QUAKER CITY BANCORP INC - 10-Q Quarterly Report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

	FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2002

OR

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

	FOR THE TRANSITION PERIOD FROM _________ TO _________

COMMISSION FILE NUMBER: 0-22528

QUAKER CITY BANCORP, INC .

(Exact name of registrant as specified in its charter)

DELAWARE		95-4444221

(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

7021 GREENLEAF AVENUE, WHITTIER, CALIFORNIA		90602

(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code (562) 907-2200

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 x

No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes x

No o

Number of shares outstanding of the registrant’s sole class of common stock at February 7, 2003: 6,394,339.

QUAKER CITY BANCORP, INC.
Index


PART I.	FINANCIAL INFORMATION

ITEM 1.	Financial Statements

	Consolidated Statements of Financial Condition (unaudited) as of December 31, 2002 and June 30, 2002	3

	Consolidated Statements of Operations (unaudited) for the Three and Six Months Ended December 31, 2002 and 2001	4

	Consolidated Statements of Comprehensive Income (unaudited) for the Three and Six Months Ended December 31, 2002 and 2001	5

	Consolidated Statements of Cash Flows (unaudited) for the Six Months Ended December 31, 2002 and 2001	6

	Notes to Consolidated Financial Statements	8

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	23

ITEM 4.	Controls and Procedures	23

PART II.	OTHER INFORMATION

ITEM 4.	Submission of Matters to a Vote of Security Holders	24

ITEM 5.	Other Information	24

ITEM 6.	Exhibits and Reports on Form 8-K	25

SIGNATURES		32

CERTIFICATIONS		33

Item 1. FINANCIAL STATEMENTS

Quaker City Bancorp, Inc.
Consolidated Statements of Financial Condition
Unaudited
(In thousands, except share data)

			December 31, 2002			June 30, 2002

Assets
	Cash and due from banks		$	18,750		$	14,128
	Interest-bearing deposits			637			762
	Federal funds sold and other short-term investments			—			3,500
	Investment securities held-to-maturity			17,245			14,273
	Investment securities available-for-sale			29,558			79,234
	Loans receivable, net			1,254,053			1,193,035
	Loans receivable held-for-sale			9,864			3,436
	Mortgage-backed securities held-to-maturity			120,619			117,827
	Mortgage-backed securities available-for-sale			81,465			26,449
	Real estate held-for-sale			37			18
	Federal Home Loan Bank stock, at cost			19,340			16,685
	Office premises and equipment, net			7,699			7,327
	Deferred tax asset			973			324
	Accrued interest receivable and other assets			11,219			10,436

		Total assets	$	1,571,459		$	1,487,434

Liabilities and Stockholders’ Equity
	Deposits		$	1,028,976		$	1,009,725
	Federal Home Loan Bank advances			386,800			330,700
	Accounts payable and accrued expenses			6,809			8,605
	Other liabilities			19,086			9,893

		Total liabilities		1,441,671			1,358,923
	Stockholders’ Equity:
	Common stock, $.01 par value. Authorized 20,000,000 shares; issued and outstanding 6,336,888 shares and 6,610,017 at December 31, 2002 and June 30, 2002, respectively			63			66
	Additional paid-in capital			125,315			124,428
	Accumulated other comprehensive loss			(700	)		(244	)
	Retained earnings, substantially restricted			5,550			4,818
	Deferred compensation			(440	)		(557	)

		Total stockholders’ equity		129,788			128,511

		Total liabilities and stockholders’ equity	$	1,571,459		$	1,487,434

See accompanying notes to consolidated financial statements.

Quaker City Bancorp, Inc.
Consolidated Statements of Operations
Unaudited
(In thousands, except share and per share data)

			Three Months Ended December 31,				Six Months Ended December 31,

			2002		2001		2002		2001

Interest income:
	Loans receivable		$	22,195	$	22,644	$	44,205	$	45,779
	Mortgage-backed securities			1,936		2,087		3,889		4,114
	Investment securities			544		501		1,327		1,105
	Other			239		254		505		540

		Total interest income		24,914		25,486		49,926		51,538

Interest expense:
	Deposits			6,337		8,478		13,048		18,331
	Federal Home Loan Bank advances			4,000		3,902		7,790		7,835

		Total interest expense		10,337		12,380		20,838		26,166

	Net interest income before provision for loan losses			14,577		13,106		29,088		25,372
Provision for loan losses				200		200		400		200

	Net interest income after provision for loan losses			14,377		12,906		28,688		25,172

Other income:
	Deposit fees			1,231		861		2,392		1,675
	Loan service charges and fees			474		562		1,092		1,078
	Gain on sale of loans held-for-sale			489		113		601		274
	Commissions			170		247		358		482
	Gain on sale of securities available-for-sale			6		—		47		—
	Other			14		12		147		25

		Total other income		2,384		1,795		4,637		3,534

Other expense:
	Compensation and employee benefits			3,701		3,176		7,515		6,390
	Occupancy, net			839		721		1,644		1,446
	Federal deposit insurance premiums			108		100		216		200
	Data processing			396		301		765		607
	Advertising and promotional			330		380		682		693
	Consulting fees			197		213		439		355
	Other general and administrative expense			1,306		892		2,520		1,788

		Total general and administrative expense		6,877		5,783		13,781		11,479
	Real estate operations, net			1		—		1		—
	Amortization of core deposit intangible			28		28		57		57

		Total other expense		6,906		5,811		13,839		11,536

	Earnings before income taxes			9,855		8,890		19,486		17,170
Income taxes				4,251		3,790		8,247		7,328

Net earnings			$	5,604	$	5,100	$	11,239	$	9,842

Average common shares outstanding				6,289,638		6,308,694		6,369,189		6,276,434
Average shares outstanding and equivalents				6,593,982		6,661,480		6,678,950		6,648,003
Basic earnings per share			$	0.89	$	0.81	$	1.76	$	1.57
Diluted earnings per share			$	0.85	$	0.77	$	1.68	$	1.48

See accompanying notes to consolidated financial statements.

QUAKER CITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Unaudited
(In thousands)

		Three Months Ended December 31,						Six Months Ended December 31,

		2002			2001			2002			2001

Net earnings		$	5,604		$	5,100		$	11,239		$	9,842
Other comprehensive income:
	Unrealized holding gain (loss) on securities available-for-sale arising during the period, net of tax		(702	)		(163	)		(429	)		13
	Reclassification adjustment for realized (gain) included in net earnings and previously included in other comprehensive income, net of tax		(3	)		—			(27	)		—

Increase (decrease) in accumulated other comprehensive income, net of tax			(705	)		(163	)		(456	)		13

	Total comprehensive income	$	4,899		$	4,937		$	10,783		$	9,855

See accompanying notes to consolidated financial statements.

QUAKER CITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
(In thousands)

				Six Months Ended December 31,

				2002			2001

Cash flows from operating activities:
	Net earnings			$	11,239		$	9,842

	Adjustments to reconcile net earnings to net cash provided by operating activities:
		Depreciation and amortization			582			26
		Provision for loan losses			400			200
		Gain on sale of real estate held-for-sale			(4	)		—
		Gain on sale of loans held-for-sale			(601	)		(274	)
		Gain on sale of securities available-for-sale			(47	)		—
		Loans originated for sale			(61,532	)		(27,537	)
		Loans purchased for sale			(6,263	)		—
		Proceeds from sale of loans held-for-sale			61,930			27,580
		Federal Home Loan Bank stock dividend received			(443	)		(465	)
		(Increase) in accrued interest receivable and other assets			(840	)		(1,179	)
		Increase (decrease) in other liabilities			9,193			(440	)
		Increase (decrease) in accounts payable and accrued expenses			(1,796	)		878
		Other			422			1,060

			Net cash provided by operating activities		12,240			9,691

Cash flows from investing activities:
	Loans originated for investment				(169,650	)		(143,272	)
	Loans purchased for investment				(77,751	)		(71,910	)
	Principal repayments on loans				185,817			155,736
	Sale of investment securities available-for-sale				49,058			—
	Purchases of investment securities available-for-sale				(266	)		(9,419	)
	Purchases of investment securities held-to-maturity				(5,000	)		(2,000	)
	Maturities and principal repayments of investment securities held-to-maturity				2,000			9,313
	Purchases of mortgage-backed securities available-for-sale				(61,982	)		—
	Purchases of mortgage-backed securities held-to-maturity				(45,799	)		(51,197	)
	Principal repayments on mortgage-backed securities held-to-maturity				42,716			22,285
	Principal repayments on mortgage-backed securities available-for-sale				7,056			4,770
	Proceeds from sale of real estate held-for-sale				23			6
	(Purchase) redemption of Federal Home Loan Bank stock				(2,212	)		1,627
	Investment in office premises and equipment				(981	)		(218	)

			Net cash used by investing activities		(76,971	)		(84,279	)

Cash flows from financing activities:
	Increase in deposits				19,251			49,535
	Proceeds from funding of Federal Home Loan Bank advances				220,400			118,300
	Repayments of Federal Home Loan Bank advances				(164,300	)		(93,600	)
	Stock options exercised				2,199			816
	Repurchase and retirement of stock				(11,822	)		—

			Net cash provided by financing activities		65,728			75,051

			Increase in cash and cash equivalents		997			463
Cash and cash equivalents at beginning of period					18,390			16,750

Cash and cash equivalents at end of period				$	19,387		$	17,213

QUAKER CITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued)
Unaudited
(In thousands)

		Six Months Ended December 31,

		2002		2001

Supplemental disclosures of cash flow information:
	Interest paid (including interest credited)	$	21,994	$	27,380
	Cash paid for income taxes		5,852		6,300

Supplemental schedule of noncash investing and financing activities:
	Additions to real estate acquired through foreclosure	$	37	$	—

See accompanying notes to consolidated financial statements.

QUAKER CITY BANCORP, INC.
Notes to Consolidated Financial Statements

1.	The consolidated statements of financial condition as of December 31, 2002, the related consolidated statements of operations and comprehensive income for the three and six months ended December 31, 2002 and 2001, and the related consolidated statements of cash flows for the six months ended December 31, 2002 and 2001 are unaudited. These statements reflect, in the opinion of management, all material adjustments, consisting solely of normal recurring accruals, necessary for a fair presentation of the financial condition of Quaker City Bancorp, Inc. (the “Company”) as of December 31, 2002, its results of operations and comprehensive income for the three and six months ended December 31, 2002 and 2001, and cash flows for the six months ended December 31, 2002 and 2001. The results of operations for the unaudited periods are not necessarily indicative of the results of operations to be expected for the entire year of fiscal 2003.

	The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all information and footnotes normally included in financial statements prepared in conformity with accounting principles generally accepted in the United States of America. Accordingly, these consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2002.

2.	Earnings per share is reported on both a basic and diluted basis. Basic earnings per share is determined by dividing net earnings by the average number of shares of common stock outstanding, while diluted earnings per share is determined by dividing net earnings by the average number of shares of common stock outstanding adjusted for the dilutive effect of common stock equivalents. Calculation of earnings per share can be found in Exhibit 11.1 to this Quarterly Report on Form 10-Q.

3.	The Company accounts for derivative instruments in accordance with Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS 133”). A derivative is considered either an asset or liability in the statement of financial position and measured at fair value. If a derivative is designated as a hedging instrument, the changes in fair value of the derivative are either (a) recognized in earnings in the period of change together with the offsetting gain or loss on the hedged item or (b) reported as a component of other comprehensive income and subsequently reclassified into earnings when the forecasted transaction affects earnings. For a derivative not designated as a hedging instrument, changes in fair value are recognized in earnings in the period of change. As of December 31, 2002, the Company has approximately $11.8 million of commitments to originate loans which will be held for sale and approximately $3.6 million of loan sale commitments that qualify as derivatives under SFAS 133. The fair value of such commitments approximates zero at December 31, 2002.

4.	Statement of Financial Accounting Standards No. 146. Statement of Financial Accounting Standards No. 146, “Accounting for Costs Associated with Exit or Disposal Activities” (“SFAS 146”), requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. SFAS 146 replaces Emerging Issues Task Force (“EITF”) Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).” The provisions of SFAS 146 are to be applied prospectively to exit or disposal activities initiated after December 31, 2002.

5.	Statement of Financial Accounting Standards No. 147. Statement of Financial Accounting Standards No. 147, “Acquisitions of Certain Financial Institutions, an amendment of FASB Statements No. 72 and 144 and FASB Interpretations No. 9” (“SFAS 147”), addresses the financial accounting and reporting for the acquisition of all or part of a financial institution, except for a transaction between two or more mutual enterprises. SFAS 147 removes acquisitions of financial institutions, other than transactions between two or more mutual enterprises, from the scope of Statement of Financial Accounting Standards No. 72, “Accounting for Certain Acquisitions of Banking or Thrift Institutions” (“SFAS 72”), and Financial Accounting Standards Board Interpretation No. 9, Applying APB Opinions No. 16 and 17 “When a Savings and Loan Association of a Similar Institution Is Acquired in a Business Combination Accounted for by the Purchase Method,” and requires that those transactions be accounted for in accordance with Statement of Financial Accounting Standards No. 141, “Business Combination,” and Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets.” Thus, the requirement of SFAS 72 to recognize, and subsequently amortize, any excess of the fair value of liabilities assumed over the fair value of tangible and identifiable assets no longer applies to acquisitions within the scope of SFAS 147.

	SFAS 147 also provides guidance on the accounting for the impairment of disposal of acquired long-term, customer-relationship, intangible assets of financial institutions such as depositor- and borrower-relationship intangible assets and credit cardholder intangible assets. Those intangible assets are subject to the same undiscounted cash flow recoverability test and impairment loss recognition and measurement provisions that Statement of Financial Accounting Standards No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets” requires for other long-lived assets that are held and used. The provisions of SFAS 147 are effective on October 1, 2002. The financial impact of implementing this Statement has not had a material impact on the Company.

Statement of Financial Accounting Standards No. 148. Statement of Financial Accounting Standards No. 148, “Accounting for Stock-Based Compensation - Transition and Disclosure - an amendment of FASB Statement No. 123” (“SFAS 148”) issued in December of 2002 amends FASB Statement No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”), to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of SFAS 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The transition guidance and annual disclosure provisions of SFAS 148 are effective for financial statements issued for fiscal years ending after December 15, 2002. The interim disclosure provisions are effective for financial reports containing financial statements for interim periods beginning after December 15, 2002. Unless the Company elects to adopt the fair value recognition provisions of SFAS 123, which it currently does not intend to do, SFAS 148 will only require expanded disclosure. It is anticipated that implementing this Statement will not have a material financial impact on the Company.

QUAKER CITY BANCORP, INC.

Item 2.

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

This Quarterly Report on Form 10-Q includes “forward-looking statements” within the meaning of the Securities Exchange Act of 1934 (the “Exchange Act”), as amended by the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, included in this report that address results or developments that the Company expects or anticipates will or may occur in the future, including such things as (i) business strategy; (ii) economic trends, including the condition of the real estate market in southern California, and the direction of interest rates and prepayment speeds of mortgage loans and mortgage-backed securities (“MBS”); (iii) the adequacy of the Company’s allowances for loan and real estate losses; (iv) goals; (v) expansion and growth of the Company’s business and operations; and (vi) other matters are forward-looking statements. These statements are based upon certain assumptions and analyses made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments as well as other factors it believes are appropriate in the circumstances. These statements are subject to a number of risks and uncertainties, many of which are beyond the control of the Company, including general economic, market or business conditions; real estate market conditions, particularly in California; the opportunities (or lack thereof) that may be presented to and pursued by the Company; competitive actions by other companies; changes in law or regulations; and other factors. Actual results could differ materially from those contemplated by these forward-looking statements. Consequently, all of the forward-looking statements made in this report are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequences to or effects on the Company and its business or operations. Forward-looking statements made in this report speak as of the date hereof. The Company undertakes no obligation to update or revise any forward-looking statement made in this report.

GENERAL

Quaker City Bancorp, Inc., incorporated in Delaware, is primarily engaged in the savings and loan business through its wholly owned subsidiary, Quaker City Bank (the “Bank”). At December 31, 2002, the Bank operated twenty-four retail banking offices in southern California, including thirteen “in-store” Wal-Mart branches. Two new Wal-Mart in-store branches were opened in September 2002 and one opened in October 2002, in the communities of Pico Rivera, Santa Fe Springs and Long Beach, California, respectively. The Bank is scheduled to open two additional in-store Wal-Mart branches within the next two fiscal years, bringing its total to fifteen in-store Wal-Mart branches. Wal-Mart has entered into an agreement with another financial institution for the opening of additional in-store branches throughout the United States. It is not known whether the Bank will open any additional branches in Wal-Mart stores other than the fifteen currently under agreement. The Bank is subject to significant competition from other financial institutions, and is also subject to the regulations of various government agencies and undergoes periodic examinations by those regulatory authorities.

The Company is primarily engaged in attracting deposits from the general public in the areas in which its branches are located and investing such deposits and other available funds (primarily Federal Home Loan Bank (“FHLB”) advances) in loans secured by multifamily mortgages, one-to-four family residential mortgages, commercial real estate mortgages and MBS.

CRITICAL ACCOUNTING POLICIES

The Company has established various accounting policies which govern the application of accounting principles generally accepted in the United States of America in the preparation of its’ financial statements. The Company’s significant accounting policies are described in the Company’s Annual Report on Form 10-K for the year ended June 30, 2002. Certain accounting policies require management to make significant estimates and assumptions which have material impact on the carrying value of certain assets and liabilities, and the Company considers these to be critical accounting policies. The estimates and assumptions management uses are based on historical experience and other factors, which it believes to be reasonable under the circumstances. Actual results could differ significantly from these estimates and assumptions which could have a material impact on the carrying value of assets and liabilities at the balance sheet dates and the Company’s results of operations for the reporting periods.

The Company believes the allowance for loan and real estate losses is the critical accounting policy that requires the most significant estimates and assumptions that are particularly susceptible to significant change in the preparation of its financial statements. For further information, please see “Results of Operations—Provision for Loan Losses.”

RESULTS OF OPERATIONS

Net Earnings. The Company recorded net earnings of $5.6 million, $0.85 per diluted share, for the quarter ended December 31, 2002, a 10.4% increase in earnings per share from the same period last year, with net earnings of $5.1 million, $0.77 per diluted share. The Company recorded net earnings of $11.2 million, $1.68 per diluted share, for the six months ended December 31, 2002, a 13.5% increase in earnings per share from the same period last year, with net earnings of $9.8 million, $1.48 per diluted share. The increase in net earnings for the three and six months ended December 31, 2002 as compared to the same periods ended December 31, 2001 is primarily a result of an increase in net interest income as discussed below.

Interest Income. Interest income amounted to $24.9 million for the quarter ended December 31, 2002 as compared to $25.5 million for the quarter ended December 31, 2001. Interest income amounted to $49.9 million for the six months ended December 31, 2002 as compared to $51.5 million for the six months ended December 31, 2001. The decrease in interest income for the three and six month periods ended December 31, 2002 is primarily a result of a decline in the yield on average interest-earning assets. The yield on average interest-earning assets was 6.62% for the quarter ended December 31, 2002 compared to 7.57% for the quarter ended December 31, 2001. The yield on average interest-earning assets was 6.71% for the six months ended December 31, 2002 compared to 7.78% for the six months ended December 31, 2001. The reduction in market interest rates during the past year has resulted in the downward repricing of adjustable-rate loans, increased loan payoffs, and loan originations and refinancings funded at historically low interest rates. Average interest-earning assets for the current quarter increased to $1.50 billion compared to $1.35 billion for the same period last year, an 11.1% increase.

Interest Expense. Interest expense for the quarter ended December 31, 2002 was $10.3 million, compared to $12.4 million for the same quarter in the previous year. Interest expense for the six months ended December 31, 2002 was $20.8 million, compared to $26.2 million for the same period in the previous year. The decrease in interest expense for the three and six month periods ended December 31, 2002 is primarily a result of a decrease in the cost of average interest-bearing liabilities. The average cost of funds was 3.06% for the quarter ended December 31, 2002 as compared to 4.09% for the quarter ended December 31, 2001, a decrease of 103 basis points or 25.2% over the comparable period last year. The average cost of funds was 3.14% for the six months ended December 31, 2002 as compared to 4.37% for the six months ended December 31, 2001, a decrease of 123 basis points or 28.1% over the comparable period last year.

Net Interest Income Before Provision for Loan Losses. Net interest income before provision for loan losses for the quarter ended December 31, 2002 amounted to $14.6 million compared to $13.1 million for the same period last year. Net interest income before provision for loan losses for the six months ended December 31, 2002 amounted to $29.1 million compared to $25.4 million for the same period last year. The net interest margin for the three months ended December 31, 2002 was 3.88% compared to 3.89% for the same period last year. The net interest margin for the six months ended December 31, 2002 was 3.91% compared to 3.83% for the same period last year, as the cost of interest-bearing liabilities decreased more quickly than the yield on interest earning assets decreased. Approximately $495.4 million of the Bank’s adjustable rate loans are constrained by floor rates that are above current market rates as of the quarter ended December 31, 2002. Accordingly, should market rates rise, these assets will not reprice upwards until the fully indexed loan rate once again exceeds the lifetime floor rate. The Bank’s constrained adjustable rate loans, together with the reduction in the cost of funds and the lagging loan pricing indices, contributed to the expansion of the net interest margin for the six months ended December 31, 2002 compared to the six months ended December 31, 2001.

The following table displays average interest rates on the Company’s interest-earning assets and interest-bearing liabilities:

	Three month average						Six month average

	December 31, 2002			December 31, 2001			December 31, 2002			December 31, 2001

Yield on interest-earning assets		6.62	%		7.57	%		6.71	%		7.78	%
Cost of interest-bearing liabilities		3.06	%		4.09	%		3.14	%		4.37	%

Interest rate spread (1)		3.56	%		3.48	%		3.57	%		3.41	%

Net interest margin (2)		3.88	%		3.89	%		3.91	%		3.83	%

(1)	The interest rate spread represents the difference between the weighted-average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.
(2)	The net interest margin represents net interest income as a percentage of average interest-earning assets.

Provision for Loan Losses. The Company maintains valuation allowances for losses on loans and real estate that the Company=s management believes to be inherent in those portfolios. The Company=s management evaluates the adequacy of the level of the loss allowance at least quarterly as a function of its internal asset review process.

The Company’s Internal Asset Review Committee meets monthly to review and determine asset

classifications and to recommend any changes to the asset valuation allowance. This Committee is comprised of the Senior Loan Servicing Officer (Chairperson), Chief Executive Officer, Chief Financial Officer, Senior Residential Lending Officer, Senior Capital Markets Officer, Senior Income Property Lending Officer, Assistant Treasurer and Controller. The Internal Auditors of the Company also attend the meeting. The Chairperson of the Internal Asset Review Committee prepares reports for the Board of Directors’ Loan Committee regarding asset quality.

The Company’s management considers various factors when assessing the adequacy of the allowance for loan losses including risk characteristics inherent in the collateral types, asset classifications, estimated collateral values, local and national economic conditions, historical loan loss experience, and the Company’s underwriting policies.

The Company’s internal asset review system and loss allowance methodology are designed to provide for timely identification of problem assets and recognition of losses. The current asset monitoring process includes the use of asset classification to segregate the assets, primarily real estate loans, into types of loans. Currently, loan type classifications include one-to-four family loans, multifamily loans, commercial and land loans, and other loans.

The allowance for loan losses consists of three elements: (i) specific valuation allowances, (ii) general valuation allowances based on historical loan loss experience and current trends, and (iii) adjustments to general valuation allowances based on general economic conditions and other risk factors in the Company’s individual markets.

Specific Valuation Allowances. A specific valuation allowance for losses on a loan is established when management determines the loan to be impaired and the loss can be reasonably estimated. Generally, the Company’s loans are collateral dependent, therefore, specific reserves are established based upon the value of the underlying collateral. To comply with this policy, management has established a monitoring system that requires an annual review of real estate loans on commercial properties with balances in excess of $500,000 and for multifamily loans with balances in excess of $750,000. In addition, all assets considered to be adversely classified or criticized are reviewed monthly for impairment. The annual review process requires an analysis of current operating statements requested from the borrower (although they are not always received from the borrower), an evaluation of the property’s current and past performance, an evaluation of the borrower’s ability to repay, and an evaluation of the overall condition and estimated value of the collateral.

General Valuation Allowances. These allowances relate to assets with no well-defined deficiencies or weaknesses and take into consideration losses that are inherent within the portfolio but that have not yet been realized. General valuation allowances are determined by applying factors that include the mix of loan products within the portfolio, any change in underwriting standards, past loss experience and general economic conditions and other risk factors. Past loss experience within homogeneous loan categories is analyzed at least annually. The Company may revise general valuation allowance factors whenever necessary in order to address improving or deteriorating credit quality trends or specific risks associated with a given loan category.

General Economic Conditions and Other Risk Factors. The Company considers general economic conditions and other risk factors when setting valuation allowances. These factors are

based on local marketplace conditions and/or events that could affect loan repayment. The assessment of general economic conditions inherently involves a higher degree of uncertainty as it requires management to anticipate the impact that economic trends, legislative actions or other unique market and/or portfolio issues have on estimated credit losses. For example, in assessing economic risks in the marketplace, management considers local unemployment trends, expansion and contraction plans of major employers, and other similar indicators. Consideration of other risk factors typically includes recent loss experience in specific portfolio segments, trends in loan quality, concentrations of credit risk together with any internal administrative risk factors. These risk factors are carefully reviewed by management and are revised as conditions dictate.

The Company has increased its commercial real estate and land loan portfolio in recent years to a level of 22.68% of total gross loans at December 31, 2002, compared to 8.39% at June 30, 1997. Both because the size of the commercial real estate and land loan portfolio has increased and most of the loans comprising the portfolio were originated within the last five fiscal years, the Company’s past loss experience with respect to its commercial real estate and land loan portfolio may not be representative of the risk of loss in such portfolio in the future. Multifamily and commercial real estate loans are generally considered to involve a higher degree of credit risk and to be more vulnerable to adverse conditions in the real estate market and to deteriorating economic conditions, particularly changes in interest rates, than one-to-four family residential mortgage loans. As a result of the potentially higher risk of these loans, a higher level of general allowance for loan losses has been allocated to the multifamily and commercial real estate portfolios. These loans typically involve higher loan principal amounts and the repayment of such loans generally depends on the income produced by the operation or sale of the property being sufficient to cover operating expenses and debt service. In addition, multifamily and commercial real estate values tend to be more cyclical and recessionary economic conditions that prevailed in prior years in the Company’s lending market area tend to result in higher vacancy, reduced rental rates and lower net operating incomes from multifamily and commercial real estate properties. Real estate values in southern California have generally remained strong though there are signs of weakness in certain segments of the market.

The following table sets forth the Company’s allowance for loan losses to total loans and the percentage of loans to total loans in each of the loan types listed:

	At December 31, 2002								At June 30, 2002

	Amount		Percentage of Allowance to Total Allowance			Percentage of Loans in Each Category to Total Loans			Amount		Percentage of Allowance to Total Allowance			Percentage of Loans in Each Category to Total Loans

	(In thousands)
One-to-four family	$	933		8.09	%		23.36	%	$	1,220		10.96	%		26.90	%
Multifamily		6,219		53.93			52.73			5,715		51.34			50.13
Commercial and land		4,165		36.12			22.68			3,841		34.51			22.08
Other		214		1.86			1.23			165		1.48			0.89
Unallocated		—		—			N/A			190		1.71			N/A

Total allowance for loan losses	$	11,531		100.00	%		100.00	%	$	11,131		100.00	%		100.00	%

The Company recorded a $200,000 provision for loan losses for both the three months ended December 31, 2002 and December 31, 2001. Management recorded a $200,000 provision for the second quarter of fiscal 2003 primarily as a result of growth in both the multifamily and commercial real estate loan portfolios during the quarter. The provision for loan losses was $400,000 for the six months ended December 31, 2002, compared to $200,000 for the same period last year. The Company adjusted down its allocation of the general allowance for single family loans during the first quarter of fiscal 2003. The Company’s single family loan portfolio has performed better than anticipated, given the current historically low interest rates combined with the relative strength of the southern California real estate market.

As a result of the potential weakness in certain segments of real estate markets and other economic factors, increases in the allowance for loan losses may be required in future periods. In addition, the Office of Thrift Supervision (“OTS”) and the Federal Deposit Insurance Corporation (“FDIC”), as an integral part of their examination processes, periodically review the Company’s allowance for loan losses. These agencies may require the Company to increase the allowance for loan losses based on their judgments of the information available at the time of their examination.

The following is a summary of the activity in the allowance for loan losses:

	At or for the Three Months Ended				At or for the Six Months Ended

	December 31, 2002		December 31, 2001		December 31, 2002		December 31, 2001

	(In thousands)

Balance at beginning of period	$	11,331	$	10,943	$	11,131	$	10,943
Provision for loan losses		200		200		400		200

Balance at end of period	$	11,531	$	11,143	$	11,531	$	11,143

The specific allowance for loan and real estate losses was $38,000 at December 31, 2002 as compared to $94,000 at December 31, 2001. The specific allowance declined due to loan payoffs and increased real estate values in southern California.

Other Income. Other income for the three months ended December 31, 2002 was $2.4 million as compared to $1.8 million for the same period last year, an increase of 32.8%. Other income for the six months ended December 31, 2002 was $4.6 million as compared to $3.5 million for the same period last year, an increase of 31.2%. Included in other income for the three months ended December 31, 2002 was an increase of $370,000 in deposit fee income, up 43.0% from the same period last year due to a continued emphasis on increasing transaction-based deposits, an $88,000 decrease in loan servicing charges and fees, a $77,000 decrease in commissions, and an increase of $376,000 in gain on sale of loans held-for-sale, up 332.7% from the same period last year due to high loan refinancing activity. Included in other income for the six months ended December 31, 2002 was an increase of $717,000 in deposit fee income related to checking accounts, up 42.81% from the same period last year, $120,000 of deferred gains recognized, a $124,000 decrease in commissions, and an increase of $327,000 in gain on sale of loans held-for-sale, up 119.3% from the same period last year due to high loan refinancing activity.

Other Expense. Other expense for the three months ended December 31, 2002 increased to $6.9 million compared to $5.8 million for the same period last year, an increase of 19.0%. Other expense for the six months ended December 31, 2002 increased to $13.8 million compared to $11.5 million for the same period last year, an increase of 20.0%. Other expense for the three and six month periods ended December 31, 2002 increased from the same periods last year as a result of costs related to retirement plan contributions including compensation costs for the Employee Stock Ownership Plan (“ESOP”) and planned branch network expansion expenses with seven new in-store branches opened since January 2002. As shares are released from the ESOP, compensation expense is recognized to the extent that the fair market value of the shares exceeds the book value of the shares. The weighted average market price of the Company’s common stock for the months ended December 31, 2002 and 2001 was $34.20 and $23.97, respectively.

The efficiency ratio for the quarter ended December 31, 2002 increased to 40.55% compared to 38.81% for the same period last year. The efficiency ratio is the measurement of general and administrative expense as a percentage of net interest income before provision for loan losses and other income, excluding nonrecurring items.

Income Taxes. The Company’s effective tax rates were 43.14% and 42.63% for the quarters ended December 31, 2002 and 2001, respectively. The Company’s effective tax rates were 42.32% and 42.68% for the six months ended December 31, 2002 and 2001, respectively. The effective tax rates were comparable to the applicable statutory rates in effect.

FINANCIAL CONDITION

Total stockholders’ equity for the Company was $129.8 million at December 31, 2002, compared to $128.5 million at June 30, 2002. Total assets were $1.57 billion at December 31, 2002, an increase of $84.0 million compared to June 30, 2002.

Pursuant to previously announced plans to repurchase Company stock, the Company acquired in the open market 229,000 shares of its common stock at an average price per share of $34.16 during the quarter ended December 31, 2002. On October 17, 2002, the Board of Directors authorized the additional repurchase of up to 5% of the Company’s outstanding common stock. This 5% authorization, in combination with the 157,551 shares remaining from the previous Board repurchase authorization, brought the total number of shares authorized for repurchase to 484,170. Up to 255,170 additional shares may be repurchased in the future under the current Board authorization.

Total loans receivable (including loans receivable held-for-sale) amounted to $1.26 billion at December 31, 2002 compared to $1.20 billion at June 30, 2002. The following table presents loans receivable at the dates indicated:

		At December 31, 2002			At June 30, 2002

		(In millions)
One-to-four family		$	298.5		$	325.4
Multifamily			673.7			606.6
Commercial and land			289.7			267.2
Other			15.7			10.8
Unamortized discounts			(2.2	)		(2.4	)
Allowance for loan losses			(11.5	)		(11.1	)

	Total	$	1,263.9		$	1,196.5

Loan originations totaled $128.5 million and loan purchases totaled $29.8 million for the quarter ended December 31, 2002, compared to loan originations of $86.2 million and loan purchases of $46.9 million for the quarter ended December 31, 2001. Loan originations totaled $231.2 million and loan purchases totaled $84.0 million for the six months ended December 31, 2002, compared to loan originations of $170.8 million and loan purchases of $71.9 million for the six months ended December 31, 2001.

Loan originations were comprised of the following:

		For the Three Months Ended				For the Six Months Ended

		December 31, 2002		December 31, 2001		December 31, 2002		December 31, 2001

		(In millions)
One-to-four family		$	44.0	$	20.8	$	70.7	$	37.6
Multifamily			65.2		51.8		123.6		100.7
Commercial and land			19.2		13.6		36.7		32.2
Other			0.1		—		0.2		0.3

	Total loans originated	$	128.5	$	86.2	$	231.2	$	170.8

Loan purchases were comprised of the following:

		For the Three Months Ended				For the Six Months Ended

		December 31, 2002		December 31, 2001		December 31, 2002		December 31, 2001

		(In millions)
One-to-four family		$	8.6	$	46.6	$	24.8	$	68.2
Multifamily			10.3		0.2		39.9		1.9
Commercial and land			3.8		0.1		12.2		1.8
Other			7.1		—		7.1		—

	Total loans purchased	$	29.8	$	46.9	$	84.0	$	71.9

The increase in loan production for the three and six months ended December 31, 2002 compared to the same periods in the previous year is primarily a result of an increase in one-to-four family and multifamily loan originations from increased refinancings due to the lower interest rate environment, as well as an increase in multifamily and commercial real estate loan purchases. At present, the Company expects to continue its focus on one-to-four family, multifamily and commercial real estate lending during the current fiscal year.

MBS held-to-maturity totaled $120.6 million at December 31, 2002, compared to $117.8 million at June 30, 2002. There were $43.0 million in amortization and payoffs and $45.8 million MBS held-to-maturity purchases made during the six month period. MBS available-for-sale amounted to $81.5 million at December 31, 2002 compared to $26.4 million at June 30, 2002. Approximately $62.0 million of MBS available-for-sale purchases were partially offset by $6.9 million in amortization and payoffs during the six months ended December 31, 2002.

CAPITAL RESOURCES AND LIQUIDITY

From time to time the Company has obtained advances from the FHLB as an alternative to retail deposit funds. The net increase in FHLB advances were $46.8 million and $56.1 million for the three and six months ended December 31, 2002. Deposits increased by $9.7 million and $19.3 million for the three and six months ended December 31, 2002. In addition, while the majority of the Bank’s deposits are retail in nature, the Bank has accepted $65.0 million in time deposits from a political subdivision. The Bank considers these funds to be wholesale deposits and an alternative borrowing source rather than a customer relationship and their levels are determined by management’s decision as to the most economic funding sources.

In addition to FHLB advances and proceeds from increases in customer deposits, other sources of liquidity for the Company include principal repayments on loans and MBS, proceeds from sales of loans held-for-sale and other cash flows generated from operations. Principal repayments on loans were $105.3 million and $85.8 million for the three months ended December 31, 2002 and 2001, respectively. Principal repayments on loans were $185.8 million and $155.7 million for the six months ended December 31, 2002 and 2001, respectively. With continued downward pressure on interest rates, loans paid off more rapidly than in the previous reporting period.

Proceeds from loan sales amounted to $43.2 million for the quarter ended December 31, 2002 as compared to $8.0 million for the quarter ended December 31, 2001. Proceeds from loan sales amounted to $61.9 million for the six months ended December 31, 2002 compared to $27.6 million for the six months ended December 31, 2001. At December 31, 2002, the Company had mortgage servicing assets related to loans sold, servicing retained, with a carrying value of $767,000. Loans serviced for others were $287.8 million at December 31, 2002 compared to $280.0 million at June 30, 2002.

The Financial Regulatory Relief and Economic Efficiency Act of 2000 repealed the statutory liquidity requirement for savings associations, citing the requirement as unnecessary. In light of this action, the OTS repealed its liquidity regulations, with the following exception. Savings associations must continue to maintain sufficient liquidity to ensure safe and sound operation; the appropriate level of liquidity will vary depending on the activities in which the savings association engages. The Bank believes that its level of liquidity is consistent with its safe and sound operation.

Sources of capital and liquidity for the Company on a stand-alone basis include distributions from the Bank. Dividends and other capital distributions from the Bank are subject to regulatory restrictions.

ASSET QUALITY

The following table sets forth information regarding nonaccrual loans, troubled debt restructured loans and real estate acquired through foreclosure at the dates indicated:

			At December 31, 2002			At June 30, 2002			At December 31, 2001

			(Dollars in thousands)
Nonaccrual loans (1):
	Real estate loans:
		One-to-four family	$	3,567		$	2,575		$	2,189
		Multifamily		—			766			585
		Commercial and land		329			907			—
		Consumer		121			23			108

		Total nonaccrual loans (1)		4,017			4,271			2,882
Troubled debt restructured loans				—			—			—

	Total nonperforming loans			4,017			4,271			2,882
Real estate acquired through foreclosure				37			18			—

	Total nonperforming assets		$	4,054		$	4,289		$	2,882

Nonperforming loans as a percentage of gross loans (2)				0.31	%		0.35	%		0.25	%
Nonperforming assets as a percentage of total assets (3)				0.26	%		0.29	%		0.21	%
Total allowance for loan losses as a percentage of gross loans				0.90	%		0.92	%		0.95	%
Total allowance for loan losses as a percentage of total nonperforming loans				287.06	%		260.62	%		386.64	%
Total allowance as a percentage of total nonperforming assets (4)				284.44	%		259.52	%		386.64	%

(1)	Nonaccrual loans are net of specific allowances of $38,000, $81,000 and $11,000 at December 31, 2002, June 30, 2002 and December 31, 2001, respectively.
(2)	Nonperforming loans are net of specific allowances and include nonaccrual and troubled debt restructured loans. Gross loans include loans held-for-sale.
(3)	Nonperforming assets include nonperforming loans and Real Estate Owned (“REO”).
(4)	Total allowance includes loan and REO valuation allowances.

The Company’s nonaccrual policy provides that interest accruals generally are to be discontinued once a loan is past due for a period of 60 days or more. Loans may also be placed on nonaccrual status even though they are less than 60 days past due if management concludes that it is probable that the borrower will not be able to comply with the repayment terms of the loan.

The Company defines nonperforming loans as nonaccrual loans and troubled debt restructured loans. Nonperforming loans are reported net of specific allowances. Nonperforming assets are defined as nonperforming loans and real estate acquired through foreclosure.

Nonperforming assets decreased to $4.1 million, 0.26% of total assets at December 31, 2002,

compared to $4.3 million, 0.29% of total assets at June 30, 2002. Classified loans decreased to $10.4 million at December 31, 2002, compared to $11.4 million at June 30, 2002.

Impaired Loans. A loan is considered impaired when, based on current circumstances and events, it is probable that a creditor will be unable to collect all amounts due according to the contractual terms of the loan agreement. Creditors are required to measure impairment of a loan based on any one of the following: (i) the present value of expected future cash flows from the loan discounted at the loan’s effective interest rate, (ii) an observable market price, or (iii) the fair value of the loan’s underlying collateral. The Company generally measures impairment based on the fair value of the loan’s underlying collateral property. Impaired loans exclude large groups of smaller balance homogeneous loans that are collectively evaluated for impairment. For the Company, loans collectively reviewed for impairment include one-to-four family loans with principal balances of less than $300,000, real estate loans on commercial properties with balances of less than $500,000 and multifamily loans with balances of less than $750,000.

Factors considered as part of the periodic loan review process to determine whether a loan is impaired, as defined under Statement of Financial Accounting Standards No. 114, “Accounting by Creditors for Impairment of a Loan,” and as amended by Statement of Financial Accounting Standards No. 118, “Accounting by Creditors for Impairment of a Loan-Income Recognition and Disclosures,” address both the amount the Company believes is probable that it will collect and the timing of such collection. As part of the Company’s loan review process, the Company considers such factors as the ability of the borrower to continue to meet the debt service requirements, assessments of other sources of repayment, the fair value of any collateral and the Company’s prior history in dealing with the particular type of loan involved. In evaluating whether a loan is considered impaired, insignificant delays (less than twelve months) in the absence of other facts and circumstances would not alone lead to the conclusion that a loan was impaired. At December 31, 2002, the Company had a gross investment in impaired loans of $38,000 for which specific valuation allowances of $38,000 had been established.

During the three and six months ended December 31, 2002, the Company’s average investment in impaired loans was $38,000 and $87,000, respectively. For the three and six months ended December 31, 2001, the Company’s average investment in impaired loans was $482,000 and $676,000 respectively. For the three and six months ended December 31, 2002, income recorded on impaired loans totaled $1,000 and $2,300, substantially all of which was recorded in accordance with the policy for nonaccrual loans. Payments received on impaired loans which are performing under their contractual terms are allocated to principal and interest in accordance with the terms of the loans. All impaired loans were performing in accordance with their contractual terms at December 31, 2002.

REGULATORY CAPITAL

The Financial Institutions Reform, Recovery and Enforcement Act of 1989 (“FIRREA”), and implementing OTS capital regulations include three separate minimum capital requirements for financial institutions subject to OTS supervision. First, the tangible capital requirement mandates that the Bank’s stockholders’ equity less intangible assets be at least 1.50% of adjusted total assets as defined in the capital regulations. Second, the core capital requirement currently mandates core capital (tangible capital plus qualifying supervisory goodwill) be at least 4.00% of adjusted total

assets as defined in the capital regulations. Third, the risk-based capital requirement presently mandates that core capital plus supplemental capital as defined by the OTS be at least 8.00% of risk-weighted assets as prescribed in the capital regulations. The capital regulations assign specific risk weightings to all assets and off-balance sheet items. The Bank was in compliance with all capital requirements in effect at December 31, 2002, and meets all standards necessary to be considered “well-capitalized” under the prompt corrective action regulations adopted by the OTS pursuant to the Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”). The following table reflects the required and actual regulatory capital ratios of the Bank at the dates indicated:

Regulatory Capital Ratios for Quaker Bank	FIRREA Minimum Requirement			FDICIA “Well-Capitalized” Minimum Requirement			Actual at December 31, 2002			Actual at June 30, 2002

Tangible capital		1.50	%		N/A			8.08	%		8.34	%
Core capital to adjusted total assets		4.00	%		5.00	%		8.08	%		8.34	%
Core capital to risk-weighted assets		4.00	%		6.00	%		11.85	%		12.39	%
Total capital to risk-weighted assets		8.00	%		10.00	%		12.92	%		13.50	%

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of loss from adverse changes in market prices and rates. The Company’s market risk arises primarily from interest rate risk inherent in its lending and deposit taking activities. To that end, management actively monitors and manages its interest rate risk exposure. The Company does not currently engage in trading activities. The Company’s financial instruments include interest sensitive loans receivable, federal funds sold, MBS, investment securities, FHLB stock, deposits and borrowings. The Company’s average interest-sensitive assets totaled approximately $1.49 billion for the six months ended December 31, 2002. Approximately $495.4 million of the Bank’s adjustable rate loans are constrained by floor rates that are above current market rates as of the quarter ended December 31, 2002. Accordingly, should market rates rise, these assets will not reprice upwards until the fully indexed loan rate once again exceeds the lifetime floor rate. Average interest-sensitive liabilities totaled approximately $1.33 billion at December 31, 2002. The composition of the Company’s financial instruments subject to market risk has not changed materially since June 30, 2002.

Item 4. CONTROLS AND PROCEDURES

Within the 90 days prior to the filing date of this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Rules 13a-14 and 13a-15 promulgated under the Exchange Act. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective in timely alerting them to material information required to be included in the Company’s periodic SEC filings.

There were no significant changes in the Company’s internal controls or in other factors that could significantly affect these internal controls subsequent to the date of the most recent evaluation. Since there were no significant deficiencies or material weaknesses in the Company’s internal controls, there were no corrective actions taken.

PART II. OTHER INFORMATION

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

At the Annual Meeting of Stockholders of the Company held on November 20, 2002 the following were approved:

	•	Election of the following nominees as directors of the Company:

		(1) David S. Engelman was elected by a vote of 5,739,070 for, with 535,907 votes withheld.

		(2) David K. Leichtfuss was elected by a vote of 5,879,934 for, with 395,043 votes withheld.

	•	The proposal to approve the Quaker City Bancorp, Inc. 2002 Equity Incentive Plan was approved by a vote of 5,222,511 in favor, 1,038,802 against, with 13,664 abstentions.

Item 5. OTHER INFORMATION

In accordance with Section 10A(i)(2) of the Exchange Act, the Company must disclose the approval by the Company’s Audit Committee of any non-audit services to be performed by KPMG LLP (“KPMG”), the Company’s independent auditor. Non-audit services are defined in the Exchange Act as services other than those provided in connection with an audit or a review of the financial statements of the Company. On October 17, 2002, the Audit Committee approved the engagement of KPMG for the provision of tax advisory services as permitted by subsection (g) of Section 10A of the Exchange Act. These services have an aggregate estimated cost of $35,000.

Item 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

Exhibit Number		Description

3.1		Amended and Restated Certificate of Incorporation of Quaker City Bancorp, Inc.(8)

3.2		Bylaws of Quaker City Bancorp, Inc.(1)

10.1		Quaker City Bancorp, Inc. 1993 Incentive Stock Option Plan.*(1)

10.2		Quaker City Bancorp, Inc. 1993 Stock Option Plan for Outside Directors.*(1)

10.3		Quaker City Federal Savings and Loan Association Recognition and Retention Plan for Officers and Employees.*(1)

10.4		Quaker City Federal Savings and Loan Association Recognition and Retention Plan for Outside Directors.*(1)

10.5		Employment Agreements between Quaker City Bancorp, Inc. and Quaker City Federal Savings and Loan Association, respectively, and J.L. Thomas as of January 1, 1994 and as amended to September 27, 1994, respectively.*(1)

10.5.1		Quaker City Federal Savings and Loan Association Three Year Employment Agreement Renewal and Extension Acknowledgment between Quaker City Federal Savings and Loan Association and J.L. Thomas dated June 23, 1995.*(2)

10.5.2		Employment Agreements between Quaker City Bancorp, Inc. and Quaker City Federal Savings and Loan Association, respectively, and J.L. Thomas as of July 1, 1996.*(3)

10.5.3		Quaker City Federal Savings and Loan Association Three Year Employment Agreement Renewal and Extension Acknowledgment between Quaker City Federal Savings and Loan Association and J.L. Thomas dated July 1, 1997.*(4)

10.5.4		Quaker City Federal Savings and Loan Association Three Year Employment Agreement Renewal and Extension Acknowledgment between Quaker City Federal Savings and Loan Association and J. L. Thomas dated July 1, 1998.*(5)

10.6		Employment Agreements between Quaker City Bancorp, Inc. and Quaker City Federal Savings and Loan Association, respectively, and Frederic R. (Rick) McGill as of January 1, 1994 and as amended to September 27, 1994, respectively.*(1)

10.6.1		Quaker City Federal Savings and Loan Association Two Year Employment Agreement Renewal and Extension Acknowledgment between Quaker City Federal Savings and Loan Association and Frederic R (Rick) McGill dated June 23, 1995.*(2)

10.6.2		Employment Agreements between Quaker City Bancorp, Inc. and Quaker City Federal Savings and Loan Association, respectively, and Frederic R. (Rick) McGill as of July 1, 1996.*(3)

10.6.3		Quaker City Federal Savings and Loan Association Three Year Employment Agreement Renewal and Extension Acknowledgment between Quaker City Federal Savings and Loan Association and Frederic R. McGill dated July 1, 1997.*(4)

Exhibit Number		Description


10.6.4		Quaker City Federal Savings and Loan Association Three Year Employment Agreement Renewal and Extension Acknowledgment between Quaker City Federal Savings and Loan Association and Frederic R. McGill dated July 1, 1998.*(5)

10.6.5		Quaker City Federal Savings and Loan Association Three Year Employment Agreement Renewal and Extension Acknowledgment between Quaker City Federal Savings and Loan Association and Frederic R. McGill dated July 1, 1999.*(6)

10.6.6		Quaker City Bank Three Year Employment Agreement Renewal and Extension Acknowledgment between Quaker City Bank and Frederic R. McGill dated July 1, 2000.*(7)

10.6.7		Quaker City Bank Three Year Employment Agreement Renewal and Extension Acknowledgment between Quaker City Bank and Frederic R. McGill dated July 1, 2001.*(8)

10.6.8		Quaker City Bank Three Year Employment Agreement Renewal and Extension Acknowledgment between Quaker City Bank and Frederic R. McGill dated July 1, 2002.*(9)

10.7		Change-in-Control Agreements between Quaker City Bancorp, Inc. and Quaker City Federal Savings and Loan Association, respectively, and Dwight L. Wilson as of January 1, 1994 and as amended to September 27, 1994, respectively.*(1)

10.7.1		Quaker City Federal Savings and Loan Association Change in Control Agreement Renewal and Extension Acknowledgment between Quaker City Federal Savings and Loan Association and Dwight L. Wilson dated September 7, 1995.*(2)

10.7.2		Quaker City Federal Savings and Loan Association Change in Control Agreement Renewal and Extension Acknowledgment between Quaker City Federal Savings and Loan Association and Dwight L. Wilson dated July 1, 1996.*(3)

10.7.3		Quaker City Federal Savings and Loan Association Change in Control Agreement Renewal and Extension Acknowledgment between Quaker City Federal Savings and Loan Association and Dwight L. Wilson dated July 1, 1997.*(4)

10.7.4		Quaker City Federal Savings and Loan Association Change in Control Agreement Renewal and Extension Acknowledgment between Quaker City Federal Savings and Loan Association and Dwight L. Wilson dated July 1, 1998.*(5)

10.7.5		Quaker City Federal Savings and Loan Association Change in Control Agreement Renewal and Extension Acknowledgment between Quaker City Federal Savings and Loan Association and Dwight L. Wilson dated July 1, 1999.*(6)

10.7.6		Quaker City Bank Change in Control Agreement Renewal and Extension Acknowledgment between Quaker City Bank and Dwight L. Wilson dated July 1, 2000.*(7)

10.7.7		Quaker City Bank Change in Control Agreement Renewal and Extension Acknowledgment between Quaker City Bank and Dwight L. Wilson dated July 1, 2001.*(8)

10.7.8		Quaker City Bank Change in Control Agreement Renewal and Extension Acknowledgment between Quaker City Bank and Dwight L. Wilson dated July 1, 2002.*(9)

Exhibit Number		Description

10.8		Change-in-Control Agreements between Quaker City Bancorp, Inc. and Quaker City Federal Savings and Loan Association, respectively, and Harold L. Rams as of January 1, 1994 and as amended to September 27, 1994, respectively.*(1)

10.8.1		Quaker City Federal Savings and Loan Association Change in Control Agreement Renewal and Extension Acknowledgment between Quaker City Federal Savings and Loan Association and Harold Rams dated July 1, 1995.*(2)

10.8.2		Quaker City Federal Savings and Loan Association Change in Control Agreement Renewal and Extension Acknowledgment between Quaker City Federal Savings and Loan Association and Harold Rams dated July 1, 1996.*(3)

10.8.3		Quaker City Federal Savings and Loan Association Change in Control Agreement Renewal and Extension Acknowledgment between Quaker City Federal Savings and Loan Association and Harold Rams dated July 1, 1997.*(4)

10.8.4		Quaker City Federal Savings and Loan Association Change in Control Agreement Renewal and Extension Acknowledgment between Quaker City Federal Savings and Loan Association and Harold Rams dated July 1, 1998.*(5)

10.8.5		Quaker City Federal Savings and Loan Association Change in Control Agreement Renewal and Extension Acknowledgment between Quaker City Federal Savings and Loan Association and Harold Rams dated July 1, 1999.*(6)

10.8.6		Quaker City Bank Change in Control Agreement Renewal and Extension Acknowledgment between Quaker City Bank and Harold Rams dated July 1, 2000.*(7)

10.8.7		Quaker City Bank Change in Control Agreement Renewal and Extension Acknowledgment between Quaker City Bank and Harold Rams dated July 1, 2001.*(8)

10.8.8		Quaker City Bank Change in Control Agreement Renewal and Extension Acknowledgment between Quaker City Bank and Harold Rams dated July 1, 2002.*(9)

10.9		Change-in-Control Agreements between Quaker City Bancorp, Inc. and Quaker City Federal Savings and Loan Association, respectively, and Kathryn M. Hennigan as of January 1, 1994 and as amended September 27, 1994, respectively.*(1)

10.9.1		Quaker City Federal Savings and Loan Association Change in Control Agreement Renewal and Extension Acknowledgment between Quaker City Federal Savings and Loan Association and Kathryn M. Hennigan dated July 1, 1995.*(2)

10.9.2		Quaker City Federal Savings and Loan Association Change in Control Agreement Renewal and Extension Acknowledgment between Quaker City Federal Savings and Loan Association and Kathryn M. Hennigan dated July 1, 1996.*(3)

10.9.3		Quaker City Federal Savings and Loan Association Change in Control Agreement Renewal and Extension Acknowledgment between Quaker City Federal Savings and Loan Association and Kathryn M. Hennigan dated July 1, 1997.*(4)

10.9.4		Quaker City Federal Savings and Loan Association Change in Control Agreement Renewal and Extension Acknowledgment between Quaker City Federal Savings and Loan Association and Kathryn M. Hennigan dated July 1, 1998.*(5)

Exhibit Number		Description

10.9.5		Quaker City Federal Savings and Loan Association Change in Control Agreement Renewal and Extension Acknowledgment between Quaker City Federal Savings and Loan Association and Kathryn M. Hennigan dated July 1, 1999.*(6)

10.9.6		Quaker City Bank Change in Control Agreement Renewal and Extension Acknowledgment between Quaker City Bank and Kathryn M. Hennigan dated July 1, 2000.*(7)

10.9.7		Quaker City Bank Change in Control Agreement Renewal and Extension Acknowledgment between Quaker City Bank and Kathryn M. Hennigan dated July 1, 2001.*(8)

10.9.8		Quaker City Bank Change in Control Agreement Renewal and Extension Acknowledgment between Quaker City Bank and Kathryn M. Hennigan dated July 1, 2002.*(9)

10.10		Change-in-Control Agreements between Quaker City Bancorp, Inc. and Quaker City Federal Savings and Loan Association, respectively, and Karen A. Tannheimer as of January 1, 1994 and as amended to September 27, 1994, respectively.*(1)

10.10.1		Quaker City Federal Savings and Loan Association Change in Control Agreement Renewal and Extension Acknowledgment between Quaker City Federal Savings and Loan Association and Karen A. Tannheimer dated June 23, 1995.*(2)

10.10.2		Quaker City Federal Savings and Loan Association Change in Control Agreement Renewal and Extension Acknowledgment between Quaker City Federal Savings and Loan Association and Karen A. Tannheimer dated July 1, 1996.*(3)

10.10.3		Quaker City Federal Savings and Loan Association Change in Control Agreement Renewal and Extension Acknowledgment between Quaker City Federal Savings and Loan Association and Karen A. Tannheimer dated July 1, 1997.*(4)

10.10.4		Quaker City Federal Savings and Loan Association Change in Control Agreement Renewal and Extension Acknowledgment between Quaker City Federal Savings and Loan Association and Karen A. Tannheimer dated July 1, 1998.*(5)

10.10.5		Quaker City Federal Savings and Loan Association Change in Control Agreement Renewal and Extension Acknowledgment between Quaker City Federal Savings and Loan Association and Karen A. Tannheimer dated July 1, 1999.*(6)

10.10.6		Quaker City Bank Change in Control Agreement Renewal and Extension Acknowledgment between Quaker City Bank and Karen A. Tannheimer dated July 1, 2000.*(7)

10.10.7		Quaker City Bank Change in Control Agreement Renewal and Extension Acknowledgment between Quaker City Bank and Karen A. Tannheimer dated July 1, 2001.*(8)

10.10.8		Quaker City Bank Change in Control Agreement Renewal and Extension Acknowledgment between Quaker City Bank and Karen A. Tannheimer dated July 1, 2002.*(9)

10.11		Change-in-Control Agreements between Quaker City Bancorp, Inc. and Quaker City Federal Savings and Loan Association, respectively, and Robert C. Teeling as of January 1, 1994 and as amended to September 27, 1994, respectively.*(1)

Exhibit Number		Description

10.11.1		Quaker City Federal Savings and Loan Association Change in Control Agreement Renewal and Extension Acknowledgment between Quaker City Federal Savings and Loan Association and Robert C. Teeling dated July 1, 1995.*(2)

10.11.2		Quaker City Federal Savings and Loan Association Change in Control Agreement Renewal and Extension Acknowledgment between Quaker City Federal Savings and Loan Association and Robert C. Teeling dated July 1, 1996.*(3)

10.11.3		Quaker City Federal Savings and Loan Association Change in Control Agreement Renewal and Extension Acknowledgment between Quaker City Federal Savings and Loan Association and Robert C. Teeling dated July 1, 1997.*(4)

10.11.4		Quaker City Federal Savings and Loan Association Change in Control Agreement Renewal and Extension Acknowledgment between Quaker City Federal Savings and Loan Association and Robert C. Teeling dated July 1, 1998.*(5)

10.11.5		Quaker City Federal Savings and Loan Association Change in Control Agreement Renewal and Extension Acknowledgment between Quaker City Federal Savings and Loan Association and Robert C. Teeling dated July 1, 1999.*(6)

10.11.6		Quaker City Bank Change in Control Agreement Renewal and Extension Acknowledgment between Quaker City Bank and Robert C. Teeling dated July 1, 2000.*(7)

10.11.7		Quaker City Bank Change in Control Agreement Renewal and Extension Acknowledgment between Quaker City Bank and Robert C. Teeling dated July 1, 2001.*(8)

10.11.8		Quaker City Bank Change in Control Agreement Renewal and Extension Acknowledgment between Quaker City Bank and Robert C. Teeling dated July 1, 2002.*(9)

10.12		The Quaker City Federal Savings and Loan Association Supplemental Executive Retirement Plan.*(1)

10.13		Quaker City Federal Savings Association Employee Stock Ownership Trust Loan and Security Agreement between California Central Trust Bank, as trustee (the “Trustee”) and Quaker City Bancorp, Inc. dated as of December 30, 1993 and related Promissory Note and Security Agreement Re Instruments or Negotiable Documents to be Deposited of the Trustee dated December 30, 1993.*(1)

10.14		Quaker City Bancorp, Inc. Amended and Restated 1997 Stock Incentive Plan.*(9)

10.15		Change in Control Agreements between Quaker City Bancorp, Inc. and Quaker City Federal Savings and Loan Association, respectively, and Hank H. Kadowaki as of April 1, 1998.*(5)

10.15.1		Quaker City Federal Savings and Loan Association Change in Control Agreement Renewal and Extension Acknowledgment between Quaker City Federal Savings and Loan Association and Hank H. Kadowaki dated July 1, 1998.*(5)

10.15.2		Quaker City Federal Savings and Loan Association Change in Control Agreement Renewal and Extension Acknowledgment between Quaker City Federal Savings and Loan Association and Hank H. Kadowaki dated July 1, 1999.*(6)

Exhibit Number		Description

10.15.3		Quaker City Bank Change in Control Agreement Renewal and Extension Acknowledgment between Quaker City Bank and Hank H. Kadowaki dated July 1, 2000.*(7)

10.15.4		Quaker City Bank Change in Control Agreement Renewal and Extension Acknowledgment between Quaker City Bank and Hank H. Kadowaki dated July 1, 2001.*(8)

10.15.5		Quaker City Bank Change in Control Agreement Renewal and Extension Acknowledgment between Quaker City Bank and Hank H. Kadowaki dated July 1, 2002.*(9)

10.16		Change in Control Agreements between Quaker City Bancorp, Inc. and Quaker City Bank, respectively, and Jerrold S. Perisho as of May 22, 2000.*(7)

10.16.1		Quaker City Bank Change in Control Agreement Renewal and Extension Acknowledgment between Quaker City Bank and Jerrold S. Perisho dated July 1, 2000.*(7)

10.16.2		Quaker City Bank Change in Control Agreement Renewal and Extension Acknowledgment between Quaker City Bank and Jerrold S. Perisho dated July 1, 2001.*(8)

10.16.3		Quaker City Bank Change in Control Agreement Renewal and Extension Acknowledgment between Quaker City Bank and Jerrold S. Perisho dated July 1, 2002.*(9)

10.17		Quaker City Bank Employees Retirement Plan.*(7)

10.18		Quaker City Bank Retirement Benefit Equalization Plan.*(7)

10.19		Quaker City Bank Employee Stock Ownership Trust amended Loan and Security Agreement between CNA Trust, as trustee (the “Trustee”) and Quaker City Bancorp, Inc. and amended related Promissory Note and Security Agreement Re Instruments or Negotiable Documents to be Deposited of the Trustee.*(8)

10.20		Form of Change in Control Agreement between Quaker City Bancorp, Inc. and Elizabeth A. Conrado as of February 11, 2002.*(9)

10.20.1		Form of Change in Control Agreement between Quaker City Bank and Elizabeth A. Conrado as of February 11, 2002.*(9)

10.20.2		Quaker City Bank Change in Control Agreement Renewal and Extension Acknowledgment between Quaker City Bank and Elizabeth A. Conrado dated July 1, 2002.*(9)

10.21		Quaker City Bancorp, Inc. 2002 Equity Incentive Plan.*(9)

11.1		Statement Regarding Computation of Earnings Per Share.

99.1		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

99.2		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


* Management contract or compensatory plan or arrangement required to be filed as an exhibit to the Annual

Report on Form 10-K pursuant to Item 14(c) of Form 10-K.
(1)	Incorporated by reference to the corresponding exhibit to the Registrant’s Form 10-K as filed with the Securities and Exchange Commission for the fiscal year ended June 30, 1994.
(2)	Incorporated by reference to the corresponding exhibit to the Registrant’s Form 10-K as filed with the Securities and Exchange Commission for the fiscal year ended June 30, 1995.
(3)	Incorporated by reference to the corresponding exhibit to the Registrant’s Form 10-K as filed with the Securities and Exchange Commission for the fiscal year ended June 30, 1996.
(4)	Incorporated by reference to the corresponding exhibit to the Registrant’s Form 10-K as filed with the Securities and Exchange Commission for the fiscal year ended June 30, 1997.
(5)	Incorporated by reference to the corresponding exhibit to the Registrant’s Form 10-K as filed with the Securities and Exchange Commission for the fiscal year ended June 30, 1998.
(6)	Incorporated by reference to the corresponding exhibit to the Registrant’s Form 10-K as filed with the Securities and Exchange Commission for the fiscal year ended June 30, 1999.
(7)	Incorporated by reference to the corresponding exhibit to the Registrant’s Form 10-K as filed with the Securities and Exchange Commission for the fiscal year ended June 30, 2000.
(8)	Incorporated by reference to the corresponding exhibit to the Registrant’s Form 10-K as filed with the Securities and Exchange Commission for the fiscal year ended June 30, 2001.
(9)	Incorporated by reference to the corresponding exhibit to the Registrant’s Form 10-K as filed with the Securities and Exchange Commission for the fiscal year ended June 30, 2002.

(b)	Reports on Form 8-K
	The Company filed a Current Report on Form 8-K on November 5, 2002 to report the Board of Directors’ decision to authorize an additional repurchase of up to five percent of the Company’s outstanding common stock.

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.

	QUAKER CITY BANCORP, INC .

Date: February 14, 2003	By:	/s/ DWIGHT L. WILSON

		Dwight L. Wilson
		Senior Vice President,
		Treasurer and Chief Financial Officer

CERTIFICATIONS

Each of the undersigned, in his capacity as the Chief Executive Officer and Chief Financial Officer of Quaker City Bancorp, Inc., as the case may be, provides the following certifications required by 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of The Sarbanes-Oxley Act of 2002, and 17 C.F.R. §240.13a-14.

Certification of Chief Executive Officer

I, Frederic R. (Rick) McGill, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Quaker City Bancorp, Inc.;

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

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

4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
	a)	Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

	b)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

	c)	Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.	The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):
	a)	All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Dated: February 14, 2003	By:	/s/ FREDERIC R. (RICK) MCGILL

		Frederic R. (Rick) McGill Chief Executive Officer

Certification of Chief Financial Officer

I, Dwight L. Wilson, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Quaker City Bancorp, Inc.;

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

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

4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
	a)	Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
	b)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
	c)	Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.	The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):
	a)	All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6.	The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Dated: February 14, 2003	By:	/s/ DWIGHT L. WILSON

		Dwight L. Wilson Chief Financial Officer

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents