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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

FOR THE FISCAL YEAR ENDED: DECEMBER 31, 2003

OR

Commission File No.: 000-50126

COMMERCIAL CAPITAL BANCORP, INC.

(Name of Registrant as Specified in its charter)

Issuer’s telephone number, including area code: (949) 585-7500

Securities registered under Section 12(b) of the Exchange Act:

NOT APPLICABLE

Securities registered under Section 12(g) of the Exchange Act:

COMMON STOCK (PAR VALUE $0.001 PER SHARE)

(Title of Class)

Check whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).    Yes  x  No  ¨

The aggregate value of the Common Stock of the registrant held by non-affiliates at June 30, 2003 was approximately $159.5 million based on the last closing sales price on a share of Common Stock of $7.75 as of June 30, 2003.

Number of shares of common stock outstanding as of March 5, 2004: 30,080,472

DOCUMENTS INCORPORATED BY REFERENCE

The registrant hereby incorporates portions of its definitive proxy statement for the Annual Meeting of Stockholders for 2004 in Part III.

PART I

Cautionary Statement Regarding Forward-Looking Statements

A number of the presentations and disclosures in this Form 10-K, including any statements preceded by, followed by or which include the words “may,” “could,” “should,” “will,” “would,” “hope,” “might,” “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “assume” or similar expressions constitute forward-looking statements.

These forward-looking statements, implicitly and explicitly, include the assumptions underlying the statements and other information with respect to our beliefs, plans, objectives, goals, expectations, anticipations, estimates, intentions, financial condition, results of operations, future performance and business, including our expectations and estimates with respect to our revenues, expenses, earnings, return on equity, return on assets, efficiency ratio, asset quality and other financial data and capital and performance ratios.

Although we believe that the expectations reflected in our forward-looking statements are reasonable, these statements involve risks and uncertainties that are subject to change based on various important factors (some of which are beyond our control). The following factors, among others, could cause our financial performance to differ materially from our goals, plans, objectives, intentions, expectations and other forward-looking statements:

If one or more of the factors affecting our forward-looking information and statements proves incorrect, then our actual results, performance or achievements could differ materially from those expressed in, or implied by, forward-looking information and statements contained in this Form 10-K. Therefore, we caution you not to place undue reliance on our forward-looking information and statements.

We do not intend to update our forward-looking information and statements, whether written or oral, to reflect change. All forward-looking statements attributable to us are expressly qualified by these cautionary statements.

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Item 1.    Business.

General

Commercial Capital Bancorp, Inc., a Nevada corporation, is a diversified financial services holding company that provides a variety of lending and deposit products and services to middle market commercial businesses, income property real estate investors, related real estate service companies and professionals. We are one of the largest independent banking organizations headquartered in Orange County, California and, based on the percentage growth in our assets on a quarterly basis over the past 36 months, we have been the fastest growing savings organization in California according to Federal Deposit Insurance Corporation (“FDIC”) data. We are recognized as one of the leading originators of multi-family residential real estate loans in California, where the market for multi-family residential loans is highly fragmented. According to DataQuick, which measures originations in California, we ranked third in the state in originations of such loans for the year ended December 31, 2003, with an aggregate of 2.87% of total originations. We conduct our operations through Commercial Capital Bank, FSB (the “Bank”), a federally chartered savings bank, Commercial Capital Mortgage, Inc. (“CCM”) (previously named Financial Institutional Partners Mortgage Corporation), a commercial mortgage banking company, and ComCap Financial Services Inc. (“ComCap”), a registered broker dealer. At December 31, 2003, we had consolidated total assets of $1.72 billion, net loans held for investment of $1.05 billion, total deposits of $645.6 million and stockholders’ equity of $102.0 million.

Following the formation of CCM in 1998, our revenues primarily consisted of transaction driven, noninterest sources of income, including cash gains on the sale of loans to third parties. To a lesser extent, CCM also earned net interest income with respect to its loans for the brief period of time that CCM warehoused the loans pending their sale. The funding for CCM’s mortgage banking activities was provided through a warehouse line of credit.

The acquisition of the Bank in December 2000 permitted us to broaden our sources and types of revenue, while at the same time provided us with access to additional sources of funds. The acquisition of the Bank also provided us with the opportunity to acquire a portion of the loans originated by CCM and increase our purchases of mortgage-backed securities, retaining such loans and investments in the Bank’s portfolio and increasing our net interest income. Consequently, the acquisition of the Bank provided us with an ongoing source of recurring spread income to supplement the transaction-driven, noninterest income we were earning with respect to our mortgage banking activities conducted by CCM. The acquisition of the Bank also provided us with alternative product sources for funding our operations, including deposits, securities sold under reverse repurchase agreements, and Federal Home Loan Bank, or FHLB, advances. Our access to transaction deposits is particularly valuable to our business strategy, because such deposits are generally more relationship-driven and less interest rate sensitive. During 2001 we emphasized growth of the Bank’s balance sheet and during 2002 we increased our emphasis on growing our retail franchise and opened a banking office in south Orange County. From November 2001 through March 2002, we issued $35 million in trust preferred securities and contributed the net proceeds to the Bank to support balance sheet growth. To further support our growth strategy, in December 2002, we completed the initial public offering of our common stock and raised net proceeds of $35.8 million. In January 2003, we issued additional common stock pursuant to the exercise of an over-allotment option granted to our underwriters which raised additional proceeds of $2.8 million. During 2003, we issued an additional $17.5 million of trust preferred securities, $7.5 million in September 2003 and $10.0 million in December 2003, with the net proceeds contributed to the Bank to support additional growth.

Effective April 1, 2003, we realigned our lending operations by moving the origination, underwriting and processing functions, as well as the related personnel, from CCM to the Bank. The realignment, which resulted in the Bank becoming the originator of most of our loans, immediately enabled the Bank to hold a significantly increased percentage of our loan originations, while further streamlining the lending process. Prior to the realignment, the Bank was limited to acquiring less than 50% of CCM’s loan production by affiliate transaction regulations governing purchases of loans from non-bank affiliates. The original structure also created redundant processes and operations that have now been eliminated. CCM will continue to actively maintain and utilize its

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independent third party warehouse line of credit to fund and sell those loans which the Bank elects to assign to CCM for various reasons, including the Bank’s loans to one borrower limits, capital constraints, geographic concentrations of loans and other reasons as determined by management.

In September 2003, the Bank opened a banking office in La Jolla, California. The new banking office serves our existing client relationships in San Diego County, the third most populous county in California, behind Los Angeles and Orange counties. In December 2003, the Bank announced its plans to open a banking office in Beverly Hills, California which is expected to open during the middle of 2004 and which will serve the most populous county in California. We already have an established market presence in Los Angeles County, having originated and funded approximately $1.7 billion of multi-family and commercial real estate loans and attracted approximately $71 million in deposits at December 31, 2003. During the fourth quarter of 2003, the Bank also formed the Financial Services Group, a new business deposit division within Relationship Banking, which attracted approximately $13.8 million of deposits, predominately transaction accounts, during its first two months of operations.

Recent Developments

On January 27, 2004, the Company announced the signing of an agreement and plan of merger pursuant to which it would acquire Hawthorne Financial, the parent of Hawthorne Savings. In connection with the transaction, the Company would issue 1.9333 shares of CCBI common stock for each share of Hawthorne Financial, which gives effect to our four-for-three stock split on February 20, 2004. The proposed acquisition is subject to shareholder and regulatory approval. Hawthorne Savings, the wholly owned federal savings bank subsidiary of Hawthorne Financial, is headquartered in El Segundo, California, operates 15 branches in Southern California and as of December 31, 2003 had $2.67 billion in assets, $2.15 billion in net loans held for investment, $1.72 billion in deposits and $185.3 million in stockholders’ equity. Based on the closing price of the Company’s stock on January 27, 2004 the transaction is valued at approximately $440 million, excluding the value of any unexercised options and warrants.

Risk Factors

We rely, in part, on external financing to fund our operations and the unavailability of such funds in the future could adversely impact our growth strategy and prospects.    The Bank relies on deposits, advances from the FHLB of San Francisco and reverse repurchase agreements to fund its operations. The Bank has also historically relied on certificates of deposit, primarily obtained out of our market area. While the Bank has reduced its reliance on certificates of deposit and has been successful in promoting its money market deposit product, jumbo and brokered deposits nevertheless constituted a significant portion of total deposits at December 31, 2003. Jumbo deposits tend to be a more volatile source of funding. Although management has historically been able to replace such deposits on maturity if desired, no assurance can be given that the Bank would be able to replace such funds at any given point in time were its financial condition or market conditions to change.

CCM relies on a warehouse line of credit to fund its loan originations which renews annually.

Although we consider such sources of funds adequate for our current capital needs, we may seek additional debt or equity capital in the future to achieve our long-term business objectives. The sale of equity or convertible debt securities in the future may be dilutive to our stockholders, and debt refinancing arrangements may require us to pledge some of our assets and enter into covenants that would restrict our ability to incur further indebtedness. There can be no assurance that additional financing sources, if sought, would be available to us or, if available, would be on terms favorable to us. If additional financing sources are unavailable or are not available on reasonable terms, our growth strategy and future prospects could be adversely impacted.

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Our business is subject to interest rate risk and variations in interest rates may negatively affect our financial performance.    We are unable to predict fluctuations of market interest rates, which are affected by many factors, including:

Changes in the interest rate environment may reduce our profits. We expect that the Bank will continue to realize income from the differential or “spread” between the interest earned on loans, securities and other interest-earning assets, and interest paid on deposits, borrowings and other interest-bearing liabilities. Net interest spreads are affected by the difference between the maturities and repricing characteristics of interest-earning assets and interest-bearing liabilities. The Bank is vulnerable to an increase in interest rates because its interest-earning assets generally have longer durations than its interest-bearing liabilities. As a result, material and prolonged increases in interest rates would decrease the Bank’s net interest income. In addition, an increase in the general level of interest rates may adversely affect the ability of some borrowers to pay the interest on and principal of their obligations. Accordingly, changes in levels of market interest rates could materially and adversely affect the Bank’s net interest spread, asset quality, levels of prepayments and cash flows as well as the market value of its securities portfolio and overall profitability.

We may have difficulty managing our growth, which may divert resources and limit our ability to successfully expand our operations.    We have grown substantially during the last couple of years. We expect to continue to experience significant growth in the amount of our assets, the level of our deposits, the number of our clients and the scale of our operations. Our future profitability will depend in part on our continued ability to grow and we can give no assurance that we will be able to sustain our historical growth rate or even be able to grow at all.

In recent years, we have incurred substantial expenses to build our management team and personnel, develop our delivery systems and establish our infrastructure to support our future loan growth. Our future success will depend on the ability of our officers and key employees to continue to implement and improve our operational, financial and management controls, reporting systems and procedures, and manage a growing number of client relationships. We may not be able to successfully implement improvements to our management information and control systems in an efficient or timely manner and may discover deficiencies in existing systems and controls. Thus, we cannot give assurances that our growth strategy will not place a strain on our administrative and operational infrastructure.

In addition, we intend to grow our deposits and expand our retail banking franchise. Such expansion will require additional capital expenditures and we may not be successful expanding our franchise or in attracting or retaining the personnel we require. Furthermore, various factors such as economic conditions, regulatory and legislative considerations and competition may impede or limit our growth. If we are unable to expand our business as we anticipate, we may be unable to realize any benefit from the investments we have made to support future growth. Alternatively, if we are unable to manage future expansion in our operations, we may have to incur additional expenditures beyond current projections to support such growth.

The Bank’s ability to pay dividends is subject to regulatory limitations which, to the extent we require such dividends in the future, may affect our ability to service our debt and pay dividends.    We are a separate legal entity from our subsidiaries and do not have significant operations of our own. We currently depend on our cash and liquidity as well as dividends from CCM to pay our operating expenses and interest payments due on

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our trust preferred securities. No assurance can be made that in the future CCM will have the capacity to pay the necessary dividends and that we will not require dividends from the Bank to satisfy our obligations. The availability of dividends from the Bank is limited by various statutes and regulations. It is possible, depending upon the financial condition of the Bank and other factors, that the Office of Thrift Supervision, or OTS, the Bank’s primary regulator, could assert that payment of dividends or other payments by the Bank are an unsafe or unsound practice. In the event CCM is unable to pay dividends sufficient to satisfy our obligations and the Bank is unable to pay dividends to us, we may not be able to service our debt, pay our obligations as they become due, or pay dividends on our common stock. Consequently, the inability to receive dividends from the Bank could adversely affect our financial condition, results of operations and prospects.

Our allowance for loan losses may not be adequate to cover actual losses.    Like all financial institutions, we maintain an allowance for loan losses to provide for loan defaults and non-performance. Our allowance for loan losses may not be adequate to cover actual loan losses, and future provisions for loan losses could materially and adversely affect our operating results. Our allowance for loan losses is based on our prior experience, as well as an evaluation of the risks associated with our loans held for investment. To date, we have experienced negligible losses. The amount of future losses is susceptible to changes in economic, operating and other conditions, including changes in interest rates, that may be beyond our control, and these losses may exceed current estimates. Federal regulatory agencies, as an integral part of their examination process, review our loans and allowance for loan losses. While we believe that our allowance for loan losses is adequate to cover current losses, we cannot assure you that we will not need to increase our allowance for loan losses or that regulators will not require us to increase this allowance. Either of these occurrences could materially and adversely affect our earnings and profitability.

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

Changes in economic conditions, particularly an economic slowdown in California, could hurt our business.    Our business is directly affected by political and market conditions, broad trends in industry and finance, legislative and regulatory changes, changes in governmental monetary and fiscal policies and inflation, all of which are beyond our control. A deterioration in economic conditions, in particular an economic slowdown within California, could result in the following consequences, any of which could hurt our business materially:

A downturn in the California real estate market could hurt our business.    Since commencing operations, our business activities and credit exposure have been concentrated in California. A downturn in the California real estate market could hurt our business because the vast majority of our loans are secured by real estate located within California. If there is a significant decline in real estate values, especially in California, the collateral for our loans will provide less security. As a result, our ability to recover on defaulted loans by selling the underlying real estate would be diminished, and we would be more likely to suffer losses on defaulted loans. Real estate values in California could be affected by, among other things, earthquakes and other natural disasters particular to California.

We may suffer losses in our loan portfolio despite our underwriting practices.    We seek to mitigate the risks inherent in our loan portfolio by adhering to specific underwriting practices. These practices include analysis of a borrower’s prior credit history, financial statements, tax returns and cash flow projections, valuation

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of collateral based on reports of independent appraisers and verification of liquid assets. Although we believe that our underwriting criteria are appropriate for the various kinds of loans we make, we may incur losses on loans that meet our underwriting criteria, and these losses may exceed the amounts set aside as reserves in our allowance for loan losses.

Our ownership is concentrated in the hands of our executive officers who may not make decisions that are in the best interests of all stockholders.    As of December 31, 2003, two of our senior executive officers, Stephen H. Gordon and David S. DePillo, owned approximately 21.9% of our outstanding common stock. In addition, over the years, these senior executive officers have been granted options to acquire shares of our common stock, which when vested and exercised will increase their ownership of shares of our common stock. Assuming the full exercise of all outstanding options, Messrs. Gordon and DePillo would own in the aggregate approximately 27.3% of our outstanding common stock. As a result, these individuals, acting together, will have the ability to significantly influence the election and removal of our board of directors, as well as the outcome of any other matters to be decided by a vote of stockholders. In addition, this concentration of ownership may delay or prevent a change in control of our company, even when a change in control may be perceived by some in the best interests of our stockholders.

We are subject to extensive regulation which could adversely affect us.    Our operations are subject to extensive regulation by federal, state and local governmental authorities and are subject to various laws and judicial and administrative decisions imposing requirements and restrictions on part or all of our operations. We believe that we are in substantial compliance in all material respects with applicable federal, state and local laws, rules and regulations. Because our business is highly regulated, the laws, rules and regulations applicable to us are subject to regular modification and change. There can be no assurance that there will be no laws, rules or regulations adopted in the future, which could make compliance more difficult or expensive, or otherwise adversely affect our business, financial condition or prospects.

We face strong competition from other financial institutions, financial service companies and other organizations offering services similar to those offered by us, which could hurt our business.    We conduct our business operations primarily in California. Increased competition within California may result in reduced loan originations and deposits. Ultimately, we may not be able to compete successfully against current and future competitors. Many competitors offer the types of loans and banking services that we offer. These competitors include other savings associations, national banks, regional banks and other community banks. We also face competition from many other types of financial institutions, including finance companies, brokerage firms, insurance companies, credit unions, mortgage banks and other financial intermediaries. In particular, our competitors include national banks and major financial companies whose greater resources may afford them a marketplace advantage by enabling them to maintain numerous banking locations and mount extensive promotional and advertising campaigns.

Additionally, banks and other financial institutions with larger capitalization and financial intermediaries not subject to bank regulatory restrictions have larger lending limits and are thereby able to serve the credit needs of larger clients. These institutions, particularly to the extent they are more diversified than we are, may be able to offer the same loan products and services that we offer at more competitive rates and prices. If we are unable to attract and retain banking clients, we may be unable to continue our loan and deposit growth and our business, financial condition and prospects may be negatively affected.

Market Area Overview and Competition

The California multi-family residential lending market has performed extremely well since the recession of the early 1990’s. Consistent occupancy and stable rental rates have both contributed to property appreciation in most markets within California. The majority of the multi-family residential market consists of small-to medium-size multi-family projects, generally below 50 units in size, which are financed with loan amounts at or below $2.0 million. The characteristics of these loans are very similar to those of one-to-four unit residential loans with

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monthly payment requirements and 30-year amortization. During the prior recession, loans made by members of our management, who were then employed by another financial institution, experienced a lower percentage of multi-family delinquencies and charge-offs as compared to one-to-four family residential loans. In addition, the peak delinquencies occurred at approximately four years from origination, which was consistent with the timing of peak delinquencies on the other institution’s one-to-four family residential loan portfolios. Based on management’s experience in the industry prior to the recession of the early 1990’s, there was not a significant level of delinquencies or charge-offs associated with lending on multi-family residential properties in California. Notwithstanding the foregoing, multi-family lending entails different risks when compared to single-family residential lending because multi-family loans typically involve large loan balances and payment on such loans is partially dependent on the successful operation of the property. Specifically, problems with respect to the operation of a multi-family property could adversely affect the value of such property, particularly if the cash flow from such property’s operations are not sufficient to cover the applicable debt service and the underlying property has to be sold in order to satisfy the debt obligation. In such a scenario, the price received in a foreclosure sale could be less than our carrying value of the loan.

According to the National Multi Housing Council, the total market value of multi-family residential real estate in the United States at 2000 is estimated to be over $1.3 trillion, which consists of 16.1 million apartment units. The total market value of multi-family residential real estate in California is estimated to amount to approximately $311 billion, consisting of 2.44 million apartment units, or 15% of the total U.S. market. As of 2000, six of the top ten U.S. multi-family housing markets were located in California, consisting of the metropolitan areas of Los Angeles, San Francisco, San Diego, San Jose, Oakland and Orange County, which together accounted for nearly $290 billion, or 22%, of the total U.S. market value.

The demand for housing within California, particularly multi-family housing, is very strong. According to the California Department of Housing and Community Development during 1990, it was estimated that there was a shortage of 660,000 housing units within California and, according to the California Senate Office of Research, during the period of 1990 through 1997, the growth in California’s population outpaced the growth in California housing units by 50%. Research from the California Department of Housing and Community Development indicates that through 2020, in order to meet housing demand in California, 220,000 housing units will need to be built each year. By comparison, according to the California Department of Housing and Community Development, for the period 1990 through 1997, an average of 91,000 housing units, including 27,000 multi-family units, were constructed in California per year. According to the National Multi Housing Council, during 2001, construction commenced on approximately 34,000 multi-family units in California.

Accordingly, we believe that within California, the demand for housing in general, and multi-family housing in particular, will remain strong for the immediate future.

Research from DataQuick indicates that during 2003, over 37,000 multi-family loans secured by properties located within California were originated. These loans had an aggregate principal balance of $26.3 billion and an average loan size of $697,000. This represented a 45% increase from the $18.1 billion of such loans originated during 2002 and a 97% increase from the $13.4 billion of such loans originated during 2001. During the year ended December 31, 2003, the largest two originators of multi-family residential loans within California were responsible for approximately 27.08% of such originations. The remainder of the market was highly fragmented, with approximately 900 institutions responsible for the remaining 72.92% of total originations.

Based upon quarterly thrift financial reports which are required to be submitted by all savings institutions regulated by the Office of Thrift Supervision (“OTS”), multi-family residential loans have out-performed other loan categories in recent periods from an asset quality perspective. As of December 31, 2003, the latest date as of which information is available, the level of non-current (i.e., non-accrual loans and loans 90 days or more overdue but still accruing interest) multi-family residential loans as a percentage of total multi-family residential loans was 0.13%, as compared to 0.85% for construction and land loans, 0.87% for commercial real estate loans, 0.84% for single-family mortgage loans, 1.21% for commercial business loans and 0.87% for consumer loans.

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Based on an analysis of the geographic regions of the country prepared by the OTS as of such date, the ratio of non-current multi-family residential loans to total multi-family residential loans was even lower, amounting to 0.05% for the western region where we conduct our business operations.

Lending Activities

General.    We focus on the origination of adjustable-rate multi-family residential and, to a lesser extent, commercial real estate loans. We define core loan originations as total loan originations net of loans funded through our strategic alliance with Greystone Servicing Corporation, a Fannie Mae Delegated Underwriting and Servicing (“DUS”) lender, and the Company’s other broker and conduit channels.

Loan Originations.    We originated loans aggregating $1.11 billion during the year ended December 31, 2003 and $760.7 million during the year ended December 31, 2002.

The following table sets forth our total loan originations for the periods indicated.

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We concentrate our lending activities on the origination of small- to medium-sized, adjustable-rate multi-family residential loans, which are secured by rental apartment buildings located primarily in California. From our inception through December 31, 2003, 56.9% of our multi-family residential loan originations were secured by properties located in Los Angeles County, 7.9% were secured by properties located in Alameda County, 7.7% were secured by properties located in Orange County, 6.3% were secured by properties located in San Diego County and 3.9% were secured by properties located in San Francisco County. We emphasize the origination of multi-family residential loans in the $500,000 to $5.0 million range, typically focusing on buildings with 16 to 100 units. Since inception through December 31, 2003, our historical average loan size was $1.5 million for multi-family residential loans. We originated $884.9 million in multi-family residential loans during the year ended December 31, 2003, which amounted to 93.3% of total core real estate loan originations during such year, compared to $621.4 million in multi-family residential loans during the year ended December 31, 2002, which amounted to 91.8% of total core real estate originations during such year.

We also originate commercial real estate loans which are generally secured by mixed-use, shopping/retail centers, office buildings and multi-tenant industrial properties located primarily in California. From our formation through December 31, 2003, 32.4% of our commercial real estate loan originations were secured by properties located in Los Angeles County, 16.4% were secured by properties located in San Diego County, 13.1% were secured by properties located in Alameda County, 9.8% were secured by properties located in Orange County and 5.2% were secured by properties located in Sacramento County. We emphasize the origination of commercial real estate loans in the $500,000 to $5.0 million range, with a historical average loan size of $1.8 million since inception through December 31, 2003. We originated $62.8 million in commercial real estate loans during the year ended December 31, 2003, which amounted to 6.6% of total core real estate originations during such year, compared to $55.2 million in commercial real estate loans during the year ended December 31, 2002, which amounted to 8.2% of total core real estate originations during such year.

We will originate multi-family residential loans for terms of up to 30 years, which are generally fully amortizing, and commercial real estate loans for terms of up to 10 years based upon a 25-year loan amortization schedule. Such loans are primarily adjustable-rate loans with an interest rate which adjusts based upon a variety of constant maturity treasury (“CMT”) or London InterBank Offer Rate (“LIBOR”)-based indices, although we also offer loans that have fixed interest rates for an initial period up to seven years and adjust thereafter based on a spread determined at origination over the applicable index for the remaining loan term. Our multi-family residential and commercial real estate loans generally have interest rate floors, payment caps and limited prepayment protection. As part of the criteria for underwriting such loans, we generally establish a maximum loan-to-value ratio of 75% for multi-family loans and 75% for commercial real estate loans and require a debt coverage ratio of 1.15 to 1 or more for multi-family loans and 1.25 to 1 or more for commercial real estate loans. For the year ended December 31, 2003, our multi-family residential loan originations had an average loan-to-value ratio of 67.58% and an average debt coverage ratio of 1.29 to 1, while the commercial real estate loan originations for such period had an average loan-to-value ratio of 62.94% and an average debt coverage ratio of 1.41 to 1.

We also offer, through our relationship with Greystone Servicing Corporation and other conduit programs, multi-family residential and commercial real estate loans to borrowers who desire longer term, fixed-rate financing. This consists of a fixed-rate loan that is eventually securitized through a major commercial mortgage-backed securities issuer. We have a letter of understanding with such commercial mortgage-backed securities issuer which sets forth the terms of how it will be paid for facilitating such loans. However, this commercial mortgage-backed securities issuer is not obligated to originate any specific amount of loans nor is it obligated to securitize any loans which it originates with our assistance. We also offer, through our brokered program, multi-family residential and commercial real estate loans which, because of size or other factors, are not consistent with our loan program. Conduit loans and brokered loans are not funded in our name and are not reflected on our balance sheet, but rather are funded in the originator’s name pursuant to the originator’s loan documentation. We do not aggregate the product for securitizations. We are paid a fee by the relevant originator for those transactions. We originated $150.3 million in conduit and brokered loans during the year ended December 31, 2003, which amounted to 13.5% of total originations during such period, compared to $72.0 million in conduit

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and brokered loans during the year ended December 31, 2002, which amounted to 9.5% of total originations during such year. During the years ended December 31, 2003 and 2002, we received $740,000 and $439,000 of net fees, respectively, with respect to conduit and brokered loans.

At December 31, 2003, our loan origination activities were conducted out of nine offices in California. See “Properties” in Item 2 hereof. Loan applications are attributable to direct marketing efforts by our loan originators, mortgage brokers, referrals from real estate brokers and developers, existing clients, walk-in clients and, to a lesser extent, advertising. At December 31, 2003, we employed 13 loan originators who are compensated primarily on a commission basis.

Loan Origination Procedures and Underwriting Criteria.    Our loan processing guidelines require that the preparation of all letters of interest, completion and processing of loan applications, underwriting and preparation of the necessary loan documentation be performed directly by us. We do not accept loan broker packages for processing and rely solely on our own origination process. Loan applications are examined for compliance with our underwriting and processing criteria and, if all requirements are met, we issue a commitment letter to the prospective borrower.

All loan originations must be underwritten in accordance with our underwriting criteria, which are prepared based on the relevant guidelines set forth by applicable regulatory authorities. Our underwriting personnel, who operate primarily out of our main office, make their underwriting decisions independent of the loan origination personnel. Primary property underwriting criteria include the property’s loan-to-value ratio and debt coverage ratio. In originating loans, we base our underwriting decisions on qualitative and quantitative evaluations of both the borrower and the property, but rely on the cash flow generated by the property as the primary source of repayment. The property’s underwriting criteria are adjusted based upon the type of transaction, for example, whether the loan is for a purchase or a refinancing, as well as the overall quality of the property. Borrower qualifications include minimum liquidity requirements, the borrower’s recurring cash flow and debt ratios, credit history (including Fair, Isaac and Co., or FICO, credit scores) and may include background searches such as public record checks. Additionally, we consider the borrower’s experience in owning or managing similar properties and our lending experience with the borrower. We also rely on qualitative factors such as the stability of the property and its sub-market, the quality of the property’s physical improvements, the property’s functional utility, the stability of rents and vacancies, and overall operations of the property and market. Other underwriting requirements include obtaining the necessary insurance and conducting an environmental review and a property appraisal. We maintain an independent third party appraiser panel that is periodically updated adding and excluding appraisers. All appraisers must provide copies of their current licenses and, among other items, sample appraisals, current client lists and references. The appraisers are engaged directly by us. The multi-family residential loans originated by us are generally originated in accordance with the OTS’ standards qualifying such loans for the lowest risk weighting classification (i.e., 50%) for purposes of the OTS’ risk-based capital requirements (except for the requirement that such loans have 12 months of payment experience).

We incur costs in originating loans, including overhead and out-of-pocket expenses. Typically, when a loan is originated, the borrower pays an origination and processing fee, as well as various third party report fees. These fees have averaged 1.1% of the principal amount of the loan. To the extent a loan is referred to us through a loan broker, the broker will receive a portion of the loan origination fee. We may charge additional fees depending upon market conditions as well as our objectives concerning loan origination volume and pricing. The volume and types of loans made by us vary with competitive and economic conditions, resulting in fluctuations in loan fees received from loan originations.

Loan Sales.    Loan originations that we decide not to retain in our loan portfolio, primarily due to the Bank’s loan-to-one borrower limits, are assigned to CCM and originated through a third-party warehouse line. CCM sells all of the loans it originates to a network of approximately 40 banks and savings institutions located primarily in California. CCM originates loans both with and without prior commitments to purchase such loans by specific buyers. All of our loan sales are conducted on a non-recourse basis with the servicing obligations

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assumed by the purchaser. The price at which we sell our loans is determined based upon market factors. Our loan sales are conducted on an individual loan-by-loan basis and we do not currently pool loans and sell them in bulk. However, CCM has entered into a sub-facility with its existing warehouse lender that provides it with the flexibility to aggregate loans and sell such loans in bulk. See “—Sources of Funds—Borrowings.” To the extent CCM determines to pool loans, it will be subject to interest rate and price risk between the period of time when it originates the loans and when it sells the loans. To the extent that CCM determines to hold its loans for longer periods of time pending their future sale, we may consider additional means of limiting its exposure to these risks. All of our loan sales are made pursuant to the terms of a mortgage loan purchase agreement.

We sold a total of $153.7 million of loans during the year ended December 31, 2003 (for a gain of $2.2 million), compared to $384.0 million of loans during the year ended December 31, 2002 (for a gain of $4.6 million). In connection with our loan sale activities, CCM is exposed to risk to the extent that a purchaser that has committed to purchase a loan from us defaults with respect to its obligation or to the extent that CCM originates a loan without obtaining a prior commitment to purchase such loan. In either case, the risk is that we cannot sell the loan or cannot sell the loan profitably. In addition, under such circumstances, we are subject to interest rate risk with respect to adjustable-rate loans that have been originated to the extent the interest rates on such loans do not adjust as rapidly as changes in the rate paid on its warehouse line of credit, as well as the additional cost of carry relating to the interest CCM pays on an originated loan pending its sale pursuant to its warehouse line of credit. To date, however, we have been able to profitably sell all loans we originate, even when a committed purchaser has failed to perform.

Loans Held for Investment

General.    Prior to our acquisition of the Bank, the Bank’s lending activities primarily focused on single-family residential lending. Since our acquisition of the Bank, we have focused on originating for investment multi-family residential and, to a lesser extent, commercial real estate loans, thereby providing us with a steady stream of interest income that we were unable to realize prior to our acquisition of the Bank. To a much lesser extent, we originate commercial business loans. We do not currently originate single-family residential or consumer loans except on a case-by-case basis as an accommodation to our banking clients. At December 31, 2003, net loans held for investment amounted to $1.05 billion, which represented 60.8% of our $1.72 billion of total assets at that date. Approximately 98.7% of loans held for investment at December 31, 2003 are either secured by properties located in California or made to clients residing in California.

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The following table sets forth the composition of our loans held for investment by type of loan at the dates indicated. We acquired the Bank on December 22, 2000. Consequently, information which would otherwise be presented in this table as of December 31, 1999 has been omitted because it is not meaningful to our results or does not exist.

The following table sets forth information at December 31, 2003 regarding the dollar amount of loans maturing in our loans held for investment portfolio based on the contractual terms to maturity or scheduled amortization, excluding potential prepayments. Loans with no stated schedule of repayments and no stated maturity are reported as due in one year or less.

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Scheduled contractual amortization of loans does not reflect the expected term of our loans held for investment. The average life of our loans is substantially less than their contractual terms because of prepayments and due-on-sale clauses, which give us, as the lender, the right to declare such loan immediately due and payable in the event, among other things, that the borrower sells the real property subject to the mortgage and any portion of the loan is still outstanding. The average life of mortgage loans tends to increase when mortgage loan rates available in the market are higher than rates on existing mortgage loans and, conversely, decrease when rates on existing mortgage loans are higher than mortgage loan rates available in the market due to refinancing of loans at available lower rates. During periods of decreasing mortgage rates, the weighted average yield on loans decreases as higher-yielding loans are repaid or refinanced at lower rates.

The following table sets forth the dollar amount of total loans held for investment due more than one year from December 31, 2003, as shown in the preceding table, which have fixed interest rates or floating or adjustable interest rates.

Origination, Purchase and Sale of Loans Held for Investment.    The following table sets forth our retained loan originations, purchases and sales for the periods indicated with respect to loans held for investment. We acquired the Bank on December 22, 2000.

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Our lending activities are subject to specified non-discriminatory underwriting standards and loan origination and purchase procedures established by the Bank’s board of directors.

The Bank’s loan officers perform full due diligence and underwrite all loan applications received by the Bank. No single officer has loan approval authority and thus all loan applications must be approved by the president/chief operating officer or executive vice president/chief lending officer. Any loan or combination of loans to one borrower in excess of $10 million must be approved by the Bank’s Directors’ Loan Committee, which consists of at least three outside directors and the president. The Directors’ Loan Committee has approval authority up to the Bank’s lending limit for either individual loans or total loan relationships.

A savings institution generally may not make loans to any one borrower or related entities if such loans would exceed 15% of its unimpaired capital and surplus, although loans in an amount equal to an additional 10% of unimpaired capital and surplus may be made to a borrower if the loans are fully secured by readily marketable securities. At December 31, 2003, the Bank’s regulatory limit on loans-to-one borrower was $20.9 million and its five largest loans or groups of loans to one borrower, including related entities, were $19.9 million, $17.3 million, $16.3 million, $13.3 million and $8.6 million. All of these five largest loans or loan concentrations were secured by multi-family residential properties located in California, except for one relationship which also had a single-family loan located in California, were originated during the last three years and were performing in accordance with their terms at December 31, 2003. See “Regulation—Regulation of Commercial Capital Bank—Loans-to-One Borrower Limitations.”

Multi-Family Residential and Commercial Real Estate Loans.    The Bank has focused its lending activities on real estate loans secured by multi-family and, to a lesser extent, commercial properties. The Bank has generally targeted higher quality, smaller multi-family residential and commercial real estate loans with principal balances ranging between $500,000 and $5.0 million, with an average balance of $1.4 million for multi-family residential loans and $1.3 million for commercial real estate loans, at December 31, 2003. At December 31, 2003, the Bank had an aggregate of $935.1 million in multi-family residential loans, comprising 88.9% of total loans held for investment, and $108.6 million in commercial real estate loans, comprising 10.3% of total loans held for investment.

Commercial Business Loans.    The Bank also originates a limited amount of commercial business loans including acquisition lines, working capital lines of credit, inventory and accounts receivable loans, and equipment financing and term loans. Loan terms may vary from one to five years. The interest rates on such loans are generally variable and are indexed to the Wall Street Journal prime rate, plus a margin. At December 31, 2003, the Bank had an aggregate of $5.7 million of commercial business loans outstanding, or 0.5% of total loans held for investment. Total undisbursed commitments amounted to $12.8 million at December 31, 2003.

Consumer Loans.    Although the Bank is authorized to make loans for a wide variety of personal or consumer purposes, the Bank does not currently originate consumer loans. At December 31, 2003, the Bank had an aggregate of $41,000 of consumer loans. We only intend to originate consumer loans on a case-by-case basis as an accommodation to our clients.

Single-Family Residential Loans.    Prior to our acquisition of the Bank in December 2000, the Bank’s primary lending activity consisted of the origination of single-family residential loans. Since we acquired the Bank, we have sold a significant amount of the Bank’s single-family residential loans. At December 31, 2003, $3.2 million of single-family residential loans, comprising 0.3% of total loans held for investment, continued to remain on our balance sheet. We only intend to originate single-family residential loans on a case-by-case basis as an accommodation to our clients.

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Asset Quality

General.    The Bank’s Internal Asset Review Committee, consisting of the Bank’s president and chief operating officer, chief financial officer, chief administrative officer, director of internal asset review and loan servicing manager, monitors the credit quality of the Bank’s assets, reviews classified and other identified loans and determines the proper level of allowances to allocate against the Bank’s loan portfolio, in each case subject to guidelines approved by the Bank’s board of directors.

Loan Delinquencies.    When a borrower fails to make a required payment on a loan, the Bank attempts to cure the deficiency by contacting the borrower and seeking payment. Contact is generally made following the fifteenth day after a payment is due, at which time a late payment is assessed. In most cases, deficiencies are cured promptly. If a delinquency extends beyond 15 days, the loan and payment history are reviewed and efforts are made to collect the loan. While the Bank generally prefers to work with borrowers to resolve such problems, if the account becomes 45 days delinquent, the Bank will institute foreclosure or other proceedings, as necessary, to minimize any potential loss. There were no real estate secured loans delinquent 60 days or more at December 31, 2003.

Non-Performing Assets.    We had one business loan with an outstanding principal balance of $129,000 that was classified as a nonperforming asset and troubled debt restructure as of December 31, 2003. The loan has been performing in accordance with its restructured terms. We did not have any non-performing assets or troubled debt restructurings at December 31, 2002, December 31, 2001 or December 31, 2000. Non-performing assets are defined as non-performing loans and real estate acquired by foreclosure or deed-in-lieu thereof. Non-performing loans are defined as non-accrual loans and loans 90 days or more past due but still accruing interest, to the extent applicable. Troubled debt restructurings are defined as loans which a bank has agreed to modify by accepting below market terms either by granting interest rate concessions or by deferring principal and/or interest payments. We place loans on non-accrual status when, in the judgment of management, the probability of collection of interest is deemed to be insufficient to warrant further accrual. When any such loan is placed on non-accrual status, previously accrued but unpaid interest will be deducted from interest income. As a matter of policy, we will not accrue interest on loans past due 90 days or more. Nonperforming assets represented 0.01% of total assets at December 31, 2003.

Classified Assets.    Federal regulations require that each insured savings institution classify its assets on a regular basis. In addition, in connection with examinations of insured institutions, federal examiners have authority to identify problem assets and, if appropriate, classify them. The Bank has established three classifications for potential problem assets: “substandard,” “doubtful” and “loss.” Substandard assets have one or more defined weaknesses and are characterized by the distinct possibility that the insured institution will sustain some loss if the deficiencies are not corrected. Doubtful assets have the weaknesses of substandard assets with the additional characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions and values questionable, and there is a high possibility of loss. An asset classified loss is considered uncollectible and of such little value that continuance as an asset of the institution is not warranted. The Bank has established another category, designated “special mention,” for assets which do not currently expose the Bank to a sufficient degree of risk to warrant classification as substandard, doubtful or loss. Assets classified as special mention, substandard or doubtful result in the Bank establishing higher levels of general allowances for loan losses. If an asset or portion thereof is classified loss, the insured institution must either establish specific allowances for loan losses in the amount of 100% of the portion of the asset classified loss, or charge-off such amount. At December 31, 2003, the Bank had one loan classified as substandard with a total outstanding principal balance of $129,000 and one loan designated as special mention with a total outstanding principal balance of $1.2 million. At December 31, 2002, the Bank had no classified loans and two loans designated as special mention with a total outstanding principal balance of $271,000.

Allowance for Loan Losses.    Like all financial institutions, we maintain an allowance for estimated loan losses based on a number of quantitative and qualitative factors, including levels and trends of past due and non-

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accrual loans, levels and trends in asset classifications, change in volume and mix of loans and collateral values. Quantitative factors used to assess the adequacy of the allowance for loan losses are established based upon management’s assessment of the credit risk in the portfolio, historical loan loss experience and our loan underwriting policies as well as management’s judgment and experience. Provisions for loan losses are provided on both a specific and general basis. Specific and general valuation allowances are increased by provisions charged to expense and decreased by charge-offs of loans, net of recoveries. Specific allowances are provided for impaired loans for which the expected loss is measurable. General valuation allowances are provided based on a formula which incorporates the factors discussed above. The Bank periodically reviews the assumptions and formula by which additions are made to the specific and general valuation allowances for losses in an effort to refine such allowances in light of the current status of the factors described above.

The following table sets forth the activity in our allowance for loan losses for the years indicated. We acquired the Bank on December 22, 2000. Consequently, information which would otherwise be presented in this table for the year ended December 31, 1999 has been omitted because it is not applicable.

The decline in the allowance for loan losses as a percent of total loans held for investment in 2003 is a result of several factors, including the continued sound performance of the Company’s loans, improvement in industry statistics and other considerations which are outlined below.

The following table sets forth information concerning the allocation of our allowance for loan losses, which is maintained on our loans held for investment portfolio, by loan category at the dates indicated. We acquired the Bank on December 22, 2000. Consequently, information which would otherwise be presented in this table for the year ended December 31, 1999 has been omitted because it is not applicable.

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The allowance for loan losses reflects management’s judgment of the level of allowance adequate to absorb estimated credit losses inherent in our loans held for investment portfolio. The board of directors of the Bank approved a policy formulated by management for a systematic analysis of the adequacy of the allowance. The major elements of the policy consist of: (1) a quarterly analysis of allowance amounts; (2) approval by the Bank’s board of directors of the quarterly analysis; and (3) division of the allowance into specific allocation and general allowance portions.

We establish the allowance for loan losses commencing with the credit quality and historical performance of our multi-family and commercial real estate loan portfolio, which accounts for 99% of the loan portfolio at December 31, 2003, and has not resulted in any delinquencies more than one payment past due, non-performing loans, adverse classifications or losses. Our overall asset quality remained sound, as supported by our internal risk rating process. The multi-family and commercial real estate loan portfolio is more seasoned and is closely monitored by a comprehensive asset quality review and asset classification process. We establish the allowance for loan losses based on the analysis of the overall asset quality of the loan portfolio, qualitative environmental risk factors and peer analysis.

The allowance for loan losses is derived by analyzing the historical loss experience and asset quality within each loan portfolio segment, along with assessing qualitative environmental factors, and correlating it with the delinquency and classification status for each portfolio segment. We utilize a loan grading system with five classification categories, including assets classified as Pass which is further divided into four risk grade levels, based upon credit risk characteristics and we categorize each loan asset by risk grade allowing for a more consistent review of similar loan assets. We also evaluate the loss exposure of classified loans, which are also reviewed individually based on the evaluation of the cash flow, collateral, other sources of repayment, guarantors and any other relevant factors to determine the inherent loss potential in the credit.

All classified loans are evaluated for potential loss exposure. The evaluation occurs at the time the loan is classified and on a regular basis (at least every 90 days) thereafter. This evaluation is documented in the Internal Asset Review Report relating to a specific loan. Specific allocation of reserves considers the value of collateral, the financial condition of the borrower, and industry and current economic trends. We complete an impairment analysis with each Internal Asset Review Report, typically on a quarterly basis, for all classified loans secured by real estate. Any deficiencies outlined by the impairment analysis are accounted for in the specific allocation reserve for the loan.

We have developed and implemented a migration analysis for the determination of inherent loss potential for both our homogeneous and non-homogeneous loan portfolios. Homogeneous loan categories consist of one-to-four family residential mortgages and consumer loans. Multi-family residential loans less than $1.0 million and commercial real estate loans less than $750,000 are also treated as homogeneous loans for asset review purposes. Homogeneous loans are analyzed on a group or pool basis for evaluating credit quality and impairment under FASB’s SFAS No 5. Non-homogeneous loan categories consist of all other multi-family residential and commercial real estate loans and all commercial business loans. These assets are reviewed individually for the purpose of evaluating credit quality and impairment under FASB’s SFAS No. 114. The loss percentage factors used for each risk class or grade for both homogeneous and non-homogeneous loan categories are based on the qualitative and quantitative factors discussed above.

General allowances are derived for consumer lending utilizing historical loss factors derived through migration analysis and adjusting for current trends, economic conditions and portfolio behavioral characteristics. Consumer lending poses more inherent risks than one-to-four family residential lending and, consequently, the loss factors are higher. Because of our limited loss history for one-to-four family residential loans, general allowances are derived utilizing historical industry loss factors, also adjusted for management’s assessment of the qualitative factors presented above. Loss factors are applied based upon delinquency status with higher loss factors applied as the number of days past due increases.

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The non-homogeneous loan portfolio’s limited seasoning and loss history also necessitated loss factors for loan categories based upon historical industry loss factors adjusted for current trends, economic conditions and portfolio behavioral characteristics. Non-homogeneous loss factors are differentiated by the applicable risk grade for each loan category, rather than by delinquency status.

We consider the following qualitative environmental factors in determining the allocated loss factors when analyzing the allowance for loan losses: the levels of and trends in past due, non-accrual and impaired loans; levels of and trends in charge-offs and recoveries; the trend in volume and terms of loans; the effects of changes in credit concentrations; the effects of changes in risk selection and underwriting standards, and other changes in lending policies, procedures and practices; the experience, ability and depth of management and other relevant staff; national and local economic trends and conditions; and industry conditions.

The overall adequacy of the allowance for loan losses is reviewed by the Bank’s Internal Asset Review Committee on a quarterly basis and submitted to the Board of Directors for approval. The Internal Asset Review Committee’s responsibilities consist of risk management, as well as problem loan management, which include ensuring proper risk grading of all loans and analysis of specific allocations for all classified loans.

In evaluating multi-family loans which compromise 89% of our loan portfolio at December 31, 2003, we previously had recorded 50 basis points in the provision for loan losses for potential loan losses for each multi-family loan. This allocation amount was established over five years ago when management was looking to establish a de novo financial institution prior to its acquisition of what is now the Bank. Given the lack of a seasoned loan portfolio, management used a five-year moving average of its peer group statistics, which included experience during a recessionary period. We believe fundamental changes have occurred since the original determination of a 50 basis points provision for multi-family loans. First, our experience originating multi-family loans has resulted in no losses and our peer group has experienced negligible charge-offs. Second, we enhanced our asset quality review system during 2002 which is not a new system to management since it is based on the asset quality system used at Home Savings of America (H.F. Ahmanson), augmented with additional market data that was not available at that time. In 2003, we requested updated financial information on our multi-family loans outstanding during 2002 and completed the reclassification of its multi-family loans based on this updated financial information during the third quarter of 2003. Using industry statistics for the past ten years, we calculated 31 basis points as a target for the multi-family portfolio as of December 31, 2003.

The allowance requirement for multi-family loans could be different in the future as the mix and grading changes each quarter and as our peer group statistics change. We use peer group statistics, including OTS data on a nationwide and local basis, since we have not experienced any losses in our own portfolio. Provision levels may also be influenced by mix and grading changes quarter over quarter. We also review economic indicators and environmental factors on a quarterly basis, which can change the allowance requirement for multi-family loans.

Investment Activities

We hold securities at the Bank and Commercial Capital Bancorp. At December 31, 2003, our consolidated securities portfolio amounted to $560.7 million, $2.2 million of which was held at Commercial Capital Bancorp and $558.5 million of which was held at the Bank. The securities held at Commercial Capital Bancorp are held for liquidity purposes and to further deploy such entities’ equity, and thereby enhance our return on equity. These securities generally provide a high degree of cash flow.

The Bank’s securities portfolio is managed in accordance with guidelines set by the Bank’s Asset/Liability Committee (“ALCO”). Specific day-to-day transactions affecting the securities portfolio are managed by the Bank’s chief executive officer and treasurer in accordance with its Investment Policy. The Bank’s Treasury Committee reviews the securities portfolio and related transactions at least monthly. These securities activities are also reviewed quarterly or more often, as needed, by the Bank’s ALCO. The Bank’s securities position is reported to the Bank’s board of directors each month and a summary of the Bank’s ALCO meetings is reported to the Bank’s board of directors at least quarterly.

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The Investment Policy, which addresses strategies, types and levels of allowable investments and which is reviewed and approved annually by the Bank’s board of directors, authorizes the Bank to invest in a variety of highly liquid, investment grade fixed-income, U.S. government and agency securities and other investment securities, subject to various limitations. The Investment Policy limits the amount the Bank can invest in various types of securities, places limits on average lives and durations of the Bank’s securities, limits the securities dealers that the Bank can conduct business with, and requires approval from a member of the Bank’s executive committee with respect to any investment other than U.S. government and U.S. government agency securities (including mortgage-backed securities) and municipal obligations. In addition, the Bank’s treasurer is prohibited from buying or selling any one security that is $5.0 million or greater without the approval of a member of the Bank’s executive committee and is prohibited from buying or selling any one security that is $25.0 million or greater without approval from two members of the Bank’s executive committee.

Although our policies permit us to invest in any investment grade securities, as of December 31, 2003, all of our investments have consisted of AAA-rated mortgage-backed securities that are insured or guaranteed by U.S. government agencies or government-sponsored enterprises and a U.S. government security. At December 31, 2003, our consolidated securities portfolio consisted of $560.6 million of mortgage-backed securities, and a $100,000 U.S. government treasury bill. All of our securities are classified as available-for-sale.

Mortgage-backed securities, which are known as mortgage participation certificates or pass-through certificates, represent a participation interest in a pool of single-family or multi-family mortgages, which are passed from the mortgage originators, through intermediaries (generally U.S. government agencies and government sponsored enterprises) that pool and repackage the participation interests in the form of securities, to investors such as us. Such U.S. government agencies and government sponsored enterprises, which guarantee the payment of principal and interest to investors, primarily include Freddie Mac, Fannie Mae and Ginnie Mae. Of our total consolidated investment in mortgage-backed securities at December 31, 2003, $329.7 million consisted of Fannie Mae pass-through certificates, $228.9 million consisted of Freddie Mac pass-through certificates and $2.0 million consisted of Ginnie Mae pass-through certificates. Of the $560.6 million of mortgage-backed securities at December 31, 2003, $226.6 million, or 40.4%, have original and weighted average remaining terms to maturity of 30 years and 29.8 years, respectively, with an estimated average life of 3.9 years, $57.4 million, or 10.2%, have original and weighted average remaining terms to maturity of 20 years and 19.3 years, respectively, with an estimated average life of 4.9 years, $276.6 million, or 49.4%, have original and weighted average terms to maturity of 15 years and 14.0 years, respectively, with an estimated average life of 4.7 years. At December 31, 2003, all of our securities with original terms to maturity of 30 years are hybrid adjustable-rate securities with a fixed rate of interest for a term of 7 years, adjusting to a current market rate index, either one-year CMT or one-year LIBOR, plus a margin thereafter. The rates on the 20-year and 15-year securities remain fixed to maturity.

Mortgage-backed securities typically are issued with stated principal amounts, and are backed by pools of mortgages that have loans with interest rates that are within a range and have varying maturities. The characteristics of the underlying pool of mortgages, such as fixed-rate or adjustable-rate, contractual scheduled amortization, as well as prepayment risk, are passed on to the certificate holder. The average life of a mortgage-backed pass-through security thus approximates the average life of the underlying pool of mortgages.

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The following table sets forth the activity in our consolidated securities portfolio for the years indicated.

Sources of Funds

General.    The Bank’s primary sources of funds for use in its lending and investing activities consist of deposits, reverse repurchase agreements, advances from the FHLB of San Francisco, and sales of, maturities and principal and interest payments on loans and securities. CCM’s primary sources of funds for use in its lending and investing activities consist of proceeds from the sale of loans and its warehouse line of credit. Commercial Capital Bancorp’s primary sources of funds for use in its investing activities consist of sales of, maturities and principal repayments on securities. In addition, proceeds raised by us from sales of common stock and the issuance of trust preferred securities have been downstreamed primarily into the Bank. We closely monitor rates and terms of competing sources of funds and utilize those sources we believe to be the most cost effective, consistent with our asset and liability management policies.

Deposits.    The Bank offers a variety of deposit products and services at competitive interest rates. The Bank utilizes traditional marketing methods to attract new clients and deposits, including various forms of advertising. The Bank also utilizes the services of deposit brokers to attract non-retail certificates of deposit, consisting largely of jumbo certificates of deposit and brokered deposits. Some of the Bank’s jumbo certificates of deposit and other deposits are also obtained through the posting of deposit rates on national computerized bulletin boards at no cost to the Bank and through the Internet.

The Bank attempts to price its deposit products in order to promote deposit growth and satisfy the Bank’s liquidity requirements and offers a variety of deposit products in order to satisfy its clients’ needs. The Bank’s current deposit products include regular checking, savings, NOW and money market deposit accounts; fixed-rate, fixed-maturity retail certificates of deposit ranging in terms from 30 days to five years; individual retirement accounts; and non-retail certificates of deposit consisting of jumbo (generally greater than or equal to $100,000) certificates, brokered certificates and public deposits. The Bank has historically relied on certificates of deposit, primarily obtained out of our market area through the Internet. As of December 31, 2003, we had $257.6 million of certificates of deposit, consisting of $81.5 million with balances less than $100,000, $108.1 million of jumbo certificates, including $99.2 million with the State of California, and $68.0 million of brokered certificates. Since December 31, 2001, the Bank has reduced its reliance on certificates of deposit and has been focusing on increasing the quality of its core deposit base by promoting its transaction accounts, primarily its money market deposit products, which has attracted a significant amount of such deposits. At December 31, 2003, our transaction accounts totaled $388.0 million, or 60.1% of total deposits, as compared to $15.6 million, or 13.2% of total deposits, at December 31, 2001. Business deposits accounted for 20% of total transaction accounts at December 31, 2003. At December 31, 2003, the Bank had 8 deposits from the State of California that amounted to $99.2 million in the aggregate, which totaled approximately 15% of total deposits and are scheduled to mature between January 3, 2004 and June 16, 2004.

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The Bank’s four existing branches are located in Irvine, Rancho Santa Margarita, La Jolla and Riverside, California. The Bank will opportunistically consider further de novo branch expansion if and when management believes that such expansion will enhance our franchise, including in northern California where the Bank has a lending presence. In December 2003, the Bank entered into a lease agreement for the purpose of opening its Beverly Hills branch, scheduled to open during the middle of 2004, and entered into another lease to move its Riverside branch location, scheduled to occur during the second quarter of 2004.

Since December 31, 2001, the Bank has increased its emphasis on attracting retail deposits from both business and retail relationships located throughout Orange, San Diego, Riverside and Los Angeles counties, California. The Bank’s money market deposit accounts are obtained from both business and retail clients, located primarily throughout southern California. We are also focused on gathering deposits from borrower client relationships developed through our multi-family and commercial lending activities. We have been successful in attracting deposits from those businesses involved in our lending activities. These businesses include property management companies, community associations, title and escrow companies, law firms and other middle-market businesses. During the fourth quarter of 2003, the Bank formed the Financial Services Group, a new business deposit division within Relationship Banking, to focus on attracting deposits from these real-estate related and middle market businesses. During its first two months of operations, the Financial Services Group attracted $13.8 million of deposits which were predominantly transaction accounts.

The following table shows the distribution of and other information relating to our deposits by type as of the dates indicated. We acquired the Bank on December 22, 2000. Consequently, no information exists prior to such date.

The following table sets forth the maturities of our certificates of deposit having principal amounts of $100,000 or more at December 31, 2003.

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The following table sets forth the activity in our deposits during the periods indicated. We acquired the Bank on December 22, 2000.

The following table sets forth, by various interest rate categories, our certificates of deposit at the dates indicated. We acquired the Bank on December 22, 2000.

The following table sets forth the amount and remaining maturities of our certificates of deposit at December 31, 2003.

Borrowings.    Commercial Capital Bancorp, CCM and the Bank utilize borrowings to fund their respective operations. The Bank uses reverse repurchase agreements and FHLB advances and CCM uses its warehouse line of credit. In addition, we have issued trust preferred securities, the proceeds of which were contributed to the Bank and, to a lesser extent, CCM.

The Bank obtains advances from the FHLB of San Francisco based upon the pledging of some of its mortgage loans and other assets, provided that standards related to the creditworthiness of the Bank have been met. FHLB of San Francisco advances are available for general business purposes to expand lending and investing activities. Such borrowings have generally been used to fund lending activities or the purchase of mortgage-