Harold P. Reichwald, Esq.
Manatt, Phelps & Phillips, LLP
11355 West Olympic Boulevard
Los Angeles, California 90064-1614

Dear Mr. Reichwald:

I am writing in response to your letter requesting an opinion that Imperial Bancorp, Los Angeles, California ("Bancorp"), would not control Imperial Financial Group, Inc., Los Angeles, California ("IFG"), for purposes of the Bank Holding Company ("BHC") Act after the spin-off transaction described below.

IFG is a newly formed subsidiary of Imperial Bank ("Bank"), which in turn is a wholly owned subsidiary of Bancorp. Bank also owns all the stock of Crown American Bank ("CAB"), a newly formed California thrift and loan company, and Imperial Trust Company ("Imperial Trust"), a California-licensed nonbank trust company. Prior to the proposed spin-off transaction, Bank will contribute to CAB all the assets and liabilities relating to Bank's small business lending division. Bank will then contribute to IFG (1) all of the stock of CAB and Imperial Trust, (2) all of the assets and liabilities relating to The Lewis Horowitz Organization, a division of Bank that specializes in financing motion picture and television programming, and (3) the 9,094,892 shares of common stock of Imperial Credit Industries, Inc. ("ICII"), a diversified financial holding company, owned by Bank, representing approximately 23.5 percent of ICII's common stock.

Following these contributions, Bank will transfer to Bancorp, as a dividend, all the outstanding Class A shares of IFG.¹ Immediately thereafter, Bancorp will distribute all the Class A shares of IFG to the holders of Bancorp common stock on a pro rata basis. You have indicated that after the proposed spin-off Bancorp and IFG will operate independently as separate public companies and will compete against each other in certain lines of business.

Bancorp has committed that Bancorp and its subsidiaries will not own any stock of IFG or its subsidiaries following the spin-off, will not receive any stock of IFG or its subsidiaries in the proposed spin-off transaction, and will not acquire any stock of IFG in the future. As a result of the spin-off, however, certain employee benefit plans established for employees of Bancorp (the "Plans") will own in the aggregate approximately 6.6 percent of the Class A shares of IFG, due to the Plans' current ownership of Bancorp shares. Bancorp is deemed to control any shares held by the Plans pursuant to section 2(g)(2) of the BHC Act. Bancorp has committed that it will cause the Plans, within 6 months of the proposed spin-off, to divest all of the IFG shares held by the Plans, and that the Plans will be amended to prohibit the acquisition of any shares of IFG in the future.

The officers and directors of Bancorp and its subsidiaries will have the right to receive approximately 19 percent of IFG's Class A shares, representing approximately 16.5 percent of IFG's total voting stock, in the proposed spin-off as a result of the status of these officers and directors as shareholders of Bancorp. These officers and directors will receive their IFG Class A shares in direct proportion to their current ownership of shares of Bancorp.² In addition, you have proposed that Bancorp and IFG (or their respective subsidiaries) would have four interlocking directors or officers following the spin-off.³ You have stated that IFG expects to grant these four interlocking directors and officers options to acquire 1,005,000 Class B shares of IFG, representing approximately an additional 4.5 percent of IFG's total voting stock. There is no agreement between IFG and Bancorp regarding the selection or service of any member of the IFG board of directors, and, following the spin-off, the board of directors of IFG will be selected exclusively by the shareholders of IFG. Bancorp has no right or ability to select the directors of IFG after the spin-off, and has committed that it will not seek any representation on the board of directors of IFG and its subsidiaries or any representation among the officers, agents or employees of IFG or any of its subsidiaries.

Moreover, Bancorp has indicated that the only employee, officer, or director interlocks between Bancorp and IFG or their subsidiaries will be those identified above. Each of the individuals that would serve as a director of both IFG and Bancorp or Bank has provided the following commitments designed to ensure that IFG remains independent from Bancorp:

• When acting as a director of IFG, the individual will not be acting pursuant to any agreement with, or instructions from, Bancorp or Bank; will not be subject to control by Bancorp or Bank; will not represent the interest of, nor act on behalf of, Bancorp or Bank; and will abstain from voting upon any matter to be acted upon by the board of directors or any committee of IFG which involves, directly or indirectly, a conflict of interest arising from his service as a director of Bancorp or Bank; and

• When acting as a director of Bancorp or Bank, the individual will not be acting pursuant to any agreement with, or instructions from, IFG; will not be subject to control by IFG; will not represent the interest of, nor act on behalf of, IFG; and will abstain from voting upon any matter to be acted upon by the board of directors or any committee of Bancorp or Bank which involves, directly or indirectly, a conflict of interest arising from his service as a director of IFG.

Based on the specific facts of this case and the commitments provided by Bancorp and others, the staff would not recommend that the Board find that Bancorp controls IFG for purposes of the BHC Act following the spin-off transaction described above. This opinion relates solely to the status of IFG under the BHC Act, and not any other act, and is based expressly on the facts and circumstances of this case as they have been described to Board staff, and any change in these facts or circumstances may result in a different opinion or trigger a presumption of control under the BHC Act, and should be communicated immediately to the Board. Furthermore, this opinion is given without prejudice to the Board's right to initiate a control proceeding against Bancorp or any of its subsidiaries or affiliates under Regulation Y in the event that the facts presented at a future time indicate that Bancorp or any of its subsidiaries or affiliates in fact controls IFG for purposes of the BHC Act.

Very truly yours,

(Signed) Scott G. Alvarez

Scott G. Alvarez

cc: Federal Reserve Bank of San Francisco

1. IFG is authorized to issue two classes of common stock -- Class A shares and Class B shares. Bank currently owns all the Class A shares and only Class A shares will be outstanding at the time of the proposed spin-off. IFG has granted or expects to grant options to certain of its officers and directors to acquire approximately 2,450,000 Class B shares. Additional Class B shares may be issued only upon the exercise of options granted under IFG's employee benefit plans or as a dividend on previously issued Class B shares. Class B shares are convertible into Class A shares on a one-for-one basis under certain circumstances and vote on all matters as a single class with Class A shares. Return to text

2. See 12 C.F.R. 225.139(c)(2).Return to text

3. In particular, you have proposed that George L. Graziado, Jr. would serve as Chairman of IFG and Chairman, President and Chief Executive Officer of Bancorp and Chairman of Bank; G. Louis Graziado, III would serve as Co-Chairman and Chief Executive Officer of IFG, director of Imperial Trust and director of Bancorp; Paul Novelly would serve as director of IFG and Bank; and Lee Mikles would serve as director of IFG, Bancorp and Bank.Return to text

4. See Letter to John F. Stuart, Esq., from William W. Wiles, Secretary of the Board, dated August 24, 1990.Return to text