfolios, fluctuations in interest rates and changes in the relative differences between short and long term interest rates, levels of nonperforming assets and operating results, the impact of terrorist actions and other risks detailed from time to time in our filings with the Securities and Exchange Commission. We caution readers not to place undue reliance on forward-looking statements. We do not undertake and specifically disclaim any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. These risks could cause our actual results for 2003 and beyond to differ materially from those expressed in any forward-looking statements by, or on behalf of, us.

     As used throughout this report, the terms “we”, “our”, “ITLA Capital” or the “Company” refer to ITLA Capital Corporation and its consolidated subsidiaries.

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PART I – FINANCIAL INFORMATION

ITLA CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

					September 30,
					2003			December 31,
					(unaudited)			2002
					(in thousands except share amounts)
				Assets
Cash and cash equivalents					$	85,592		$	160,848
Investment securities available for sale, at fair value						46,015			54,677
Stock in Federal Home Loan Bank						15,887			16,934
Loans, net (net of allowance for loan losses of $31,244 and $31,081 as of September 30, 2003 and December 31, 2002, respectively)						1,332,098			1,316,298
Real estate loans held in trust, net (net of allowance for loan losses of $1,928 as of September 30, 2003 and December 31, 2002)						85,195			121,936
Interest receivable						8,331			9,158
Other real estate owned, net						14,767			12,593
Premises and equipment, net						5,381			4,197
Deferred income taxes						13,923			13,822
Goodwill						3,118			3,118
Other assets						16,667			8,384
			Total assets		$	1,626,974		$	1,721,965
				Liabilities and Shareholders’ Equity
Liabilities:
	Deposit accounts				$	987,418		$	1,065,911
	Federal Home Loan Bank advances					317,735			338,685
	Collateralized mortgage obligations					32,550			69,077
	Accounts payable and other liabilities					27,987			10,006
			Total liabilities			1,365,690			1,483,679
Commitments and contingencies
Guaranteed preferred beneficial interests in the Company’s junior subordinated deferrable interest debentures, net						81,797			81,595
Shareholders’ equity:
	Preferred stock, 5,000,000 shares authorized, none issued					—			—
	Contributed capital - common stock, $.01 par value; 20,000,000 shares authorized, 8,261,408 and 8,226,414 issued as of September 30, 2003 and December 31, 2002, respectively					59,748			58,841
	Retained earnings					159,691			135,773
	Accumulated other comprehensive income					126			435
						219,565			195,049
	Less treasury stock, at cost 2,489,826 and 2,447,656 shares as of September 30, 2003 and December 31, 2002, respectively					(40,078	)		(38,358	)
		Total shareholders’ equity				179,487			156,691
			Total liabilities and shareholders’ equity		$	1,626,974		$	1,721,965

See accompanying notes to the unaudited consolidated financial statements.

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ITLA CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

				For the Three Months Ended					For the Nine Months Ended
				September 30,					September 30,
				2003		2002			2003		2002
				(in thousands except per share amounts)
Interest income:
	Loans, including fees			$	24,802	$	24,020		$	78,877	$	70,598
	Real estate loans held in trust				1,407		2,458			5,036		7,960
	Cash and investment securities				866		902			4,597		2,427
		Total interest income			27,075		27,380			88,510		80,985
Interest expense:
	Deposit accounts				5,544		6,815			18,681		22,203
	Federal Home Loan Bank advances				1,367		1,422			3,855		4,310
	Collateralized mortgage obligations				204		563			885		1,852
		Total interest expense			7,115		8,800			23,421		28,365
			Net interest income before provision for loan losses		19,960		18,580			65,089		52,620
Provision for loan losses					750		2,700			7,100		6,125
			Net interest income after provision for loan losses		19,210		15,880			57,989		46,495
Non-interest income:
	Premium on sale of loans, net				—		—			8,983		—
	Late and collection fees				61		38			192		157
	Other				716		(92	)		5,379		16
		Total non-interest income			777		(54	)		14,554		173
Non-interest expense:
	Compensation and benefits				4,610		3,303			14,735		9,781
	Occupancy and equipment				1,236		777			3,502		2,232
	Other				3,112		2,379			9,755		7,076
		Total general and administrative			8,958		6,459			27,992		19,089
	Real estate owned expense, net				220		71			373		325
	Provision for losses on other real estate owned				—		—			370		796
	Loss (gain) on sale of other real estate owned, net				389		—			60		(75	)
		Total real estate owned expense, net			609		71			803		1,046
			Total non-interest expense		9,567		6,530			28,795		20,135
Income before provision for income taxes and minority interest in income of subsidiary					10,420		9,296			43,748		26,533
Minority interest in income of subsidiary					1,540		815			4,506		2,411
Income before provision for income taxes					8,880		8,481			39,242		24,122
Provision for income taxes					3,473		3,326			15,324		9,443
	NET INCOME			$	5,407	$	5,155		$	23,918	$	14,679
	BASIC EARNINGS PER SHARE			$	0.90	$	0.86		$	3.97	$	2.45
	DILUTED EARNINGS PER SHARE			$	0.83	$	0.80		$	3.69	$	2.29

See accompanying notes to the unaudited consolidated financial statements.

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ITLA CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

					For the Nine Months Ended
					September 30,
					2003			2002
					(in thousands)
Cash Flows From Operating Activities:
	Net Income				$	23,918		$	14,679
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization of premises and equipment				1,119			674
		Amortization of premium on purchased loans				1,549			1,532
		Amortization of original issue discount on collateralized mortgage obligations				57			136
		Accretion of deferred loan origination fees, net of costs				(1,992	)		(868	)
		Provision for loan losses				7,100			6,125
		Provision for losses on other real estate owned				370			796
		Loss (gain) on sales of other real estate owned				60			(75	)
	Decrease in interest receivable					827			2,127
	Increase in other assets					(8,283	)		(912	)
	Increase (decrease) in accounts payable and other liabilities					17,981			(2,899	)
	Other operating activities, net					250			(32	)
			Net cash provided by operating activities			42,956			21,283
Cash Flows From Investing Activities:
	Proceeds from securitization and sale of real estate loans					—			98,155
	Decrease (increase) in loans, net					23,706			(63,527	)
	Net cash paid to acquire Asahi Bank of California					—			(14,872	)
	Repayment of real estate loans held in trust					35,543			28,774
	Purchase of loans					(54,040	)		(30,084	)
	Purchases of investment securities available for sale					(34,363	)		(77,670	)
	Proceeds from the maturity and calls of investment securities available for sale					42,365			55,000
	Decrease (increase) in stock in Federal Home Loan Bank					1,047			(2,990	)
	Proceeds from sale of other real estate owned					6,471			2,720
	Other investing activities, net					(1,793	)		(1,822	)
			Net cash provided by (used in) investing activities			18,936			(6,316	)
Cash Flows From Financing Activities:
	Decrease in deposit accounts					(78,493	)		(68,938	)
	Net (repayment of) proceeds from borrowings from the Federal Home Loan Bank					(20,950	)		59,800
	Repayment of Asahi repurchase agreement, net					—			(14,693	)
	Principal payments on collateralized mortgage obligations					(36,584	)		(30,384	)
	Cash paid to acquire treasury stock					(1,720	)		(2,343	)
	Proceeds from exercise of employee stock options					599			184
			Net cash used in financing activities			(137,148	)		(56,374	)
				Net decrease in cash and cash equivalents		(75,256	)		(41,407	)
				Cash and cash equivalents at beginning of period		160,848			134,241
				Cash and cash equivalents at end of period	$	85,592		$	92,834
Supplemental Cash Flow Information:
		Cash paid during the period for interest			$	28,116		$	28,473
		Cash paid during the period for income taxes			$	16,260		$	10,225
Non-cash Investing Transactions:
		Loans transferred to other real estate owned			$	9,075		$	4,258

See accompanying notes to the unaudited consolidated financial statements.

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ITLA CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – BASIS OF PRESENTATION

     The unaudited consolidated financial statements of ITLA Capital Corporation (the “Company”) included herein reflect all normal recurring adjustments which are, in the opinion of management, necessary to present fairly the results of operations and financial position of the Company, as of and for the interim periods indicated. The unaudited consolidated financial statements include the accounts of ITLA Capital Corporation and its wholly-owned subsidiaries, Imperial Capital Bank (the “Bank”), Imperial Capital Real Estate Investment Trust (“Imperial Capital REIT”), ITLA Capital Statutory Trust I (“Trust I”), ITLA Capital Statutory Trust II (“Trust II”), ITLA Capital Statutory Trust III (“Trust III”), ITLA Capital Statutory Trust IV (“Trust IV”), and ITLA Capital Statutory Trust V (“Trust V”). All intercompany transactions and balances have been eliminated. Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to the rules and regulations of the U.S. Securities and Exchange Commission. Certain amounts in prior periods have been reclassified to conform to the presentation in the current period. The results of operations for the three and nine months ended September 30, 2003 are not necessarily indicative of the results of operations for the remainder of the year.

     These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our annual report on Form 10-K for the year ended December 31, 2002.

NOTE 2 – ACCOUNTING FOR STOCK-BASED COMPENSATION

     In December 2002, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 148, Accounting for Stock-Based Compensation, to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123, Accounting for Stock-Based Compensation, to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The transition guidance and annual disclosure provisions are effective for fiscal years ending after December 15, 2002. The interim disclosure provisions are effective for financial reports containing financial statements for interim periods beginning after December 15, 2002. The Company adopted the provisions of SFAS No. 148 effective in the first quarter of 2003.

     The Company has stock-based compensation plans. These plans are accounted for under APB Opinion No. 25, Accounting for Stock Issued to Employees, and accordingly, no compensation costs have been recognized in the accompanying unaudited consolidated statements of income. The Company applies SFAS No. 123 for disclosure purposes only. SFAS No. 123 disclosures include pro forma net income and earning per share as if the fair value-based method of accounting had been used. If compensation had been determined based on SFAS No. 123, the Company’s pro forma net income and pro forma per share data would be as follows:

6

		For the Three Months				For the Nine Months
		Ended September 30,				Ended September 30,
		2003		2002		2003		2002
		(in thousands, except per share data)
Net income, as reported		$	5,407	$	5,155	$	23,918	$	14,679
Less: Stock-based employee compensation expense determined under the fair value method, net of tax			356		348		996		628
Pro forma net income		$	5,051	$	4,807	$	22,922	$	14,051
Earnings per share:
	Basic – as reported	$	0.90	$	0.86	$	3.97	$	2.45
	Basic – pro forma	$	0.84	$	0.81	$	3.81	$	2.35
	Diluted – as reported	$	0.83	$	0.80	$	3.69	$	2.29
	Diluted – pro forma	$	0.77	$	0.75	$	3.53	$	2.19

     The fair value of each option grant was estimated on the date of grant using an option pricing model with the following weighted-average assumptions for option grants.

	Weighted-Average
	Assumptions for Option Grants
	2003		2002
Dividend Yield		0.00%		0.00%
Expected Volatility		36.24%		31.36%
Risk-Free Interest Rates		4.17%-4.34%		4.62%-4.88%
Expected Lives		Seven Years		Seven Years

NOTE 3 – EARNINGS PER SHARE

     Basic Earnings Per Share (“Basic EPS”) is computed by dividing net income by the weighted-average number of common shares outstanding for the period. Diluted Earnings Per Share (“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 in the issuance of common stock which shared in the Company’s earnings.

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The following is a reconciliation of the calculation of Basic EPS and Diluted EPS:

	For the Three Months Ended September 30,							For the Nine Months Ended September 30,
			Weighted-							Weighted-
			Average		Per					Average		Per
	Net		Shares		Share			Net		Shares		Share
	Income		Outstanding		Amount			Income		Outstanding		Amount
	(in thousands, except per share data)
2003
Basic EPS	$	5,407		6,031	$	0.90		$	23,918		6,019	$	3.97
Effect of dilutive stock options		—		517		(0.07	)		—		471		(0.28	)
Diluted EPS	$	5,407		6,548	$	0.83		$	23,918		6,490	$	3.69
2002
Basic EPS	$	5,155		5,966	$	0.86		$	14,679		5,984	$	2.45
Effect of dilutive stock options		—		469		(0.06	)		—		429		(0.16	)
Diluted EPS	$	5,155		6,435	$	0.80		$	14,679		6,413	$	2.29

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     NOTE 4 – COMPREHENSIVE INCOME

     Comprehensive income, which encompasses net income and the net change in unrealized gains (losses) on investment securities available for sale, is presented below:

		Three Months Ended					Nine Months Ended
		September 30,					September 30,
		2003			2002		2003			2002
					(in thousands)
Net Income		$	5,407		$	5,155	$	23,918		$	14,679
Other comprehensive (loss) income:
	Unrealized (loss) gain on investment securities available for sale, net of tax (benefit) expense of ($70) and $141 for the three months ended September 30, 2003 and 2002, and net of tax (benefit) expense of ($198) and $297 for the nine months ended September 30, 2003 and 2002, respectively.		(110	)		212		(309	)		445
Comprehensive income		$	5,297		$	5,367	$	23,609		$	15,124

NOTE 5 – IMPAIRED LOANS RECEIVABLE

     As of September 30, 2003 and December 31, 2002, the recorded investment in impaired loans and impaired real estate loans held in trust was $11.3 million and $16.0 million, respectively. The average recorded investment in impaired loans was $10.6 million for the three months ended September 30, 2003 and $7.8 million for the same period last year. The average recorded investment in impaired loans was $13.3 million for the nine months ended September 30, 2003 and $10.8 million for the same period last year. Interest income recognized on impaired loans totaled $120,000 and $377,000 for the three and nine months ended September 30, 2003 as compared to $89,000 and $169,000 for the same periods last year.

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NOTE 6 – RESIDUAL INTEREST IN SECURITIZATION

     During the first quarter of 2002, the Company formed a limited liability company to issue $86.3 million of asset-backed notes in a securitization of substantially all of the Company’s residential loan portfolio. The Company recognized a gain of $3.7 million on the securitization of these loans, which was included in other non-interest income within the consolidated statement of income. Concurrent with recognizing such gain on sale, the Company recorded a residual interest of $5.6 million, which represented the present value of future cash flows (spread and fees) that are estimated to be received over the life of the loans. The residual interest is recorded on the consolidated balance sheet in “Investment securities available for sale, at fair value”. The value of the residual interest is subject to substantial credit, prepayment, and interest rate risk on the sold residential loans. In accordance with the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 115, Accounting for Certain Investments in Debt and Equity Securities, the residual interest is classified as “available-for-sale” and, as such, recorded at fair value with the resultant changes in fair value recorded as accumulated unrealized gain or loss in a separate component of shareholders’ equity entitled “accumulated other comprehensive income or loss”, until realized. Fair value is estimated on a monthly basis based on a discounted cash flow analysis. These cash flows are estimated over the lives of the receivables using prepayment, default, and interest rate assumptions that management believes market participants would use for similar financial instruments.

     During the nine months ended September 30, 2003, the Company recognized an other than temporary impairment of $750,000 in connection with its residual interest. Impairments that are deemed to be other than temporary are charged to income as other expense. In evaluating impairments as other than temporary the Company considers credit risk, as well as the magnitude and trend of default rates and prepayment speeds of the underlying residential loans.

     At September 30, 2003 and December 31, 2002, key economic assumptions and the sensitivity of the current fair value of the residual interest based on projected cash flows to immediate adverse changes in those assumptions are as follows:

	September 30,			December 31,
	2003			2002
Dollars in thousands
Fair value of retained interest	$	5,368		$	5,619
Weighted average life (in years) - securities		0.90			1.49
Weighted average life (in years) - residual interest		4.39			4.70
Weighted average annual prepayment speed		35.0	%		35.0	%
Impact of 10% adverse change	$	(74	)	$	(23	)
Impact of 25% adverse change	$	(193	)	$	(59	)
Weighted average annual discount rate		15.0	%		15.0	%
Impact of 10% adverse change	$	(306	)	$	(167	)
Impact of 25% adverse change	$	(737	)	$	(404	)
Weighted average lifetime credit losses		3.3	%		3.3	%
Impact of 10% adverse change	$	(163	)	$	(285	)
Impact of 25% adverse change	$	(407	)	$	(678	)

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     These sensitivities are hypothetical and should be used with caution. As the figures indicate, changes in the fair value of the residual interest are based on a variation in assumptions and generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, in the above table, the effect of a variation in a particular assumption on the fair value of the residual interest is calculated without changing any other assumption; in reality, changes in one factor may result in changes in another (for example, increases in market interest rates may result in lower prepayments but increased credit losses), which might magnify or counteract the sensitivities, and depending on the severity of such changes, the results of operations may be materially affected.

NOTE 7 – NEW ACCOUNTING PRONOUNCEMENTS

     In November 2002, FASB issued FASB Interpretation No. 45 (“FIN 45”), Guarantor’s Accounting and Disclosure Requirement for Guarantees, Including Indirect Guarantees of Indebtedness of Others. FIN 45 elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued. It also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The initial recognition and measurement provisions for FIN 45 are applicable on a prospective basis to guarantees issued or modified after December 31, 2002. The disclosure requirements of FIN 45 are effective for financial statements of interim or annual periods ending after December 15, 2002, and were included in the Company’s financial statements for the year ended December 31, 2002. Implementation of the provisions of FIN 45 did not have an impact on the Company’s financial statements.

     In January 2003, FASB issued FIN 46, an interpretation of Accounting Research Bulletin No. 51, Consolidated Financial Statements. FIN 46 establishes the criteria used to identify variable interest entities and to determine whether or not to consolidate a variable interest entity. Under the criteria established by FIN 46, the Company believes it may be required to de-consolidate its trust subsidiaries. The result will be to recognize investments in its trust subsidiaries in other assets, to report the amount of subordinated debentures issued by the Company to its trust subsidiaries in the liability section of the Company’s consolidated balance sheets, and to recognize the interest expense in the subordinated debentures in the consolidated statements of income. Prior to FIN 46, the Company consolidated its trust subsidiaries and reported trust preferred securities in the mezzanine section of the Company’s consolidated balance sheets and recognized the proportionate share of income attributable to the preferred shareholders as minority interest in income of subsidiary in the consolidated statements of income. This interpretation was effective immediately for variable interest entities created after January 31, 2003 and was initially to be effective for variable interest entities acquired prior to February 1, 2003, in the quarter ended September 30, 2003. Effective October 9, 2003, the FASB agreed to defer the effective date of FIN 46 for variable interests held by public companies in all entities that were acquired prior to February 1, 2003. The deferral will require that public companies adopt the provisions of FIN 46 for periods ending after December 15, 2003.

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     On May 15, 2003, FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity. SFAS No. 150 modifies the accounting for certain financial instruments that issuers could account for as equity. Under SFAS No. 150, those instruments with characteristics of both liabilities and equity must be classified as liabilities in the consolidated balance sheets, with the corresponding payments to holders of the instruments recognized as interest expense.

     The reporting requirements of SFAS No. 150 are effective July 1, 2003. As a result of this new standard, should the adoption of FIN 46 not otherwise require de-consolidation of the trusts, the Company would be required to reclassify its trust preferred securities, presented on the consolidated balance sheets as “Guaranteed preferred beneficial interest in the Company’s junior subordinated deferrable interest debentures, net”, to liabilities and recognize the related expense within the consolidated statements of income as interest expense rather than minority interest in income of subsidiary. On October 29, 2003, the FASB agreed to defer provisions related to mandatorily redeemable financial instruments to periods beginning after December 15, 2004.

     The adoption of FIN 46 and SFAS No. 150 will not have a material impact on the results of operations or the financial position of the Company but will require the restatement of certain financial ratios, such as net interest margin and efficiency ratios, for all periods presented.

NOTE 8 – BUSINESS SEGMENT INFORMATION

     SFAS No. 131, Disclosures About Segments of an Enterprise and Related Information, requires disclosure of segment information in a manner consistent with the “management approach”. The management approach is based on the way the chief operating decision-maker organizes segments within a company for making operating decisions and assessing performance.

     The main factors used to identify operating segments were the specific product and business lines of the various operating segments of the Company. Operating segments are organized separately by product and service offered. We have identified one operating segment that meets the criteria of being a reportable segment in accordance with the provisions of SFAS No. 131. This reportable segment is the origination and purchase of loans, which by its legal form, is identified as operations of the Bank and Imperial Capital REIT. This segment derives the majority of its revenue by originating and purchasing loans. Other operating segments of the Company that did not meet the criteria of being a reportable segment in accordance with SFAS No. 131 have been aggregated and reported as “All Other”. Substantially all of the transactions from the Company’s operating segments occur in the United States. The Company has no transactions with a single external customer that exceeds ten percent of the Company’s consolidated revenues.

     Transactions between the reportable segment of the Company and its other operating segments are made at terms which approximate arm’s-length transactions and in accordance with GAAP. There is no significant difference between the measurement of the reportable segment’s assets and profits and losses disclosed below and the measurement of assets and profits and losses in our consolidated balance sheets and statements of income. Accounting allocations are made in the same manner for all operating segments.

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		Lending
		Operations		All Other		Eliminations			Consolidated
For the three months ended September 30,
	2003
	Revenues from external customers	$	27,631	$	221	$	—		$	27,852
	Total interest income		26,916		1,971		(1,812	)		27,075
	Total interest expense		7,308		1,554		(1,747	)		7,115
	Net Income	$	6,896	$	5,396	$	(6,885	)	$	5,407
	2002
	Revenues from external customers	$	27,021	$	305	$	—		$	27,326
	Total interest income		27,059		1,351		(1,030	)		27,380
	Total interest expense		9,065		765		(1,030	)		8,800
	Net Income	$	6,263	$	5,126	$	(6,234	)	$	5,155
For the nine months ended September 30,
	2003
	Revenues from external customers	$	102,659	$	405	$	—		$	103,064
	Total interest income		88,316		5,343		(5,149	)		88,510
	Total interest expense		23,906		4,623		(5,108	)		23,421
	Net Income	$	29,190	$	23,885	$	(29,157	)	$	23,918
	2002
	Revenues from external customers	$	80,907	$	251	$	—		$	81,158
	Total interest income		80,960		3,108		(3,083	)		80,985
	Total interest expense		29,124		2,324		(3,083	)		28,365
	Net Income	$	18,918	$	14,614	$	(18,853	)	$	14,679

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

     The following discussion and analysis is intended to identify the major factors that influenced the financial condition and results of operations for the three and nine months ended September 30, 2003.

RESULTS OF OPERATIONS

Three Months Ended September 30, 2003 Compared to Three Months Ended September 30, 2002

General

     Consolidated net income was at $5.4 million and $5.2 million for the three months ended September 30, 2003 and 2002, respectively. Diluted EPS was $0.83 for the three months ended September 30, 2003 compared to $0.80 for the same period last year, an increase of $0.03 per diluted share. The increase in net income was primarily due to increases in net interest income and non-interest income, partially offset by increases in non-interest expense and minority interest in income of subsidiary.

     The increase in net interest income from prior year was a result of the increase in the average balance of loans outstanding and the decline in average cost of funds due to our interest bearing liabilities repricing to lower current market interest rates. A significant portion of the loan portfolio is not subject to downward pricing adjustment due to interest rate floors. The resulting increase in net interest income was partially offset by a decline in the yield of the loan portfolio as higher yielding loans were repaid and replaced by new loan production at lower current market interest rates.

     The return on average assets was 1.42% for the three months ended September 30, 2003 compared to 1.49% for the same period last year. The return on average shareholders’ equity was 12.02% for the three months ended September 30, 2003, compared to 13.64% for the same period last year.

     Total loan production was $279.6 million for the three months ended September 30, 2003, consisting of the origination and/or acquisition of $230.4 million of commercial real estate loans, $21.6 million of franchise loans, and $27.6 million of film finance loans. The Bank’s loan production for the same period last year was $144.7 million, consisting of originated and/or acquired commercial real estate loans.

     The increase in non-interest income was primarily due to income earned in connection with the Bank’s refund anticipation loan (“RAL”) program and its strategic relationship with Household International, Inc. (“Household”). Because the origination of loans under the RAL program results from the filing of individual income tax returns, transaction activity is concentrated most heavily during the tax season. This results in the Company earning most of its RAL program income in the first quarter of the year. We expect that our financial results for the remaining quarter of 2003 will not be significantly impacted by the RAL program due to the seasonal nature of the business.

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Net Interest Income and Margin

     The following table presents, for the three months ended September 30, 2003 and 2002, our condensed average balance sheet information, together with interest income and yields earned on average interest-earning assets and interest expense and rates paid on average interest-bearing liabilities. Average balances are computed using daily average balances. Nonaccrual loans are included in loans receivable.

			For the Three Months Ended September 30,
			2003								2002
			Average			Income/		Yield/			Average			Income/		Yield/
			Balance			Expense		Rate			Balance			Expense		Rate
			(dollars in thousands)
Assets
Cash and investments			$	110,343		$	866		3.11	%	$	69,738		$	902		5.13	%
Loans receivable:
	Loans			1,279,054			24,802		7.69	%		1,147,784			24,020		8.30	%
	Real estate loans held in trust			88,960			1,407		6.27	%		138,906			2,458		7.02	%
Total loans receivable				1,368,014			26,209		7.60	%		1,286,690			26,478		8.16	%
Total interest-earning assets				1,478,357		$	27,075		7.27	%		1,356,428		$	27,380		8.01	%
Non-interest-earning assets				66,405								45,321
Allowance for loan losses				(33,456	)							(30,156	)
	Total assets		$	1,511,306							$	1,371,593
Liabilities and Shareholders’ Equity
Deposit accounts:
	Money market and passbook accounts		$	169,417		$	659		1.54	%	$	136,569		$	642		1.87	%
	Time certificates			753,880			4,885		2.57	%		754,340			6,173		3.25	%
		Total deposit accounts		923,297			5,544		2.38	%		890,909			6,815		3.03	%
Collateralized mortgage obligations				37,453			204		2.16	%		83,530			563		2.67	%
FHLB advances				236,539			1,367		2.29	%		211,101			1,422		2.66	%
Total interest-bearing liabilities				1,197,289		$	7,115		2.36	%		1,185,540		$	8,800		2.94	%
Non-interest-bearing liabilities				53,818								7,884
Guaranteed preferred beneficial interests in the Company’s junior subordinated deferrable interest debentures				81,775								28,174
Shareholders’ equity				178,424								149,995
	Total liabilities and shareholders’ equity		$	1,511,306							$	1,371,593
Net interest spread									4.91	%							5.07	%
Net interest income before provision for loan losses						$	19,960							$	18,580
Net interest margin									5.36	%							5.43	%

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     The following table sets forth a summary of the changes in interest income and interest expense resulting from changes in average interest-earning asset and interest-bearing liability balances and changes in average interest rates. The change in interest due to both volume and rate has been allocated to change due to volume and rate in proportion to the relationship of absolute dollar amounts of each.

			For the Three Months Ended
			September 30, 2003 and 2002
			Increase (Decrease) Due to:
			Rate			Volume			Total
						(In thousands)
Interest and fees earned from:
	Cash and investment securities		$	(354	)	$	318		$	(36	)
	Loans			(1,615	)		2,397			782
	Real estate loans held in trust			(263	)		(788	)		(1,051	)
		Total increase (decrease) in interest income		(2,232	)		1,927			(305	)
Interest paid on:
	Deposit accounts			(1,464	)		193			(1,271	)
	Collateralized mortgage obligations			(107	)		(252	)		(359	)
	FHLB advances			(200	)		145			(55	)
		Total increase (decrease) in interest expense		(1,771	)		86			(1,685	)
		Increase (decrease) in net interest income	$	(461	)	$	1,841		$	1,380

     Total interest income decreased $0.3 million to $27.1 million in the third quarter of 2003 as compared to $27.4 million for the same period last year. The net decrease in interest income was primarily attributable to the decrease of 74 basis points in the yields earned on interest earning assets partially offset by an increase of $121.9 million in interest earning assets.

     The average balance of loans held by the Bank was $1.3 billion and $1.1 billion for the three months ended September 30, 2003 and 2002, respectively. Loans secured by income producing properties and construction loans had an average balance of $1.1 billion during the quarter ended September 30, 2003 and 2002. The average balance of franchise loans was $64.1 million and $62.3 million during the quarter ended September 30, 2003 and 2002, respectively. The average balance of film finance loans was $87.6 million during the quarter ended September 30, 2003. We acquired the Lewis Horwitz Organization (“LHO”) during the fourth quarter of 2002 to originate film finance loans.

     The average balance of real estate loans held in trust decreased to $89.0 million for the three months ended September 30, 2003 as compared to $138.9 million for the same period last year. This decrease was due to loan prepayments and principal amortization.

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     The average balance of our cash and investments increased to $110.3 million in the third quarter of 2003 compared to $69.7 million during the same period last year. The increase in our average cash and investments was attributable to the increased liquidity that was maintained in connection with the Bank’s RAL program. The decline in the average yield earned on cash and investments from 5.13% during the third quarter of 2002 to 3.11% during the third quarter of 2003 was primarily caused by lower yields earned on short-term and overnight investments.

     The average yield earned on total loans decreased to 7.60% in the quarter ended September 30, 2003 as compared to 8.16% in the same period last year. The decline in our yield was primarily caused by higher yielding loans being repaid and replaced by new loan production at lower current market interest rates. Our commercial real estate loan portfolio is primarily comprised of adjustable rate mortgages indexed to six month LIBOR. Approximately 94.5% of our real estate loan portfolio (including real estate loans held in trust) are adjustable rate mortgages at September 30, 2003. These adjustable rate mortgages generally reprice on a quarterly basis and approximately $1.2 billion or 89.0% of our real estate loan portfolio contain interest rate floors, below which the loans’ contractual interest rate may not adjust. At September 30, 2003, the weighted average floor interest rate of these loans was 7.0%. At that date, approximately $1.2 billion or 97.4% of those loans were at the floor interest rate, approximately $20.8 million or 1.7% were within 50 basis points of their floor interest rate, and approximately $1.8 million or 0.1% were greater than 50 but less than 100 basis points from their floor interest rate.

     Total interest expense decreased by $1.7 million to $7.1 million in the third quarter of 2003, compared to $8.8 million for the same period last year. This decrease was primarily attributable to lower interest rates paid on all interest bearing liabilities and lower average balances on our Collateralized Mortgage Obligations (“CMOs”) partially offset by higher average balances on deposit accounts and Federal Home Loan Bank (“FHLB”) advances.

     Our average cost of funds decreased to 2.36% during the three month period ended September 30, 2003, compared to 2.94% for the same period last year. This decrease in funding costs was due primarily to lower rates being paid on our deposit accounts and CMOs as compared to the same period last year as a result of the general decline in market interest rates. The average rate paid on deposit accounts was 2.38% during the three months ended September 30, 2003 as compared to 3.03% for the same period last year. The average rate paid on the CMOs was 2.16% during the three months ended September 30, 2003 compared to 2.67% for the same period last year. The average balance of deposit accounts increased $32.4 million to $923.3 million for the three months ended September 30, 2003 as compared to $890.9 million for the same period last year. The average balance of our CMOs was $37.5 million during the third quarter of 2003, compared to $83.5 million for the same period last year reflecting the decline in the related real estate loans held in trust. FHLB advances averaged $236.5 million in the current quarter, compared to $211.1 million for the same period last year.

     Net interest margin decreased to 5.36% for the three months ended September 30, 2003 as compared to 5.43% for the same period last year primarily due to higher yielding loans within the Bank’s loan portfolio being repaid and replaced by new loan production at lower current

17

market rates. Additionally, the loans held by the REIT are repricing to lower interest rates slightly faster than the related CMOs.

Provision for Loan Losses

     Management periodically assesses the adequacy of the allowance for loan losses by reference to many factors which may be weighted differently at various times depending on prevailing conditions. These factors include, among other elements:

• general portfolio trends relative to asset and portfolio size;

• asset categories;

• credit and geographic concentrations;

• delinquency trends and nonaccrual loan levels;

• historical loss experience; and

• risks associated with changes in economic, social and business conditions.

     Accordingly, the calculation of the adequacy of the allowance for loan losses is not based solely on the level of nonperforming assets. Management believes that the allowance for loan losses as of September 30, 2003 was adequate to absorb the known and inherent risks of loss in the loan portfolio at that date. While management believes the estimates and assumptions used in its determination of the adequacy of the allowance are reasonable, there can be no assurance that such estimates and assumptions will not be proven incorrect in the future, or that the actual amount of future provisions will not exceed the amount of past provisions or that any increased provisions that may be required will not adversely impact our financial condition and results of operations. In addition, the determination of the amount of the Bank’s allowance for loan losses is subject to review by the Bank’s regulators, as part of the routine examination process, which may result in the establishment of additional reserves based upon their judgment of information available to them at the time of their examination.

     The consolidated provision for loan losses totaled $750,000 for the third quarter of 2003, compared to $2.7 million for the same period last year. The current period provision for loan losses was recorded to provide for reserves adequate to absorb known and inherent risks of losses in the loan portfolio. Our assessment of the provision for loan losses includes a valuation of certain nonperforming loans and other loans of concern. The prior year provision included specific reserves related to certain nonperforming loans and other loans of concern. The allowance for loan losses was 2.29% of total loans and real estate loans held in trust at September 30, 2003 as compared to 2.24% at December 31, 2002. During the quarters ended September 30, 2003 and 2002, we had net loan charge-offs of $1.1 million and $1.0 million, respectively. See also – “Financial Condition – Credit Risk”.

Non-Interest Income

     Non-interest income increased to $777,000 for the three months ended September 30, 2003, compared to a net loss of $54,000 for the same period last year. Substantially all of the increase was due to residual income earned in connection with the RAL program.

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Non-Interest Expense

     Non-interest expense totaled $9.6 million for the three months ended September 30, 2003, compared to $6.5 million for the same period last year. The increase was attributable to the acquisition of LHO, additions relating to the Bank’s franchise lending origination staff, the development of Imperial Capital Express (“ICE”) (the Bank’s small balance commercial real estate lending platform), and certain continuing infrastructure and personnel costs incurred in connection with the Bank’s charter conversion. Our efficiency ratio (defined as recurring general and administrative expenses as a percentage of net revenue) was 43.20 percent in the third quarter of 2003 as compared to 34.86 percent for the same period in 2002.

Minority Interest in Income of Subsidiary

     Minority interest in income of subsidiary, consisting of trust income earned by holders of our trust preferred securities, was $1.5 million during the three month period ended September 30, 2003 as compared to $815,000 for the same period last year. On a period-to-period comparison, the increase was primarily due to the issuance of the $55.0 million of additional trust preferred securities during the fourth quarter of 2002.

19

Nine Months Ended September 30, 2003 Compared to Nine Months Ended September 30, 2002

General

     Consolidated net income totaled $23.9 million for the nine months ended September 30, 2003 compared to $14.7 million for the same period last year. Diluted EPS was $3.69 for the nine months ended September 30, 2003, compared to $2.29 for the same period last year, an increase of $1.40 per diluted share. The increase in net income was primarily due to increases in net interest income and non-interest income, partially offset by increases in the provision for loan losses, non-interest expense and minority interest in income of subsidiary. Net interest income improved from prior year primarily as a result of the increase in average balance of loans outstanding, increased interest income from cash and investment securities and a decline in the average cost of funds due to its interest bearing liabilities repricing to lower current market interest rates. These increases were partially offset by a decline in net interest income of the REIT, a decline in the yield on cash and investment securities, and a decline in the yield of the loan portfolio, as higher yielding loans were repaid and replaced by new loan production at lower current market interest rates. The increase in non-interest income was primarily due to the Bank’s RAL program and its strategic relationship with Household.

     The return on average assets was 1.80% for the nine months ended September 30, 2003, compared to 1.44% for the same period last year. The return on average shareholders’ equity was 18.50% for the nine months ended September 30, 2003, compared to 13.54% for the same period last year.

     Total loan production was $525.4 million for the nine months ended September 30, 2003, compared to $374.6 million for the same period last year. During the current nine month period, the Bank originated and/or purchased $439.5 million of commercial real estate loans, $52.0 million of film finance loans and $33.9 million of franchise loans. Loan production for the same period last year consisted of $331.8 million of originated and/or acquired commercial real estate loans, including $36.8 million of loans acquired from Asahi Bank of California and $6.0 million of acquired franchise loans.

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Net Interest Income and Margin

     The following table presents, for the nine months ended September 30, 2003 and 2002, our condensed average balance sheet information, together with interest income and yields earned on average interest-earning assets and interest expense and rates paid on average interest-bearing liabilities. Average balances are computed using daily average balances. Nonaccrual loans are included in loans receivable.

			For the Nine Months Ended September 30,
			2003								2002
			Average			Income/		Yield/			Average			Income/		Yield/
			Balance			Expense		Rate			Balance			Expense		Rate
			(dollars in thousands)
Assets
Cash and investments			$	340,725		$	4,597		1.80	%	$	69,626		$	2,427		4.66	%
Loans receivable:
	Loans			1,291,178			78,877		8.17	%		1,123,084			70,598		8.40	%
	Real estate loans held in trust			104,286			5,036		6.46	%		148,589			7,960		7.16	%
Total loans receivable				1,395,464			83,913		8.04	%		1,271,673			78,558		8.26	%
Total interest-earning assets				1,736,189		$	88,510		6.82	%		1,341,299		$	80,985		8.07	%
Non-interest-earning assets				76,308								54,522
Allowance for loan losses				(33,499	)							(29,299	)
	Total assets		$	1,778,998							$	1,366,522
Liabilities and Shareholders’ Equity
Deposit accounts:
	Money market and passbook accounts		$	165,725		$	1,954		1.58	%	$	149,874		$	2,279		2.03	%
	Time certificates			822,742			16,727		2.72	%		755,317			19,924		3.53	%
		Total deposit accounts		988,467			18,681		2.53	%		905,191			22,203		3.28	%
Collateralized mortgage obligations				51,011			885		2.32	%		93,534			1,852		2.65	%
FHLB advances				190,876			3,855		2.70	%		186,328			4,310		3.09	%
Total interest-bearing liabilities				1,230,354		$	23,421		2.55	%		1,185,053		$	28,365		3.20	%
Non-interest-bearing liabilities				294,084								8,403
Guaranteed preferred beneficial interests in Company’s junior subordinated deferrable interest debentures				81,707								28,153
Shareholders’ equity				172,853								144,913
	Total liabilities and shareholders’ equity		$	1,778,998							$	1,366,522
Net interest spread									4.27	%							4.87	%
Net interest income before provision for loan losses						$	65,089							$	52,620
Net interest margin									5.01	%							5.25	%

21

     The following table sets forth a summary of the changes in interest income and interest expense resulting from changes in average interest-earning asset and interest-bearing liability balances and changes in average interest rates. The change in interest due to both volume and rate has been allocated to change due to volume and rate in proportion to the relationship of the absolute dollar amounts of each.

			For the Nine Months Ended
			September 30, 2003 and 2002
			Increase (Decrease) Due to:
			Rate			Volume			Total
			(In thousands)
Interest and fees earned from:
	Cash and investment securities		$	(1,486	)	$	3,656		$	2,170
	Loans			(3,925	)		12,204			8,279
	Real estate loans held in trust			(779	)		(2,145	)		(2,924	)
		Total increase (decrease) in interest income		(6,190	)		13,715			7,525
Interest paid on:
	Deposit accounts			(5,093	)		1,571			(3,522	)
	Collateralized mortgage obligations			(231	)		(736	)		(967	)
	FHLB advances			(547	)		92			(455	)
		Total increase (decrease) in interest expense		(5,871	)		927			(4,944	)
		Increase (decrease) in net interest income	$	(319	)	$	12,788		$	12,469

     Total interest income increased $7.5 million to $88.5 million in the nine months ended September 30, 2003, as compared to $81.0 million for the same period last year. The net increase in interest income was primarily attributable to the increase in the average volume of the Bank’s loans during the period and the additional interest income earned on the increased liquidity maintained in connection with the RAL program partially offset by a decline in the interest income earned by the REIT.

     The average balance of loans held by the Bank was $1.3 billion and $1.1 billion for the nine months ended September 30, 2003 and 2002, respectively. Loans secured by income producing properties and construction loans were essentially unchanged with an average balance of $1.1 billion during the nine months ended September 30, 2003 and 2002. The average balance of franchise loans was $58.7 million and $60.2 million during the nine months ended September 30, 2003 and 2002, respectively. The average balance of film finance loans was $102.9 million during the nine months ended September 30, 2003. We first began originating film finance loans during the fourth quarter of 2002 when we acquired LHO.

     The average balance of real estate loans held in trust decreased to $104.3 million for the nine months ended September 30, 2003 as compared to $148.6 million for the same period last year. This decrease was due to loan prepayments and principal amortization.

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     The average balance of our cash and investments increased to $340.7 million for the nine months ended September 30, 2003 compared to $69.6 million during the same period last year. The increase in our average cash and investments was attributable to the increased liquidity maintained in connection with the RAL program. The decline in the average yield earned on cash and investments from 4.66% during the nine months ended September 30, 2002 to 1.80% during the same period in 2003 was caused by lower yields earned on short-term and overnight investments as a significant portion of our excess liquidity related to the RAL program was maintained in overnight investments. The decrease in the average yield was further impacted by the declining interest rate environment experienced during the current year.

     The average yield earned on loans decreased 22 basis points to 8.04% for the nine months ended September 30, 2003 compared to 8.26% in the same period last year. The decrease in the yield on loans was primarily due to higher yielding loans being repaid and replaced by new loan production at lower current market interest rates, offset in part by higher yields earned on our participation interests in RAL loans. Our commercial real estate loan portfolio is primarily comprised of adjustable rate mortgages indexed to the six month LIBOR.

     Total interest expense decreased by $5.0 million to $23.4 million for the nine months ended September 30, 2003, compared to $28.4 million for the same period last year. This decrease was primarily attributable to lower interest rates paid on all interest bearing liabilities and lower average balances on CMOs partially offset by higher average balances on deposit accounts and FHLB advances.

     Our average cost of funds decreased to 2.55% during the nine months ended September 30, 2003, compared to 3.20% for the same period last year. This decrease in funding costs was primarily due to the general decline in market interest rates during the current year, which has resulted in a continued decline in our cost of funds. The average rate paid on deposit accounts was 2.53% during the nine months ended September 30, 2003 compared to 3.28% for the same period last year. The average rate paid on the CMOs was 2.32% during the nine months ended September 30, 2003 compared to 2.65% for the same period last year. The average balance of deposit accounts increased $83.3 million to $988.5 million for the nine months ended September 30, 2003, compared to $905.2 million for the same period last year. The average balance of our CMOs was $51.0 million during the nine months ended September 30, 2003, compared to $93.5 million for the same period last year, reflecting the decline in the related real estate loans held in trust. FHLB advances averaged $190.9 million for the nine months ended September 30, 2003, compared to $186.3 million for the same period last year.

     Net interest margin decreased to 5.01% for the nine months ended September 30, 2003 compared to 5.25% for the same period last year. This decrease was primarily due to the significant increase in average interest-earning assets during the period and the 60 basis point decrease in net interest spread. The decrease in the net interest spread was caused by a 125 basis point decrease in the average yield earned on interest-earning assets primarily as a result of lower yields earned on short-term and overnight investments, partially offset by a 65 basis point decrease in cost of funds. A significant portion of our excess liquidity resulting from the RAL program was maintained in overnight investments at rates significantly below rates earned on other interest-earning assets.

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Provision for Loan Losses

     The consolidated provision for loan losses totaled $7.1 million for the nine months ended September 30, 2003, compared to $6.1 million for the same period last year. The current period provision for loan losses was recorded to provide for reserves based on an analysis of the factors referred to previously and the valuation of certain nonperforming loans and other loans of concern. During the nine months ended September 30, 2003 and 2002, we had net loan charge-offs of $6.9 million and $3.2 million, respectively. The increase in charge-offs primarily related to one commercial real estate loan.

Non-Interest Income

     Non-interest income totaled $14.6 million for the nine months ended September 30, 2003, compared to $0.2 million for the same period last year. The increase was primarily attributable to fee income earned in connection with the RAL program consisting of $9.0 million of net premiums on the sale of RAL loans and $4.6 million of processing and administrative fees.

Non-Interest Expense

     Non-interest expense totaled $28.8 million for the nine months ended September 30, 2003, compared to $20.1 million for the same period last year. The increase in non-interest expense was primarily due to the acquisition of LHO, additions relating to the Bank’s franchise lending origination staff, the development of ICE (the Bank’s small balance commercial real estate lending platform), and infrastructure and personnel costs incurred in connection with the Bank’s charter conversion. Our efficiency ratio (defined as recurring general and administrative expenses as a percentage of net revenue) was 35.15 percent for the nine months ended September 30, 2003, compared to 36.16 percent for the same period in 2002.

Minority Interest in Income of Subsidiary

     Minority interest in income of subsidiary was $4.5 million during the nine month period ended September 30, 2003 compared to $2.4 million for the same period last year. The increase was primarily due to the issuance of $55.0 million of additional Trust Preferred securities during the fourth quarter of 2002.

FINANCIAL CONDITION

     Total assets decreased to $1.6 billion at September 30, 2003 as compared to $1.7 billion at December 31, 2002. At September 30, 2003, loans, net totaled $1.3 billion, including approximately $1.2 billion of commercial real estate loans, $80.1 million of franchise loans and $82.5 million of film finance loans. During the nine months ended September 30, 2003, the Bank’s loan portfolio increased $15.8 million and the REIT’s portfolio decreased $36.7 million. The decrease in the REIT’s loan portfolio reflects an increase in loan prepayments experienced during the nine months ended September 30, 2003 as compared to prior periods. Additionally, cash and cash equivalents decreased $75.3 million primarily as a result of reducing excess liquidity that was maintained to fund anticipated loan production at December 31, 2002. Total deposit accounts, which are concentrated in time certificates, declined to $1.0 billion at September 30, 2003 from $1.1 billion at December 31, 2002. FHLB advances decreased $21.0 million to $317.7 million at September 30, 2003, compared to $338.7 million at December 31,

24

2002. Management believes that a significant portion of deposits will remain with us upon maturity based on our historical experience regarding retention of deposits. CMOs decreased $36.5 million to $32.6 million at September 30, 2003 compared to $69.1 million at December 31, 2002 reflecting the decline in real estate loans held in trust. Accounts payable and other liabilities increased $18.0 million primarily as a result of outstanding checks and other liabilities related to the RAL program.

Residual Interest

     In the first quarter of 2002, we formed a limited liability company to issue $86.3 million of asset-backed notes in a securitization of substantially all of our residential loan portfolio. These notes were rated AAA by Standard & Poor’s, Aaa by Moody’s, and are insured by Financial Security Assurance. In the securitization, residential loans were sold to the limited liability company for a cash purchase price and an interest in the loans securitized in the form of the excess spread. The cash purchase price was raised through an offering of asset-backed notes issued by the limited liability company. Note holders are entitled to receive the principal collected on the loans and the stated interest rate on the notes. We are entitled to receive the excess spread. The excess spread generally represents, over the estimated life of the loans, the excess of the weighted average coupon on the loans sold over the sum of the note interest rate less other expenses including a trustee fee and an insurance fee. Valuation of the excess spread includes an estimate of annual future credit losses related to the loans securitized. These estimated cash flows are discounted when computing the value of the residual interest.

     We recognized a gain on the sale of these loans, although cash (representing the excess spread and servicing fees) is received by us over the lives of the loans. Concurrent with recognizing such gain on sale, we recorded the excess spread as a residual interest of $5.6 million which is included in our consolidated balance sheets as “Investment securities available for sale, at fair value.” The value of the residual interest is subject to substantial credit, prepayment and interest rate risk on the sold residential loans.

     In accordance with the provisions of SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, we classified our residual interest as an “available-for-sale” asset and, as such, they are recorded at fair value with the resultant changes in fair value recorded as accumulated unrealized gain or loss in a separate component of shareholders equity entitled “accumulated other comprehensive income or loss”, until realized. We estimate fair value on a monthly basis based on a discounted cash flow analysis. These cash flows are estimated over the lives of the receivables using prepayment, default, and interest rate assumptions that we believe market participants would use for similar financial instruments.

     During the nine months ended September 30, 2003, we recognized an other than temporary impairment of $750,000 in connection with its residual interest. Impairments that are deemed to be other than temporary are charged to income, as other expense. In evaluating impairments as other than temporary we consider credit risk, as well as the magnitude and trend of default rates and prepayment speeds of the underlying residential loans.

25

     At September 30, 2003 and December 31, 2002, key economic assumptions and the sensitivity of the current fair value of the residual interest based on projected cash flows to immediate adverse changes in those assumptions is as follows:

	September 30,			December 31,
	2003			2002
Dollars in thousands
Fair value of retained interest	$	5,368		$	5,619
Weighted average life (in years) – securities		0.90			1.49
Weighted average life (in years) – residual interest		4.39			4.70
Weighted average annual prepayment speed		35.0	%		35.0	%
Impact of 10% adverse change	$	(74	)	$	(23	)
Impact of 25% adverse change	$	(193	)	$	(59	)
Weighted average annual discount rate		15.0	%		15.0	%
Impact of 10% adverse change	$	(306	)	$	(167	)
Impact of 25% adverse change	$	(737	)	$	(404	)
Weighted average lifetime credit losses		3.3	%		3.3	%
Impact of 10% adverse change	$	(163	)	$	(285	)
Impact of 25% adverse change	$	(407	)	$	(678	)

     These sensitivities are hypothetical and should be used with caution. As the figures indicate, changes in the fair value of our residual are based on a variation in assumptions and generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, in the above table, the effect of a variation in a particular assumption on the fair value of the residual interest is calculated without changing any other assumption; in reality, changes in one factor may result in changes in another (for example, increases in market interest rates may result in lower prepayments but increased credit losses), which might magnify or counteract the sensitivities, and depending on the severity of such changes, the results of operations may be materially affected.

26

CREDIT RISK

Nonperforming Assets, Other Loans of Concern and Allowance for Loan Losses

     The following table sets forth our nonperforming assets by category and troubled debt restructurings as of the dates indicated.

			September 30,			December 31,
			2003			2002
			(dollars in thousands)
Nonaccrual loans:
	Real estate		$	3,756		$	3,913
	Franchise			823			1,986
	Film finance			2,357			—
		Total nonaccrual loans		6,936			5,899
Other real estate owned, net				14,767			12,593
		Total nonperforming assets		21,703			18,492
		Performing troubled debt restructurings		4,732			7,858
			$	26,435		$	26,350
Nonaccrual loans to total loans and real estate loans held in trust				0.48	%		0.36	%
Allowance for loan losses to nonaccrual loans				478.26	%		555.61	%
Nonperforming assets to total assets				1.33	%		1.08	%

     At September 30, 2003, other real estate owned consisted of four income producing properties totaling $14.8 million. Management periodically evaluates the estimated fair value of its other real estate owned properties. In connection with this process, we will be reviewing the valuation of certain properties during the fourth quarter of 2003. Any changes in fair value will be adjusted upon completion of these assessments.

     As of September 30, 2003 and December 31, 2002, other loans of concern totaled $27.5 million and $35.5 million, respectively. Other loans of concern consist of loans with respect to which known information concerning possible credit problems with the borrowers or the cash flows of the properties securing the respective loans has caused management to be concerned about the ability of the borrowers to comply with present loan repayment terms, which may result in the future inclusion of such loans in the nonaccrual category. The decrease in other loans of concern for the nine months ended September 30, 2003 was primarily due to $5.6 million of loans being paid-off, and $15.4 million of loans migrating to nonaccrual status, partially offset by $13.1 million of new other loans of concern.

27

     The following table provides certain information with respect to our allowance for loan losses, including charge-offs, recoveries and selected ratios for the periods indicated.

		For the Nine			For the Year
		Months Ended			Ended
		September 30,			December 31,
		2003			2002
		(dollars in thousands)
Balance at beginning of period		$	33,009		$	26,650
Provision for loan losses			7,100			9,030
Additions related to acquisitions			—			2,048
Charge-offs			(6,948	)		(4,730	)
Recoveries			11			11
Net charge-offs			(6,937	)		(4,719	)
	Balance at end of period	$	33,172		$	33,009
Allowance for loan losses as a percentage of loans and loans held in trust, net			2.29	%		2.24	%

Liquidity

     Liquidity refers to our ability to maintain cash flow adequate to fund operations and meet obligations and other commitments on a timely basis, including the payment of maturing deposits and the origination or purchase of new loans. We maintain a cash and investment securities portfolio designed to satisfy operating liquidity requirements while preserving capital and maximizing yield. As of September 30, 2003, we held $85.6 million of cash and cash equivalents (consisting primarily of short-term investments with original maturities of 90 days or less) and $46.0 million of investment securities classified as available for sale.

     Short-term fixed income investments classified as cash equivalents consisted of interest-bearing deposits at financial institutions, government money market funds and short-term government agency securities, while investment securities available for sale consisted primarily of fixed income instruments, which were rated “AAA”, or equivalent by nationally recognized rating agencies. In addition, our liquidity position is supported by a credit facility with the Federal Home Loan Bank of San Francisco. As of September 30, 2003, we had remaining available borrowing capacity under this credit facility of $152.6 million, net of the $8.0 million of additional Federal Home Loan Bank Stock that we would be required to purchase to support those additional borrowings, and $30.0 million of unused federal funds credit facilities under established lines of credit with two banks.

28

Capital Resources

     As of September 30, 2003, the Bank’s Leverage (Core), Tier I and Total Risk-Based capital ratios were 15.17%, 15.03% and 16.30%, respectively. These ratios were 13.02%, 13.18% and 14.44%, respectively, as of December 31, 2002. The minimum regulatory requirement for Leverage (Core), Tier I and Total Risk-Based capital are 4.0%, 4.0% and 8.0%, respectively. As of September 30, 2003, the most recent notification from its primary regulator categorized the Bank’s capital position as “well capitalized” under the regulatory framework for prompt corrective actions.

     At September 30, 2003, shareholders’ equity totaled $179.5 million, or 11.03 percent of total assets. Our book value per share of common stock was $31.10 as of September 30, 2003, as compared to $27.11 as of December 31, 2002, and $26.14 as of September 30, 2002.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

     Our estimated sensitivity to interest rate risk, as measured by the estimated interest earnings sensitivity profile and the interest sensitivity gap analysis, has not materially changed from the information disclosed in our annual report on Form 10-K for the year ended December 31, 2002.

Item 4. Controls and Procedures

     (a)  Evaluation of Disclosure Controls and Procedures: An evaluation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Act”)) was carried out as of September 30, 2003 under the supervision and with the participation of the Company’s Chief Executive Officer, Chief Financial Officer and several other members of the Company’s senior management. The Company’s Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2003, the Company’s disclosure controls and procedures are effective in ensuring that the information required to be disclosed by the Company in the reports it files or submits under the Act is (i) accumulated and communicated to the Company’s management (including the Chief Executive Officer and Chief Financial Officer) in a timely manner, and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

     (b)  Changes in Internal Control over Financial Reporting: During the quarter ended September 30, 2003, no change occurred in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

29

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings
	We are party to certain legal proceedings incidental to our business. Management believes that the outcome of such proceedings, in the aggregate, will not have a material effect on our financial condition or results of operations.
Item 2.	Changes in Securities
	Not applicable.
Item 3.	Defaults Upon Senior Securities
	Not applicable.
Item 4.	Submission of Matters to a Vote of Security Holders
	(a)       On July 30, 2003, the Company held its Annual Meeting of Shareholders.
	(b)       Shareholders voted on the following matters:

(i) The election of Norval L. Bruce as director for a term to expire in 2006:

Votes	For	Against		Withheld
	5,088,232		0	204,546

(ii) The election of Jeffrey L. Lipscomb as director for a term to expire in 2006:

Votes	For	Against		Withheld
	5,088,232		0	204,546

(iii) The election of Preston Martin as director for a term to expire in 2006:

Votes	For	Against		Withheld
	5,118,307		0	174,471

(iv) The ratification of the appointment of Ernst & Young LLP as independent auditors of the Company for the fiscal year ending December 31, 2003:

Votes	For	Against	Withheld
	5,174,042	118,736	0

Item 5.	Other Information
	None.
Item 6.	Exhibits and Reports on Form 8-K
	(a)   See exhibit index
	(b)   During the third quarter of 2003, we filed or furnished the following reports on Form 8-K

Item #		Item Description	Filing Date
	9	Materials presented at the Company’s Annual Meeting of Stockholders	July 30, 2003
	7 & 12	Second Quarter Earnings Press Release	August 4, 2003

30

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	ITLA CAPITAL CORPORATION
Date: November 14, 2003	/s/ George W. Haligowski
	George W. Haligowski
	Chairman of the Board, President and
	Chief Executive Officer
Date: November 14, 2003	/s/ Timothy M. Doyle
	Timothy M. Doyle
	Senior Managing Director and
	Chief Financial Officer

31

EXHIBIT INDEX

			Reference to
			Prior Filling
			or Exhibit
			Number
Regulation S-K			Attached
Exhibit Number		Document	Hereto
	3.1	Certificate of Incorporation	**
	3.2	Bylaws, as amended	******
	4	Instruments Defining the Rights of Security Holders, Including Indentures	None
	10.1	1995 Stock Option Plan For Nonemployee Directors	*
	10.2	1995 Employee Stock Incentive Plan	*******
	10.3a	Nonqualified (Non-Employer Securities) Deferred Compensation Plan	10.3a
	10.3b	Nonqualified (Employer Securities Only) Deferred Compensation Plan	10.3b
	10.4	Supplemental Salary Savings Plan	*
	10.5	Data Processing Agreement	*
	10.6	Employment Agreement with George W. Haligowski	*
	10.7	Change of Control Agreements	***
	10.8	Recognition and Retention Plan	**
	10.9	Voluntary Retainer Stock and Deferred Compensation Plan for Outside Directors	**
	10.10	Supplemental Executive Retirement Plan	10.10
	10.11	ITLA Capital Corporation Rabbi Trust Agreement	***
	10.12	Salary Continuation Plan	****
	10.13	Licensing Agreement, dated October 30, 2002, between Imperial Capital Bank and Beneficial Franchise Company, Inc.	********
	10.14	Amended and Restated Sale and Servicing Agreement for RALs and RACs, dated as of January 3, 2003, between Imperial Capital Bank, Household Tax Masters Inc., and Household Tax Masters Acquisition Corporation	********
	11	Statement Regarding Computation of Per Share Earnings	None
	13	Quarterly Report to Security Holders	None
	15	Letter Regarding Unaudited Interim Financial Information	None
	18	Letter Regarding Change in Accounting Principles	None
	19	Report furnished to Security Holders	None
	22	Published Report Regarding Matters Submitted to Vote of Security Holders	None
	23	Consent of Experts	None
	24	Power of Attorney	None
	31.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer	31.1
	31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer	31.2
	32	Section 1350 Certifications of Chief Executive Officer and Chief Financial Officer	32

*	Filed as an exhibit to Imperial’s Registration Statement on Form S-1 (File No. 33-96518) filed with the Commission on September 1, 1995, pursuant to Section 5 of the Securities Act of 1933.
* *	Filed as an exhibit to the Company’s Registration Statement on Form S-4 (File No. 333-03551) filed with the Commission on May 10, 1996, pursuant to Section 5 of the Securities Act of 1933.
* * *	Filed as an exhibit to the Company’s Form 10-K for the year ended December 31, 1999 (File No. 0-26960).
* * * *	Filed as an exhibit to the Company’s Registrant’s Form 10-K for the year ended December 31, 2000 (File No. 0-26960).
* * * * *	Filed as an exhibit to the Company’s Registrant’s Form 10-K for the year ended December 31, 2001 (File No. 0-26960).
* * * * * *	Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2000 (File No. 0-26960).
* * * * * * *	Filed as an appendix to the Company’s definitive proxy materials filed on September 29, 2001.
* * * * * * * *	Filed as an exhibit to the Current Report on Form 8-K filed by the Company on February 5, 2003 (File No. 0-26960). Portions of this exhibit have been omitted pursuant to a request for confidential treatment granted by the Commission.

32 EX-10.3(A) 3 v94420exv10w3xay.txt EXHIBIT 10.3A EXHIBIT 10.3a ITLA CAPITAL CORPORATION CONSOLIDATED NONQUALIFIED (NON-EMPLOYER SECURITIES) DEFERRED COMPENSATION PLAN (Effective January 1, 1997) ITLA Capital Corporation, a Delaware business corporation has adopted the ITLA Capital Corporation Consolidated Nonqualified (Non-Employer Securities) Deferred Compensation Plan (the "Plan") effective as of January 1, 1997, as amended as of January 1, 2003. The Plan is an unfunded plan, hereby adopted, established and maintained by ITLA Capital Corporation (the "Company") for the purpose of providing benefits for certain individuals as provided herein. ARTICLE I ELIGIBILITY TO PARTICIPATE 1.1 Eligibility to Participate. For purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), the Plan is limited to a select group of management or highly compensated employees, and shall at all times remain unfunded. 1.2 Designated Participants. An executive or senior management employee of the Company (which shall include for employment and compensation purposes all other related employers of the Company under Section 414 of the Internal Revenue Code of 1986, as amended (the "Code")) is eligible to become a Participant in the Plan provided such employee is designated as a Participant below or such employee is later designated by the Compensation Committee of the Board of Directors of the Company and such designation is attached as a written amendment to the Plan signed by a duly authorized officer of the Company. Under no circumstance shall an employee below the level of First Vice President be eligible to participate in the Plan. The following individuals shall constitute the eligible Participants in the Plan: George W. Haligowski (effective January 1997) Norval L. Bruce (effective January 1997) Timothy Doyle (effective January 1997) Steven Romelt (effective January 1997) Don Nickbarg (effective May 2000) William Schack (effective January 2002) Scott Wallace (effective January 2002) Lewis Horwitz (effective October 2002) Arthur Stribley (effective October 2002) William Callam (effective January 2003) Once an employee becomes a Participant, he or she shall remain a Participant until all benefits to which he or she (or to the individual the Participant designates as his or her "Designated Beneficiary" in such Participant's designation of beneficiary form) is entitled to under the Plan have been paid. To the extent George Haligowski's Employment Agreement dated July 23, 1997 differs from the terms of the Plan, George Haligowski's Employment Agreement shall be the controlling document. 1.3 Written Deferral Election. The individuals described in Section 1.2 shall be eligible to participate in the Plan and may do so by filing a written deferral election with the Company in a form approved by the Company. In the first year in which a Participant becomes eligible to participate in the Plan, the newly eligible Participant may make an election to defer compensation for services to be performed subsequent to the election within thirty (30) days after the date the person becomes eligible. For all other years, elections to defer payment of compensation must be made before the beginning of the calendar year for which the compensation is payable. 1.4 Deferred Compensation Account. For each individual electing to participate in the Plan, the Company shall establish and maintain a Deferred Compensation Account. The amount of each Participant's deferred compensation shall be credited to his or her Deferred Compensation Account no later than the end of the month following the month in which the compensation would otherwise have been paid to the Participant. The Participant's Deferred Compensation Account shall also be credited and debited for deemed earnings and losses attributable to the investment (or deemed investment) of, or interest credits on, such Deferred Compensation Account under Section 2.2 or 3.1 of the Plan, whichever is applicable. The Deferred Compensation Account shall also be reduced for any distributions and withdrawals made under the Plan to a Participant or his or her Designated Beneficiary including tax and other withholdings. In general, the Deferred Compensation Accounts will be valued at the end of each calendar quarter (each a "Valuation Date"). Any Participant to whom an amount is credited under the Plan shall be deemed a general, unsecured creditor of the Company. 1.5 Amount of Deferrals. Each Participant may defer all or any portion of the compensation otherwise payable to him or her by the Company for the calendar year beginning after the date of said election (or for the remaining portion of the first year of participation) as specified in said written election to the Company, and the amounts so deferred by a Participant shall be paid only as provided in the Plan. In no event shall the amount of compensation deferred by a Participant under the Plan and the ITLA Consolidated Non Qualified (Employer Securities Only) Deferred Compensation Plan (the "Employer Securities Deferred Compensation Plan") exceed the amount needed to satisfy employment tax and other required payroll withholdings. A Participant may change the amount of, or suspend, future deferrals with respect to compensation otherwise payable to him or her for calendar years beginning after the date of change or suspension as specified by written notice to the Company. If a Participant elects to suspend deferrals, the Participant may make a new election to again become a Participant in the Plan. Any new election to defer payment of compensation must be made before the beginning of the next calendar year for which the compensation is payable. The election to defer shall be irrevocable as to the deferred compensation for the calendar year for which the election is made. In no event may a Participant suspend or change the amount of deferrals for a calendar year once the calendar year has commenced. ARTICLE II DEFERRED COMPENSATION 2 2.1 Contributions to and Withdrawals from Trust by the Company. Within thirty (30) days after each calendar month, the Company shall transfer into the ITLA Capital Corporation Rabbi Trust (the "Trust") an amount in cash equal to the total amount of all Participant deferrals under the Plan for the preceding calendar month. In addition, as soon as practicable after each Valuation Date, the Company shall contribute cash to the Trust equal to the amount by which the deemed earnings or interest credits, whichever is applicable, on the Deferred Compensation Accounts of all Participants for the applicable calendar quarter exceeded the actual earnings of the Trust for such period, and appropriate adjustment will be made to each Participant's Deferred Compensation Account for such period. To the extent that the actual earnings of the Trust exceeded the deemed earnings or interest credits, whichever is applicable, on the Deferred Compensation Accounts of all Participants for such calendar quarter, the excess earnings will be promptly paid by the Trust to the Company, and appropriate adjustment will be made to each Participant's Deferred Compensation Account for such period. The adjustments referred to in the preceding two sentences shall likewise be made with respect to a Participant's Deferred Compensation Account as of the day next preceding (a) a Change of Control, (b) the effective date of a termination of the Plan or (c) the final installment payment of such Participant's Deferred Compensation Account, whichever is applicable. The Trust shall likewise pay funds from a Participant's Deferred Compensation Account to the Company to satisfy any tax and other withholding obligations. 2.2 Deemed Investments. All amounts credited under the terms of the Plan to a Deferred Compensation Account maintained in the name of a Participant by the Company shall be invested (or deemed invested) in various mutual funds selected by the Company while such Participant is employed by the Company. Each Participant may select the deemed investment for his/her Deferred Compensation Account from the investment options selected by the Company and may change such deemed investments at such times and in accordance with the rules adopted by the Company. In the absence of any investment directions, Deferred Compensation Accounts will be deemed invested in the in-house sweep funds of the trustee of the Trust. Notwithstanding that the earnings or losses on deemed investments used to determine the value of Participants' Deferred Compensation Accounts are based on the actual performance of certain specified investments, neither the Company nor the Trust is obligated to invest deferrals in any particular investments. However, the Company and the Trust are required to make the adjustments set forth in Section 2.1 based upon the performance of deemed investments vs. actual investments. If any investments are made with deferrals, Participants shall have no right or interest in or with respect to such investments. Specifically, Participants shall have no voting rights with respect to any stock or securities held by the Plan. None of the Deferred Compensation Accounts in the Plan shall be actually (or deemed) invested in ITLA Capital Corporation stock. To the extent a Participant's Deferred Compensation Account, or any portion thereof, is actually invested in ITLA Capital Corporation stock as of the date of the execution of the Plan, as amended on January 1, 2003, the amount of the Participant's Deferred Compensation Account represented thereby (including the shares of such stock) shall be transferred to the Deferred Compensation Account of such Participant in the Employer Securities Deferred Compensation Plan. In the case of a deemed investment in ITLA Capital Corporation stock, such investment will be changed as soon as practicable, or alternatively, at the written election of the Participant, the amount represented thereby shall be transferred to the Participant's Deferred Compensation Account in 3 the Employer Securities Deferred Compensation Plan and actually invested in ITLA Capital Corporation stock. 4 ARTICLE III DISTRIBUTION 3.1 Distribution of Deferred Compensation Accounts. On the first day of the month next following the date on which a Participant's employment with the Company and all other related employers of the Company (as determined under Section 414 of the Code) terminates for any reason including death, distribution of the amount credited to the Participant's Deferred Compensation Account in accordance with the Plan shall commence in accordance with one of the alternatives set forth below as selected by the Participant. A Participant's initial selection of the method of distribution shall be made in writing at the time the Participant first elects to defer compensation under the Plan for any given calendar year. Any such selection may be subsequently changed by a Participant by delivering a new written election to the Company (such new written election shall automatically revoke any prior written election). However, the most recent written election received by the Company prior to the thirteenth (13th) month before the Participant's termination of employment with the Company shall be controlling and any written election received within thirteen (13) months prior to the Participant's termination of employment with the Company shall be disregarded. The alternative forms of distribution shall be: a) a single lump sum payment equal to the Participant's total Deferred Compensation Account at termination of employment; b) five annual installments with the first installment (1/5 of the Participant's Deferred Compensation Account) being distributed on the first day of the month next following the Participant's termination of employment and subsequent annual installments being made on each annual anniversary of the first distribution date (1/4 of the Participant's Deferred Compensation Account on the second distribution date); or c) ten annual installments with the first installment (1/10 of the Participant's Deferred Compensation Account) being distributed on the first day of the month next following the Participant's termination of employment and subsequent annual installments being made on each annual anniversary of the first distribution date (1/9 of the Participant's Deferred Compensation Account on the second distribution date). The amount of each such annual installment will be calculated based upon the amortization of the value of the Participant's Deferred Compensation Account balance as the date of his or her termination of employment at a credited interest rate equal to 125% of the Imperial Capital Bank's (or its successor in interest) cost of funds. Interest credited to a Participant's Deferred Compensation Account as of the Valuation Date preceding the date of the next distribution shall be added to the Participant's Deferred Compensation Account and distributed as a part of the next installment. The final installment will be the balance of the Participant's Deferred Compensation Account and interest credited to the Account as of the day next preceding such final distribution. 5 Except as set forth above with respect to interest crediting, a Participant's Deferred Compensation Account shall not be adjusted for any deemed earnings or losses after the date of the Participant's termination of employment. If the Participant fails to select a distribution method in writing, distribution shall be made in a single lump sum payment. The Compensation Committee of the Board of Directors of the Company shall determine whether the distribution is made in cash or in-kind. Any distribution of securities from the Plan shall comply with all applicable federal and state securities laws. All distributions under the Plan shall be less applicable tax and other required or authorized withholdings. Notwithstanding the distribution election made by a Participant and notwithstanding that distributions have commenced in installments, the distribution of the Participant's total remaining Deferred Compensation Account shall be made in a single lump sum upon a Change of Control or termination of the Plan. 3.2 Participant's Death. If a Participant should die before distribution of the full amount of the Deferred Compensation Account described in the Plan has been made to the Participant, any remaining amounts shall be distributed to the Participant's Designated Beneficiary by the method designated by the Participant in his or her most recent written election delivered to the Company at least thirteen (13) months prior to his or her termination of employment with the Company. Any written election received by the Company within thirteen (13) months of the Participant's termination of employment with the Company shall be disregarded. If a Participant has no Designated Beneficiary at the time of death, then, notwithstanding any provision herein to the contrary, such amounts shall be distributed to such Participant's estate in a single lump sum distribution as soon as administratively feasible following such Participant's death. 3.3 Advance Distribution for Financial Hardship. In the event a Participant incurs an Unforeseeable Financial Emergency, such Participant may make a written request to the Company for a hardship withdrawal from his or her Deferred Compensation Account established under the Plan, provided that the entire amount requested by the Participant is not reasonably available from other resources. The amount of the withdrawal will be net of applicable tax and other required or authorized withholdings. An "Unforeseeable Financial Emergency" shall mean an unforeseeable, severe financial hardship to such Participant resulting from a sudden and unexpected illness or accident of the Participant or a family member of the Participant, loss of property of the Participant due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant. Withdrawals of amounts because of an unforeseeable emergency are only permitted to the extent reasonably needed to satisfy the emergency need. This Section shall be interpreted in a manner consistent with Section 1 ..457-2(h)(4) and 1 .457-2(h)(5) of the Treasury Regulations. The Compensation Committee of the Board of Directors of the Company shall determine in its sole discretion whether an advance withdrawal shall be permitted due to an Unforeseeable Financial Emergency. The Participant's Deferred Compensation Account shall be reduced by the amount of any advance distribution for hardship including withholdings. 6 3.4 Change of Control. Upon a Change of Control of the Company, as defined in Section 6.7 of the Plan, the Deferred Compensation Accounts of all Participants shall be distributed in a single lump sum payment as soon as practicable to the Participants or to the Designated Beneficiaries of any deceased Participants. 3.5 Distribution for Tax Purposes. Anything herein to the contrary notwithstanding, if, at any time, the Compensation Committee of the Board of Directors of the Company determines that an amount in a Participant's Deferred Compensation Account is includable in the gross income of the Participant and subject to withholding tax, the Compensation Committee shall permit a lump sum distribution in cash from the Participant's Deferred Compensation Account equal to (a) the amount of withholding tax applicable to the phantom gross income deemed received by the Participant from his or her Deferred Compensation Account for income and/or employment tax purposes plus (b) the withholding tax applicable to the amounts under subpart(a) and this subpart (b) constituting gross income to the Participant for income and/or employment tax purposes. The cash distribution shall be made from the Trust to the Company to satisfy the withholding tax obligation and the Participant's Deferred Compensation Account shall be reduced by the amounts so withheld. 3.6 Limitation on Distribution to Covered Employees. Notwithstanding any other provision of the Plan, in the event that the Participant is a "covered employee" as defined in Section 162(m)(3) of the Code, or would be a covered employee if the Participant's Deferred Compensation Account were distributed in accordance with the other provisions of Article III, the maximum amount which may be distributed from the Participant's Deferred Compensation Account in any Plan Year shall not exceed one million ($1,000,000) less the amount of compensation paid by the Company to the Participant in such Plan Year which is not "performance-based" (as defined in Code Section 162(m)(4)(C)). The amount of compensation which is not "performance-based" shall be reasonably determined by the Company at the time of the proposed distribution. Any amount which is not distributed to the Participant in a Plan Year as a result of the limitation set forth in this Section 3.6 shall be distributed to the Participant in the next Plan Year, subject to compliance with the foregoing limitations set forth in this Section 3.6. The provisions of this Section 3.6 shall not apply if the Compensation Committee of the Board of Directors of the Company, upon consultation with legal counsel, determines that the restrictions of Code Section 162(m) do not apply to the limit the deductibility of payments made under the Plan (or otherwise by the Company) to the Participant. ARTICLE IV AMENDMENT AND TERMINATION OF PLAN 4.1 Amendment or Termination. The Company intends the Plan to remain in existence until all Participants in the Plan have received all of their benefits payable under the Plan. The Company, however, reserves the right to amend or terminate the Plan when, in the sole opinion of the Company, such amendment or termination is advisable. Any such amendment or termination shall be made pursuant to a resolution of the Compensation Committee of the Board of Directors of the Company. No amendment or termination of the Plan shall reduce the amount credited to the Participant's Deferred Compensation Account below the balance 7 immediately prior to the effective date of the resolution amending or terminating the Plan or delay the distribution date for the Participant's Deferred Compensation Account. 4.2 Distribution on Termination. Upon termination of the Plan, the Deferred Compensation Accounts of all Participants shall be distributed in a single lump sum payment as soon as practicable following the effective date of the Plan termination. ARTICLE V CLAIMS PROCEDURE 5.1 Claims Procedure. An initial claim for benefits under the Plan must be made by the Participant or his or her Designated Beneficiary to the Claims Reviewer which shall be the Compensation Committee of the Board of Directors of the Company (unless another person or organizational unit is designated by the Company as Claims Reviewer), in accordance with the terms of this Claims Procedure. Not later than 90 days after receipt of such a claim, the Claims Reviewer will render a written decision on the claim to the claimant, unless special circumstances require the extension of such 90-day period. If such extension is necessary, the Claims Reviewer shall provide the Participant or his or her Designated Beneficiary with written notification of such extension before the expiration of the initial 90-day period. Such notice shall specify the reason or reasons for such extension and the date by which the final decision can be expected. In no event shall such extension exceed a period of 90 days from the end of the initial 90-day period. In the event the Claims Reviewer denies the claim of a Participant or his or her Designated Beneficiary in whole or in part, the Claims Reviewer's written notification shall specify, in a manner calculated to be understood by the claimant, the reason for the denial; a reference to the Plan or other document or form that is the basis for the denial; a description of any additional material or information necessary for the claimant to perfect the claim; an explanation as to why such information or material is necessary; and an explanation of the applicable claims procedure. Should the claim be denied in whole or in part and should the claimant be dissatisfied with the Claim's Reviewer's disposition of the claimant's claim, the claimant may have a full and fair review of the claim by the Company upon written request therefor submitted by the claimant or the claimant's duly authorized representative and received by the Company within 60 days after the claimant receives written notification that the claimant's claim has been denied. In connection with such review, the claimant or the claimant's duly authorized representative shall be entitled to review pertinent documents and submit the claimant's views as to the issues in writing. The Company shall act to deny or accept the claim within 60 days after receipt of the claimant's written request for review unless special circumstances require the extension of such 60-day period. If such extension is necessary, the Company shall provide the claimant with written notification of such extension before the expiration of such initial 60-day period. In all events, the Company shall act to deny or accept the claim within 120 days of the receipt of the claimant's written request for review. The action of the Company shall be in the form of a written notice to the claimant and its contents shall include all of the requirements for action on the original claim. In no event may a claimant commence legal action for benefits the claimant believes are due the claimant until the claimant has exhausted all of the remedies and procedures afforded the claimant by this Article V. 8 ARTICLE VI ADMINISTRATION 6.1 Unsecured Claims. The right of a Participant or a Participant's Designated Beneficiary to receive a distribution hereunder shall be an unsecured claim against the general assets of the Company, and neither a Participant nor his or her Designated Beneficiary shall have any rights in or against any amount credited to any Deferred Compensation Account under the Plan or any other assets of the Company. The Plan at all times shall be considered entirely unfunded both for tax purposes and for purposes of Title I of ERISA, as amended. Any funds invested hereunder shall continue for all purposes to be part of the general assets of the Company and available to its general creditors in the event of bankruptcy or insolvency. Deferred Compensation Accounts under the Plan and any benefits which may be payable pursuant to the Plan are not subject in any manner to anticipation, sale, alienation, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors of the Participant or a Participant's Designated Beneficiary. The Plan constitutes a mere unsecured promise by the Company to make benefit payments in the future. No interest or right to receive a benefit may be taken, either voluntarily or involuntarily, for the satisfaction of the debts of, or other obligations or claims against, such person or entity, including claims for alimony, support, separate maintenance and claims in bankruptcy proceedings. 6.2 Plan Administration. The Plan shall be administered by the Compensation Committee of the Board of Directors of the Company, which shall have the authority, duty and power to interpret and construe the provisions of the Plan as the Compensation Committee deems appropriate including the authority to determine eligibility for benefits under the Plan. The Compensation Committee shall have the duty and responsibility of maintaining records, making the requisite calculations and disbursing the payments hereunder. The interpretations, determinations, regulations and calculations of the Compensation Committee shall be final and binding on all persons and parties concerned. The Compensation Committee may delegate any of its duties of Plan Administration to such employees or other persons as it deems appropriate. 6.3 Expenses. Expenses of administration shall be paid by the Company. The Compensation Committee of the Board of Directors of the Company shall be entitled to rely on all tables, valuations, certificates, opinions, data and reports furnished by any actuary, accountant, controller, counsel or other person employed or retained by the Company with respect to the Plan. 6.4 Statements. The Compensation Committee of the Board of Directors of the Company shall furnish individual annual or more frequent statements to each Participant, or each Designated Beneficiary currently receiving benefits, in such form as determined by the Compensation Committee or as required by law. The Compensation Committee may delegate the duty to provide such statements to the trustee of the Trust. 6.5 No Enlargement of Rights. The sole rights of a Participant or Designated Beneficiary under the Plan shall be to have the Plan administered according to its provisions, to receive whatever benefits he or she may be entitled to hereunder, and nothing in the Plan shall be 9 interpreted as a guaranty that any assets or funds in any trust which may be established in connection with the Plan or assets of the Company will be sufficient to pay any benefits hereunder. Further, the adoption and maintenance of the Plan shall not be construed as creating any contract of employment between the Company and any Participant. The Plan shall not affect the right of the Company to deal with any Participants in employment respects, including their hiring, discharge, compensation, and conditions of employment. 6.6 Rules and Procedures. The Company may from time to time establish rules and procedures which it determines to be necessary for the proper administration of the Plan and the benefits payable to an individual in the event that individual is declared incompetent and a conservator or other person legally charged with that individual's care is appointed. Except as otherwise provided herein, when the Company determines that such individual is unable to manage his or her financial affairs, the Company may pay such individual's benefits to such conservator, person legally charged with such individual's care, or institutions contributing toward or providing for the care and maintenance of such individual. Any such payment shall constitute a complete discharge of any liability of the Company and the Plan to such individual. 6.7 Change of Control. Notwithstanding any provision to the contrary, in the event of a Change of Control, as defined herein, Participants shall receive their Deferred Compensation Accounts in a single lump sum payment as soon as administratively feasible following the date of the Change of Control. The term "Change of Control" means the occurrence of any of the following events with respect to the Company: (1) any person (as the term is used in section 13(d) and 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act") is or becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly of securities of the Company representing 33.33% or more of the Company's outstanding voting securities; (2) individuals who are members of the Board of Directors of the Company on the date hereof (the "Incumbent Board") cease for any reason to constitute at least a majority thereof, provided that any person becoming a director subsequent to the date hereof whose election was approved by a vote of at least two thirds of the directors comprising the Incumbent Board, or whose nomination for election by the Company's stockholders was approved by the nominating committee serving under an Incumbent Board, shall be considered a member of the Incumbent Board; (3) a reorganization, merger, consolidation, sale of all or substantially all of the assets of the Company or a similar transaction in which the Company is not the resulting entity (unless the continuing ownership requirements clause (4) below are met with respect to the resulting entity); or (4) a merger or consolidation of the Company with any other corporation other than a merger or consolidation in which the voting securities of the Company outstanding immediately prior thereto represent at least 66.67% of the total voting power represented by the voting securities of the Company or the surviving entity outstanding immediately after such merger or consolidation. The term "Change of Control" shall not include: (1) an acquisition of securities by an employee benefit plan of the Company; or (2) any of the above mentioned events or occurrences which require but do not receive the requisite government or regulatory approval to bring the event or occurrence to fruition. 6.8 Information. Each Participant shall keep the Company informed of his or her current address and the current address of his or her Designated Beneficiary. The Company shall not be obligated to search for any person. If such person is not located within three (3) years after 10 the date on which payment of the Participant's benefits payable under the Plan may first be made, payment may be made as though the Participant or his or her Designated Beneficiary had died at the end of such three-year period. 6.9 Loss. Notwithstanding any provision herein to the contrary, neither the Company nor any individual acting as an employee or agent of the Company including the trustee of the Trust shall be liable to any Participant, any Participant's Designated Beneficiary, or any other person for any claim, loss, liability or expense incurred in connection with the Plan, unless attributable to fraud or willful misconduct on the part of the Company or any such employee or agent of the Company. 6.10 Indemnification. The Company shall indemnify and hold harmless the members of the Board of Directors, the trustee of the Trust and any other persons to whom any responsibility with respect to the Plan is allocated or delegated, from and against any and all liabilities, costs and expenses, including attorneys' fees, incurred by such persons as a result of any act, or omission to act, in connection with the performance of their duties, responsibilities and obligations under the Plan and under ERISA, other than such liabilities, costs and expenses as may result from the bad faith, willful misconduct or criminal acts of such persons or to the extent such indemnification is specifically prohibited by ERISA. The Company shall have the obligation to conduct the defense of such persons in any proceeding to which this Section applies. If any Board member or any person covered by this indemnification clause determines that the defense provided by the Company is inadequate, that member or person shall be entitled to retain separate legal counsel for his or her defense and the Company shall be obligated to pay for all reasonable legal fees and other court costs incurred in the course of such defense unless a court of competent jurisdiction finds such person has acted in bad faith or engaged in willful misconduct or criminal acts. 6.11 Trust Matters. The Company's obligations under the Plan with respect to Deferred Compensation Accounts may be satisfied with Trust assets distributed pursuant to the terms of the Plan and any such distribution shall reduce the Company's corresponding obligation under the Plan with respect thereto. The provisions of the Plan shall govern the rights of a Participant to receive distributions pursuant to the Plan. The provisions of the Trust shall govern the rights of the Company, Participants and the creditors of the Company to the assets transferred to, invested by, and held in the Trust. The Company shall at all times remain liable to carry out its obligations under the Plan. Except for amendments to the Trust to comply with applicable laws, no amendment or modification shall be made to the Trust with respect to the Plan without the prior written consent of all Participants in the Plan who have Deferred Compensation Accounts. 6.12 Applicable Law. All questions pertaining to the construction, validity and effect of the Plan shall be determined in accordance with the laws of the State of California. 11 IN WITNESS WHEREOF, ITLA Capital Corporation has caused this Plan to be executed on this 13th day of November, 2003. By /s/ JEFFREY L. LIPSCOMB -------------------------------------- Jeffrey L. Lipscomb, member of the Board of Directors Chairman of the Compensation Committee On behalf of ITLA Capital Corporation 12 EX-10.3(B) 4 v94420exv10w3xby.txt EXHIBIT 10.3B Exhibit 10.3b ITLA CAPITAL CORPORATION CONSOLIDATED NONQUALIFIED (EMPLOYER SECURITIES ONLY) DEFERRED COMPENSATION PLAN (Effective January 1, 2003) ITLA Capital Corporation, a Delaware business corporation, has adopted the ITLA Capital Corporation Consolidated Nonqualified (Employer Securities Only) Deferred Compensation Plan (the "Plan") effective as of January 1, 2003. The Plan is an unfunded plan, hereby adopted, established and maintained by ITLA Capital Corporation (the "Company") for the purpose of providing benefits for certain individuals as provided herein. ARTICLE I ELIGIBILITY TO PARTICIPATE 1.1 Eligibility to Participate. For purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), the Plan is limited to a select group of management or highly compensated employees, and shall at all times remain unfunded. 1.2 Designated Participants. An executive or senior management employee of the Company (which shall include for employment and compensation purposes all other related employers of the Company under Section 414 of the Internal Revenue Code of 1986, as amended (the "Code")) is eligible to become a Participant in the Plan provided such employee is designated as a Participant below or such employee is later designated by the Compensation Committee of the Board of Directors of the Company and such designation is attached as a written amendment to the Plan signed by a duly authorized officer of the Company. Under no circumstance shall an employee below the level of First Vice President be eligible to participate in the Plan. The following individuals shall constitute the eligible Participants as of the Plan's effective date: George W. Haligowski (effective January 1997) Norval L. Bruce (effective January 1997) Timothy Doyle (effective January 1997) Steven Romelt (effective January 1997) Don Nickbarg (effective May 2000) William Schack (effective January 2002) Scott Wallace (effective January 2002) Lewis Horwitz (effective October 2002) Arthur Stribley (effective October 2002) William Callam (effective January 2003) Once an employee becomes a Participant, he or she shall remain a Participant until all benefits to which he or she (or to the individual the Participant designates as his or her "Designated Beneficiary" in such Participant's designation of beneficiary form) is entitled to under the Plan have been paid. To the extent George Haligowski's Employment Agreement dated July 28,2000 (as the same may be thereafter amended). 1 differs from the terms of the Plan, George Haligowski's Employment Agreement shall be the controlling document. 1.3 Written Deferral Election. The individuals described in Section 1.2 shall be eligible to participate in the Plan and may do so by filing a written deferral election with the Company in a form approved by the Company. In the first year in which a Participant becomes eligible to participate in the Plan, the newly eligible Participant may make an election to defer compensation for services to be performed subsequent to the election within thirty (30) days after the date the person becomes eligible. For all other years, elections to defer payment of compensation must be made before the beginning of the calendar year for which the compensation is payable. Notwithstanding the foregoing, no deferred elections shall be permitted under the Plan for calendar year 2003. However, transfers to the Plan from the ITLA Capital Corporation Consolidated Non-Qualified (Non-Employer Securities) Deferred Compensation Plan (the "Non-Employer Securities Deferred Compensation Plan") shall be permitted during calendar year 2003 relating to actual or deemed investments in ITLA Capital Corporation stock as provided in the Non-Employer Securities Deferred Compensation Plan. 1.4 Deferred Compensation Account. For each individual electing to participate in the Plan, the Company shall establish and maintain a Deferred Compensation Account. The amount of each Participant's deferred compensation shall be credited to his or her Deferred Compensation Account no later than the end of the month following the month in which the compensation would otherwise have been paid to the Participant or his or her Designated Beneficiary. The Participant's Deferred Compensation Account shall be invested solely in ITLA Capital Corporation stock. The Deferred Compensation Account shall be reduced for any distributions and withdrawals made under the Plan to a Participant including tax and other withholdings. Any Participant to whom an amount is credited under the Plan shall be deemed a general, unsecured creditor of the Company. 1.5 Amount of Deferrals. Each Participant may defer all or any portion of the compensation otherwise payable to him or her by the Company for the calendar year beginning after the date of said election (or for the remaining portion of the first year of participation) as specified in said written election to the Company, and the amounts so deferred by a Participant shall be distributed only as provided in the Plan. In no event shall the amount of compensation deferred by a Participant under the Plan and the Non-Employer Securities Deferred Compensation Plan exceed the amount needed to satisfy employment tax and other required payroll withholdings. A Participant may change the amount of, or suspend, future deferrals with respect to compensation otherwise payable to him or her for calendar years beginning after the date of change or suspension as specified by written notice to the Company. If a Participant elects to suspend deferrals, the Participant may make a new election to again become a Participant in the Plan. Any new election to defer payment of compensation must be made before the beginning of the next calendar year for which the compensation is payable. The election to defer shall be irrevocable as to the deferred compensation for the calendar year for which the election is made. In no event may a Participant suspend or change the amount of deferrals for a calendar year once the calendar year has commenced. ARTICLE II 2 DEFERRED COMPENSATION 2.1 Contributions to, Investments by, and Withdrawals from Trust. Within thirty (30) days after each calendar month, the Company shall transfer into the ITLA Capital Corporation Rabbi Trust (the "Trust") an amount in cash or a number of shares of ITLA Capital Corporation stock (based upon the closing sale price as of the most recent trading day preceding the contribution date) equal to the total amount of all Participant deferrals under the Plan for the preceding calendar month. All cash contributions to the Trust shall, as soon as practicable, be invested solely in ITLA Capital Corporation stock. All cash dividends received on shares of ITLA Capital Corporation stock held by the Trust shall be reinvested in ITLA Capital Corporation stock (other than cash representing fractional interests). To satisfy tax and other withholding obligations of the Company relating to a Participant's Deferred Compensation Account under the Plan, the Trust shall timely deliver to the Company a sufficient number of shares of ITLA Capital Corporation stock from a Participant's Deferred Compensation Account (based upon the closing sale price on the most recent trading day prior to the date of delivery) equal to withholding obligation, and the Participant's Deferred Compensation Account shall be reduced by such number of shares so delivered. ARTICLE III DISTRIBUTION 3.1 Distribution of Deferred Compensation Accounts. On the first day of the month next following the date on which a Participant's employment with the Company and all other related employers of the Company (as determined under Section 414 of the Code) terminates for any reason including death, distribution of the Participant's Deferred Compensation Account in accordance with the Plan shall commence in accordance with one of the alternatives set forth below as selected by the Participant. A Participant's initial selection of the method of distribution shall be made in writing at the time the Participant first elects to defer compensation under the Plan for any given calendar year. Any such selection may be subsequently changed by a Participant by delivering a new written election to the Company (such new written election shall automatically revoke any prior written election). However, the most recent written election received by the Company prior to the thirteenth (13th) month before the Participant's termination of employment with the Company shall be controlling and any written election received within thirteen (13) months prior to the Participant's termination of employment with the Company shall be disregarded. The alternative forms of distribution shall be: a) a single lump sum distribution of the Participant's Deferred Compensation Account; b) five annual installments with the first installment (1/5 of the Participant's Deferred Compensation Account) being distributed on the first day of the month next following the Participant's termination of employment and subsequent annual installments being made on each annual anniversary of the first distribution date (1/4 of the Participant's Deferred Compensation Account on the 3 second distribution date); or c) ten annual installments with the first installment (1/10 of the Participant's Deferred Compensation Account being distributed on the first day of the month next following the Participant's termination of employment) and subsequent annual installments being made on each annual anniversary of the first distribution date (1/9 of the Participant's Deferred Compensation Account on the second distribution date). If the Participant fails to select a distribution method in writing, distribution shall be made in a single lump sum. All distributions shall be made solely in shares of ITLA Capital Corporation stock (except for cash in lieu of fractional share interests). All such distributions from the Plan shall comply with all applicable federal and state securities laws. All distributions under the Plan shall be less applicable tax and other required or authorized withholdings. Notwithstanding the distribution election made by a Participant and notwithstanding that distributions have commenced in installments, the distribution of the Participant's total remaining Deferred Compensation Account shall be made in a single lump sum upon a Change of Control or termination of the Plan. 3.2 Participant's Death. If a Participant should die before full distribution of his or her Deferred Compensation Account, such Participant's remaining Deferred Compensation Account shall be distributed to the Participant's Designated Beneficiary by the method designated by the Participant in his or her most recent written election delivered to the Company at least thirteen (13) months prior to his or her termination of employment with the Company. Any written election received by the Company within thirteen (13) months of the Participant's termination of employment with the Company shall be disregarded. If a Participant has no Designated Beneficiary at the time of death, then, notwithstanding any provision herein to the contrary, his or her remaining Deferred Compensation Account shall be distributed to such Participant's estate in a single lump sum distribution as soon as administratively feasible following such Participant's death. 3.3 Advance Distribution for Financial Hardship. In the event a Participant incurs an Unforeseeable Financial Emergency, such Participant may make a written request to the Company for a hardship withdrawal from his or her Deferred Compensation Account established under the Plan, provided that the entire amount requested by the Participant is not reasonably available from other resources. The amount of the withdrawal will be net of applicable tax and other required or authorized withholdings. An "Unforeseeable Financial Emergency" shall mean an unforeseeable, severe financial hardship to such Participant resulting from a sudden and unexpected illness or accident of the Participant or a family member of the Participant, loss of property of the Participant due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant. Withdrawals due to an unforeseeable emergency are only permitted to the extent reasonably needed to satisfy the emergency need. This Section shall be interpreted in a manner consistent with Section 1 .457-2(h)(4) and 1 ..457-2(h)(5) of the Treasury Regulations. The Compensation Committee of the Board of Directors of the Company shall determine in its sole discretion whether an advance withdrawal shall be permitted due to an Unforeseeable Financial Emergency. The Participant's 4 Deferred Compensation Account shall be reduced by the amount of any advance distribution for hardship including withholdings. 5 3.4 Change of Control. Upon a Change of Control of the Company, as defined in Section 6.7 of the Plan, the Deferred Compensation Accounts of all Participants shall be paid in a single lump sum distribution of shares of ITLA Capital Corporation stock as soon as practicable to the Participants or to the Designated Beneficiaries of any deceased Participants. 3.5 Distribution for Tax Purposes. Anything herein to the contrary notwithstanding, if, at any time, the Compensation Committee of the Board of Directors of the Company determines that an amount in a Participant's Deferred Compensation Account is includable in the gross income of the Participant and subject to withholding tax, the Compensation Committee shall permit a lump sum distribution in kind from the Participant's Deferred Compensation Account equal in value to (a) the amount of withholding tax applicable to the phantom gross income deemed received by the Participant from his or her Deferred Compensation Account for income and/or employment tax purposes plus (b) the withholding tax applicable to the amounts under subpart(a) and this subpart (b) constituting gross income to the Participant for income and/or employment tax purposes. The in kind distribution shall be made from the Trust to the Company to satisfy the withholding tax obligation and the Participant's Deferred Compensation Account shall be reduced by the number of shares of ITLA Capital Corporation stock so distributed for withholding tax obligations. 3.6 Limitation on Distribution to Covered Employees. Notwithstanding any other provision of the Plan, in the event that the Participant is a "covered employee" as defined in Section 162(m)(3) of the Code, or would be a covered employee if the Participant's Deferred Compensation Account were distributed in accordance with the other provisions of Article III, the maximum amount (based upon the fair market value of the shares of ITLA Capital Corporation stock distributed on the distribution date) which may be distributed from the Participant's Deferred Compensation Account in any Plan Year shall not exceed one million ($1,000,000) less the amount of compensation paid by the Company to the Participant in such Plan Year which is not "performance-based" (as defined in Code Section 162(m)(4)(C)). The amount of compensation which is not "performance-based" shall be reasonably determined by the Company at the time of the proposed distribution. Any amount which is not distributed to the Participant in a Plan Year as a result of the limitation set forth in this Section 3.6 shall be distributed to the Participant in the next Plan Year, subject to compliance with the foregoing limitations set forth in this Section 3.6. The provisions of this Section 3.6 shall not apply if the Compensation Committee of the Board of Directors of the Company, upon consultation with legal counsel, determines that the restrictions of Code Section 162(m) do not apply to the limit the deductibility of distributions made under the Plan (or otherwise by the Company) to the Participant. ARTICLE IV AMENDMENT AND TERMINATION OF PLAN 4.1 Amendment or Termination. The Company intends the Plan to remain in existence until all Participants in the Plan have received all of their benefits payable under the Plan. The Company, however, reserves the right to amend or terminate the Plan when, in the sole opinion of the Company, such amendment or termination is advisable. Any such amendment or 6 termination shall be made pursuant to a resolution of the Compensation Committee of the Board of Directors of the Company. No amendment or termination of the Plan shall reduce the number of shares of ITLA Capital Corporation stock credited to the Participant's Deferred Compensation Account below the balance immediately prior to the effective date of the resolution amending or terminating the Plan or delay the distribution date for the Participant's Deferred Compensation Account. 4.2 Distribution on Termination. Upon termination of the Plan, the Deferred Compensation Accounts of all Participants shall be paid in kind, in a single lump sum distribution as soon as practicable following the effective date of the Plan termination. ARTICLE V CLAIMS PROCEDURE 5.1 Claims Procedure. An initial claim for benefits under the Plan must be made by the Participant or his or her Designated Beneficiary to the Claims Reviewer which shall be the Compensation Committee of the Board of Directors of the Company (unless another person or organizational unit is designated by the Company as Claims Reviewer), in accordance with the terms of this Claims Procedure. Not later than 90 days after receipt of such a claim, the Claims Reviewer will render a written decision on the claim to the claimant, unless special circumstances require the extension of such 90-day period. If such extension is necessary, the Claims Reviewer shall provide the Participant or his or her Designated Beneficiary with written notification of such extension before the expiration of the initial 90-day period. Such notice shall specify the reason or reasons for such extension and the date by which the final decision can be expected. In no event shall such extension exceed a period of 90 days from the end of the initial 90-day period. In the event the Claims Reviewer denies the claim of a Participant or his or her Designated Beneficiary in whole or in part, the Claims Reviewer's written notification shall specify, in a manner calculated to be understood by the claimant, the reason for the denial; a reference to the Plan or other document or form that is the basis for the denial; a description of any additional material or information necessary for the claimant to perfect the claim; an explanation as to why such information or material is necessary; and an explanation of the applicable claims procedure. Should the claim be denied in whole or in part and should the claimant be dissatisfied with the Claim's Reviewer's disposition of the claimant's claim, the claimant may have a full and fair review of the claim by the Company upon written request therefor submitted by the claimant or the claimant's duly authorized representative and received by the Company within 60 days after the claimant receives written notification that the claimant's claim has been denied. In connection with such review, the claimant or the claimant's duly authorized representative shall be entitled to review pertinent documents and submit the claimant's views as to the issues in writing. The Company shall act to deny or accept the claim within 60 days after receipt of the claimant's written request for review unless special circumstances require the extension of such 60-day period. If such extension is necessary, the Company shall provide the claimant with written notification of such extension before the expiration of such initial 60-day period. In all events, the Company shall act to deny or accept the claim within 120 days of the receipt of the claimant's written request for review. The action of the Company shall be in the form of a written notice to the claimant and its contents shall 7 include all of the requirements for action on the original claim. In no event may a claimant commence legal action for benefits the claimant believes are due the claimant until the claimant has exhausted all of the remedies and procedures afforded the claimant by this Article V. ARTICLE VI ADMINISTRATION 6.1 Unsecured Claims. The right of a Participant or a Participant's Designated Beneficiary to receive a distribution hereunder shall be an unsecured claim against the general assets of the Company, and neither a Participant nor his or her Designated Beneficiary shall have any rights in or against any amount credited to any Deferred Compensation Account under the Plan or any other assets of the Company. The Plan at all times shall be considered entirely unfunded both for tax purposes and for purposes of Title I of ERISA, as amended. Any assets or investments hereunder shall continue for all purposes to be part of the general assets of the Company and available to its general creditors in the event of bankruptcy or insolvency. Deferred Compensation Accounts under the Plan and any benefits which may be distributable pursuant to the Plan are not subject in any manner to anticipation, sale, alienation, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors of the Participant or a Participant's Designated Beneficiary. The Plan constitutes a mere unsecured promise by the Company to make benefit distributions in the future. No interest or right to receive a benefit may be taken, either voluntarily or involuntarily, for the satisfaction of the debts of, or other obligations or claims against, such person or entity, including claims for alimony, support, separate maintenance and claims in bankruptcy proceedings. 6.2 Plan Administration. The Plan shall be administered by the Compensation Committee of the Board of Directors of the Company, which shall have the authority, duty and power to interpret and construe the provisions of the Plan as the Compensation Committee deems appropriate including the authority to determine eligibility for benefits under the Plan. The Compensation Committee shall have the duty and responsibility of maintaining records, making the requisite calculations and disbursing benefits hereunder. The interpretations, determinations, regulations and calculations of the Compensation Committee shall be final and binding on all persons and parties concerned. The Compensation Committee may delegate any of its duties of Plan Administration to such employees or other persons as it deems appropriate. 6.3 Expenses. Expenses of administration shall be paid by the Company. The Compensation Committee of the Board of Directors of the Company shall be entitled to rely on all tables, certificates, opinions, data and reports furnished by any accountant, controller, counsel or other person employed or retained by the Company with respect to the Plan. 6.4 Statements. The Compensation Committee of the Board of Directors of the Company shall furnish individual annual or more frequent statements to each Participant, or each Designated Beneficiary currently receiving benefits, in such form as determined by the Compensation Committee or as required by law. The Compensation Committee may delegate the duty to provide such statements to the trustee of the Trust. 8 6.5 No Enlargement of Rights. The sole rights of a Participant or Designated Beneficiary under the Plan shall be to have the Plan administered according to its provisions, to receive whatever benefits he or she may be entitled to hereunder, and nothing in the Plan shall be interpreted as a guaranty that any assets or funds in any trust which may be established in connection with the Plan or assets of the Company will be sufficient to pay any benefits hereunder. Further, the adoption and maintenance of the Plan shall not be construed as creating any contract of employment between the Company and any Participant. The Plan shall not affect the right of the Company to deal with any Participants in employment respects, including their hiring, discharge, compensation, and conditions of employment. 6.6 Rules and Procedures. The Company may from time to time establish rules and procedures which it determines to be necessary for the proper administration of the Plan and the benefits payable to an individual in the event that individual is declared incompetent and a conservator or other person legally charged with that individual's care is appointed. Except as otherwise provided herein, when the Company determines that such individual is unable to manage his or her financial affairs, the Company may distribute such individual's benefits to such conservator, person legally charged with such individual's care, or institutions contributing toward or providing for the care and maintenance of such individual. Any such distribution shall constitute a complete discharge of any liability of the Company and the Plan to such individual. 6.7 Change of Control. Notwithstanding any provision to the contrary, in the event of a Change of Control, as defined herein, Participants shall receive their Deferred Compensation Accounts in a single lump sum distribution as soon as administratively feasible following the date of the Change of Control. The term "Change of Control" means the occurrence of any of the following events with respect to the Company: (1) any person (as the term is used in section 13(d) and 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act") is or becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly of securities of the Company representing 33.33% or more of the Company's outstanding voting securities; (2) individuals who are members of the Board of Directors of the Company on the date hereof (the "Incumbent Board") cease for any reason to constitute at least a majority thereof, provided that any person becoming a director subsequent to the date hereof whose election was approved by a vote of at least two thirds of the directors comprising the Incumbent Board, or whose nomination for election by the Company's stockholders was approved by the nominating committee serving under an Incumbent Board, shall be considered a member of the Incumbent Board; (3) a reorganization, merger, consolidation, sale of all or substantially all of the assets of the Company or a similar transaction in which the Company is not the resulting entity (unless the continuing ownership requirements clause (4) below are met with respect to the resulting entity); or (4) a merger or consolidation of the Company with any other corporation other than a merger or consolidation in which the voting securities of the Company outstanding immediately prior thereto represent at least 66.67% of the total voting power represented by the voting securities of the Company or the surviving entity outstanding immediately after such merger or consolidation. The term "Change of Control" shall not include: (1) an acquisition of securities by an employee benefit plan of the Company; or (2) any of the above mentioned events or occurrences which require but do not receive the requisite government or regulatory approval to bring the event or occurrence to fruition. 9 6.8 Information. Each Participant shall keep the Company informed of his or her current address and the current address of his or her Designated Beneficiary. The Company shall not be obligated to search for any person. If such person is not located within three (3) years after the date on which distribution of the Participant's benefits payable under the Plan may first be made, distribution may be made as though the Participant or his or her Designated Beneficiary had died at the end of such three-year period. 6.9 Loss. Notwithstanding any provision herein to the contrary, neither the Company nor any individual acting as an employee or agent of the Company including the trustee of the Trust shall be liable to any Participant, any Participant's Designated Beneficiary, or any other person for any claim, loss, liability or expense incurred in connection with the Plan, unless attributable to fraud or willful misconduct on the part of the Company or any such employee or agent of the Company. 6.10 Indemnification. The Company shall indemnify and hold harmless the members of the Board of Directors, the trustee of the Trust and any other persons to whom any responsibility with respect to the Plan is allocated or delegated, from and against any and all liabilities, costs and expenses, including attorneys' fees, incurred by such persons as a result of any act, or omission to act, in connection with the performance of their duties, responsibilities and obligations under the Plan and under ERISA, other than such liabilities, costs and expenses as may result from the bad faith, willful misconduct or criminal acts of such persons or to the extent such indemnification is specifically prohibited by ERISA. The Company shall have the obligation to conduct the defense of such persons in any proceeding to which this Section applies. If any Board member or any person covered by this indemnification clause determines that the defense provided by the Company is inadequate, that member or person shall be entitled to retain separate legal counsel for his or her defense and the Company shall be obligated to pay for all reasonable legal fees and other court costs incurred in the course of such defense unless a court of competent jurisdiction finds such person has acted in bad faith or engaged in willful misconduct or criminal acts. 6.11 Trust Matters. The Company's obligations under the Plan with respect to Deferred Compensation Accounts may be satisfied with Trust assets distributed in kind pursuant to the terms of the Plan and any such distribution shall reduce the Company's corresponding obligation under the Plan with respect thereto. The provisions of the Plan shall govern the rights of a Participant to receive distributions pursuant to the Plan. The provisions of the Trust shall govern the rights of the Company, Participants and the creditors of the Company to the assets transferred to, invested by, and held in the Trust. The Company shall at all times remain liable to carry out its obligations under the Plan. Except for amendments to the Trust to comply with applicable laws, no amendment or modification shall be made to the Trust with respect to the Plan without the prior written consent of all Participants in the Plan who have Deferred Compensation Accounts. 6.12 Applicable Law. All questions pertaining to the construction, validity and effect of the Plan shall be determined in accordance with the laws of the State of California. 10 IN WITNESS WHEREOF, ITLA Capital Corporation has caused the Plan to be executed on this 13th day of November, 2003. By /s/ JEFFREY L. LIPSCOMB ------------------------------ Jeffrey L. Lipscomb, Member of the Board of Directors Chairman of the Compensation Committee On behalf of ITLA Capital Corporation 11 EX-10.10 5 v94420exv10w10.txt EXHIBIT 10.10 EXHIBIT 10.10 ITLA CAPITAL CORPORATION SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN (Effective January 1, 1997) Amended as of January 28, 2000 and January 1, 2003 Preamble ITLA Capital Corporation, a Delaware corporation, has adopted the ITLA Supplemental Executive Retirement Plan, effective January 1, 1997, as amended as of January 28, 2000 and January 1, 2003, for a select group of executives and senior management personnel to ensure that the overall effectiveness of the Company's executive compensation program will attract, retain and motivate qualified executives and senior management personnel. ARTICLE I DEFINTTIONS When used herein, the following words shall have the meanings below unless the context clearly indicates otherwise: 1.1 "Applicable Measurement Period" means the period of time since the last day investment credit had been previously allocated on the Participant's Change in Control Cash Account Balance under Section 5.2. 1.2 "Change in Control" means the occurrence of any of the following events with respect to the Company: (1) any person (as the term is used in section 13(d) and 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act") is or becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly of securities of the Company representing 33.33% or more of the Company's outstanding voting securities; (2) individuals who are members of the Board of Directors of the Company on the date hereof (the "Incumbent Board") cease for any reason to constitute at least a majority thereof, provided that any person becoming a director subsequent to the date hereof whose election was approved by a vote of at least two thirds of the directors comprising the Incumbent Board, or whose nomination for election by the Company's stockholders was approved by the nominating committee serving under an Incumbent Board, shall be considered a member of the Incumbent Board; (3) a reorganization, merger, consolidation, sale of all or substantially all of the assets of the Company or a similar transaction in which the Company is not the resulting entity (unless the continuing ownership requirements clause (4) below are met with respect to the resulting entity); or (4) a merger or consolidation of the Company with any other corporation other than a merger or consolidation in which the voting securities of the Company outstanding immediately prior thereto represent at least 66.67% of the total voting power represented by the voting securities of the Company or the surviving entity outstanding immediately after such merger or consolidation. The term "Change in Control" shall not include: (1) an acquisition of securities by an employee benefit plan of the Company; or (2) any of the above mentioned events or occurrences which require but do not receive the requisite government or regulatory approval to bring the event or occurrence to fruition. 1.3 "Change in Control Cash Account Balance" means, with respect to a Participant, a credit to a Participant under the Plan on the records of the Company equal to the Initial Change in Control Cash Balance plus amounts credited pursuant to Section 5.2. The Change in Control Cash Account Balance, if applicable, shall be a bookkeeping entry only and shall be utilized solely as a device for the measurement and determination of the cash amounts to be paid to a Participant, or his or her Designated Beneficiary, pursuant to the Plan. 1.4 "Claims Reviewer" means the Compensation Committee of the Board of Directors of the Company, unless another person or organizational unit is designated by the Company as Claims Reviewer. 1.5 "Company" means ITLA Capital Corporation, a Delaware corporation, and any successor thereto. For purposes of determining whether a Participant is employed by, or received Earnings from, the Company at any particular time, the term "Company" shall also include any entity that would be treated as a single employer with the Company under Section 414 of the Internal Revenue Code of 1986, as amended. 1.6 "Company Stock" means the Company's designated Recognition and Retention Plan shares, treasury shares and publicly traded common stock including publicly traded common stock of a successor in interest. 1.7 "Designated Beneficiary" means the individual the Participant designates as his or her Beneficiary in such Participant's Supplemental Executive Retirement Plan designation of beneficiary form. 1.8 "Disability" means total and permanent disability as defined in the Company's long term disability plan. 1.9 "Earnings" means the Participant's base annual salary from the Company (without regard to any deferral election made by the Participant and/or any bonuses paid to the Participant). 1.10 "Haligowski Employment Agreement" means that certain employment agreement between the Company and George Haligowski dated January 28, 2000, as the same may be thereafter amended. 1.11 "Initial Change in Control Cash Balance" means, with respect to a Participant, the unsecured obligation of the Company that is intended to represent a cash amount based upon the conversion of his Stock Account Balance to cash on the day next following the consummation of a Change in Control pursuant to a Participant's election, or an automatic conversion, under Section 5.1, in exchange for the cancellation of his or her Vested Stock Account Balance, equal to the number of shares of Company Stock allocated to his or her Vested Stock Account Balance as of the consummation of the Change in Control multiplied by the cash value of the per share merger consideration to be received in the Change in Control transaction as of the date of consummation of the Change in Control (i.e., in the case of a common stock for 2 common stock exchange, the exchange ratio multiplied by the closing sales price of the acquiror's common stock on the date of the consummation of the Change in Control (or if such day is not a trading day, then on the last trading day prior thereto) with the amount thereby determined being multiplied by the number of shares of Company Stock allocated to a Participant's Stock Vested Account Balance as of the consummation of such Change in Control). 1.12 "Participant" means any employee of the Company who meets the eligibility requirements of Article II and is designated and approved for participation in the Plan as set forth in Article II. 1.13 "Participant's Account" or "Account" means the Vested Stock Account Balance or Change in Control Cash Account Balance of each Participant, whichever is applicable. 1.14 "Plan" means the ITLA Capital Corporation Supplemental Executive Retirement Plan, as set forth herein and as amended from time-to-time. 1.15 "Plan Year" means the calendar year. 1.16 "Retirement Date" means the later of the date a Participant leaves the employ of the Company or the date upon which the Participant attains the age of 62. 1.17 "Stock Account Balance" means, with respect to a Participant, the number of shares of Company Stock allocated to a Participant, whether vested or unvested, under the Plan. 1.18 "Trust" means the Trust under the Company Rabbi Trust Agreement. 1.19 "Trustee" means Union Bank of California or any other person or corporation selected by the Company to serve in such capacity of the Trust. 1.20 "Vested Stock Account Balance" means, with respect to a Participant, the number of vested shares of Company Stock credited to the Stock Account Balance of a Participant. 1.21 "Vesting Cycle" means one the following of seven consecutive three calendar year periods: (1) January 1, 1997 through December 31, 1999; (2) January 1, 2000 through December 31, 2002; (3) January 1, 2003 through December 31, 2005; (4) January 1, 2006 through December 31, 2008; (5) January 1,2009 through December 31, 2011; (6) January 1, 2012 through December 31, 2014 and (7) January 1, 2015 through December 31, 2017. ARTICLE II ELIGIBILITY TO PARTICIPATE 2.1 Eligibility to Participate. For purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), the Plan is limited to a select group of management and highly compensated employees. 3 2.2 Designated Participants. An executive or senior management employee of the Company is eligible to become a Participant in the Plan; provided such employee is designated as a Participant below or, such employee is later designated as a Participant by the Compensation Committee of the Board of Directors of the Company and, such designation is attached as a written amendment to the Plan signed by a duly authorized officer of the Company. Under no circumstance shall an employee below the level of Managing Director or Senior Vice President be eligible to participate in the Plan. The following individuals are Participants in the Plan as of January 1, 2003. George W. Haligowski (effective January 1997) Norval L. Bruce (effective January 1997) Timothy Doyle (effective January 1997) Steven Romelt (effective January 1997) Don Nickbarg (effective May 2000) William Schack (effective January 2002) Scott Wallace (effective January 2002) William Callam (effective January 2003) Once an employee becomes a Participant, he or she shall remain a Participant until all benefits, if any, to which he or she (or his or her Designated Beneficiary) is entitled under the Plan have been distributed. ARTICLE III ELIGIBILITY FOR AND DISTRIBUTION OF BENEFITS 3.1 Eligibility for Benefits. Each Participant shall be eligible to receive his or her Vested Stock Account Balance or Change in Control Cash Account Balance, whichever is applicable, under the Plan as provided in Sections 3.3 and 3.4 below. Except as set forth in Sections 3.5 and 6.1 below, no benefits shall be payable from the Plan to a Participant while such Participant is employed by the Company. 3.2 Incidents of Ownership. Notwithstanding the above, a Participant shall have no incidents of ownership with respect to the Company Stock or any other assets held under the Plan. A Participant shall not have any right to vote shares of Company Stock allocated or credited to the Participant's Stock Account Balance under the Plan. 3.3 Form of Distribution. A Participant's Vested Stock Account Balance shall be distributed solely in Company Stock. A Participant's Change in Control Cash Account Balance shall be distributed solely in cash. 3.4 Election and Timing of Distribution. Except as provided in Sections 3.5 and 6.1, a Participant's Account shall be distributed either in a single lump sum distribution, five (5) annual installments or ten (10) annual installments in accordance with the written election of such Participant. Such written election must be in form acceptable to the Compensation 4 Committee of the Board of Directors of the Company and shall not be effective until received by the Compensation Committee. A Participant's election may be changed at any time by filing a new written election (which shall automatically revoke his or her prior written election) with the Compensation Committee of the Board of Directors of the Company, which election shall become effective upon its receipt by the Compensation Committee; provided however, the most recent written election received prior to the thirteenth (13th) month before the Participant's termination of employment shall be controlling and any written election received within the thirteen (13) month period immediately preceding the Participant's termination of employment shall be disregarded; and provided further, that the first written election made under the Plan by a Participant in calendar year 2003 and received by the Compensation Committee prior to January 1, 2004 shall in all cases be honored unless timely revoked thereafter by a new binding written election. If no written election is made, then the Participant's Account shall be paid in a single lump sum distribution. A single lump sum distribution shall be made within forty-five (45) days after a Participant's termination of employment. In the case of an annual installment method (5 or 10 year term), the first annual distribution shall be made on the first day of the calendar month next following the one year anniversary of the Participant's termination of employment (1/5 or 1/10 of the Participant's Account, whichever is applicable), and subsequent annual installments will be made on each annual anniversary of the first distribution (1/4 or 1/9 of the Participant's Account on the second distribution date, whichever is applicable). All distributions under the Plan shall be less applicable tax and other required or authorized withholdings. The Trust shall timely deliver to the Company a sufficient number of shares of Company Stock from a Participant's Vested Stock Account Balance (based upon the closing price of the most recent trading date prior to the date of delivery) or cash from his or her Change in Control Cash Account Balance to satisfy the withholding obligations of such Participant. All distributions of Company Stock shall comply with federal and state securities laws. 3.5 Advance Distribution for Financial Hardship. With the consent of the Compensation Committee of the Board of Directors of the Company, and notwithstanding anything contained in Section 3.4 to the contrary, a Participant may withdraw up to one hundred percent (100%) of his or her Vested Stock Account Balance (in shares) or Change in Control Cash Account Balance (in cash), in each case less applicable tax and other required or authorized withholdings, prior to termination of employment as may be required to meet a Participant's Unforeseeable Financial Emergency (as defined herein), provided that the entire amount requested by the Participant is not reasonably available from other resources of the Participant. An "Unforeseeable Financial Emergency" shall mean an unforeseeable, severe financial condition resulting from (1) a sudden and unexpected illness or accident of the Participation or an immediate family member of the Participant; (2) loss of the Participant's property due to casualty; or (3) other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant. The withdrawal must be necessary to satisfy the Unforeseeable Financial Emergency and no more may be withdrawn from the Participant's Account than is required to relieve the financial need after taking into account other resources that are reasonably available to the Participant for this purpose. The Participant must certify that the financial need cannot be relieved through any other reasonable sources, including but not limited to, reimbursement or compensation by insurance or otherwise, liquidation of the Participant's assets, to the extent such liquidation would not itself cause an immediate and heavy financial need or by borrowing from commercial sources on reasonable commercial terms. This Section 3.5 shall be interpreted in a manner consistent with Section 1.457-2(h)(4), (5) of the Treasury Regulations. The Participant's Account shall be reduced by the amount of any advance distribution for financial hardship including withholdings. 5 3.6 Limitation on Distribution to Covered Employees. Notwithstanding any other provision of the Plan, in the event that the Participant is a "covered employee" as defined in Section 1 62(m)(3) of the Internal Revenue Code of 1986, as amended (the "Code"), or would be a covered employee if the benefits were distributed in accordance with Section 3.5 or 6.1, the maximum amount which may be distributed from the Participant's Account under Section 3.5 or 6.1 in any Plan Year shall not exceed one million dollars ($1,000,000) less the amount of compensation paid by the Company to the Participant in such Plan Year which is not "performance-based" (as defined in Code Section 162(m)(4)(C)). The amount of compensation which is not "performance-based" shall be reasonably determined by the Company at the time of the proposed distribution. Any amount which is not distributed to the Participant in a Plan Year as a result of the limitation set forth in this Section 3.6 shall be distributed to the Participant in the next Plan Year, subject to compliance with the foregoing limitation set forth in this Section 3.6. The provisions of this Section 3.6 shall not apply if the Compensation Committee of the Board of Directors of the Company, upon consultation with legal counsel, determines that the restrictions of Code Section 162(m) do not apply to limit the deductibility of distributions made under the Plan (or otherwise by the Company) to the Participant. ARTICLE IV ALLOCATION AND FUNDING OF STOCK ACCOUNT BALANCES 4.1 Allocation to Stock Account Balances. Shares of Company Stock under the Plan are allocated to a Participant's Stock Account Balance on an annual basis on or within ninety (90) days of the last day of the Plan Year. A Participant must be employed by the Company as of the last day of the Plan Year in order to receive an allocation of shares for such Plan Year under this Section 4.1 and Section 4.2. The amount of Company Stock allocated to a Participant's Stock Account Balance pursuant to this Section 4.1 and Section 4.2 shall be determined using the fair market value of the Company Stock as of October 8, 1998, of nine dollars ($9.00) a share. 4.2 Allocation Amounts. The annual amount allocated to a Participant pursuant to Section 4.1 shall be calculated as follows, subject to approval of the allocation by the Compensation Committee of the Board of Directors of the Company and the award of sufficient shares of Company Stock to fund the annual allocation: - The annual amount shall be equal to 20% of each such Participant's Earnings (except in the case of George Haligowski, 33 1/3% of his Earnings) for the Plan Year. Notwithstanding the preceding sentences, the Compensation Committee of the Board of Directors of the Company may approve a greater or lesser award for any Participant or determine that no award is appropriate for a Participant. In no event, however, shall the total number of shares of Company Stock allocated under the Plan (excluding reinvestments under Section 4.3 and stock dividends and distributions) exceed the issued Recognition and Retention Plan shares to be allocated under the Plan. 6 4.3 Contribution to Trust and Reinvestment of Cash Dividends. The Company shall contribute shares of Company Stock to the Trust on an annual basis in an amount equal to the total annual allocation for all Participants for the Plan Year as determined under Section 4.2 to the extent that the Compensation Committee of the Board of Directors of the Company approves such funding. The contributed shares shall come from the issued Recognition and Retention Plan shares approved for such use by the shareholders in the Company's Recognition and Retention Plan. All Recognition and Retention Plan terms pertaining to the granting of the shares shall remain in full force and effect. The Plan shall be funded with Recognition and Retention Plan shares only to the extent that shares are available and the shares are awarded by the Compensation Committee of the Board of Directors of the Company. The number of shares of Company Stock allocated to each Participant's Stock Account Balance under the Plan for a Plan Year under Sections 4.1 and 4.2 shall be determined by dividing the Participant's allocation amount for such Plan Year as determined in Section 4.2 above by the fair market value of Company Stock on October 8, 1998, of nine dollars ($9.00) a share. If the available Recognition and Retention Plan shares should be insufficient to cover the allocation amounts for all Participants for any Plan Year as determined under Section 4.2 above, the allocation amounts shall be reduced for each Participant on a pro rata basis. Stock dividends and distributions on shares of Company Stock allocated to a Participant's Stock Account Balance shall be added to the Participant's Stock Account Balance with the portion allocated to unvested shares being subject to the same vesting requirements of the underlying shares. All cash dividends received on shares of Company Stock allocated to a Participant's Stock Account Balance, whether vested or unvested, shall be reinvested by the Trustee in shares of Company Stock (rounded to the nearest whole share), such additional shares shall be added to the Participant's Stock Account Balance, and the Participant shall at all times be fully vested in such reinvestments. 4.4 Special Allocation Upon Change of Control. In the event of a pending Change of Control, the Company shall, on the business day next preceding the consummation of the Change in Control, credit the Stock Account Balance of each Participant in the employ of the Company on such date (or who has been terminated involuntarily by action of the Company within the three months preceding such date, unless such termination is for cause as defined in the Company's Change of Control Severance Agreements) as follows: - Each such Participant's Stock Account Balance shall be credited with a number of shares of Company Stock, based upon the average high and low quoted sales price of such stock on the trading day next preceding the day the shares are credited, such that the additional shares credited in total value equal 60% of the Participant's Earnings for the prior Plan Year (plus in the case of George Haligowski, such additional shares to fund the obligation set forth in Section 4(e) of the Haligowski Employment Agreement); and - The number of credited shares shall be contributed to the Trust. The number of shares to be contributed and allocated pursuant to this Section 4.4 is subject to the 7 limitations set forth in Section 4.5. In the event the pending Change in Control is abandoned or terminated after the contribution and allocation of shares pursuant to this Section 4.4, then in that event, the shares contributed and allocated pursuant to this Section 4.4 shall be forfeited as of the date of abandonment or termination. 8 4.5 Reduction of Special Allocation. If the available Recognition and Retention Plan shares are insufficient to fund the contribution and allocation under Section 4.4, such contribution and allocation shall be reduced for each Participant on a pro rata basis. 4.6 Vesting. A Participant shall only have a vested right to the shares allocated to his or her Stock Account Balance for a Vesting Cycle under Sections 4.1 and 4.2 (and any stock dividends and distributions relating thereto) if such Participant is employed by the Company on the last day of the Vesting Cycle. Notwithstanding the preceding sentence, a Participant shall be 100% vested in all shares allocated to his or her Stock Account Balance under Sections 4.1 and 4.2 (including any stock dividends distributions relating thereto) in the event of the consummation of a Change of Control (if he or she is employed immediately prior to the Change in Control) or termination of employment due to death, Disability or after Retirement Date. A Participant shall be vested in all shares allocated to his or her Stock Account Balance under Section 4.4 upon the consummation of the Change in Control. A Participant shall at all times be 100% vested in reinvestments in Company Stock allocated to his or her Stock Account Balance under Section 4.3. A Participant employed by the Company on the date of termination of the Plan shall also be 100% vested in his or her Stock Account Balance upon Plan termination. Notwithstanding the foregoing or anything contained elsewhere in the Plan, a Participant's Vested Stock Account Balance shall be subject to forfeiture as provided in Section 7.1. 4.7 Forfeiture. In the event a Participant leaves the employ of the Company prior to a Change in Control and before the end of a Vesting Cycle for reasons other than death, Disability or after Retirement Date, all shares allocated to his or her Stock Account Balance under Section 4.1 and 4.2 (including stock dividends and distributions relating thereto) for that Vesting Cycle shall be forfeited. Shares allocated to a Participant's Stock Account Balance under Section 4.4 shall be forfeited upon the abandonment or termination of the pending Change in Control. Forfeited shares shall be returned to the Company and may be reallocated to satisfy future contributions under Sections 4.1 through 4.4. Notwithstanding the foregoing or anything contained elsewhere in the Plan, the Vested Stock Account Balance of a Participant shall be subject to forfeiture as provided in Section 7.1. 4.8 No Further Contributions after a Change in Control. No further contributions of Company Stock shall be made under Sections 4.1 and 4.2 after a Change in Control. ARTICLE V CONVERSION TO INITIAL CHANGE IN CONTROL CASH BALANCE AND INVESTMENT CREDITS 5.1 Procedure for Conversion. Within 30 days prior to the consummation of a Change in Control, a Participant (including a Participant or Designated Beneficiary who is then receiving installment distributions of Company Stock pursuant to Section 3.4) may make a written election to convert his or her Vested Stock Account Balance to the Initial Change in Control Cash Balance as of the day next following the Change in Control. Such written election must be received by the Compensation Committee of the Board of Directors of the Company within such 30 day period. If such written election is timely made, then on the day next following the Change in 9 Control, the Vested Stock Account Balance of the electing Participant shall terminate and his or her benefits under the Plan shall then consist solely of his or her Change in Control Cash Account Balance. In the event the Change in Control transaction results in the exchange of the outstanding shares of common stock of the Company for consideration other than publicly traded shares of the acquiror (and cash in lieu of fractional share interests), then in that event, immediately following the consummation of the Change in Control the Stock Account Balance of each Participant shall be automatically converted to the Initial Change in Control Cash Balance. Nothing herein shall alter the method of distribution of a Participant's Account (i.e., lump sum, five (5) year installments or ten (10) year installments) under Section 3.4. 5.2 Investment Credits. Each Participant's Change in Control Cash Account Balance shall be credited with an investment credit through the close of business on each of (i) the last day of the Plan Year and (ii) the day next preceding the date of any distribution of benefits to the Participant from his or her Change in Control Cash Account Balance. The investment credit shall be determined by multiplying either (a) the average yield on the 10 year constant maturity U.S. Treasury Securities, as published in the Federal Reserve Statistical Release, determined by taking the average yield for the last active trading day of each calendar month during the Applicable Measurement Period times the average daily balance in the Participant's Change in Control Cash Account Balance for such Applicable Measurement Period or (b) 125% of the annualized average cost of funds of Imperial Capital Bank (or its successor in interest) during the Applicable Account Period times the average daily balance in the Participant's Change in Control Cash Account Balance for such Applicable Measurement Period, whichever results in the highest yield, with the yield being applied on a pro-rata basis for any Applicable Measurement Period that is less than one year. 5.3 Trust Provisions. As soon as practicable following the consummation of a Change in Control (but not later than 30 days after the occurrence thereof), the Company shall contribute cash to the Trust in an amount equal to the Initial Change in Control Cash Account Balance of each Participant whose Vested Stock Account Balance is converted pursuant to Section 5.1, and shares contained in the Stock Account Balance of each such Participant shall be tended by the Trustee to the Company in cancellation of such Stock Account Balance. The preceding sentence shall not apply, if the shares of Company Stock in the Stock Account Balance of a Participant are exchanged for cash in the Change in Control transaction. To the extent that the actual earnings of a Participant's Change in Control Cash Account Balance, based upon investments of the Trust, exceed the amount of investment credit to be allocated to a Participant's Change in Control Cash Account Balance pursuant to Section 5.2, the excess shall be distributed by the Trust to the Company. To the extent that such actual earnings are less than the investment credit to be allocated to a Participant's Change in Control Cash Account Balance, the shortfall shall be promptly contributed in cash to the Trust by the Company. 5.4 Vested Benefits. The Change in Control Cash Account Balance of each Participant shall be 100% vested at all times and shall not be subject to forfeiture. 10 ARTICLE VI AMENDMENT AND TERMINATION 6.1 Amendment or Termination. The Company intends the Plan to remain in existence until all Participants in the Plan have received all of their benefits payable under the Plan. The Company, however, reserves the right to amend or terminate the Plan prior to a Change in Control when, in the sole opinion of the Company, such amendment or termination is advisable. Any such amendment or termination shall be made pursuant to a resolution of the Compensation Committee of the Board of Directors of the Company. No amendment or termination of the Plan shall directly or indirectly reduce any Participant's Account below the balance of such Account immediately prior to the effective date of the resolution amending or terminating the Plan; nor shall any amendment or termination of the Plan delay the distribution date for the Participant's Account. Upon termination of the Plan any unvested shares of Company Stock allocated to the Stock Account Balance of a Participant who is then employed by the Company shall become fully vested. Notwithstanding anything contained in Section 3.4 to the contrary, upon termination of the Plan all Participant Accounts (including those Accounts which are then being distributed to Participants or Designated Beneficiaries in installments) shall be paid in a single lump sum distribution within 30 days after such termination but subject to the limitations set forth in Section 3.6, regardless of the distribution elections made by the Participants. Distribution of Stock Account Balances shall be made solely in shares of Company Stock and distribution of Change in Control Cash Account Balances, if applicable, shall be made solely in cash. No amendment to (other than to comply with law) or termination of the Plan will be permitted to be made by the Company after a Change in Control without the written consent of all Participants including Participants or Designated Beneficiaries then receiving distributions. ARTICLE VII ADMINISTRATION 7.1 Termination of Benefits. Notwithstanding any other provision of the Plan, the rights of a Participant or his or her Designated Beneficiary to benefits under the Plan will, at the discretion of the Compensation Committee of Board of Directors, be terminated, and the Company will have no obligation hereunder to such Participant or his or her Designated Beneficiary, if such Participant is discharged from employment from the Company for cause (as defined in the Company's Change of Control Severance Agreements) prior to a Change in Control. 7.2 Unsecured Claims. The right of a Participant or his or her Designated Beneficiary to receive a benefit hereunder shall be an unsecured claim against the general assets of the Company, and neither a Participant nor his or her Designated Beneficiary shall have any rights in or against any shares or amount credited to any Accounts under this Plan or any other assets of the Company. Notwithstanding any other provisions to the contrary, the Plan at all times shall be considered entirely unfunded both for tax purposes and for purposes of Title I of ERISA as amended. Any assets or investments hereunder shall continue for all purposes to be part of the general assets of the Company and available to its general creditors in the event of bankruptcy or 11 insolvency. Accounts under this Plan and any benefits which may be payable pursuant to this Plan are not subject in any manner to anticipation, sale, alienation, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors of a Participant or his or her Designated Beneficiary. The Plan constitutes a mere unsecured promise by the Company to make benefit distributions in the future. No interest or right to receive a benefit may be taken, either voluntarily of involuntarily, for the satisfaction of the debts of, or other obligations or claims against, such person or entity, including claims for alimony, support, separate maintenance and claims in bankruptcy proceedings. 7.3 Plan Administration. The Plan shall be administered by the Compensation Committee of the Board of Directors of the Company, which shall have the authority, duty and power to interpret and construe the provisions of the Plan as the Compensation Committee deems appropriate including the authority to determine eligibility for benefits under the Plan. The Compensation Committee shall have the duty and responsibility of maintaining records, making the requisite calculations and distributions hereunder. The interpretations, determinations, regulations and calculations of the Compensation Committee shall be final and binding on all persons and parties concerned. The Compensation Committee may delegate any of its duties to an employee or employees of the Company or other persons as it deems appropriate. 7.4 Expenses. Expenses of administration shall be paid by the Company. The Compensation Committee of the Board of Directors of the Company shall be entitled to rely on all tables, valuations, certificates, opinions, data and reports furnished by any actuary, accountant, controller, counsel or other person employed or retained by the Company with respect to the Plan. 7.5 Statements. The Compensation Committee of the Board of Directors of the Company (or the Trustee if such duty is delegated to the Trustee) shall furnish individual annual or more frequent statements of accrued benefits to each Participant (or if the Participant's Designated Beneficiary is currently receiving benefits under the Plan, to such Participant's Designated Beneficiary) in such form as determined by the Compensation Committee of the Board of Directors of the Company or as required by the law. 7.6 No Enlargement of Rights. The sole rights of a Participant or his or her Designated Beneficiary under the Plan shall be to have this Plan administered according to its provisions, to receive whatever benefits he or she may be entitled to hereunder, and nothing in the Plan shall be interpreted as a guaranty that any assets or funds in any trust which may be established in connection with the Plan or assets of the Company will be sufficient to pay any benefit hereunder. Further, the adoption and maintenance of this Plan shall not be construed as creating any contract of employment between the Company and the Participant. The Plan shall not affect the right of the Company to deal with any Participants in employment respects, including their hiring, discharge, compensation and conditions of employment. 7.7 Rules and Procedures. The Company may from time to time establish rules and procedures which it determines to be necessary for the proper administration of the Plan and the benefits payable to an individual in the event that individual is declared incompetent and a conservator or other person legally charged with that individual's care is appointed. Except as 12 otherwise provided herein, when the Company determines that such individual is unable to manage his or her financial affairs, the Company may pay such individual's benefits to such conservator, person legally charged with such individual's care, or institution then contributing toward or providing for the care and maintenance of such individual. Any such distribution shall constitute a complete discharge of any liability of the Company, the Plan, the Trust and the Trustee to such individual. 7.8 Information. Each Participant shall keep the Company informed of his or her current address and the current address of his or her Designated Beneficiary. The Company shall not be obligated to search for any person. If such person(s) is (are) not located within three (3) years after the date on which distribution of the Participant's benefits payable under this Plan may first be made, distribution may be made as though the Participant or his or her Designated Beneficiary had died at the end of such three-year period. 7.9 Loss. Notwithstanding any provision herein to the contrary, neither the Company nor any individual acting as an employee or agent of the Company including the Trustee shall be liable to any Participant, his or her Designated Beneficiary, or any other person for any claim, loss, liability or expense incurred in connection with the Plan, unless attributable to fraud or willful misconduct on the part of the Company or any such employee or agent of the Company. 7.10 Indemnification. The Company shall indemnify and hold harmless the members of the Board of Directors, the Trustee, and any other persons to whom any responsibility with respect to the Plan is allocated or delegated, from and against any and all liabilities, costs and expenses, including attorneys' fees, incurred by such persons as a result of any act, or omission to act, in connection with the performance of their duties, responsibilities and obligations under the Plan and under ERISA, other than such liabilities, costs and expenses as may result from the bad faith, willful misconduct or criminal acts of such persons or to the extent such indemnification is specifically prohibited by ERISA. The Company shall have the obligation to conduct the defense of such persons in any proceeding to which this Section applies. If any Board member or any person covered by this indemnification clause determines that the defense provided by the Company is inadequate, that member or person shall be entitled to retain separate legal counsel for his or her defense and the Company shall be obligated to pay for all reasonable legal fees and other court costs incurred in the course of such defense unless a court of competent jurisdiction finds such person has acted in bad faith or engaged in willful misconduct or criminal acts. 7.11 Trust Matters. The Company's obligations under the Plan with respect to the Accounts may be satisfied with Trust assets distributed pursuant to the terms of the Plan and any such distribution shall reduce the Company's corresponding obligation under the Plan with respect to the Accounts. The provisions of the Plan shall govern the rights of a Participant to receive distributions pursuant to the Plan. The provisions of the Trust shall govern the rights of the Company, Participants and the creditors of the Company to the assets transferred to and/or held by the Trust. The Company shall at all times remain liable to carry out its obligations under the Plan. Except for amendments to the Trust to comply with applicable laws, no amendment or modification shall be made to the Trust without the prior written consent of all Participants who have Accounts. 13 7.12 Applicable Law. All questions pertaining to the construction, validity and effect of the Plan shall be determined in accordance with the laws of the State of California. ARTICLE VIII CLAIMS PROCEDURE 8.1 Claims Procedure. An initial claim for benefits under the Plan must be made by the Participant or his or her Designated Beneficiary in accordance with the terms of the Plan through which the benefits are provided. Not later than 90 days after receipt of such a claim, the Claims Reviewer will render a written decision on the claim to the claimant, unless special circumstances require the extension of such 90-day period. If such extension is necessary, the Claims Reviewer shall provide the Participant or his or her Designated Beneficiary with written notification of such extension before the expiration of the initial 90-day period. Such notice shall specify the reason or reasons for such extension and the date by which the final decision can be expected. In no event shall such extension exceed a period of 90 days from the end of the initial 90-day period. In the event the Claims Reviewer denies the claim of a Participant or his or her Designated Beneficiary in whole or in part, the Claims Reviewer's written notification shall specify, in a manner calculated to be understood by the claimant, the reason for the denial; a reference to the Plan or other document or form that is the basis for the denial; a description of any additional material or information necessary for the claimant to perfect the claim; an explanation as to why such information or material is necessary; and an explanation of the applicable claims procedure. Should the claim be denied in whole or in part and should the claimant be dissatisfied with the Claim's Reviewer's disposition of the claimant's claim, the claimant may have a full and fair review of the claim by the Company upon written request therefore submitted by the claimant or the claimant's duly authorized representative and received by the Company within 60 days after the claimant receives written notification that the claimant's claim has been denied. In connection with such review, the claimant or the claimant's duly authorized representative shall be entitled to review pertinent documents and submit the claimant's views as to the issues, in writing. The Company shall act to deny or accept the claim within 60 days after receipt of the claimant's written request for review unless special circumstances require the extension of such 60-day period. If such extension is necessary, the Company shall provide the claimant with written notification of such extension before the expiration of such initial 60-day period. In all events, the Company shall act to deny or accept the claim within 120 days of the receipt of the claimant's written request for review. The action of the Company shall be in the form of a written notice to the claimant and its contents shall include all of the requirements for action on the original claim. In no event may a claimant commerce legal action for benefits the claimant believes are due the claimant until the claimant has exhausted all of the remedies and procedures afforded the claimant by this Article VIII. 14 ITLA Capital Corporation has caused this Plan to be executed on this 13th day of November 2003 (but effective January 1, 2003). By /s/ JEFFREY L. LIPSCOMB ---------------------------------------- Name Jeffrey L. Lipscomb, Member of the Board of Directors Chairman of the Compensation Committee --------------------------------------- On behalf of ITLA Capital Corporation 15 EX-31.1 6 v94420exv31w1.htm EXHIBIT 31.1

EXHIBIT 31.1

CERTIFICATIONS

I, George W. Haligowski, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of ITLA Capital Corporation;

2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.     Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.     The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.     The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 14, 2003

/s/ George W. Haligowski

George W. Haligowski
Chairman of the Board, President and
Chief Executive Officer

33 EX-31.2 7 v94420exv31w2.htm EXHIBIT 31.2

EXHIBIT 31.2

CERTIFICATIONS

I, Timothy M. Doyle, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of ITLA Capital Corporation;

2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.     Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.     The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of our annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.     The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 14, 2003

/s/ Timothy M. Doyle

Timothy M. Doyle
Senior Managing Director and
Chief Financial Officer

34 EX-32 8 v94420exv32.htm EXHIBIT 32

EXHIBIT 32

CERTIFICATION

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350), each of the undersigned hereby certifies in his capacity as an officer of ITLA Capital Corporation (the “Company”) that the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2003 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the financial statements included in such report.

Date: November 14, 2003	/s/ George W. Haligowski
	George W. Haligowski
	Chairman of the Board, President
	and Chief Executive Officer
Date: November 14, 2003	/s/ Timothy M. Doyle
	Timothy M. Doyle
	Senior Managing Director and
	Chief Financial Officer

35 -----END PRIVACY-ENHANCED MESSAGE-----

EX-10.3(A)

                                                                EXHIBIT 10.3a

ITLA CAPITAL CORPORATION CONSOLIDATED NONQUALIFIED (NON-EMPLOYER SECURITIES)
                           DEFERRED COMPENSATION PLAN

                           (Effective January 1, 1997)

ITLA Capital Corporation, a Delaware business corporation has adopted the ITLA
Capital Corporation Consolidated Nonqualified (Non-Employer Securities) Deferred
Compensation Plan (the "Plan") effective as of January 1, 1997, as amended as of
January 1, 2003. The Plan is an unfunded plan, hereby adopted, established and
maintained by ITLA Capital Corporation (the "Company") for the purpose of
providing benefits for certain individuals as provided herein.

                                    ARTICLE I

                           ELIGIBILITY TO PARTICIPATE

        1.1 Eligibility to Participate. For purposes of Title I of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), the Plan is
limited to a select group of management or highly compensated employees, and
shall at all times remain unfunded.

        1.2 Designated Participants. An executive or senior management employee
of the Company (which shall include for employment and compensation purposes all
other related employers of the Company under Section 414 of the Internal Revenue
Code of 1986, as amended (the "Code")) is eligible to become a Participant in
the Plan provided such employee is designated as a Participant below or such
employee is later designated by the Compensation Committee of the Board of
Directors of the Company and such designation is attached as a written amendment
to the Plan signed by a duly authorized officer of the Company. Under no
circumstance shall an employee below the level of First Vice President be
eligible to participate in the Plan. The following individuals shall constitute
the eligible Participants in the Plan:

George W. Haligowski (effective January 1997)
Norval L. Bruce (effective January 1997)
Timothy Doyle (effective January 1997)
Steven Romelt (effective January 1997)
Don Nickbarg (effective May 2000)
William Schack (effective January 2002)
Scott Wallace (effective January 2002)
Lewis Horwitz (effective October 2002)
Arthur Stribley (effective October 2002)
William Callam (effective January 2003)

Once an employee becomes a Participant, he or she shall remain a Participant
until all benefits to which he or she (or to the individual the Participant
designates as his or her "Designated Beneficiary" in such Participant's
designation of beneficiary form) is entitled to under the Plan have been paid.
To the extent George Haligowski's Employment Agreement dated July 23, 1997
differs from the terms of the Plan, George Haligowski's Employment Agreement
shall be the




controlling document.

        1.3 Written Deferral Election. The individuals described in Section 1.2
shall be eligible to participate in the Plan and may do so by filing a written
deferral election with the Company in a form approved by the Company. In the
first year in which a Participant becomes eligible to participate in the Plan,
the newly eligible Participant may make an election to defer compensation for
services to be performed subsequent to the election within thirty (30) days
after the date the person becomes eligible. For all other years, elections to
defer payment of compensation must be made before the beginning of the calendar
year for which the compensation is payable.

          1.4 Deferred Compensation Account. For each individual electing to
participate in the Plan, the Company shall establish and maintain a Deferred
Compensation Account. The amount of each Participant's deferred compensation
shall be credited to his or her Deferred Compensation Account no later than the
end of the month following the month in which the compensation would otherwise
have been paid to the Participant. The Participant's Deferred Compensation
Account shall also be credited and debited for deemed earnings and losses
attributable to the investment (or deemed investment) of, or interest credits
on, such Deferred Compensation Account under Section 2.2 or 3.1 of the Plan,
whichever is applicable. The Deferred Compensation Account shall also be reduced
for any distributions and withdrawals made under the Plan to a Participant or
his or her Designated Beneficiary including tax and other withholdings. In
general, the Deferred Compensation Accounts will be valued at the end of each
calendar quarter (each a "Valuation Date"). Any Participant to whom an amount is
credited under the Plan shall be deemed a general, unsecured creditor of the
Company.

          1.5 Amount of Deferrals. Each Participant may defer all or any portion
of the compensation otherwise payable to him or her by the Company for the
calendar year beginning after the date of said election (or for the remaining
portion of the first year of participation) as specified in said written
election to the Company, and the amounts so deferred by a Participant shall be
paid only as provided in the Plan. In no event shall the amount of compensation
deferred by a Participant under the Plan and the ITLA Consolidated Non Qualified
(Employer Securities Only) Deferred Compensation Plan (the "Employer Securities
Deferred Compensation Plan") exceed the amount needed to satisfy employment tax
and other required payroll withholdings. A Participant may change the amount of,
or suspend, future deferrals with respect to compensation otherwise payable to
him or her for calendar years beginning after the date of change or suspension
as specified by written notice to the Company. If a Participant elects to
suspend deferrals, the Participant may make a new election to again become a
Participant in the Plan. Any new election to defer payment of compensation must
be made before the beginning of the next calendar year for which the
compensation is payable. The election to defer shall be irrevocable as to the
deferred compensation for the calendar year for which the election is made. In
no event may a Participant suspend or change the amount of deferrals for a
calendar year once the calendar year has commenced.

                                   ARTICLE II

                              DEFERRED COMPENSATION



                                       2


        2.1 Contributions to and Withdrawals from Trust by the Company. Within
thirty (30) days after each calendar month, the Company shall transfer into the
ITLA Capital Corporation Rabbi Trust (the "Trust") an amount in cash equal to
the total amount of all Participant deferrals under the Plan for the preceding
calendar month. In addition, as soon as practicable after each Valuation Date,
the Company shall contribute cash to the Trust equal to the amount by which the
deemed earnings or interest credits, whichever is applicable, on the Deferred
Compensation Accounts of all Participants for the applicable calendar quarter
exceeded the actual earnings of the Trust for such period, and appropriate
adjustment will be made to each Participant's Deferred Compensation Account for
such period. To the extent that the actual earnings of the Trust exceeded the
deemed earnings or interest credits, whichever is applicable, on the Deferred
Compensation Accounts of all Participants for such calendar quarter, the excess
earnings will be promptly paid by the Trust to the Company, and appropriate
adjustment will be made to each Participant's Deferred Compensation Account for
such period. The adjustments referred to in the preceding two sentences shall
likewise be made with respect to a Participant's Deferred Compensation Account
as of the day next preceding (a) a Change of Control, (b) the effective date of
a termination of the Plan or (c) the final installment payment of such
Participant's Deferred Compensation Account, whichever is applicable. The Trust
shall likewise pay funds from a Participant's Deferred Compensation Account to
the Company to satisfy any tax and other withholding obligations.

          2.2 Deemed Investments. All amounts credited under the terms of the
Plan to a Deferred Compensation Account maintained in the name of a Participant
by the Company shall be invested (or deemed invested) in various mutual funds
selected by the Company while such Participant is employed by the Company. Each
Participant may select the deemed investment for his/her Deferred Compensation
Account from the investment options selected by the Company and may change such
deemed investments at such times and in accordance with the rules adopted by the
Company. In the absence of any investment directions, Deferred Compensation
Accounts will be deemed invested in the in-house sweep funds of the trustee of
the Trust. Notwithstanding that the earnings or losses on deemed investments
used to determine the value of Participants' Deferred Compensation Accounts are
based on the actual performance of certain specified investments, neither the
Company nor the Trust is obligated to invest deferrals in any particular
investments. However, the Company and the Trust are required to make the
adjustments set forth in Section 2.1 based upon the performance of deemed
investments vs. actual investments. If any investments are made with deferrals,
Participants shall have no right or interest in or with respect to such
investments. Specifically, Participants shall have no voting rights with respect
to any stock or securities held by the Plan. None of the Deferred Compensation
Accounts in the Plan shall be actually (or deemed) invested in ITLA Capital
Corporation stock. To the extent a Participant's Deferred Compensation Account,
or any portion thereof, is actually invested in ITLA Capital Corporation stock
as of the date of the execution of the Plan, as amended on January 1, 2003, the
amount of the Participant's Deferred Compensation Account represented thereby
(including the shares of such stock) shall be transferred to the Deferred
Compensation Account of such Participant in the Employer Securities Deferred
Compensation Plan. In the case of a deemed investment in ITLA Capital
Corporation stock, such investment will be changed as soon as practicable, or
alternatively, at the written election of the Participant, the amount
represented thereby shall be transferred to the Participant's Deferred
Compensation Account in



                                       3


the Employer Securities Deferred Compensation Plan and actually invested in ITLA
Capital Corporation stock.



                                       4


                                   ARTICLE III

                                  DISTRIBUTION

        3.1 Distribution of Deferred Compensation Accounts. On the first day of
the month next following the date on which a Participant's employment with the
Company and all other related employers of the Company (as determined under
Section 414 of the Code) terminates for any reason including death, distribution
of the amount credited to the Participant's Deferred Compensation Account in
accordance with the Plan shall commence in accordance with one of the
alternatives set forth below as selected by the Participant. A Participant's
initial selection of the method of distribution shall be made in writing at the
time the Participant first elects to defer compensation under the Plan for any
given calendar year. Any such selection may be subsequently changed by a
Participant by delivering a new written election to the Company (such new
written election shall automatically revoke any prior written election).
However, the most recent written election received by the Company prior to the
thirteenth (13th) month before the Participant's termination of employment with
the Company shall be controlling and any written election received within
thirteen (13) months prior to the Participant's termination of employment with
the Company shall be disregarded. The alternative forms of distribution shall
be:

                a) a single lump sum payment equal to the Participant's total
                Deferred Compensation Account at termination of employment;

                b) five annual installments with the first installment (1/5 of
                the Participant's Deferred Compensation Account) being
                distributed on the first day of the month next following the
                Participant's termination of employment and subsequent annual
                installments being made on each annual anniversary of the first
                distribution date (1/4 of the Participant's Deferred
                Compensation Account on the second distribution date); or

                c) ten annual installments with the first installment (1/10 of
                the Participant's Deferred Compensation Account) being
                distributed on the first day of the month next following the
                Participant's termination of employment and subsequent annual
                installments being made on each annual anniversary of the first
                distribution date (1/9 of the Participant's Deferred
                Compensation Account on the second distribution date).

        The amount of each such annual installment will be calculated based upon
the amortization of the value of the Participant's Deferred Compensation Account
balance as the date of his or her termination of employment at a credited
interest rate equal to 125% of the Imperial Capital Bank's (or its successor in
interest) cost of funds. Interest credited to a Participant's Deferred
Compensation Account as of the Valuation Date preceding the date of the next
distribution shall be added to the Participant's Deferred Compensation Account
and distributed as a part of the next installment. The final installment will be
the balance of the Participant's Deferred Compensation Account and interest
credited to the Account as of the day next preceding such final distribution.



                                       5

Except as set forth above with respect to interest crediting, a Participant's
Deferred Compensation Account shall not be adjusted for any deemed earnings or
losses after the date of the Participant's termination of employment. If the
Participant fails to select a distribution method in writing, distribution shall
be made in a single lump sum payment. The Compensation Committee of the Board of
Directors of the Company shall determine whether the distribution is made in
cash or in-kind. Any distribution of securities from the Plan shall comply with
all applicable federal and state securities laws. All distributions under the
Plan shall be less applicable tax and other required or authorized withholdings.
Notwithstanding the distribution election made by a Participant and
notwithstanding that distributions have commenced in installments, the
distribution of the Participant's total remaining Deferred Compensation Account
shall be made in a single lump sum upon a Change of Control or termination of
the Plan.

        3.2 Participant's Death. If a Participant should die before distribution
of the full amount of the Deferred Compensation Account described in the Plan
has been made to the Participant, any remaining amounts shall be distributed to
the Participant's Designated Beneficiary by the method designated by the
Participant in his or her most recent written election delivered to the Company
at least thirteen (13) months prior to his or her termination of employment with
the Company. Any written election received by the Company within thirteen (13)
months of the Participant's termination of employment with the Company shall be
disregarded. If a Participant has no Designated Beneficiary at the time of
death, then, notwithstanding any provision herein to the contrary, such amounts
shall be distributed to such Participant's estate in a single lump sum
distribution as soon as administratively feasible following such Participant's
death.

        3.3 Advance Distribution for Financial Hardship. In the event a
Participant incurs an Unforeseeable Financial Emergency, such Participant may
make a written request to the Company for a hardship withdrawal from his or her
Deferred Compensation Account established under the Plan, provided that the
entire amount requested by the Participant is not reasonably available from
other resources. The amount of the withdrawal will be net of applicable tax and
other required or authorized withholdings. An "Unforeseeable Financial
Emergency" shall mean an unforeseeable, severe financial hardship to such
Participant resulting from a sudden and unexpected illness or accident of the
Participant or a family member of the Participant, loss of property of the
Participant due to casualty, or other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the control of the
Participant. Withdrawals of amounts because of an unforeseeable emergency are
only permitted to the extent reasonably needed to satisfy the emergency need.
This Section shall be interpreted in a manner consistent with Section 1
..457-2(h)(4) and 1 .457-2(h)(5) of the Treasury Regulations. The Compensation
Committee of the Board of Directors of the Company shall determine in its sole
discretion whether an advance withdrawal shall be permitted due to an
Unforeseeable Financial Emergency. The Participant's Deferred Compensation
Account shall be reduced by the amount of any advance distribution for hardship
including withholdings.



                                       6


        3.4 Change of Control. Upon a Change of Control of the Company, as
defined in Section 6.7 of the Plan, the Deferred Compensation Accounts of all
Participants shall be distributed in a single lump sum payment as soon as
practicable to the Participants or to the Designated Beneficiaries of any
deceased Participants.

     3.5 Distribution for Tax Purposes. Anything herein to the contrary
notwithstanding, if, at any time, the Compensation Committee of the Board of
Directors of the Company determines that an amount in a Participant's Deferred
Compensation Account is includable in the gross income of the Participant and
subject to withholding tax, the Compensation Committee shall permit a lump sum
distribution in cash from the Participant's Deferred Compensation Account equal
to (a) the amount of withholding tax applicable to the phantom gross income
deemed received by the Participant from his or her Deferred Compensation Account
for income and/or employment tax purposes plus (b) the withholding tax
applicable to the amounts under subpart(a) and this subpart (b) constituting
gross income to the Participant for income and/or employment tax purposes. The
cash distribution shall be made from the Trust to the Company to satisfy the
withholding tax obligation and the Participant's Deferred Compensation Account
shall be reduced by the amounts so withheld.

     3.6 Limitation on Distribution to Covered Employees. Notwithstanding any
other provision of the Plan, in the event that the Participant is a "covered
employee" as defined in Section 162(m)(3) of the Code, or would be a covered
employee if the Participant's Deferred Compensation Account were distributed in
accordance with the other provisions of Article III, the maximum amount which
may be distributed from the Participant's Deferred Compensation Account in any
Plan Year shall not exceed one million ($1,000,000) less the amount of
compensation paid by the Company to the Participant in such Plan Year which is
not "performance-based" (as defined in Code Section 162(m)(4)(C)). The amount of
compensation which is not "performance-based" shall be reasonably determined by
the Company at the time of the proposed distribution. Any amount which is not
distributed to the Participant in a Plan Year as a result of the limitation set
forth in this Section 3.6 shall be distributed to the Participant in the next
Plan Year, subject to compliance with the foregoing limitations set forth in
this Section 3.6. The provisions of this Section 3.6 shall not apply if the
Compensation Committee of the Board of Directors of the Company, upon
consultation with legal counsel, determines that the restrictions of Code
Section 162(m) do not apply to the limit the deductibility of payments made
under the Plan (or otherwise by the Company) to the Participant.

                                   ARTICLE IV

                        AMENDMENT AND TERMINATION OF PLAN

        4.1 Amendment or Termination. The Company intends the Plan to remain in
existence until all Participants in the Plan have received all of their benefits
payable under the Plan. The Company, however, reserves the right to amend or
terminate the Plan when, in the sole opinion of the Company, such amendment or
termination is advisable. Any such amendment or termination shall be made
pursuant to a resolution of the Compensation Committee of the Board of Directors
of the Company. No amendment or termination of the Plan shall reduce the amount
credited to the Participant's Deferred Compensation Account below the balance



                                       7

immediately prior to the effective date of the resolution amending or
terminating the Plan or delay the distribution date for the Participant's
Deferred Compensation Account.

        4.2 Distribution on Termination. Upon termination of the Plan, the
Deferred Compensation Accounts of all Participants shall be distributed in a
single lump sum payment as soon as practicable following the effective date of
the Plan termination.

                                    ARTICLE V

                                CLAIMS PROCEDURE

        5.1 Claims Procedure. An initial claim for benefits under the Plan must
be made by the Participant or his or her Designated Beneficiary to the Claims
Reviewer which shall be the Compensation Committee of the Board of Directors of
the Company (unless another person or organizational unit is designated by the
Company as Claims Reviewer), in accordance with the terms of this Claims
Procedure. Not later than 90 days after receipt of such a claim, the Claims
Reviewer will render a written decision on the claim to the claimant, unless
special circumstances require the extension of such 90-day period. If such
extension is necessary, the Claims Reviewer shall provide the Participant or his
or her Designated Beneficiary with written notification of such extension before
the expiration of the initial 90-day period. Such notice shall specify the
reason or reasons for such extension and the date by which the final decision
can be expected. In no event shall such extension exceed a period of 90 days
from the end of the initial 90-day period. In the event the Claims Reviewer
denies the claim of a Participant or his or her Designated Beneficiary in whole
or in part, the Claims Reviewer's written notification shall specify, in a
manner calculated to be understood by the claimant, the reason for the denial; a
reference to the Plan or other document or form that is the basis for the
denial; a description of any additional material or information necessary for
the claimant to perfect the claim; an explanation as to why such information or
material is necessary; and an explanation of the applicable claims procedure.
Should the claim be denied in whole or in part and should the claimant be
dissatisfied with the Claim's Reviewer's disposition of the claimant's claim,
the claimant may have a full and fair review of the claim by the Company upon
written request therefor submitted by the claimant or the claimant's duly
authorized representative and received by the Company within 60 days after the
claimant receives written notification that the claimant's claim has been
denied. In connection with such review, the claimant or the claimant's duly
authorized representative shall be entitled to review pertinent documents and
submit the claimant's views as to the issues in writing. The Company shall act
to deny or accept the claim within 60 days after receipt of the claimant's
written request for review unless special circumstances require the extension of
such 60-day period. If such extension is necessary, the Company shall provide
the claimant with written notification of such extension before the expiration
of such initial 60-day period. In all events, the Company shall act to deny or
accept the claim within 120 days of the receipt of the claimant's written
request for review. The action of the Company shall be in the form of a written
notice to the claimant and its contents shall include all of the requirements
for action on the original claim. In no event may a claimant commence legal
action for benefits the claimant believes are due the claimant until the
claimant has exhausted all of the remedies and procedures afforded the claimant
by this Article V.



                                       8


                                   ARTICLE VI

                                 ADMINISTRATION

        6.1 Unsecured Claims. The right of a Participant or a Participant's
Designated Beneficiary to receive a distribution hereunder shall be an unsecured
claim against the general assets of the Company, and neither a Participant nor
his or her Designated Beneficiary shall have any rights in or against any amount
credited to any Deferred Compensation Account under the Plan or any other assets
of the Company. The Plan at all times shall be considered entirely unfunded both
for tax purposes and for purposes of Title I of ERISA, as amended. Any funds
invested hereunder shall continue for all purposes to be part of the general
assets of the Company and available to its general creditors in the event of
bankruptcy or insolvency. Deferred Compensation Accounts under the Plan and any
benefits which may be payable pursuant to the Plan are not subject in any manner
to anticipation, sale, alienation, transfer, assignment, pledge, encumbrance,
attachment, or garnishment by creditors of the Participant or a Participant's
Designated Beneficiary. The Plan constitutes a mere unsecured promise by the
Company to make benefit payments in the future. No interest or right to receive
a benefit may be taken, either voluntarily or involuntarily, for the
satisfaction of the debts of, or other obligations or claims against, such
person or entity, including claims for alimony, support, separate maintenance
and claims in bankruptcy proceedings.

        6.2 Plan Administration. The Plan shall be administered by the
Compensation Committee of the Board of Directors of the Company, which shall
have the authority, duty and power to interpret and construe the provisions of
the Plan as the Compensation Committee deems appropriate including the authority
to determine eligibility for benefits under the Plan. The Compensation Committee
shall have the duty and responsibility of maintaining records, making the
requisite calculations and disbursing the payments hereunder. The
interpretations, determinations, regulations and calculations of the
Compensation Committee shall be final and binding on all persons and parties
concerned. The Compensation Committee may delegate any of its duties of Plan
Administration to such employees or other persons as it deems appropriate.

        6.3 Expenses. Expenses of administration shall be paid by the Company.
The Compensation Committee of the Board of Directors of the Company shall be
entitled to rely on all tables, valuations, certificates, opinions, data and
reports furnished by any actuary, accountant, controller, counsel or other
person employed or retained by the Company with respect to the Plan.

        6.4 Statements. The Compensation Committee of the Board of Directors of
the Company shall furnish individual annual or more frequent statements to each
Participant, or each Designated Beneficiary currently receiving benefits, in
such form as determined by the Compensation Committee or as required by law. The
Compensation Committee may delegate the duty to provide such statements to the
trustee of the Trust.

        6.5 No Enlargement of Rights. The sole rights of a Participant or
Designated Beneficiary under the Plan shall be to have the Plan administered
according to its provisions, to receive whatever benefits he or she may be
entitled to hereunder, and nothing in the Plan shall be



                                       9


interpreted as a guaranty that any assets or funds in any trust which may be
established in connection with the Plan or assets of the Company will be
sufficient to pay any benefits hereunder. Further, the adoption and maintenance
of the Plan shall not be construed as creating any contract of employment
between the Company and any Participant. The Plan shall not affect the right of
the Company to deal with any Participants in employment respects, including
their hiring, discharge, compensation, and conditions of employment.

        6.6 Rules and Procedures. The Company may from time to time establish
rules and procedures which it determines to be necessary for the proper
administration of the Plan and the benefits payable to an individual in the
event that individual is declared incompetent and a conservator or other person
legally charged with that individual's care is appointed. Except as otherwise
provided herein, when the Company determines that such individual is unable to
manage his or her financial affairs, the Company may pay such individual's
benefits to such conservator, person legally charged with such individual's
care, or institutions contributing toward or providing for the care and
maintenance of such individual. Any such payment shall constitute a complete
discharge of any liability of the Company and the Plan to such individual.

        6.7 Change of Control. Notwithstanding any provision to the contrary, in
the event of a Change of Control, as defined herein, Participants shall receive
their Deferred Compensation Accounts in a single lump sum payment as soon as
administratively feasible following the date of the Change of Control. The term
"Change of Control" means the occurrence of any of the following events with
respect to the Company: (1) any person (as the term is used in section 13(d) and
14(d) of the Securities Exchange Act of 1934 (the "Exchange Act") is or becomes
the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly of securities of the Company representing 33.33% or more of the
Company's outstanding voting securities; (2) individuals who are members of the
Board of Directors of the Company on the date hereof (the "Incumbent Board")
cease for any reason to constitute at least a majority thereof, provided that
any person becoming a director subsequent to the date hereof whose election was
approved by a vote of at least two thirds of the directors comprising the
Incumbent Board, or whose nomination for election by the Company's stockholders
was approved by the nominating committee serving under an Incumbent Board, shall
be considered a member of the Incumbent Board; (3) a reorganization, merger,
consolidation, sale of all or substantially all of the assets of the Company or
a similar transaction in which the Company is not the resulting entity (unless
the continuing ownership requirements clause (4) below are met with respect to
the resulting entity); or (4) a merger or consolidation of the Company with any
other corporation other than a merger or consolidation in which the voting
securities of the Company outstanding immediately prior thereto represent at
least 66.67% of the total voting power represented by the voting securities of
the Company or the surviving entity outstanding immediately after such merger or
consolidation. The term "Change of Control" shall not include: (1) an
acquisition of securities by an employee benefit plan of the Company; or (2) any
of the above mentioned events or occurrences which require but do not receive
the requisite government or regulatory approval to bring the event or occurrence
to fruition.

        6.8 Information. Each Participant shall keep the Company informed of his
or her current address and the current address of his or her Designated
Beneficiary. The Company shall not be obligated to search for any person. If
such person is not located within three (3) years after



                                       10


the date on which payment of the Participant's benefits payable under the Plan
may first be made, payment may be made as though the Participant or his or her
Designated Beneficiary had died at the end of such three-year period.

        6.9 Loss. Notwithstanding any provision herein to the contrary, neither
the Company nor any individual acting as an employee or agent of the Company
including the trustee of the Trust shall be liable to any Participant, any
Participant's Designated Beneficiary, or any other person for any claim, loss,
liability or expense incurred in connection with the Plan, unless attributable
to fraud or willful misconduct on the part of the Company or any such employee
or agent of the Company.

        6.10 Indemnification. The Company shall indemnify and hold harmless the
members of the Board of Directors, the trustee of the Trust and any other
persons to whom any responsibility with respect to the Plan is allocated or
delegated, from and against any and all liabilities, costs and expenses,
including attorneys' fees, incurred by such persons as a result of any act, or
omission to act, in connection with the performance of their duties,
responsibilities and obligations under the Plan and under ERISA, other than such
liabilities, costs and expenses as may result from the bad faith, willful
misconduct or criminal acts of such persons or to the extent such
indemnification is specifically prohibited by ERISA. The Company shall have the
obligation to conduct the defense of such persons in any proceeding to which
this Section applies. If any Board member or any person covered by this
indemnification clause determines that the defense provided by the Company is
inadequate, that member or person shall be entitled to retain separate legal
counsel for his or her defense and the Company shall be obligated to pay for all
reasonable legal fees and other court costs incurred in the course of such
defense unless a court of competent jurisdiction finds such person has acted in
bad faith or engaged in willful misconduct or criminal acts.

        6.11 Trust Matters. The Company's obligations under the Plan with
respect to Deferred Compensation Accounts may be satisfied with Trust assets
distributed pursuant to the terms of the Plan and any such distribution shall
reduce the Company's corresponding obligation under the Plan with respect
thereto. The provisions of the Plan shall govern the rights of a Participant to
receive distributions pursuant to the Plan. The provisions of the Trust shall
govern the rights of the Company, Participants and the creditors of the Company
to the assets transferred to, invested by, and held in the Trust. The Company
shall at all times remain liable to carry out its obligations under the Plan.
Except for amendments to the Trust to comply with applicable laws, no amendment
or modification shall be made to the Trust with respect to the Plan without the
prior written consent of all Participants in the Plan who have Deferred
Compensation Accounts.

        6.12 Applicable Law. All questions pertaining to the construction,
validity and effect of the Plan shall be determined in accordance with the laws
of the State of California.



                                       11


        IN WITNESS WHEREOF, ITLA Capital Corporation has caused this Plan to be
executed on this 13th day of November, 2003.

By /s/ JEFFREY L. LIPSCOMB
   --------------------------------------
   Jeffrey L. Lipscomb, member of the
       Board of Directors
   Chairman of the Compensation Committee

On behalf of ITLA Capital Corporation



                                       12

EX-10.3(B)

                                                       Exhibit 10.3b


               ITLA CAPITAL CORPORATION CONSOLIDATED NONQUALIFIED
                           (EMPLOYER SECURITIES ONLY)
                           DEFERRED COMPENSATION PLAN

                           (Effective January 1, 2003)

ITLA Capital Corporation, a Delaware business corporation, has adopted the ITLA
Capital Corporation Consolidated Nonqualified (Employer Securities Only)
Deferred Compensation Plan (the "Plan") effective as of January 1, 2003. The
Plan is an unfunded plan, hereby adopted, established and maintained by ITLA
Capital Corporation (the "Company") for the purpose of providing benefits for
certain individuals as provided herein.

                                    ARTICLE I

                           ELIGIBILITY TO PARTICIPATE

        1.1 Eligibility to Participate. For purposes of Title I of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), the Plan is
limited to a select group of management or highly compensated employees, and
shall at all times remain unfunded.

        1.2 Designated Participants. An executive or senior management employee
of the Company (which shall include for employment and compensation purposes all
other related employers of the Company under Section 414 of the Internal Revenue
Code of 1986, as amended (the "Code")) is eligible to become a Participant in
the Plan provided such employee is designated as a Participant below or such
employee is later designated by the Compensation Committee of the Board of
Directors of the Company and such designation is attached as a written amendment
to the Plan signed by a duly authorized officer of the Company. Under no
circumstance shall an employee below the level of First Vice President be
eligible to participate in the Plan. The following individuals shall constitute
the eligible Participants as of the Plan's effective date:

George W. Haligowski (effective January 1997)
Norval L. Bruce (effective January 1997)
Timothy Doyle (effective January 1997)
Steven Romelt (effective January 1997)
Don Nickbarg (effective May 2000)
William Schack (effective January 2002)
Scott Wallace (effective January 2002)
Lewis Horwitz  (effective October 2002)
Arthur Stribley (effective October 2002)
William Callam (effective January 2003)

Once an employee becomes a Participant, he or she shall remain a Participant
until all benefits to which he or she (or to the individual the Participant
designates as his or her "Designated Beneficiary" in such Participant's
designation of beneficiary form) is entitled to under the Plan have been paid.
To the extent George Haligowski's Employment Agreement dated July 28,2000 (as
the same may be thereafter amended).



                                       1


differs from the terms of the Plan, George Haligowski's Employment Agreement
shall be the controlling document.

        1.3 Written Deferral Election. The individuals described in Section 1.2
shall be eligible to participate in the Plan and may do so by filing a written
deferral election with the Company in a form approved by the Company. In the
first year in which a Participant becomes eligible to participate in the Plan,
the newly eligible Participant may make an election to defer compensation for
services to be performed subsequent to the election within thirty (30) days
after the date the person becomes eligible. For all other years, elections to
defer payment of compensation must be made before the beginning of the calendar
year for which the compensation is payable. Notwithstanding the foregoing, no
deferred elections shall be permitted under the Plan for calendar year 2003.
However, transfers to the Plan from the ITLA Capital Corporation Consolidated
Non-Qualified (Non-Employer Securities) Deferred Compensation Plan (the
"Non-Employer Securities Deferred Compensation Plan") shall be permitted during
calendar year 2003 relating to actual or deemed investments in ITLA Capital
Corporation stock as provided in the Non-Employer Securities Deferred
Compensation Plan.

        1.4 Deferred Compensation Account. For each individual electing to
participate in the Plan, the Company shall establish and maintain a Deferred
Compensation Account. The amount of each Participant's deferred compensation
shall be credited to his or her Deferred Compensation Account no later than the
end of the month following the month in which the compensation would otherwise
have been paid to the Participant or his or her Designated Beneficiary. The
Participant's Deferred Compensation Account shall be invested solely in ITLA
Capital Corporation stock. The Deferred Compensation Account shall be reduced
for any distributions and withdrawals made under the Plan to a Participant
including tax and other withholdings. Any Participant to whom an amount is
credited under the Plan shall be deemed a general, unsecured creditor of the
Company.

        1.5 Amount of Deferrals. Each Participant may defer all or any portion
of the compensation otherwise payable to him or her by the Company for the
calendar year beginning after the date of said election (or for the remaining
portion of the first year of participation) as specified in said written
election to the Company, and the amounts so deferred by a Participant shall be
distributed only as provided in the Plan. In no event shall the amount of
compensation deferred by a Participant under the Plan and the Non-Employer
Securities Deferred Compensation Plan exceed the amount needed to satisfy
employment tax and other required payroll withholdings. A Participant may change
the amount of, or suspend, future deferrals with respect to compensation
otherwise payable to him or her for calendar years beginning after the date of
change or suspension as specified by written notice to the Company. If a
Participant elects to suspend deferrals, the Participant may make a new election
to again become a Participant in the Plan. Any new election to defer payment of
compensation must be made before the beginning of the next calendar year for
which the compensation is payable. The election to defer shall be irrevocable as
to the deferred compensation for the calendar year for which the election is
made. In no event may a Participant suspend or change the amount of deferrals
for a calendar year once the calendar year has commenced.

                                   ARTICLE II



                                       2


                              DEFERRED COMPENSATION

        2.1 Contributions to, Investments by, and Withdrawals from Trust. Within
thirty (30) days after each calendar month, the Company shall transfer into the
ITLA Capital Corporation Rabbi Trust (the "Trust") an amount in cash or a number
of shares of ITLA Capital Corporation stock (based upon the closing sale price
as of the most recent trading day preceding the contribution date) equal to the
total amount of all Participant deferrals under the Plan for the preceding
calendar month. All cash contributions to the Trust shall, as soon as
practicable, be invested solely in ITLA Capital Corporation stock. All cash
dividends received on shares of ITLA Capital Corporation stock held by the Trust
shall be reinvested in ITLA Capital Corporation stock (other than cash
representing fractional interests). To satisfy tax and other withholding
obligations of the Company relating to a Participant's Deferred Compensation
Account under the Plan, the Trust shall timely deliver to the Company a
sufficient number of shares of ITLA Capital Corporation stock from a
Participant's Deferred Compensation Account (based upon the closing sale price
on the most recent trading day prior to the date of delivery) equal to
withholding obligation, and the Participant's Deferred Compensation Account
shall be reduced by such number of shares so delivered.

                                   ARTICLE III

                                  DISTRIBUTION

        3.1 Distribution of Deferred Compensation Accounts. On the first day of
the month next following the date on which a Participant's employment with the
Company and all other related employers of the Company (as determined under
Section 414 of the Code) terminates for any reason including death, distribution
of the Participant's Deferred Compensation Account in accordance with the Plan
shall commence in accordance with one of the alternatives set forth below as
selected by the Participant. A Participant's initial selection of the method of
distribution shall be made in writing at the time the Participant first elects
to defer compensation under the Plan for any given calendar year. Any such
selection may be subsequently changed by a Participant by delivering a new
written election to the Company (such new written election shall automatically
revoke any prior written election). However, the most recent written election
received by the Company prior to the thirteenth (13th) month before the
Participant's termination of employment with the Company shall be controlling
and any written election received within thirteen (13) months prior to the
Participant's termination of employment with the Company shall be disregarded.
The alternative forms of distribution shall be:

                a) a single lump sum distribution of the Participant's Deferred
                Compensation Account;

                b) five annual installments with the first installment (1/5 of
                the Participant's Deferred Compensation Account) being
                distributed on the first day of the month next following the
                Participant's termination of employment and subsequent annual
                installments being made on each annual anniversary of the first
                distribution date (1/4 of the Participant's Deferred
                Compensation Account on the




                                       3


                second distribution date); or

                c) ten annual installments with the first installment (1/10 of
                the Participant's Deferred Compensation Account being
                distributed on the first day of the month next following the
                Participant's termination of employment) and subsequent annual
                installments being made on each annual anniversary of the first
                distribution date (1/9 of the Participant's Deferred
                Compensation Account on the second distribution date).

If the Participant fails to select a distribution method in writing,
distribution shall be made in a single lump sum. All distributions shall be made
solely in shares of ITLA Capital Corporation stock (except for cash in lieu of
fractional share interests). All such distributions from the Plan shall comply
with all applicable federal and state securities laws. All distributions under
the Plan shall be less applicable tax and other required or authorized
withholdings. Notwithstanding the distribution election made by a Participant
and notwithstanding that distributions have commenced in installments, the
distribution of the Participant's total remaining Deferred Compensation Account
shall be made in a single lump sum upon a Change of Control or termination of
the Plan.

        3.2 Participant's Death. If a Participant should die before full
distribution of his or her Deferred Compensation Account, such Participant's
remaining Deferred Compensation Account shall be distributed to the
Participant's Designated Beneficiary by the method designated by the Participant
in his or her most recent written election delivered to the Company at least
thirteen (13) months prior to his or her termination of employment with the
Company. Any written election received by the Company within thirteen (13)
months of the Participant's termination of employment with the Company shall be
disregarded. If a Participant has no Designated Beneficiary at the time of
death, then, notwithstanding any provision herein to the contrary, his or her
remaining Deferred Compensation Account shall be distributed to such
Participant's estate in a single lump sum distribution as soon as
administratively feasible following such Participant's death.

        3.3 Advance Distribution for Financial Hardship. In the event a
Participant incurs an Unforeseeable Financial Emergency, such Participant may
make a written request to the Company for a hardship withdrawal from his or her
Deferred Compensation Account established under the Plan, provided that the
entire amount requested by the Participant is not reasonably available from
other resources. The amount of the withdrawal will be net of applicable tax and
other required or authorized withholdings. An "Unforeseeable Financial
Emergency" shall mean an unforeseeable, severe financial hardship to such
Participant resulting from a sudden and unexpected illness or accident of the
Participant or a family member of the Participant, loss of property of the
Participant due to casualty, or other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the control of the
Participant. Withdrawals due to an unforeseeable emergency are only permitted to
the extent reasonably needed to satisfy the emergency need. This Section shall
be interpreted in a manner consistent with Section 1 .457-2(h)(4) and 1
..457-2(h)(5) of the Treasury Regulations. The Compensation Committee of the
Board of Directors of the Company shall determine in its sole discretion whether
an advance withdrawal shall be permitted due to an Unforeseeable Financial
Emergency. The Participant's



                                       4


Deferred Compensation Account shall be reduced by the amount of any advance
distribution for hardship including withholdings.



                                       5


        3.4 Change of Control. Upon a Change of Control of the Company, as
defined in Section 6.7 of the Plan, the Deferred Compensation Accounts of all
Participants shall be paid in a single lump sum distribution of shares of ITLA
Capital Corporation stock as soon as practicable to the Participants or to the
Designated Beneficiaries of any deceased Participants.

        3.5 Distribution for Tax Purposes. Anything herein to the contrary
notwithstanding, if, at any time, the Compensation Committee of the Board of
Directors of the Company determines that an amount in a Participant's Deferred
Compensation Account is includable in the gross income of the Participant and
subject to withholding tax, the Compensation Committee shall permit a lump sum
distribution in kind from the Participant's Deferred Compensation Account equal
in value to (a) the amount of withholding tax applicable to the phantom gross
income deemed received by the Participant from his or her Deferred Compensation
Account for income and/or employment tax purposes plus (b) the withholding tax
applicable to the amounts under subpart(a) and this subpart (b) constituting
gross income to the Participant for income and/or employment tax purposes. The
in kind distribution shall be made from the Trust to the Company to satisfy the
withholding tax obligation and the Participant's Deferred Compensation Account
shall be reduced by the number of shares of ITLA Capital Corporation stock so
distributed for withholding tax obligations.

        3.6 Limitation on Distribution to Covered Employees. Notwithstanding any
other provision of the Plan, in the event that the Participant is a "covered
employee" as defined in Section 162(m)(3) of the Code, or would be a covered
employee if the Participant's Deferred Compensation Account were distributed in
accordance with the other provisions of Article III, the maximum amount (based
upon the fair market value of the shares of ITLA Capital Corporation stock
distributed on the distribution date) which may be distributed from the
Participant's Deferred Compensation Account in any Plan Year shall not exceed
one million ($1,000,000) less the amount of compensation paid by the Company to
the Participant in such Plan Year which is not "performance-based" (as defined
in Code Section 162(m)(4)(C)). The amount of compensation which is not
"performance-based" shall be reasonably determined by the Company at the time of
the proposed distribution. Any amount which is not distributed to the
Participant in a Plan Year as a result of the limitation set forth in this
Section 3.6 shall be distributed to the Participant in the next Plan Year,
subject to compliance with the foregoing limitations set forth in this Section
3.6. The provisions of this Section 3.6 shall not apply if the Compensation
Committee of the Board of Directors of the Company, upon consultation with legal
counsel, determines that the restrictions of Code Section 162(m) do not apply to
the limit the deductibility of distributions made under the Plan (or otherwise
by the Company) to the Participant.

                                   ARTICLE IV

                        AMENDMENT AND TERMINATION OF PLAN

        4.1 Amendment or Termination. The Company intends the Plan to remain in
existence until all Participants in the Plan have received all of their benefits
payable under the Plan. The Company, however, reserves the right to amend or
terminate the Plan when, in the sole opinion of the Company, such amendment or
termination is advisable. Any such amendment or



                                       6


termination shall be made pursuant to a resolution of the Compensation Committee
of the Board of Directors of the Company. No amendment or termination of the
Plan shall reduce the number of shares of ITLA Capital Corporation stock
credited to the Participant's Deferred Compensation Account below the balance
immediately prior to the effective date of the resolution amending or
terminating the Plan or delay the distribution date for the Participant's
Deferred Compensation Account.

        4.2 Distribution on Termination. Upon termination of the Plan, the
Deferred Compensation Accounts of all Participants shall be paid in kind, in a
single lump sum distribution as soon as practicable following the effective date
of the Plan termination.

                                    ARTICLE V

                                CLAIMS PROCEDURE

        5.1 Claims Procedure. An initial claim for benefits under the Plan must
be made by the Participant or his or her Designated Beneficiary to the Claims
Reviewer which shall be the Compensation Committee of the Board of Directors of
the Company (unless another person or organizational unit is designated by the
Company as Claims Reviewer), in accordance with the terms of this Claims
Procedure. Not later than 90 days after receipt of such a claim, the Claims
Reviewer will render a written decision on the claim to the claimant, unless
special circumstances require the extension of such 90-day period. If such
extension is necessary, the Claims Reviewer shall provide the Participant or his
or her Designated Beneficiary with written notification of such extension before
the expiration of the initial 90-day period. Such notice shall specify the
reason or reasons for such extension and the date by which the final decision
can be expected. In no event shall such extension exceed a period of 90 days
from the end of the initial 90-day period. In the event the Claims Reviewer
denies the claim of a Participant or his or her Designated Beneficiary in whole
or in part, the Claims Reviewer's written notification shall specify, in a
manner calculated to be understood by the claimant, the reason for the denial; a
reference to the Plan or other document or form that is the basis for the
denial; a description of any additional material or information necessary for
the claimant to perfect the claim; an explanation as to why such information or
material is necessary; and an explanation of the applicable claims procedure.
Should the claim be denied in whole or in part and should the claimant be
dissatisfied with the Claim's Reviewer's disposition of the claimant's claim,
the claimant may have a full and fair review of the claim by the Company upon
written request therefor submitted by the claimant or the claimant's duly
authorized representative and received by the Company within 60 days after the
claimant receives written notification that the claimant's claim has been
denied. In connection with such review, the claimant or the claimant's duly
authorized representative shall be entitled to review pertinent documents and
submit the claimant's views as to the issues in writing. The Company shall act
to deny or accept the claim within 60 days after receipt of the claimant's
written request for review unless special circumstances require the extension of
such 60-day period. If such extension is necessary, the Company shall provide
the claimant with written notification of such extension before the expiration
of such initial 60-day period. In all events, the Company shall act to deny or
accept the claim within 120 days of the receipt of the claimant's written
request for review. The action of the Company shall be in the form of a written
notice to the claimant and its contents shall



                                       7


include all of the requirements for action on the original claim. In no event
may a claimant commence legal action for benefits the claimant believes are due
the claimant until the claimant has exhausted all of the remedies and procedures
afforded the claimant by this Article V.

                                   ARTICLE VI

                                 ADMINISTRATION

        6.1 Unsecured Claims. The right of a Participant or a Participant's
Designated Beneficiary to receive a distribution hereunder shall be an unsecured
claim against the general assets of the Company, and neither a Participant nor
his or her Designated Beneficiary shall have any rights in or against any amount
credited to any Deferred Compensation Account under the Plan or any other assets
of the Company. The Plan at all times shall be considered entirely unfunded both
for tax purposes and for purposes of Title I of ERISA, as amended. Any assets or
investments hereunder shall continue for all purposes to be part of the general
assets of the Company and available to its general creditors in the event of
bankruptcy or insolvency. Deferred Compensation Accounts under the Plan and any
benefits which may be distributable pursuant to the Plan are not subject in any
manner to anticipation, sale, alienation, transfer, assignment, pledge,
encumbrance, attachment, or garnishment by creditors of the Participant or a
Participant's Designated Beneficiary. The Plan constitutes a mere unsecured
promise by the Company to make benefit distributions in the future. No interest
or right to receive a benefit may be taken, either voluntarily or involuntarily,
for the satisfaction of the debts of, or other obligations or claims against,
such person or entity, including claims for alimony, support, separate
maintenance and claims in bankruptcy proceedings.

        6.2 Plan Administration. The Plan shall be administered by the
Compensation Committee of the Board of Directors of the Company, which shall
have the authority, duty and power to interpret and construe the provisions of
the Plan as the Compensation Committee deems appropriate including the authority
to determine eligibility for benefits under the Plan. The Compensation Committee
shall have the duty and responsibility of maintaining records, making the
requisite calculations and disbursing benefits hereunder. The interpretations,
determinations, regulations and calculations of the Compensation Committee shall
be final and binding on all persons and parties concerned. The Compensation
Committee may delegate any of its duties of Plan Administration to such
employees or other persons as it deems appropriate.

        6.3 Expenses. Expenses of administration shall be paid by the Company.
The Compensation Committee of the Board of Directors of the Company shall be
entitled to rely on all tables, certificates, opinions, data and reports
furnished by any accountant, controller, counsel or other person employed or
retained by the Company with respect to the Plan.

        6.4 Statements. The Compensation Committee of the Board of Directors of
the Company shall furnish individual annual or more frequent statements to each
Participant, or each Designated Beneficiary currently receiving benefits, in
such form as determined by the Compensation Committee or as required by law. The
Compensation Committee may delegate the duty to provide such statements to the
trustee of the Trust.



                                       8


        6.5 No Enlargement of Rights. The sole rights of a Participant or
Designated Beneficiary under the Plan shall be to have the Plan administered
according to its provisions, to receive whatever benefits he or she may be
entitled to hereunder, and nothing in the Plan shall be interpreted as a
guaranty that any assets or funds in any trust which may be established in
connection with the Plan or assets of the Company will be sufficient to pay any
benefits hereunder. Further, the adoption and maintenance of the Plan shall not
be construed as creating any contract of employment between the Company and any
Participant. The Plan shall not affect the right of the Company to deal with any
Participants in employment respects, including their hiring, discharge,
compensation, and conditions of employment.

        6.6 Rules and Procedures. The Company may from time to time establish
rules and procedures which it determines to be necessary for the proper
administration of the Plan and the benefits payable to an individual in the
event that individual is declared incompetent and a conservator or other person
legally charged with that individual's care is appointed. Except as otherwise
provided herein, when the Company determines that such individual is unable to
manage his or her financial affairs, the Company may distribute such
individual's benefits to such conservator, person legally charged with such
individual's care, or institutions contributing toward or providing for the care
and maintenance of such individual. Any such distribution shall constitute a
complete discharge of any liability of the Company and the Plan to such
individual.

        6.7 Change of Control. Notwithstanding any provision to the contrary, in
the event of a Change of Control, as defined herein, Participants shall receive
their Deferred Compensation Accounts in a single lump sum distribution as soon
as administratively feasible following the date of the Change of Control. The
term "Change of Control" means the occurrence of any of the following events
with respect to the Company: (1) any person (as the term is used in section
13(d) and 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act") is
or becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly of securities of the Company representing 33.33% or
more of the Company's outstanding voting securities; (2) individuals who are
members of the Board of Directors of the Company on the date hereof (the
"Incumbent Board") cease for any reason to constitute at least a majority
thereof, provided that any person becoming a director subsequent to the date
hereof whose election was approved by a vote of at least two thirds of the
directors comprising the Incumbent Board, or whose nomination for election by
the Company's stockholders was approved by the nominating committee serving
under an Incumbent Board, shall be considered a member of the Incumbent Board;
(3) a reorganization, merger, consolidation, sale of all or substantially all of
the assets of the Company or a similar transaction in which the Company is not
the resulting entity (unless the continuing ownership requirements clause (4)
below are met with respect to the resulting entity); or (4) a merger or
consolidation of the Company with any other corporation other than a merger or
consolidation in which the voting securities of the Company outstanding
immediately prior thereto represent at least 66.67% of the total voting power
represented by the voting securities of the Company or the surviving entity
outstanding immediately after such merger or consolidation. The term "Change of
Control" shall not include: (1) an acquisition of securities by an employee
benefit plan of the Company; or (2) any of the above mentioned events or
occurrences which require but do not receive the requisite government or
regulatory approval to bring the event or occurrence to fruition.



                                       9

        6.8 Information. Each Participant shall keep the Company informed of his
or her current address and the current address of his or her Designated
Beneficiary. The Company shall not be obligated to search for any person. If
such person is not located within three (3) years after the date on which
distribution of the Participant's benefits payable under the Plan may first be
made, distribution may be made as though the Participant or his or her
Designated Beneficiary had died at the end of such three-year period.

        6.9 Loss. Notwithstanding any provision herein to the contrary, neither
the Company nor any individual acting as an employee or agent of the Company
including the trustee of the Trust shall be liable to any Participant, any
Participant's Designated Beneficiary, or any other person for any claim, loss,
liability or expense incurred in connection with the Plan, unless attributable
to fraud or willful misconduct on the part of the Company or any such employee
or agent of the Company.

        6.10 Indemnification. The Company shall indemnify and hold harmless the
members of the Board of Directors, the trustee of the Trust and any other
persons to whom any responsibility with respect to the Plan is allocated or
delegated, from and against any and all liabilities, costs and expenses,
including attorneys' fees, incurred by such persons as a result of any act, or
omission to act, in connection with the performance of their duties,
responsibilities and obligations under the Plan and under ERISA, other than such
liabilities, costs and expenses as may result from the bad faith, willful
misconduct or criminal acts of such persons or to the extent such
indemnification is specifically prohibited by ERISA. The Company shall have the
obligation to conduct the defense of such persons in any proceeding to which
this Section applies. If any Board member or any person covered by this
indemnification clause determines that the defense provided by the Company is
inadequate, that member or person shall be entitled to retain separate legal
counsel for his or her defense and the Company shall be obligated to pay for all
reasonable legal fees and other court costs incurred in the course of such
defense unless a court of competent jurisdiction finds such person has acted in
bad faith or engaged in willful misconduct or criminal acts.

        6.11 Trust Matters. The Company's obligations under the Plan with
respect to Deferred Compensation Accounts may be satisfied with Trust assets
distributed in kind pursuant to the terms of the Plan and any such distribution
shall reduce the Company's corresponding obligation under the Plan with respect
thereto. The provisions of the Plan shall govern the rights of a Participant to
receive distributions pursuant to the Plan. The provisions of the Trust shall
govern the rights of the Company, Participants and the creditors of the Company
to the assets transferred to, invested by, and held in the Trust. The Company
shall at all times remain liable to carry out its obligations under the Plan.
Except for amendments to the Trust to comply with applicable laws, no amendment
or modification shall be made to the Trust with respect to the Plan without the
prior written consent of all Participants in the Plan who have Deferred
Compensation Accounts.

        6.12 Applicable Law. All questions pertaining to the construction,
validity and effect of the Plan shall be determined in accordance with the laws
of the State of California.



                                       10


        IN WITNESS WHEREOF, ITLA Capital Corporation has caused the Plan to be
executed on this 13th day of November, 2003.

By /s/ JEFFREY L. LIPSCOMB
   ------------------------------
   Jeffrey L. Lipscomb, Member of the Board
     of Directors
   Chairman of the Compensation Committee

On behalf of ITLA Capital Corporation



                                       11

EX-10.10

                                                                   EXHIBIT 10.10

                            ITLA CAPITAL CORPORATION
                     SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
                           (Effective January 1, 1997)
               Amended as of January 28, 2000 and January 1, 2003

                                    Preamble

ITLA Capital Corporation, a Delaware corporation, has adopted the ITLA
Supplemental Executive Retirement Plan, effective January 1, 1997, as amended as
of January 28, 2000 and January 1, 2003, for a select group of executives and
senior management personnel to ensure that the overall effectiveness of the
Company's executive compensation program will attract, retain and motivate
qualified executives and senior management personnel.

                                    ARTICLE I

                                   DEFINTTIONS

        When used herein, the following words shall have the meanings below
unless the context clearly indicates otherwise:

        1.1 "Applicable Measurement Period" means the period of time since the
last day investment credit had been previously allocated on the Participant's
Change in Control Cash Account Balance under Section 5.2.

        1.2 "Change in Control" means the occurrence of any of the following
events with respect to the Company: (1) any person (as the term is used in
section 13(d) and 14(d) of the Securities Exchange Act of 1934 (the "Exchange
Act") is or becomes the beneficial owner (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly of securities of the Company representing
33.33% or more of the Company's outstanding voting securities; (2) individuals
who are members of the Board of Directors of the Company on the date hereof (the
"Incumbent Board") cease for any reason to constitute at least a majority
thereof, provided that any person becoming a director subsequent to the date
hereof whose election was approved by a vote of at least two thirds of the
directors comprising the Incumbent Board, or whose nomination for election by
the Company's stockholders was approved by the nominating committee serving
under an Incumbent Board, shall be considered a member of the Incumbent Board;
(3) a reorganization, merger, consolidation, sale of all or substantially all of
the assets of the Company or a similar transaction in which the Company is not
the resulting entity (unless the continuing ownership requirements clause (4)
below are met with respect to the resulting entity); or (4) a merger or
consolidation of the Company with any other corporation other than a merger or
consolidation in which the voting securities of the Company outstanding
immediately prior thereto represent at least 66.67% of the total voting power
represented by the voting securities of the Company or the surviving entity
outstanding immediately after such merger or consolidation. The term "Change in
Control" shall not include: (1) an acquisition of securities by an employee
benefit plan of the Company; or (2) any of the above mentioned events or
occurrences which require but do not receive the requisite government or
regulatory approval to bring the event or occurrence to fruition.





        1.3 "Change in Control Cash Account Balance" means, with respect to a
Participant, a credit to a Participant under the Plan on the records of the
Company equal to the Initial Change in Control Cash Balance plus amounts
credited pursuant to Section 5.2. The Change in Control Cash Account Balance, if
applicable, shall be a bookkeeping entry only and shall be utilized solely as a
device for the measurement and determination of the cash amounts to be paid to a
Participant, or his or her Designated Beneficiary, pursuant to the Plan.

        1.4 "Claims Reviewer" means the Compensation Committee of the Board of
Directors of the Company, unless another person or organizational unit is
designated by the Company as Claims Reviewer.

        1.5 "Company" means ITLA Capital Corporation, a Delaware corporation,
and any successor thereto. For purposes of determining whether a Participant is
employed by, or received Earnings from, the Company at any particular time, the
term "Company" shall also include any entity that would be treated as a single
employer with the Company under Section 414 of the Internal Revenue Code of
1986, as amended.

        1.6 "Company Stock" means the Company's designated Recognition and
Retention Plan shares, treasury shares and publicly traded common stock
including publicly traded common stock of a successor in interest.

        1.7 "Designated Beneficiary" means the individual the Participant
designates as his or her Beneficiary in such Participant's Supplemental
Executive Retirement Plan designation of beneficiary form.

        1.8 "Disability" means total and permanent disability as defined in the
Company's long term disability plan.

        1.9 "Earnings" means the Participant's base annual salary from the
Company (without regard to any deferral election made by the Participant and/or
any bonuses paid to the Participant).

        1.10 "Haligowski Employment Agreement" means that certain employment
agreement between the Company and George Haligowski dated January 28, 2000, as
the same may be thereafter amended.

        1.11 "Initial Change in Control Cash Balance" means, with respect to a
Participant, the unsecured obligation of the Company that is intended to
represent a cash amount based upon the conversion of his Stock Account Balance
to cash on the day next following the consummation of a Change in Control
pursuant to a Participant's election, or an automatic conversion, under Section
5.1, in exchange for the cancellation of his or her Vested Stock Account
Balance, equal to the number of shares of Company Stock allocated to his or her
Vested Stock Account Balance as of the consummation of the Change in Control
multiplied by the cash value of the per share merger consideration to be
received in the Change in Control transaction as of the date of consummation of
the Change in Control (i.e., in the case of a common stock for



                                       2


common stock exchange, the exchange ratio multiplied by the closing sales price
of the acquiror's common stock on the date of the consummation of the Change in
Control (or if such day is not a trading day, then on the last trading day prior
thereto) with the amount thereby determined being multiplied by the number of
shares of Company Stock allocated to a Participant's Stock Vested Account
Balance as of the consummation of such Change in Control).

        1.12 "Participant" means any employee of the Company who meets the
eligibility requirements of Article II and is designated and approved for
participation in the Plan as set forth in Article II.

        1.13 "Participant's Account" or "Account" means the Vested Stock Account
Balance or Change in Control Cash Account Balance of each Participant, whichever
is applicable.

        1.14 "Plan" means the ITLA Capital Corporation Supplemental Executive
Retirement Plan, as set forth herein and as amended from time-to-time.

        1.15 "Plan Year" means the calendar year.

        1.16 "Retirement Date" means the later of the date a Participant leaves
the employ of the Company or the date upon which the Participant attains the age
of 62.

        1.17 "Stock Account Balance" means, with respect to a Participant, the
number of shares of Company Stock allocated to a Participant, whether vested or
unvested, under the Plan.

        1.18 "Trust" means the Trust under the Company Rabbi Trust Agreement.

        1.19 "Trustee" means Union Bank of California or any other person or
corporation selected by the Company to serve in such capacity of the Trust.

        1.20 "Vested Stock Account Balance" means, with respect to a
Participant, the number of vested shares of Company Stock credited to the Stock
Account Balance of a Participant.

        1.21 "Vesting Cycle" means one the following of seven consecutive three
calendar year periods: (1) January 1, 1997 through December 31, 1999; (2)
January 1, 2000 through December 31, 2002; (3) January 1, 2003 through December
31, 2005; (4) January 1, 2006 through December 31, 2008; (5) January 1,2009
through December 31, 2011; (6) January 1, 2012 through December 31, 2014 and (7)
January 1, 2015 through December 31, 2017.

                                   ARTICLE II

                           ELIGIBILITY TO PARTICIPATE

        2.1 Eligibility to Participate. For purposes of Title I of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), the Plan is
limited to a select group of management and highly compensated employees.



                                       3


        2.2 Designated Participants. An executive or senior management employee
of the Company is eligible to become a Participant in the Plan; provided such
employee is designated as a Participant below or, such employee is later
designated as a Participant by the Compensation Committee of the Board of
Directors of the Company and, such designation is attached as a written
amendment to the Plan signed by a duly authorized officer of the Company. Under
no circumstance shall an employee below the level of Managing Director or Senior
Vice President be eligible to participate in the Plan. The following individuals
are Participants in the Plan as of January 1, 2003.

George W. Haligowski (effective January 1997)
Norval L. Bruce (effective January 1997)
Timothy Doyle (effective January 1997)
Steven Romelt (effective January 1997)
Don Nickbarg (effective May 2000)
William Schack (effective January 2002)
Scott Wallace (effective January 2002)
William Callam (effective January 2003)

Once an employee becomes a Participant, he or she shall remain a Participant
until all benefits, if any, to which he or she (or his or her Designated
Beneficiary) is entitled under the Plan have been distributed.

                                   ARTICLE III

                  ELIGIBILITY FOR AND DISTRIBUTION OF BENEFITS

        3.1 Eligibility for Benefits. Each Participant shall be eligible to
receive his or her Vested Stock Account Balance or Change in Control Cash
Account Balance, whichever is applicable, under the Plan as provided in Sections
3.3 and 3.4 below. Except as set forth in Sections 3.5 and 6.1 below, no
benefits shall be payable from the Plan to a Participant while such Participant
is employed by the Company.

        3.2 Incidents of Ownership. Notwithstanding the above, a Participant
shall have no incidents of ownership with respect to the Company Stock or any
other assets held under the Plan. A Participant shall not have any right to vote
shares of Company Stock allocated or credited to the Participant's Stock Account
Balance under the Plan.

        3.3 Form of Distribution. A Participant's Vested Stock Account Balance
shall be distributed solely in Company Stock. A Participant's Change in Control
Cash Account Balance shall be distributed solely in cash.

        3.4 Election and Timing of Distribution. Except as provided in Sections
3.5 and 6.1, a Participant's Account shall be distributed either in a single
lump sum distribution, five (5) annual installments or ten (10) annual
installments in accordance with the written election of such Participant. Such
written election must be in form acceptable to the Compensation



                                       4



Committee of the Board of Directors of the Company and shall not be effective
until received by the Compensation Committee. A Participant's election may be
changed at any time by filing a new written election (which shall automatically
revoke his or her prior written election) with the Compensation Committee of the
Board of Directors of the Company, which election shall become effective upon
its receipt by the Compensation Committee; provided however, the most recent
written election received prior to the thirteenth (13th) month before the
Participant's termination of employment shall be controlling and any written
election received within the thirteen (13) month period immediately preceding
the Participant's termination of employment shall be disregarded; and provided
further, that the first written election made under the Plan by a Participant in
calendar year 2003 and received by the Compensation Committee prior to January
1, 2004 shall in all cases be honored unless timely revoked thereafter by a new
binding written election. If no written election is made, then the Participant's
Account shall be paid in a single lump sum distribution. A single lump sum
distribution shall be made within forty-five (45) days after a Participant's
termination of employment. In the case of an annual installment method (5 or 10
year term), the first annual distribution shall be made on the first day of the
calendar month next following the one year anniversary of the Participant's
termination of employment (1/5 or 1/10 of the Participant's Account, whichever
is applicable), and subsequent annual installments will be made on each annual
anniversary of the first distribution (1/4 or 1/9 of the Participant's Account
on the second distribution date, whichever is applicable). All distributions
under the Plan shall be less applicable tax and other required or authorized
withholdings. The Trust shall timely deliver to the Company a sufficient number
of shares of Company Stock from a Participant's Vested Stock Account Balance
(based upon the closing price of the most recent trading date prior to the date
of delivery) or cash from his or her Change in Control Cash Account Balance to
satisfy the withholding obligations of such Participant. All distributions of
Company Stock shall comply with federal and state securities laws.

        3.5 Advance Distribution for Financial Hardship. With the consent of the
Compensation Committee of the Board of Directors of the Company, and
notwithstanding anything contained in Section 3.4 to the contrary, a Participant
may withdraw up to one hundred percent (100%) of his or her Vested Stock Account
Balance (in shares) or Change in Control Cash Account Balance (in cash), in each
case less applicable tax and other required or authorized withholdings, prior to
termination of employment as may be required to meet a Participant's
Unforeseeable Financial Emergency (as defined herein), provided that the entire
amount requested by the Participant is not reasonably available from other
resources of the Participant. An "Unforeseeable Financial Emergency" shall mean
an unforeseeable, severe financial condition resulting from (1) a sudden and
unexpected illness or accident of the Participation or an immediate family
member of the Participant; (2) loss of the Participant's property due to
casualty; or (3) other similar extraordinary and unforeseeable circumstances
arising as a result of events beyond the control of the Participant. The
withdrawal must be necessary to satisfy the Unforeseeable Financial Emergency
and no more may be withdrawn from the Participant's Account than is required to
relieve the financial need after taking into account other resources that are
reasonably available to the Participant for this purpose. The Participant must
certify that the financial need cannot be relieved through any other reasonable
sources, including but not limited to, reimbursement or compensation by
insurance or otherwise, liquidation of the Participant's assets, to the extent
such liquidation would not itself cause an immediate and heavy financial need or
by borrowing from commercial sources on reasonable commercial terms. This
Section 3.5 shall be interpreted in a manner consistent with Section
1.457-2(h)(4), (5) of the Treasury Regulations. The Participant's Account shall
be reduced by the amount of any advance distribution for financial hardship
including withholdings.



                                       5




        3.6 Limitation on Distribution to Covered Employees. Notwithstanding any
other provision of the Plan, in the event that the Participant is a "covered
employee" as defined in Section 1 62(m)(3) of the Internal Revenue Code of 1986,
as amended (the "Code"), or would be a covered employee if the benefits were
distributed in accordance with Section 3.5 or 6.1, the maximum amount which may
be distributed from the Participant's Account under Section 3.5 or 6.1 in any
Plan Year shall not exceed one million dollars ($1,000,000) less the amount of
compensation paid by the Company to the Participant in such Plan Year which is
not "performance-based" (as defined in Code Section 162(m)(4)(C)). The amount of
compensation which is not "performance-based" shall be reasonably determined by
the Company at the time of the proposed distribution. Any amount which is not
distributed to the Participant in a Plan Year as a result of the limitation set
forth in this Section 3.6 shall be distributed to the Participant in the next
Plan Year, subject to compliance with the foregoing limitation set forth in this
Section 3.6. The provisions of this Section 3.6 shall not apply if the
Compensation Committee of the Board of Directors of the Company, upon
consultation with legal counsel, determines that the restrictions of Code
Section 162(m) do not apply to limit the deductibility of distributions made
under the Plan (or otherwise by the Company) to the Participant.

                                   ARTICLE IV

                ALLOCATION AND FUNDING OF STOCK ACCOUNT BALANCES

        4.1 Allocation to Stock Account Balances. Shares of Company Stock under
the Plan are allocated to a Participant's Stock Account Balance on an annual
basis on or within ninety (90) days of the last day of the Plan Year. A
Participant must be employed by the Company as of the last day of the Plan Year
in order to receive an allocation of shares for such Plan Year under this
Section 4.1 and Section 4.2. The amount of Company Stock allocated to a
Participant's Stock Account Balance pursuant to this Section 4.1 and Section 4.2
shall be determined using the fair market value of the Company Stock as of
October 8, 1998, of nine dollars ($9.00) a share.

        4.2 Allocation Amounts. The annual amount allocated to a Participant
pursuant to Section 4.1 shall be calculated as follows, subject to approval of
the allocation by the Compensation Committee of the Board of Directors of the
Company and the award of sufficient shares of Company Stock to fund the annual
allocation:

                -       The annual amount shall be equal to 20% of each such
                        Participant's Earnings (except in the case of George
                        Haligowski, 33 1/3% of his Earnings) for the Plan Year.

Notwithstanding the preceding sentences, the Compensation Committee of the Board
of Directors of the Company may approve a greater or lesser award for any
Participant or determine that no award is appropriate for a Participant. In no
event, however, shall the total number of shares of Company Stock allocated
under the Plan (excluding reinvestments under Section 4.3 and stock dividends
and distributions) exceed the issued Recognition and Retention Plan shares to be
allocated under the Plan.



                                       6


        4.3 Contribution to Trust and Reinvestment of Cash Dividends. The
Company shall contribute shares of Company Stock to the Trust on an annual basis
in an amount equal to the total annual allocation for all Participants for the
Plan Year as determined under Section 4.2 to the extent that the Compensation
Committee of the Board of Directors of the Company approves such funding. The
contributed shares shall come from the issued Recognition and Retention Plan
shares approved for such use by the shareholders in the Company's Recognition
and Retention Plan. All Recognition and Retention Plan terms pertaining to the
granting of the shares shall remain in full force and effect. The Plan shall be
funded with Recognition and Retention Plan shares only to the extent that shares
are available and the shares are awarded by the Compensation Committee of the
Board of Directors of the Company.

The number of shares of Company Stock allocated to each Participant's Stock
Account Balance under the Plan for a Plan Year under Sections 4.1 and 4.2 shall
be determined by dividing the Participant's allocation amount for such Plan Year
as determined in Section 4.2 above by the fair market value of Company Stock on
October 8, 1998, of nine dollars ($9.00) a share. If the available Recognition
and Retention Plan shares should be insufficient to cover the allocation amounts
for all Participants for any Plan Year as determined under Section 4.2 above,
the allocation amounts shall be reduced for each Participant on a pro rata
basis.

Stock dividends and distributions on shares of Company Stock allocated to a
Participant's Stock Account Balance shall be added to the Participant's Stock
Account Balance with the portion allocated to unvested shares being subject to
the same vesting requirements of the underlying shares. All cash dividends
received on shares of Company Stock allocated to a Participant's Stock Account
Balance, whether vested or unvested, shall be reinvested by the Trustee in
shares of Company Stock (rounded to the nearest whole share), such additional
shares shall be added to the Participant's Stock Account Balance, and the
Participant shall at all times be fully vested in such reinvestments.

        4.4 Special Allocation Upon Change of Control. In the event of a pending
Change of Control, the Company shall, on the business day next preceding the
consummation of the Change in Control, credit the Stock Account Balance of each
Participant in the employ of the Company on such date (or who has been
terminated involuntarily by action of the Company within the three months
preceding such date, unless such termination is for cause as defined in the
Company's Change of Control Severance Agreements) as follows:

                -       Each such Participant's Stock Account Balance shall be
                        credited with a number of shares of Company Stock, based
                        upon the average high and low quoted sales price of such
                        stock on the trading day next preceding the day the
                        shares are credited, such that the additional shares
                        credited in total value equal 60% of the Participant's
                        Earnings for the prior Plan Year (plus in the case of
                        George Haligowski, such additional shares to fund the
                        obligation set forth in Section 4(e) of the Haligowski
                        Employment Agreement); and

                -       The number of credited shares shall be contributed to
                        the Trust.

The number of shares to be contributed and allocated pursuant to this Section
4.4 is subject to the



                                       7


limitations set forth in Section 4.5. In the event the pending Change in Control
is abandoned or terminated after the contribution and allocation of shares
pursuant to this Section 4.4, then in that event, the shares contributed and
allocated pursuant to this Section 4.4 shall be forfeited as of the date of
abandonment or termination.



                                       8


        4.5 Reduction of Special Allocation. If the available Recognition and
Retention Plan shares are insufficient to fund the contribution and allocation
under Section 4.4, such contribution and allocation shall be reduced for each
Participant on a pro rata basis.

        4.6 Vesting. A Participant shall only have a vested right to the shares
allocated to his or her Stock Account Balance for a Vesting Cycle under Sections
4.1 and 4.2 (and any stock dividends and distributions relating thereto) if such
Participant is employed by the Company on the last day of the Vesting Cycle.
Notwithstanding the preceding sentence, a Participant shall be 100% vested in
all shares allocated to his or her Stock Account Balance under Sections 4.1 and
4.2 (including any stock dividends distributions relating thereto) in the event
of the consummation of a Change of Control (if he or she is employed immediately
prior to the Change in Control) or termination of employment due to death,
Disability or after Retirement Date. A Participant shall be vested in all shares
allocated to his or her Stock Account Balance under Section 4.4 upon the
consummation of the Change in Control. A Participant shall at all times be 100%
vested in reinvestments in Company Stock allocated to his or her Stock Account
Balance under Section 4.3. A Participant employed by the Company on the date of
termination of the Plan shall also be 100% vested in his or her Stock Account
Balance upon Plan termination. Notwithstanding the foregoing or anything
contained elsewhere in the Plan, a Participant's Vested Stock Account Balance
shall be subject to forfeiture as provided in Section 7.1.

        4.7 Forfeiture. In the event a Participant leaves the employ of the
Company prior to a Change in Control and before the end of a Vesting Cycle for
reasons other than death, Disability or after Retirement Date, all shares
allocated to his or her Stock Account Balance under Section 4.1 and 4.2
(including stock dividends and distributions relating thereto) for that Vesting
Cycle shall be forfeited. Shares allocated to a Participant's Stock Account
Balance under Section 4.4 shall be forfeited upon the abandonment or termination
of the pending Change in Control. Forfeited shares shall be returned to the
Company and may be reallocated to satisfy future contributions under Sections
4.1 through 4.4. Notwithstanding the foregoing or anything contained elsewhere
in the Plan, the Vested Stock Account Balance of a Participant shall be subject
to forfeiture as provided in Section 7.1.

        4.8 No Further Contributions after a Change in Control. No further
contributions of Company Stock shall be made under Sections 4.1 and 4.2 after a
Change in Control.

                                    ARTICLE V

   CONVERSION TO INITIAL CHANGE IN CONTROL CASH BALANCE AND INVESTMENT CREDITS

        5.1 Procedure for Conversion. Within 30 days prior to the consummation
of a Change in Control, a Participant (including a Participant or Designated
Beneficiary who is then receiving installment distributions of Company Stock
pursuant to Section 3.4) may make a written election to convert his or her
Vested Stock Account Balance to the Initial Change in Control Cash Balance as of
the day next following the Change in Control. Such written election must be
received by the Compensation Committee of the Board of Directors of the Company
within such 30 day period. If such written election is timely made, then on the
day next following the Change in



                                       9


Control, the Vested Stock Account Balance of the electing Participant shall
terminate and his or her benefits under the Plan shall then consist solely of
his or her Change in Control Cash Account Balance. In the event the Change in
Control transaction results in the exchange of the outstanding shares of common
stock of the Company for consideration other than publicly traded shares of the
acquiror (and cash in lieu of fractional share interests), then in that event,
immediately following the consummation of the Change in Control the Stock
Account Balance of each Participant shall be automatically converted to the
Initial Change in Control Cash Balance. Nothing herein shall alter the method of
distribution of a Participant's Account (i.e., lump sum, five (5) year
installments or ten (10) year installments) under Section 3.4.

        5.2 Investment Credits. Each Participant's Change in Control Cash
Account Balance shall be credited with an investment credit through the close of
business on each of (i) the last day of the Plan Year and (ii) the day next
preceding the date of any distribution of benefits to the Participant from his
or her Change in Control Cash Account Balance. The investment credit shall be
determined by multiplying either (a) the average yield on the 10 year constant
maturity U.S. Treasury Securities, as published in the Federal Reserve
Statistical Release, determined by taking the average yield for the last active
trading day of each calendar month during the Applicable Measurement Period
times the average daily balance in the Participant's Change in Control Cash
Account Balance for such Applicable Measurement Period or (b) 125% of the
annualized average cost of funds of Imperial Capital Bank (or its successor in
interest) during the Applicable Account Period times the average daily balance
in the Participant's Change in Control Cash Account Balance for such Applicable
Measurement Period, whichever results in the highest yield, with the yield being
applied on a pro-rata basis for any Applicable Measurement Period that is less
than one year.

        5.3 Trust Provisions. As soon as practicable following the consummation
of a Change in Control (but not later than 30 days after the occurrence
thereof), the Company shall contribute cash to the Trust in an amount equal to
the Initial Change in Control Cash Account Balance of each Participant whose
Vested Stock Account Balance is converted pursuant to Section 5.1, and shares
contained in the Stock Account Balance of each such Participant shall be tended
by the Trustee to the Company in cancellation of such Stock Account Balance. The
preceding sentence shall not apply, if the shares of Company Stock in the Stock
Account Balance of a Participant are exchanged for cash in the Change in Control
transaction. To the extent that the actual earnings of a Participant's Change in
Control Cash Account Balance, based upon investments of the Trust, exceed the
amount of investment credit to be allocated to a Participant's Change in Control
Cash Account Balance pursuant to Section 5.2, the excess shall be distributed by
the Trust to the Company. To the extent that such actual earnings are less than
the investment credit to be allocated to a Participant's Change in Control Cash
Account Balance, the shortfall shall be promptly contributed in cash to the
Trust by the Company.

        5.4 Vested Benefits. The Change in Control Cash Account Balance of each
Participant shall be 100% vested at all times and shall not be subject to
forfeiture.



                                       10


                                   ARTICLE VI

                            AMENDMENT AND TERMINATION

        6.1 Amendment or Termination. The Company intends the Plan to remain in
existence until all Participants in the Plan have received all of their benefits
payable under the Plan. The Company, however, reserves the right to amend or
terminate the Plan prior to a Change in Control when, in the sole opinion of the
Company, such amendment or termination is advisable. Any such amendment or
termination shall be made pursuant to a resolution of the Compensation Committee
of the Board of Directors of the Company. No amendment or termination of the
Plan shall directly or indirectly reduce any Participant's Account below the
balance of such Account immediately prior to the effective date of the
resolution amending or terminating the Plan; nor shall any amendment or
termination of the Plan delay the distribution date for the Participant's
Account. Upon termination of the Plan any unvested shares of Company Stock
allocated to the Stock Account Balance of a Participant who is then employed by
the Company shall become fully vested. Notwithstanding anything contained in
Section 3.4 to the contrary, upon termination of the Plan all Participant
Accounts (including those Accounts which are then being distributed to
Participants or Designated Beneficiaries in installments) shall be paid in a
single lump sum distribution within 30 days after such termination but subject
to the limitations set forth in Section 3.6, regardless of the distribution
elections made by the Participants. Distribution of Stock Account Balances shall
be made solely in shares of Company Stock and distribution of Change in Control
Cash Account Balances, if applicable, shall be made solely in cash. No amendment
to (other than to comply with law) or termination of the Plan will be permitted
to be made by the Company after a Change in Control without the written consent
of all Participants including Participants or Designated Beneficiaries then
receiving distributions.

                                   ARTICLE VII

                                 ADMINISTRATION

        7.1 Termination of Benefits. Notwithstanding any other provision of the
Plan, the rights of a Participant or his or her Designated Beneficiary to
benefits under the Plan will, at the discretion of the Compensation Committee of
Board of Directors, be terminated, and the Company will have no obligation
hereunder to such Participant or his or her Designated Beneficiary, if such
Participant is discharged from employment from the Company for cause (as defined
in the Company's Change of Control Severance Agreements) prior to a Change in
Control.

        7.2 Unsecured Claims. The right of a Participant or his or her
Designated Beneficiary to receive a benefit hereunder shall be an unsecured
claim against the general assets of the Company, and neither a Participant nor
his or her Designated Beneficiary shall have any rights in or against any shares
or amount credited to any Accounts under this Plan or any other assets of the
Company. Notwithstanding any other provisions to the contrary, the Plan at all
times shall be considered entirely unfunded both for tax purposes and for
purposes of Title I of ERISA as amended. Any assets or investments hereunder
shall continue for all purposes to be part of the general assets of the Company
and available to its general creditors in the event of bankruptcy or



                                       11


insolvency. Accounts under this Plan and any benefits which may be payable
pursuant to this Plan are not subject in any manner to anticipation, sale,
alienation, transfer, assignment, pledge, encumbrance, attachment, or
garnishment by creditors of a Participant or his or her Designated Beneficiary.
The Plan constitutes a mere unsecured promise by the Company to make benefit
distributions in the future. No interest or right to receive a benefit may be
taken, either voluntarily of involuntarily, for the satisfaction of the debts
of, or other obligations or claims against, such person or entity, including
claims for alimony, support, separate maintenance and claims in bankruptcy
proceedings.

        7.3 Plan Administration. The Plan shall be administered by the
Compensation Committee of the Board of Directors of the Company, which shall
have the authority, duty and power to interpret and construe the provisions of
the Plan as the Compensation Committee deems appropriate including the authority
to determine eligibility for benefits under the Plan. The Compensation Committee
shall have the duty and responsibility of maintaining records, making the
requisite calculations and distributions hereunder. The interpretations,
determinations, regulations and calculations of the Compensation Committee shall
be final and binding on all persons and parties concerned. The Compensation
Committee may delegate any of its duties to an employee or employees of the
Company or other persons as it deems appropriate.

        7.4 Expenses. Expenses of administration shall be paid by the Company.
The Compensation Committee of the Board of Directors of the Company shall be
entitled to rely on all tables, valuations, certificates, opinions, data and
reports furnished by any actuary, accountant, controller, counsel or other
person employed or retained by the Company with respect to the Plan.

        7.5 Statements. The Compensation Committee of the Board of Directors of
the Company (or the Trustee if such duty is delegated to the Trustee) shall
furnish individual annual or more frequent statements of accrued benefits to
each Participant (or if the Participant's Designated Beneficiary is currently
receiving benefits under the Plan, to such Participant's Designated Beneficiary)
in such form as determined by the Compensation Committee of the Board of
Directors of the Company or as required by the law.

        7.6 No Enlargement of Rights. The sole rights of a Participant or his or
her Designated Beneficiary under the Plan shall be to have this Plan
administered according to its provisions, to receive whatever benefits he or she
may be entitled to hereunder, and nothing in the Plan shall be interpreted as a
guaranty that any assets or funds in any trust which may be established in
connection with the Plan or assets of the Company will be sufficient to pay any
benefit hereunder. Further, the adoption and maintenance of this Plan shall not
be construed as creating any contract of employment between the Company and the
Participant. The Plan shall not affect the right of the Company to deal with any
Participants in employment respects, including their hiring, discharge,
compensation and conditions of employment.

        7.7 Rules and Procedures. The Company may from time to time establish
rules and procedures which it determines to be necessary for the proper
administration of the Plan and the benefits payable to an individual in the
event that individual is declared incompetent and a conservator or other person
legally charged with that individual's care is appointed. Except as



                                       12


otherwise provided herein, when the Company determines that such individual is
unable to manage his or her financial affairs, the Company may pay such
individual's benefits to such conservator, person legally charged with such
individual's care, or institution then contributing toward or providing for the
care and maintenance of such individual. Any such distribution shall constitute
a complete discharge of any liability of the Company, the Plan, the Trust and
the Trustee to such individual.

        7.8 Information. Each Participant shall keep the Company informed of his
or her current address and the current address of his or her Designated
Beneficiary. The Company shall not be obligated to search for any person. If
such person(s) is (are) not located within three (3) years after the date on
which distribution of the Participant's benefits payable under this Plan may
first be made, distribution may be made as though the Participant or his or her
Designated Beneficiary had died at the end of such three-year period.

        7.9 Loss. Notwithstanding any provision herein to the contrary, neither
the Company nor any individual acting as an employee or agent of the Company
including the Trustee shall be liable to any Participant, his or her Designated
Beneficiary, or any other person for any claim, loss, liability or expense
incurred in connection with the Plan, unless attributable to fraud or willful
misconduct on the part of the Company or any such employee or agent of the
Company.

        7.10 Indemnification. The Company shall indemnify and hold harmless the
members of the Board of Directors, the Trustee, and any other persons to whom
any responsibility with respect to the Plan is allocated or delegated, from and
against any and all liabilities, costs and expenses, including attorneys' fees,
incurred by such persons as a result of any act, or omission to act, in
connection with the performance of their duties, responsibilities and
obligations under the Plan and under ERISA, other than such liabilities, costs
and expenses as may result from the bad faith, willful misconduct or criminal
acts of such persons or to the extent such indemnification is specifically
prohibited by ERISA. The Company shall have the obligation to conduct the
defense of such persons in any proceeding to which this Section applies. If any
Board member or any person covered by this indemnification clause determines
that the defense provided by the Company is inadequate, that member or person
shall be entitled to retain separate legal counsel for his or her defense and
the Company shall be obligated to pay for all reasonable legal fees and other
court costs incurred in the course of such defense unless a court of competent
jurisdiction finds such person has acted in bad faith or engaged in willful
misconduct or criminal acts.

        7.11 Trust Matters. The Company's obligations under the Plan with
respect to the Accounts may be satisfied with Trust assets distributed pursuant
to the terms of the Plan and any such distribution shall reduce the Company's
corresponding obligation under the Plan with respect to the Accounts. The
provisions of the Plan shall govern the rights of a Participant to receive
distributions pursuant to the Plan. The provisions of the Trust shall govern the
rights of the Company, Participants and the creditors of the Company to the
assets transferred to and/or held by the Trust. The Company shall at all times
remain liable to carry out its obligations under the Plan. Except for amendments
to the Trust to comply with applicable laws, no amendment or modification shall
be made to the Trust without the prior written consent of all Participants who
have Accounts.



                                       13


        7.12 Applicable Law. All questions pertaining to the construction,
validity and effect of the Plan shall be determined in accordance with the laws
of the State of California.

                                  ARTICLE VIII

                                CLAIMS PROCEDURE

        8.1 Claims Procedure. An initial claim for benefits under the Plan must
be made by the Participant or his or her Designated Beneficiary in accordance
with the terms of the Plan through which the benefits are provided. Not later
than 90 days after receipt of such a claim, the Claims Reviewer will render a
written decision on the claim to the claimant, unless special circumstances
require the extension of such 90-day period. If such extension is necessary, the
Claims Reviewer shall provide the Participant or his or her Designated
Beneficiary with written notification of such extension before the expiration of
the initial 90-day period. Such notice shall specify the reason or reasons for
such extension and the date by which the final decision can be expected. In no
event shall such extension exceed a period of 90 days from the end of the
initial 90-day period. In the event the Claims Reviewer denies the claim of a
Participant or his or her Designated Beneficiary in whole or in part, the Claims
Reviewer's written notification shall specify, in a manner calculated to be
understood by the claimant, the reason for the denial; a reference to the Plan
or other document or form that is the basis for the denial; a description of any
additional material or information necessary for the claimant to perfect the
claim; an explanation as to why such information or material is necessary; and
an explanation of the applicable claims procedure. Should the claim be denied in
whole or in part and should the claimant be dissatisfied with the Claim's
Reviewer's disposition of the claimant's claim, the claimant may have a full and
fair review of the claim by the Company upon written request therefore submitted
by the claimant or the claimant's duly authorized representative and received by
the Company within 60 days after the claimant receives written notification that
the claimant's claim has been denied. In connection with such review, the
claimant or the claimant's duly authorized representative shall be entitled to
review pertinent documents and submit the claimant's views as to the issues, in
writing. The Company shall act to deny or accept the claim within 60 days after
receipt of the claimant's written request for review unless special
circumstances require the extension of such 60-day period. If such extension is
necessary, the Company shall provide the claimant with written notification of
such extension before the expiration of such initial 60-day period. In all
events, the Company shall act to deny or accept the claim within 120 days of the
receipt of the claimant's written request for review. The action of the Company
shall be in the form of a written notice to the claimant and its contents shall
include all of the requirements for action on the original claim. In no event
may a claimant commerce legal action for benefits the claimant believes are due
the claimant until the claimant has exhausted all of the remedies and procedures
afforded the claimant by this Article VIII.



                                       14


ITLA Capital Corporation has caused this Plan to be executed on this 13th day
of November 2003 (but effective January 1, 2003).

                                     By /s/ JEFFREY L. LIPSCOMB
                                        ----------------------------------------
                                     Name Jeffrey L. Lipscomb, Member of the
                                            Board of Directors
                                          Chairman of the Compensation Committee
                                         ---------------------------------------
                                     On behalf of ITLA Capital Corporation



                                       15

EX-31.1

exv31w1

EX-31.2

exv31w2

EX-32

exv32