Edgar Filing: IMPERIAL CAPITAL BANCORP, INC.

form10-q0608.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

R	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2008

£	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 1-33199

	IMPERIAL CAPITAL BANCORP, INC.
	(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 Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes R No £.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “larger accelerated filer,” “accelerated filer” and “small reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer £ Accelerated Filer R

Non-Accelerated Filer £ (Do not check if a smaller reporting company) Smaller reporting company £

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes £ No R.

Number of shares of common stock of the registrant: 5,428,760 outstanding as of July 25, 2008.

IMPERIAL CAPITAL BANCORP, INC.

FORM 10-Q

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2008

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets – June 30, 2008 (Unaudited) and December 31, 2007	3
	Consolidated Statements of Income – Three and Six Months Ended June 30, 2008 and 2007 (Unaudited)	4
	Consolidated Statements of Cash Flows – Six Months Ended June 30, 2008 and 2007 (Unaudited)	5
	Notes to the 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	30
Item 4.	Controls and Procedures	31

PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33
Item 3.	Defaults Upon Senior Securities	34
Item 4.	Submission of Matters to a Vote of Security Holders	34
Item 5.	Other Information	34
Item 6.	Exhibits	34
	Signatures	35

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 our competitors’ loan and other products, loan demand risks, the quality or composition of our loan or investment portfolios, increased costs from pursuing the national expansion of our lending platform and operational challenges inherent in implementing this expansion strategy, fluctuations in interest rates, and changes in the relative differences between short- and long-term interest rates, conditions in the commercial and residential real estate markets, levels of non-performing assets and other loans of concern, and operating results, capital and credit market conditions, the economic impact of any 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 any 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 2008 and beyond to differ materially from those expressed in any forward-looking statements by, or on behalf of, us, and could negatively affect the Company’s operating and stock price performance.

As used throughout this report, the terms “we”, “our”, “us”, or the “Company” refer to Imperial Capital Bancorp, Inc. and its consolidated subsidiaries.

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PART I – FINANCIAL INFORMATION

IMPERIAL CAPITAL BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

	June 30,
	2008			December 31,
	(unaudited)			2007
	(in thousands, except share data)
Assets
Cash and cash equivalents	$	4,922		$	8,944
Investment securities available-for-sale, at fair value		106,434			117,924
Investment securities held-to-maturity, at amortized cost		914,433			159,023
Stock in Federal Home Loan Bank		62,025			53,497
Loans, net (net of allowance for loan losses of $51,159 and $47,783 as of June 30, 2008 and December 31, 2007, respectively)		2,914,301			3,125,072
Interest receivable		22,044			20,841
Other real estate and other assets owned, net		20,912			19,396
Premises and equipment, net		8,745			8,550
Deferred income taxes		13,651			12,148
Other assets		32,715			25,824
Total assets	$	4,100,182		$	3,551,219

Liabilities and Shareholders’ Equity
Liabilities:
Deposit accounts	$	2,492,526		$	2,181,858
Federal Home Loan Bank advances and other borrowings		1,260,707			1,021,235
Accounts payable and other liabilities		34,433			33,959
Junior subordinated debentures		86,600			86,600
Total liabilities		3,874,266			3,323,652

Commitments and contingencies

Shareholders’ equity:
Preferred stock, 5,000,000 shares authorized, none issued		—			—
Contributed capital - common stock, $.01 par value; 20,000,000 shares authorized, 9,146,256 and 9,142,256 issued as of June 30, 2008 and December 31, 2007, respectively		85,286			85,009
Retained earnings		258,126			255,947
Accumulated other comprehensive (loss) income, net		(1,956	)		267
		341,456			341,223
Less treasury stock, at cost 4,112,832 and 3,995,634 shares as of June 30, 2008 and December 31, 2007, respectively		(115,540	)		(113,656	)

Total shareholders' equity		225,916			227,567

Total liabilities and shareholders' equity	$	4,100,182		$	3,551,219

See accompanying notes to the unaudited consolidated financial statements.

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IMPERIAL CAPITAL BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


	For the Three Months Ended June 30,					For the Six Months Ended June 30,

	2008			2007		2008			2007
	(in thousands, except per share data)
Interest income:
Loans, including fees	$	49,921		$	58,464	$	104,756		$	117,227
Cash and investment securities		13,446			4,519		17,695			9,088

Total interest income		63,367			62,983		122,451			126,315

Interest expense:
Deposit accounts		24,302			27,485		49,385			54,073
Federal Home Loan Bank advances and other borrowings		12,494			11,593		24,412			22,270
Junior subordinated debentures		1,798			2,088		3,803			4,166

Total interest expense		38,594			41,166		77,600			80,509

Net interest income before provision for loan losses		24,773			21,817		44,851			45,806

Provision for loan losses		6,250			500		10,500			1,250

Net interest income after provision for loan losses		18,523			21,317		34,351			44,556

Non-interest income:
Late and collection fees		196			236		415			539
Loss on sale of loans		(531	)		—		(479	)		—
Other		(814	)		607		(817	)		1,020

Total non-interest income		(1,149	)		843		(881	)		1,559

Non-interest expense:
Compensation and benefits		5,695			5,056		12,559			11,238
Occupancy and equipment		1,914			1,998		3,856			3,941
Other		5,081			4,849		9,765			9,145

Total general and administrative		12,690			11,903		26,180			24,324

Real estate and other assets owned expense, net		259			195		687			358
Provision for losses on real estate and other assets owned		478			—		1,105			—
Loss on sale of real estate and other assets owned, net		63			—		463			—

Total real estate and other assets owned expense, net		800			195		2,255			358

Total non-interest expense		13,490			12,098		28,435			24,682

Income before provision for income taxes		3,884			10,062		5,035			21,433
Provision for income taxes		1,534			4,024		1,988			8,658

NET INCOME	$	2,350		$	6,038	$	3,047		$	12,775

Basic earnings per share	$	0.43		$	1.10	$	0.56		$	2.32

Diluted earnings per share	$	0.43		$	1.08	$	0.56		$	2.26

Dividends declared per share of common stock	$	—		$	0.16	$	0.16		$	0.32

See accompanying notes to the unaudited consolidated financial statements.

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IMPERIAL CAPITAL BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

	For the Six Months Ended June 30,
	2008			2007
	(in thousands)
Cash Flows From Operating Activities:
Net Income	$	3,047		$	12,775
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of premises and equipment		1,458			1,495
(Accretion) amortization of discounts and premiums on loans and investment securities		(985	)		2,327
Accretion of deferred loan origination fees, net of costs		(820	)		(1,389	)
Provision for loan losses		10,500			1,250
Provision for losses on other real estate owned		1,105			—
Other, net		(481	)		(1,186	)
(Increase) decrease in interest receivable		(1,203	)		223
(Increase) decrease in other assets		(6,891	)		369
Increase (decrease) in accounts payable and other liabilities		474			(8,157	)

Net cash provided by operating activities		6,204			7,707

Cash Flows From Investing Activities:
Purchases of investment securities available-for-sale		(10,143	)		(59,029	)
Proceeds from maturity and calls of investment securities available-for-sale		18,558			43,288
Purchases of investment securities held-to-maturity		(784,619	)		—
Proceeds from the maturity and redemption of investment securities held-to-maturity		31,615			17,991
Increase in stock in Federal Home Loan Bank		(6,930	)		—
Purchase of loans		—			(47,343	)
Proceeds from sale of loans		53,797			—
Other decreases (increases) in loans, net		135,642			(74,853	)
Proceeds from sale of other real estate owned		5,986			—
Cash paid for capital expenditures		(1,702	)		(2,483	)
Proceeds from sale of equipment		71			—

Net cash used in investing activities		(557,725	)		(122,429	)

Cash Flows From Financing Activities:
Proceeds and excess tax benefits from exercise of employee stock options		71			2,462
Cash paid to acquire treasury stock		(1,884	)		(7,124	)
Cash paid for dividends		(828	)		(1,675	)
Increase in deposit accounts		310,668			99,022
Repayments from short-term borrowings		(2,600	)		(3,498	)
Proceeds from long-term borrowings		414,000			100,000
Repayments of long-term borrowings		(171,928	)		(68,240	)

Net cash provided by financing activities		547,499			120,947

Net (decrease) increase in cash and cash equivalents		(4,022	)		6,225
Cash and cash equivalents at beginning of period		8,944			30,448

Cash and cash equivalents at end of period	$	4,922		$	36,673

Supplemental Cash Flow Information:
Cash paid during the period for interest	$	73,906		$	80,597
Cash paid during the period for income taxes	$	194		$	7,337
Non-Cash Investing and Financing Transactions:
Loans transferred to other real estate owned	$	9,070		$	11,134
Cash dividends declared but not yet paid	$	—		$	836

See accompanying notes to the unaudited consolidated financial statements.

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IMPERIAL CAPITAL BANCORP, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – BASIS OF PRESENTATION

The unaudited consolidated financial statements of Imperial Capital Bancorp, Inc. and subsidiaries (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 the dates and for the interim periods indicated. The unaudited consolidated financial statements include the accounts of Imperial Capital Bancorp, Inc. and its wholly-owned subsidiaries, Imperial Capital Bank (the “Bank”) and Imperial Capital Real Estate Investment Trust (“Imperial Capital REIT”).

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 periods. The results of operations for the three and six months ended June 30, 2008 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, 2007.

NOTE 2 – ACCOUNTING FOR STOCK-BASED COMPENSATION

Effective January 1, 2006, the Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 123 (revised 2004), “Share-Based Payment”, which requires the recognition of the expense related to the fair value of stock-based compensation awards within the consolidated statement of income. Stock-based compensation expense for the three and six months ended June 30, 2008 and 2007 includes compensation expense for stock-based compensation awards for which the requisite service was performed during the period. Compensation expense for unvested stock-based compensation awards granted prior to January 1, 2006 are based on the grant date fair value estimated in accordance with the original provisions of SFAS No. 123, “Accounting for Stock-Based Compensation”. Compensation expense for all stock-based compensation awards granted subsequent to January 1, 2006 are based on the grant date fair value estimated in accordance with the provisions of SFAS No. 123(R).

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Total stock-based compensation expense included in our consolidated statements of income for the three and six months ended June 30, 2008 was approximately $83,000 ($73,000, net of tax, or $0.01 per diluted share) and $167,000 ($146,000, net of tax, or $0.03 per diluted share), respectively. For the three and six months ended June 30, 2007, these amounts were $39,000 ($23,000, net of tax, or $0.00 per diluted share) and $58,000 ($35,000, net of tax, or $0.01 per diluted share), respectively. Unrecognized stock-based compensation expense related to stock options was approximately $627,000 and $363,000, respectively, at June 30, 2008 and 2007. The weighted-average period over which the unrecognized expense was expected to be recognized was 1.9 years and 2.5 years at June 30, 2008 and 2007, respectively.

The fair value of each option grant is estimated on the date of grant using a Black-Scholes option pricing model. No options were granted during the six months ended June 30, 2008. The weighted-average assumptions for option grants during the six months ended June 30, 2007 were:

		Weighted-Average Assumptions for Option Grants 2007

Dividend Yield		1.18%
Expected Volatility		23.83%
Risk-Free Interest Rates		4.72%
Expected Lives		Five Years
Weighted-Average Fair Value		$14.49

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. Stock options outstanding as of June 30, 2008 and 2007 were 550,650 and 498,900, respectively. For the three and six months ended June 30, 2008, 533,650 and 514,050, respectively, of these options outstanding were excluded from the diluted EPS computation as their effect was anti-dilutive, compared to 94,500 and 63,250, respectively, for the same periods last year.

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

	Net Income		Weighted- Average Shares Outstanding		Per Share Amount
	(in thousands, except per share data)
For the Three Months Ended June 30,
2008
Basic EPS	$	2,350		5,429	$	0.43
Effect of dilutive stock options		—		2		(0.00	)
Diluted EPS	$	2,350		5,431	$	0.43

2007
Basic EPS	$	6,038		5,489	$	1.10
Effect of dilutive stock options		—		124		(0.02	)
Diluted EPS	$	6,038		5,613	$	1.08

For the Six Months Ended June 30,
2008
Basic EPS	$	3,047		5,427	$	0.56
Effect of dilutive stock options		—		12		(0.00	)
Diluted EPS	$	3,047		5,439	$	0.56

2007
Basic EPS	$	12,775		5,509	$	2.32
Effect of dilutive stock options		—		139		(0.06	)
Diluted EPS	$	12,775		5,648	$	2.26

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						Six Months Ended
	June 30,						June 30,
	2008			2007			2008			2007
	(in thousands)

Net Income	$	2,350		$	6,038		$	3,047		$	12,775
Other comprehensive loss:
Change in net unrealized gains (loss) on investment securities available-for-sale, net of tax benefit of $1,515 and $557 for the three months ended June 30, 2008 and 2007, respectively, and $1,482 and $313 for the six months ended June 30, 2008 and 2007, respectively.		(2,272	)		(835	)		(2,223	)		(469	)

Comprehensive Income	$	78		$	5,203		$	824		$	12,306

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NOTE 5 – IMPAIRED LOANS RECEIVABLE

As of June 30, 2008 and December 31, 2007, the recorded investment in impaired loans was $125.6 million and $47.0 million, respectively. The average recorded investment in impaired loans was $111.7 million and $88.0 million, respectively, for the three and six months ended June 30, 2008, and $41.9 million and $39.9 million, respectively, for the same periods last year. Interest income recognized on impaired loans totaled $169,000 and $361,000 respectively, for the three and six months ended June 30, 2008, as compared to $213,000 and $406,000, respectively, for the same periods last year.

NOTE 6 – FAIR VALUE

The Company adopted the provisions of SFAS No. 157 as of January 1, 2008, for financial instruments. Although the adoption of SFAS No. 157 did not materially impact its financial condition or results of operations, the Company is now required to provide additional disclosures as part of its financial statements. In accordance with FASB Staff Position No. 157-2, "Effective Date of FASB Statement No. 157," the Company will delay application of SFAS No. 157 for non-financial assets and non-financial liabilities, until January 1, 2009.

SFAS No. 157 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

Investment securities available-for sale are reported at fair value utilizing Level 1 inputs with respect to valuing equity securities with quoted prices on an active market, Level 2 inputs for investment and debt securities, and Level 3 inputs related to the valuation of the Company’s residual interest in securitized loans. The valuation for investment and debt securities utilizing Level 2 inputs were primarily determined by an independent pricing service using matrix pricing, which is a mathematical technique widely used in the industry to value securities without relying exclusively on quoted market prices for the specific securities, but rather by relying on the securities’ relationship to other benchmark quoted securities.

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The Company’s assets measured at fair value on a recurring basis subject to the disclosure requirements of SFAS No. 157 at June 30, 2008, were as follows:

Assets and Liabilities Measured at Fair Value on a Recurring Basis at June 30, 2008
	Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Balance at June 30, 2008
	(dollars in thousands)
Assets
Investment securities — available-for-sale		$	117		$	105,531		$	786		$	106,434

Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis
	Balance at December 31, 2007			Total Realized and Unrealized Gains Included in Income	Total Realized and Unrealized Gains			Purchases, Sales, Other Settlements and Issuances, net				Net Transfers In and/or Out of Level 3			Balance at June 30, 2008
				Net Revaluation of Retained Interests
	(dollars in thousands)
Assets
Investment securities — available-for-sale		$	1,318	$ —		$	—		$	(532	)		$	—		$	786

The Company’s assets measured at fair value on a non-recurring basis subject to the disclosure requirements of SFAS No. 157 at June 30, 2008, were as follows:

Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis at June 30, 2008
	Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Balance at June 30, 2008
	(dollars in thousands)
Assets
Impaired Loans		$	—		$	—		$	113,232		$	113,232

Impaired loans, which are measured for impairment using the fair value of the collateral, for collateral dependent loans, had a carrying amount $125.6 million, with a valuation allowance of $12.3 million.

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Certain non-financial assets and non-financial liabilities measured at fair value on a recurring basis include reporting units measured at fair value in the first step of a goodwill impairment test. Certain non-financial assets measured at fair value on a non-recurring basis include non-financial assets and non-financial liabilities measured at fair value in the second step of a goodwill impairment test, as well as intangible assets and other non-financial long-lived assets measured at fair value for impairment assessment. As stated above, SFAS No. 157 will be applicable to these fair value measurements beginning January 1, 2009.

NOTE 7 – NEW ACCOUNTING PRONOUNCEMENTS

In June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 establishes a single model to address accounting for uncertainty in tax positions. FIN 48 clarifies the accounting for uncertainty in income taxes by prescribing a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken, or expected to be taken, in a tax return. The interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition requirements. FIN 48 was effective for the Company on January 1, 2007. The adoption of FIN 48 did not have a material impact on the Company’s financial condition or results of operations.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS No. 157 was effective for the Company on January 1, 2008. The adoption of SFAS No. 157 did not have a material impact on the Company’s financial condition or results of operations.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities." SFAS No. 159 provides companies with an option to report selected financial assets and liabilities at fair value. The objective of SFAS No. 159 is to reduce both complexity in accounting for financial instruments and the volatility in earnings caused by measuring related assets and liabilities differently. SFAS No. 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. SFAS No. 159 was effective for us on January 1, 2008. The adoption of SFAS No. 159 did not have a material impact on the Company’s financial condition or results of operations.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB Statement No. 51.” SFAS No. 160 amends Accounting Research Bulletin (ARB) No. 51, “Consolidated Financial Statements,” to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS No. 160 clarifies that a noncontrolling interest in a subsidiary, which is sometimes referred to as minority interest, is an ownership interest in the consolidated entity that should be reported as a component of equity in the consolidated financial statements. Among other requirements, SFAS No. 160 requires consolidated net income to be reported at amounts that include the amounts attributable to both the parent and the noncontrolling interest. It also requires disclosure, on the face of the consolidated income statement, of the amounts of consolidated net income attributable to the parent and to the noncontrolling interest. SFAS No. 160 is effective for the Company on January 1, 2009 and is not expected to have a significant impact on the Company’s financial condition or results of operations.

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In March 2008, the FASB issued SFAS No. 161, "Disclosures About Derivative Instruments and Hedging Activities, an Amendment of FASB Statement No.133." SFAS No. 161 amends SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," to amend and expand the disclosure requirements of SFAS No. 133 to provide greater transparency about (i) how and why an entity uses derivative instruments, (ii) how derivative instruments and related hedge items are accounted for under SFAS No. 133 and its related interpretations, and (iii) how derivative instruments and related hedged items affect an entity's financial position, results of operations and cash flows. To meet those objectives, SFAS No. 161 requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments and disclosures about credit-risk-related contingent features in derivative agreements. SFAS No. 161 is effective for the Company on January 1, 2009 and is not expected to have a significant impact on the Company's financial condition or results of operations.

NOTE 8 – BUSINESS SEGMENT INFORMATION

SFAS No. 131, “Disclosures About Segments of an Enterprise and Related Information” (“SFAS No. 131”), 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 are 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.

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 accounting principles generally accepted in the United States. There is no significant difference between the measurement of the reportable segments profits and losses disclosed below and the measurement of profits and losses in the Company’s consolidated statements of income. Accounting allocations are made in the same manner for all operating segments.

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	Lending
	Operations		All Other			Consolidated
	(in thousands)
For the three months ended June 30,
2008
Revenues from external customers	$	62,192	$	26		$	62,218
Total interest income		63,314		53			63,367
Total interest expense		36,796		1,798			38,594
Net income (loss)		4,022		(1,672	)		2,350

2007
Revenues from external customers	$	63,260	$	566		$	63,826
Total interest income		62,539		444			62,983
Total interest expense		39,078		2,088			41,166
Net income (loss)		7,480		(1,442	)		6,038


For the six months ended June 30,
2008
Revenues from external customers	$	122,003	$	(433	)	$	121,570
Total interest income		122,340		111			122,451
Total interest expense		73,797		3,803			77,600
Net income (loss)		6,753		(3,706	)		3,047

2007
Revenues from external customers	$	126,958	$	916		$	127,874
Total interest income		125,606		709			126,315
Total interest expense		76,343		4,166			80,509
Net income (loss)		16,047		(3,272	)		12,775

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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 affected our financial condition and results of operations as of and for the three and six months ended June 30, 2008.

Application of Critical Accounting Policies and Accounting Estimates

The accounting and reporting policies followed by us conform, in all material respects, to accounting principles generally accepted in the United States (“GAAP”) and to general practices within the financial services industry. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. While we base our estimates on historical experience, current information and other factors deemed to be relevant, actual results could differ from those estimates.

We consider accounting estimates to be critical to reported financial results if (i) the accounting estimate requires management to make assumptions about matters that are highly uncertain and (ii) different estimates that management reasonably could have used for the accounting estimate in the current period, or changes in the accounting estimate that are reasonably likely to occur from period to period, could have a material impact on our financial statements. Accounting polices related to the allowance for loan losses are considered to be critical, as these policies involve considerable subjective judgment and estimation by management. We also consider our accounting polices related to other real estate and other assets owned to be critical due to the potential significance of these activities and the estimates involved.

For additional information regarding critical accounting policies, refer to Note 1 – “Organization and Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements and the sections captioned “Application of Critical Accounting Policies and Accounting Estimates” and “Allowance for Loan Losses and Non-performing Assets” in Management's Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s Form 10-K for the year ended December 31, 2007. There have been no significant changes in the Company's application of accounting policies since December 31, 2007.

RESULTS OF OPERATIONS

Three Months Ended June 30, 2008 Compared to Three Months Ended June 30, 2007

Executive Summary

Consolidated net income and diluted EPS were $2.4 million and $0.43, respectively, for the three months ended June 30, 2008, compared to $6.0 million and $1.08 for the same period last year. The decline in net income during the current period was primarily caused by a $5.8 million increase in provision for loan losses recorded and a $2.0 million decrease in non-interest income, partially offset by a $3.0 million increase in net interest income before provision for loan losses.

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Net interest income before provision for loan losses increased 13.5% to $24.8 million for the quarter ended June 30, 2008, compared to $21.8 million for the same period last year. The increase was primarily due to an increase in interest earned on our investment securities held-to-maturity, as well as a decline in our average cost of funds, as deposits have repriced to current market interest rates. The increase in net interest income was partially offset by a decline in the yield earned on our loan portfolio, as higher yielding loans have paid-off and were replaced by loan production that was originated at lower spreads over our cost of funds due to competitive pricing pressures, as well as our adjustable rate loan portfolio repricing to lower current market interest rates. During the quarters ended June 30, 2008 and 2007, the average balance of our investment securities held-to-maturity was $567.4 million and $181.6 million, respectively. At June 30, 2008, our investment securities held-to-maturity totaled $914.4 million as compared to $159.0 million at December 31, 2007. These increases were primarily related to the purchase of approximately $784.6 million of AAA rated corporate sponsored collateralized mortgage obligations (CMOs) during the current year, which are secured by Alt A first lien residential mortgage loans, predominantly all of which carry fixed interest rates. For further discussion regarding these CMO acquisitions refer to management’s discussion of net interest income and margin for the three months ended June 30, 2008 and 2007.

The provision for loan losses was $6.3 million and $500,000, respectively, for the quarters ended June 30, 2008 and 2007. The increase in the provision for loan losses recorded during the current quarter was primarily due to the increase in our non-performing loans. Non-performing loans as of June 30, 2008 were $116.8 million, compared to $91.5 million and $38.0 million at March 31, 2008 and December 31, 2007, respectively. The increase in non-performing loans during the year was primarily related to non-performing construction and land development loans, which increased from $8.8 million at December 31, 2007 to $78.7 million at June 30, 2008. Our construction and land loan portfolio at June 30, 2008 totaled $460.0 million, of which $296.2 million were residential and condominium conversion construction loans and land development loans, representing 10.0% of our total loan portfolio.

The return on average assets was 0.25% for the three months ended June 30, 2008, compared to 0.70% for the same period last year. The return on average shareholders’ equity was 4.16% for the three months ended June 30, 2008, compared to 10.71% for the same period last year.

Loan originations were $87.1 million for the quarter ended June 30, 2008, compared to $337.7 million for the same period last year. During the current quarter, we originated $31.7 million of commercial real estate loans, $46.1 million of small balance multi-family real estate loans, and $9.2 million of entertainment finance loans. Loan originations for the same period last year consisted of $191.6 million of commercial real estate loans, $117.1 million of small balance multi-family real estate loans, and $29.0 million of entertainment finance loans. Loan originations during the current period were impacted by a decline in customer demand as a result of uncertainty regarding current real estate market conditions. In addition, our wholesale loan operations acquired $29.7 million of commercial and multi-family real estate loans during the quarter ended June 30, 2007. We did not purchase any loans during the current period.

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Net Interest Income and Margin

The following table presents for the three months ended June 30, 2008 and 2007, 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 June 30,
	2008								2007
	Average Balance			Income/Expense		Yield/Rate			Average Balance			Income/Expense		Yield/Rate
	(dollars in thousands)
Assets
Cash and investment securities	$	740,508		$	13,446		7.30	%	$	365,701		$	4,519		4.96	%
Loans receivable		3,076,065			49,921		6.53	%		3,080,233			58,464		7.61	%
Total interest earning assets		3,816,573		$	63,367		6.68	%		3,445,934		$	62,983		7.33	%
Non-interest earning assets		78,925								80,514
Allowance for loan losses		(48,830	)							(46,218	)
Total assets	$	3,846,668							$	3,480,230

Liabilities and Shareholders’ Equity
Interest bearing deposit accounts:
Interest bearing demand	$	33,347		$	255		3.08	%	$	25,246		$	246		3.91	%
Money market and passbook		273,732			2,431		3.57	%		230,458			2,871		5.00	%
Time certificates		1,982,484			21,616		4.39	%		1,843,336			24,368		5.30	%
Total interest bearing deposit accounts		2,289,563			24,302		4.27	%		2,099,040			27,485		5.25	%
FHLB advances and other borrowings		1,198,617			12,494		4.19	%		1,023,291			11,593		4.54	%
Junior subordinated debentures		86,600			1,798		8.35	%		86,600			2,088		9.67	%
Total interest bearing liabilities		3,574,780		$	38,594		4.34	%		3,208,931		$	41,166		5.15	%
Non-interest bearing demand accounts		9,254								10,377
Other non-interest bearing liabilities		35,380								34,727
Shareholders’ equity		227,254								226,195
Total liabilities and shareholders’ equity	$	3,846,668							$	3,480,230
Net interest spread (1)							2.34	%							2.18	%

Net interest income before provision for loan losses				$	24,773							$	21,817
Net interest margin (2)							2.61	%							2.54	%

____________

(1)	Average yield on interest earning assets minus average rate paid on interest bearing liabilities.

(2)	Net interest income divided by total average interest earning assets.

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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 June 30, 2008 and 2007
	Increase (Decrease) Due to:
	Rate			Volume			Total
	(in thousands)
Interest and fees earned from:
Cash and investment securities	$	2,814		$	6,113		$	8,927
Loans		(8,462	)		(81	)		(8,543	)

Total increase (decrease) in interest income		(5,648	)		6,032			384

Interest paid on:
Deposit accounts		(5,488	)		2,305			(3,183	)
FHLB advances and other borrowings		(948	)		1,849			901
Junior subordinated debentures		(290	)		—			(290	)

Total (decrease) increase in interest expense		(6,726	)		4,154			(2,572	)

Increase in net interest income	$	1,078		$	1,878		$	2,956

Total interest income increased $384,000 to $63.4 million for the current quarter as compared to $63.0 million for the same period last year. The increase in interest income was primarily attributable to a $374.8 million increase in the average balance on cash and investments, as well as an increase of 234 basis points in the average yield earned on cash and investments. These increases were partially offset by a 108 basis point decline in the average yield earned on total loans receivable.

The average balance of cash and investment securities increased to $740.5 million during the quarter compared to $365.7 million during the same period last year. This increase was primarily due to an increase in the average balance of our investment securities held-to-maturity, which totaled $567.4 million as of June 30, 2008, as compared to $181.6 million as of June 30, 2007. These increases were primarily related to the purchase of approximately $784.6 million of AAA rated corporate sponsored CMOs during the current year, which are secured by Alt A first lien residential mortgage loans, predominantly all of which carry fixed interest rates. These CMOs were acquired at an average cost of 88% of their current par value (actual cost ranged from 68% to 96% of current par value, depending on estimated average lives, credit enhancement through subordination levels, and underlying collateral performance). These investments were priced to earn a weighted average effective yield of 8.9%, and they carry an average credit enhancement of 8.6% through subordination provided by junior CMO tranches that bear the initial losses on the underlying loans. The average expected life of these CMOs is approximately 5 years. The average yield earned on our cash and investment securities was 7.30% during the three months ended June 30, 2008, as compared to 4.96% during the same period last year. These increases were primarily related to the CMO purchases during the current year. The average yield earned during the current quarter on our investment securities held-to-maturity was 7.72%, as compared to 4.20% during the same period last year.

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The average aggregate balance of our loan portfolio was $3.1 billion for each of the quarters ended June 30, 2008 and 2007. Commercial real estate loans had an average aggregate balance of $600.5 million during the quarter ended June 30, 2008, compared to $563.8 million during the same period last year. Construction and land loans had an average aggregate balance of $436.9 million during the quarter ended June 30, 2008, compared to $423.8 million during the same period last year. Multi-family real estate loans had an average aggregate balance of $1.9 billion during the quarter ended June 30, 2008, compared to $2.0 billion during the same period last year. Single-family residential loans had an average aggregate balance of $11.9 million during the quarter ended June 30, 2008, compared to $28.1 million during the same period last year. The average aggregate balance of entertainment finance loans was $66.1 million and $78.9 million during the quarters ended June 30, 2008 and 2007, respectively.

The average yield earned on total loans decreased to 6.53% during the quarter ended June 30, 2008 as compared to 7.61% during the same period last year. The decrease in yield was primarily due to higher yielding loans paying off and being replaced by loan production that was originated at lower spreads over our cost of funds due to competitive pricing pressures, as well as our adjustable rate loan portfolio repricing to lower current market interest rates. To a lesser extent, the average loan yield was also impacted by the increase in non-performing loans, as well as the reversal of all previously accrued but uncollected interest against our current period operating results. A significant portion of our loan portfolio is comprised of adjustable rate loans indexed to either six month LIBOR or the Prime Rate, most with interest rate floors and caps below and above which the loan’s contractual interest rate may not adjust. Approximately 52.0% of our loan portfolio was adjustable at June 30, 2008, and approximately 41.2% of the loan portfolio was comprised of hybrid loans, which after an initial fixed rate period of three or five years, will convert to an adjustable interest rate for the remaining term of the loan. As of June 30, 2008, our hybrid loans had a weighted average of 2.3 years remaining until conversion to an adjustable rate loan. Our adjustable rate loans generally reprice on a quarterly or semi-annual basis with increases generally limited to maximum adjustments of 2% per year up to 5% for the life of the loan. At June 30, 2008, approximately $2.5 billion, or 83.7%, of our adjustable and hybrid loan portfolio contained interest rate floors, below which the loans’ contractual interest rate may not adjust. The inability of our loans to adjust downward can contribute to increased income in periods of declining interest rates, and also assists us in our efforts to limit the risks to earnings resulting from changes in interest rates, subject to the risk that borrowers may refinance these loans during periods of declining interest rates. At June 30, 2008, the weighted average floor interest rate of these loans was 6.92%. At that date, approximately $725.6 million, or 24.3%, of these loans were at the floor interest rate. At June 30, 2008, 45.8% of the adjustable rate loans outstanding had a lifetime interest rate cap. The weighted-average lifetime interest rate cap on our adjustable rate loan portfolio was 12.03% at that date. At June 30, 2008, none of these loans were at their cap rate.

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Total interest expense decreased by $2.6 million to $38.6 million during the current quarter, compared to $41.2 million for the same period last year. The decrease in interest expense was primarily attributable to a decline in average rates paid of 98 basis points and 35 basis points on interest bearing deposits and FHLB advances and other borrowings, respectively, as deposits repriced to lower current market interest rates and FHLB advances matured and were replaced with new advances at lower current market interest rates. These decreases were partially offset by increases in the average balances of deposits and FHLB advances and other borrowings of $190.5 million and $175.3 million, respectively.

Our average cost of funds decreased to 4.34% during the three months ended June 30, 2008, compared to 5.15% for the same period last year. As discussed above, the decrease in the average funding costs was primarily due to deposits repricing and FHLB advances maturing and being replaced with new advances at lower current market interest rates. The average rate paid on deposit accounts was 4.27% during the three months ended June 30, 2008 as compared to 5.25% for the same period last year. The average balance of deposit accounts increased by $190.5 million to $2.3 billion for the three months ended June 30, 2008 as compared to $2.1 billion for the same period last year. The average rate paid on FHLB advances and other borrowings was 4.19% during the three months ended June 30, 2008 compared to 4.54% for the same period last year. FHLB advances and other borrowings averaged $1.2 billion during the current quarter, compared to $1.0 billion for the same period last year.

Net interest margin increased to 2.61% for the three months ended June 30, 2008 as compared to 2.54% for the same period last year. This increase was caused by a 16 basis point increase in our net interest spread, partially offset by a $370.6 million increase in our average interest earning assets.

Provision for Loan Losses

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

•

the risk characteristics of various classifications of loans;

•

general portfolio trends relative to asset and portfolio size;

•

asset categories;

•

collateral values;

•

potential credit and geographic concentrations;

•

delinquency trends within the loan portfolio;

•

changes in the volume and severity of past due loans, classified loans and other loans of concern;

•

historical loss experience and risks associated with changes in economic, social and business conditions; and

•

the underwriting standards in effect when the loan was made.

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Accordingly, the calculation of the adequacy of the allowance for loan losses is not based solely on the level of non-performing assets. The quantitative factors, included above, are utilized by our management to identify two different risk groups (1) individual loans (loans with specifically identifiable risks); and (2) homogeneous loans (groups of loans with similar characteristics). The allocation for individual loans is based on either a specific reserve analysis, which is performed on impaired loans and our other loans of concern, or on risk rating grades assigned to each loan as a result of our loan management and review processes. 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 collateral 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.

Loans evaluated by our specific reserve analysis are based on estimated cash flows discounted at the loan’s original effective interest rate or, for collateral dependent loans, based on the underlying collateral value. Individual loans assessed by our risk rating process are assigned a risk-rating grade, as well as a loss ratio. Risk ratings and loss ratios are determined based on historical loss experience, augmented by the experience of management with similar assets and our independent loan review process. The loan review process begins at the loan’s origination where we obtain information about the borrower and the real estate collateral, such as personal financial statements, FICO scores, property rent rolls, property operating statements, appraisals, market assessments, and other pertinent data. Throughout the loan life, we obtain updated information such as rent rolls, property cash flow statements, personal financial statements, and for certain loans, updated property inspection reports. This information, at the individual borrower and loan level, provides input into our risk profile of our borrowers, and serves as the primary basis for each loan’s risk grade. We also assign loss ratios to groups of loans. These loss ratios are assigned to the various homogenous categories of the portfolio.

Loss ratios and specific reserves for all categories of loans are evaluated on a quarterly basis. Loss ratios associated with historical loss experience are determined based on a rolling migration analysis of each loan category within our portfolio. This migration analysis estimates loss factors based on the performance of each loan category over a five year time period. These loss factors are then adjusted for other identifiable risks specifically related to each loan category or risk grade. We utilize market and other economic data, which we accumulate on a quarterly basis, to evaluate and identify the economic and real estate related trends within each regional market that we operate. In addition to the information gathered from this data, we also typically consider other risk factors, such as specific risks within a loan category, peer analysis reports, and any other relevant trends or data, in determining any necessary adjustments to our historical loss factors. To the extent that known risks or trends exist, the loss ratios are adjusted accordingly, and incorporated into our assessment of the adequacy of our allowance for loan losses.

The qualitative factors, included above, are also utilized to identify other risks inherent in the portfolio and to determine whether the estimated credit losses associated with the current portfolio might differ from historical loss trends or the loss ratios discussed above. We estimate a range of exposure for each applicable qualitative factor and evaluate the current condition and trend of each factor. Based on this evaluation, we assign a positive, negative or neutral grade to each factor to determine whether the portion of the qualitative reserve is in the high, middle or low end of the range for each factor. Because of the subjective nature of these factors and the judgments required to determine the estimated ranges, the actual losses incurred can vary significantly from the estimated amounts.

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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 bank 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 was $6.3 million and $500,000 for the quarters ended June 30, 2008 and 2007, respectively. The provision for loan losses was recorded based on an analysis of the factors referred to above. The increase in provision for loan losses during the quarter was primarily due to the increase in our non-performing loans. Non-performing loans as of June 30, 2008 were $116.8 million, compared to $91.5 million and $38.0 million at March 31, 2008 and December 31, 2007, respectively. As a percentage of our total loan portfolio, the amount of non-performing loans was 3.94% and 1.20% at June 30, 2008 and December 31, 2007, respectively. The increase in non-performing loans during the year was primarily related to non-performing construction and land development loans, which increased from $8.8 million at December 31, 2007 to $78.7 million at June 30, 2008.

With the housing and secondary mortgage markets continuing to deteriorate and showing no signs of stabilizing in the near future, we continue to aggressively monitor our real estate loan portfolio, including our residential and condominium conversion construction and land development loan portfolio. Within our residential and condominium conversion construction and land development loan portfolio, at June 30, 2008, approximately 58.3%, 23.9% and 5.3% were located in California, New York and Florida, respectively. At June 30, 2008, we had $74.9 million of non-performing loans within our residential and condominium conversion construction and land development loan portfolio, consisting of ten lending relationships. Of these non-performing construction loans, five relationships, with an aggregate balance of $57.2 million, were located in California (Huntington Beach, Cathedral City, Indio, Corona and Palmdale).

The allowance for loan losses as a percentage of our total loans was 1.73% at June 30, 2008 compared to 1.51% at December 31, 2007. We believe that these reserves levels were adequate to support known and inherent losses in our loan portfolio and for specific reserves as of June 30, 2008 and December 31, 2007, respectively. The allowance for loan losses is impacted by inherent risk in the loan portfolio, including the level of our non-performing loans and other loans of concern, as well as specific reserves and charge-off activity. Other loans of concern increased from $27.4 million at December 31, 2007 to $144.4 million at June 30, 2008, as compared to $115.7 million at March 31, 2008. The increase during the current year was primarily caused by the addition of $55.9 million of single-family and condominium conversion construction and land development loans, $15.7 million of commercial and retail construction projects, and $52.4 million of commercial and multi-family real estate loans.

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During the quarters ended June 30, 2008 and 2007, we had net loan charge-offs of $3.4 million and $4.7 million, respectively. The charge-offs taken during the current period were previously specifically reserved for under our allowance for loan loss methodology discussed above. See also – “Financial Condition – Credit Risk”.

Non-Interest Income

Non-interest income decreased to ($1.1 million) for the quarter ended June 30, 2008 as compared to $843,000 for the same period last year. The decline in non-interest income primarily related to a $1.1 million loss provision recorded during the current period for unfunded commitments, as well as a loss on sale of loans recognized in connection with the sale of approximately $53.2 million of multi-family loans in June 2008. Non-interest income typically consists of fees and other miscellaneous income earned on customer accounts.

Non-Interest Expense

Non-interest expense totaled $13.5 million for the current quarter, compared to $12.1 million for the same period last year. The increase in non-interest expense primarily related to a decline in the deferral of general and administrative costs incurred related to the origination of loans. As the volume of our loan production decreased during the current quarter as compared to the same period last year, the deferrable portion of these loan costs has also declined. Further contributing to the increase was a $605,000 increase in expenses associated with real estate owned and other foreclosed assets. This increase primarily related to a $478,000 provision recorded during the quarter in connection with a decline in the estimated fair value of these properties. Our efficiency ratio (defined as general and administrative expenses as a percentage of net revenue) was 53.7% for the quarter ended June 30, 2008, as compared to 52.5% for the same period last year.

Six Months Ended June 30, 2008 Compared to Six Months Ended June 30, 2007

Executive Summary

Consolidated net income and diluted EPS were $3.0 million and $0.56, respectively, for the six months ended June 30, 2008, compared to $12.8 million and $2.26 for the same period last year. The decline in net income was primarily caused by a $9.3 million increase in provision for loan losses recorded during the current period.

Net interest income before provision for loan losses decreased 2.1% to $44.9 million for the six months ended June 30, 2008, compared to $45.8 million for the same period last year. The decrease was primarily due to the decline in the yield earned on our loan portfolio, as higher yielding loans have paid-off and were replaced by loan production that was originated at lower spreads over our cost of funds due to competitive pricing pressures, as well as our adjustable rate loan portfolio repricing to lower current market interest rates. This decline was partially offset by a decrease in our average cost of funds, as deposits have repriced to current market interest rates, as well as an increase in interest earned on our investment securities held-to-maturity, which, as discussed within the comparison of the three months ended June 30, 2008 and 2007, primarily related to the purchase of approximately $784.6 million of AAA rated corporate sponsored CMOs. During the six months ended June 30, 2008 and 2007, the average balance of our investment securities held-to-maturity was $363.3 million and $185.8 million, respectively.

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The provision for loan losses was $10.5 million and $1.3 million, respectively, for the six months ended June 30, 2008 and 2007. As discussed in detail above, the increase in provision for loan losses during the current six month period was primarily due to the increase in our non-performing loans.

The return on average assets was 0.17% for the six months ended June 30, 2008, compared to 0.75% for the same period last year. The return on average shareholders’ equity was 2.69% for the six months ended June 30, 2008, compared to 11.44% for the same period last year.

Loan originations were $175.5 million for the six months ended June 30, 2008, compared to $677.1 million for the same period last year. During the current six month period, we originated $74.4 million of commercial real estate loans, $65.1 million of small balance multi-family real estate loans, and $34.9 million of entertainment finance loans. Loan originations for the same period last year consisted of $428.9 million of commercial real estate loans, $191.0 million of small balance multi-family real estate loans, and $57.2 million of entertainment finance loans. As discussed above, loan originations during the current period were impacted by a decline in customer demand as a result of uncertainty regarding current real estate market conditions. In addition, our wholesale loan operations acquired $47.3 million of commercial and multi-family real estate loans during the six months ended June 30, 2007. We did not have any wholesale loan purchases during the current six month period.

Net Interest Income and Margin

The following table presents for the six months ended June 30, 2008 and 2007, 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.

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	For the Six Months Ended June 30,
	2008								2007
	Average Balance			Income/Expense		Yield/Rate			Average Balance			Income/Expense		Yield/Rate
	(dollars in thousands)
Assets
Cash and investment securities	$	539,974		$	17,695		6.59	%	$	369,433		$	9,088		4.96	%
Loans receivable		3,113,515			104,756		6.77	%		3,042,421			117,227		7.77	%
Total interest earning assets		3,653,489		$	122,451		6.74	%		3,411,854		$	126,315		7.47	%
Non-interest earning assets		81,173								77,969
Allowance for loan losses		(48,133	)							(46,396	)
Total assets	$	3,686,529							$	3,443,427

Liabilities and Shareholders’ Equity
Interest bearing deposit accounts:
Interest bearing demand	$	30,649		$	490		3.22	%	$	24,825		$	434		3.53	%
Money market and passbook		261,029			4,890		3.77	%		226,647			5,589		4.97	%
Time certificates		1,892,616			44,005		4.68	%		1,832,487			48,050		5.29	%
Total interest bearing deposit accounts		2,184,294			49,385		4.55	%		2,083,959			54,073		5.23	%
FHLB advances and other borrowings		1,141,113			24,412		4.30	%		1,000,576			22,270		4.49	%
Junior subordinated debentures		86,600			3,803		8.83	%		86,600			4,166		9.70	%
Total interest bearing liabilities		3,412,007		$	77,600		4.57	%		3,171,135		$	80,509		5.12	%
Non-interest bearing demand accounts		9,497								11,007
Other non-interest bearing liabilities		36,818								36,132
Shareholders’ equity		228,207								225,153
Total liabilities and shareholders’ equity	$	3,686,529							$	3,443,427
Net interest spread (1)							2.17	%							2.35	%

Net interest income before provision for loan losses				$	44,851							$	45,806
Net interest margin (2)							2.47	%							2.71	%

____________

(1)	Average yield on interest earning assets minus average rate paid on interest bearing liabilities.

(2)	Net interest income divided by total average interest earning assets.

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	For the Six Months Ended June 30, 2008 and 2007
	Increase (Decrease) Due to:
	Rate			Volume		Total
	(in thousands)
Interest and fees earned from:
Cash and investment securities	$	3,579		$	5,028	$	8,607
Loans		(15,204	)		2,733		(12,471	)

Total (decrease) increase in interest income		(11,625	)		7,761		(3,864	)

Interest paid on:
Deposit accounts		(7,229	)		2,541		(4,688	)
FHLB advances and other borrowings		(957	)		3,099		2,142
Junior subordinated debentures		(363	)		—		(363	)

Total (decrease) increase in interest expense		(8,549	)		5,640		(2,909	)

(Decrease) increase in net interest income	$	(3,076	)	$	2,121	$	(955	)

Total interest income decreased $3.9 million to $122.5 million for the six months ended June 30, 2008 as compared to $126.3 million for the same period last year. The decrease in interest income was primarily attributable to a 100 basis point decrease in the average yield earned on total loans receivable, partially offset by a $71.1 million increase in the average balance of total loans receivable and a $170.5 million and 163 basis point increase in the average balance and yield earned on cash and investments.

The average balance of cash and investment securities increased to $540.0 million for the six months ended June 30, 2008, as compared to $369.4 million during the same period last year. This increase was primarily due to an increase in the average balance of our investment securities held-to-maturity, which totaled $363.3 million during the six months ended June 30, 2008, as compared to $185.8 million for the same period last year. The average yield earned on our cash and investment securities increased to 6.59% during the six months ended June 30, 2008, as compared to 4.96% for the same period last year. The average yield earned during the six months ended June 30, 2008 on our investment securities held-to-maturity was 6.94%, as compared to 4.21% for the same period last year. These increases were primarily related to our CMO purchases during the current year, as discussed above.

The average aggregate balance of our loan portfolio was $3.1 billion and $3.0 billion for the six months ended June 30, 2008 and 2007, respectively. Commercial real estate loans had an average aggregate balance of $609.5 million during the six months ended June 30, 2008 compared to $550.3 million during the same period last year. Construction and land loans had an average aggregate balance of $428.5 million during the six months ended June 30, 2008 compared to $402.6 million during the same period last year. Multi-family real estate loans had an average aggregate balance of $2.0 billion during each of the six months ended June 30, 2008 and 2007. Single-family residential loans had an average aggregate balance of $13.1 million during the six months ended June 30, 2008 compared to $32.8 million during the same period last year. The average aggregate balance of entertainment finance loans was $68.3 million and $76.3 million during the six months ended June 30, 2008 and 2007, respectively.

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The average yield earned on total loans decreased to 6.77% during the six months ended June 30, 2008 as compared to 7.77% during the same period last year. The decrease in yield was primarily due to higher yielding loans paying off and being replaced by loan production that was originated at lower spreads over our cost of funds due to competitive pricing pressures, as well as our adjustable rate loan portfolio repricing to lower current market interest rates. To a lesser extent, the average loan yield was also impacted by the increase in non-performing loans, as well as the reversal of all previously accrued but uncollected interest against our current period operating results.

Total interest expense decreased by $2.9 million to $77.6 million for the six months ended June 30, 2008, compared to $80.5 million for the same period last year. The decrease in interest expense was primarily attributable to a 68 basis points decline in the average rate paid on interest bearing deposits, as deposits repriced to lower current market interest rates. This decrease was partially offset by increases in the average balances of deposits and FHLB advances and other borrowings of $100.3 million and $140.5 million, respectively.

Our average cost of funds decreased to 4.57% during the six months ended June 30, 2008, compared to 5.12% for the same period last year. As discussed above, the decrease in the average funding costs was primarily due to deposits repricing to lower current market interest rates. The average rate paid on deposit accounts was 4.55% during the six months ended June 30, 2008, as compared to 5.23% for the same period last year. The average balance of deposit accounts increased by $100.3 million to $2.2 billion for the six months ended June 30, 2008 as compared to $2.1 billion for the same period last year. The average rate paid on FHLB advances and other borrowings was 4.30% during the six months ended June 30, 2008 compared to 4.49% for the same period last year. This decline was primarily attributable to FHLB advances maturing and being replaced with new advances at lower current market interest rates. FHLB advances and other borrowings averaged $1.1 billion during the six months ended June 30, 2008, compared to $1.0 billion for the same period last year.

Net interest margin decreased to 2.47% for the six months ended June 30, 2008 as compared to 2.71% for the same period last year. This decrease was caused by an 18 basis point decline in our net interest spread and a $241.6 million increase in our average interest earning assets.

Provision for Loan Losses

The consolidated provision for loan losses was $10.5 million and $1.3 million for the six months ended June 30, 2008 and 2007, respectively. The provision for loan losses was recorded based on an analysis of the factors referred to above in the discussion regarding the three months ended June 30, 2008 and 2007. During the six months ended June 30, 2008 and 2007, we had net loan charge-offs of $7.1 million and $4.3 million, respectively. See management’s discussion of the provision for loan losses for the three months ended June 30, 2008 and 2007 for additional discussion regarding the provision for loan losses incurred during the current period and the corresponding methodology.

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Non-Interest Income

Non-interest income decreased to ($881,000) during the six months ended June 30, 2008 as compared to $1.6 million for the same period last year. As discussed above, the decline in non-interest income primarily related to a loss provision recorded during the current period for unfunded commitments, as well as a loss on sale of loans recognized in connection with the sale of approximately $53.2 million of multi-family loans in June 2008.

Non-Interest Expense

Non-interest expense totaled $28.4 million for the six months ended June 30, 2008, compared to $24.7 million for the same period last year. The increase in non-interest expense primarily related to a decline in the deferral of general and administrative costs incurred related to the origination of loans. As the volume of our loan production decreased during the current six month period as compared to the same period last year, the deferrable portion of these loan costs has also declined. Further contributing to the increase was a $1.9 million increase in expenses associated with real estate owned and other foreclosed assets. This increase primarily related to a $1.1 million provision recorded during the year in connection with a decline in the estimated fair value of these properties, as well as $463,000 of losses recorded on the sale of other real estate owned. Our efficiency ratio was 59.5% for the six months ended June 30, 2008, as compared to 51.4% for the same period last year.

FINANCIAL CONDITION

Total assets increased $549.0 million to $4.1 billion at June 30, 2008 as compared to $3.6 billion at December 31, 2007. The increase in total assets was primarily due to a $755.4 million increase in our investment securities held-to-maturity, resulting from the CMOs purchased during the current year, as discussed above, partially offset by a $207.4 million decrease in our loan portfolio. At June 30, 2008, gross loans totaled $3.0 billion, including approximately $2.4 billion of real estate loans, $460.0 million of construction and land development loans, $69.0 million of entertainment finance loans, and $10.5 million of other loans.

Deposits and FHLB advances and other borrowings increased by $310.7 million and $239.5 million, respectively, during the six months ended June 30, 2008. Total deposit accounts increased to $2.5 billion at June 30, 2008, compared to $2.2 billion at December 31, 2007. The increase in deposits included a $245.9 million increase in time deposits, as well as a $64.8 million increase in savings and checking account balances. Management believes that a significant portion of time deposits will remain with us upon maturity based on our historical experience regarding retention of deposits. FHLB advances and other borrowings increased to $1.3 billion as of June 30, 2008 compared to $1.0 billion at December 31, 2007. The increase in FHLB advances were primarily utilized to match fund the CMO acquisitions during the year.

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CREDIT RISK

Non-performing Assets, Other Loans of Concern and Allowance for Loan Losses

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

	June 30, 2008			December 31, 2007
	(dollars in thousands)
Nonaccrual loans:
Real estate	$	38,092		$	29,145
Construction and land		78,655			8,804
Entertainment finance		12			13
Total nonaccrual loans		116,759			37,962
Other real estate and other assets owned, net		20,912			19,396
Total non-performing assets		137,671			57,358
Performing troubled debt restructurings		8,077			7,802
Total non-performing assets and performing troubled debt restructurings	$	145,748		$	65,160

Nonaccrual loans to total loans		3.94	%		1.20	%
Allowance for loan losses to nonaccrual loans		43.82	%		125.87	%
Non-performing assets to total assets		3.36	%		1.62	%

Non-performing assets were $137.7 million and $57.4 million, representing 3.36% and 1.62% of total assets as of June 30, 2008 and December 31, 2007, respectively. At June 30, 2008, non-performing loans consisted of $78.7 million construction and land loans, $15.5 million of commercial real estate loans, $22.6 million of multi-family real estate loans, and $12,000 of entertainment finance loans. The increase in non-performing assets during the six months ended June 30, 2008 consisted of the addition of $107.6 million of non-performing loans, partially offset by paydowns received of $10.6 million, charge-offs of $7.7 million and loan upgrades from non-performing to performing status of $1.5 million. As of June 30, 2008, as compared to December 31, 2007, the net increase in non-performing loans primarily consisted of $48.4 million of residential and condominium construction real estate loans, representing six lending relationships, $23.0 million of residential land development loans and $20.1 million of multi-family and commercial real estate loans. The allowance for loan loss coverage ratio (defined as the allowance for loan losses divided by non-accrual loans) was 43.8% at June 30, 2008 as compared to 125.9% at December 31, 2007. In addition, our other real estate and other assets owned increased to $20.9 million at June 30, 2008, as compared to $19.4 million at December 31, 2007. During the six months ended June 30, 2008, we foreclosed on eleven properties representing $9.1 million, sold nine properties representing $6.4 million and recorded an aggregate charge-off of $1.1 million on five different properties.

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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 Six Months Ended June 30, 2008			For the Year Ended December 31, 2007			For the Six Months Ended June 30, 2007
	(dollars in thousands)

Balance at beginning of period	$	47,783		$	46,049		$	46,049
Provision for loan losses		10,500			11,077			1,250
Charge-offs		(7,737	)		(10,873	)		(4,848	)
Recoveries		613			1,530			549
Net charge-offs		(7,124	)		(9,343	)		(4,299	)

Balance at end of period	$	51,159		$	47,783		$	43,000

Allowance for loan losses as a percentage of loans, net		1.73	%		1.51	%		1.38	%

Liquidity

Liquidity refers to our ability to maintain cash flows 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 June 30, 2008, we held $4.9 million of cash and cash equivalents (consisting primarily of short-term investments with original maturities of 90 days or less) and $106.4 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, overnight repurchase agreement investments, 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 credit facilities with the Federal Home Loan Bank of San Francisco and the Federal Reserve Bank of San Francisco. As of June 30, 2008, we had remaining available borrowing capacity under the Federal Home Loan Bank of San Francisco credit facility of $288.1 million, net of the $9.8 million of additional Federal Home Loan Bank stock that we would be required to purchase to support those additional borrowings. As of June 30, 2008, we had an available borrowing capacity under the Federal Reserve Bank of San Francisco credit facility of $166.1 million. We also had available $98.0 million of uncommitted, unsecured lines of credit with four unaffiliated financial institutions.

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Capital Resources

The Company, the Bank’s holding company, had Tier 1 leverage, Tier 1 risk based and total risk-based capital ratios at June 30, 2008 of 7.79%, 9.93% and 11.49%, respectively, which represents $107.3 million, $118.6 million and $44.9 million, respectively, of capital in excess of the amount required to be “well capitalized”. These ratios were 8.44%, 9.73% and 11.29% as of December 31, 2007, respectively.

The Bank had Tier 1 leverage, Tier 1 risk based and total risk-based capital ratios at June 30, 2008 of 7.68%, 9.79% and 11.05%, respectively, which represents $102.6 million, $113.7 million and $31.4 million, respectively, of capital in excess of the amount required to be “well capitalized” for regulatory purposes. These ratios were 8.31%, 9.60% and 10.85% as of December 31, 2007, respectively.

At June 30, 2008, shareholders' equity totaled $225.9 million, or 5.5% of total assets. Our book value per share of common stock was $44.88 as of June 30, 2008, as compared to $44.22 as of December 31, 2007, and $43.75 as of June 30, 2007.

On March 19, 2008, we announced that our Board of Directors determined that, following the payment of our cash dividend for that quarter, our regular quarterly cash dividend would be suspended for the remainder of 2008. This decision was made in order to preserve our capital during the extraordinarily difficult current operating environment. The Board plans to reassess the dividend when economic conditions and capital markets normalize.

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, 2007.

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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 June 30, 2008 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. In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Our disclosure controls and procedures have been designed to meet, and management believes that they meet, reasonable assurance standards. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Based on their evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2008, the Company’s disclosure controls and procedures were effective at the reasonable assurance level 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) to allow timely decisions regarding required disclosure, 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 June 30, 2008, 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.

The Company does not expect that its internal control over financial reporting will prevent all error and all fraud. A control procedure, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control procedure are met. Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any control procedure also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control procedure, misstatements due to error or fraud may occur and not be detected.

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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 currently pending proceedings, in the aggregate, will not have a material effect on our financial condition or results of operations.

Item 1A. Risk Factors

Our business is subject to general economic risks that could adversely impact our results of operations and financial condition.

·	Changes in economic conditions, particularly a further economic slowdown in California, could hurt our business.

Our business is directly affected by market conditions, trends in industry and finance, legislative and regulatory changes, and changes in governmental monetary and fiscal policies and inflation, all of which are beyond our control. In 2007, the housing and real estate sectors experienced an economic slowdown that has continued into 2008. Further deterioration in economic conditions, particularly within the State of California, could result in the following consequences, among others, any of which could hurt our business materially:

·	loan delinquencies may increase;

·	problem assets and foreclosures may increase;

·	demand for our products and services may decline; and

·	collateral for our loans may decline in value, in turn reducing a customer’s borrowing power and reducing the value of assets and collateral securing our loans.

·	Recent negative developments in the financial industry and credit markets may continue to adversely impact our financial condition and results of operations.

Negative developments beginning in the latter half of 2007 in the sub-prime mortgage market and the securitization markets for such loans, together with substantially increased oil prices and other factors, have resulted in uncertainty in the financial markets in general and a related general economic downturn, which have continued in 2008. Many lending institutions, including us, have experienced declines in the performance of their loans, including construction and land loans, and commercial and multi-family real estate loans. Moreover, competition among depository institutions for deposits and quality loans has increased significantly. In addition, the values of real estate collateral supporting many loans have declined and may continue to decline. Bank and bank holding company stock prices have been negatively affected, as has the ability of banks and bank holding companies to raise capital or borrow in the debt markets compared to recent years. These conditions may have a material adverse effect on our financial condition and results of operations. In addition, as a result of the foregoing factors, there is a potential for new federal or state laws and regulations regarding lending and funding practices and liquidity standards, and bank regulatory agencies are expected to be very aggressive in responding to concerns and trends identified in examinations. Negative developments in the financial industry and the impact of new legislation in response to those developments could restrict our business operations, including our ability to originate loans, and adversely impact our results of operations and financial condition.

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·	We may elect or be compelled to seek additional capital in the future, but that capital may not be available when it is needed.

We are required by federal and state regulatory authorities to maintain adequate levels of capital to support our operations. In addition, we may elect to raise additional capital to support the growth of our business or to finance acquisitions, if any, or we elect to raise additional capital for other reasons. In that regard, a number of financial institutions have recently raised considerable amounts of capital as a result of a deterioration in their results of operations and financial condition arising from the turmoil in the mortgage loan market, deteriorating economic conditions, declines in real estate values and other factors. Should we be required by regulatory authorities or otherwise elect to raise additional capital, we may seek to do so through the issuance of, among other things, our common stock or securities convertible into our common stock, which could dilute your ownership interest in the Company.

Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a number of other factors, many of which are outside our control, and on our financial performance. Accordingly, we cannot assure you of our ability to raise additional capital if needed or on terms acceptable to us. If we cannot raise additional capital when needed or on terms acceptable to us, it may have a material adverse effect on our financial condition, results of operations and prospects.

Other than the additional risk factors set forth above, there have been no material changes to the risk factors set forth in Part I. Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2007.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table sets forth the repurchases of our common stock for the fiscal quarter ended June 30, 2008.

Period	Total Number of Shares Purchased(1)		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs(2)
April 1, 2008 to April 30, 2008		2,922	$	17.68		—		110,486
May 1, 2008 to May 31, 2008		58,986		10.57		—		110,486
June 1, 2008 to June 30, 2008		9,100		10.43		—		110,486
Total		71,008	$	10.84		—		110,486

____________

(1) Shares purchased during the quarter ended June 30, 2008, represent open market purchases by the Company’s rabbi trust in connection with our Supplemental Executive Retirement Plan and our Nonqualified Deferred Compensation Plan.

(2) There were no repurchases under the twelfth extension of our stock repurchase program during the three months ended June 30, 2008. The twelfth extension was announced on March 14, 2006, and authorized the repurchase of an additional 5% of the outstanding shares as of the authorization date. At June 30, 2008, a total of 110,486 shares remained available for repurchase under this extension.

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Item 3. Defaults Upon Senior Securities

Not applicable.

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

None.

Item 5. Other Information

None.

Item 6. Exhibits

See exhibit index.

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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.

	IMPERIAL CAPITAL BANCORP, INC.

Date: July 30, 2008	/s/ George W. Haligowski
	George W. Haligowski
	Chairman of the Board, President and
	Chief Executive Officer

Date: July 30, 2008	/s/ Timothy M. Doyle
	Timothy M. Doyle
	Executive Managing Director and
	Chief Financial Officer

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EXHIBIT INDEX

Regulation S-K Exhibit Number	Document	Reference to Prior Filling or Exhibit Number Attached Hereto

3.1	Certificate of Incorporation	************
3.2	Bylaws, as amended	***
4	Instruments Defining the Rights of Security Holders, Including Indentures	**********
10.1	2005 Re-Designated, Amended and Restated Stock Option Plan For Nonemployee Directors (“NEDP”)	*****
10.2	2005 Re-Designated, Amended and Restated Employee Stock Incentive Plan (“ESIP”)	********
10.3a	409A Consolidated Nonqualified (Employer Securities Only) 2005 Deferred Compensation Plan	***
10.3b	409A Consolidated Nonqualified (Non-Employer Securities) 2005 Deferred Compensation Plan	***
10.3c	Consolidated Nonqualified (Employer Securities Only) Deferred Compensation Plan	***
10.3d	Consolidated Nonqualified (Non-Employer Securities) Deferred Compensation Plan	***
10.4	Supplemental Salary Savings Plan	*
10.5a	Amended and Restated Employment Agreement with George W. Haligowski	********
10.5b	Non-Competition and Non-Solicitation Agreement with George W. Haligowski	********
10.6 10.7 10.8 10.9	Change in Control Severance Agreement with Norval L. Bruce Change in Control Severance Agreement with Timothy M. Doyle Change in Control Severance Agreement with Lyle C. Lodwick Change in Control Severance Agreement with Phillip E. Lombardi	****** **** **** *********
10.10	Recognition and Retention Plan	**
10.11	Voluntary Retainer Stock and Deferred Compensation Plan for Outside Directors	****
10.12	Amended and Restated Supplemental Executive Retirement Plan	********
10.13	Amended and Restated ITLA Capital Corporation Rabbi Trust Agreement	*********
10.14	Amended and Restated Salary Continuation Plan	********
10.15	Form of Incentive Stock Option Agreement under ESIP	******
10.16 10.17	Form of Non-Qualified Stock Option Agreement under the ESIP Form of Non-Qualified Stock Option Agreement under the NEDP	**** *****
10.18	Description of Named Executive Officer Salary, Bonus and Perquisite Arrangements for 2008	*************
10.19	Description of Director Fee Arrangements	*************
10.20	Split Dollar Agreement	*************
11	Statement Regarding Computation of Per Share Earnings	Not Required
13	Annual Report to Security Holders	None
18	Letter Regarding Change in Accounting Principles	None
21	Subsidiaries of the Registrant	Not Required
22	Published Report Regarding Matters Submitted to Vote of Security Holders	None
23.1	Consent of Ernst & Young LLP	Not Required
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 Current Report on Form 8-K filed on December 7, 2007.
* * * *	Filed as an exhibit to Amendment No. Two to the Company’s Registration Statement on Form S-4 (File No. 333-03551) filed with the Commission on June 19, 1996.
* * * * *	Filed as an appendix to the Company’s definitive proxy materials filed on June 27, 2005.
* * * * * *	Filed as an exhibit to the Company’s Current Report on Form 8-K filed on August 9, 2005.
* * * * * * *	Filed as an exhibit to the Company’s Current Report on Form 8-K filed on November 4, 2005.
* * * * * * * *	Filed as an exhibit to the Company’s Current Report on Form 8-K filed on February 24, 2006.
* * * * * * * * *	Filed as an exhibit to the Company’s Form 10-Q for the quarter ended June 30, 2006.
* * * * * * * * * *	The Company hereby agrees to furnish the SEC, upon request, copies of the instruments defining the rights of the holders of each issue of the Company's long-term debt.
* * * * * * * * * * *	Filed as an exhibit to the Company’s Form 10-K for the year ended December 31, 2006.
* * * * * * * * * * * *	Filed as an exhibit to the Company’s Form 10-Q for the quarter ended June 30, 2007 (File No. 01-33199).
* * * * * * * * * * * * *	Filed as an exhibit to the Company’s Form 10-K for the year ended December 31, 2007.

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