##### 



Exhibit 13.0

SELECTED CONSOLIDATED FINANCIAL DATA

We are providing the following selected
consolidated financial information about us to assist you in
your review of the Company. This information is derived from our
audited financial statements for each of the fiscal years shown
below. The following information is only a summary, and you
should read it together with our consolidated financial
statements and notes included in this Annual Report.

|                                    |  |                        |           |      |  |      |           |      |  |      |           |   |  |   |           |   |  |   |           |  
|----------------------------------- |  | ---------------------- | --------- | ---- |  | ---- | --------- | ---- |  | ---- | --------- | - |  | - | --------- | - |  | - | --------- | -
|                                    |  |                       
|                                    |  | At December 31,       
|                                    |  |                       
|                                    |  | 2004                   |           | 2003 |  | 2002 |           | 2001 |  | 2000
|                                    |  |                        |           |      |  |      |           |      |  |     
|                                    |  |                       
|                                    |  | (Dollars in Thousands)
|Financial Condition and Other Data: |  |                        |           |      |  |      |           |      |  |      |           |   |  |   |           |   |  |   |           |  
|Total assets                        |  | $                      | 6,315,681 |      |  | $    | 5,587,927 |      |  | $    | 4,853,636 |   |  | $ | 2,932,043 |   |  | $ | 2,502,119 |  
|Total loans held in portfolio, net  |  |                        | 3,994,269 |      |  |      | 3,713,255 |      |  |      | 2,978,945 |   |  |   | 2,229,753 |   |  |   | 1,902,921 |  
|Securities(1)                       |  |                        | 1,494,342 |      |  |      | 1,505,782 |      |  |      | 1,581,381 |   |  |   | 593,393   |   |  |   | 487,240   |  
|Deposits                            |  |                        | 5,215,862 |      |  |      | 4,483,521 |      |  |      | 4,006,813 |   |  |   | 2,466,152 |   |  |   | 2,064,019 |  
|Subordinated debentures             |  |                        | 136,000   |      |  |      | 136,000   |      |  |      | 136,000   |   |  |   | 36,000    |   |  |   | 30,000    |  
|Borrowings                          |  |                        | 407,262   |      |  |      | 505,542   |      |  |      | 353,374   |   |  |   | 238,000   |   |  |   | 260,558   |  
|Stockholders equity(2)             |  |                        | 484,012   |      |  |      | 414,466   |      |  |      | 282,367   |   |  |   | 174,124   |   |  |   | 133,645   |  
|Nonperforming assets                |  |                        | 12,574    |      |  |      | 5,857     |      |  |      | 4,654     |   |  |   | 991       |   |  |   | 2,631     |  
|Ratio of equity to assets           |  |                        | 7.66      | %    |  |      | 7.42      | %    |  |      | 5.82      | % |  |   | 5.94      | % |  |   | 5.34      | %

|                                                               |  |                                                      |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|-------------------------------------------------------------- |  | ---------------------------------------------------- | ------- | ---- |  | ---- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | - |  | - | ------- | -
|                                                               |  |                                                     
|                                                               |  | For the Years Ended December 31,                    
|                                                               |  |                                                     
|                                                               |  | 2004                                                 |         | 2003 |  | 2002 |         | 2001 |  | 2000
|                                                               |  |                                                      |         |      |  |      |         |      |  |     
|                                                               |  |                                                     
|                                                               |  | (Dollars in Thousands, Except Per Share Information)
|Operating Data:                                                |  |                                                      |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|Interest income                                                |  | $                                                    | 300,064 |      |  | $    | 260,262 |      |  | $    | 205,178 |   |  | $ | 202,787 |   |  | $ | 186,688 |  
|Interest expense                                               |  |                                                      | 92,583  |      |  |      | 91,714  |      |  |      | 80,232  |   |  |   | 104,330 |   |  |   | 103,704 |  
|                                                               |  |                                                      |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|Net interest income                                            |  |                                                      | 207,481 |      |  |      | 168,548 |      |  |      | 124,946 |   |  |   | 98,457  |   |  |   | 82,984  |  
|Provision for loan losses                                      |  |                                                      | 4,201   |      |  |      | 9,967   |      |  |      | 9,673   |   |  |   | 5,620   |   |  |   | 9,765   |  
|                                                               |  |                                                      |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|Net interest income after provision for loan
    losses        |  |                                                      | 203,280 |      |  |      | 158,581 |      |  |      | 115,273 |   |  |   | 92,837  |   |  |   | 73,219  |  
|Noninterest income                                             |  |                                                      | 30,877  |      |  |      | 23,203  |      |  |      | 12,142  |   |  |   | 6,905   |   |  |   | 4,751   |  
|Noninterest expense(3)                                         |  |                                                      | 99,153  |      |  |      | 80,208  |      |  |      | 64,349  |   |  |   | 49,296  |   |  |   | 40,099  |  
|                                                               |  |                                                      |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|Income before taxes                                            |  |                                                      | 135,004 |      |  |      | 101,576 |      |  |      | 63,066  |   |  |   | 50,446  |   |  |   | 37,871  |  
|Income tax expense                                             |  |                                                      | 49,401  |      |  |      | 36,938  |      |  |      | 24,138  |   |  |   | 19,958  |   |  |   | 13,743  |  
|                                                               |  |                                                      |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|Net income                                                     |  | $                                                    | 85,603  |      |  | $    | 64,638  |      |  | $    | 38,928  |   |  | $ | 30,488  |   |  | $ | 24,128  |  
|                                                               |  |                                                      |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|Operating Ratios and Other Data:                               |  |                                                      |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|Return on average assets                                       |  |                                                      | 1.44    | %    |  |      | 1.26    | %    |  |      | 1.14    | % |  |   | 1.12    | % |  |   | 1.02    | %
|Return on average equity                                       |  |                                                      | 18.92   |      |  |      | 18.84   |      |  |      | 18.42   |   |  |   | 19.58   |   |  |   | 20.12   |  
|Interest rate spread(4)                                        |  |                                                      | 3.42    |      |  |      | 3.21    |      |  |      | 3.46    |   |  |   | 3.30    |   |  |   | 3.24    |  
|Net interest margin(4)                                         |  |                                                      | 3.63    |      |  |      | 3.41    |      |  |      | 3.73    |   |  |   | 3.69    |   |  |   | 3.59    |  
|Efficiency ratio(5)                                            |  |                                                      | 41.60   |      |  |      | 41.83   |      |  |      | 46.94   |   |  |   | 46.79   |   |  |   | 45.70   |  
|Noninterest expense to average assets                          |  |                                                      | 1.67    |      |  |      | 1.56    |      |  |      | 1.88    |   |  |   | 1.82    |   |  |   | 1.70    |  
|Average equity to average assets                               |  |                                                      | 7.62    |      |  |      | 6.66    |      |  |      | 6.18    |   |  |   | 5.74    |   |  |   | 4.90    |  
|Dividend payout ratio(6)                                       |  |                                                      | 8.89    |      |  |      | 8.51    |      |  |      | 10.64   |   |  |   | 10.39   |   |  |   | 8.06    |  
|Asset Quality Data:                                            |  |                                                      |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|Nonperforming assets to total assets                           |  |                                                      | 0.20    | %    |  |      | 0.10    | %    |  |      | 0.10    | % |  |   | 0.03    | % |  |   | 0.11    | %
|Nonperforming loans to total loans held in
    portfolio       |  |                                                      | 0.31    |      |  |      | 0.16    |      |  |      | 0.15    |   |  |   | 0.04    |   |  |   | 0.13    |  
|Allowance for loan losses to total loans held in
    portfolio |  |                                                      | 1.39    |      |  |      | 1.54    |      |  |      | 1.61    |   |  |   | 1.53    |   |  |   | 1.50    |  
|Net charge-offs to average gross loans(8)                      |  |                                                      | 0.11    |      |  |      | 0.06    |      |  |      | 0.23    |   |  |   | 0.00    |   |  |   | 0.02    |  
|Bank Regulatory Capital Ratios:                                |  |                                                      |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|Tier I risk-based capital                                      |  |                                                      | 11.42   | %    |  |      | 10.92   | %    |  |      | 10.26   | % |  |   | 9.65    | % |  |   | 9.71    | %
|Total risk-based capital                                       |  |                                                      | 12.67   |      |  |      | 12.18   |      |  |      | 11.52   |   |  |   | 10.91   |   |  |   | 10.97   |  
|Leverage ratio (Tier I capital to total
    average assets)    |  |                                                      | 8.49    |      |  |      | 7.86    |      |  |      | 7.57    |   |  |   | 7.26    |   |  |   | 6.95    |  
|Per Share Data:                                                |  |                                                      |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|Basic earnings per share(2)(7)                                 |  | $                                                    | 1.89    |      |  | $    | 1.48    |      |  | $    | 0.98    |   |  | $ | 0.80    |   |  | $ | 0.65    |  
|Diluted earnings per share(2)(7)                               |  |                                                      | 1.80    |      |  |      | 1.41    |      |  |      | 0.94    |   |  |   | 0.77    |   |  |   | 0.62    |  
|Dividends declared per share(7)                                |  |                                                      | 0.16    |      |  |      | 0.12    |      |  |      | 0.10    |   |  |   | 0.08    |   |  |   | 0.05    |  






|    |                                                                                                                                                                                                                                                                                                                           
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes available-for-sale securities and
    held-to-maturity securities.                                                                                                                                                                                                                                               
|(2) | In conjunction with the acquisitions of First
    Continental Bank in July 2003 and Bank of Canton of California
    in October 2002, the Company issued 2.3 million and
    2.7 million shares of common stock, respectively.                                                                                            
|(3) | Includes $6.75 million of expense
    representing litigation settlement in 2002.                                                                                                                                                                                                                                         
|(4) | Calculated on a nontax equivalent basis.                                                                                                                                                                                                                                                                                  
|(5) | Represents noninterest expense divided by the
    total of our net interest income before provision for loan
    losses and our noninterest income.                                                                                                                                                                       
|(6) | Dividends declared per share as a percentage of
    diluted earnings per share.                                                                                                                                                                                                                                           
|(7) | The Company completed a two-for-one stock split
    in each of the years 2001 and 2003. Accordingly, for the years
    ended December 31, 1999, 2000, 2001 and 2002, basic
    earnings per share, diluted earnings per share and dividends per
    share have been restated to reflect the effect of the stock
    split.
|(8) | Average gross loans include loans held for sale.                                                                                                                                                                                                                                                                          

19



---



##### 



MANAGEMENTS DISCUSSION AND ANALYSIS
OF

FINANCIAL CONDITION AND RESULTS OF
OPERATIONS


This report on Form 10-K may include
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking
statements are based upon specific assumptions that may or may
not prove correct. Forward-looking statements are also subject
to known and unknown risks, uncertainties and other factors
relating to the Companys and the Banks operations
and business environment, all of which are difficult to predict,
and many of which are beyond the control of the Company and the
Bank. The factors include, among others:



| |   |                                                                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | economic and business conditions in the areas
    and markets in which the Company and the Bank operate,
    particularly those affecting loans secured by real
    estate;
|
| |  | deterioration or improvement in the ability of
    the Banks borrowers to pay their debts to the
    Bank;                                                                
|
| |  | market fluctuations such as those affecting
    interest and foreign exchange rates and the value of securities
    in which the Bank invests;                             
|
| |  | competition from other financial institutions,
    whether banks, investment banks, insurance companies or
    others;                                                     
|
| |  | the ability of the Bank to assimilate
    acquisitions, enter new markets and lines of business, and open
    new branches, successfully;                                  
|
| |  | changes in business strategies;                                                                                                                                            
|
| |  | changes in tax law and governmental regulation
    of financial institutions;                                                                                              
|
| |  | demographic changes; and                                                                                                                                                   
|
| |  | other risks and uncertainties, including those
    discussed in the documents the Company files with the Securities
    and Exchange Commission (SEC).                   

The foregoing may cause the actual results and
performance of the Company and the Bank to be materially
different from the results and performance indicated or
suggested by the forward-looking statements.

The following discussion and analysis is
intended to assist in an understanding of the significant
factors that influence our financial condition at
December 31, 2004, as compared to December 31, 2003.
It also analyzes our results of operations for the year ended
December 31, 2004, as compared to the year ended
December 31, 2003, and for the year ended December 31,
2003, as compared to the year ended December 31, 2002. You
should read the discussion and analysis together with our
financial statements and corresponding notes included in this
Annual Report.

SUMMARY RESULTS

UCBH Holdings, Inc. (we,
our, and Company), operating through its
principal subsidiary, United Commercial Bank (Bank),
earned $85.6 million for the year ended December 31,
2004, compared to $64.6 million for the year ended
December 31, 2003, an increase of $21.0 million, or
32.4%. For the year ended December 31, 2003, net income
increased $25.7 million or 66.0%, as compared to net income
of $38.9 million for the year ended December 31, 2002.
Diluted earnings per share for the 2004 year was $1.80,
compared to $1.41 for the 2003 year and $0.94 for the year
2002.

Our revenues for the year ended December 31,
2004, consist of approximately 87% net interest income,
which represents the difference between interest income and
interest expense, and 13% noninterest income. We generate
interest income primarily on the loans and securities that we
hold in our portfolios. Interest expense results from the
interest that we pay customers on their deposits and debt
holders on our borrowings.

Noninterest income results primarily from
commercial banking fees, charges on deposit accounts; and gains
on sales of multifamily loans, U.S. Small Business
Administration (SBA) loans and securities.

20



---



##### 



As a result of the increased earnings of the
organization, our return on average assets (ROA)
increased to 1.44% for the year ended December 31, 2004,
compared with 1.26% and 1.14%, for corresponding periods of 2003
and 2002, respectively. Our return on average equity
(ROE) was 18.92% for the year ended
December 31, 2004, compared to 18.84% and 18.42%, for the
corresponding periods in 2003 and 2002, respectively.

Our efficiency ratio, which represents the ratio
of total noninterest expense to the sum of net interest income
and noninterest income, was comparable at 41.60% and 41.83% for
the years ended December 31, 2004 and 2003, respectively.
The decrease in the efficiency ratio from 46.94% for the year
ended December 31, 2002, to 41.83% in 2003 was a result of
a one-time $6.75 million pretax charge for the settlement
of a litigation. Prior to the one-time charge, the efficiency
ratio in 2002 was 42.02%.

Compared to the year ended December 31,
2003, our interest income increased by $39.8 million to
$300.1 million for the year ended December 31, 2004,
or 15.3%, respectively, as a result of a $776.8 million
increase in our average interest-earning assets primarily due to
loan production. Our average loans outstanding were
$4.08 billion for the year ended December 31, 2004,
compared with $3.38 billion for the same period in 2003.

Our interest income increased $55.1 million,
or 26.8%, from the year ended December 31, 2003, compared
to the corresponding period in 2002. The increase was primarily
due to a $1.59 billion increase in the average balance of
interest-earning assets resulting from organic growth and the
acquisition of FCB in July 2003.

As a financial institution, we are sensitive to
fluctuations in market interest rates. As a result of the
decreases in market interest rates during the year of 2004, the
yields on our loans and deposits have been decreasing. Since the
rate of the decrease on loan yields was less than the rate of
the decrease on the cost of our deposits, our net interest
margin, on a non-tax equivalent basis, improved from 3.41% to
3.63% for the 2004 year when compared with the
2003 year.

The decrease in net interest margin from 3.73%
for the year ended December 31, 2002 to 3.41% for the year
ended December 31, 2003 reflects the acquisition of the
Bank of Canton of California (BCC) in October 2002.
When acquired, BCC had a high securities concentration and high
CD concentration and, accordingly, a net interest margin of
only 2.23%. The lower BCC net interest margin resulted in a
decrease of UCBHs net interest margin from 4.02% preceding
the acquisition to 3.48% in the first full quarter following the
acquisition.

The loan loss provision for the year ended
December 31, 2004, was $4.2 million, compared with a
provision of $10.0 million for the year ended
December 31, 2003. The allowance for loan losses was
$56.5 million and $58.1 million at December 31,
2004 and 2003, respectively. The reduction in the allowance for
loan losses, and the related provision for loan losses reflects
the following:



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | the Banks continued quarterly process of
    re-evaluating its loss factors in light of its own historical
    loss experience, loan delinquency and classification, and
    economic outlook and other data. In conjunction with this
    evaluation, the loan loss factors for the commercial real estate
    portfolio were reduced as a result of the Company expanding the
    review process of the commercial real estate credits. In doing
    so, the Company determined that the inherent volatility risk in
    the portfolio was decreased due to stronger identification,
    administration and action plan implementation on credits in the
    commercial real estate portfolio. The loan loss factor on the
    aggregate consumer portfolio was also reduced, reflecting the
    significantly lower credit card portfolio which has higher
    inherent risk than other components of the consumer portfolio;
|
| | (b) | the reclassification of $326.0 million of
    loans held for sale during the year for which the related
    allowance was required to be reversed;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| | (c) | the sale of $362.4 million of multifamily
    loans during the year; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| | (d) | the upgrade of certain classified loans due to
    sustained credit performance.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

21



---



##### 



The foregoing four factors, primarily occurring
in the fourth quarter 2004, resulted in a negative loan loss
provision of $626,000 in the fourth quarter of 2004.

The decrease in the allowance for loan losses as
a result of the factors discussed above was partially offset by
an increase resulting from higher loan originations during the
year and an increase in the overall nonperforming loans.

Our provision for loan losses of
$10.0 million for the year ended December 31, 2003 was
comparable to our provision of $9.7 million for the year
ended December 31, 2002.

Noninterest income increased by 33.1% to
$30.9 million in 2004, compared with noninterest income of
$23.2 million in 2003. This increase was primarily driven
by increases in commercial banking fees and gains on sales of
loans. During 2004, commercial banking fees increased primarily
due to increases in trade finance activity. During 2004, the
Bank also sold $362.4 million of multifamily loans for a
gain of $7.7 million. There were no multifamily loan sales
in 2003. The Bank plans to originate multifamily loans for sale.
These loans will be classified as loans held for sale and are
presented separately on the consolidated balance sheets.

Our noninterest expenses increased 23.6% to
$99.2 million for the year ended December 31, 2004,
compared with $80.2 million in 2003. The increase resulted
primarily from an increase in personnel expenses, occupancy
expenses, and professional fees and contracted services. In
2004, personnel expenses increased to $50.9 million from
$42.3 million in 2003, as a result of additional staffing
required to support the growth of the Banks commercial
banking business, the expansion of the Hong Kong branch,
the opening of the California branches and the expansion of the
Banks infrastructure to support a larger and growing
organization. Occupancy expenses increased to $10.2 million
from $5.9 million in 2003, as a result of the opening of
three branches in California and a branch in New York as
well as the relocation of the San Francisco headquarters
and the expansion of the Hong Kong branch. Also, 2004 occupancy
expenses reflect a full year of occupancy expenses of the new
branches opened in the latter part of 2003. Professional fees
and contracted services increased by 29.2% to $7.5 million
from $5.8 million in 2003, primarily as a result of
professional fees, primarily accounting, associated with the
Sarbanes-Oxley Act implementation.

Our noninterest expenses increased 24.6% to
$80.2 million for the year ended December 31, 2003,
from $64.3 million for the corresponding period of 2002,
primarily as a result of increases in personnel cost and
reflected our acquisition of BCC in October 2002.

TREND ANALYSIS

Although we have operated in California since
1974, we operated as a thrift until 1998. In 1998, we changed
our charter to that of a commercial bank and began operating as
a commercial bank. Presented below are charts reflecting our
growth trends since becoming a commercial bank.

Following are graphs reflecting our total balance
sheet, loan and deposit growth since 1998 as of the end of the
specified periods:

Total Assets

($ Millions)


(Total Assets Graph)

22



---



##### 



Total Loans Held in Portfolio

($ Millions)


(Total Assets Loans Graph)

Total Deposits

($ Millions)


(Total Deposits)

Core Deposits

($ Millions)


(Core Deposits)

We have grown our balance sheet at a compounded
rate of 19.7% since 1998. In 2002, we acquired BCC, with assets
of $1.55 billion, which accounts for the substantial
increase in the assets that year. Similarly, in 2003, we
acquired First Continental Bank (FCB) with assets of
$356.7 million. Without these acquisitions, we would have
grown our balance sheet at a compounded annualized rate of 12.5%
since 1998. In the future, our goal is to grow our balance sheet
organically in a range of 14% to 17% per annum without
acquisitions.

Our loan portfolio has grown at a compounded rate
of 18.1% since 1998. Without the acquisitions of BCC and FCB,
the growth rate would have been 14.1%, compounded annually. Our
ongoing goal is to increase our loan portfolio by a range of 17%
to 22% annually.

Our deposits have grown at a compounded rate of
21.3% since 1998. Without the acquisitions of BCC and FCB, the
growth rate would have been 14.3%, compounded annually. Our core
deposits have grown at a rate of 35.2% since becoming a
commercial bank. Without the acquisitions of BCC and FCB, the
growth rate would have been 31.0%, compounded annually.

Following is a table reflecting our asset quality
since becoming a commercial bank as of the end of the specified
periods:

|                                                                  |  |      |       |      |  |      |       |      |  |      |       |      |  |      |       |  |  |  |       |  |  |  |       |  |  |  |       | 
|----------------------------------------------------------------- |  | ---- | ----- | ---- |  | ---- | ----- | ---- |  | ---- | ----- | ---- |  | ---- | ----- |  |  |  | ----- |  |  |  | ----- |  |  |  | ----- | 
|                                                                  |  | 1998 |       | 1999 |  | 2000 |       | 2001 |  | 2002 |       | 2003 |  | 2004
|                                                                  |  |      |       |      |  |      |       |      |  |      |       |      |  |     
|Charge-offs as a % of average loans                               |  |      | 0.05% |      |  |      | 0.07% |      |  |      | 0.02% |      |  |      | 0.00% |  |  |  | 0.23% |  |  |  | 0.06% |  |  |  | 0.11% | 
|Loan delinquency ratio (30 days +)                                |  |      | 0.78% |      |  |      | 1.12% |      |  |      | 0.75% |      |  |      | 0.64% |  |  |  | 0.88% |  |  |  | 0.87% |  |  |  | 0.90% | 
|Ratio of nonperforming loans to total loans held
    in portfolio |  |      | 0.41% |      |  |      | 0.27% |      |  |      | 0.13% |      |  |      | 0.04% |  |  |  | 0.15% |  |  |  | 0.16% |  |  |  | 0.31% | 
|Ratio of nonperforming loans to total assets                      |  |      | 0.32% |      |  |      | 0.23% |      |  |      | 0.11% |      |  |      | 0.03% |  |  |  | 0.10% |  |  |  | 0.10% |  |  |  | 0.20% | 

23



---



##### 



We have maintained a good credit quality by
adhering to our conservative credit underwriting criteria. The
2004 higher ratios of nonperforming loans to total loans and
nonperforming loans to total assets is primarily due to four
nonperforming commercial real estate loans totaling
$8.1 million, and our nonperforming construction loans of
$4.4 million.

The chart below presents selected operating
metrics of the Company since becoming a commercial bank:

|                         |  |                                  |        |      |  |      |        |      |  |      |        |      |  |      |        |  |  |  |        |  |  |  |        |  |  |  |        | 
|------------------------ |  | -------------------------------- | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ------ |  |  |  | ------ |  |  |  | ------ |  |  |  | ------ | 
|                         |  |                                 
|                         |  | For the Years Ended December 31,
|                         |  |                                 
|                         |  | 1998                             |        | 1999 |  | 2000 |        | 2001 |  | 2002 |        | 2003 |  | 2004
|                         |  |                                  |        |      |  |      |        |      |  |      |        |      |  |     
|Return on average assets |  |                                  | 0.60%  |      |  |      | 0.87%  |      |  |      | 1.02%  |      |  |      | 1.12%  |  |  |  | 1.14%  |  |  |  | 1.26%  |  |  |  | 1.44%  | 
|Return on average equity |  |                                  | 12.52% |      |  |      | 18.00% |      |  |      | 20.12% |      |  |      | 19.58% |  |  |  | 18.42% |  |  |  | 18.84% |  |  |  | 18.92% | 
|Efficiency ratio(1)      |  |                                  | 60.32% |      |  |      | 49.74% |      |  |      | 45.70% |      |  |      | 46.79% |  |  |  | 46.94% |  |  |  | 41.83% |  |  |  | 41.60% | 
|Net interest margin(2)   |  |                                  | 2.98%  |      |  |      | 3.34%  |      |  |      | 3.62%  |      |  |      | 3.73%  |  |  |  | 3.79%  |  |  |  | 3.49%  |  |  |  | 3.72%  | 



---



|    |                                                                                                                                                
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Efficiency ratio represents total noninterest
    expense divided by the sum of net interest income and total
    noninterest income.          
|   
|(2) | Net interest margin represents net interest
    income divided by average interest-earning assets and calculated
    on a tax equivalent basis.

Our net interest margin improvement results from
continuing balance sheet restructuring, as we reduce the
concentration in low yielding loans and increase core deposits.
ROA has increased accordingly. When we acquired BCC, we blended
our 4.02% margin with their 2.23% margin. BCC had a
heavy concentration of low interest yielding securities and high
interest costing certificates of deposit, which caused
compression in the margin. Through restructuring the
BCC assets and deposits, we have improved our margin since
the acquisition in 2002.

Capital

We have increased our capital since 1998 through
the retention of earnings and the issuance of new stock in
conjunction with acquisitions. The charts below present our
capital level and Tier I and Total risk-based capital
ratios since 1998. As of December 31, 2004, the Bank met
the well capitalized requirements under these
guidelines.

Stockholders Equity

($ Thousands)


Stockholders' Equity

Tier I Leverage Ratio

(Bank Level)


Stockholders' Equity

24



---



##### 



Total Risk-Based Ratio

(Bank Level)


(Total Risk-Based Ratio)

We have declared dividends since 2000 and plan to
continue dividend payments for the next year. The chart below
presents our dividend payments restated to reflect the effect of
the two-for-one stock splits of the April 8, 2003, and
April 11, 2001, on a per share basis and in total since
1998.

Dividends Declared Per Share

(Dividends Declared per Share)

Corporate Developments

The Bank continues to expand its branch presence
in key target markets during 2004. In June 2004, the Bank
opened two new branches, one in Foster City, California and
one in Torrance, California. In August 2004, the Bank opened a
new branch in Westminster, California. In the fourth quarter of
2004, the Bank opened the Van Nuys branch in California and
the Bowery branch in New York.

During the first quarter of 2004, the
Companys wholly owned subsidiary UCB Investment Services,
Inc. (UCBIS) commenced business. UCBIS is a
registered broker-dealer with the SEC and a member of the NASD
and Securities Investor Protection Corporation
(SIPC). UCBIS acts as an introducing broker in the
sales of mutual funds, listed and over-the-counter equity
securities, and corporate, municipal, and U.S. government
debt. UCBIS also sells fixed and variable annuities and covered
options to its customers. UCBIS is registered with the Municipal
Securities Rulemaking Board (MSRB). UCBIS does not
have custody or possession of customer funds or securities.
Customer accounts are carried on a fully-disclosed basis at
UCBIS clearing firm National Financial Services, LLC.

Impact of Critical Accounting
Policies

Our consolidated financial statements are
prepared in accordance with accounting principles generally
accepted in the United States of America (GAAP)
and follow general industry practices. The most significant
accounting policies followed by the Company are presented in
Note 1 to the Consolidated Financial Statements. These
policies, along with the disclosures presented in the other
financial statement notes and in this discussion and analysis,
provide information on how significant assets and liabilities
are valued in the financial statements and how those values are
determined. The critical accounting policies include estimation
techniques and judgments that are based on the relevant
variables and the Companys assumptions.

A number of critical accounting policies are used
in the preparation of the Consolidated Financial Statements,
which this discussion accompanies.

The Use of
Estimates.The preparation of the
Consolidated Financial Statements in accordance with GAAP
requires management to make certain estimates and assumptions
which affect the amounts of reported assets and liabilities as
well as contingent assets and liabilities as of the date of
these financial statements.

25



---



##### 



These estimates and assumptions also affect the
reported amounts of revenues and expenses during the reporting
period(s). The Company has established detailed policies and
control procedures that are intended to ensure that valuation
methods are well controlled and applied consistently from period
to period unless actual results indicate a change in estimate is
required.


Allowance for Loan
Losses.The allowance for loan losses
represents a reserve for probable credit losses inherent in the
commercial and consumer loan portfolios at the balance sheet
date. The methodology for calculating the allowance involves
evaluation of the Companys historical losses and
management judgment of inherent losses in these portfolios, as
well as an evaluation of impaired loans.

The Company uses a risk grading system to
determine the credit quality of its loans. Loans are reviewed to
determine the obligors ability to fulfill its financial
obligations to the Company. The loss factors are applied to
particular loan segments according to the severity of
classification or grade. Management believes the current risk
grades assigned to loans are appropriate.

Whenever possible, the Company uses its own
historical loss experience or independent verifiable data to
estimate the loss factors. Additionally, management evaluates
the inherent risks in the respective loan segment in determining
the appropriate loss factor. The application of these loss
factors establishes the amount of the allowance for credit
losses applicable to the particular segments. Managements
judgment is also applied when considering uncertainties based on
current macroeconomic conditions affecting the Companys
existing portfolios.

Furthermore, each impaired loan is evaluated
individually. The evaluation includes an assessment of the
accounts collateral, marketability or other sources of
repayment to establish an appropriate reserve.

The Company has and will continue to refine its
allowance methodology as it improves its processes and gathers
additional data on customers. During the fourth quarter of 2004,
the Company reduced the loan loss factors on the commercial real
estate portfolio as a result of the Company expanding the review
process of commercial real estate credits. In doing so, the
Company determined that the inherent volatility risk in the
portfolio was decreased due to stronger identification,
administration and action plan implementation on credits in the
commercial real estate portfolio. Additionally, the loan loss
factor on consumer credits, in aggregate, was reduced,
reflecting the significantly lower credit card portfolio which
has higher inherent risk than other components of the consumer
portfolio. Included in other liabilities is approximately
$3.9 million related to loan loss allowance for unfunded
loan commitments. The comparable figure for 2003 is
$2.7 million.

Excluding unfunded commitments, the
Companys Allowance for Loan Loss was $56.5 million,
or 1.39% of loans compared to $58.1 million, or 1.54% of
loans at 2003. In managements judgment, the estimate for
allowance for loan losses is adequate.

Fair Value of Certain
Assets.Certain assets of the Company
are recorded at fair value. In some cases, the fair value used
is an estimate. Included among these assets are securities that
are classified as available for sale, goodwill and other
intangible assets, other real estate owned and impaired loans.
These estimates may change from period to period as they are
affected by changes in interest rates and other market
conditions. Losses not anticipated or greater than anticipated
could result if the Company sold one of these assets,
subsequently discovering that its estimate of fair value had
been too high. Gains not anticipated or greater than anticipated
could result if the Company were to sell one of these assets,
subsequently discovering that its estimate of fair value had
been too low. The Company arrives at estimates of fair value as
follows:

Available-for-Sale
Securities:The fair values of most
securities classified as available for sale are based on quoted
market prices. If quoted market prices are not available, fair
values are extrapolated from the quoted prices of similar
instruments. Declines in fair value deemed other-than-temporary
that would result in a write-down of a security, if any, are
reported in noninterest expense.

Goodwill and Other Intangible
Assets:The Company establishes
goodwill and other intangible assets including core deposit
intangibles and capitalized servicing rights by estimating fair
value of assets and liabilities acquired using various valuation
approaches, such as market value, replacement costs and
estimated cash flows for future periods. Additionally, the
Company must assess goodwill each year and other intangible
assets each quarter for impairment. This assessment involves
reviewing or revising estimated cash flows for

26



---



##### 



future periods. If the future cash flows are
materially less than the estimates, the Company would be
required to take a charge against earnings to write down the
asset to the lower fair value.


Mortgage servicing rights result from the sale of
multifamily loans and SBA loans with the servicing rights
retained, and the securitization and retention of one to four
single-family and multifamily loans with the servicing rights
retained. The market value for servicing is based upon the
coupon rates, maturity, and prepayment rates experienced for the
mortgages being serviced. The value of mortgage servicing rights
is based on various assumptions including prepayment speeds and
discount rates. See Note 4 to the Consolidated Financial
Statements for further discussion.

Income Taxes.The
provision for income taxes is based on income reported for
financial statement purposes and differs from the amount of
taxes currently payable, since certain income and expense items
are reported for financial statement purposes in different
periods than those for tax reporting purposes.

The Company accounts for income taxes using the
asset and liability approach, the objective of which is to
establish deferred tax assets and liabilities for the temporary
differences between the financial reporting basis and the tax
basis of the Companys assets and liabilities at enacted
tax rates expected to be in effect when such amounts are
realized or settled. A valuation allowance is established for
deferred tax assets if, based on the weight of available
evidence, it is more likely than not that some portion or all of
the deferred tax assets will not be realized. A valuation
allowance is established, when necessary, to reduce the deferred
tax assets to the amount that is more likely than not to be
realized.

Alternative Methods of
Accounting.The accounting and
reporting policies of the Company are in accordance with GAAP
and conform to practices within the banking industry.

When the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 123,
Accounting for Stock-Based Compensation, in 1996, it
elected to continue to use the method of accounting for stock
options which did not recognize compensation expense at the time
options were granted. As required by SFAS No. 123, pro
forma amounts of compensation expense and the pro forma effect
on net income and earnings per share are disclosed each year as
if the Company had instead elected to use the accounting method
that recognizes compensation expense. The Company adopted
SFAS No. 148 Accounting for Stock-Based
Compensation  Transition and Disclosure, during
2003. The pro forma amounts of compensation expense and the pro
forma effect on net income and earnings per share are disclosed
in Note 1 to the Consolidated Financial Statements using
the Black-Scholes model for pricing options. Had the Company
elected to adopt the SFAS No. 123 fair value based
method of accounting instead of pro forma disclosure, additional
compensation expense, as disclosed in Note 16 to the
Consolidated Financial Statements, would have been recognized.

Recent Accounting Pronouncements

Note 2 to the Consolidated Financial
Statements discusses new accounting policies adopted by the
Company during 2004 and the expected impact of accounting
policies issued or proposed, but not yet required to be adopted.
To the extent the adoption of new accounting standards
materially affects the Companys financial statements, the
impacts are discussed in the applicable sections of this
financial review and Notes to the Consolidated Financial
Statements.

In March 2004, the FASB approved the consensus
reached on the Emerging Issues Task Force (EITF)
Issue No. 03-1, The Meaning of Other-Than-Temporary
Impairment and Its Application to Certain Investments.
EITF Issue No. 03-1 clarifies the investment impairment
methodology for debt and equity securities within the scope of
SFAS No. 115, Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of
Liabilities, and SFAS No. 124, Accounting
for Certain Investments Held by Not-For-Profit
Organizations, and for equity securities that are not
subject to the scope of SFAS No. 115 and not accounted
for under the equity method under APB Opinion No. 18 and
related interpretations (hereinafter referred to as cost
method investments).

Certain disclosure requirements regarding
investments accounted for under SFAS No. 115 and
SFAS No. 124 are effective for annual financial
statements for fiscal years ending after December 31, 2003.

27



---



##### 



These currently effective disclosure requirements
have been adopted by the Company and did not have a material
impact on the financial condition or operating results of the
Company. Additional disclosure requirements regarding cost
method investments are effective for annual periods ending after
June 15, 2004. The Company does not anticipate the adoption
of these disclosure requirements to have a material impact on
the financial condition or operating results of the Company.


In September 2004, the FASB issued a final FASB
Staff Position (FSP), FSP EITF 03-1-1, delaying
the effective date of the measurement and recognition guidance
indefinitely. Excluding the deferred guidance, the adoption of
EITF No. 03-01 did not have a material impact on the
financial condition or operating results of the Company.

On December 16, 2004, the FASB issued
SFAS No. 123R, Share-Based Payment.
SFAS No. 123R is a revision of SFAS No. 123,
Accounting for Stock-Based Compensation.
SFAS No. 123R eliminates the ability to account for
share-based compensation transactions using the intrinsic value
method as prescribed under APB Opinion No. 25,
Accounting for Stock Issued to Employees, and
requires that such transactions be accounted for using a fair
valuebased method. SFAS No. 123R covers a wide
range of share-based compensation arrangements including share
options, restricted share plans, performance-based awards, share
appreciation rights, and employee share purchase plans.
SFAS No. 123R is effective for the interim and annual
periods beginning after June 15, 2005.

SFAS No. 123R may be adopted using one
of two methods: (1) A modified perspective
method in which compensation cost is recognized beginning with
the effective date (a) based on the requirements of
SFAS No. 123R for all share-based payments granted
after the effective date and (b) based on the requirements
of SFAS No. 123 for all awards granted to employees
prior to the effective date of SFAS No. 123R that
remain unvested on the effective date. (2) A modified
retrospective method which includes the requirements of
the modified prospective method described above, but also
permits entities to restate based on the amounts previously
recognized under SFAS No. 123 for purposes of pro
forma disclosures either (a) all prior periods presented or
(b) prior interim periods of the year of adoption. The
adoption of SFAS No. 123R may have a material impact
on the Companys financial position and results of
operations.

Results of Operations

General.Our main
source of income is net interest income, which is the difference
between our interest income (generally interest paid to us by
borrowers and paid on our investments) and our interest expense
(generally the interest we paid to depositors as well as
interest we paid on borrowings, such as loans from the Federal
Home Loan Bank). Changes in the average amount of
interest-earning assets we hold (generally loans and
investments) as well as in interest-bearing liabilities we incur
(generally deposits and other borrowings) during a period affect
the amount of net interest income we earn. Changes in the
interest rates earned on loans and securities and paid on
deposits and other borrowings also affect our net interest
income.

Our results of operations in 2004 were affected
by our 2003 acquisition of First Continental Bank
(FCB). The impact of this event is described in more
detail below.

We also earn noninterest income, which is
generally made up of commercial banking fees and other fees paid
by our customers, and gains on sales of loans and securities. In
addition to interest expense, our income is impacted by
noninterest expenses (primarily our personnel, occupancy and
professional fees), and our provision for loan losses. Other
factors beyond our control, such as economic and business
conditions, competition from other financial institutions,
market fluctuations, changes in tax law and government
regulation of financial institutions may also significantly
affect our results of operations.

The Bank offers commercial deposit facilities and
commercial loans. Included in the loans offered are
nonresidential real estate loans, commercial business loans,
multifamily real estate loans, construction loans, and small
business loans. Through the consumer business division, the Bank
offers consumer deposit products including savings accounts,
checking accounts and time deposits. The consumer division also
originates residential mortgage (one to four family) loans and
home equity lines of credit.

28



---



##### 



The Bank originates commercial real estate loans
for primary users, as well as for investors. The Bank also
originates multifamily mortgages, which are typically secured by
five- to 50-unit residential buildings, within its primary
market areas. Loans secured by residential buildings in excess
of 50 units are underwritten pursuant to the Banks
underwriting standards for commercial nonresidential real estate
loans. Both types of commercial real estate loans are generally
adjustable-rate or fixed-rate for an initial period of time and
then become adjustable-rate loans. Multifamily mortgages are
generally amortized over 30 years and have balloon payments
between 15 to 25 years. Commercial nonresidential real
estate loans are generally amortized over 25 years and have
balloon payments between seven to ten years.

Construction loans are originated primarily for
the construction of entry-level and first-time move-up housing
within California or mixed-use properties. The Bank focuses on
mid-tier builders. Construction loans are generally prime based,
are generally written for a one-year term and may have up to a
one-year renewal option.

The Bank provides commercial business loans to
customers for working capital purposes for accounts receivable
and inventory, as well as loans to finance equipment. In
addition, the Bank offers small business loans, for which 75% of
the principal balance is generally guaranteed by the
U.S. Small Business Administration.

The Bank originates fixed-rate and
adjustable-rate residential mortgage (one to four family) loans
within its primary market area. These loans are originated
through its retail branches. Such mortgage loans are originated
primarily for owner-occupants. In addition to these residential
mortgage loans, the Bank offers home equity loans.

The Bank originates home equity lines of credit
secured by residential real estate. These lines generally
consist of floating rate loans tied to the prime rate.



| |                          
| | -------------------------
| | Operating Data and Ratios

Following is a table of selected operating
metrics for the years ended December 31, 2004 and 2003
(dollars in thousands):

|                           |  |                     |        |                     |  |                |        |   |  |   |        |     |  |  |       |   
|-------------------------- |  | ------------------- | ------ | ------------------- |  | -------------- | ------ | - |  | - | ------ | --- |  |  | ----- | --
|                           |  |                     |        |                     |  |               
|                           |  | For the Years Ended |        |                    
|                           |  | December 31,        |        | Increase (Decrease)
|                           |  |                     |        |                    
|                           |  | 2004                |        | 2003                |  | $/Basis Points |        | %
|                           |  |                     |        |                     |  |                |        |  
|Net income                 |  | $                   | 85,603 |                     |  | $              | 64,638 |   |  | $ | 20,695 |     |  |  | 32.43 | % 
|Diluted earnings per share |  | $                   | 1.80   |                     |  | $              | 1.41   |   |  | $ | 0.39   |     |  |  | 27.66 | % 
|Return on average assets   |  |                     | 1.44   | %                   |  |                | 1.26   | % |  |   | 18     | bp  |  |  | 14.29 | % 
|Return on average equity   |  |                     | 18.92  | %                   |  |                | 18.84  | % |  |   | 8      | bp  |  |  | 0.42  | % 
|Efficiency ratio           |  |                     | 41.60  | %                   |  |                | 41.83  | % |  |   | (23    | )bp |  |  | (0.55 | )%

The consolidated net income of the Company during
the year ended December 31, 2004, increased by
$21.0 million, or 32.4%, to $85.6 million, compared to
$64.6 million for the preceding year, primarily as a result
of the increase in interest-earning assets.

The ROA and the ROE for the year ended
December 31, 2004, improved primarily due to higher net
interest income. The slight decrease in the efficiency ratio
from December 31, 2004 compared to December 31, 2003
was primarily due to higher interest income and a
$7.7 million gain in multifamily loan sales.

29



---



##### 



Following is a table of selected operating
metrics for the years ended December 31, 2003 and 2002
(dollars in thousands):

|                           |  |                     |        |                     |  |                |        |   |  |   |        |     |  |  |        |   
|-------------------------- |  | ------------------- | ------ | ------------------- |  | -------------- | ------ | - |  | - | ------ | --- |  |  | ------ | --
|                           |  |                     |        |                     |  |               
|                           |  | For the Years Ended |        |                    
|                           |  | December 31,        |        | Increase (Decrease)
|                           |  |                     |        |                    
|                           |  | 2003                |        | 2002                |  | $/Basis Points |        | %
|                           |  |                     |        |                     |  |                |        |  
|Net income                 |  | $                   | 64,638 |                     |  | $              | 38,928 |   |  | $ | 25,710 |     |  |  | 66.05  | % 
|Diluted earnings per share |  | $                   | 1.41   |                     |  | $              | 0.94   |   |  | $ | 0.47   |     |  |  | 50.00  | % 
|Return on average assets   |  |                     | 1.26   | %                   |  |                | 1.14   | % |  |   | 12     | bp  |  |  | 10.53  | % 
|Return on average equity   |  |                     | 18.84  | %                   |  |                | 18.42  | % |  |   | 42     | bp  |  |  | 2.28   | % 
|Efficiency ratio           |  |                     | 41.83  | %                   |  |                | 46.94  | % |  |   | (511   | )bp |  |  | (10.89 | )%

The consolidated net income of the Company during
the year ended December 31, 2003, increased by
$25.7 million, or 66.1%, to $64.6 million, compared to
$38.9 million for the preceding year, primarily as a result
of the increase in interest-earning assets.

The ROA and the ROE for the year ended
December 31, 2003, improved primarily due to higher net
interest income.

The 511 basis point reduction in the
efficiency ratio resulted from a one-time $6.75 million
pretax charge for the settlement of a litigation and a one-time
$350,000 tax benefit resulting from a California tax law change.
Prior to the one-time charge and tax benefit, the efficiency
ratio in 2002 was 42.02%.



| |                                                
| | -----------------------------------------------
| | Net Interest Income and Net Interest
    Margin

Following is a table of selected ratios that
reflect the dynamics of the net interest income for the Company
for the years ended December 31, 2004 and 2003 (dollars in
thousands):

|                                                         |  |                     |         |                     |  |                |         |   |  |   |        |     |  |  |        |   
|-------------------------------------------------------- |  | ------------------- | ------- | ------------------- |  | -------------- | ------- | - |  | - | ------ | --- |  |  | ------ | --
|                                                         |  |                     |         |                     |  |               
|                                                         |  | For the Years Ended |         |                    
|                                                         |  | December 31,        |         | Increase (Decrease)
|                                                         |  |                     |         |                    
|                                                         |  | 2004                |         | 2003                |  | $/Basis Points |         | %
|                                                         |  |                     |         |                     |  |                |         |  
|Net interest income before provision for loan
    losses |  | $                   | 207,481 |                     |  | $              | 168,548 |   |  | $ | 38,933 |     |  |  | 23.10  | % 
|Net interest margin(1)                                   |  |                     | 3.72    | %                   |  |                | 3.49    | % |  |   | 23     | bp  |  |  | 6.59   | % 
|Average yield on loans(2)                                |  |                     | 5.55    | %                   |  |                | 5.67    | % |  |   | (12    | )bp |  |  | (2.12  | )%
|Average yield on securities                              |  |                     | 4.54    | %                   |  |                | 4.41    | % |  |   | 13     | bp  |  |  | 2.95   | % 
|Average cost of deposits                                 |  |                     | 1.39    | %                   |  |                | 1.61    | % |  |   | (22    | )bp |  |  | (13.66 | )%
|Average cost of borrowings                               |  |                     | 3.63    | %                   |  |                | 4.32    | % |  |   | (69    | )bp |  |  | (15.97 | )%



---



|    |                                      
|--- | -------------------------------------
|(1) | Calculated on a tax equivalent basis.
|(2) | Includes loans held for sale.        

Net interest income before provision for loan
losses increased $38.9 million for the year ended
December 31, 2004 compared to the prior year. The increase
in net interest income reflects the growth in interest-earning
assets, primarily in the Companys loan portfolio, coupled
with a 23 basis point improvement in the net interest
margin. The average cost of deposits decreased 22 basis
points from 2003 to 2004. This savings was partially offset by a
12 basis point decrease in average loan yields from 2003 to
2004. The decreases in loan yields and the deposit cost reflect
the decline in the overall market interest rate environment from
the prior year. The decrease in loan yields reflects repricing
of adjustable-rate loans resulting from reductions in market
interest rate indices, as well as the impact of accelerated
prepayments on higher-yielding loans due to the low market
interest rates.

The average yield on securities increased
13 basis points in the year ended December 31, 2004,
from the year ended December 31, 2003. Premium as a
percentage of the outstanding balance on the securities
portfolio declined substantially between December 31, 2003,
and December 31, 2004. In the second quarter of 2003, the
Company began to sell premium securities and replace them with
bonds that were discounted or close to par. This restructuring
of the securities portfolio was completed in the second quarter
of 2004. Additionally, in

30



---



##### 



the third quarter of 2003, amortization of the
premium increased as a result of accelerated prepayments caused
by the sharp decline in the general level of market interest
rates. The effect of these factors was partially offset by the
higher average yield on securities in the first quarter of 2003
compared with the same period in 2004, reflecting the decline in
market interest rates subsequent to the first quarter of 2003.


The net interest margin, calculated on a tax
equivalent basis, was 3.72% for the year ended December 31,
2004, as compared to 3.49% for the prior year. Certain
interest-earning assets of the Company qualify for state or
federal tax exemptions or credits. The net interest margin,
calculated on a tax equivalent basis, considers the tax benefit
derived from these assets. The increase in the net interest
margin reflects the favorable impact of increasing loans while
decreasing the cost of deposits.

Following is a table of selected ratios that
reflects the dynamics of the net interest income for the Company
for the years ended December 31, 2003 and 2002 (dollars in
thousands):

|                                                         |  |                     |         |                     |  |        |         |   |  |   |        |      |  |  |        |   
|-------------------------------------------------------- |  | ------------------- | ------- | ------------------- |  | ------ | ------- | - |  | - | ------ | ---- |  |  | ------ | --
|                                                         |  |                     |         |                    
|                                                         |  | For the Years Ended |         | Increase (Decrease)
|                                                         |  | December 31,        |         |                    
|                                                         |  |                     |         | $/Basis             |  |       
|                                                         |  | 2003                |         | 2002                |  | Points |         | %
|                                                         |  |                     |         |                     |  |        |         |  
|Net interest income before provision for loan
    losses |  | $                   | 168,548 |                     |  | $      | 124,946 |   |  | $ | 43,602 |      |  |  | 34.90  | % 
|Net interest margin(1)                                   |  |                     | 3.49    | %                   |  |        | 3.79    | % |  |   | (30    | ) bp |  |  | (7.92  | )%
|Average yield on loans(2)                                |  |                     | 5.67    | %                   |  |        | 6.43    | % |  |   | (76    | ) bp |  |  | (11.82 | )%
|Average yield on securities                              |  |                     | 4.41    | %                   |  |        | 5.38    | % |  |   | (97    | ) bp |  |  | (18.03 | )%
|Average cost of deposits                                 |  |                     | 1.61    | %                   |  |        | 2.16    | % |  |   | (55    | ) bp |  |  | (25.46 | )%
|Average cost of borrowings                               |  |                     | 4.32    | %                   |  |        | 5.17    | % |  |   | (85    | ) bp |  |  | (16.44 | )%



---



|    |                                      
|--- | -------------------------------------
|(1) | Calculated on a tax equivalent basis.
|   
|(2) | Includes loans held for sale.        

Our net interest margin, calculated on a fully
tax equivalent basis, declined to 3.49% for 2003 from 3.79% for
2002. Also, our net interest margin, calculated on a nontax
equivalent basis, declined to 3.41% for 2003 from 3.73% for
2002. The main driver of the dip in margin was the blending of
BCCs 2.23% margin with UCBs 4.02% margin as of the
last reported date prior to the acquisition. The BCC margin was
low due to its high securities concentration and due to a high
certificate of deposit concentration in the deposit portfolio.
Our net interest income for 2003 was $168.5 million, an
increase of $43.6 million, or 34.9%, from our net interest
income of $124.9 million for 2002, primarily as a result of
the following factors:



| |   |                                                                                                                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | We increased the average balance of loans from
    $2.44 billion in 2002 to $3.38 billion in 2003.                                                                                                                                         
|
| |  | We increased our average balance of securities
    from $893.2 million in 2002 to $1.55 billion in 2003.                                                                                                                                   
|
| |  | We reduced our average cost of deposits from
    2.16% in 2002 to 1.61% in 2003.                                                                                                                                                           
|
| |  | Partially offsetting the reduction in the deposit
    cost was a decrease in the average yield on securities from
    5.38% in 2002 to 4.41% in 2003, and a decrease in the average
    yield on loans from 6.43% in 2002 to 5.67% in 2003.

31



---



##### 



The following is a table reflecting selected
average balances of the Companys assets and liabilities
for the years ended December 31, 2004 and 2003 (dollars in
thousands):

|                                                             |  |                     |           |          |  |   |           |   |  |   |         |  |  |  |       |  
|------------------------------------------------------------ |  | ------------------- | --------- | -------- |  | - | --------- | - |  | - | ------- |  |  |  | ----- | -
|                                                             |  |                     |           |          |  |  
|                                                             |  | For the Years Ended |           |         
|                                                             |  | December 31,        |           | Increase
|                                                             |  |                     |           |         
|                                                             |  | 2004                |           | 2003     |  | $ |           | %
|                                                             |  |                     |           |          |  |   |           |  
|Average interest-earning assets                              |  | $                   | 5,717,609 |          |  | $ | 4,940,788 |   |  | $ | 776,821 |  |  |  | 15.72 | %
|Average interest-bearing liabilities                         |  |                     | 5,055,731 |          |  |   | 4,449,868 |   |  |   | 605,863 |  |  |  | 13.62 | %
|Average loans outstanding, including loans held
    for sale |  |                     | 4,077,799 |          |  |   | 3,380,121 |   |  |   | 697,678 |  |  |  | 20.64 | %
|Average securities outstanding                               |  |                     | 1,609,040 |          |  |   | 1,550,841 |   |  |   | 58,199  |  |  |  | 3.75  | %
|Average outstanding deposits                                 |  |                     | 4,822,523 |          |  |   | 4,261,201 |   |  |   | 561,322 |  |  |  | 13.17 | %
|Average outstanding borrowings                               |  |                     | 471,477   |          |  |   | 348,973   |   |  |   | 122,504 |  |  |  | 35.10 | %

The following table presents the composition of
the Banks average loan portfolio, including loans held for
sale, at the dates indicated (dollars in thousands):

|                         |  |                     |           |          |  |   |           |   |  |   |         |  |  |  |       |  
|------------------------ |  | ------------------- | --------- | -------- |  | - | --------- | - |  | - | ------- |  |  |  | ----- | -
|                         |  |                     |           |          |  |  
|                         |  | For the Years Ended |           |         
|                         |  | December 31,        |           | Increase
|                         |  |                     |           |         
|                         |  | 2004                |           | 2003     |  | $ |           | %
|                         |  |                     |           |          |  |   |           |  
|Average commercial loans |  | $                   | 3,673,831 |          |  | $ | 3,018,639 |   |  | $ | 655,192 |  |  |  | 21.70 | %
|Average consumer loans   |  |                     | 403,968   |          |  |   | 361,482   |   |  |   | 42,486  |  |  |  | 11.75 | %
|                         |  |                     |           |          |  |   |           |   |  |   |         |  |  |  |       |  
|Average gross loans      |  | $                   | 4,077,799 |          |  | $ | 3,380,121 |   |  | $ | 697,678 |  |  |  | 20.64 | %
|                         |  |                     |           |          |  |   |           |   |  |   |         |  |  |  |       |  

The following table presents components of the
Banks average outstanding deposits at the dates indicated
(dollars in thousands):

|                                     |  |                     |           |          |  |   |           |   |  |   |         |  |  |  |       |  
|------------------------------------ |  | ------------------- | --------- | -------- |  | - | --------- | - |  | - | ------- |  |  |  | ----- | -
|                                     |  |                     |           |          |  |  
|                                     |  | For the Years Ended |           |         
|                                     |  | December 31,        |           | Increase
|                                     |  |                     |           |         
|                                     |  | 2004                |           | 2003     |  | $ |           | %
|                                     |  |                     |           |          |  |   |           |  
|Average noninterest-bearing deposits |  | $                   | 374,269   |          |  | $ | 296,306   |   |  | $ | 77,963  |  |  |  | 26.31 | %
|Average interest-bearing deposits    |  |                     | 4,448,254 |          |  |   | 3,964,893 |   |  |   | 483,361 |  |  |  | 12.19 | %
|                                     |  |                     |           |          |  |   |           |   |  |   |         |  |  |  |       |  
|Total average outstanding deposits   |  | $                   | 4,822,523 |          |  | $ | 4,261,199 |   |  | $ | 561,324 |  |  |  | 13.17 | %
|                                     |  |                     |           |          |  |   |           |   |  |   |         |  |  |  |       |  

The increase of $776.8 million on average
interest-earning assets for the year ended December 31,
2004, resulted primarily from organic commercial loan growth.
Average outstanding loans increased by $697.7 million for
the year ended December 31, 2004, from the same period last
year as a result of the Banks continued focus on
commercial lending activities. Average commercial loan balances
increased $655.2 million for the year ended
December 31, 2004. This increase is primarily due to the
Banks continued emphasis on commercial real estate and
commercial business loans. Average consumer loans for the years
ended December 31, 2004 and 2003, were at
$404.0 million and $361.5 million, respectively. As of
December 31, 2004, the loan pipeline approximated
$1.35 billion, which was comprised of $1.32 billion
for commercial loans and $29.4 million of consumer loans.

Average securities increased $58.2 million
for the year ended December 31, 2004. Securities
prepayments, which accelerated with the low market interest rate
environment, were substantially replaced with new securities
purchases. During 2004, the Company also sold securities with an
aggregate principal balance of $809.1 million. Securities
were sold in 2004 to protect the Company from accelerating
prepayments of premium securities in a time of increasing market
interest rates. The Companys restructuring strategy was to
replace securities that have high prepayment and extension risk
with shorter-dated securities with less prepayment and extension
risk.

Average outstanding deposits increased
$561.3 million for the year ended December 31, 2004,
compared to the prior year. This increase is a result of the
Companys ongoing focus on the generation of commercial and
consumer demand deposits. Average interest-bearing and average
noninterest-bearing deposits increased

32



---



##### 



$483.4 million and $78.0 million,
respectively, for the year ended December 31, 2004,
compared to the prior year.


The following is a table reflecting selected
average balances of the Companys assets and liabilities
for the years ended December 31, 2003 and 2002 (dollars in
thousands):

|                                                             |  |                     |           |          |  |   |           |   |  |   |           |  |  |  |       |  
|------------------------------------------------------------ |  | ------------------- | --------- | -------- |  | - | --------- | - |  | - | --------- |  |  |  | ----- | -
|                                                             |  |                     |           |          |  |  
|                                                             |  | For the Years Ended |           |         
|                                                             |  | December 31,        |           | Increase
|                                                             |  |                     |           |         
|                                                             |  | 2003                |           | 2002     |  | $ |           | %
|                                                             |  |                     |           |          |  |   |           |  
|Average interest-earning assets                              |  | $                   | 4,940,788 |          |  | $ | 3,346,453 |   |  | $ | 1,594,335 |  |  |  | 47.64 | %
|Average interest-bearing liabilities                         |  |                     | 4,449,868 |          |  |   | 3,002,946 |   |  |   | 1,446,922 |  |  |  | 48.18 | %
|Average loans outstanding, including loans held
    for sale |  |                     | 3,380,121 |          |  |   | 2,442,790 |   |  |   | 937,331   |  |  |  | 38.37 | %
|Average securities outstanding                               |  |                     | 1,550,841 |          |  |   | 893,240   |   |  |   | 657,601   |  |  |  | 73.62 | %
|Average outstanding deposits                                 |  |                     | 4,261,201 |          |  |   | 2,829,183 |   |  |   | 1,432,018 |  |  |  | 50.62 | %
|Average outstanding borrowings                               |  |                     | 348,973   |          |  |   | 277,272   |   |  |   | 71,701    |  |  |  | 25.86 | %

The following table presents the composition of
the Banks average loan portfolio, including loans held for
sale, at the dates indicated (dollars in thousands):

|                         |  |                     |           |          |  |   |           |   |  |   |         |  |  |  |       |  
|------------------------ |  | ------------------- | --------- | -------- |  | - | --------- | - |  | - | ------- |  |  |  | ----- | -
|                         |  |                     |           |          |  |  
|                         |  | For the Years Ended |           |         
|                         |  | December 31,        |           | Increase
|                         |  |                     |           |         
|                         |  | 2003                |           | 2002     |  | $ |           | %
|                         |  |                     |           |          |  |   |           |  
|Average commercial loans |  | $                   | 3,018,639 |          |  | $ | 2,120,468 |   |  | $ | 898,171 |  |  |  | 42.36 | %
|Average consumer loans   |  |                     | 361,482   |          |  |   | 322,322   |   |  |   | 39,160  |  |  |  | 12.15 | %
|                         |  |                     |           |          |  |   |           |   |  |   |         |  |  |  |       |  
|Average gross loans      |  | $                   | 3,380,121 |          |  | $ | 2,442,790 |   |  | $ | 937,331 |  |  |  | 38.37 | %
|                         |  |                     |           |          |  |   |           |   |  |   |         |  |  |  |       |  

The following table presents components of the
Banks average outstanding deposits at the dates indicated
(dollars in thousands):

|                                     |  |                     |           |          |  |   |           |   |  |   |           |  |  |  |       |  
|------------------------------------ |  | ------------------- | --------- | -------- |  | - | --------- | - |  | - | --------- |  |  |  | ----- | -
|                                     |  |                     |           |          |  |  
|                                     |  | For the Years Ended |           |         
|                                     |  | December 31,        |           | Increase
|                                     |  |                     |           |         
|                                     |  | 2003                |           | 2002     |  | $ |           | %
|                                     |  |                     |           |          |  |   |           |  
|Average noninterest-bearing deposits |  | $                   | 296,306   |          |  | $ | 166,809   |   |  | $ | 129,497   |  |  |  | 77.63 | %
|Average interest-bearing deposits    |  |                     | 3,964,893 |          |  |   | 2,662,374 |   |  |   | 1,302,519 |  |  |  | 48.92 | %
|                                     |  |                     |           |          |  |   |           |   |  |   |           |  |  |  |       |  
|Total average outstanding deposits   |  | $                   | 4,261,199 |          |  | $ | 2,829,183 |   |  | $ | 1,432,016 |  |  |  | 50.62 | %
|                                     |  |                     |           |          |  |   |           |   |  |   |           |  |  |  |       |  

The increase of $1.59 billion on average
earning assets for the year ended December 31, 2003,
resulted primarily from the BCC and FCB acquisitions and organic
commercial loan growth, organic commercial loan growth. Average
outstanding loans increased to $3.38 billion for the year
ended December 31, 2003, from $2.44 billion for the
corresponding period of 2002, an increase of
$937.3 million, or 38.4%, as a result of the Banks
continued focus on commercial lending activities and the
addition of loans from the acquisitions of BCC and FCB. Loan
growth during the year ended December 31, 2003, was offset
by the internal securitization of multifamily loans as discussed
below. Average commercial loans increased $898.2 million to
$3.02 billion for the year ended December 31, 2003, up
from $2.12 billion for the year ended December 31,
2002. Average consumer loans increased $39.2 million to
$361.5 million for the year ended December 31, 2003,
up from $322.3 million for the year ended December 31,
2002. The relatively low growth was due to the acceleration of
principal prepayments resulting from the low market interest
rate environment.

Average securities increased to
$1.55 billion for the year ended December 31, 2003, up
from $893.2 million for the same period of 2002, an
increase of $657.6 million, or 73.6%. This increase was
primarily due to the addition of securities from the BCC
acquisition and internal securitizations of loans of
$286.1 million during the year ended December 31,
2003. Securities runoff which accelerated with the lower market
interest rate environment was substantially replaced with new
securities purchases. During the year of 2003, the Company also
sold securities with an aggregate principal balance of
$942.1 million. Such securities generally carried the
higher purchase premiums and had longer terms. Such securities
were sold to protect the

33



---



##### 



Company from both accelerating prepayments and
from increases in market interest rates. As part of the
Companys restructuring strategy, securities that have high
prepayment and extension risk were replaced with shorter-dated
securities with less prepayment and extension risk.


Average interest-bearing deposits increased to
$3.96 billion for the year ended December 31, 2003, up
from $2.66 billion in the corresponding period of the prior
year as a result of organic deposit generation and the addition
of deposits from the BCC and FCB acquisitions. Average
noninterest-bearing deposits increased to $296.3 million
for the year ended December 31, 2003, up from
$166.8 million for the corresponding period of the prior
year. This increase of $129.5 million, or 77.6%, was a
result of the Companys ongoing focus on the generation of
commercial and consumer demand deposit accounts and from the
acquisitions of BCC and FCB.

The following table presents, for the periods
indicated, the distribution of our average assets and
liabilities, and stockholders equity, as well as the total
dollar amounts of interest income from average interest-earning
assets, and the resultant yields and dollar amounts of interest
expense of average interest-bearing liabilities, expressed both
in dollars and rates (dollars in thousands):

|                                                                     |                                 |                                         |           |           |           |            |         |         |        |           |      |            |      |         |           |           |           |            |         |         |        |  |      |      |      |   |           |           |           |   |         |         |        |  |      |      |      | 
|-------------------------------------------------------------------- | ------------------------------- | --------------------------------------- | --------- | --------- | --------- | ---------- | ------- | ------- | ------ | --------- | ---- | ---------- | ---- | ------- | --------- | --------- | --------- | ---------- | ------- | ------- | ------ |  | ---- | ---- | ---- | - | --------- | --------- | --------- | - | ------- | ------- | ------ |  | ---- | ---- | ---- | 
|                                                                     |                                 |                                        
|                                                                     |                                 | For the Years Ended December 31,       
|                                                                     |                                 |                                        
|                                                                     |                                 |                                         |           |           |           |           
|                                                                     |                                 | 2004                                    |           | 2003      |           | 2002      
|                                                                     |                                 |                                         |           |           |           |           
|                                                                     |                                 |                                         |           | Interest  |           |            |         |         |        | Interest  |      |            |      |         |           | Interest  |           |           
|                                                                     |                                 | Average                                 |           | Income or |           | Average    |         | Average |        | Income or |      | Average    |      | Average |           | Income or |           | Average   
|                                                                     |                                 | Balance                                 |           | Expense   |           | Yield/Cost |         | Balance |        | Expense   |      | Yield/Cost |      | Balance |           | Expense   |           | Yield/Cost
|                                                                     |                                 |                                         |           |           |           |            |         |         |        |           |      |            |      |         |           |           |           |           
|Interest-earning assets                                              |                                 |                                         |           |           |           |            |         |         |        |           |      |            |      |         |           |           |           |            |         |         |        |  |      |      |      |   |           |           |           |   |         |         |        |  |      |     
|                                                                     | Loans(1)(5)                     |                                         | $         | 4,077,799 |           |            | $       | 226,292 |        |           |      | 5.55       | %    |         | $         | 3,380,121 |           |            | $       | 191,754 |        |  |      | 5.67 | %    |   | $         | 2,442,790 |           |   | $       | 156,983 |        |  |      | 6.43 | %   
|                                                                     | Securities(6)                   |                                         |           | 1,609,040 |           |            |         | 73,123  |        |           |      | 4.54       |      |         |           | 1,550,841 |           |            |         | 68,447  |        |  |      | 4.41 |      |   |           | 893,240   |           |   |         | 48,039  |        |  |      | 5.38 |     
|                                                                     | Other                           |                                         |           | 30,770    |           |            |         | 649     |        |           |      | 2.11       |      |         |           | 9,826     |           |            |         | 61      |        |  |      | 0.63 |      |   |           | 10,423    |           |   |         | 156     |        |  |      | 1.50 |     
|                                                                     |                                 |                                         |           |           |           |            |         |         |        |           |      |            |      |         |           |           |           |            |         |         |        |  |      |      |      |   |           |           |           |   |         |         |        |  |      |     
|Total interest-earning assets                                        |                                 |                                         | 5,717,609 |           |           |            | 300,064 |         |        |           | 5.25 |            |      |         | 4,940,788 |           |           |            | 260,262 |         |        |  | 5.27 |      |      |   | 3,346,453 |           |           |   | 205,178 |         |        |  | 6.13 |     
|Noninterest-earning assets                                           |                                 |                                         | 222,289   |           |           |            |        |         |        |           |     |            |      |         | 209,442   |           |           |            |        |         |        |  |     |      |      |   | 74,632    |           |           |   |        |         |        |  |     |     
|                                                                     |                                 |                                         |           |           |           |            |         |         |        |           |      |            |      |         |           |           |           |            |         |         |        |  |      |      |      |   |           |           |           |   |         |         |        |  |      |     
|Total assets                                                         |                                 | $                                       | 5,939,898 |           |           | $          | 300,064 |         |        |           | 5.05 |            |      | $       | 5,150,230 |           |           | $          | 260,262 |         |        |  | 5.05 |      |      | $ | 3,421,085 |           |           | $ | 205,178 |         |        |  | 6.00 |     
|                                                                     |                                 |                                         |           |           |           |            |         |         |        |           |      |            |      |         |           |           |           |            |         |         |        |  |      |      |      |   |           |           |           |   |         |         |        |  |      |     
|Interest-bearing liabilities:                                        |                                 |                                         |           |           |           |            |         |         |        |           |      |            |      |         |           |           |           |            |         |         |        |  |      |      |      |   |           |           |           |   |         |         |        |  |      |     
|                                                                     | Deposits:                       |                                         |           |           |           |            |         |         |        |           |      |            |      |         |           |           |           |            |         |         |        |  |      |      |      |   |           |           |           |   |         |         |        |  |      |      |     
|                                                                     |                                 | NOW, checking and money market accounts |           | $         | 827,861   |            |         | $       | 9,295  |           |      |            | 1.12 |         |           | $         | 624,330   |            |         | $       | 6,774  |  |      |      | 1.09 |   |           | $         | 389,303   |   |         | $       | 5,952  |  |      |      | 1.53 | 
|                                                                     |                                 | Savings accounts                        |           |           | 921,106   |            |         |         | 8,451  |           |      |            | 0.92 |         |           |           | 787,796   |            |         |         | 7,191  |  |      |      | 0.91 |   |           |           | 521,050   |   |         |         | 6,582  |  |      |      | 1.26 | 
|                                                                     |                                 | Time deposits                           |           |           | 2,699,287 |            |         |         | 49,521 |           |      |            | 1.83 |         |           |           | 2,552,769 |            |         |         | 54,759 |  |      |      | 2.15 |   |           |           | 1,752,021 |   |         |         | 48,702 |  |      |      | 2.78 | 
|                                                                     |                                 |                                         |           |           |           |            |         |         |        |           |      |            |      |         |           |           |           |            |         |         |        |  |      |      |      |   |           |           |           |   |         |         |        |  |      |     
|                                                                     | Total interest-bearing deposits |                                         |           | 4,448,254 |           |            |         | 67,267  |        |           |      | 1.51       |      |         |           | 3,964,895 |           |            |         | 68,724  |        |  |      | 1.73 |      |   |           | 2,662,374 |           |   |         | 61,236  |        |  |      | 2.30 |     
|                                                                     |                                 |                                         |           |           |           |            |         |         |        |           |      |            |      |         |           |           |           |            |         |         |        |  |      |      |      |   |           |           |           |   |         |         |        |  |      |     
|                                                                     | Borrowings                      |                                         |           | 471,477   |           |            |         | 17,131  |        |           |      | 3.63       |      |         |           | 348,973   |           |            |         | 15,068  |        |  |      | 4.32 |      |   |           | 277,272   |           |   |         | 14,343  |        |  |      | 5.17 |     
|                                                                     | Subordinated debentures         |                                         |           | 136,000   |           |            |         | 8,185   |        |           |      | 6.02       |      |         |           | 136,000   |           |            |         | 7,922   |        |  |      | 5.83 |      |   |           | 63,300    |           |   |         | 4,653   |        |  |      | 7.35 |     
|                                                                     |                                 |                                         |           |           |           |            |         |         |        |           |      |            |      |         |           |           |           |            |         |         |        |  |      |      |      |   |           |           |           |   |         |         |        |  |      |     
|Total interest-bearing liabilities                                   |                                 |                                         | 5,055,731 |           |           |            | 92,583  |         |        |           | 1.83 |            |      |         | 4,449,868 |           |           |            | 91,714  |         |        |  | 2.06 |      |      |   | 3,002,946 |           |           |   | 80,232  |         |        |  | 2.67 |     
|                                                                     |                                 |                                         |           |           |           |            |         |         |        |           |      |            |      |         |           |           |           |            |         |         |        |  |      |      |      |   |           |           |           |   |         |         |        |  |      |     
|Noninterest-bearing deposits                                         |                                 |                                         | 374,269   |           |           |            |         |         |        |           |      |            |      |         | 296,306   |           |           |            |         |         |        |  |      |      |      |   | 166,809   |           |           |   |         |         |        |  |      |     
|Other noninterest-bearing liabilities                                |                                 |                                         | 57,445    |           |           |            |         |         |        |           |      |            |      |         | 61,047    |           |           |            |         |         |        |  |      |      |      |   | 39,992    |           |           |   |         |         |        |  |      |     
|Stockholders equity                                                 |                                 |                                         | 452,453   |           |           |            |         |         |        |           |      |            |      |         | 343,009   |           |           |            |         |         |        |  |      |      |      |   | 211,338   |           |           |   |         |         |        |  |      |     
|                                                                     |                                 |                                         |           |           |           |            |         |         |        |           |      |            |      |         |           |           |           |            |         |         |        |  |      |      |      |   |           |           |           |   |         |         |        |  |      |     
|Total liabilities and stockholders equity                           |                                 | $                                       | 5,939,898 |           |           |            |         |         |        |           |      |            |      | $       | 5,150,230 |           |           |            |         |         |        |  |      |      |      | $ | 3,421,085 |           |           |   |         |         |        |  |      |     
|                                                                     |                                 |                                         |           |           |           |            |         |         |        |           |      |            |      |         |           |           |           |            |         |         |        |  |      |      |      |   |           |           |           |   |         |         |        |  |      |     
|Net interest income/net interest rate spread(2)(4)                   |                                 |                                         |           |           |           | $          | 207,481 |         |        |           | 3.42 | %          |      |         |           |           |           | $          | 168,548 |         |        |  | 3.21 | %    |      |   |           |           |           | $ | 124,946 |         |        |  | 3.46 | %   
|                                                                     |                                 |                                         |           |           |           |            |         |         |        |           |      |            |      |         |           |           |           |            |         |         |        |  |      |      |      |   |           |           |           |   |         |         |        |  |      |     
|Net interest-earning assets/net interest
    margin(3)(4)            |                                 | $                                       | 661,878   |           |           |            |         |         |        |           | 3.63 | %          |      | $       | 490,920   |           |           |            |         |         |        |  | 3.41 | %    |      | $ | 343,507   |           |           |   |         |         |        |  | 3.73 | %   
|                                                                     |                                 |                                         |           |           |           |            |         |         |        |           |      |            |      |         |           |           |           |            |         |         |        |  |      |      |      |   |           |           |           |   |         |         |        |  |      |     
|Ratio of interest-earning assets to
    interest-bearing liabilities |                                 |                                         | 1.13      | x         |           |            |         |         |        |           |      |            |      |         | 1.11      | x         |           |            |         |         |        |  |      |      |      |   | 1.11      | x         |           |   |         |         |        |  |      |     
|                                                                     |                                 |                                         |           |           |           |            |         |         |        |           |      |            |      |         |           |           |           |            |         |         |        |  |      |      |      |   |           |           |           |   |         |         |        |  |      |     

34



---



##### 





---



|    |                                                                                                                                                                                                                              
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Nonaccrual loans are included in the table for
    computation purposes, but interest for such loans is included on
    a cash basis.                                                                                        
|   
|(2) | Interest rate spread represents the difference
    between the average yield on interest-earning assets and the
    average cost of interest- bearing liabilities.                                                           
|   
|(3) | Net interest margin represents net interest
    income divided by average interest-earning assets.                                                                                                                           
|   
|(4) | Calculated on a non-tax equivalent basis.                                                                                                                                                                                    
|   
|(5) | Average loans balance include loans held for sale.                                                                                                                                                                           
|   
|(6) | Average yield on investment securities is
    computed using historical cost balances; the yield information
    does not give effect to changes in fair value that are reflected
    as a component of stockholders equity.

Our net interest income is affected by changes in
the amount and mix of our interest-earning assets and
interest-bearing liabilities, referred to as volume
changes. It is also affected by changes in the yields that
we earn on interest-earning assets and rates that we pay on
interest-bearing deposits and other borrowed funds, referred to
as rate changes.

The following table sets forth the changes in
interest income and interest expense for the major categories of
our interest-earning assets and interest-bearing liabilities,
and the amount of change that is attributable to volume changes
and rate changes for the years indicated. Changes not solely
attributable to rate or volume have been allocated to volume and
rate changes in proportion to the relationship of the absolute
dollar amounts of the changes in each.

|                                           |                         |                                                            |        |                              |        |     |       |        |        |      |        |        |        |   |        |        |        |   |         |         |         |   |        |        |        | 
|------------------------------------------ | ----------------------- | ---------------------------------------------------------- | ------ | ---------------------------- | ------ | --- | ----- | ------ | ------ | ---- | ------ | ------ | ------ | - | ------ | ------ | ------ | - | ------- | ------- | ------- | - | ------ | ------ | ------ | 
|                                           |                         |                                                            |        |                             
|                                           |                         | Year Ended December 31, 2004                               |        | Year Ended December 31, 2003
|                                           |                         | Compared to the                                            |        | Compared to the             
|                                           |                         | Year Ended December 31, 2003                               |        | Year Ended December 31, 2002
|                                           |                         |                                                            |        |                             
|                                           |                         | Volume                                                     |        | Rate                         |        | Net |       | Volume |        | Rate |        | Net   
|                                           |                         |                                                            |        |                              |        |     |       |        |        |      |        |       
|                                           |                         |                                                           
|                                           |                         | (Dollars in Thousands)                                    
|Interest income:                           |                         |                                                            |        |                              |        |     |       |        |        |      |        |        |        |   |        |        |        |   |         |         |         |   |        |       
|                                           | Loans                   |                                                            | $      | 38,615                       |        |     | $     | (4,077 | )      |      | $      | 34,538 |        |   | $      | 50,067 |        |   | $       | (15,296 | )       |   | $      | 34,771 |       
|                                           | Securities              |                                                            |        | 2,611                        |        |     |       | 2,065  |        |      |        | 4,676  |        |   |        | 26,981 |        |   |         | (6,573  | )       |   |        | 20,408 |       
|                                           | Other                   |                                                            |        | 280                          |        |     |       | 308    |        |      |        | 588    |        |   |        | (9     | )      |   |         | (86     | )       |   |        | (95    | )     
|                                           |                         |                                                            |        |                              |        |     |       |        |        |      |        |        |        |   |        |        |        |   |         |         |         |   |        |       
|                                           |                         | Total interest income on interest-earning assets           |        |                              | 41,506 |     |       |        | (1,704 | )    |        |        | 39,802 |   |        |        | 77,039 |   |         |         | (21,955 | ) |        |        | 55,084 | 
|                                           |                         |                                                            |        |                              |        |     |       |        |        |      |        |        |        |   |        |        |        |   |         |         |         |   |        |       
|Interest expense:                          |                         |                                                            |        |                              |        |     |       |        |        |      |        |        |        |   |        |        |        |   |         |         |         |   |        |       
|                                           | Deposits:               |                                                            |        |                              |        |     |       |        |        |      |        |        |        |   |        |        |        |   |         |         |         |   |        |        |       
|                                           |                         | NOW, checking, and money market accounts                   |        |                              | 2,278  |     |       |        | 243    |      |        |        | 2,521  |   |        |        | 1,583  |   |         |         | (762    | ) |        |        | 821    | 
|                                           |                         | Savings accounts                                           |        |                              | 1,223  |     |       |        | 37     |      |        |        | 1,260  |   |        |        | 1,330  |   |         |         | (721    | ) |        |        | 609    | 
|                                           |                         | Time deposits                                              |        |                              | 3,442  |     |       |        | (8,680 | )    |        |        | (5,238 | ) |        |        | 12,104 |   |         |         | (6,046  | ) |        |        | 6,058  | 
|                                           | Borrowings              |                                                            |        | 3,761                        |        |     |       | (1,698 | )      |      |        | 2,063  |        |   |        | 2,009  |        |   |         | (1,284  | )       |   |        | 725    |       
|                                           | Subordinated debentures |                                                            |        |                             |        |     |       | 263    |        |      |        | 263    |        |   |        | 3,990  |        |   |         | (721    | )       |   |        | 3,269  |       
|                                           |                         |                                                            |        |                              |        |     |       |        |        |      |        |        |        |   |        |        |        |   |         |         |         |   |        |       
|                                           |                         | Total interest expense on interest-bearing
    liabilities |        |                              | 10,704 |     |       |        | (9,835 | )    |        |        | 869    |   |        |        | 21,016 |   |         |         | (9,534  | ) |        |        | 11,482 | 
|                                           |                         |                                                            |        |                              |        |     |       |        |        |      |        |        |        |   |        |        |        |   |         |         |         |   |        |       
|Increase (decrease) in net interest income |                         | $                                                          | 30,802 |                              |        | $   | 8,131 |        |        | $    | 38,933 |        |        | $ | 56,023 |        |        | $ | (12,421 | )       |         | $ | 43,602 |       
|                                           |                         |                                                            |        |                              |        |     |       |        |        |      |        |        |        |   |        |        |        |   |         |         |         |   |        |       

Allowance and Provision for Loan
Losses.The Company uses a systematic
methodology in accordance with GAAP to calculate its allowance
for loan losses. This methodology involves significant
judgments. See the Impact of Critical Accounting
Policies section under this Item for a discussion on the
methodology. Through application of this methodology, which
takes into account our loan portfolio mix, credit quality, loan
growth, the amount and trends relating to our delinquent and
nonperforming loans, regulatory policies, general economic
conditions and other factors relating to the collectibility of
loans in our portfolio, we determine the appropriateness of our
allowance for loan losses, which is adjusted by quarterly
provisions charged against earnings.

35



---



##### 



The loan loss provision for the year ended
December 31, 2004, was $4.2 million compared with a
provision of $10.0 million for the year ended
December 31, 2003. The allowance for loan losses was
$56.5 million and $58.1 million at December 31,
2004 and 2003, respectively. The reduction in the allowance for
loan losses and the related provision for loan losses reflects
the following:



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | the Banks continued quarterly process of
    re-evaluating its loss factors in light of its own historical
    loss experience, loan delinquency and classification, and
    economic outlook and other data. In conjunction with this
    evaluation, the loan loss factors for the commercial real estate
    portfolio were reduced as a result of the Company expanding the
    review process of the commercial real estate credits. In doing
    so, the Company determined that the inherent volatility risk in
    the portfolio was decreased due to stronger identification,
    administration and action plan implementation on credits in the
    commercial real estate portfolio. The loan loss factor on the
    aggregate consumer portfolio was also reduced, reflecting the
    significantly lower credit card portfolio which has higher
    inherent risk than other components of the consumer portfolio;
|
| | (b) | the reclassification of $326.0 million of
    loans held for sale during the year for which the related
    allowance was required to be reversed;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| | (c) | the sale of $362.4 million of multifamily
    loans during the year; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| | (d) | the upgrade of certain classified loans due to
    sustained credit performance.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

The foregoing four factors, primarily occurring
in the fourth quarter of 2004, resulted in a negative loan loss
provision of $626,000 in the fourth quarter of 2004.

The decrease in the allowance for loan losses and
the related provision for loan losses as a result of the factors
discussed above was partially offset by an increase resulting
from higher loan originations during the year and an increase in
the overall nonperforming loans. For the year ended
December 31, 2004, the allowance for loan losses and
provision for loan losses was also affected by the following:



| |   |                                           
| | - | ------------------------------------------
| |  | Loan Growth and Portfolio
    Composition:



| |                                                                                                                                                                                                                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our overall loan portfolio grew
    $279.4 million from December 31, 2003, to
    December 31, 2004, primarily as a result of the Banks
    continued focus on commercial lending activities. Loan growth
    remained concentrated in the Banks commercial portfolio.                                            
|
| | For the year ended December 31, 2004,
    commercial real estate fundings increased by 19.8% compared with
    2003. For the year ended December 31, 2004, outstanding
    construction commitments increased 22.5% compared to the prior
    year, and commercial business commitments increased 97.9% in
    2004.
|
| | The residential mortgage loan fundings also
    increased substantially in 2004. For the year ended
    December 31, 2004, residential commitments increased by
    17.8% compared with 2003.                                                                                                                       



| |   |               
| | - | --------------
| |  | Asset Quality:



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The asset quality at December 31, 2004
    remained high, consistent with December 31, 2003. Total
    criticized loans, which are defined as those we classify as
    risk-graded Special Mention, Substandard, Doubtful or Loss were
    $74.2 million, or 1.83%, of loans held in portfolio at
    December, compared with $62.2 million, or 1.65%, of loans
    held in portfolio as of December 31, 2003. The 19.2%
    increase in the criticized loans reflects an increase in Special
    Mention loans from 0.29% of loans held in portfolio at
    December 31, 2003 to 0.71% at December 2004, offset by a
    decrease in the Substandard loans from 1.34% at
    December 31, 2003 to 1.09% at December 31, 2004.
    Doubtful loans were 0.02% and 0.03% of loans held in portfolio
    at December 31, 2003 and 2004, respectively. Nonaccrual
    loans increased to $12.6 million at December 31, 2004
    from $5.9 million at December 31, 2003. The increase
    in nonperforming loans relates primarily to commercial real
    estate loans. Total loans thirty or more days delinquent at
    December 31, 2004 and 2003 were 0.90% and 0.87%,
    respectively.

36



---



##### 





| |   |                 
| | - | ----------------
| |  | Net Charge-offs:



| |                                                                                                                                                                                                                                                                                      
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Net charge-offs of $4.7 million for the year
    ended December 31, 2004, increased as compared to net
    charge-offs of $2.0 million for the corresponding period of
    2003. The charge-offs in the year ended December 31, 2004,
    were related primarily to commercial loans.



| |   |                     
| | - | --------------------
| |  | Management Judgment:



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | To derive the provision for loan losses during
    the year ended December 31, 2004, judgment is applied when
    considering uncertainties based on current macroeconomic
    conditions and other factors. For example, judgment as to the
    economic outlook in California will affect managements
    assessment of potential losses based on exposure to that
    marketplace. The judgment related to these uncertainties result
    in an unallocated portion of the allowance for loan losses.

In the quarter ended June 30, 2004, the
Company reclassified approximately $3.1 million from the
allowance for loan losses related to unfunded commitments and
off-balance-sheet commitments for letters of credit to other
liabilities. The reclassification reduced the June 30,
2004, allowance for loan losses from $62.6 million, or
1.55% of total loans to $59.5 million, or 1.47% of total
loans. As of December 31, 2004, the associated allowance
balance in other liabilities was $3.9 million. For
comparison purposes, we reclassified $2.7 million of the
December 31, 2003, allowance for loan losses balance,
resulting in the reduction from $60.9 million or 1.61% of
total loans, to $58.1 million or 1.53% of total loans.



| |                   
| | ------------------
| | Noninterest Income

The following table presents the composition of
our noninterest income for the periods indicated (dollars in
thousands):

|                                        |  |                                  |        |      |  |      |        |   |  |   |        |  
|--------------------------------------- |  | -------------------------------- | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|                                        |  |                                 
|                                        |  | For the Years Ended December 31,
|                                        |  |                                 
|                                        |  | 2004                             |        | 2003 |  | 2002
|                                        |  |                                  |        |      |  |     
|Commercial banking and other fees       |  | $                                | 8,525  |      |  | $    | 7,063  |   |  | $ | 5,202  |  
|Service charges on deposits             |  |                                  | 2,654  |      |  |      | 2,249  |   |  |   | 1,704  |  
|Gain on sale of securities, net         |  |                                  | 12,713 |      |  |      | 11,013 |   |  |   | 3,527  |  
|Gain on sale of multifamily loans       |  |                                  | 7,732  |      |  |      |       |   |  |   |       |  
|Gain on sale of SBA loans, net          |  |                                  | 1,463  |      |  |      | 3,030  |   |  |   | 1,838  |  
|Equity loss in other equity investments |  |                                  | (2,210 | )    |  |      | (152   | ) |  |   | (129   | )
|                                        |  |                                  |        |      |  |      |        |   |  |   |        |  
|Total noninterest income                |  | $                                | 30,877 |      |  | $    | 23,203 |   |  | $ | 12,142 |  
|                                        |  |                                  |        |      |  |      |        |   |  |   |        |  

Our noninterest income increased by
$7.7 million, or 33.1%, to $30.9 million for the year
ended December 31, 2004, from $23.2 million for the
preceding year. The increase was primarily due to increases in
commercial banking fees and gains on sales of loans and
securities. During 2004, the Bank sold $362.4 million of
multifamily loans for a gain of $7.7 million. There were no
multifamily loans sales in prior years. Commercial banking and
other fees increased 20.7% to $8.5 million for the year
ended December 31, 2004, as compared to $7.1 million
for the corresponding period of 2003, as a result of increased
commercial banking activities, primarily our trade finance
business.

The Company recognized $2.2 million of
equity losses from CRA-related investments during the year ended
December 31, 2004, primarily as a result of the recognition
of our share of equity losses on CRA-related investments. As
disclosed in Note 1 to the Consolidated Financial
Statements, the Company invests in CRA qualified investments.
Such investments have increased in order to assist the Bank in
fulfilling its requirements under the Community Reinvestment
Act. The above $2.2 million is our share of the underlying
investment equity losses exclusive of tax benefits and credits.
The tax savings on such equity losses was $2.2 million,
which includes $929,000 of a reduction of income taxes and
$1.2 million resulting from CRA-related tax credits.

37



---



##### 



Our noninterest income increased by
$11.1 million, or 91.1%, to $23.2 million for the year
ended December 31, 2003, from $12.1 million for the
preceding year. The increase was primarily due to an increase in
gain from sale of SBA loans and securities as well as commercial
banking fees.



| |                    
| | -------------------
| | Noninterest Expense

The following table presents the composition of
our noninterest expense for the periods indicated (dollars in
thousands):

|                                          |  |                                  |        |      |  |      |        |   |  |   |        |  
|----------------------------------------- |  | -------------------------------- | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|                                          |  |                                 
|                                          |  | For the Years Ended December 31,
|                                          |  |                                 
|                                          |  | 2004                             |        | 2003 |  | 2002
|                                          |  |                                  |        |      |  |     
|                                          |  |                                 
|                                          |  | (Dollars in Thousands)          
|Personnel                                 |  | $                                | 50,931 |      |  | $    | 42,310 |   |  | $ | 29,965 |  
|Occupancy                                 |  |                                  | 10,164 |      |  |      | 5,869  |   |  |   | 5,326  |  
|Data processing                           |  |                                  | 5,896  |      |  |      | 4,826  |   |  |   | 3,463  |  
|Furniture and equipment depreciation      |  |                                  | 5,396  |      |  |      | 3,661  |   |  |   | 2,614  |  
|Professional fees and contracted services |  |                                  | 7,496  |      |  |      | 5,802  |   |  |   | 5,626  |  
|Deposit insurance                         |  |                                  | 774    |      |  |      | 695    |   |  |   | 467    |  
|Communication                             |  |                                  | 1,287  |      |  |      | 1,066  |   |  |   | 726    |  
|Core deposit intangible amortization      |  |                                  | 1,283  |      |  |      | 1,762  |   |  |   | 227    |  
|Litigation settlement                     |  |                                  |       |      |  |      |       |   |  |   | 6,750  |  
|Miscellaneous expense                     |  |                                  | 15,926 |      |  |      | 14,217 |   |  |   | 9,185  |  
|                                          |  |                                  |        |      |  |      |        |   |  |   |        |  
|Total noninterest expense                 |  | $                                | 99,153 |      |  | $    | 80,208 |   |  | $ | 64,349 |  
|                                          |  |                                  |        |      |  |      |        |   |  |   |        |  
|Efficiency ratio                          |  |                                  | 41.60  | %    |  |      | 41.83  | % |  |   | 46.94  | %
|Noninterest expenses to average assets    |  |                                  | 1.67   | %    |  |      | 1.56   | % |  |   | 1.88   | %

Our noninterest expense increased to
$99.2 million for 2004, from $80.2 million for 2003,
an increase of $18.9 million, or 23.6% primarily due to
higher personnel, occupancy, furniture and equipment,
professional fees, primarily accounting, and contracted
services. Personnel expenses increased by $8.6 million from
2003 to 2004 due to the additional staffing required to support
the growth of the Banks commercial banking business, the
expansion of the Hong Kong and California branches, the
expansion of the Banks infrastructure to support a larger
and growing organization, and the FCB acquisition, which closed
in July 2003. Professional fees and contracted services
increased by 29.2% to $7.5 million in 2004 compared to
$5.8 million in 2003, predominately as a result of
Sarbanes-Oxley related preparation costs. Furniture and
equipment increased 47.4% and occupancy expenses increased 73.2%
for 2004 compared to 2003 reflecting primarily the opening of
the Foster City, Torrance, Westminster and Van Nuys branches in
California, the Bowery Branch in New York, the expansion of the
Hong Kong branch and the Companys corporate relocation.
The increase in miscellaneous expenses of $1.7 million for
2004, compared with 2003 was primarily related to the
Companys continued expansion, corporate relocation and
advertising costs.

Our noninterest expense increased to
$80.2 million for 2003, from $64.3 million for 2002,
an increase of $15.9 million, or 24.6%. The higher expenses
in 2003 resulted primarily from a $12.3 million increase in
personnel expenses due to the additional staffing that resulted
from the acquisitions of BCC and FCB, the Hong Kong branch and
the growth of the Banks commercial banking business.
Miscellaneous expenses increased from $9.2 million in 2002
to $14.2 million in 2003, primarily as a result of
increases in expenses associated with the BCC operations and FCB
acquisition, merchant card processing, and advertising.



| |                           
| | --------------------------
| | Provision for Income Taxes

During 2004, we recorded a $49.4 million
provision for income taxes, which resulted in an effective tax
rate of 36.6%, compared with an effective tax rate of 36.4% for
the year ended December 31, 2003. The effective tax rates
for 2004 and 2003 reflect the realization of tax benefits from
the Banks lending and hiring activities in Enterprise
Zones areas in the California and federal and state tax benefits
from qualified

38



---



##### 



investments pursuant to the Community
Reinvestment Act and the Federal benefit from the Banks
municipal bond portfolio.


The 2003 effective tax rate of 36.4% is lower,
compared with 38.3% for the year ended December 31, 2002.
The decrease in the effective tax rate from 2002 to 2003
resulted primarily from the realization of tax benefits from the
Banks lending and hiring activities in Enterprise Zones
areas in California and the Federal benefit from the Banks
municipal bond portfolio.

Significant
Fourth Quarter Adjustments

During the fourth quarter, the Company identified
accounting errors, primarily relating to accounting for the
purchase consideration for the FCB acquisition, certain
Community Reinvestment Act (CRA) investments,
recognition of rent escalation clauses on operating leases and
gain on sale of SBA loans. These matters are more fully
described below.

The Company determined that the initial
calculation of the purchase price for the acquisition of FCB, as
reported in the 2003 consolidated financial statements, was
based on the Companys common stock value at the per share
price on the closing date of the acquisition when the proper
stock value share price should have been an average stock price
at the announcement date. As a result, $44.2 million of the
purchase price was allocated to goodwill, which represents an
overstatement of $16.8 million. To properly reflect the
fair value of the purchase consideration, the Company recorded
an adjustment in the amount of $16.8 million in the fourth
quarter of 2004, reducing paid in capital, total
stockholders equity, and goodwill by this amount. This
adjustment did not affect the Companys results of
operations or cash flows.

The Company invests in CRA qualified investments
such as affordable housing and small business investment
companies. During the fourth quarter, the company recognized a
liability of $10.4 million, and a corresponding increase in
CRA investments, for delayed equity contributions that are
unconditional and legally binding relating to affordable housing
investments. This adjustment did not affect the Companys
results of operations or cash flows.

The Company determined that recognition of rent
expense for leases with rent holidays or leases with rent
escalation clauses was not recognized on a straight-line basis.
Accordingly, in the fourth quarter the Company recorded a
cumulative adjustment to increase occupancy expense related and
deferred rent by $1.2 million. This also resulted in
recognition of a tax benefit of $490,000.

The Company sells SBA loans and retains the right
to service those loans. The Company determined that it was not
recognizing the gain on sale of such loans pursuant to
FAS 140. Accordingly, the Company recorded a cumulative
adjustment in the fourth quarter to reduce gain on loan sales
and servicing rights by $1.9 million. This also resulted in
recognition of a tax benefit of $793,000.

In addition to the adjustments to occupancy
expense and reduction in gain on sale of SBA loans discussed
above, the Company recorded certain other minor adjustments,
which in the aggregate, resulted in an increase to income before
taxes in the fourth quarter of 2004 of $1.7 million.

These adjustments were immaterial to all prior
period financial statements.

Financial Position

The following table outlines the Companys
loans, securities and total assets at the dates indicated
(dollars in thousands):

|                              |  |                 |           |                     |  |   |           |   |  |   |         |   |  |  |       |   
|----------------------------- |  | --------------- | --------- | ------------------- |  | - | --------- | - |  | - | ------- | - |  |  | ----- | --
|                              |  |                 |           |                    
|                              |  | At December 31, |           | Increase (Decrease)
|                              |  |                 |           |                    
|                              |  | 2004            |           | 2003                |  | $ |           | %
|                              |  |                 |           |                     |  |   |           |  
|Total loans held in portfolio |  | $               | 4,050,741 |                     |  | $ | 3,771,381 |   |  | $ | 279,360 |   |  |  | 7.41  | % 
|Securities                    |  | $               | 1,494,342 |                     |  | $ | 1,505,782 |   |  | $ | (11,440 | ) |  |  | (0.76 | )%
|Total assets                  |  | $               | 6,315,681 |                     |  | $ | 5,587,927 |   |  | $ | 727,754 |   |  |  | 13.02 | % 

The Company experienced continued asset and core
deposit growth during 2004. The increase of $727.8 million
in total assets from December 31, 2003, to
December 31, 2004, was primarily related to increases in
the loan portfolio.

39



---



##### 



During the year ended December 31, 2004,
total loans held in portfolio increased by $279.4 million.
This growth resulted primarily from an organic increase in
commercial loans from the Banks continuing focus on
originating such loans. Total commercial loans grew to
$3.58 billion at December 31, 2004, up from
$3.46 billion at December 31, 2003, as a result of new
commercial loan commitments of $2.21 billion during 2004
due to the lower interest rates and continued loan generation
efforts, partially offset by principal repayments, loan sales
and the internal securitization of multifamily loans. The growth
in the commercial loan commitments from $1.81 billion in
2003 to $2.21 billion in 2004 reflects the growth of the
Commercial Banking Division through forming new customer
relationships and expanding our market share in Greater Los
Angeles and the Companys expansion in Hong Kong. Consumer
loans increased to $482.2 million at December 31,
2004, from $317.5 million at December 31, 2003,
primarily due to organic growth.

As a result of favorable market conditions, the
Company experienced a higher level of new loan commitments;
$2.48 billion for the year ended December 31, 2004,
which was composed of $2.21 billion in commercial loan
commitments and $274.2 million in consumer commitments.

In 2003, the Company implemented a securities
restructuring strategy intended to replace securities that have
high prepayment and extension risk with securities that are
shorter-dated and have less prepayment and extension risk. The
Company also increased loan production and accelerated the
planned balance sheet restructuring announced at the time of the
BCC acquisition to reduce the percentage of securities and
increase the percentage of loans on the balance sheet. The
securities restructuring strategy and increased loan production
were intended to protect the Company from mark-to-market
volatility in the securities portfolio and better position the
Company for accelerated margin expansion in an upward market
interest rate environment.

The securities balance (including the
available-for-sale and held-to-maturity portfolios) decreased by
$11.4 million from December 31, 2003, to
December 31, 2004. This was primarily the result of
purchases of $1.51 billion and internal securitizations of
$147.1 million, partially offset by sales of
$809.1 million, principal repayments and securities calls
of $300.2 million, and maturities and payoffs of
$552.4 million in 2004.

The following table outlines the Companys
loans, securities and total assets at the dates indicated
(dollars in thousands):

|                              |  |                 |           |                     |  |   |           |   |  |   |         |   |  |  |       |   
|----------------------------- |  | --------------- | --------- | ------------------- |  | - | --------- | - |  | - | ------- | - |  |  | ----- | --
|                              |  |                 |           |                    
|                              |  | At December 31, |           | Increase (Decrease)
|                              |  |                 |           |                    
|                              |  | 2003            |           | 2002                |  | $ |           | %
|                              |  |                 |           |                     |  |   |           |  
|Total loans held in portfolio |  | $               | 3,771,381 |                     |  | $ | 3,027,810 |   |  | $ | 743,571 |   |  |  | 24.56 | % 
|Securities                    |  | $               | 1,505,782 |                     |  | $ | 1,581,381 |   |  | $ | (75,599 | ) |  |  | (4.78 | )%
|Total assets                  |  | $               | 5,587,927 |                     |  | $ | 4,853,636 |   |  | $ | 734,291 |   |  |  | 15.13 | % 

The size of the balance sheet increased from
$4.85 billion at December 31, 2002, to
$5.59 billion at December 31, 2003, an increase of
$734.3 million, or 15.13%. On July 14, 2003, the
Company announced the completion of its acquisition of FCB, with
$356.7 million in assets, $243.1 million of loans and
$325.6 million of deposits. The Company issued
approximately 2.3 million shares of its common stock in
exchange for all the outstanding shares of common stock of FCB.
During 2003, the balance sheet increased $731.6 million of
which $374.9 million was the result of internal growth with
the balance being attributable to the FCB acquisition. This
internal growth resulted primarily from the increase in the size
of our loan portfolio of $516.8 million offset by a
decrease in our securities portfolio of $131.9 million.

Loans held in portfolio increased from
$3.03 billion at December 31, 2002, to
$3.77 billion at December 31, 2003, an increase of
$743.5 million, or 24.56%. The portfolio increased
primarily as a result of the acquisition of FCB and the
origination of loans from the BCC customer base during 2003,
partially offset by the internal securitizations of loans.

Total loans in 2003 acquired from FCB totaled
$243.1 million at the acquisition date. Total new loan
commitments in 2003, as detailed below, were $2.06 billion
and were primarily commercial loans. During 2003, the Bank
internally securitized a total of $91.9 million of
residential mortgage (one to four family) loans and
$194.2 million of multifamily loans. In an internal loan
securitization, the Bank exchanges either multifamily or
residential mortgage (one to four family) loans for Fannie Mae
(FNMA) securities, which

40



---



##### 



are available-for-sale securities. Accordingly,
no gain or loss is recognized since no assets are sold. The Bank
performs internal securitizations for risk-based capital
management purposes. The Banks risk-based capital ratio
has improved following a securitization, since the securities
have a lower risk-based capital requirement than do the whole
loans which were securitized.


Our securities portfolio, including
available-for-sale and held-to-maturity securities, decreased
from $1.58 billion at December 31, 2002, to
$1.51 billion at December 31, 2003. This decrease in
securities is a result of sales of $942.1 million, and
principal repayments and securities calls of
$618.9 million, mostly offset by purchases of
$1.26 billion and internal securitizations of
$286.0 million.

Loan Quality
Data and Ratios

The following table outlines certain information
regarding the Companys allowance for loan losses, past due
and nonperforming loans for the periods indicated:

|                                                         |  |                 |        |                        |  |                |        |   |  |   |        |     |  |  |         |   
|-------------------------------------------------------- |  | --------------- | ------ | ---------------------- |  | -------------- | ------ | - |  | - | ------ | --- |  |  | ------- | --
|                                                         |  |                 |        |                       
|                                                         |  | At December 31, |        | Increase (Decrease)   
|                                                         |  |                 |        |                       
|                                                         |  | 2004            |        | 2003                   |  | $/Basis Points |        | %
|                                                         |  |                 |        |                        |  |                |        |  
|                                                         |  |                 |        |                        |  |               
|                                                         |  |                 |        | (Dollars in Thousands) |  |               
|Allowance for loan losses                                |  | $               | 56,472 |                        |  | $              | 58,126 |   |  | $ | (1,654 | )   |  |  | (2.85   | )%
|Allowance for loan losses to loans held in
    portfolio |  |                 | 1.39   | %                      |  |                | 1.54   | % |  |   | (15    | )bp |  |  | 9.74    | % 
|Past due loans to total loans held in portfolio          |  |                 | 0.90   | %                      |  |                | 0.87   | % |  |   | 3      | bp  |  |  | 3.45    | % 
|Nonperforming loans/assets                               |  | $               | 12,574 |                        |  | $              | 5,857  |   |  | $ | 6,717  |     |  |  | 114.68  | % 
|Nonperforming assets to total assets                     |  |                 | 0.20   | %                      |  |                | 0.10   | % |  |   | 10     | bp  |  |  | (100.00 | )%

The loan loss provision for the year ended
December 31, 2004, was $4.2 million, compared with a
provision of $10.0 million for the year ended
December 31, 2003. The allowance for loan losses was
$56.5 million and $58.1 million at December 31,
2004 and 2003, respectively. The reduction in the allowance for
loan losses, and the related provision for loan losses reflects
the following:



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | the Banks continued quarterly process of
    re-evaluating its loss factors in light of its own historical
    loss experience, loan delinquency and classification, and
    economic outlook and other data. In conjunction with this
    evaluation, the loan loss factors for the commercial real estate
    portfolio were reduced as a result of the Company expanding the
    review process of the commercial real estate credits. In doing
    so, the Company determined that the inherent volatility risk in
    the portfolio was decreased due to stronger identification,
    administration and action plan implementation on credits in the
    commercial real estate portfolio. The loan loss factor on the
    aggregate consumer portfolio was also reduced, reflecting the
    significantly lower credit card portfolio which has higher
    inherent risk than other components of the consumer portfolio;
|
| | (b) | the reclassification of $326.0 million of
    loans held for sale during the year for which the related
    allowance was required to be reversed;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| | (c) | the sale of $362.4 million of multifamily
    loans during the year; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| | (d) | the upgrade of certain classified loans due to
    sustained credit performance.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

The foregoing four factors, primarily occurring
in the fourth quarter of 2004, resulted in a negative loan loss
provision of $626,000 in the fourth quarter of 2004.

The decrease in the allowance for loan losses as
a result of the factors discussed above was partially offset by
an increase resulting from higher loan originations during the
year and an increase in the overall nonperforming loans.

The ratio of past due loans which are loans with
payments that are at least 30 days delinquent, to total
loans from December 31, 2003, to December 31, 2004,
increased to 0.90%, from 0.87% at December 31, 2003.
Nonperforming assets to loans increased $6.7 million from
$5.9 million at December 31, 2003, to
$12.6 million

41



---



##### 



at December 31, 2004, primarily as a result
of four nonperforming commercial real estate loans totaling
$8.1 million during 2004.


The following table shows the composition of our
loan portfolio by amount and percentage of total gross loans in
each major loan category at the dates indicated:

|                                           |                   |                        |           |           |  |        |       |        |   |        |           |           |  |        |       |        |   |        |           |           |  |  |       |        |   |   |           |           |  |  |       |        |   |   |           |           |  |  |       |        |  
|------------------------------------------ | ----------------- | ---------------------- | --------- | --------- |  | ------ | ----- | ------ | - | ------ | --------- | --------- |  | ------ | ----- | ------ | - | ------ | --------- | --------- |  |  | ----- | ------ | - | - | --------- | --------- |  |  | ----- | ------ | - | - | --------- | --------- |  |  | ----- | ------ | -
|                                           |                   |                       
|                                           |                   | At December 31,       
|                                           |                   |                       
|                                           |                   |                        |           |           |  |        |       |        |   |       
|                                           |                   | 2004                   |           | 2003      |  | 2002   |       | 2001   |   | 2000  
|                                           |                   |                        |           |           |  |        |       |        |   |       
|                                           |                   | Amount                 |           | %         |  | Amount |       | %      |   | Amount |           | %         |  | Amount |       | %      |   | Amount |           | %        
|                                           |                   |                        |           |           |  |        |       |        |   |        |           |           |  |        |       |        |   |        |           |          
|                                           |                   |                       
|                                           |                   | (Dollars in Thousands)
|Commercial:                                |                   |                        |           |           |  |        |       |        |   |        |           |           |  |        |       |        |   |        |           |           |  |  |       |        |   |   |           |           |  |  |       |        |   |   |           |           |  |  |       |       
|Secured by real estate  nonresidential    |                   | $                      | 1,951,020 |           |  |        | 48.08 | %      |   | $      | 1,709,976 |           |  |        | 45.24 | %      |   | $      | 1,279,809 |           |  |  | 42.20 | %      |   | $ | 798,882   |           |  |  | 35.22 | %      |   | $ | 597,981   |           |  |  | 30.91 | %     
|Secured by real estate  multifamily       |                   |                        | 865,483   |           |  |        | 21.33 |        |   |        | 1,162,565 |           |  |        | 30.76 |        |   |        | 914,630   |           |  |  | 30.16 |        |   |   | 677,271   |           |  |  | 29.86 |        |   |   | 514,697   |           |  |  | 26.61 |       
|Construction                               |                   |                        | 291,080   |           |  |        | 7.17  |        |   |        | 293,875   |           |  |        | 7.77  |        |   |        | 216,218   |           |  |  | 7.13  |        |   |   | 182,558   |           |  |  | 8.05  |        |   |   | 131,878   |           |  |  | 6.82  |       
|Business                                   |                   |                        | 468,220   |           |  |        | 11.54 |        |   |        | 296,100   |           |  |        | 7.83  |        |   |        | 261,787   |           |  |  | 8.63  |        |   |   | 163,628   |           |  |  | 7.21  |        |   |   | 99,401    |           |  |  | 5.14  |       
|                                           |                   |                        |           |           |  |        |       |        |   |        |           |           |  |        |       |        |   |        |           |           |  |  |       |        |   |   |           |           |  |  |       |        |   |   |           |           |  |  |       |       
|                                           | Total commercial  |                        |           | 3,575,803 |  |        |       | 88.12  |   |        |           | 3,462,516 |  |        |       | 91.60  |   |        |           | 2,672,444 |  |  |       | 88.12  |   |   |           | 1,822,339 |  |  |       | 80.34  |   |   |           | 1,343,957 |  |  |       | 69.48  |  
|                                           |                   |                        |           |           |  |        |       |        |   |        |           |           |  |        |       |        |   |        |           |           |  |  |       |        |   |   |           |           |  |  |       |        |   |   |           |           |  |  |       |       
|Consumer:                                  |                   |                        |           |           |  |        |       |        |   |        |           |           |  |        |       |        |   |        |           |           |  |  |       |        |   |   |           |           |  |  |       |        |   |   |           |           |  |  |       |       
|Residential mortgage (one to four family)  |                   |                        | 434,323   |           |  |        | 10.70 |        |   |        | 274,392   |           |  |        | 7.26  |        |   |        | 311,067   |           |  |  | 10.25 |        |   |   | 430,057   |           |  |  | 18.96 |        |   |   | 574,219   |           |  |  | 29.68 |       
|Other                                      |                   |                        | 47,926    |           |  |        | 1.18  |        |   |        | 43,117    |           |  |        | 1.14  |        |   |        | 49,372    |           |  |  | 1.63  |        |   |   | 16,003    |           |  |  | 0.70  |        |   |   | 16,288    |           |  |  | 0.84  |       
|                                           |                   |                        |           |           |  |        |       |        |   |        |           |           |  |        |       |        |   |        |           |           |  |  |       |        |   |   |           |           |  |  |       |        |   |   |           |           |  |  |       |       
|                                           | Total consumer    |                        |           | 482,249   |  |        |       | 11.88  |   |        |           | 317,509   |  |        |       | 8.40   |   |        |           | 360,439   |  |  |       | 11.88  |   |   |           | 446,060   |  |  |       | 19.66  |   |   |           | 590,507   |  |  |       | 30.52  |  
|                                           |                   |                        |           |           |  |        |       |        |   |        |           |           |  |        |       |        |   |        |           |           |  |  |       |        |   |   |           |           |  |  |       |        |   |   |           |           |  |  |       |       
|                                           | Total gross loans |                        |           | 4,058,052 |  |        |       | 100.00 | % |        |           | 3,780,025 |  |        |       | 100.00 | % |        |           | 3,032,883 |  |  |       | 100.00 | % |   |           | 2,268,399 |  |  |       | 100.00 | % |   |           | 1,934,464 |  |  |       | 100.00 | %
|                                           |                   |                        |           |           |  |        |       |        |   |        |           |           |  |        |       |        |   |        |           |           |  |  |       |        |   |   |           |           |  |  |       |        |   |   |           |           |  |  |       |       
|Net deferred loan origination (fees) costs |                   |                        | (7,311    | )         |  |        |       |        |   |        | (8,644    | )         |  |        |       |        |   |        | (5,073    | )         |  |  |       |        |   |   | (4,096    | )         |  |  |       |        |   |   | (2,642    | )         |  |  |       |       
|                                           |                   |                        |           |           |  |        |       |        |   |        |           |           |  |        |       |        |   |        |           |           |  |  |       |        |   |   |           |           |  |  |       |        |   |   |           |           |  |  |       |       
|Loans                                      |                   |                        | 4,050,741 |           |  |        |       |        |   |        | 3,771,381 |           |  |        |       |        |   |        | 3,027,810 |           |  |  |       |        |   |   | 2,264,303 |           |  |  |       |        |   |   | 1,931,822 |           |  |  |       |       
|Allowance for loan losses                  |                   |                        | (56,472   | )         |  |        |       |        |   |        | (58,126   | )         |  |        |       |        |   |        | (48,865   | )         |  |  |       |        |   |   | (34,550   | )         |  |  |       |        |   |   | (28,901   | )         |  |  |       |       
|                                           |                   |                        |           |           |  |        |       |        |   |        |           |           |  |        |       |        |   |        |           |           |  |  |       |        |   |   |           |           |  |  |       |        |   |   |           |           |  |  |       |       
|                                           | Total net loans   |                        | $         | 3,994,269 |  |        |       |        |   |        | $         | 3,713,255 |  |        |       |        |   |        | $         | 2,978,945 |  |  |       |        |   |   | $         | 2,229,753 |  |  |       |        |   |   | $         | 1,902,921 |  |  |       |        |  
|                                           |                   |                        |           |           |  |        |       |        |   |        |           |           |  |        |       |        |   |        |           |           |  |  |       |        |   |   |           |           |  |  |       |        |   |   |           |           |  |  |       |       

As of December 31, 2004 and 2003, the
composition of the loans held for sale portfolio was as follows:

|                          |                                         |                        |         |                     |  |   |        |        |  |   |         |         |   |  |          |        |   
|------------------------- | --------------------------------------- | ---------------------- | ------- | ------------------- |  | - | ------ | ------ |  | - | ------- | ------- | - |  | -------- | ------ | --
|                          |                                         |                        |         |                    
|                          |                                         | At December 31,        |         | Increase (Decrease)
|                          |                                         |                        |         |                    
|                          |                                         | 2004                   |         | 2003                |  | $ |        | %     
|                          |                                         |                        |         |                     |  |   |        |       
|                          |                                         |                       
|                          |                                         | (Dollars in Thousands)
|Commercial:               |                                         |                        |         |                     |  |   |        |        |  |   |         |         |   |  |          |       
|                          | Secured by real estate  nonresidential |                        | $       | 26,882              |  |   | $      | 14,203 |  |   | $       | 12,679  |   |  |          | 89.27  | % 
|                          | Secured by real estate  multifamily    |                        |         | 295,253             |  |   |        |       |  |   |         | 295,253 |   |  |          | 100.00 | % 
|                          | Business                                |                        |         | 3,337               |  |   |        | 6,059  |  |   |         | (2,722  | ) |  |          | (44.92 | )%
|                          |                                         |                        |         |                     |  |   |        |        |  |   |         |         |   |  |          |       
|Gross loans held for sale |                                         | $                      | 325,472 |                     |  | $ | 20,262 |        |  | $ | 305,210 |         |   |  | 1,506.32 | %     
|Net deferred loan fees    |                                         |                        | 535     |                     |  |   |       |        |  |   | 535     |         |   |  | 100.00   | %     
|                          |                                         |                        |         |                     |  |   |        |        |  |   |         |         |   |  |          |       
|Loans held for sale       |                                         | $                      | 326,007 |                     |  | $ | 20,262 |        |  | $ | 305,745 |         |   |  | 1,508.96 | %     
|                          |                                         |                        |         |                     |  |   |        |        |  |   |         |         |   |  |          |       

The Bank has identified certain loans that will
be sold during 2005. As a result, such loans are classified as
held for sale at December 31, 2004.

The Company continues to emphasize production of
commercial real estate and commercial business loans. The Bank
also originates and funds loans that qualify for guarantees
issued by the SBA. The SBA guarantees on such loans are
generally 75% of the loan amount. The residual portion of the
loan is not guaranteed by the U.S. government, and the
Company bears the credit risk on that portion of such loans. The
Company generally sells the guaranteed portion of each SBA loan
at the time of loan origination. From time-to-time, the Company
may sell part of the unguaranteed portion of the SBA loans. SBA
regulations require that the originator retain a minimum of 5%
of the total loan amount.

42



---



##### 



As a result of changing the loan origination
focus to commercial loans, we are originating more loans that
reprice in shorter time periods than the traditional repricing
terms of residential mortgage (one to four family) loans.
Construction loans, commercial business loans and SBA loans
generally have monthly repricing terms. Commercial real estate
loans generally reprice monthly or are intermediate fixed,
meaning that the loans have interest rates that are fixed for a
period, typically five years, and then generally reprice monthly
or become due and payable. Multifamily loans are generally
adjustable-rate and reprice semiannually. Residential mortgage
(one to four family) loans may be adjustable-rate and reprice
semiannually or annually, have fixed rates, meaning that the
loans have interest rates that are fixed over the term of the
loans, for terms of 15 or 30 years, or have interest rates
that are fixed for a period, typically five years, and then
generally reprice semiannually or annually.

The following table reflects the Banks loan
composition by type and rate at the dates indicated:

|                               |  |                        |           |                     |  |   |           |   |  |   |         |   |  |  |       |   
|------------------------------ |  | ---------------------- | --------- | ------------------- |  | - | --------- | - |  | - | ------- | - |  |  | ----- | --
|                               |  |                        |           |                    
|                               |  | At December 31,        |           | Increase (Decrease)
|                               |  |                        |           |                    
|                               |  | 2004                   |           | 2003                |  | $ |           | %
|                               |  |                        |           |                     |  |   |           |  
|                               |  |                       
|                               |  | (Dollars in Thousands)
|Adjustable-rate loans          |  | $                      | 2,603,889 |                     |  | $ | 2,679,428 |   |  | $ | (75,539 | ) |  |  | (2.82 | %)
|Intermediate fixed-rated loans |  |                        | 881,744   |                     |  |   | 563,570   |   |  |   | 318,174 |   |  |  | 56.46 | % 
|Fixed-rate loans               |  |                        | 572,419   |                     |  |   | 537,027   |   |  |   | 35,392  |   |  |  | 6.59  | % 
|                               |  |                        |           |                     |  |   |           |   |  |   |         |   |  |  |       |   
|Total gross loans              |  | $                      | 4,058,052 |                     |  | $ | 3,780,025 |   |  | $ | 278,027 |   |  |  | 7.36  | % 
|                               |  |                        |           |                     |  |   |           |   |  |   |         |   |  |  |       |   

Adjustable-rate loans decreased
$75.5 million from December 31, 2003, to
December 31, 2004. Adjustable-rate loans represented 64.2%
of gross loans at December 31, 2004, compared with 70.9% of
gross loans at December 31, 2003. The increase of
$318.2 million in intermediate fixed-rate loans from
December 31, 2003, to December 31, 2004, is a result
of the origination of new intermediate fixed-rate multifamily
loans based on market demand. The fixed-rate loans increased
$35.4 million from December 31, 2003, to
December 31, 2004.

As a result of the change in the type of loan
originations and anticipated market interest rate movements, the
loans which reprice or mature within the next year increased to
$2.41 billion at December 31, 2004, from
$1.83 billion at December 31, 2003.

43



---



##### 



The table below sets forth the estimated impact
of repricing of our loan portfolio at December 31, 2004.
Adjustable-rate mortgages are shown in the period in which they
reprice, rather than when they become due, with the exception of
adjustable-rate loans that have reached a contractual floor.
Loans that are at the floor level are shown in the period they
become due. The table does not include the effects of possible
prepayments. The rate of loan prepayment varies from time to
time, depending upon various factors, including market interest
rates.

|                              |                                           |                        |   |             |           |             |   |            |         |              |   |              |         |       |   |         |         |  |   |         |         |  |   |        |        |   |           |           |           | 
|----------------------------- | ----------------------------------------- | ---------------------- | - | ----------- | --------- | ----------- | - | ---------- | ------- | ------------ | - | ------------ | ------- | ----- | - | ------- | ------- |  | - | ------- | ------- |  | - | ------ | ------ | - | --------- | --------- | --------- | 
|                              |                                           |                       
|                              |                                           | At December 31, 2004  
|                              |                                           |                       
|                              |                                           |                        |   | After       |           | After       |   | After      |         | After        |   |             
|                              |                                           |                        |   | One Year    |           | Three Years |   | Five Years |         | Ten Years    |   |             
|                              |                                           | Within                 |   | Through     |           | Through     |   | Through    |         | Through      |   | After        |         |      
|                              |                                           | One Year               |   | Three Years |           | Five Years  |   | Ten Years  |         | Twenty Years |   | Twenty Years |         | Total
|                              |                                           |                        |   |             |           |             |   |            |         |              |   |              |         |      
|                              |                                           |                       
|                              |                                           | (Dollars in Thousands)
|Commercial:                   |                                           |                        |   |             |           |             |   |            |         |              |   |              |         |       |   |         |         |  |   |         |         |  |   |        |        |   |           |          
|                              | Secured by real estate  nonresidential   |                        | $ | 1,374,188   |           |             | $ | 101,856    |         |              | $ | 179,634      |         |       | $ | 275,927 |         |  | $ | 18,004  |         |  | $ | 1,411  |        |   | $         | 1,951,020 |          
|                              | Secured by real estate  multifamily      |                        |   | 223,472     |           |             |   | 215,569    |         |              |   | 270,522      |         |       |   | 54,812  |         |  |   | 101,108 |         |  |   |       |        |   |           | 865,483   |          
|                              | Construction                              |                        |   | 273,834     |           |             |   | 17,246     |         |              |   |             |         |       |   |        |         |  |   |        |         |  |   |       |        |   |           | 291,080   |          
|                              | Business                                  |                        |   | 458,479     |           |             |   | 7,432      |         |              |   | 1,081        |         |       |   | 513     |         |  |   |        |         |  |   | 715    |        |   |           | 468,220   |          
|                              |                                           |                        |   |             |           |             |   |            |         |              |   |              |         |       |   |         |         |  |   |         |         |  |   |        |        |   |           |          
|                              |                                           | Total commercial       |   |             | 2,329,973 |             |   |            | 324,103 |              |   |              | 451,237 |       |   |         | 331,252 |  |   |         | 119,112 |  |   |        | 2,126  |   |           |           | 3,575,803 | 
|                              |                                           |                        |   |             |           |             |   |            |         |              |   |              |         |       |   |         |         |  |   |         |         |  |   |        |        |   |           |          
|Consumer:                     |                                           |                        |   |             |           |             |   |            |         |              |   |              |         |       |   |         |         |  |   |         |         |  |   |        |        |   |           |          
|                              | Residential mortgage (one to four family) |                        |   | 28,959      |           |             |   | 37,789     |         |              |   | 67,075       |         |       |   | 24,935  |         |  |   | 209,228 |         |  |   | 66,337 |        |   |           | 434,323   |          
|                              | Other                                     |                        |   | 47,184      |           |             |   | 25         |         |              |   |             |         |       |   | 20      |         |  |   |        |         |  |   | 697    |        |   |           | 47,926    |          
|                              |                                           |                        |   |             |           |             |   |            |         |              |   |              |         |       |   |         |         |  |   |         |         |  |   |        |        |   |           |          
|                              |                                           | Total consumer         |   |             | 76,143    |             |   |            | 37,814  |              |   |              | 67,075  |       |   |         | 24,955  |  |   |         | 209,228 |  |   |        | 67,034 |   |           |           | 482,249   | 
|                              |                                           |                        |   |             |           |             |   |            |         |              |   |              |         |       |   |         |         |  |   |         |         |  |   |        |        |   |           |          
|                              |                                           | Total gross loans      |   | $           | 2,406,116 |             |   | $          | 379,917 |              |   | $            | 518,312 |       |   | $       | 356,207 |  |   | $       | 328,340 |  |   | $      | 69,160 |   |           | $         | 4,058,052 | 
|                              |                                           |                        |   |             |           |             |   |            |         |              |   |              |         |       |   |         |         |  |   |         |         |  |   |        |        |   |           |          
|Net deferred origination fees |                                           |                        |   |             |           |             |   |            |         |              |   |              |         |       |   |         |         |  |   |         |         |  |   |        |        |   | (7,311    | )        
|                              |                                           |                        |   |             |           |             |   |            |         |              |   |              |         |       |   |         |         |  |   |         |         |  |   |        |        |   |           |          
|Loans                         |                                           |                        |   |             |           |             |   |            |         |              |   |              |         |       |   |         |         |  |   |         |         |  |   |        |        |   | 4,050,741 |          
|Allowance for loan losses     |                                           |                        |   |             |           |             |   |            |         |              |   |              |         |       |   |         |         |  |   |         |         |  |   |        |        |   | (56,472   | )        
|                              |                                           |                        |   |             |           |             |   |            |         |              |   |              |         |       |   |         |         |  |   |         |         |  |   |        |        |   |           |          
|Net loans                     |                                           |                        |   |             |           |             |   |            |         |              |   |              |         |       |   |         |         |  |   |         |         |  |   |        |        | $ | 3,994,269 |          
|                              |                                           |                        |   |             |           |             |   |            |         |              |   |              |         |       |   |         |         |  |   |         |         |  |   |        |        |   |           |          

44



---



##### 



The following table sets forth the contractual
maturity of gross loans at December 31, 2004. The table
does not include the effects of possible prepayments. The rate
of loan prepayment varies from time to time, depending upon
various factors, including market interest rates.

|                              |                                           |                        |   |             |         |             |   |            |         |              |   |              |         |       |   |           |           |  |   |         |         |  |   |         |         |   |           |           |           | 
|----------------------------- | ----------------------------------------- | ---------------------- | - | ----------- | ------- | ----------- | - | ---------- | ------- | ------------ | - | ------------ | ------- | ----- | - | --------- | --------- |  | - | ------- | ------- |  | - | ------- | ------- | - | --------- | --------- | --------- | 
|                              |                                           |                       
|                              |                                           | At December 31, 2004  
|                              |                                           |                       
|                              |                                           |                        |   | After       |         | After       |   | After      |         | After        |   |             
|                              |                                           |                        |   | One Year    |         | Three Years |   | Five Years |         | Ten Years    |   |             
|                              |                                           | Within                 |   | Through     |         | Through     |   | Through    |         | Through      |   | After        |         |      
|                              |                                           | One Year               |   | Three Years |         | Five Years  |   | Ten Years  |         | Twenty Years |   | Twenty Years |         | Total
|                              |                                           |                        |   |             |         |             |   |            |         |              |   |              |         |      
|                              |                                           |                       
|                              |                                           | (Dollars in Thousands)
|Commercial:                   |                                           |                        |   |             |         |             |   |            |         |              |   |              |         |       |   |           |           |  |   |         |         |  |   |         |         |   |           |          
|                              | Secured by real estate  nonresidential   |                        | $ | 37,299      |         |             | $ | 169,937    |         |              | $ | 482,855      |         |       | $ | 1,178,417 |           |  | $ | 58,103  |         |  | $ | 24,409  |         |   | $         | 1,951,020 |          
|                              | Secured by real estate  multifamily      |                        |   | 1,115       |         |             |   | 2,255      |         |              |   | 36,046       |         |       |   | 513,180   |           |  |   | 307,702 |         |  |   | 5,186   |         |   |           | 865,484   |          
|                              | Construction                              |                        |   | 256,599     |         |             |   | 34,481     |         |              |   |             |         |       |   |          |           |  |   |        |         |  |   |        |         |   |           | 291,080   |          
|                              | Business                                  |                        |   | 366,294     |         |             |   | 39,040     |         |              |   | 33,658       |         |       |   | 21,637    |           |  |   | 3,269   |         |  |   | 4,321   |         |   |           | 468,219   |          
|                              |                                           |                        |   |             |         |             |   |            |         |              |   |              |         |       |   |           |           |  |   |         |         |  |   |         |         |   |           |          
|                              |                                           | Total commercial       |   |             | 661,307 |             |   |            | 245,713 |              |   |              | 552,559 |       |   |           | 1,713,234 |  |   |         | 369,074 |  |   |         | 33,916  |   |           |           | 3,575,803 | 
|                              |                                           |                        |   |             |         |             |   |            |         |              |   |              |         |       |   |           |           |  |   |         |         |  |   |         |         |   |           |          
|Consumer:                     |                                           |                        |   |             |         |             |   |            |         |              |   |              |         |       |   |           |           |  |   |         |         |  |   |         |         |   |           |          
|                              | Residential mortgage (one to four family) |                        |   | 573         |         |             |   | 1,207      |         |              |   | 4,031        |         |       |   | 10,729    |           |  |   | 220,103 |         |  |   | 197,680 |         |   |           | 434,323   |          
|                              | Other                                     |                        |   | 1,955       |         |             |   | 119        |         |              |   | 597          |         |       |   | 20        |           |  |   | 4,639   |         |  |   | 40,596  |         |   |           | 47,926    |          
|                              |                                           |                        |   |             |         |             |   |            |         |              |   |              |         |       |   |           |           |  |   |         |         |  |   |         |         |   |           |          
|                              |                                           | Total consumer         |   |             | 2,528   |             |   |            | 1,326   |              |   |              | 4,628   |       |   |           | 10,749    |  |   |         | 224,742 |  |   |         | 238,276 |   |           |           | 482,249   | 
|                              |                                           |                        |   |             |         |             |   |            |         |              |   |              |         |       |   |           |           |  |   |         |         |  |   |         |         |   |           |          
|                              |                                           | Total gross loans      |   | $           | 663,835 |             |   | $          | 247,039 |              |   | $            | 557,187 |       |   | $         | 1,723,983 |  |   | $       | 593,816 |  |   | $       | 272,192 |   |           |           | 4,058,052 | 
|                              |                                           |                        |   |             |         |             |   |            |         |              |   |              |         |       |   |           |           |  |   |         |         |  |   |         |         |   |           |          
|Net deferred origination fees |                                           |                        |   |             |         |             |   |            |         |              |   |              |         |       |   |           |           |  |   |         |         |  |   |         |         |   | (7,311    | )        
|                              |                                           |                        |   |             |         |             |   |            |         |              |   |              |         |       |   |           |           |  |   |         |         |  |   |         |         |   |           |          
|Loans                         |                                           |                        |   |             |         |             |   |            |         |              |   |              |         |       |   |           |           |  |   |         |         |  |   |         |         |   | 4,050,741 |          
|Allowance for loan losses     |                                           |                        |   |             |         |             |   |            |         |              |   |              |         |       |   |           |           |  |   |         |         |  |   |         |         |   | (56,472   | )        
|                              |                                           |                        |   |             |         |             |   |            |         |              |   |              |         |       |   |           |           |  |   |         |         |  |   |         |         |   |           |          
|Net loans                     |                                           |                        |   |             |         |             |   |            |         |              |   |              |         |       |   |           |           |  |   |         |         |  |   |         |         | $ | 3,994,269 |          
|                              |                                           |                        |   |             |         |             |   |            |         |              |   |              |         |       |   |           |           |  |   |         |         |  |   |         |         |   |           |          

The following table sets forth the dollar amount
of all loans for which final payment is not due until after
December 31, 2005:

|            |                                           |                             |         |            |         |       |           |           |           |   |           |           |           | 
|----------- | ----------------------------------------- | --------------------------- | ------- | ---------- | ------- | ----- | --------- | --------- | --------- | - | --------- | --------- | --------- | 
|            |                                           |                            
|            |                                           | Due After December 31, 2005
|            |                                           |                            
|            |                                           | Fixed                       |         | Adjustable |         | Total
|            |                                           |                             |         |            |         |      
|            |                                           |                            
|            |                                           | (Dollars in Thousands)     
|Commercial: |                                           |                             |         |            |         |       |           |           |           |   |           |          
|            | Secured by real estate  nonresidential   |                             | $       | 174,333    |         |       | $         | 1,739,388 |           |   | $         | 1,913,721 |          
|            | Secured by real estate  multifamily      |                             |         | 68,657     |         |       |           | 795,712   |           |   |           | 864,368   |          
|            | Construction                              |                             |         | 7,549      |         |       |           | 26,932    |           |   |           | 34,481    |          
|            | Business                                  |                             |         | 9,708      |         |       |           | 92,217    |           |   |           | 101,926   |          
|            |                                           |                             |         |            |         |       |           |           |           |   |           |          
|            |                                           | Total commercial            |         |            | 260,247 |       |           |           | 2,654,249 |   |           |           | 2,914,496 | 
|            |                                           |                             |         |            |         |       |           |           |           |   |           |          
|Consumer:   |                                           |                             |         |            |         |       |           |           |           |   |           |          
|            | Residential mortgage (one to four family) |                             |         | 282,141    |         |       |           | 151,609   |           |   |           | 433,750   |          
|            | Other                                     |                             |         | 742        |         |       |           | 45,229    |           |   |           | 45,971    |          
|            |                                           |                             |         |            |         |       |           |           |           |   |           |          
|            |                                           | Total consumer              |         |            | 282,883 |       |           |           | 196,838   |   |           |           | 479,721   | 
|            |                                           |                             |         |            |         |       |           |           |           |   |           |          
|Total loans |                                           | $                           | 543,130 |            |         | $     | 2,851,087 |           |           | $ | 3,394,217 |          
|            |                                           |                             |         |            |         |       |           |           |           |   |           |          

45



---



##### 



The table below shows new loan commitments during
the years indicated:

|                  |                                           |                        |           |         |           |      |           |         |           |   |           |         |           | 
|----------------- | ----------------------------------------- | ---------------------- | --------- | ------- | --------- | ---- | --------- | ------- | --------- | - | --------- | ------- | --------- | 
|                  |                                           | 2004                   |           | 2003    |           | 2002
|                  |                                           |                        |           |         |           |     
|                  |                                           |                       
|                  |                                           | (Dollars in Thousands)
|Commercial:       |                                           |                        |           |         |           |      |           |         |           |   |           |        
|                  | Secured by real estate  nonresidential   |                        | $         | 748,506 |           |      | $         | 625,038 |           |   | $         | 355,662 |          
|                  | Secured by real estate  multifamily      |                        |           | 575,421 |           |      |           | 612,603 |           |   |           | 480,934 |          
|                  | Construction                              |                        |           | 421,924 |           |      |           | 344,352 |           |   |           | 269,771 |          
|                  | Business                                  |                        |           | 460,290 |           |      |           | 232,609 |           |   |           | 193,847 |          
|                  |                                           |                        |           |         |           |      |           |         |           |   |           |        
|                  |                                           | Total commercial loans |           |         | 2,206,141 |      |           |         | 1,814,602 |   |           |         | 1,300,214 | 
|Consumer:         |                                           |                        |           |         |           |      |           |         |           |   |           |        
|                  | Residential mortgage (one to four family) |                        |           | 234,522 |           |      |           | 199,169 |           |   |           | 128,371 |          
|                  | Home equity and other                     |                        |           | 39,677  |           |      |           | 34,605  |           |   |           | 32,198  |          
|                  |                                           |                        |           |         |           |      |           |         |           |   |           |        
|                  |                                           | Total consumer loans   |           |         | 274,199   |      |           |         | 233,774   |   |           |         | 160,569   | 
|                  |                                           |                        |           |         |           |      |           |         |           |   |           |        
|Total commitments |                                           | $                      | 2,480,340 |         |           | $    | 2,048,376 |         |           | $ | 1,460,783 |        
|                  |                                           |                        |           |         |           |      |           |         |           |   |           |        

As a result of our continued focus on commercial
lending activities, loan growth remained concentrated in our
commercial loan portfolio, which totaled $3.58 billion at
December 31, 2004, a 3.3% increase from $3.46 billion
at December 31, 2003.

Our commercial loan portfolio increased 29.6%
during 2003 from $2.67 billion at December 31, 2002,
to $3.46 billion at December 31, 2003.

Internal Loan
Securitizations.The Company manages
its risk-based capital level through a variety of means,
including internal loan securitizations. In such
securitizations, the Company exchanges either multifamily or
residential mortgage (one to four family) loans for Fannie Mae
(FNMA) securities. Residential mortgage (one to four
family) loans are generally included in the 50% risk weight for
risk-based capital purposes, whereas multifamily loans may fall
either into the 50% or 100% risk weight depending on the
specific criteria of each individual loan. FNMA securities are
classified as a 20% risk weight.

These internal securitizations do not have a cash
impact to the Company, since selected loans from the
Companys loan portfolio are exchanged for FNMA securities.
Such securities are represented by exactly the same loans
previously held in the Companys loan portfolio. The FNMA
securities are generally held as available-for-sale
(AFS) securities in the Companys investment
and mortgage-backed securities portfolio.

Through these securitization transactions, the
Company also reduces its credit risk. In these securitizations,
the Company fully transfers credit risk on the related loans to
FNMA. The Companys yield on the FNMA securities is lower
than the average yield on the underlying loans. This difference
is the guarantee fee that is retained by FNMA as compensation
for relieving the Company of the credit risk on these loans.
Since the Company retains all of the securities issued by FNMA
in the securitization, no gain or loss is recognized on the
exchange transaction. The Company continues to service the loans
included in these securitizations. In addition, these
securitization transactions improve the Companys
liquidity, since FNMA securities receive more favorable
treatment as a collateral base for borrowings than do whole
loans.

The Company internally securitized
$147.1 million of multifamily loans for 2004; and
$91.9 million and $194.2 million of residential
mortgage (one to four family) loans and of multifamily loans for
2003, respectively.

Risk Elements.We
generally place loans on nonaccrual status when they become
90 days past due, unless the loan is both well secured and
in the process of collection. Loans may be placed on nonaccrual
status earlier if, in managements opinion, the full and
timely collection of principal or interest becomes uncertain.
When a loan is placed on nonaccrual status, unpaid accrued
interest is charged against interest income. We charge off loans
when we determine that collection has become unlikely. Other
real estate owned (OREO), of which the Bank has
none, would consist of real estate acquired by us through
foreclosure.

46



---



##### 



The following is the Banks risk elements
table at the dates indicated:

|                                                                            |             |                                           |                            |      |       |           |       |      |       |           |       |   |       |           |       |   |     |           |      |   |       |           | 
|--------------------------------------------------------------------------- | ----------- | ----------------------------------------- | -------------------------- | ---- | ----- | --------- | ----- | ---- | ----- | --------- | ----- | - | ----- | --------- | ----- | - | --- | --------- | ---- | - | ----- | --------- | 
|                                                                            |             |                                          
|                                                                            |             | At December 31,                          
|                                                                            |             |                                          
|                                                                            |             | 2004                                      |                            | 2003 |       | 2002      |       | 2001 |       | 2000     
|                                                                            |             |                                           |                            |      |       |           |       |      |       |          
|                                                                            |             |                                          
|                                                                            |             | (Dollars in Thousands)                   
|Nonaccrual loans:                                                           |             |                                           |                            |      |       |           |       |      |       |           |       |   |       |           |       |   |     |           |      |  
|                                                                            | Commercial: |                                           |                            |      |       |           |       |      |       |           |       |   |       |           |       |   |     |           |      |   |      
|                                                                            |             | Secured by real estate  nonresidential   |                            | $    | 8,085 |           |       | $    |      |           |       | $ |      |           |       | $ |    |           |      | $ | 740   |          
|                                                                            |             | Secured by real estate  multifamily      |                            |      |      |           |       |      |      |           |       |   |      |           |       |   | 210 |           |      |   |      |          
|                                                                            |             | Construction                              |                            |      | 4,353 |           |       |      | 5,102 |           |       |   | 4,533 |           |       |   |    |           |      |   | 104   |          
|                                                                            |             | Business                                  |                            |      | 136   |           |       |      | 631   |           |       |   | 68    |           |       |   |    |           |      |   |      |          
|                                                                            |             |                                           |                            |      |       |           |       |      |       |           |       |   |       |           |       |   |     |           |      |  
|                                                                            |             |                                           | Total commercial           |      |       | 12,574    |       |      |       | 5,733     |       |   |       | 4,601     |       |   |     | 210       |      |   |       | 844       | 
|                                                                            |             |                                           |                            |      |       |           |       |      |       |           |       |   |       |           |       |   |     |           |      |  
|                                                                            | Consumer:   |                                           |                            |      |       |           |       |      |       |           |       |   |       |           |       |   |     |           |      |   |      
|                                                                            |             | Residential mortgage (one to four family) |                            |      |      |           |       |      | 124   |           |       |   |      |           |       |   | 781 |           |      |   | 1,672 |          
|                                                                            |             | Other                                     |                            |      |      |           |       |      |      |           |       |   | 53    |           |       |   |    |           |      |   |      |          
|                                                                            |             |                                           |                            |      |       |           |       |      |       |           |       |   |       |           |       |   |     |           |      |  
|                                                                            |             |                                           | Total consumer             |      |       |          |       |      |       | 124       |       |   |       | 53        |       |   |     | 781       |      |   |       | 1,672     | 
|                                                                            |             |                                           |                            |      |       |           |       |      |       |           |       |   |       |           |       |   |     |           |      |  
|                                                                            |             |                                           | Total nonaccrual loans     |      |       | 12,574    |       |      |       | 5,857     |       |   |       | 4,654     |       |   |     | 991       |      |   |       | 2,516     | 
|Other real estate owned (OREO)                                              |             |                                           |                           |      |       |           |      |      |       |           |      |   |       |           |      |   |     |           | 115  |  
|                                                                            |             |                                           |                            |      |       |           |       |      |       |           |       |   |       |           |       |   |     |           |      |  
|                                                                            |             |                                           | Total nonperforming assets |      | $     | 12,574    |       |      | $     | 5,857     |       |   | $     | 4,654     |       |   | $   | 991       |      |   | $     | 2,631     | 
|                                                                            |             |                                           |                            |      |       |           |       |      |       |           |       |   |       |           |       |   |     |           |      |  
|Nonperforming assets to total assets                                        |             |                                           | 0.20                       | %    |       |           | 0.10  | %    |       |           | 0.10  | % |       |           | 0.03  | % |     |           | 0.11 | %
|Nonaccrual loans to total loans                                             |             |                                           | 0.31                       |      |       |           | 0.16  |      |       |           | 0.15  |   |       |           | 0.04  |   |     |           | 0.13 |  
|Nonperforming assets to total loans and OREO                                |             |                                           | 0.31                       |      |       |           | 0.16  |      |       |           | 0.15  |   |       |           | 0.04  |   |     |           | 0.14 |  
|                                                                            |             |                                           | Total loans                |      | $     | 4,050,741 |       |      | $     | 3,771,381 |       |   | $     | 3,027,810 |       |   | $   | 2,264,303 |      |   | $     | 1,931,822 | 
|                                                                            |             |                                           |                            |      |       |           |       |      |       |           |       |   |       |           |       |   |     |           |      |  
|Gross income not recognized on nonaccrual loans                             |             | $                                         | 699                        |      |       | $         | 363   |      |       | $         | 211   |   |       | $         | 24    |   |     | $         | 116  |  
|Accruing loans contractually past due
    90 days or more                   |             |                                           | 3,101                      |      |       |           | 1,469 |      |       |           | 4,302 |   |       |           | 1,269 |   |     |           |     |  
|Loans classified as troubled debt restructurings
    but not included above |             |                                           | 11,329                     |      |       |           | 9,094 |      |       |           |      |   |       |           |      |   |     |           |     |  

Total nonperforming assets were
$12.6 million at December 31, 2004, an increase of
$6.7 million, from $5.9 million at December 31,
2003. The increase was primarily attributable to four
non-residential loans secured by real estate.

The ratio of nonperforming assets to total assets
was 0.20% at December 31, 2004, compared with 0.10% at
December 31, 2003 and 2002. Total nonperforming assets
increased to $5.9 million at December 31, 2003, from
$4.7 million at December 31, 2002. The 2003 increase
was primarily due to two construction loans to the same borrower
on the same property that were over 90 days past due.

The Banks policy is to record OREO at the
lower of carrying value or fair value less estimated disposal
costs. Any write-down of OREO would be charged to earnings.

The $11.3 million performing restructured
amount in the table above represents two loans. The restructured
classification for the performing commercial real estate loan of
$8.9 million is due to the Bank making interest rate
concessions on a separate loan in the amount of
$1.7 million to the same obligor secured by the same
property. The fully drawn outstanding balance on the separate
loan is $1.7 million and is included

47



---



##### 



in the nonaccrual commercial real estate in the
table above. The other performing restructured loan is
represented by a commercial business loan of $2.4 million
where the Company provided an interest rate concession.


With the exception of the loans described in the
above and the classified loans, we are not aware of any other
loans as of December 31, 2004, where the known credit
problems of the borrower lead us to believe that they will not
comply with their repayment schedule, or that would result in
the loan being included in the nonperforming loan table at a
future date.

Since 1998, we have engaged an independent loan
review firm to examine the classification of our commercial loan
portfolio. The firm reviews new commercial loan commitments in
excess of $100,000 and also conducts annual reviews based on a
specified criteria. The firm is comprised of former bank
regulators and former bankers. They have not made any material
recommendation for changes to our classifications as a result of
their review since 1998.

Management cannot predict the extent to which
economic conditions in the Banks market area may worsen or
the full impact that such conditions may have on the Banks
loan portfolio. Accordingly, there can be no assurance that
other loans will not become 90 days or more past due, be
placed on nonaccrual status, or become impaired or restructured
loans or OREO in the future.

We have a risk rating process to which all loans
in the portfolio are subjected. Criticized loans are classified
in the following categories:



| |   |                                                                                                                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Special Mention: loans that should
    not yet be adversely classified but have credit deficiencies or
    potential weaknesses that warrant our attention.                                                              
|
| |  | Substandard: loans with one or more
    well-defined weaknesses, which have the distinct possibility
    that we will sustain some loss if the weaknesses are not
    corrected.                                         
|
| |  | Doubtful: loans with the weaknesses
    of a substandard loan plus such weaknesses, which make
    collection or liquidation in full questionable, based on current
    information, and have a high probability of loss.
|
| |  | Loss: loans considered uncollectible.                                                                                                                                                                                    

Allowance for Loan
Losses.The allowance for loan losses
covers the commercial and consumer loan portfolio. The allowance
for loan losses is intended to adjust the value of the
Companys loan assets for probable credit losses inherent
at the balance sheet date in accordance with GAAP. The
methodology for calculating the allowance involves significant
judgment. First and foremost, it involves early detection of
credits that are deteriorating. Second, it involves
managements judgment to derive loss factors.

Loans are reviewed for information affecting the
obligors ability to fulfill its obligations. In assessing
the risk grading of a particular loan, the factors considered
include the obligors debt capacity and financial
flexibility, the level of earnings of the borrowers, the amount
and sources of repayment, the level and nature of contingencies,
management strength, the quality of the collateral, and the
industry in which the borrower operates. These factors are based
on an evaluation of historical information as well as subjective
assessment and interpretation. Emphasizing one factor over
another or considering additional factors that may be relevant
in determining the risk grading of a particular loan, but which
are not currently an explicit part of the Companys
methodology, could affect the risk grade assigned to that loan.

Management also applies judgment to derive loss
factors associated with each credit facility. These loss factors
are considered by type of obligor and collateral. Whenever
possible, the Company uses its own historical loss experience or
independent verifiable data to estimate the loss factors. Many
factors can affect managements estimates of a loss factor.
The application of different loss factors will change the amount
of the allowance for credit losses determined to be appropriate
by the Company. Given the process the Company follows in
determining the risk grading of its loans, management believes
the current risk gradings assigned to loans are appropriate.

48



---



##### 



Managements judgment is also applied when
considering uncertainties based on current macroeconomic
conditions and other factors. For example, judgment as to the
economic and business conditions in the areas and markets in
which the Company and the Bank operate will affect
managements assessment of potential losses based on
exposure to that marketplace. Notwithstanding the judgment
required in assessing the allowance for loan losses, the Company
believes its estimate for the allowance for loan losses is
adequate.

The following table sets forth information
concerning our allowance for loan losses and allowance for
losses related to unfunded commitments for the dates indicated:

|                                                |                           |                                           |                   |       |       |       |        |       |       |       |        |       |       |       |        |       |     |     |        |       |     |     | 
|----------------------------------------------- | ------------------------- | ----------------------------------------- | ----------------- | ----- | ----- | ----- | ------ | ----- | ----- | ----- | ------ | ----- | ----- | ----- | ------ | ----- | --- | --- | ------ | ----- | --- | --- | 
|                                                |                           |                                          
|                                                |                           | For the Years Ended December 31,         
|                                                |                           |                                          
|                                                |                           | 2004                                      |                   | 2003  |       | 2002  |        | 2001  |       | 2000 
|                                                |                           |                                           |                   |       |       |       |        |       |       |      
|                                                |                           |                                          
|                                                |                           | (Dollars in Thousands)                   
|Balance at beginning of year:                   |                           |                                           |                   |       |       |       |        |       |       |       |        |       |       |       |        |       |     |     |        |      
|Allowance for loan losses                       |                           | $                                         | 58,126            |       |       | $     | 48,865 |       |       | $     | 34,550 |       |       | $     | 28,901 |       |     | $   | 19,503 |      
|Allowance for losses  unfunded
    commitments |                           |                                           | 2,737             |       |       |       |       |       |       |       |       |       |       |       |       |       |     |     |       |      
|                                                |                           |                                           |                   |       |       |       |        |       |       |       |        |       |       |       |        |       |     |     |        |      
|Total allowance for losses at beginning of year |                           |                                           | 60,863            |       |       |       | 48,865 |       |       |       | 34,550 |       |       |       | 28,901 |       |     |     | 19,503 |      
|Acquired allowance for loan losses              |                           |                                           |                  |       |       |       | 4,028  |       |       |       | 10,162 |       |       |       |       |       |     |     |       |      
|                                                | Provision for loan losses |                                           |                   | 4,202 |       |       |        | 9,967 |       |       |        | 9,673 |       |       |        | 5,620 |     |     |        | 9,765 |    
|Charge-offs:                                    |                           |                                           |                   |       |       |       |        |       |       |       |        |       |       |       |        |       |     |     |        |      
|                                                | Commercial:               |                                           |                   |       |       |       |        |       |       |       |        |       |       |       |        |       |     |     |        |       |    
|                                                |                           | Secured by real estate  nonresidential   |                   |       | 1,577 |       |        |       | 87    |       |        |       |      |       |        |       |    |     |        |       | 551 |    
|                                                |                           | Secured by real estate  multifamily      |                   |       | 127   |       |        |       |      |       |        |       |      |       |        |       |    |     |        |       |    |    
|                                                |                           | Construction                              |                   |       |      |       |        |       | 170   |       |        |       | 2,172 |       |        |       |    |     |        |       |    |    
|                                                |                           | Business                                  |                   |       | 2,985 |       |        |       | 2,713 |       |        |       | 3,337 |       |        |       | 121 |     |        |       | 165 |    
|                                                |                           |                                           |                   |       |       |       |        |       |       |       |        |       |       |       |        |       |     |     |        |      
|                                                |                           |                                           | Total commercial  |       |       | 4,689 |        |       |       | 2,970 |        |       |       | 5,509 |        |       |     | 121 |        |       |     | 716 | 
|                                                |                           |                                           |                   |       |       |       |        |       |       |       |        |       |       |       |        |       |     |     |        |      
|                                                | Consumer:                 |                                           |                   |       |       |       |        |       |       |       |        |       |       |       |        |       |     |     |        |       |    
|                                                |                           | Residential mortgage (one to four family) |                   |       |      |       |        |       |      |       |        |       |      |       |        |       |    |     |        |       | 37  |    
|                                                |                           | Other                                     |                   |       | 109   |       |        |       | 379   |       |        |       | 54    |       |        |       |    |     |        |       | 164 |    
|                                                |                           |                                           |                   |       |       |       |        |       |       |       |        |       |       |       |        |       |     |     |        |      
|                                                |                           |                                           | Total consumer    |       |       | 109   |        |       |       | 379   |        |       |       | 54    |        |       |     |    |        |       |     | 201 | 
|                                                |                           |                                           |                   |       |       |       |        |       |       |       |        |       |       |       |        |       |     |     |        |      
|                                                |                           |                                           | Total charge-offs |       |       | 4,798 |        |       |       | 3,349 |        |       |       | 5,563 |        |       |     | 121 |        |       |     | 917 | 
|                                                |                           |                                           |                   |       |       |       |        |       |       |       |        |       |       |       |        |       |     |     |        |      
|Recoveries:                                     |                           |                                           |                   |       |       |       |        |       |       |       |        |       |       |       |        |       |     |     |        |      
|                                                | Commercial:               |                                           |                   |       |       |       |        |       |       |       |        |       |       |       |        |       |     |     |        |       |    
|                                                |                           | Secured by real estate  nonresidential   |                   |       |      |       |        |       | 30    |       |        |       |      |       |        |       |    |     |        |       | 535 |    
|                                                |                           | Secured by real estate  multifamily      |                   |       |      |       |        |       |      |       |        |       |      |       |        |       |    |     |        |       |    |    
|                                                |                           | Construction                              |                   |       |      |       |        |       | 300   |       |        |       |      |       |        |       |    |     |        |       |    |    
|                                                |                           | Business                                  |                   |       | 119   |       |        |       | 952   |       |        |       | 13    |       |        |       | 68  |     |        |       |    |    
|                                                |                           |                                           |                   |       |       |       |        |       |       |       |        |       |       |       |        |       |     |     |        |      
|                                                |                           |                                           | Total commercial  |       |       | 119   |        |       |       | 1,282 |        |       |       | 13    |        |       |     | 68  |        |       |     | 535 | 
|                                                |                           |                                           |                   |       |       |       |        |       |       |       |        |       |       |       |        |       |     |     |        |      
|                                                | Consumer:                 |                                           |                   |       |       |       |        |       |       |       |        |       |       |       |        |       |     |     |        |       |    
|                                                |                           | Residential mortgage (one to four family) |                   |       |      |       |        |       |      |       |        |       |      |       |        |       |    |     |        |       |    |    
|                                                |                           | Other                                     |                   |       | 26    |       |        |       | 70    |       |        |       | 30    |       |        |       | 82  |     |        |       | 15  |    
|                                                |                           |                                           |                   |       |       |       |        |       |       |       |        |       |       |       |        |       |     |     |        |      
|                                                |                           |                                           | Total consumer    |       |       | 26    |        |       |       | 70    |        |       |       | 30    |        |       |     | 82  |        |       |     | 15  | 
|                                                |                           |                                           |                   |       |       |       |        |       |       |       |        |       |       |       |        |       |     |     |        |      
|                                                |                           |                                           | Total recoveries  |       |       | 145   |        |       |       | 1,352 |        |       |       | 43    |        |       |     | 150 |        |       |     | 550 | 
|                                                |                           |                                           |                   |       |       |       |        |       |       |       |        |       |       |       |        |       |     |     |        |      
|Total allowance for losses at end of year       |                           | $                                         | 60,412            |       |       | $     | 60,863 |       |       | $     | 48,865 |       |       | $     | 34,550 |       |     | $   | 28,901 |      
|                                                |                           |                                           |                   |       |       |       |        |       |       |       |        |       |       |       |        |       |     |     |        |      
|Allowance for loan losses                       |                           | $                                         | 56,472            |       |       | $     | 58,126 |       |       | $     | 48,865 |       |       | $     | 34,550 |       |     | $   | 28,901 |      
|Allowance for losses  unfunded
    commitments |                           |                                           | 3,940             |       |       |       | 2,737  |       |       |       |       |       |       |       |       |       |     |     |       |      
|                                                |                           |                                           |                   |       |       |       |        |       |       |       |        |       |       |       |        |       |     |     |        |      
|Total allowance for losses at end of year       |                           | $                                         | 60,412            |       |       | $     | 60,863 |       |       | $     | 48,865 |       |       | $     | 34,550 |       |     | $   | 28,901 |      
|                                                |                           |                                           |                   |       |       |       |        |       |       |       |        |       |       |       |        |       |     |     |        |      
|Allowance for loan losses to ending loans(1)    |                           |                                           | 1.39              | %     |       |       | 1.54   | %     |       |       | 1.61   | %     |       |       | 1.53   | %     |     |     | 1.50   | %    
|Net charge-offs to average loans outstanding(2) |                           |                                           | 0.11              |       |       |       | 0.06   |       |       |       | 0.23   |       |       |       | 0.00   |       |     |     | 0.02   |      



---



|    |                                                                                                                                                                  
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Ratio of allowance for loan losses to ending
    loans for December 31, 2004 and 2003 are based on loans
    held in portfolio, and excludes loans held for sale.

49



---



##### 





|    |                                                                                                                                                  
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Average loans balance includes loans held for
    sale, as such amounts were reclassified in December 2004 at
    the time the decision was made.

The loan loss provision for the year ended
December 31, 2004, was $4.2 million, compared with a
provision of $10.0 million for the year ended
December 31, 2003. The allowance for loan losses was
$56.5 million and $58.1 million at December 31,
2004 and 2003, respectively. The reduction in the allowance for
loan losses, and the related provision for loan losses reflects
the following:



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | the Banks continued quarterly process of
    re-evaluating its loss factors in light of its own historical
    loss experience, loan delinquency and classification, and
    economic outlook and other data. In conjunction with this
    evaluation, the loan loss factors for the commercial real estate
    portfolio were reduced as a result of the Company expanding the
    review process of the commercial real estate credits. In doing
    so, the Company determined that the inherent volatility risk in
    the portfolio was decreased due to stronger identification,
    administration and action plan implementation on credits in the
    commercial real estate portfolio. The loan loss factor on the
    aggregate consumer portfolio was also reduced, reflecting the
    significantly lower credit card portfolio which has higher
    inherent risk than other components of the consumer portfolio;
|
| | (b) | the reclassification of $326.0 million of
    loans held for sale during the year for which the related
    allowance was required to be reversed;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| | (c) | the sale of $362.4 million of multifamily
    loans during the year; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| | (d) | the upgrade of certain classified loans due to
    sustained credit performance.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

The decrease in the allowance for loan losses as
a result of the factors discussed above was partially offset by
an increase resulting from higher loan originations during the
year and an increase in the overall nonperforming loans.

The foregoing four factors, primarily occurring
in the fourth quarter of 2004, resulted in a negative loan loss
provision of $626,000 in the fourth quarter of 2004.

During 2003, we increased the allowance for loan
losses to $58.1 million from $48.9 million at
December 31, 2002, an increase of $9.2 million, or
18.8%. This increase was primarily due to the continued growth
of the commercial loan portfolio and the resulting increase in
the risk profile inherent in the portfolio. The increased
allowance resulted from a provision of $10.0 million
coupled with the $4.0 million for allowance for loan losses
from FCB, net of net charge-offs of $2.0 million during the
year, partially offset by a $2.7 million reclassification
of allowance for unfunded commitments to other liabilities.

50



---



##### 



The following table presents an analysis of the
allocation of our allowance for loan losses at the dates
indicated. The allocation of the allowance to each category is
not necessarily indicative of future loss in any particular
category and does not restrict our use of the allowance to
absorb losses in other categories.

|                                                      |                                           |                        |        |        |        |        |        |       |       |        |        |        |        |        |        |       |       |        |        |        |        |  |        |       |       |   |        |        |        |  |        |       |       |   |        |        |        |  |        |       |       | 
|----------------------------------------------------- | ----------------------------------------- | ---------------------- | ------ | ------ | ------ | ------ | ------ | ----- | ----- | ------ | ------ | ------ | ------ | ------ | ------ | ----- | ----- | ------ | ------ | ------ | ------ |  | ------ | ----- | ----- | - | ------ | ------ | ------ |  | ------ | ----- | ----- | - | ------ | ------ | ------ |  | ------ | ----- | ----- | 
|                                                      |                                           |                       
|                                                      |                                           | At December 31,       
|                                                      |                                           |                       
|                                                      |                                           |                        |        |        |        |        |        |       |       |       
|                                                      |                                           | 2004                   |        | 2003   |        | 2002   |        | 2001  |       | 2000  
|                                                      |                                           |                        |        |        |        |        |        |       |       |       
|                                                      |                                           | Amount                 |        | %(1)   |        | Amount |        | %(1)  |       | Amount |        | %(1)   |        | Amount |        | %(1)  |       | Amount |        | %(1)  
|                                                      |                                           |                        |        |        |        |        |        |       |       |        |        |        |        |        |        |       |       |        |        |       
|                                                      |                                           |                       
|                                                      |                                           | (Dollars in Thousands)
|Allocated:                                            |                                           |                        |        |        |        |        |        |       |       |        |        |        |        |        |        |       |       |        |        |        |        |  |        |       |       |   |        |        |        |  |        |       |       |   |        |        |        |  |        |      
|Commercial:                                           |                                           |                        |        |        |        |        |        |       |       |        |        |        |        |        |        |       |       |        |        |        |        |  |        |       |       |   |        |        |        |  |        |       |       |   |        |        |        |  |        |      
|                                                      | Secured by real estate  nonresidential   |                        | $      | 26,047 |        |        |        | 48.08 | %     |        | $      | 26,702 |        |        |        | 45.24 | %     |        | $      | 18,647 |        |  |        | 42.20 | %     |   | $      | 11,435 |        |  |        | 35.22 | %     |   | $      | 10,321 |        |  |        | 30.91 | %    
|                                                      | Secured by real estate  multifamily      |                        |        | 629    |        |        |        | 21.33 |       |        |        | 5,263  |        |        |        | 30.76 |       |        |        | 8,977  |        |  |        | 30.16 |       |   |        | 6,087  |        |  |        | 29.86 |       |   |        | 4,572  |        |  |        | 26.61 |      
|                                                      | Construction                              |                        |        | 7,419  |        |        |        | 7.17  |       |        |        | 9,274  |        |        |        | 7.77  |       |        |        | 9,275  |        |  |        | 7.13  |       |   |        | 4,654  |        |  |        | 8.05  |       |   |        | 3,646  |        |  |        | 6.82  |      
|                                                      | Business                                  |                        |        | 12,489 |        |        |        | 11.54 |       |        |        | 6,011  |        |        |        | 7.83  |       |        |        | 7,017  |        |  |        | 8.63  |       |   |        | 4,401  |        |  |        | 7.21  |       |   |        | 2,788  |        |  |        | 5.14  |      
|                                                      |                                           |                        |        |        |        |        |        |       |       |        |        |        |        |        |        |       |       |        |        |        |        |  |        |       |       |   |        |        |        |  |        |       |       |   |        |        |        |  |        |      
|                                                      |                                           | Total commercial       |        |        | 46,584 |        |        |       | 88.12 |        |        |        | 47,250 |        |        |       | 91.60 |        |        |        | 43,916 |  |        |       | 88.12 |   |        |        | 26,577 |  |        |       | 80.34 |   |        |        | 21,327 |  |        |       | 69.48 | 
|                                                      |                                           |                        |        |        |        |        |        |       |       |        |        |        |        |        |        |       |       |        |        |        |        |  |        |       |       |   |        |        |        |  |        |       |       |   |        |        |        |  |        |      
|Consumer:                                             |                                           |                        |        |        |        |        |        |       |       |        |        |        |        |        |        |       |       |        |        |        |        |  |        |       |       |   |        |        |        |  |        |       |       |   |        |        |        |  |        |      
|                                                      | Residential mortgage (one to four family) |                        |        | 728    |        |        |        | 10.70 |       |        |        | 292    |        |        |        | 7.26  |       |        |        | 1,555  |        |  |        | 10.25 |       |   |        | 2,187  |        |  |        | 18.96 |       |   |        | 2,930  |        |  |        | 29.68 |      
|                                                      | Other                                     |                        |        | 330    |        |        |        | 1.18  |       |        |        | 465    |        |        |        | 1.14  |       |        |        | 635    |        |  |        | 1.63  |       |   |        | 183    |        |  |        | 0.70  |       |   |        | 173    |        |  |        | 0.84  |      
|                                                      |                                           |                        |        |        |        |        |        |       |       |        |        |        |        |        |        |       |       |        |        |        |        |  |        |       |       |   |        |        |        |  |        |       |       |   |        |        |        |  |        |      
|                                                      |                                           | Total consumer         |        |        | 1,058  |        |        |       | 11.88 |        |        |        | 757    |        |        |       | 8.40  |        |        |        | 2,190  |  |        |       | 11.88 |   |        |        | 2,370  |  |        |       | 19.66 |   |        |        | 3,103  |  |        |       | 30.52 | 
|                                                      |                                           |                        |        |        |        |        |        |       |       |        |        |        |        |        |        |       |       |        |        |        |        |  |        |       |       |   |        |        |        |  |        |       |       |   |        |        |        |  |        |      
|Total allocated                                       |                                           |                        | 47,642 |        |        |        | 100.00 | %     |       |        | 48,007 |        |        |        | 100.00 | %     |       |        | 46,106 |        |        |  | 100.00 | %     |       |   | 28,947 |        |        |  | 100.00 | %     |       |   | 24,430 |        |        |  | 100.00 | %    
|                                                      |                                           |                        |        |        |        |        |        |       |       |        |        |        |        |        |        |       |       |        |        |        |        |  |        |       |       |   |        |        |        |  |        |       |       |   |        |        |        |  |        |      
|Unallocated                                           |                                           |                        | 8,830  |        |        |        |        |       |       |        | 10,122 |        |        |        |        |       |       |        | 2,759  |        |        |  |        |       |       |   | 5,603  |        |        |  |        |       |       |   | 4,471  |        |        |  |        |      
|                                                      |                                           |                        |        |        |        |        |        |       |       |        |        |        |        |        |        |       |       |        |        |        |        |  |        |       |       |   |        |        |        |  |        |       |       |   |        |        |        |  |        |      
|Total allowance for loan losses                       |                                           | $                      | 56,472 |        |        |        |        |       |       | $      | 58,129 |        |        |        |        |       |       | $      | 48,865 |        |        |  |        |       |       | $ | 34,550 |        |        |  |        |       |       | $ | 28,901 |        |        |  |        |      
|                                                      |                                           |                        |        |        |        |        |        |       |       |        |        |        |        |        |        |       |       |        |        |        |        |  |        |       |       |   |        |        |        |  |        |       |       |   |        |        |        |  |        |      
|Total allowance for losses  unfunded
    commitments |                                           | $                      | 3,940  |        |        |        |        |       |       | $      | 2,737  |        |        |        |        |       |       | $      |       |        |        |  |        |       |       | $ |       |        |        |  |        |       |       | $ |       |        |        |  |        |      
|                                                      |                                           |                        |        |        |        |        |        |       |       |        |        |        |        |        |        |       |       |        |        |        |        |  |        |       |       |   |        |        |        |  |        |       |       |   |        |        |        |  |        |      



---



|    |                                                                                                                   
|--- | ------------------------------------------------------------------------------------------------------------------
|(1) | Percentages represent gross loan category as a
    percentage of total gross loans, excluding loans held for sale.

Securities.The
Company maintains an investment and mortgage-backed securities
portfolio (portfolio) to provide both liquidity and
enhance the income of the organization. The portfolio is
comprised of two segments: Available For Sale (AFS)
and Held to Maturity (HTM). The Company does not
maintain a trading portfolio. The Company carries the AFS
portfolio at fair value, with unrealized changes in the fair
value of the securities reflected as Accumulated Other
Comprehensive Income (Loss). At the end of each month, the
Company adjusts the carrying value of its AFS portfolio to
reflect the current fair value of each security. The HTM
portfolio is carried at amortized cost. At the time a security
is purchased, the Company classifies it either as AFS or HTM.
Securities are classified as HTM if the Company has the positive
intent and ability to hold such securities to maturity.

The Companys portfolio investments are
governed by the Asset/Liability Policy (A/L Policy),
which is approved by the Board of Directors of the Company. The
A/L Policy sets forth exposure limits for selected investments,
as a function of total assets, total securities and Tier I
Capital. The A/L Policy further sets forth maximum maturity and
duration limits for securities. The A/L Policy also further
limits the concentration in a particular investment as a
function of the total issue. The A/L Policy sets forth goals for
each type of investment with respect to Return on Assets, Return
on Equity and Return on Risk-Based Capital. It also sets forth
limits for interest rate sensitivity for each type of investment.

Permitted investments include
U.S. Government obligations, agency securities, municipal
obligations, investment grade securities, commercial paper,
corporate debt, money market mutual funds and guaranteed
preferred beneficial interests in junior subordinated
debentures. The Companys Board has directed management to
invest in securities with the objective of optimizing the yield
on investments that appropriately balances the risk-based
capital utilization and interest rate sensitivity. The A/L
Policy requires that all securities be of investment grade at
the time of purchase.

51



---



##### 



To protect against the accelerating prepayment
speed of the securities portfolio due to the lower market
interest rate environment, the Company implemented a securities
portfolio restructuring strategy during the quarter ended
June 30, 2003. Under this strategy, the Company began
selling securities which had the highest exposure to prepayment
and interest rate risk, and purchased shorter-dated securities
with reduced prepayment and interest rate risk.

The securities portfolio (including available for
sale and held to maturity) totaled $1.49 billion at
December 31, 2004, compared with $1.51 billion at
December 31, 2003. The decrease of $11.4 million, or
0.76%, in the securities portfolio resulted primarily from the
sales of $809.1 million, principal repayments and
securities calls of $300.2 million, and maturities/payoffs
of $552.4 million; partially offset by security purchases
of $1.51 billion, and internal securitization of
multifamily and residential mortgage (one to four family) loans.
The Company intends to continue restructuring its balance sheet
by accelerating the organic growth of its loan portfolio and
decreasing securities concentration.

The portfolio provides liquidity for the
Companys operations. Such liquidity can either be realized
through the sale of AFS securities or through borrowing.
Securities are generally pledged as collateral for any such
borrowings.

During 2004, the Company increased its
held-to-maturity securities portfolio from $284.7 million
at December 31, 2003, to $325.2 million. This increase
of $40.5 million resulted from purchased securities during
the period that were classified as held to maturity, a
reflection of the Companys intent and ability to hold
these securities to maturity based upon our liquidity position
and the size of our portfolio. The Company plans from
time-to-time to continue to purchase securities for its
held-to-maturity portfolio. However, for the foreseeable future,
the Company expects that the preponderance of its securities
portfolio will be classified as available for sale.

52



---



##### 



The following table presents our securities
portfolio at the dates indicated:

|                                                                        |                            |                                                         |           |         |           |                        |           |         |           |           |           |         |           |   |           |         |           |   |           |         |           |   |           |         |           | 
|----------------------------------------------------------------------- | -------------------------- | ------------------------------------------------------- | --------- | ------- | --------- | ---------------------- | --------- | ------- | --------- | --------- | --------- | ------- | --------- | - | --------- | ------- | --------- | - | --------- | ------- | --------- | - | --------- | ------- | --------- | 
|                                                                        |                            |                                                        
|                                                                        |                            | At December 31,                                        
|                                                                        |                            |                                                        
|                                                                        |                            |                                                         |           |         |           |                       
|                                                                        |                            | 2004                                                    |           | 2003    |           | 2002                  
|                                                                        |                            |                                                         |           |         |           |                       
|                                                                        |                            | Amortized                                               |           | Market  |           | Amortized              |           | Market  |           | Amortized |           | Market 
|                                                                        |                            | Cost                                                    |           | Value   |           | Cost                   |           | Value   |           | Cost      |           | Value  
|                                                                        |                            |                                                         |           |         |           |                        |           |         |           |           |           |        
|                                                                        |                            |                                                         |           |         |           |                        |           |         |           |          
|                                                                        |                            |                                                         |           |         |           | (Dollars in Thousands) |           |         |           |          
|Investment securities available for sale:                               |                            |                                                         |           |         |           |                        |           |         |           |           |           |         |           |   |           |         |           |   |           |         |           |   |           |        
|                                                                        | Trust Preferred Securities |                                                         | $         | 18,441  |           |                        | $         | 18,219  |           |           | $         | 13,189  |           |   | $         | 12,795  |           |   | $         | 62,313  |           |   | $         | 58,176  |          
|                                                                        | Federal Agency Notes       |                                                         |           | 232,594 |           |                        |           | 230,046 |           |           |           | 222,309 |           |   |           | 218,753 |           |   |           | 45,252  |           |   |           | 45,304  |          
|                                                                        | Foreign Debt Securities    |                                                         |           |        |           |                        |           |        |           |           |           |        |           |   |           |        |           |   |           | 8,017   |           |   |           | 8,014   |          
|                                                                        | Asset-backed Securities    |                                                         |           |        |           |                        |           |        |           |           |           | 16,426  |           |   |           | 16,285  |           |   |           | 5,826   |           |   |           | 5,739   |          
|                                                                        | Municipals                 |                                                         |           |        |           |                        |           |        |           |           |           | 90      |           |   |           | 90      |           |   |           | 360     |           |   |           | 360     |          
|                                                                        | Domestic Corporate Bonds   |                                                         |           |        |           |                        |           |        |           |           |           | 5,153   |           |   |           | 5,148   |           |   |           |        |           |   |           |        |          
|                                                                        | Commercial Paper           |                                                         |           |        |           |                        |           |        |           |           |           | 9,991   |           |   |           | 9,991   |           |   |           |        |           |   |           |        |          
|                                                                        |                            |                                                         |           |         |           |                        |           |         |           |           |           |         |           |   |           |         |           |   |           |         |           |   |           |        
|                                                                        |                            | Total investment securities available for sale          |           | $       | 251,035   |                        |           | $       | 248,265   |           |           | $       | 267,158   |   |           | $       | 263,062   |   |           | $       | 121,768   |   |           | $       | 117,593   | 
|                                                                        |                            |                                                         |           |         |           |                        |           |         |           |           |           |         |           |   |           |         |           |   |           |         |           |   |           |        
|Mortgage-backed securities available for sale:                          |                            |                                                         |           |         |           |                        |           |         |           |           |           |         |           |   |           |         |           |   |           |         |           |   |           |        
|                                                                        | FNMA                       |                                                         | $         | 366,307 |           |                        | $         | 363,097 |           |           | $         | 440,835 |           |   | $         | 440,453 |           |   | $         | 577,731 |           |   | $         | 590,373 |          
|                                                                        | GNMA                       |                                                         |           | 106,501 |           |                        |           | 105,072 |           |           |           | 79,103  |           |   |           | 78,842  |           |   |           | 280,263 |           |   |           | 286,153 |          
|                                                                        | FHLMC                      |                                                         |           | 288,789 |           |                        |           | 285,965 |           |           |           | 275,882 |           |   |           | 273,940 |           |   |           | 289,094 |           |   |           | 289,959 |          
|                                                                        | Other                      |                                                         |           | 167,719 |           |                        |           | 166,741 |           |           |           | 163,687 |           |   |           | 164,773 |           |   |           | 184,919 |           |   |           | 185,309 |          
|                                                                        |                            |                                                         |           |         |           |                        |           |         |           |           |           |         |           |   |           |         |           |   |           |         |           |   |           |        
|                                                                        |                            | Total mortgage-backed securities available for
    sale |           | $       | 929,316   |                        |           | $       | 920,875   |           |           | $       | 959,507   |   |           | $       | 958,008   |   |           | $       | 1,332,007 |   |           | $       | 1,351,794 | 
|                                                                        |                            |                                                         |           |         |           |                        |           |         |           |           |           |         |           |   |           |         |           |   |           |         |           |   |           |        
|Total investment and mortgage- backed securities
    available for sale |                            | $                                                       | 1,180,351 |         |           | $                      | 1,169,140 |         |           | $         | 1,226,665 |         |           | $ | 1,221,070 |         |           | $ | 1,453,775 |         |           | $ | 1,469,387 |        
|                                                                        |                            |                                                         |           |         |           |                        |           |         |           |           |           |         |           |   |           |         |           |   |           |         |           |   |           |        
|Investment securities held to maturity:                                 |                            |                                                         |           |         |           |                        |           |         |           |           |           |         |           |   |           |         |           |   |           |         |           |   |           |        
|                                                                        | Municipals                 |                                                         | $         | 215,594 |           |                        | $         | 222,297 |           |           | $         | 184,264 |           |   | $         | 187,735 |           |   | $         | 111,049 |           |   | $         | 113,637 |          
|                                                                        |                            |                                                         |           |         |           |                        |           |         |           |           |           |         |           |   |           |         |           |   |           |         |           |   |           |        
|Mortgage-backed securities held to maturity:                            |                            |                                                         |           |         |           |                        |           |         |           |           |           |         |           |   |           |         |           |   |           |         |           |   |           |        
|                                                                        | FNMA                       |                                                         | $         | 5,765   |           |                        | $         | 5,689   |           |           | $         |        |           |   | $         |        |           |   | $         |        |           |   | $         |        |          
|                                                                        | GNMA                       |                                                         |           | 102,439 |           |                        |           | 102,595 |           |           |           | 99,524  |           |   |           | 98,713  |           |   |           |        |           |   |           |        |          
|                                                                        | FHLMC                      |                                                         |           | 1,404   |           |                        |           | 1,388   |           |           |           |        |           |   |           |        |           |   |           |        |           |   |           |        |          
|                                                                        | Other                      |                                                         |           | 0       |           |                        |           | 0       |           |           |           | 924     |           |   |           | 924     |           |   |           | 945     |           |   |           | 945     |          
|                                                                        |                            |                                                         |           |         |           |                        |           |         |           |           |           |         |           |   |           |         |           |   |           |         |           |   |           |        
|                                                                        |                            | Total mortgage-backed securities held to maturity       |           | $       | 109,608   |                        |           | $       | 109,672   |           |           | $       | 100,448   |   |           | $       | 99,637    |   |           | $       | 945       |   |           | $       | 945       | 
|                                                                        |                            |                                                         |           |         |           |                        |           |         |           |           |           |         |           |   |           |         |           |   |           |         |           |   |           |        
|Total investment and mortgage- backed securities
    held to maturity   |                            | $                                                       | 325,202   |         |           | $                      | 331,969   |         |           | $         | 284,712   |         |           | $ | 287,372   |         |           | $ | 111,994   |         |           | $ | 114,582   |        
|                                                                        |                            |                                                         |           |         |           |                        |           |         |           |           |           |         |           |   |           |         |           |   |           |         |           |   |           |        
|                                                                        |                            | Total securities                                        |           | $       | 1,505,553 |                        |           | $       | 1,501,109 |           |           | $       | 1,511,377 |   |           | $       | 1,508,442 |   |           | $       | 1,565,769 |   |           | $       | 1,583,969 | 
|                                                                        |                            |                                                         |           |         |           |                        |           |         |           |           |           |         |           |   |           |         |           |   |           |         |           |   |           |        

53



---



##### 



Note 6 to the Consolidated Financial
Statements discusses the recognition of the unrealized gains and
losses in the above table. Note 6 to the Consolidated
Financial Statements also discusses the factors considered by
the Company in assessing whether an unrealized loss is temporary
or other-than-temporary. When an unrealized loss is
other-than-temporary, the difference between amortized cost and
market value is recorded as a charge against earnings. The
company considers specific factors in order to determine whether
unrealized losses were considered to be temporary and when they
were considered other-than-temporary. These factors include
credit ratings, credit rating trends, general level of interest
rates, severity of impairment and length of duration of
impairment.

The amortized cost of securities below book value
as of December 31, 2004 for less than twelve months and
more than twelve months totaled $719.0 million and
$261.0 million, respectively. The table below presents the
distribution of these securities by credit rating by NRSROs
(dollars in thousands):

|                           |       |                     |         |                     |  |    |   |     |  |     |       |       |  |           |         |         |  |   |     |     |  |   |       |       |  |   |       |       |  |   |         |         | 
|-------------------------- | ----- | ------------------- | ------- | ------------------- |  | -- | - | --- |  | --- | ----- | ----- |  | --------- | ------- | ------- |  | - | --- | --- |  | - | ----- | ----- |  | - | ----- | ----- |  | - | ------- | ------- | 
|                           |       |                    
|                           |       | December 31, 2004  
|                           |       |                    
|                           |       |                     |         |                     |  |   
|                           |       | Less Than 12 Months |         | More Than 12 Months |  |   
|                           |       |                     |         |                     |  |   
|                           |       | AAA                 |         | AA-                 |  | A- |   | AAA |  | AA- |       | A-    |  | Not Rated |         | Total  
|                           |       |                     |         |                     |  |    |   |     |  |     |       |       |  |           |         |        
|                           |       |                     |         |                     |  |    |   |     |  |     |       |       |  |           |         |        
|Federal Agency Notes       |       | $                   | 152,929 |                     |  | $  |  |     |  | $   |      |       |  | $         | 66,975  |         |  | $ |    |     |  | $ |      |       |  | $ |      |       |  | $ | 219,904 |        
|MBS and CMOs               |       |                     | 551,586 |                     |  |    |  |     |  |     |      |       |  |           | 164,169 |         |  |   |    |     |  |   |      |       |  |   |      |       |  |   | 715,755 |        
|Trust Preferred Securities |       |                     |        |                     |  |    |  |     |  |     | 4,000 |       |  |           |        |         |  |   |    |     |  |   | 4,500 |       |  |   | 5,000 |       |  |   | 13,500  |        
|Municipal Securities       |       |                     | 10,532  |                     |  |    |  |     |  |     |      |       |  |           | 19,832  |         |  |   | 570 |     |  |   |      |       |  |   |      |       |  |   | 30,934  |        
|                           |       |                     |         |                     |  |    |   |     |  |     |       |       |  |           |         |         |  |   |     |     |  |   |       |       |  |   |       |       |  |   |         |        
|                           | Total |                     | $       | 715,047             |  |    | $ |    |  |     | $     | 4,000 |  |           | $       | 250,976 |  |   | $   | 570 |  |   | $     | 4,500 |  |   | $     | 5,000 |  |   | $       | 980,093 | 
|                           |       |                     |         |                     |  |    |   |     |  |     |       |       |  |           |         |         |  |   |     |     |  |   |       |       |  |   |       |       |  |   |         |        

On average, these securities were 0.98% below
their respective book value. As a percentage of its book value,
the single largest unrealized loss of 3.03% was due to one
CMO note. In the available-for-sale portfolio,
82 securities were below book value. In the
held-to-maturity portfolio, which had a high concentration of
municipal bonds with nominal par amounts, 50 securities
were below book value.

Most of the securities with market values below
book value are rated AAA by one or more NRSROs. The
$4.0 million of trust preferred security valued below book
value for less than twelve months consists of one bond issued
from a pool that is collateralized by trust preferred securities
(pooled trust preferred security). It is rated A-,
and there have been no changes in credit rating for this
security since purchase. There were two trust preferred
securities valued below book value for more than twelve months.
One of these securities is a $4.5 million pooled trust
preferred security rated A. It was purchased at par value, and
there have been no changes in credit rating for this security
since purchase. The other trust preferred security is a
$5.0 million floating rate bond indexed to 6-month LIBOR.
It was purchased at par value and is not rated by any NRSRO. On
March 9, 2005, the company guaranteeing this trust
preferred security announced that it was calling the security
effective April 6, 2005 at par value plus accrued interest.
There were two municipal bonds rated AA- with an aggregate
amortized cost of $570,000. The total temporary impairment on
these two municipal bonds as of December 31, 2004 was
$8,700 and was not considered significant given their credit
rating.

54



---



##### 



The following table presents the carrying value,
weighted average yields and contractual maturities of our
securities at December 31, 2004:

|                                                                       |                      |                                                         |        |                    |        |                   |      |                 |      |          |        |          |        |          |      |          |      |          |         |          |         |  |      |      |      |   |         |   |           |  |      |   |      |   |           |         |           |  |      |      |      |  
|---------------------------------------------------------------------- | -------------------- | ------------------------------------------------------- | ------ | ------------------ | ------ | ----------------- | ---- | --------------- | ---- | -------- | ------ | -------- | ------ | -------- | ---- | -------- | ---- | -------- | ------- | -------- | ------- |  | ---- | ---- | ---- | - | ------- | - | --------- |  | ---- | - | ---- | - | --------- | ------- | --------- |  | ---- | ---- | ---- | -
|                                                                       |                      |                                                        
|                                                                       |                      | At December 31, 2004                                   
|                                                                       |                      |                                                        
|                                                                       |                      |                                                         |        |                    |        |                   |      |                
|                                                                       |                      |                                                         |        | After One Year     |        | After Five Years  |      |                 |      |         
|                                                                       |                      | Within One Year                                         |        | through Five Years |        | through Ten Years |      | After Ten Years |      | Total   
|                                                                       |                      |                                                         |        |                    |        |                   |      |                 |      |         
|                                                                       |                      |                                                         |        | Weighted           |        |                   |      | Weighted        |      |          |        | Weighted |        |          |      | Weighted |      |          |         | Weighted
|                                                                       |                      | Carrying                                                |        | Average            |        | Carrying          |      | Average         |      | Carrying |        | Average  |        | Carrying |      | Average  |      | Carrying |         | Average 
|                                                                       |                      | Value                                                   |        | Yield              |        | Value             |      | Yield           |      | Value    |        | Yield    |        | Value    |      | Yield    |      | Value    |         | Yield   
|                                                                       |                      |                                                         |        |                    |        |                   |      |                 |      |          |        |          |        |          |      |          |      |          |         |         
|                                                                       |                      |                                                        
|                                                                       |                      | (Dollars in Thousands)                                 
|Investment securities available for sale:                              |                      |                                                         |        |                    |        |                   |      |                 |      |          |        |          |        |          |      |          |      |          |         |          |         |  |      |      |      |   |         |   |           |  |      |   |      |   |           |         |           |  |      |     
|Trust Preferred Securities                                             |                      | $                                                       |       |                    |        |                   |     | %               |      | $        |       |          |        |          |     | %        |      | $        |        |          |         |  |     | %    |      | $ | 18,219  |   |           |  | 4.63 | % |      | $ | 18,219    |         |           |  | 4.63 | %   
|                                                                       | Federal Agency Notes |                                                         |        | 99,963             |        |                   |      | 1.95            | %    |          |        | 21,681   |        |          |      | 3.58     | %    |          |         | 108,402  |         |  |      | 4.43 | %    |   |         |  |           |  |      |  |      |   |           | 230,046 |           |  |      | 3.27 | %   
|                                                                       |                      |                                                         |        |                    |        |                   |      |                 |      |          |        |          |        |          |      |          |      |          |         |          |         |  |      |      |      |   |         |   |           |  |      |   |      |   |           |         |           |  |      |     
|                                                                       |                      | Total investment securities available for sale          |        |                    | 99,963 |                   |      |                 | 1.95 | %        |        |          | 21,681 |          |      |          | 3.58 | %        |         |          | 108,402 |  |      |      | 4.43 | % |         |   | 18,219    |  |      |   | 4.63 | % |           |         | 248,265   |  |      |      | 3.37 | %
|                                                                       |                      |                                                         |        |                    |        |                   |      |                 |      |          |        |          |        |          |      |          |      |          |         |          |         |  |      |      |      |   |         |   |           |  |      |   |      |   |           |         |           |  |      |     
|Mortgage-backed securities available for sale:                         |                      |                                                         |        |                    |        |                   |      |                 |      |          |        |          |        |          |      |          |      |          |         |          |         |  |      |      |      |   |         |   |           |  |      |   |      |   |           |         |           |  |      |     
|FNMA                                                                   |                      |                                                         |       |                    |        |                   |     |                 |      |          | 1,132  |          |        |          | 8.05 | %        |      |          | 37,170  |          |         |  | 5.36 | %    |      |   | 324,795 |   |           |  | 4.46 | % |      |   | 363,097   |         |           |  | 4.56 | %   
|GNMA                                                                   |                      |                                                         |       |                    |        |                   |     |                 |      |          |       |          |        |          |     |          |      |          |        |          |         |  |     |      |      |   | 105,072 |   |           |  | 4.36 | % |      |   | 105,072   |         |           |  | 4.36 | %   
|FHLMC                                                                  |                      |                                                         |       |                    |        |                   |     |                 |      |          |       |          |        |          |     |          |      |          | 26,474  |          |         |  | 4.01 | %    |      |   | 259,491 |   |           |  | 4.48 | % |      |   | 285,965   |         |           |  | 4.43 | %   
|Other                                                                  |                      |                                                         |       |                    |        |                   |     |                 |      |          |       |          |        |          |     |          |      |          |        |          |         |  |     |      |      |   | 166,741 |   |           |  | 4.29 | % |      |   | 166,741   |         |           |  | 4.29 | %   
|                                                                       |                      |                                                         |        |                    |        |                   |      |                 |      |          |        |          |        |          |      |          |      |          |         |          |         |  |      |      |      |   |         |   |           |  |      |   |      |   |           |         |           |  |      |     
|                                                                       |                      | Total mortgage-backed securities available for
    sale |        |                    |       |                   |      |                 |      |          |        |          | 1,132  |          |      |          | 8.05 | %        |         |          | 63,644  |  |      |      | 4.80 | % |         |   | 856,099   |  |      |   | 4.42 | % |           |         | 920,875   |  |      |      | 4.45 | %
|                                                                       |                      |                                                         |        |                    |        |                   |      |                 |      |          |        |          |        |          |      |          |      |          |         |          |         |  |      |      |      |   |         |   |           |  |      |   |      |   |           |         |           |  |      |     
|Total investment and mortgage-backed securities
    available for sale |                      |                                                         | 99,963 |                    |        |                   | 1.95 | %               |      |          | 22,813 |          |        |          | 3.80 | %        |      |          | 172,046 |          |         |  | 4.56 | %    |      |   | 874,318 |   |           |  | 4.42 | % |      |   | 1,169,140 |         |           |  | 4.22 | %   
|                                                                       |                      |                                                         |        |                    |        |                   |      |                 |      |          |        |          |        |          |      |          |      |          |         |          |         |  |      |      |      |   |         |   |           |  |      |   |      |   |           |         |           |  |      |     
|Investment securities held to maturity:                                |                      |                                                         |        |                    |        |                   |      |                 |      |          |        |          |        |          |      |          |      |          |         |          |         |  |      |      |      |   |         |   |           |  |      |   |      |   |           |         |           |  |      |     
|Municipals                                                             |                      |                                                         |       |                    |        |                   |     |                 |      |          |       |          |        |          |     |          |      |          | 328     |          |         |  | 4.89 | %    |      |   | 215,266 |   |           |  | 4.77 | % |      |   | 215,594   |         |           |  | 4.77 | %   
|                                                                       |                      |                                                         |        |                    |        |                   |      |                 |      |          |        |          |        |          |      |          |      |          |         |          |         |  |      |      |      |   |         |   |           |  |      |   |      |   |           |         |           |  |      |     
|Mortgage-backed securities held to maturity:                           |                      |                                                         |        |                    |        |                   |      |                 |      |          |        |          |        |          |      |          |      |          |         |          |         |  |      |      |      |   |         |   |           |  |      |   |      |   |           |         |           |  |      |     
|FNMA                                                                   |                      |                                                         |       |                    |        |                   |     |                 |      |          |       |          |        |          |     |          |      |          |        |          |         |  |     |      |      |   | 5,765   |   |           |  | 4.49 | % |      |   | 5,765     |         |           |  | 4.49 | %   
|GNMA                                                                   |                      |                                                         |       |                    |        |                   |     |                 |      |          |       |          |        |          |     |          |      |          |        |          |         |  |     |      |      |   | 102,439 |   |           |  | 5.01 | % |      |   | 102,439   |         |           |  | 5.01 | %   
|FHLMC                                                                  |                      |                                                         |       |                    |        |                   |     |                 |      |          |       |          |        |          |     |          |      |          |        |          |         |  |     |      |      |   | 1,404   |   |           |  | 4.72 | % |      |   | 1,404     |         |           |  | 4.72 | %   
|                                                                       |                      |                                                         |        |                    |        |                   |      |                 |      |          |        |          |        |          |      |          |      |          |         |          |         |  |      |      |      |   |         |   |           |  |      |   |      |   |           |         |           |  |      |     
|Total mortgage-backed securities held to maturity                      |                      |                                                         |       |                    |        |                   |     |                 |      |          |       |          |        |          |     |          |      |          |        |          |         |  |     |      |      |   | 109,608 |   |           |  | 4.98 | % |      |   | 109,608   |         |           |  | 4.98 | %   
|                                                                       |                      |                                                         |        |                    |        |                   |      |                 |      |          |        |          |        |          |      |          |      |          |         |          |         |  |      |      |      |   |         |   |           |  |      |   |      |   |           |         |           |  |      |     
|Total investment and mortgage-backed securities
    held to maturity   |                      |                                                         |       |                    |        |                   |     |                 |      |          |       |          |        |          |     |          |      |          | 328     |          |         |  | 4.89 | %    |      |   | 324,874 |   |           |  | 4.84 | % |      |   | 325,202   |         |           |  | 4.84 | %   
|                                                                       |                      |                                                         |        |                    |        |                   |      |                 |      |          |        |          |        |          |      |          |      |          |         |          |         |  |      |      |      |   |         |   |           |  |      |   |      |   |           |         |           |  |      |     
|                                                                       |                      | Total securities                                        |        | $                  | 99,963 |                   |      |                 | 1.95 | %        |        | $        | 22,813 |          |      |          | 3.80 | %        |         | $        | 172,374 |  |      |      | 4.56 | % |         | $ | 1,199,192 |  |      |   | 4.54 | % |           | $       | 1,494,342 |  |      |      | 4.35 | %
|                                                                       |                      |                                                         |        |                    |        |                   |      |                 |      |          |        |          |        |          |      |          |      |          |         |          |         |  |      |      |      |   |         |   |           |  |      |   |      |   |           |         |           |  |      |     

Deposits.Deposits
have traditionally been our primary source of funds to use in
lending and investment activities. At December 31, 2004,
53.4% of our deposits were time deposits, 27.4% were negotiable
order of withdrawal (NOW) accounts, demand deposit
and money market accounts, and 19.2% were savings accounts. By
comparison, at December 31, 2003, 57.4% of our deposits
were time deposits, 22.9% were NOW accounts, demand deposit and
money market accounts, and 19.7% were savings accounts.

We obtain our deposits primarily from the
communities we serve. With the exception of state and federal
government entities (Public Fund Sector)
contributing 7.6% of total deposits, no other material portion
of our deposits were from or were dependent upon any one
customer or industry. We accept deposits over

55



---



##### 



$100,000 from customers. Included in the figure
for time deposits at December 31, 2004, is
$1.87 billion of deposits of $100,000 or greater, compared
to $1.53 billion at December 31, 2003. Such deposits
made up 35.8% of total deposits at December 31, 2004,
compared to 34.1% at December 31, 2003. At
December 31, 2003, we had $2.3 million in brokered
deposits. We had no brokered deposits at December 31, 2004.


Our average cost of deposits during 2004 was
1.39% as compared to 1.61% for 2003, and 2.16% for 2002. Our
average interest rate paid on deposits was 1.59%, 1.33%, and
1.90% at December 31, 2004, 2003 and 2002, respectively.

Core deposits include NOW accounts, demand
deposit and money market accounts, and savings accounts. Core
deposits increased 27.1% to $2.43 billion at
December 31, 2004, compared to $1.91 billion at
December 31, 2003. This growth in core deposits resulted
primarily from the Banks continued focus on developing new
commercial relationships in the ethnic Chinese community and
further expansion into the Banks retail niche market. Time
deposits increased 8.3% to $2.79 billion at
December 31, 2004, from $2.57 billion at
December 31, 2003, primarily as a result of the further
incursions we have made in our niche markets.

Core deposits increased 27.0% to
$1.91 billion at the end of 2003, compared to
$1.50 billion for the year ended December 31, 2002.
This growth in core deposits resulted primarily from the
acquisition of BCC during which the Bank acquired
$1.25 billion in deposits. Of this total,
$333.1 million were represented by core deposits and
$913.5 million by time deposits. The balance of the
increase was due to the expansion into the Banks retail
niche market. Time deposits increased 2.8% to $2.57 billion
at December 31, 2003, from $2.50 billion at
December 31, 2002, also due to the above factors.

The following table presents the time to maturity
of the time deposit accounts at December 31, 2004:

|                        |  |             |           | 
|----------------------- |  | ----------- | --------- | 
|Maturity Period         |  | Amount     
|                        |  |            
|                        |  | (Dollars in
|                        |  | Thousands) 
|One year or less        |  | $           | 2,525,310 | 
|Two through three years |  |             | 256,327   | 
|Thereafter              |  |             | 6,370     | 
|                        |  |             |           | 
|                        |  | $           | 2,788,007 | 
|                        |  |             |           | 

At December 31, 2004, the Bank had
$1.87 billion in time deposit accounts in amounts of
$100,000 or more maturing as follows:

|                         |       |             |         |           | 
|------------------------ | ----- | ----------- | ------- | --------- | 
|Maturity Period          |       | Amount     
|                         |       |            
|                         |       | (Dollars in
|                         |       | Thousands) 
|Three months or less     |       | $           | 695,912 |          
|Over 3 through 6 months  |       |             | 484,389 |          
|Over 6 through 12 months |       |             | 521,567 |          
|Over 12 months           |       |             | 167,489 |          
|                         |       |             |         |          
|                         | Total |             | $       | 1,869,357 | 
|                         |       |             |         |          

Other Borrowings.The Bank maintains borrowing lines with numerous correspondent
banks and brokers and with the Federal Home Loan Bank
(FHLB) of San Francisco to supplement our
supply of lendable funds and to manage liquidity. Such
borrowings are generally secured with mortgage loans and/or
securities with a market value at least equal to outstanding
balances. In addition to loans and securities, advances from the
FHLB of San Francisco are typically secured by a pledge of
our stock in the FHLB of San Francisco. At
December 31, 2004, we had $407.3 million of advances
outstanding and $481.3 million outstanding at
December 31, 2003. At December 31, 2004, we had
$921.5 million of additional FHLB borrowings available for
future borrowing capacity.

Included in the $407.3 million of FHLB
advances as of December 31, 2004, were $72.3 million
of short-term, fixed-rate advances that mature within one year.
All of the $335.0 million in long-term advances mature

56



---



##### 



between 2006 and 2008. As of December 31,
2004, $241.0 million of these advances may be terminated at
the option of the FHLB of San Francisco. The FHLB may
terminate the advances at quarterly intervals at specified
periods ranging from three to five years beyond the original
advance dates. To date, the FHLB has not exercised its option to
terminate any advances to the Company. In the event the FHLB
decided to exercise this option, the Company would need to pay
the advances back.


As of December 31, 2004, the Hong Kong
branch had short-term borrowings of $46.3 million
principally denominated in Hong Kong dollars with local
financial institutions for liquidity management purposes.

During the fourth quarter of 2004, the Wells
Fargo Bank borrowing line maintained by UCBH was increased from
$10.0 million to $20.0 million. The line was
established in 2002 for liquidity purposes, is active as of
December 31, 2004, and has not been drawn upon. The
interest rate on the line which matures in December 2005 was
3.45% as of December 31, 2004. The purpose of the line is
to provide liquidity for the holding company should
unanticipated needs for such liquidity arise.

Subordinated Debentures of the Company
(TPS).The Company
established special purpose trusts in 1998, 2001, and 2002 for
the purpose of issuing Guaranteed Preferred Beneficial Interests
in its Subordinated Debentures (Capital Securities).
The trusts exist for the sole purpose of issuing the Capital
Securities and investing the proceeds thereof in Subordinated
Debentures issued by the Company. Payment of distributions out
of the monies held by the trusts and payments on liquidation of
the trusts, or the redemption of the Capital Securities, are
guaranteed by the Company to the extent the trusts have funds
available thereof. The obligations of the Company under the
guarantees and the Subordinated Debentures are subordinate and
junior in right of payment to all indebtedness of the Company
and will be structurally subordinated to all liabilities and
obligations of the Companys subsidiaries. Included in the
total TPS is $30.0 million of TPS, which were issued in
1998 at the time of the management-led buyout of the Company.
The cost of that debt is 9.38% and the debt has a par call in
May 2005. These trusts are not consolidated on our financial
statements. Please see Note 2 to the Consolidated Financial
Statements for further discussion.

The Company had $136.0 million of TPS
outstanding at December 31, 2004, and at December 31,
2003. The proceeds of the 2002 issuances were primarily used to
fund the acquisition of BCC in October 2002.

Regulatory Capital.Under capital adequacy guidelines and the regulatory framework
for prompt corrective action, the Bank must meet specific
capital guidelines as calculated under regulatory accounting
practices. As of December 31, 2004, the Bank met the
Well Capitalized requirements under these
guidelines. The total risk-based capital ratio of the Bank at
December 31, 2004, was 12.67%, as compared with 12.18% at
December 31, 2003. The ratio of Tier I Capital (as
defined in the regulations) to average assets (as defined) of
the Bank at December 31, 2004, was 8.49% as compared with
7.86% at December 31, 2003. The increase in these two
ratios was primarily due to 2004 net income.

The Company is categorized as Well
Capitalized. The Companys total risk-based capital
ratio is higher than the Banks due to the inclusion of the
Capital Securities as capital in the risk-based
capital calculation. Capital Securities are includable as
capital up to 25% of Tier I Capital. As discussed in
Note 2 to the Consolidated Financial Statements, the trusts
were deconsolidated for reporting purposes pursuant to the
FIN 46R interpretation. In March 2005, the Federal Reserve
issued final guidance allowing the inclusion of capital
securities in Tier I capital subject to tightened
quantitative limits and a broader range of restricted core
capital elements, as defined. The Banks Tier I
capital is unaffected, since all trust preferred securities have
been issued at the holding company level.

Stockholders
Equity.Effective July 11, 2003,
the Company issued approximately 2.3 million common shares
with an aggregate value of $70.0 million in conjunction
with the acquisition of FCB. Total common shares outstanding at
December 31, 2004, were 45.6 million, compared with
45.0 million outstanding at December 31, 2003; prior
periods have been restated for the April 2003 two-for-one stock
split. On January 27, 2005, the Company declared a
two-for-one stock split in the form of a stock dividend to
shareholders of record as of March 31, 2005 and
distributable on April 12, 2005.

Liquidity.As a
financial institution, we must maintain sufficient levels of
liquid assets at all times to meet our cash flow needs. These
liquid assets ensure that we have the cash available to pay out
deposit

57



---



##### 



withdrawals, meet the credit needs of our
customers and be able to take advantage of investment
opportunities as they arise. In addition to liquid assets,
certain liabilities can provide liquidity as well. Liquid assets
can include cash and deposits that we have with other banks,
federal funds sold and other short-term investments, maturing
loans and investments, payments by borrowers of principal and
interest on loans, payments of principal and interest on
investments and loans sales. Additional sources of liquidity can
include increased deposits, lines of credit and other borrowings.


Net cash provided by operating activities for the
year ended December 31, 2004, was $73.3 million. Of
this amount, $85.6 million is from the Companys net
income as reduced by $18.0 million for net non-cash charges
and $14.1 million net decrease in operating assets, and
increased by $19.9 million net increase in operating
liabilities. Non-cash charges primarily consist of gain on sale
of loans, securities and other assets, net amounting to
$19.6 million, and other, net amounting to
$10.4 million, which includes the amortization of deferred
loan fees and the write off of loans, offset by provision for
loan losses amounting to $4.2 million, and depreciation and
amortization of premises and equipment amounting to
$7.0 million.

Net cash used in investing activities for the
year ended December 31, 2004, was $575.4 million. Of
this amount, $1.20 billion was used in loans originated and
purchased, net of principal collections, offset by
$479.5 million in proceeds from sale of loans and
$164.8 million from net activities related to the
investments and mortgage back activities.

Net cash provided by financing activities for the
year ended December 31, 2004, was $633.6 million
primarily due to $732.4 million from net activities related
to deposits, offset by $97.8 million reduction of net
borrowings from the Federal Home Loan Bank of
San Francisco.

The Company considers the impairment of value to
certain investment and mortgage-backed securities is
attributable to the movement of market interest rates and
believes the fair value will improve over time due to the high
credit ratings of the securities. There are no credit concerns
with any of these investment and mortgage-backed securities, and
the Company has the intent and ability to hold these securities
to maturity.

At December 31, 2004, we had
$2.53 billion of certificates of deposit scheduled to
mature within one year. We believe that our liquidity resources
will provide us with sufficient amounts of cash necessary to
meet these commitments.

Our liquidity may be adversely affected by
unexpected withdrawals of deposits, excessive interest rates
paid by competitors and other factors. We review our liquidity
position regularly in light of our expected growth in loans and
deposits. We believe that we maintain adequate sources of
liquidity to meet our needs.

Capital Resources.The Company has continuously declared quarterly dividends on
common stock since 2000. The Company paid aggregate dividends of
$6.8 million and $5.0 million during 2004 and 2003,
respectively. The payment of such dividends did not have a
significant impact on the liquidity of the Company. As a result
of the dividend payouts, the total capital of the Company was
reduced by $7.3 million and $5.0 million during 2004
and 2003, respectively. The payment of dividends during 2004 had
the effect of reducing the Tier I leverage capital ratio by
12 basis points and risk-based capital ratio by
14 basis points. The payment of dividends during 2003 had
the effect of reducing the Tier I leverage capital ratio by
13 basis points and risk-based capital ratio by
13 basis points.

Contractual Obligation and Off-Balance-Sheet
Arrangements.In the ordinary course
of operations, the Company enters into certain contractual
obligations. Such obligations include the funding of operations
through debt issuances as well as leases for premises and
equipment. The Company also enters into limited use of
derivative financial instruments for hedging purposes, which
create contractual obligations, as part of its interest rate
risk management process and customer accommodation activities.
The Company engages in certain financial transactions that are
not recorded on the Companys balance sheet, in accordance
with GAAP, or may be recorded on the Companys balance
sheet in amounts that are different than the full contract or
notional amount of the transaction. Such transactions are
structured to meet the financial needs of customers, manage the
Companys credit, market or liquidity risks, diversify
funding sources or optimize capital.

58



---



##### 



The following table presents, as of
December 31, 2004, the Companys significant
contractual obligations and commercial commitments:

|                                    |                                           |                                          |           |           |   |           |           |           |   |         |         |         |  |  |         |         |  |  |         |         | 
|----------------------------------- | ----------------------------------------- | ---------------------------------------- | --------- | --------- | - | --------- | --------- | --------- | - | ------- | ------- | ------- |  |  | ------- | ------- |  |  | ------- | ------- | 
|                                    |                                           |                                         
|                                    |                                           | Payments Due/Stated Maturities by Period
|                                    |                                           |                                         
|                                    |                                           |                                          |           | Less than |   |           |           | More than
|Contractual Obligations             |                                           | Total                                    |           | 1 Year    |   | 1-3 Years |           | 3-5 Years |   | 5 Years
|                                    |                                           |                                          |           |           |   |           |           |           |   |        
|                                    |                                           |                                         
|                                    |                                           | (Dollars in Thousands)                  
|Deposits:                           |                                           |                                          |           |           |   |           |           |           |   |         |         |         |  |  |         |         |  |  |         |        
|                                    | Demand and savings accounts(1)            |                                          | $         | 2,427,855 |   |           | $         | 2,427,855 |   |         | $       |        |  |  | $       |        |  |  | $       |        | 
|                                    | Time deposits                             |                                          |           | 2,788,007 |   |           |           | 2,525,310 |   |         |         | 256,327 |  |  |         | 6,266   |  |  |         | 104     | 
|                                    |                                           |                                          |           |           |   |           |           |           |   |         |         |         |  |  |         |         |  |  |         |        
|                                    |                                           |                                          | 5,215,862 |           |   |           | 4,953,165 |           |   |         | 256,327 |         |  |  | 6,266   |         |  |  | 104     |        
|Long-term debt:                     |                                           |                                          |           |           |   |           |           |           |   |         |         |         |  |  |         |         |  |  |         |        
|                                    | FHLB borrowings                           |                                          |           | 334,952   |   |           |           |          |   |         |         | 91,000  |  |  |         | 243,952 |  |  |         |        | 
|                                    | Subordinated debentures                   |                                          |           | 136,000   |   |           |           |          |   |         |         |        |  |  |         |        |  |  |         | 136,000 | 
|                                    |                                           |                                          |           |           |   |           |           |           |   |         |         |         |  |  |         |         |  |  |         |        
|                                    |                                           |                                          | 470,952   |           |   |           |          |           |   |         | 91,000  |         |  |  | 243,952 |         |  |  | 136,000 |        
|Off-balance-sheet arrangements:     |                                           |                                          |           |           |   |           |           |           |   |         |         |         |  |  |         |         |  |  |         |        
|Letters of credit                   |                                           |                                          |           |           |   |           |           |           |   |         |         |         |  |  |         |         |  |  |         |        
|                                    | Commercial                                |                                          |           | 14,455    |   |           |           | 14,455    |   |         |         |        |  |  |         |        |  |  |         |        | 
|                                    | Standby                                   |                                          |           | 30,296    |   |           |           | 28,986    |   |         |         | 1,310   |  |  |         |        |  |  |         |        | 
|                                    |                                           |                                          |           |           |   |           |           |           |   |         |         |         |  |  |         |         |  |  |         |        
|                                    |                                           |                                          | 44,751    |           |   |           | 43,441    |           |   |         | 1,310   |         |  |  |        |         |  |  |        |        
|Unfunded CRA investment commitments |                                           |                                          | 8,331     |           |   |           | 8,331     |           |   |         |        |         |  |  |        |         |  |  |        |        
|                                   
|Commitments to extend credit:       |                                           |                                          |           |           |   |           |           |           |   |         |         |         |  |  |         |         |  |  |         |        
|                                    | Consumer (including residential mortgage) |                                          |           | 75,558    |   |           |           | 75,558    |   |         |         |        |  |  |         |        |  |  |         |        | 
|                                    | Commercial (excluding construction)       |                                          |           | 451,946   |   |           |           | 451,946   |   |         |         |        |  |  |         |        |  |  |         |        | 
|                                    | Construction                              |                                          |           | 260,441   |   |           |           | 260,441   |   |         |         |        |  |  |         |        |  |  |         |        | 
|                                    |                                           |                                          |           |           |   |           |           |           |   |         |         |         |  |  |         |         |  |  |         |        
|                                    |                                           |                                          | 787,945   |           |   |           | 787,945   |           |   |         |        |         |  |  |        |         |  |  |        |        
|Lease obligations:                  |                                           |                                          |           |           |   |           |           |           |   |         |         |         |  |  |         |         |  |  |         |        
|                                    | Operating leases                          |                                          |           | 33,219    |   |           |           | 6,025     |   |         |         | 13,568  |  |  |         | 4,847   |  |  |         | 8,779   | 
|Derivatives:                        |                                           |                                          |           |           |   |           |           |           |   |         |         |         |  |  |         |         |  |  |         |        
|                                    | Foreign exchange contracts receivable     |                                          |           | (176,644  | ) |           |           | (176,644  | ) |         |         |        |  |  |         |        |  |  |         |        | 
|                                    | Foreign exchange contracts payable        |                                          |           | 175,954   |   |           |           | 175,954   |   |         |         |        |  |  |         |        |  |  |         |        | 
|                                    | Put option to buy                         |                                          |           | 18,683    |   |           |           | 18,683    |   |         |         |        |  |  |         |        |  |  |         |        | 
|                                    | Put option to sell                        |                                          |           | (18,683   | ) |           |           | (18,683   | ) |         |         |        |  |  |         |        |  |  |         |        | 
|                                    |                                           |                                          |           |           |   |           |           |           |   |         |         |         |  |  |         |         |  |  |         |        
|                                    |                                           |                                          | (690      | )         |   |           | (690      | )         |   |         |        |         |  |  |        |         |  |  |        |        



---



|    |                                                                                                                     
|--- | --------------------------------------------------------------------------------------------------------------------
|(1) | Accounts with indeterminate maturities, such as
    savings and checking, are included in one year or less category.

Deposits.Deposit
liabilities represent the primary source of funding for the
Companys lending and investment activities. Deposits are
raised primarily from the marketplace communities we serve.
Approximately 47% of the deposits are composed of transaction,
savings and money market accounts that have no stated maturity.
The remaining 53% of deposits are composed of time deposits, the
majority of which have remaining maturities of less than one
year. The Companys business is not seasonal in nature, and
it accepts deposits over $100,000 from customers. With one
exception, no single customer or industry accounts for a
meaningful percentage of deposits. The exception is the State of
California and municipalities in California whose balances total
$395.5 million or 7.58% of total deposits as of
December 31, 2004, with one entity

59



---



##### 



accounting for a majority of those balances.
Please refer to Note 10 to the Consolidated Financial
Statements for additional details on the deposit portfolio.


Borrowings.The Bank
maintains borrowing lines with numerous correspondent banks and
with the Federal Home Loan Bank (FHLB) of
San Francisco to supplement our supply of lendable funds
and to manage liquidity. Such borrowings are generally secured
with mortgage loans and/or securities with a market value at
least equal to outstanding balances. In addition to loans and
securities, advances from the FHLB of San Francisco are
typically secured by a pledge of our stock in the FHLB of
San Francisco. Please refer to the Other Borrowings section
above for additional discussion of borrowings. As of
December 31, 2004, the Bank borrowings referenced in the
above table all had remaining maturities of less than three
months.

In 1998, 2001 and 2002, the Company issued Junior
Subordinated Debentures (Debentures). As of
December 31, 2004, the net outstanding balance of the
Debentures totaled $136.0 million. The Debentures are
subordinate and junior in right of payment to all indebtedness
of the Company and will be structurally subordinated to all
liabilities and obligations of the Companys subsidiaries.
The Debentures are owned solely by special purpose trusts
created by the Company during the same time period to raise
funds for capital and expansion purposes by issuing capital
securities. The Company owns the common equity of the trusts,
which equates to a three-percent interest in the outstanding
balance of the Debentures held by the trusts. The Debentures
bear either fixed interest at 9.38% or variable interests based
on LIBOR rates, and have stated maturities ranging from
May 1, 2028 through November 7, 2032. The Debentures
may be redeemed early by the Company after a stated period based
on the original terms of each trust. Interest is payable either
semi-annually or quarterly. Please refer to Notes 11 and 20
to the Consolidated Financial Statements for additional details
on the Junior Subordinated Debentures and the Special Purpose
Trusts.

Letters of Credit.Letters of Credit are conditional commitments issued by the
Company to guarantee the performance of a customer to a third
party. The credit risk involved with issuing letters of credit
is essentially the same as that involved in extending loan
facilities to customers. These letters of credit are usually
secured by the customers inventories or deposits held at
the Company.

Commitments to Extend
Credit.Commitments to extend credit
are agreements to lend to a customer as long as there is no
violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other
termination clauses. The company evaluates each customers
credit worthiness on a case-by-case basis. The amount of
collateral obtained, if deemed necessary by the Company upon
extension of credit, is based on managements credit
evaluation of the counterparty. Collateral held generally
includes residential or commercial real estate, accounts
receivable, or other assets.

Lease Obligations.The Company leases various premises and equipment under
noncancellable operating leases, many of which contain renewal
options and some of which contain escalation clauses. The
contractual minimum future lease payments are shown in the table
above and do not contain common area costs or maintenance
charges, nor do they reflect future contractual minimum lease
receipts from sublessees or tenants at the Companys
facilities. As of December 31, 2004, the Company had no
obligations under capital leases. Please refer to Note 20
in the Notes to Consolidated Financial Statements for additional
details on lease commitments.

Foreign Exchange
Contracts.Foreign exchange contracts
are contracts to purchase or sell currencies in the
over-the-counter market. Such contracts can be either for
immediate or forward delivery. Entering into foreign exchange
contracts agreements involves the risk of dealing with
counterparties and their ability to meet the terms of the
contracts. The Company purchases or sells foreign exchange
contracts in order to mitigate risk in and/or hedge a balance
sheet or off-balance-sheet foreign exchange position.
Additionally, the Company purchases and sells foreign exchange
contracts for customers, as long as the foreign exchange risk is
fully covered with an offsetting position. Please refer to
Note 18 to the Consolidated Financial Statements for
additional details on foreign exchange derivative instruments.



| |                
| | ---------------
| | Risk Management

Overview.We manage
all major aspects of our business through an integrated risk
infrastructure that includes planning and review processes. We
derive our revenue from assuming and managing financial risk.

60



---



##### 



We evaluate our risk and returns to produce
sustainable revenue, to reduce earnings volatility and increase
shareholder value. Our business exposes us to four major risks:
liquidity, credit, market and operational.


Liquidity risk is the inability to accommodate
liability maturities and withdrawals, fund asset growth and
otherwise meet contractual obligations at reasonable market
rates. Credit risk is the inability of a customer to meet its
repayment obligations. Market risk is the fluctuation in asset
values caused by changes in market prices and yields.
Operational risk is the potential for loss resulting from events
involving people, processes, technology, execution, legal,
regulatory or reputation. We evaluate risk through various
management committees with the oversight of the Board of
Directors.

The key management committees of the Company are
as follows:



| |   |                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------
| |  | Enterprise Risk Management Committee reviews
    credit market, liquidity and operational risk.                            
|
| |  | Credit Management Committee reviews credit
    policies, products, and problem assets risk.                                
|
| |  | Asset/ Liability Committee reviews securities,
    loans and borrowings to assess yield, market and interest rate
    risk.

Three Lines of
Defense.Management has established
control processes and procedures to align risk-taking and risk
management throughout our organization. Each of our lines of
business is responsible for identifying, quantifying, mitigating
and managing all risks. Lines of business make and execute
business plans, which makes them most familiar with the changing
nature of risks and therefore best able to take actions to
manage and mitigate those risks. Interest rate risk associated
with our business activities is generally managed centrally in
the Corporate Treasury function.

Our Risk Management Department translates
business plans into approved limits, approves requests for
changes to those limits, approves transactions as appropriate
and works closely with business divisions to establish and
monitor risk parameters.

Our Internal Audit Department provides an
independent assessment of our management systems and internal
control systems. Internal audit activities are designed to
provide reasonable assurance that resources are adequately
protected; significant financial, managerial and operating
information is complete, accurate, and employees actions
are in compliance with corporate policies, standards,
procedures, and applicable laws and regulations. In 2004,
internal audit also assisted in the management testing phase of
the Sarbanes-Oxley Section 404 project.



| |                          
| | -------------------------
| | Liquidity Risk Management

As a financial institution, we must maintain
sufficient levels of liquid assets at all times to meet our cash
flow needs. These liquid assets ensure that we have the cash
available to pay out deposit withdrawals, meet the credit needs
of our customers and be able to take advantage of investment
opportunities as they arise. In addition to liquid assets,
certain liabilities can provide liquidity as well. Liquid assets
can include cash and deposits that we have with other banks,
federal funds sold and other short-term investments, maturing
loans and investments, payments by borrowers of principal and
interest on loans, payments of principal and interest on
investments and loans sales. Additional sources of liquidity can
include increased deposits, lines of credit and other borrowings.

At December 31, 2004, we had
$2.53 billion of certificates of deposit scheduled to
mature within one year. We believe that our liquidity resources
will provide us with sufficient amounts of cash necessary to
meet these commitments.

Our liquidity may be adversely affected by
unexpected withdrawals of deposits, excessive interest rates
paid by competitors and other factors. We review our liquidity
position regularly in light of our expected growth in loans and
deposits. We believe that we maintain adequate sources of
liquidity to meet our needs.

At December 31, 2004, both the Company and
the Bank met all of their regulatory capital requirements with
risk-based capital ratios of 13.23% and 12.67%, respectively.

61



---



##### 





| |                       
| | ----------------------
| | Credit Risk Management

The Companys credit risk management is an
integrated process that stresses consistency with credit
policies, line of business, accountability, oversight by the
Chief Credit Officer and comprehensive risk measurement and
diligent monitoring. Credit risk is also reviewed regularly by
the Companys Regulatory Examiners, independent loan review
firm and Internal Audit, and is subject to examination by the
regulators.

Credit risk (including counterparty risk) is
managed within the framework and guidance of comprehensive
policies. Actual credit performance and exceptions are measured
and managed through detailed tracking and analysis, and credit
policies are routinely reviewed and/or modified as appropriate.

All portfolios of credit risk are subject to
periodic reviews, to ensure that the risk identification
processes are functioning properly and that credit standards are
followed. Such reviews are conducted by the business divisions
themselves and by the office of the Chief Credit Officer. Credit
risk is also reviewed regularly by the Companys loan
examiners and Internal Audit, and is subject to examination by
the regulators.



| |                       
| | ----------------------
| | Market Risk Management

Market Risk and Net Portfolio
Value.Market risk is the risk of loss
of income from adverse changes in prices and rates that are set
by the market. We are at risk due to changes in interest rates
that may affect the income we receive on lending and investment
activities, as well as the costs associated with our deposits
and borrowings. A sudden and substantial change in interest
rates could affect our earnings, if the rates of interest we
earn on our loans and investments do not change at the same
speed, to the same extent or on the same basis as the interest
rates we pay on our deposits and borrowings. We make it a high
priority to actively monitor and manage our exposure to interest
rate risk.

We accomplish this by first evaluating the
interest rate risk that is inherent in the makeup of our assets
and liabilities. Then, we consider our business strategy,
current operating environment, capital and liquidity
requirements, as well as our current performance objectives, to
determine an appropriate level of risk.

Our Board of Directors reviews our interest rate
risk exposure quarterly. Our Board of Directors has appointed an
Asset/ Liability Committee which includes certain senior
management that is responsible for working with the Board of
Directors to establish strategies to manage interest rate risk
and to evaluate the effectiveness of these strategies. The
Committee also estimates the effect of changes in interest rate
on our net portfolio value (NPV) and whether such
effects are within the limits set by the Board.

We also monitor our interest rate sensitivity
through the use of a model which estimates the change in our NPV
in the event of a range of assumed changes in market interest
rates. Net portfolio value is defined as the current market
value of our assets, less the current market value of our
liabilities, plus or minus the current value of
off-balance-sheet items. We estimate current market values
through analysis of cash flows.

As market interest rates decrease, the average
expected life of our fixed-rate loans and investment securities
shortens due to quicker prepayments, causing a relatively
moderate increase in their value. The value of our deposit
portfolio exhibits only relatively minor movements in a
declining interest rate environment, since they are primarily
short term in nature, resulting in the value of deposits
decreasing more quickly than the value of assets increasing.

As market interest rates rise, the average
expected life of our fixed-rate loans and securities lengthens
as prepayments decrease, causing a decline in value. The value
of our deposits increases slowly in a rising rate environment,
due to the concentration of time deposits in our deposit base
which have terms of one year or less.

We may use certain derivative financial
instruments for hedging purposes, such as interest rate swaps,
caps, and floors as part of our hedging program, to help
mitigate our interest rate risk. Such instruments involve, to
varying degrees, elements of credit and interest rate risk in
excess of the amount that is presented on our balance sheet. See
the above Contractual Obligation and Off-Balance-Sheet
Arrangements section for additional information.

62



---



##### 



The following table lists the percentage change
in our net portfolio value, assuming an immediate change in
interest rates of plus or minus 100 and 200 basis points,
from the level at December 31, 2004 and 2003, and sustained
through the projected forward rates. All loans and investments
presented in this table are classified as held to maturity or
available for sale. We had no trading securities at that date.

|                                                      |  |                        |         |          |  |          |         |   |  |  |        |   
|----------------------------------------------------- |  | ---------------------- | ------- | -------- |  | -------- | ------- | - |  |  | ------ | --
|                                                      |  |                       
|                                                      |  | Net Portfolio Value at
|                                                      |  | December 31, 2004     
|                                                      |  |                       
|Change in Interest Rates in Basis Points (Rate Shock) |  | Amount                 |         | $ Change |  | % Change
|                                                      |  |                        |         |          |  |         
|                                                      |  |                       
|                                                      |  | (Dollars in Thousands)
|200                                                   |  | $                      | 662,958 |          |  | $        | (97,361 | ) |  |  | (12.81 | )%
|100                                                   |  |                        | 716,363 |          |  |          | (43,956 | ) |  |  | (5.78  | ) 
|0                                                     |  |                        | 760,319 |          |  |          |        |   |  |  |       |   
|(100)                                                 |  |                        | 783,618 |          |  |          | 23,298  |   |  |  | 3.06   |   
|(200)                                                 |  |                        | 744,158 |          |  |          | (16,162 | ) |  |  | (2.13  | ) 

|                                                      |  |                        |         |          |  |          |          |   |  |  |        |   
|----------------------------------------------------- |  | ---------------------- | ------- | -------- |  | -------- | -------- | - |  |  | ------ | --
|                                                      |  |                       
|                                                      |  | Net Portfolio Value at
|                                                      |  | December 31, 2003     
|                                                      |  |                       
|Change in Interest Rates in Basis Points (Rate Shock) |  | Amount                 |         | $ Change |  | % Change
|                                                      |  |                        |         |          |  |         
|                                                      |  |                       
|                                                      |  | (Dollars in Thousands)
|200                                                   |  | $                      | 614,523 |          |  | $        | (130,825 | ) |  |  | (17.55 | )%
|100                                                   |  |                        | 687,338 |          |  |          | (58,010  | ) |  |  | (7.78  | ) 
|0                                                     |  |                        | 745,348 |          |  |          |         |   |  |  |       |   
|(100)                                                 |  |                        | 776,855 |          |  |          | 31,507   |   |  |  | 4.23   |   
|(200)                                                 |  |                        | 720,582 |          |  |          | (24,766  | ) |  |  | (3.32  | ) 

Like all models that are dependent upon future
interest rate movements and other variable, the NPV model that
we use has some shortcomings. We have to make certain
assumptions, including estimated prepayments, which may or may
not actually reflect how actual yields and costs will react to
market interest rates. For example, the NPV model assumes that
the makeup of our interest rate-sensitive assets and liabilities
will remain constant over the period being measured. Thus,
although using such a model can be instructive in providing an
indication of the Banks exposure to interest rate risk, we
cannot precisely forecast the effects of a change in market
interest rates, and the results indicated by the model are
likely to differ from actual results.



| |                            
| | ---------------------------
| | Operational Risk Management

Operational risk is the potential for loss
resulting from events involving people, processes, technology,
legal/regulatory issues, external events, execution and
reputation. Successful operational risk management is
particularly important to a diversified financial services
company like ours because of the nature, volume and complexity
of our various businesses.

The Enterprise Risk Management Committee provides
oversight to accelerate and facilitate consistency of effective
policies, best practices, controls and monitoring tools for
managing and assessing all types of operational risks across the
Company. Such risks are managed through corporate wide or
business division specific policies and procedures, controls and
monitoring tools. Examples of these include personnel management
practices, data reconciliation processes, transaction processing
monitoring and analysis, systems interruptions and new product
introduction processes.

Operational risks fall into two major categories:
business specific and corporate-wide affecting all business
lines. Operational Risk Management plays a different role in
each category. For business specific risks, Operational Risk
Management works with the divisions to ensure consistency in
policies, processes, and assessments. With respect to
corporate-wide risks, such as information security, business
recovery, legal and compliance, Operational Risk Management
assesses the risks, develops a consolidated corporate view and
communicates that view to the business level.

To manage company-wide risks, we maintain
specialized support groups, such as Legal, Information Security,
Business Recovery, Finance, Compliance, and Technology and
Operations. These groups assist the lines of business in the
development and implementation of risk management practices
specific to the needs of

63



---



##### 



the individual businesses. An example of such an
effort is our company-wide implementation of the anti-money
laundering aspects of the USA PATRIOT Act.


Additional Information

Trading Price of Common
Stock.On November 5, 1998, the
Companys stock began trading on The NASDAQ Stock Market
under the ticker symbol UCBH. On February 28,
2005, the stock closed at $41.39. The common stocks high
and low bid price for each of the four quarters ended
December 31, 2004 and December 31, 2003, were as
follows:

|                                 |  |         |       |         |  |         |       |         |  |         |       |         |  |         |       |         |  |   |       |  |  |   |       |  |  |   |       |  |  |   |       | 
|-------------------------------- |  | ------- | ----- | ------- |  | ------- | ----- | ------- |  | ------- | ----- | ------- |  | ------- | ----- | ------- |  | - | ----- |  |  | - | ----- |  |  | - | ----- |  |  | - | ----- | 
|                                 |  | 2004    |       | 2004    |  | 2004    |       | 2004    |  | 2003    |       | 2003    |  | 2003    |       | 2003   
|                                 |  | Fourth  |       | Third   |  | Second  |       | First   |  | Fourth  |       | Third   |  | Second  |       | First  
|                                 |  | Quarter |       | Quarter |  | Quarter |       | Quarter |  | Quarter |       | Quarter |  | Quarter |       | Quarter
|                                 |  |         |       |         |  |         |       |         |  |         |       |         |  |         |       |        
|High bid price during quarter(1) |  | $       | 47.95 |         |  | $       | 41.27 |         |  | $       | 42.25 |         |  | $       | 41.50 |         |  | $ | 39.87 |  |  | $ | 33.40 |  |  | $ | 29.10 |  |  | $ | 22.37 | 
|Low bid price during quarter(1)  |  | $       | 37.84 |         |  | $       | 36.85 |         |  | $       | 33.72 |         |  | $       | 35.83 |         |  | $ | 31.32 |  |  | $ | 29.00 |  |  | $ | 22.53 |  |  | $ | 20.55 | 



---



|    |                                                                                                                                                                                             
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Adjusted for two-for-one stock split for
    shareholders of record as of March 31, 2001 and completed
    on April 11, 2001, and as of March 31, 2003, and
    completed on April 11, 2003.

As of February 15, 2005, there were
28,841 shareholders of the Companys common stock. The
Company and the Bank are prohibited by federal regulations from
paying dividends if the payment would reduce their regulatory
capital below certain minimum requirements. The Company declared
dividends totaling $0.12 per share in 2003 and
$0.16 per share in 2004.

64



---



##### 



[PRICEWATERHOUSECOOPERS LOGO]




REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM

To the Board of Directors and Stockholders of
UCBH Holdings, Inc.:

We have completed an integrated audit of UCBH
Holdings, Inc.s 2004 consolidated financial statements and
of its internal control over financial reporting as of
December 31, 2004 and audits of its 2003 and 2002
consolidated financial statements in accordance with the
standards of the Public Company Accounting Oversight Board
(United States). Our opinions, based on our audits, are
presented below.

Consolidated financial
statements

In our opinion, the consolidated financial
statements listed in the accompanying index present fairly, in
all material respects, the financial position of UCBH Holdings,
Inc. and its subsidiaries at December 31, 2004 and 2003,
and the results of their operations and their cash flows for
each of the three years in the period ended December 31,
2004 in conformity with accounting principles generally accepted
in the United States of America. These financial statements are
the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these
statements in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit of financial statements
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.

Internal control over financial
reporting

Also, we have audited managements
assessment, included in Managements Report on Internal
Control Over Financial Reporting appearing under Item 9A,
that UCBH Holdings, Inc. did not maintain effective internal
control over financial reporting as of December 31, 2004,
because the Company did not maintain effective controls over the
financial reporting process because the Company had a shortage
of qualified financial reporting personnel with sufficient
depth, skills and experience to apply generally accepted
accounting principles to the Companys transactions and to
prepare financial statements that comply with accounting
principles generally accepted in the United States of America,
based on criteria established in Internal Control 
Integrated Frameworkissued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). The
Companys management is responsible for maintaining
effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over
financial reporting. Our responsibility is to express opinions
on managements assessment and on the effectiveness of the
Companys internal control over financial reporting based
on our audit.

We conducted our audit of internal control over
financial reporting in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. An audit of internal control over financial reporting
includes obtaining an understanding of internal control over
financial reporting, evaluating managements assessment,
testing and evaluating the design and operating effectiveness of
internal control, and performing such other procedures as we
consider necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinions.

A companys internal control over financial
reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A
companys internal control over financial reporting
includes those policies and procedures that (i) pertain to
the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions
of the assets of the company;

65



---



##### 



(ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of
management and directors of the company; and (iii) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.


Because of its inherent limitations, internal
control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures
may deteriorate.

A material weakness is a control deficiency, or
combination of control deficiencies, that results in more than a
remote likelihood that a material misstatement of the annual or
interim financial statements will not be prevented or detected.
As of December 31, 2004, the Company did not maintain
effective controls over the financial reporting process because
the Company had a shortage of qualified financial reporting
personnel with sufficient depth, skills and experience to apply
generally accepted accounting principles to the Companys
transactions and to prepare financial statements that comply
with accounting principles generally accepted in the United
States of America. This material weakness resulted in material
audit adjustments to the 2004 financial statements as well as
adjustments to incorrect and omitted footnote disclosures,
including, but not limited to, Segment Information, Federal and
State Taxes on Income and Mortgage Servicing. Additionally, this
material weakness could result in a material misstatement of
annual or interim financial statements that would not be
prevented or detected. Accordingly management has determined
that this control deficiency constituted a material weakness.
This material weakness was considered in determining the nature,
timing, and extent of audit tests applied in our audit of the
2004 consolidated financial statements, and our opinion
regarding the effectiveness of the Companys internal
control over financial reporting does not affect our opinion on
those consolidated financial statements.

In our opinion, managements assessment that
UCBH Holdings, Inc. did not maintain effective internal control
over financial reporting as of December 31, 2004, is fairly
stated, in all material respects, based on criteria established
in Internal Control  Integrated Frameworkissued by the COSO. Also, in our opinion, because of the
effect of the material weakness described above on the
achievement of the objectives of the control criteria, UCBH
Holdings, Inc. has not maintained effective internal control
over financial reporting as of December 31, 2004, based on
criteria established in Internal Control 
Integrated Frameworkissued by the COSO.

PricewaterhouseCoopers LLP 
 San Francisco, California 
 March 15, 2005

66



---



##### 






UCBH HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)


|                                                                                                                                                                                                            |                             |                                            |           |           |           |   |           |           |           | 
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------- | ------------------------------------------ | --------- | --------- | --------- | - | --------- | --------- | --------- | 
|                                                                                                                                                                                                            |                             |                                           
|                                                                                                                                                                                                            |                             | December 31,                              
|                                                                                                                                                                                                            |                             |                                           
|                                                                                                                                                                                                            |                             | 2004                                       |           | 2003     
|                                                                                                                                                                                                            |                             |                                            |           |          
|ASSETS                                                                                                                                                                                                     
|Cash and due from banks                                                                                                                                                                                     |                             | $                                          | 73,864    |           |           | $ | 76,786    |          
|Federal funds sold                                                                                                                                                                                          |                             |                                            | 134,500   |           |           |   |          |          
|Investment and mortgage-backed securities
    available for sale, at fair value                                                                                                                             |                             |                                            | 1,169,140 |           |           |   | 1,221,070 |          
|Investment and mortgage-backed securities, at
    cost (fair value of $331,969 and $287,372 at December 31,
    2004 and 2003, respectively)                                                                |                             |                                            | 325,202   |           |           |   | 284,712   |          
|Federal Home Loan Bank stock and other
    equity investments                                                                                                                                               |                             |                                            | 56,867    |           |           |   | 41,316    |          
|Loans held for sale, at the lower of cost or
    market value                                                                                                                                               |                             |                                            | 326,007   |           |           |   | 20,262    |          
|Loans held in portfolio                                                                                                                                                                                     |                             |                                            | 4,050,741 |           |           |   | 3,771,381 |          
|Allowance for loan losses                                                                                                                                                                                   |                             |                                            | (56,472   | )         |           |   | (58,126   | )        
|                                                                                                                                                                                                            |                             |                                            |           |           |           |   |           |          
|                                                                                                                                                                                                            | Net loans held in portfolio |                                            |           | 3,994,269 |           |   |           | 3,713,255 |          
|                                                                                                                                                                                                            |                             |                                            |           |           |           |   |           |          
|Accrued interest receivable                                                                                                                                                                                 |                             |                                            | 24,507    |           |           |   | 21,756    |          
|Premises and equipment, net                                                                                                                                                                                 |                             |                                            | 89,238    |           |           |   | 84,145    |          
|Goodwill                                                                                                                                                                                                    |                             |                                            | 68,301    |           |           |   | 87,437    |          
|Intangibles, net                                                                                                                                                                                            |                             |                                            | 17,576    |           |           |   | 15,117    |          
|Other assets                                                                                                                                                                                                |                             |                                            | 36,210    |           |           |   | 22,071    |          
|                                                                                                                                                                                                            |                             |                                            |           |           |           |   |           |          
|                                                                                                                                                                                                            |                             | Total assets                               |           | $         | 6,315,681 |   |           | $         | 5,587,927 | 
|                                                                                                                                                                                                            |                             |                                            |           |           |           |   |           |          
|                                                                                                                                                                                                           
|LIABILITIES                                                                                                                                                                                                
|Noninterest-bearing deposits                                                                                                                                                                                |                             | $                                          | 428,602   |           |           | $ | 324,615   |          
|Interest-bearing deposits                                                                                                                                                                                   |                             |                                            | 4,787,260 |           |           |   | 4,158,906 |          
|                                                                                                                                                                                                            |                             |                                            |           |           |           |   |           |          
|                                                                                                                                                                                                            |                             | Total deposits                             |           |           | 5,215,862 |   |           |           | 4,483,521 | 
|                                                                                                                                                                                                            |                             |                                            |           |           |           |   |           |          
|Borrowings                                                                                                                                                                                                  |                             |                                            | 407,262   |           |           |   | 505,542   |          
|Subordinated debentures                                                                                                                                                                                     |                             |                                            | 136,000   |           |           |   | 136,000   |          
|Accrued interest payable                                                                                                                                                                                    |                             |                                            | 6,110     |           |           |   | 8,346     |          
|Other liabilities                                                                                                                                                                                           |                             |                                            | 66,435    |           |           |   | 40,052    |          
|                                                                                                                                                                                                            |                             |                                            |           |           |           |   |           |          
|                                                                                                                                                                                                            |                             | Total liabilities                          |           | $         | 5,831,669 |   |           | $         | 5,173,461 | 
|                                                                                                                                                                                                            |                             |                                            |           |           |           |   |           |          
|Commitments and contingencies (Notes 18 and
    20)                                                                                                                                                         |                             |                                            |           |           |           |   |           |          
|                                                                                                                                                                                                           
|STOCKHOLDERS EQUITY                                                                                                                                                                                       
|Preferred stock, $0.01 par value,
    10,000,000 shares authorized, none issued and outstanding                                                                                                             |                             |                                            |          |           |           |   |          |          
|Common stock, $0.01 par value,
    180,000,000 shares authorized at December 31, 2004 and
    2003; 45,565,912 and 45,038,378 shares issued and
    outstanding at December 31, 2004 and 2003, respectively |                             |                                            | 456       |           |           |   | 450       |          
|Additional paid-in capital                                                                                                                                                                                  |                             |                                            | 203,432   |           |           |   | 208,990   |          
|Accumulated other comprehensive loss                                                                                                                                                                        |                             |                                            | (6,498    | )         |           |   | (3,245    | )        
|Retained earnings  substantially
    restricted                                                                                                                                                            |                             |                                            | 286,622   |           |           |   | 208,271   |          
|                                                                                                                                                                                                            |                             |                                            |           |           |           |   |           |          
|                                                                                                                                                                                                            |                             | Total stockholders equity                 |           |           | 484,012   |   |           |           | 414,466   | 
|                                                                                                                                                                                                            |                             |                                            |           |           |           |   |           |          
|                                                                                                                                                                                                            |                             | Total liabilities and stockholders equity |           | $         | 6,315,681 |   |           | $         | 5,587,927 | 
|                                                                                                                                                                                                            |                             |                                            |           |           |           |   |           |          

See accompanying notes to consolidated financial
statements.

67



---



##### 






UCBH HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in Thousands, Except for Per Share
Data)


|                                 |                                           |                                                         |         |         |         |      |         |         |         |   |        |         |         | 
|-------------------------------- | ----------------------------------------- | ------------------------------------------------------- | ------- | ------- | ------- | ---- | ------- | ------- | ------- | - | ------ | ------- | ------- | 
|                                 |                                           |                                                        
|                                 |                                           | For the Years Ended December 31,                       
|                                 |                                           |                                                        
|                                 |                                           | 2004                                                    |         | 2003    |         | 2002
|                                 |                                           |                                                         |         |         |         |     
|Interest income:                 |                                           |                                                         |         |         |         |      |         |         |         |   |        |        
|                                 | Loans                                     |                                                         | $       | 226,292 |         |      | $       | 191,754 |         |   | $      | 156,983 |        
|                                 | Funds sold and due from banks             |                                                         |         | 649     |         |      |         | 106     |         |   |        | 183     |        
|                                 | Investment and mortgage-backed securities |                                                         |         | 73,123  |         |      |         | 68,402  |         |   |        | 48,012  |        
|                                 |                                           |                                                         |         |         |         |      |         |         |         |   |        |        
|                                 |                                           | Total interest income                                   |         |         | 300,064 |      |         |         | 260,262 |   |        |         | 205,178 | 
|                                 |                                           |                                                         |         |         |         |      |         |         |         |   |        |        
|Interest expense:                |                                           |                                                         |         |         |         |      |         |         |         |   |        |        
|                                 | Deposits                                  |                                                         |         | 67,267  |         |      |         | 68,724  |         |   |        | 61,236  |        
|                                 | Short-term borrowings                     |                                                         |         | 2,165   |         |      |         | 1,084   |         |   |        | 565     |        
|                                 | Subordinated debentures                   |                                                         |         | 8,185   |         |      |         | 7,922   |         |   |        | 4,653   |        
|                                 | Long-term borrowings                      |                                                         |         | 14,966  |         |      |         | 13,984  |         |   |        | 13,778  |        
|                                 |                                           |                                                         |         |         |         |      |         |         |         |   |        |        
|                                 |                                           | Total interest expense                                  |         |         | 92,583  |      |         |         | 91,714  |   |        |         | 80,232  | 
|                                 |                                           |                                                         |         |         |         |      |         |         |         |   |        |        
|                                 |                                           | Net interest income                                     |         |         | 207,481 |      |         |         | 168,548 |   |        |         | 124,946 | 
|Provision for loan losses        |                                           |                                                         | 4,201   |         |         |      | 9,967   |         |         |   | 9,673  |        
|                                 |                                           |                                                         |         |         |         |      |         |         |         |   |        |        
|                                 |                                           | Net interest income after provision for loan
    losses |         |         | 203,280 |      |         |         | 158,581 |   |        |         | 115,273 | 
|                                 |                                           |                                                         |         |         |         |      |         |         |         |   |        |        
|Noninterest income:              |                                           |                                                         |         |         |         |      |         |         |         |   |        |        
|                                 | Commercial banking and other fees         |                                                         |         | 8,525   |         |      |         | 7,063   |         |   |        | 5,202   |        
|                                 | Service charges on deposits               |                                                         |         | 2,654   |         |      |         | 2,249   |         |   |        | 1,704   |        
|                                 | Gain on sale of securities, net           |                                                         |         | 12,713  |         |      |         | 11,013  |         |   |        | 3,527   |        
|                                 | Gain on sale of SBA loans, net            |                                                         |         | 1,463   |         |      |         | 3,030   |         |   |        | 1,838   |        
|                                 | Gain on sale of multifamily loans         |                                                         |         | 7,732   |         |      |         |        |         |   |        |        |        
|                                 | Equity loss in other equity investments   |                                                         |         | (2,210  | )       |      |         | (152    | )       |   |        | (129    | )      
|                                 |                                           |                                                         |         |         |         |      |         |         |         |   |        |        
|                                 |                                           | Total noninterest income                                |         |         | 30,877  |      |         |         | 23,203  |   |        |         | 12,142  | 
|                                 |                                           |                                                         |         |         |         |      |         |         |         |   |        |        
|Noninterest expense:             |                                           |                                                         |         |         |         |      |         |         |         |   |        |        
|                                 | Personnel                                 |                                                         |         | 50,931  |         |      |         | 42,310  |         |   |        | 29,965  |        
|                                 | Occupancy                                 |                                                         |         | 10,164  |         |      |         | 5,869   |         |   |        | 5,326   |        
|                                 | Data processing                           |                                                         |         | 5,896   |         |      |         | 4,826   |         |   |        | 3,463   |        
|                                 | Furniture and equipment                   |                                                         |         | 5,396   |         |      |         | 3,661   |         |   |        | 2,614   |        
|                                 | Professional fees and contracted services |                                                         |         | 7,496   |         |      |         | 5,802   |         |   |        | 5,626   |        
|                                 | Deposit insurance                         |                                                         |         | 774     |         |      |         | 695     |         |   |        | 467     |        
|                                 | Communication                             |                                                         |         | 1,287   |         |      |         | 1,066   |         |   |        | 726     |        
|                                 | Core deposit intangible amortization      |                                                         |         | 1,283   |         |      |         | 1,762   |         |   |        | 227     |        
|                                 | Litigation settlement                     |                                                         |         |        |         |      |         |        |         |   |        | 6,750   |        
|                                 | Miscellaneous expense                     |                                                         |         | 15,926  |         |      |         | 14,217  |         |   |        | 9,185   |        
|                                 |                                           |                                                         |         |         |         |      |         |         |         |   |        |        
|                                 |                                           | Total noninterest expense                               |         |         | 99,153  |      |         |         | 80,208  |   |        |         | 64,349  | 
|                                 |                                           |                                                         |         |         |         |      |         |         |         |   |        |        
|Income before income tax expense |                                           |                                                         | 135,004 |         |         |      | 101,576 |         |         |   | 63,066 |        
|Income tax expense               |                                           |                                                         | 49,401  |         |         |      | 36,938  |         |         |   | 24,138 |        
|                                 |                                           |                                                         |         |         |         |      |         |         |         |   |        |        
|                                 |                                           | Net income                                              |         | $       | 85,603  |      |         | $       | 64,638  |   |        | $       | 38,928  | 
|                                 |                                           |                                                         |         |         |         |      |         |         |         |   |        |        
|Basic earnings per share         |                                           | $                                                       | 1.89    |         |         | $    | 1.48    |         |         | $ | 0.98   |        
|                                 |                                           |                                                         |         |         |         |      |         |         |         |   |        |        
|Diluted earnings per share       |                                           | $                                                       | 1.80    |         |         | $    | 1.41    |         |         | $ | 0.94   |        
|                                 |                                           |                                                         |         |         |         |      |         |         |         |   |        |        
|Dividends declared per share     |                                           | $                                                       | 0.16    |         |         | $    | 0.12    |         |         | $ | 0.10   |        
|                                 |                                           |                                                         |         |         |         |      |         |         |         |   |        |        

See accompanying notes to consolidated financial
statements.

68



---



##### 






UCBH HOLDINGS, INC. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS EQUITY AND COMPREHENSIVE INCOME
(LOSS)


(Dollars in Thousands, Except for Per Share
Data)


|                             |                                                                                                                    |                 |            |            |  |               |     |                  |  |               |         |               |   |        |        |         |   |   |         |        |   |   |         |         |   |  |   |         |  
|---------------------------- | ------------------------------------------------------------------------------------------------------------------ | --------------- | ---------- | ---------- |  | ------------- | --- | ---------------- |  | ------------- | ------- | ------------- | - | ------ | ------ | ------- | - | - | ------- | ------ | - | - | ------- | ------- | - |  | - | ------- | -
|                             |                                                                                                                    |                 |            |            |  | Accumulated   |     |                  |  |               |         |              
|                             |                                                                                                                    | Common Stock(1) |            | Additional |  | Other         |     |                  |  | Total         |         |              
|                             |                                                                                                                    |                 |            | Paid-In    |  | Comprehensive |     | Retained         |  | Stockholders |         | Comprehensive
|                             |                                                                                                                    | Shares          |            | Amount     |  | Capital       |     | Income (Loss)(2) |  | Earnings      |         | Equity        |   | Income
|                             |                                                                                                                    |                 |            |            |  |               |     |                  |  |               |         |               |   |       
|Balance at December 31, 2001 |                                                                                                                    |                 | 38,718,564 |            |  | $             | 194 |                  |  | $             | 66,685  |               |   | $      | (6,481 | )       |   | $ | 113,726 |        |   | $ | 174,124 |         |   |  |   |        
|                             | Net income                                                                                                         |                 |            |           |  |               |     |                 |  |               |         |              |   |        |        |        |   |   |         | 38,928 |   |   |         | 38,928  |   |  | $ | 38,928  |  
|                             | Other comprehensive income, net of tax(2)                                                                          |                 |            |           |  |               |     |                 |  |               |         |              |   |        |        | 15,534  |   |   |         |       |   |   |         | 15,534  |   |  |   | 15,534  |  
|                             |                                                                                                                    |                 |            |            |  |               |     |                  |  |               |         |               |   |        |        |         |   |   |         |        |   |   |         |         |   |  |   |        
|                             | Comprehensive income                                                                                               |                 |            |           |  |               |     |                 |  |               |         |              |   |        |        |        |   |   |         |       |   |   |         |        |   |  | $ | 54,462  |  
|                             |                                                                                                                    |                 |            |            |  |               |     |                  |  |               |         |               |   |        |        |         |   |   |         |        |   |   |         |         |   |  |   |        
|                             | Stock options exercised, including related tax
    benefit                                                         |                 |            | 648,980    |  |               |     | 3                |  |               |         | 6,518         |   |        |        |        |   |   |         |       |   |   |         | 6,521   |   |  |   |         |  
|                             | Cash dividend $0.10 per share                                                                                      |                 |            |           |  |               |     |                 |  |               |         |              |   |        |        |        |   |   |         | (3,990 | ) |   |         | (3,990  | ) |  |   |         |  
|                             | Issuance of shares in connection with acquisition
    of Bank of Canton of California                              |                 |            | 2,651,184  |  |               |     | 13               |  |               |         | 51,237        |   |        |        |        |   |   |         |       |   |   |         | 51,250  |   |  |   |         |  
|                             |                                                                                                                    |                 |            |            |  |               |     |                  |  |               |         |               |   |        |        |         |   |   |         |        |   |   |         |         |   |  |   |        
|Balance at December 31, 2002 |                                                                                                                    |                 | 42,018,728 |            |  |               | 210 |                  |  |               | 124,440 |               |   |        | 9,053  |         |   |   | 148,664 |        |   |   | 282,367 |         |   |  |   |        
|                             | Net income                                                                                                         |                 |            |           |  |               |     |                 |  |               |         |              |   |        |        |        |   |   |         | 64,638 |   |   |         | 64,638  |   |  | $ | 64,638  |  
|                             | Other comprehensive loss, net of tax(2)                                                                            |                 |            |           |  |               |     |                 |  |               |         |              |   |        |        | (12,298 | ) |   |         |       |   |   |         | (12,298 | ) |  |   | (12,298 | )
|                             |                                                                                                                    |                 |            |            |  |               |     |                  |  |               |         |               |   |        |        |         |   |   |         |        |   |   |         |         |   |  |   |        
|                             | Comprehensive income                                                                                               |                 |            |           |  |               |     |                 |  |               |         |              |   |        |        |        |   |   |         |       |   |   |         |        |   |  | $ | 52,340  |  
|                             |                                                                                                                    |                 |            |            |  |               |     |                  |  |               |         |               |   |        |        |         |   |   |         |        |   |   |         |         |   |  |   |        
|                             | Stock options exercised, including related tax
    benefit                                                         |                 |            | 729,143    |  |               |     | 7                |  |               |         | 14,785        |   |        |        |        |   |   |         |       |   |   |         | 14,792  |   |  |   |         |  
|                             | Cash dividend $0.12 per share                                                                                      |                 |            |           |  |               |     |                 |  |               |         |              |   |        |        |        |   |   |         | (5,031 | ) |   |         | (5,031  | ) |  |   |         |  
|                             | Issuance of shares in connection with acquisition
    of First Continental Bank                                    |                 |            | 2,290,507  |  |               |     | 23               |  |               |         | 69,975        |   |        |        |        |   |   |         |       |   |   |         | 69,998  |   |  |   |         |  
|                             | Stock split                                                                                                        |                 |            |           |  |               |     | 210              |  |               |         | (210          | ) |        |        |        |   |   |         |       |   |   |         |        |   |  |   |         |  
|                             |                                                                                                                    |                 |            |            |  |               |     |                  |  |               |         |               |   |        |        |         |   |   |         |        |   |   |         |         |   |  |   |        
|Balance at December 31, 2003 |                                                                                                                    |                 | 45,038,378 |            |  |               | 450 |                  |  |               | 208,990 |               |   |        | (3,245 | )       |   |   | 208,271 |        |   |   | 414,466 |         |   |  |   |        
|                             | Net income                                                                                                         |                 |            |           |  |               |     |                 |  |               |         |              |   |        |        |        |   |   |         | 85,603 |   |   |         | 85,603  |   |  | $ | 85,603  |  
|                             | Other comprehensive loss, net of tax(2)                                                                            |                 |            |           |  |               |     |                 |  |               |         |              |   |        |        | (3,253  | ) |   |         |       |   |   |         | (3,253  | ) |  |   | (3,253  | )
|                             |                                                                                                                    |                 |            |            |  |               |     |                  |  |               |         |               |   |        |        |         |   |   |         |        |   |   |         |         |   |  |   |        
|                             | Comprehensive income                                                                                               |                 |            |           |  |               |     |                 |  |               |         |              |   |        |        |        |   |   |         |       |   |   |         |        |   |  | $ | 82,350  |  
|                             |                                                                                                                    |                 |            |            |  |               |     |                  |  |               |         |               |   |        |        |         |   |   |         |        |   |   |         |         |   |  |   |        
|                             | Stock options exercised, including related tax
    benefit                                                         |                 |            | 527,534    |  |               |     | 6                |  |               |         | 11,233        |   |        |        |        |   |   |         |       |   |   |         | 11,239  |   |  |   |         |  
|                             | Cash dividend $0.16 per share                                                                                      |                 |            |           |  |               |     |                 |  |               |         |              |   |        |        |        |   |   |         | (7,252 | ) |   |         | (7,252  | ) |  |   |         |  
|                             | Adjustment to purchase consideration in
    connection with acquisition of First Continental Bank (see
    Note 3) |                 |            |           |  |               |     |                 |  |               |         | (16,791       | ) |        |        |        |   |   |         |       |   |   |         | (16,791 | ) |  |   |         |  
|                             |                                                                                                                    |                 |            |            |  |               |     |                  |  |               |         |               |   |        |        |         |   |   |         |        |   |   |         |         |   |  |   |        
|Balance at December 31, 2004 |                                                                                                                    |                 | 45,565,912 |            |  | $             | 456 |                  |  | $             | 203,432 |               |   | $      | (6,498 | )       |   | $ | 286,622 |        |   | $ | 484,012 |         |   |  |   |        
|                             |                                                                                                                    |                 |            |            |  |               |     |                  |  |               |         |               |   |        |        |         |   |   |         |        |   |   |         |         |   |  |   |        



---



|    |                                                                                                                                                               
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | See Note 14 for information on stock
    dividend declared on January 27, 2005.                                                                               
|   
|(2) | Accumulated Other Comprehensive Income (Loss)
    arises solely from net unrealized gains (losses) on securities
    available for sale, presented net of tax.

See accompanying notes to consolidated financial
statements.

69



---



##### 






UCBH HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH
FLOWS

(Dollars in Thousands)


|                                                                                                                                                                              |                                                                                                  |                                                             |                                                    |            |            |          |   |          |            |          |   |           |            |          |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------ | ----------------------------------------------------------- | -------------------------------------------------- | ---------- | ---------- | -------- | - | -------- | ---------- | -------- | - | --------- | ---------- | -------- | -
|                                                                                                                                                                              |                                                                                                  |                                                            
|                                                                                                                                                                              |                                                                                                  | For the Years Ended December 31,                           
|                                                                                                                                                                              |                                                                                                  |                                                            
|                                                                                                                                                                              |                                                                                                  | 2004                                                        |                                                    | 2003       |            | 2002    
|                                                                                                                                                                              |                                                                                                  |                                                             |                                                    |            |            |         
|Cash flows from operating activities:                                                                                                                                         |                                                                                                  |                                                             |                                                    |            |            |          |   |          |            |          |   |          
|                                                                                                                                                                              | Net income                                                                                       |                                                             | $                                                  | 85,603     |            |          | $ | 64,638   |            |          | $ | 38,928    |           
|                                                                                                                                                                              | Adjustments to reconcile net income to net cash
    provided by (used for) operating activities: |                                                             |                                                    |            |            |          |   |          |            |          |   |           |           
|                                                                                                                                                                              |                                                                                                  | Provision for loan losses                                   |                                                    |            | 4,201      |          |   |          | 9,967      |          |   |           | 9,673      |         
|                                                                                                                                                                              |                                                                                                  | Amortization of purchase price adjustments                  |                                                    |            | (492       | )        |   |          | (3,321     | )        |   |           | (1,027     | )       
|                                                                                                                                                                              |                                                                                                  | Amortization of core deposit intangible                     |                                                    |            | 1,282      |          |   |          | 1,762      |          |   |           | 227        |         
|                                                                                                                                                                              |                                                                                                  | Depreciation and amortization of premises and
    equipment |                                                    |            | 7,021      |          |   |          | 5,810      |          |   |           | 2,901      |         
|                                                                                                                                                                              |                                                                                                  | Gain on sale of loans, securities and other
    assets, net |                                                    |            | (19,592    | )        |   |          | (13,912    | )        |   |           | (5,107     | )       
|                                                                                                                                                                              |                                                                                                  | Other, net                                                  |                                                    |            | (10,449    | )        |   |          | 9,054      |          |   |           | 2,134      |         
|                                                                                                                                                                              |                                                                                                  | Changes in operating assets and liabilities:                |                                                    |            |            |          |   |          |            |          |   |           |            |         
|                                                                                                                                                                              |                                                                                                  |                                                             | Decrease (increase) in other assets                |            |            | (10,940  | ) |          |            | 20,279   |   |           |            | 1,424    |  
|                                                                                                                                                                              |                                                                                                  |                                                             | Increase (decrease) in other liabilities           |            |            | 22,103   |   |          |            | (8,692   | ) |           |            | 11,307   |  
|                                                                                                                                                                              |                                                                                                  |                                                             | (Increase) decrease in accrued interest receivable |            |            | (3,159   | ) |          |            | 1,939    |   |           |            | 6,466    |  
|                                                                                                                                                                              |                                                                                                  |                                                             | (Decrease) increase in accrued interest payable    |            |            | (2,236   | ) |          |            | (3,509   | ) |           |            | (1,422   | )
|                                                                                                                                                                              |                                                                                                  |                                                             |                                                    |            |            |          |   |          |            |          |   |          
|                                                                                                                                                                              |                                                                                                  |                                                             | Net cash provided by operating activities          |            |            | 73,342   |   |          |            | 84,015   |   |           |            | 65,504   |  
|                                                                                                                                                                              |                                                                                                  |                                                             |                                                    |            |            |          |   |          |            |          |   |          
|Cash flows from investing activities:                                                                                                                                         |                                                                                                  |                                                             |                                                    |            |            |          |   |          |            |          |   |          
|                                                                                                                                                                              | Acquisition, net of cash acquired                                                                |                                                             |                                                    |           |            |          |   | 46,280   |            |          |   | (130,489  | )         
|                                                                                                                                                                              | Investments and mortgage-backed securities,
    available for sale:                              |                                                             |                                                    |            |            |          |   |          |            |          |   |           |           
|                                                                                                                                                                              |                                                                                                  | Principal payments and maturities                           |                                                    |            | 756,762    |          |   |          | 599,925    |          |   |           | 306,982    |         
|                                                                                                                                                                              |                                                                                                  | Purchases                                                   |                                                    |            | (1,440,455 | )        |   |          | (1,080,127 | )        |   |           | (1,070,856 | )       
|                                                                                                                                                                              |                                                                                                  | Sales                                                       |                                                    |            | 821,821    |          |   |          | 953,144    |          |   |           | 953,141    |         
|                                                                                                                                                                              |                                                                                                  | Called                                                      |                                                    |            | 68,136     |          |   |          | 98,932     |          |   |           | 92,073     |         
|                                                                                                                                                                              | Investments and mortgage-backed securities, held
    to maturity:                                |                                                             |                                                    |            |            |          |   |          |            |          |   |           |           
|                                                                                                                                                                              |                                                                                                  | Principal payments and maturities                           |                                                    |            | 27,610     |          |   |          | 21,900     |          |   |           | 83         |         
|                                                                                                                                                                              |                                                                                                  | Purchases                                                   |                                                    |            | (69,074    | )        |   |          | (193,544   | )        |   |           | (74,440    | )       
|                                                                                                                                                                              | Loans originated and purchased, net of principal
    collections                                 |                                                             |                                                    | (1,201,383 | )          |          |   | (939,264 | )          |          |   | (641,986  | )         
|                                                                                                                                                                              | Proceeds from the sale of loans                                                                  |                                                             |                                                    | 479,495    |            |          |   | 135,948  |            |          |   | 75,283    |           
|                                                                                                                                                                              | Purchases of premises and other equipment                                                        |                                                             |                                                    | (12,950    | )          |          |   | (9,414   | )          |          |   | (1,402    | )         
|                                                                                                                                                                              | Other investing activities, net                                                                  |                                                             |                                                    | (5,324     | )          |          |   | (6,885   | )          |          |   | (3,663    | )         
|                                                                                                                                                                              |                                                                                                  |                                                             |                                                    |            |            |          |   |          |            |          |   |          
|                                                                                                                                                                              |                                                                                                  |                                                             | Net cash used in investing activities              |            |            | (575,362 | ) |          |            | (373,105 | ) |           |            | (495,274 | )
|                                                                                                                                                                              |                                                                                                  |                                                             |                                                    |            |            |          |   |          |            |          |   |          
|Cash flows from financing activities:                                                                                                                                         |                                                                                                  |                                                             |                                                    |            |            |          |   |          |            |          |   |          
|                                                                                                                                                                              | Net increase in NOW, checking, money market and
    savings accounts                             |                                                             |                                                    | 517,744    |            |          |   | 307,944  |            |          |   | 287,454   |           
|                                                                                                                                                                              | Net increase (decrease) increase in time deposits                                                |                                                             |                                                    | 214,632    |            |          |   | (154,356 | )          |          |   | (9,307    | )         
|                                                                                                                                                                              | Proceeds from long-term borrowings                                                               |                                                             |                                                    | 70,000     |            |          |   |         |            |          |   | 16,000    |           
|                                                                                                                                                                              | Payments on long-term borrowings                                                                 |                                                             |                                                    |           |            |          |   | (4,000   | )          |          |   |          |           
|                                                                                                                                                                              | (Decrease) increase in short-term borrowings                                                     |                                                             |                                                    | (167,823   | )          |          |   | 156,634  |            |          |   | 62,500    |           
|                                                                                                                                                                              | Proceeds from issuance of common stock                                                           |                                                             |                                                    | 5,824      |            |          |   | 5,432    |            |          |   | 3,185     |           
|                                                                                                                                                                              | Payment of cash dividend on common stock                                                         |                                                             |                                                    | (6,779     | )          |          |   | (4,732   | )          |          |   | (3,714    | )         
|                                                                                                                                                                              | Proceeds from issuance of subordinated debentures                                                |                                                             |                                                    |           |            |          |   |         |            |          |   | 100,000   |           
|                                                                                                                                                                              |                                                                                                  |                                                             |                                                    |            |            |          |   |          |            |          |   |          
|                                                                                                                                                                              |                                                                                                  |                                                             | Net cash provided by financing activities          |            |            | 633,598  |   |          |            | 306,922  |   |           |            | 456,118  |  
|                                                                                                                                                                              |                                                                                                  |                                                             |                                                    |            |            |          |   |          |            |          |   |          
|                                                                                                                                                                              | Net increase in cash and cash equivalents                                                        |                                                             |                                                    | 131,578    |            |          |   | 17,832   |            |          |   | 26,348    |           
|                                                                                                                                                                              | Cash and cash equivalents at the beginning of the
    year                                       |                                                             |                                                    | 76,786     |            |          |   | 58,954   |            |          |   | 32,606    |           
|                                                                                                                                                                              |                                                                                                  |                                                             |                                                    |            |            |          |   |          |            |          |   |          
|                                                                                                                                                                              | Cash and cash equivalents at the end of the year                                                 |                                                             | $                                                  | 208,364    |            |          | $ | 76,786   |            |          | $ | 58,954    |           
|                                                                                                                                                                              |                                                                                                  |                                                             |                                                    |            |            |          |   |          |            |          |   |          
|Supplemental disclosure of cash flow information:                                                                                                                             |                                                                                                  |                                                             |                                                    |            |            |          |   |          |            |          |   |          
|                                                                                                                                                                              | Cash paid during the year for interest                                                           |                                                             | $                                                  | 94,602     |            |          | $ | 95,223   |            |          | $ | 81,654    |           
|                                                                                                                                                                              | Cash paid during the year for income taxes                                                       |                                                             |                                                    | 36,372     |            |          |   | 37,610   |            |          |   | 32,271    |           
|Supplemental schedule of noncash investing and
    financing activities:                                                                                                      |                                                                                                  |                                                             |                                                    |            |            |          |   |          |            |          |   |          
|                                                                                                                                                                              | Loans securitized                                                                                |                                                             |                                                    | 147,134    |            |          |   | 286,050  |            |          |   | 315,234   |           
|                                                                                                                                                                              | Income tax benefit from stock options exercised                                                  |                                                             |                                                    | 5,415      |            |          |   | 9,353    |            |          |   | 3,333     |           
|Acquisitions of First Continental Bank in 2003,
    and Bank of Canton of California, and Brooklyn, New York branch
    in 2002 were accounted for using the purchase method: |                                                                                                  |                                                             |                                                    |            |            |          |   |          |            |          |   |          
|                                                                                                                                                                              | Fair value of assets acquired (see Note 3)                                                       |                                                             |                                                    |           |            |          |   | 385,594  |            |          |   | 1,555,880 |           
|                                                                                                                                                                              | Fair value of liabilities assumed                                                                |                                                             |                                                    |           |            |          |   | 326,897  |            |          |   | 1,331,214 |           
|                                                                                                                                                                              |                                                                                                  |                                                             |                                                    |            |            |          |   |          |            |          |   |          
|                                                                                                                                                                              | Net assets acquired                                                                              |                                                             |                                                    |           |            |          |   | 58,697   |            |          |   | 224,666   |           
|                                                                                                                                                                              | Less common stock issued                                                                         |                                                             |                                                    |           |            |          |   | (53,207  | )          |          |   | (51,250   | )         
|                                                                                                                                                                              |                                                                                                  |                                                             |                                                    |            |            |          |   |          |            |          |   |          
|                                                                                                                                                                              | Cash paid                                                                                        |                                                             | $                                                  |           |            |          | $ | 5,490    |            |          | $ | 173,416   |           
|                                                                                                                                                                              |                                                                                                  |                                                             |                                                    |            |            |          |   |          |            |          |   |          

See accompanying notes to consolidated financial
statements.

70



---



##### 






UCBH HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



|   |                                                                                       
|-- | --------------------------------------------------------------------------------------
|1. | Basis of Presentation and Summary of
    Significant Accounting and Reporting Policies

Organization

UCBH Holdings, Inc. (the Company or
UCBH) is a bank holding company organized under the
laws of Delaware that conducts its business through its
principal subsidiary, United Commercial Bank (the
Bank or UCB), a California
state-chartered commercial bank. The Bank offers a full range of
commercial and consumer banking products through its retail
branches and other banking offices in California and New York,
and internationally through its full-service branch in Hong
Kong, which was opened during the second half of 2003 under a
license granted by the Hong Kong Monetary Authority. During the
three months ended March 31, 2004, the Companys
wholly owned subsidiary, UCB Investment Services, Inc.
(UCBIS), commenced business. UCBIS is a registered
broker-dealer with the Securities and Exchange Commission and a
member of the National Association of Securities Dealers
(NASD) and the Securities Investor Protection
Corporation (SIPC).

Principles of
Consolidation

The consolidated financial statements include the
accounts of the Company and most of its wholly owned
subsidiaries. All significant intercompany transactions and
balances have been eliminated in consolidation. The wholly owned
subsidiaries not included in the consolidated results are
certain special purpose trusts established for the purpose of
issuing Guaranteed Preferred Beneficial Interests in the
Companys Junior Subordinated Debentures. These trusts are
excluded pursuant to Financial Accounting Standards Board
(FASB) Interpretation No. 46R
(FIN 46R) issued by the FASB in December of
2003, Consolidation of Variable Interest Entities,
as the Company is not deemed to be the primary beneficiary. The
Company also invests in affordable housing and small business
corporations, limited liability companies, and limited
partnerships as a result of Community Reinvestment Act
(CRA) requirements. Such investments are generally
accounted for under the equity or cost method pursuant to
Accounting Principles Board Opinion No. 18, The
Equity Method of Accounting for Investments in Common
Stock. None of these investments meet the requirements of
FIN 46R, and therefore, are not consolidated.

Fourth
Quarter Adjustments

During the fourth quarter, the Company identified
accounting errors, primarily relating to accounting for the
purchase consideration for the FCB acquisition, certain
Community Reinvestment Act (CRA) investments,
recognition of rent escalation clauses on operating leases and
gain on sale of SBA loans. These matters are more fully
described in Note 23.

Reclassifications

Certain reclassifications have been made to prior
years consolidated financial statements in order to
conform to the December 31, 2004, presentation.

In April 2003, the Company completed a
two-for-one stock split in the legal form of a stock dividend.
Furthermore, as discussed in Note 14 of the Consolidated
Financial Statements, on January 9, 2003, the Board
declared its two-for-one stock split in the legal form of a
stock dividend for shareholders of record as of March 31,
2003. Accordingly, the financial statements for all years
presented have been restated to reflect the effect of this stock
split, including cash dividends.

Use of
Estimates in Preparation of Financial Statements

The preparation of financial statements in
conformity with accounting principles generally accepted in the
United States of America (GAAP) requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities, and disclosure of contingent
assets and liabilities at the date of

71



---



##### 



UCBH HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)





|   |                                                                                                         
|-- | --------------------------------------------------------------------------------------------------------
|1. | Basis of Presentation and Summary of
    Significant Accounting and Reporting Policies 
    (Continued)

the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual
results could differ from those estimated results.

Cash and Cash
Equivalents

Cash and cash equivalents consist of cash and
noninterest-bearing deposits, federal funds sold and securities
purchased under agreements to resell. For purposes of the
statements of cash flows, the Company considers all highly
liquid debt instruments with original maturities of three months
or less when purchased to be cash equivalents.

Federal Funds
Sold and Securities Purchased Under Agreements to
Resell

The Bank is required to maintain cash reserves in
a noninterest-bearing account at the Federal Reserve Bank of
San Francisco. Through the Federal Reserve Bank, the cash
in excess of the Banks reserve requirement from its
noninterest-bearing account at the Federal Reserve Bank
(Federal Funds) is available for overnight and one
day period sales to other institutions with accounts at the
Federal Reserve Bank that are temporarily short of their reserve
requirements. These sales include interest (Federal Funds
Rate) the Bank charges other institutions for use of its
Federal Funds.

The Company periodically purchases securities
under agreements to resell (repurchase agreements). The amounts
advanced under such agreements represent short-term loans.
During the agreement period, the securities are maintained by
the dealer under a written custodial agreement that explicitly
recognizes the Companys interest in the securities.

Investment
and Mortgage-backed Securities

In accordance with Statement of Financial
Accounting Standards (SFAS) No. 115,
Accounting for Certain Investments in Debt and Equity
Securities, the Company has designated a portion of the
investment and mortgage-backed securities portfolio as
held-to-maturity securities. As such, this portion
of the portfolio is carried at cost, adjusted for the
amortization of premiums and accretion of discounts. Cost is
determined on a specific identification basis. Inasmuch as the
Company has the ability and intent to hold the
held-to-maturity securities in its portfolio until
maturity, the carrying value has not been adjusted to reflect
decreases in market value from amortized cost, if any. Declines
in fair value that are deemed other-than-temporary, if any, are
reported in noninterest income.

Additionally, in accordance with
SFAS No. 115, the Company has designated a portion of
the investment and mortgage-backed securities portfolio as
available for sale. Such securities are carried at
fair value. Fair value is the quoted market price. If quoted
market prices are not available, fair values are extrapolated
from the quoted prices of similar instruments. Unrealized
holding gains or losses for available-for-sale
securities are excluded from earnings and reported in a separate
component of stockholders equity, net of tax. Premiums and
discounts on investment and mortgage-backed securities are
amortized against interest income, using the interest method,
with the amortization period extending to the expected life of
the securities. Gains or losses on the sale of securities,
derived from the difference between the sales price and the
securities carrying value, are recognized when sold. The Company
does not maintain a trading account for securities.

72



---



##### 



UCBH HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)





|   |                                                                                                         
|-- | --------------------------------------------------------------------------------------------------------
|1. | Basis of Presentation and Summary of
    Significant Accounting and Reporting Policies 
    (Continued)

Loans Held
for Sale

Loans originated and intended for sale are
carried at the lower of aggregate cost or market value.

Loans Held in
Portfolio

Loans are carried at the principal balance
outstanding and adjusted for the amortization of premiums and
the accretion of discounts. Premiums and discounts are
recognized generally as an adjustment of loan yield by the
interest method based on the contractual term of the loans.
Amortization of deferred loan fees is discontinued on
nonperforming loans. Interest is accrued as earned.

Loans are generally placed on nonaccrual status
when the payments become 90 days past due, or earlier if,
in managements opinion, the full and timely collection of
principal or interest becomes uncertain. Any accrued and unpaid
interest on such loans is reversed and charged against current
income.

The Company recognizes interest income on
nonaccrual loans to the extent received in cash. However, where
there is doubt regarding the ultimate collectibility of the loan
principal, cash receipts, whether designated as principal or
interest, are applied to reduce the carrying value of the loan.

The Company considers a loan to be impaired when,
based on current information and events, it is probable that the
Company will be unable to collect all amounts due according to
the contractual terms of the loan agreement, including scheduled
interest payments. For a loan that has been restructured, the
contractual terms of the loan agreement refer to the contractual
terms specified by the original loan agreement, not the
contractual terms specified by the restructuring agreement.
Restructured and performing loans are not placed on nonaccrual
status.

When evaluating loans for possible impairment,
the Company makes an individual assessment for impairment when
and while such loans are on nonaccrual status, or the loan has
been restructured. When a loan has been identified as being
impaired, the amount of impairment will be measured by the
Company using discounted cash flows, except when it is
determined that the primary remaining source of repayment for
the loan is the operation or liquidation of the underlying
collateral. In such cases, the current fair value of the
collateral, reduced by estimated costs to sell, will be used in
place of discounted cash flows. The Company does not apply the
loan-by-loan evaluation process described above to large groups
of smaller balance homogeneous loans that are evaluated
collectively for impairment, such as residential mortgage (one
to four family) loans, home equity loans, and other consumer
loans.

If the measurement of the impaired loan is less
than the recorded investment in the loan (including accrued
interest, net deferred loan fees or costs and unamortized
premium or discount), an impairment is recognized by creating or
adjusting an existing allocation of the allowance for loan
losses. The Companys charge-off policy with respect to
impaired loans is similar to its charge-off policy for all
loans. Specifically, loans are charged off in the month in which
they are considered uncollectible.

Allowance for
Loan Losses

The allowance for loan losses is based on
managements ongoing evaluation of various factors
affecting collectibility of the loan portfolio. These factors
include, but are not limited to, changes in the composition of
the portfolio, current and economic conditions, overall
portfolio quality, review of specific problem loans, and
historical loan loss experience. A formal process is used to
establish an adequate allowance for loan losses.

The Company uses a risk grading system to
determine the credit quality of its loans. Loans are reviewed
for information affecting the obligors ability to fulfill
its obligations. In assessing the risk grading of a particular
loan, the factors considered include the obligors debt
capacity and financial flexibility, the level of earnings of the
borrowers, the amount and sources of repayment, the level and
nature of contingencies,

73



---



##### 



UCBH HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)





|   |                                                                                                         
|-- | --------------------------------------------------------------------------------------------------------
|1. | Basis of Presentation and Summary of
    Significant Accounting and Reporting Policies 
    (Continued)

management strength, the quality of the
collateral, and the industry in which the borrower operates.
These factors are based on an evaluation of historical
information as well as subjective assessment and interpretation.
Emphasizing one factor over another or considering additional
factors that may be relevant in determining the risk grading of
a particular loan, but which are not currently an explicit part
of the Companys methodology, could affect the risk grade
assigned to that loan.

Management also applies judgment to derive loss
factors associated with each credit facility. These loss factors
are considered by type of obligor and collateral. The Company
uses its own historical loss experience or independent
verifiable data to estimate the loss factors. Many factors can
affect managements estimates of a loss factor. The
application of different loss factors will change the amount of
the allowance for credit losses determined to be appropriate by
the Company. Given the process the Company follows in
determining the risk grading of its loans, management believes
the current risk gradings assigned to loans are appropriate.

Managements judgment is also applied when
considering uncertainties based on current macroeconomic
conditions and other factors. For example, judgment as to the
economic outlook in California will affect managements
assessment of potential losses based on exposure to that
marketplace.

The allowance is increased by provisions charged
to expense and reduced by loan losses, net of recoveries. Loans
are charged off when they are classified as a loss.
For any loan which is deemed classified, an impairment
assessment is performed and the amount by which the recorded
loan amount exceeds the value of the property or other
collateral securing the loan is charged off, unless the loan is
both well secured and in the process of collection. Recoveries
of amounts that have been previously charged off are only
recorded to the extent cash is received.

Management believes that, as of December 31,
2004 and 2003, the allowance for loan losses was adequate based
on information available at the time. If the economy weakens in
the Companys principal market areas, the Companys
loan portfolios could be adversely affected and higher
charge-offs and increases in nonperforming assets could result.
Such an adverse impact could also require a larger allowance for
loan losses and increased charge-offs.

Premises and
Equipment

Premises and equipment are carried at cost, less
accumulated depreciation and amortization. Provisions for
depreciation and amortization are determined on a straight-line
basis over the lesser of the estimated useful lives or the terms
of the leases. Terms range from three to ten years for
furniture, equipment, and computer software, and from forty to
fifty years for premises.

Other Real
Estate Owned (OREO)

Foreclosed assets (other real estate owned)
consist of properties acquired through, or in lieu of,
foreclosure and are carried at the lower of cost or fair value
less estimated selling costs, and are included in other assets.
Cost includes the unpaid loan balance adjusted for applicable
accrued interest, unamortized deferred loan fees and acquisition
costs. In the event that the fair value less estimated selling
costs is less than cost at the time of acquisition, the
shortfall is charged to the allowance for loan losses.
Subsequent write-downs, if any, and disposition gains and losses
are reflected as charges to current operations. The Company had
no OREO at December 31, 2004 or 2003.

Other Equity
Investments

The Company is subject to certain requirements
involving Community Reinvestment Act (CRA)
activities. The CRA generally requires the federal banking
agencies to evaluate the record of a financial institution in
meeting the credit needs of its local communities, including
low- and moderate-income

74



---



##### 



UCBH HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)





|   |                                                                                                         
|-- | --------------------------------------------------------------------------------------------------------
|1. | Basis of Presentation and Summary of
    Significant Accounting and Reporting Policies 
    (Continued)

neighborhoods. The Company invests in CRA
qualified investments such as affordable housing and small
business investment companies. Such investments are included in
other assets on the consolidated balance sheets and are direct
equity investments substantially in limited partnerships and
limited liability companies. Affordable housing investments are
accounted for using the equity accounting method, per the
FASBs Accounting Principles Board Opinion 18
(APB 18) The Equity Method of
Accounting for Investments in Common Stock. Similarly,
other limited partnership and limited liability investments of
5% and over are accounted for under the equity accounting
method; minor interests less than 5% under the cost basis,
consistent with no influence over the underlying companys
operating and financial policies. Under equity accounting, the
Company adjusts its cost basis by recognizing its share of
earnings or losses of the underlying investment as equity loss
in other equity investments on the consolidated statements of
income. Under cost basis accounting, the Companys cost
basis in each investment is reduced by dividends received until
cost basis of the individual investment is fully recovered. None
of these investments meet the criteria of FIN No. 46
as referred to above and, therefore, are not consolidated. These
investments totaled $30.9 million and $16.4 million as
of December 31, 2004 and December 31, 2003,
respectively.

Accounting
for Acquisitions of Certain Financial Institutions

The Company capitalizes unidentifiable intangible
assets as goodwill resulting from acquisitions of financial
institutions. Accordingly, the Companys intangible assets
resulting from an acquisition are subject to the same
undiscounted cash flow recoverability test, impairment loss
recognition, and measurement provisions required for the
Companys other long-lived assets. The First Continental
Bank (FCB) and the Bank of Canton of California
(BCC) acquisitions were accounted for in accordance
with this policy.

Goodwill and
Core Deposit Intangibles

In accordance with SFAS No. 142 and
No. 141, goodwill resulting from the Companys
acquisitions of FCB and BCC will not be amortized to expense
over a fixed period of time, but will be tested for impairment
at least annually by management to determine if facts and
circumstances suggest that it is not recoverable. No such
impairment in goodwill has occurred as of December 31, 2004
or 2003. Identifiable intangible assets, namely core deposit
intangibles related to the FCB and BCC acquisitions and the
purchase of certain assets and liabilities of a bank branch in
Brooklyn, New York, are amortized over their estimated period of
benefit. Identifiable intangible assets are tested for
impairment quarterly.

Securities
Sold Under Agreements to Repurchase

The Company periodically enters into sales of
securities under agreements to repurchase (reverse repurchase
agreements). Fixed-coupon reverse repurchase agreements are
treated as financing. Accordingly, the securities underlying the
agreements remain in the asset accounts, and the obligations to
repurchase securities sold are reflected as a liability in the
consolidated balance sheets. The securities underlying the
agreements are delivered to the dealers who arrange the
transactions. Under some agreements, the dealers may sell, lend,
or otherwise dispose of the securities to other parties and
agree to resell to the Company substantially identical
securities at the maturities of the agreements.

Derivative
Instruments and Hedging Activities

Financial derivatives are instruments where a
notional principal amount is tied to an underlying interest
rate, currency exchange rate or other financial asset, index or
pricing measure. Examples of derivative financial instrument are
foreign exchange contracts (swaps and forwards), interest rate
swaps, options, caps, floors, forwards, and similar instruments.

75



---



##### 



UCBH HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)





|   |                                                                                                         
|-- | --------------------------------------------------------------------------------------------------------
|1. | Basis of Presentation and Summary of
    Significant Accounting and Reporting Policies 
    (Continued)

The Company does not speculate on the future
direction of interest or exchange rates. Nonetheless, the
Company may from time to time enter into financial derivative
transactions to mitigate interest rate exposures inherent in its
assets, liabilities, or its net interest position and/or to
hedge various market or foreign exchange risks. The Company may
also engage in financial derivative transactions on behalf of
customers and to facilitate their transactions.

As of December 31, 2004 and 2003, the
Company had no derivative transactions designated as hedges
according to the relevant accounting criteria. The
Companys derivatives not accounted for as hedges are
carried at fair value in the financial statements with any gains
or losses reflected in miscellaneous expense.

Accounting
for Loan Sales

The Company primarily sells loans on a whole loan
basis either with the Company releasing or retaining the right
to service the loans. When the Company does not retain the
servicing rights to the loans, the gain or loss on the sale is
equal to the difference between the proceeds received and the
book basis of the loans sold. If the loans are sold with the
Company retaining the servicing rights, the gain or loss depends
in part on the fair value attributed to the servicing rights.

The rules governing the accounting for loan
securitizations are established in Statement of Financial
Accounting Standards No. 140 Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of
Liabilities (SFAS 140). This standard
establishes the conditions that must be present for treating a
transfer of financial assets as a sale.

In a sale, exchange or securitization, the
Company may retain servicing rights of the underlying loans. In
calculation the gain or loss on the sale, the Company allocates
the cost basis of the loans sold between the assets sold and
servicing rights based on their relative fair values at the date
of sale. A gain or loss is recognized as the difference between
the cash proceeds from the sale and the allocated cost basis of
the assets sold. Because market quotes are generally not
available for servicing assets, the Company estimates fair value
based upon modeling techniques which are based on the
assumptions the Company believes market participants would use
for similar assets and liabilities.

Accounting
for Income Taxes

The Company accounts for income taxes in
accordance with SFAS No. 109, Accounting for
Income Taxes. SFAS No. 109 requires the
recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been
recognized in the Companys financial statements or tax
returns. The Company provides a valuation allowance against net
deferred tax assets to the extent that realization of the assets
is not considered more likely than not. The Company and the Bank
file a consolidated federal income tax return and a combined
California state income tax return.

Accounting
for Stock-Based Compensation

The Company has elected to continue accounting
for employee stock-based compensation using the intrinsic value
method in accordance with Accounting Principles Board (the
APB) Opinion No. 25, Accounting for Stock
Issued to Employees, rather than the alternative fair
value accounting allowed by SFAS No. 123,
Accounting for Stock-Based Compensation, as amended
by SFAS No. 148, Accounting for Stock-Based
Compensation-Transition and Disclosure. Under APB
No. 25, the Company records no stock-based employee
compensation cost if the stock options are granted with an
exercise price equal to or greater than the market value of the
underlying common stock on the date of grant. As of
December 31, 2004, the Company has one stock-based employee
compensation plan, which is described more fully in
Note 16. No stock-based employee compensation cost is
reflected in net income, as all options granted under this plan
had an exercise price equal to the market value of the
underlying common stock on the date of grant.

76



---



##### 



UCBH HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)





|   |                                                                                                         
|-- | --------------------------------------------------------------------------------------------------------
|1. | Basis of Presentation and Summary of
    Significant Accounting and Reporting Policies 
    (Continued)

Had compensation cost for the Companys
stock-based compensation arrangements for employees been
determined based on the fair value at grant date of the awards
for the years ended December 31, 2004, 2003 and 2002,
consistent with the provisions of SFAS 123, the
Companys net loss and loss per share would have been the
pro forma amounts as follows (dollars in thousands, except for
per share data):

|                            |                                                                                                                                                    |              |   |        |   |      |   |        |   |  |   |        |  
|--------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------- | ------------ | - | ------ | - | ---- | - | ------ | - |  | - | ------ | -
|                            |                                                                                                                                                    |             
|                            |                                                                                                                                                    | December 31,
|                            |                                                                                                                                                    |             
|                            |                                                                                                                                                    | 2004         |   | 2003   |   | 2002
|                            |                                                                                                                                                    |              |   |        |   |     
|Net income:                 |                                                                                                                                                    |              |   |        |   |      |   |        |   |  |   |       
|                            | As reported                                                                                                                                        |              | $ | 85,603 |   |      | $ | 64,638 |   |  | $ | 38,928 |  
|                            | Deduct: Total stock-based employee compensation
    expense determined under fair value based method of all awards,
    net of related tax effects |              |   | (6,367 | ) |      |   | (4,452 | ) |  |   | (3,413 | )
|                            |                                                                                                                                                    |              |   |        |   |      |   |        |   |  |   |       
|                            | Pro forma net income                                                                                                                               |              | $ | 79,236 |   |      | $ | 60,186 |   |  | $ | 35,515 |  
|                            |                                                                                                                                                    |              |   |        |   |      |   |        |   |  |   |       
|Basic earnings per share:   |                                                                                                                                                    |              |   |        |   |      |   |        |   |  |   |       
|                            | As reported                                                                                                                                        |              | $ | 1.89   |   |      | $ | 1.48   |   |  | $ | 0.98   |  
|                            | Pro forma                                                                                                                                          |              | $ | 1.75   |   |      | $ | 1.38   |   |  | $ | 0.90   |  
|Diluted earnings per share: |                                                                                                                                                    |              |   |        |   |      |   |        |   |  |   |       
|                            | As reported                                                                                                                                        |              | $ | 1.80   |   |      | $ | 1.41   |   |  | $ | 0.94   |  
|                            | Pro forma                                                                                                                                          |              | $ | 1.66   |   |      | $ | 1.32   |   |  | $ | 0.86   |  

If the computed fair values of the stock awards
had been amortized to expense over the vesting period of the
awards, pro forma amounts would have been as shown in the above
table. The impact of outstanding non-vested stock options has
been excluded from the pro forma calculation.

Earnings per
Share

In accordance with SFAS No. 128,
Earnings per Share, which specifies the computation,
presentation and disclosure requirements for earnings per share
(EPS), the Company computes basic EPS by dividing
net income by the weighted average number of shares outstanding
during the period. Diluted EPS is based upon the weighted
average number of common and common equivalent shares
outstanding during the period, which is calculated using the
treasury stock method for stock options. Common equivalent
shares are excluded from the computation in periods in which
they have an anti-dilutive effect on EPS, and accordingly, are
excluded from the calculation.

Transfers of
Financial Assets and Mortgage Servicing Rights

The Company accounts for transfers of financial
assets in accordance with SFAS No. 140,
Accounting for Transfers and Servicing of Financial Assets
and Extinguishment of Liabilities. SFAS No. 140
requires application of a financial components approach
that focuses on control. Under this approach, after a transfer
of financial assets, an entity recognizes the financial and
servicing assets it controls and the liabilities it has
incurred, derecognizes financial assets when control has been
surrendered, and derecognizes liabilities when extinguished. The
statement also distinguishes transfers of financial assets that
are sales from transfers of financial assets that are secured
borrowings. The Company recognizes as servicing assets, rights
to service loans it does not own but services for others for a
fee.

Additionally, the Company exchanges either
multifamily or residential mortgage (one to four family) loans
for Federal National Mortgage Association (FNMA)
securities. These internal securitizations do not have a cash
impact to the Company, since selected loans from the
Companys loan portfolio are exchanged for FNMA securities.
Such securities are represented by exactly the same loans
previously held in the Companys

77



---



##### 



UCBH HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)





|   |                                                                                                         
|-- | --------------------------------------------------------------------------------------------------------
|1. | Basis of Presentation and Summary of
    Significant Accounting and Reporting Policies 
    (Continued)

loan portfolio. The FNMA securities are generally
held as available-for-sale (AFS) securities in the
Companys investment and mortgage-backed securities
portfolio. Since the Company retains all of the securities
issued by FNMA in the securitization, no gain or loss is
recognized on the exchange transaction. The Company continues to
service the loans included in these securitizations.

MSRs are carried at the lower of cost or fair
value and are amortized in proportion to and over the estimated
net servicing revenue.

In determining fair value, the Company stratifies
its MSRs based on the risk characteristics of the underlying
loan pools. The fair value of MSRs is determined by calculating
the present value of estimated future net servicing cash flows,
using assumptions of prepayments, defaults, ancillary income,
servicing costs and discount rates that the Company believes
market participants would use for similar assets.

If the Company determines that the impairment for
a stratum is temporary, a valuation allowance is recognized
through a charge to current earnings for the amount the
amortized balance exceeds the current fair value. If the fair
value of the stratum were to later increase, the reduction of
the valuation allowance may be recorded as a recovery through
income. However, if the Company determines that an impairment
for a stratum is other-thantemporary, the value of the
MSRs and any related valuation allowance is written-down.

If temporary impairment exists, the Company
establishes a valuation allowance through a charge to net income
for any excess of amortized cost over the current fair value, by
risk stratification. If the Company later determines that all or
a portion of the temporary impairment no longer exists for a
particular risk stratification, it may reduce the valuation
allowance through an increase to net income. Under the policy,
the Company evaluates other-than-temporary impairment of MSRs by
considering both historical and projected trends in interest
rates, pay off activity and whether the impairment could be
recovered through interest rate increases. The Company
recognizes a direct write-down when it determines that the
recoverability of a recorded valuation allowance is remote. A
direct write-down permanently reduces the carrying value of the
MSRs, while a valuation allowance (temporary impairment) can be
reversed.

Segment
Reporting

In accordance to SFAS No. 131,
Disclosures about Segments of an Enterprise and Related
Information, the Company designates the internal
organization that is used by management for making operating
decisions and assessing performance as the source of the
Companys reportable segments. SFAS No. 131 also
requires disclosure about products and services, geographic
areas and major customers. The Companys three reportable
segments are domestic commercial banking, the Hong Kong branch
and UCB Investment Services, Inc.

Translation
of Foreign Currencies

The Company considers the functional currency of
its foreign branch to be the United States dollar. Accordingly,
the Company remeasures monetary assets and liabilities at
year-end exchange rates while nonmonetary items are remeasured
at historical rates. Income and expense accounts are remeasured
at the average rates in effect during the year, except for
depreciation which is remeasured at historical rates. Foreign
currency transaction gains and losses are recognized in income
in the period of occurrence.

Certain
Financial Instruments with Characteristics of Both Liabilities
and Equities

The Company accounts for financial instruments
with characteristics of both liability and equity according to
the provisions of SFAS No. 150, Accounting for
Certain Financial Instruments with Characteristics of both
Liability and Equity. SFAS No. 150 requires that
an issuer classify financial

78



---



##### 



UCBH HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)





|   |                                                                                                         
|-- | --------------------------------------------------------------------------------------------------------
|1. | Basis of Presentation and Summary of
    Significant Accounting and Reporting Policies 
    (Continued)

instruments that are within its scope as a
liability. Many of those instruments were classified as equity
under previous guidance.



|   |                                 
|-- | --------------------------------
|2. | Recent Accounting Pronouncements

Other-Than-Temporary
Impairment and Its Application to Certain
Investments

In March 2004, the FASB approved the consensus
reached on the Emerging Issues Task Force (EITF)
Issue No. 03-1, The Meaning of Other-Than-Temporary
Impairment and Its Application to Certain Investments.
EITF Issue No. 03-1 clarifies the investment impairment
methodology for debt and equity securities within the scope of
SFAS No. 115, Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of
Liabilities, and SFAS No. 124, Accounting
for Certain Investments Held by Not-For-Profit
Organizations, and for equity securities that are not
subject to the scope of SFAS No. 115 and not accounted
for under the equity method under APB Opinion No. 18 and
related interpretations (hereinafter referred to as cost
method investments).

Certain disclosure requirements regarding
investments accounted for under SFAS No. 115 and
SFAS No. 124 are effective for annual financial
statements for fiscal years ending after December 31, 2003.
These currently effective disclosure requirements have been
adopted by the Company and did not have a material impact on the
financial condition or operating results of the Company.
Additional disclosure requirements regarding cost method
investments are effective for annual periods ending after
June 15, 2004. The Company does not anticipate the adoption
of these disclosure requirements to have a material impact on
the financial condition or operating results of the Company.

In September 2004, the FASB issued a final FASB
Staff Position (FSP), FSP EITF 03-1-1, delaying
the effective date of the measurement and recognition guidance
indefinitely. Excluding the deferred guidance, the adoption of
EITF No. 03-01 did not have a material impact on the
financial condition or operating results of the Company.

Accounting
for Stock-Based Compensation

On December 16, 2004, the FASB issued
SFAS No. 123R, Share-Based Payment.
SFAS No. 123R is a revision of SFAS No. 123,
Accounting for Stock-Based Compensation.
SFAS No. 123R eliminates the ability to account for
share-based compensation transactions using the intrinsic value
method as prescribed under APB Opinion No. 25,
Accounting for Stock Issued to Employees, and
requires that such transactions be accounted for using a fair
valuebased method. SFAS No. 123R covers a wide
range of share-based compensation arrangements including share
options, restricted share plans, performance-based awards, share
appreciation rights, and employee share purchase plans.
SFAS No. 123R is effective for the interim and annual
periods beginning after June 15, 2005.

SFAS No. 123R may be adopted using one
of two methods: (1) A modified perspective
method in which compensation cost is recognized beginning with
the effective date (a) based on the requirements of
SFAS No. 123R for all share-based payments granted
after the effective date and (b) based on the requirements
of SFAS No. 123 for all awards granted to employees
prior to the effective date of SFAS No. 123R that
remain unvested on the effective date. (2) A modified
retrospective method which includes the requirements of
the modified prospective method described above, but also
permits entities to restate based on the amounts previously
recognized under SFAS No. 123 for purposes of pro
forma disclosures either (a) all prior periods presented or
(b) prior interim periods of the year of adoption. The
adoption of SFAS No. 123R may have a material impact
on the Companys financial position and results of
operation.

79



---



##### 



UCBH HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)









|   |                                                   
|-- | --------------------------------------------------
|2. | Recent Accounting Pronouncements 
    (Continued)

Consolidation
of Variable Interest Entities

In January 2003, the FASB issued FASB
Interpretation No. 46, (FIN 46)
Consolidation of Variable Interest Entities. This
interpretation applies immediately to variable interest entities
(VIE) in which an enterprise obtains an interest
after that date. It applies in the first fiscal year or interim
period beginning after June 15, 2003, to any VIE in which
an enterprise holds a variable interest that is acquired before
February 1, 2003. Previously issued accounting
pronouncements require the consolidation of one entity in the
financial statements of another if the second entity has a
controlling interest in the first. In effect, FIN 46
applies broader criteria than just voting rights in determining
whether controlling financial interest in one entity by another
exists. Specifically, if by design the owners of the entity have
not made an equity investment sufficient to absorb its expected
losses and the owners lack any one of three essential
characteristics of controlling financial interest, the entity is
to be consolidated in the financial statements of its primary
beneficiary. The three characteristics are the ability to make
decisions about the entitys activities, the obligation to
absorb the expected losses of the entity, and the right to
receive the expected residual returns of the entity.

As of December 31, 2003, the Company adopted
FASB Interpretation No. 46R (revised December 2003),
Consolidation of Variable Interest Entities, an
interpretation of ARB No. 51 (FIN 46R).
FIN 46R clarifies the application of Accounting Research
Bulletin No. 51, Consolidated Financial Statements and
finalizes this statement for public entities. Under
FIN 46R, a VIE is defined as an entity subject to
consolidation based on criteria specified in FIN 46R.

In 1998, 2001 and 2002, the Company created
certain special purpose trusts for the purpose of issuing
capital securities. Through the third quarter of 2003, these
trusts were consolidated into the financial results of the
Company. Under FIN 46R, the trusts would no longer be
consolidated as the trusts are deemed VIEs and the Company does
not have a variable interest in the trusts. Consequently, the
trusts have been deconsolidated from the financial results of
the Company effective December 31, 2003 with consistent
presentation for periods presented.

The impact of this deconsolidation on the
Companys financial condition and operating results was
immaterial, resulting primarily in classification changes on the
Balance Sheet. A potential outcome arising as a result of
FIN 46R was that the Federal Reserve Bank may no longer
allow the capital securities issued by the trusts to be included
in Tier I capital of the Company. In March 2005, the
Federal Reserve finalized its guidance that these securities may
continue to be included in the Companys Tier I
capital subject to tightened quantitative limits and a broader
range of restricted core capital elements, as defined. The
Banks Tier I capital is unaffected as the trusts and
their securities have been issued at the holding company level.



| |                                                                           
| | --------------------------------------------------------------------------
| | Accounting for Certain Loans or Debt
    Securities Acquired in a Transfer

In December 2003, the American Institute of
Certified Public Accountants (AICPA) issued
Statement of Position 03-3 (SOP 03-3), which
addresses accounting for loans or debt securities acquired in a
transfer and the resulting differences between contractual cash
flows and cash flows expected to be collected. This SOP does not
apply to loans originated by the Bank. This SOP limits the yield
that may be accreted to the excess of the investors
estimate of undiscounted expected principal, interest, and other
cash flows over the investors initial investment in the
loan. SOP 03-3 requires that the excess of contractual cash
flows over cash flows expected to be collected not be recognized
as an adjustment of yield, loss accrual, or valuation allowance.
SOP 03-3 also prohibits carrying over or creation of
valuation allowances in the initial accounting of all loans
acquired in a transfer that are within the scope of this SOP.
The prohibition of the valuation allowance carryover applies to
the purchase of individual loans, pools of loans and loans
acquired in a purchase business combination.

80



---



##### 



UCBH HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)









|   |                                                   
|-- | --------------------------------------------------
|2. | Recent Accounting Pronouncements 
    (Continued)

SOP 03-3 is effective for loans acquired in
fiscal years beginning after December 15, 2004. For loans
acquired in fiscal years beginning on or before
December 15, 2004, decreases in cash flows expected to be
collected should be applied prospectively. The Company does not
anticipate the adoption of SOP 03-3 to have a material impact on
the financial condition or operating results of the Company.



|   |                                                                 
|-- | ----------------------------------------------------------------
|3. | Goodwill, Core Deposit Intangibles and
    Business Combinations



| |                                       
| | --------------------------------------
| | Business Combinations and
    Goodwill

In July 2003, the Company completed its
acquisition of privately-held FCB, a full-service commercial
bank headquartered in Rosemead, California, with four branches
serving the San Gabriel Valley in Southern California. The
acquisition was undertaken to strengthen the Companys
competitive position and market share in the Southern California
marketplace and better position the Company for future growth.

Under the terms of the agreement announced on
April 3, 2003, FCB merged into the Companys
subsidiary, UCB, and the Company issued approximately
2.3 million shares of its common stock in exchange for all
of the outstanding shares of common stock of FCB. The merger was
effected under the charter and insurance of deposits of UCB, and
UCB, as the surviving entity, continues to operate as the wholly
owned subsidiary of the Company under the name United
Commercial Bank.

The acquisition was effective July 11, 2003,
and was accounted for using the purchase method of accounting in
accordance with SFAS No. 141, Business
Combinations. The results of FCBs operations have
been included in the consolidated financial statements since
that date. The aggregate purchase price was approximately
$76.2 million, composed of cash of $6.2 million and
$70.0 million of the Companys common stock, valued at
the per share closing price on The NASDAQ Stock Market
(NASDAQ) on the closing date of the acquisition.

During the fourth quarter of 2004, the Company
determined that the initial calculation of the purchase price
for the acquisition of FCB, as reported in the 2003 consolidated
financial statements, was based on the Companys common
stock value at the per share price on the closing date of the
acquisition when the proper stock value share price should have
been an average stock price at the announcement date. As a
result, $44.2 million of the purchase price was allocated
to goodwill, which represents an overstatement of
$16.8 million. To properly reflect the fair value of the
purchase price consideration, the Company recorded an adjustment
in the amount of $16.8 million in the fourth quarter of
2004, reducing paid in capital, total stockholders equity,
and goodwill by this amount.

In accordance with SFAS No. 141, the
Company recorded the assets acquired and liabilities assumed at
their fair values at the acquisition date. The total acquisition
cost (including direct transaction costs) exceeded the fair
value of the new assets acquired by $46.4 million. This
amount was recognized at acquisition date as intangible assets,
consisting of goodwill of $44.2 million and a core deposit
intangible of $2.2 million. The fair value determination of
core deposit intangibles was based upon independent appraiser
valuation. The professional service fees with regard to the
acquisition were reflected as a component of the total purchase
price.

81



---



##### 



UCBH HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



3.     Goodwill,
Intangibles and Business Combinations 
(Continued)


The following table summarizes the estimated fair
values of the assets acquired and liabilities assumed at the
date of acquisition as adjusted (dollars in thousands):

|                          |                           |   |         |         | 
|------------------------- | ------------------------- | - | ------- | ------- | 
|Cash and cash equivalents |                           | $ | 51,770  |        
|Securities                |                           |   | 56,854  |        
|Loans, net                |                           |   | 243,015 |        
|Goodwill                  |                           |   | 25,112  |        
|Core deposit intangibles  |                           |   | 2,225   |        
|Other assets              |                           |   | 4,460   |        
|                          |                           |   |         |        
|                          | Total assets acquired     |   | $       | 383,436 | 
|                          |                           |   |         |        
|Deposits                  |                           |   | 325,975 |        
|Other liabilities         |                           |   | 428     |        
|                          |                           |   |         |        
|                          | Total liabilities assumed |   | $       | 326,403 | 
|                          |                           |   |         |        
|                          | Net assets acquired       |   | $       | 57,033  | 
|                          |                           |   |         |        

In accordance with SFAS No. 142,
Goodwill and Other Intangible Assets, goodwill will
not be expensed over a fixed period of time, but will be tested
for impairment at least annually. None of the goodwill is
expected to be deductible for income tax purposes. Identifiable
intangible assets, namely core deposit intangibles, of
$2.2 million are amortized over their estimated period of
benefit. Amortization expense for the FCB core deposit
intangibles was $193,000 and $435,000 for the year ended
December 31, 2004 and 2003, respectively.

Unaudited pro forma consolidated results of
operations for the year ended December 31, 2003, as though
FCB had been acquired as of January 1, 2003, are as follows
(dollars in thousands):

|                           |  |      |         | 
|-------------------------- |  | ---- | ------- | 
|                           |  | 2003
|                           |  |     
|Net interest income        |  | $    | 174,377 | 
|Net income                 |  | $    | 65,783  | 
|Basic earnings per share   |  | $    | 1.51    | 
|Diluted earnings per share |  | $    | 1.44    | 

The following table summarizes the changes in the
carrying amount of goodwill (dollars in thousands):

|                                   |  |   |         |  
|---------------------------------- |  | - | ------- | -
|December 31 December 31, 2002      |  | $ | 46,052  |  
|First Continental Bank acquisition |  |   | 44,248  |  
|Adjustments                        |  |   | (2,863  | )
|                                   |  |   |         |  
|December 31, 2003                  |  |   | 87,437  |  
|Adjustments                        |  |   | (19,136 | )
|                                   |  |   |         |  
|December 31, 2004                  |  | $ | 68,301  |  
|                                   |  |   |         |  

Included in the $19.1 million goodwill
adjustment is $2.3 million related to certain asset and
liability adjustments post acquisition dates. During the quarter
ended June 30, 2004, the Company finalized its purchase
accounting with respect to the FCB acquisition and as a result,
there was a $2.3 million reduction in goodwill. In the
third quarter of 2004 and 2003, the annual review of goodwill
for impairment was performed, and it was determined that no
adjustment was necessary. The Company will continue to evaluate
goodwill for impairment in the future.

82



---



##### 



UCBH HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



3.     Goodwill,
Intangibles and Business Combinations 
(Continued)




| |                         
| | ------------------------
| | Core Deposit Intangibles

The gross carrying amount of core deposit
intangibles and the associated accumulated amortization are as
follows (dollars in thousands):

|                         |  |                         |        |                         |  |          |        |              |  |   |        |  |  |   |        |  
|------------------------ |  | ----------------------- | ------ | ----------------------- |  | -------- | ------ | ------------ |  | - | ------ |  |  | - | ------ | -
|                         |  |                         |        |                        
|                         |  | As of December 31, 2004 |        | As of December 31, 2003
|                         |  |                         |        |                        
|                         |  | Gross                   |        |                         |  | Gross    |        |             
|                         |  | Carrying                |        | Accumulated             |  | Carrying |        | Accumulated 
|                         |  | Amount                  |        | Amortization            |  | Amount   |        | Amortization
|                         |  |                         |        |                         |  |          |        |             
|Core deposit intangibles |  | $                       | 13,100 |                         |  | $        | (3,272 | )            |  | $ | 13,100 |  |  | $ | (1,989 | )

The following table illustrates core deposit
intangibles balance sheet changes for the years ended
December 31, 2004 and 2003 (dollars in thousands):

|                             |                          |       |        |        |   | 
|---------------------------- | ------------------------ | ----- | ------ | ------ | - | 
|Balance at December 31, 2002 |                          | $     | 10,734 |       
|                             | Addition/ Capitalization |       |        | 2,138  |  
|                             | Purchases                |       |        |       |  
|                             | Amortization             |       |        | (1,761 | )
|                             | Write-downs              |       |        |       |  
|                             |                          | Other |        |        |  | 
|                             |                          |       |        |       
|Balance at December 31, 2003 |                          | $     | 11,111 |       
|                             | Addition/ Capitalization |       |        |       |  
|                             | Purchases                |       |        |       |  
|                             | Amortization             |       |        | (1,283 | )
|                             | Write-downs              |       |        |       |  
|                             |                          | Other |        |        |  | 
|                             |                          |       |        |       
|Balance at December 31, 2004 |                          | $     | 9,828  |       
|                             |                          |       |        |       

83



---



##### 



UCBH HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|   |                          
|-- | -------------------------
|4. | Mortgage Servicing Rights

Amortization expense on MSRs is recorded as a
reduction in loan servicing fee income and reported as part of
commercial banking and other fees. During the year ended
December 31, 2004, intangible assets were reviewed for
impairment and $80,000 of capitalized loan servicing assets was
deemed impaired during the second quarter, and the asset written
down accordingly. The following table illustrates MSR balance
sheet changes for the years ended December 31, 2004 and
2003 (dollars in thousands):

|                             |                          |   |       |        |  
|---------------------------- | ------------------------ | - | ----- | ------ | -
|Balance at December 31, 2002 |                          | $ | 1,631 |       
|                             | Addition/ Capitalization |   |       | 1,983  |  
|                             | Purchases                |   |       | 841    |  
|                             | Amortization             |   |       | (449   | )
|                             | Write-downs              |   |       |       |  
|                             | Other                    |   |       |       |  
|                             |                          |   |       |       
|Balance at December 31, 2003 |                          | $ | 4,006 |       
|                             | Addition/ Capitalization |   |       | 5,319  |  
|                             | Purchases                |   |       |       |  
|                             | Amortization             |   |       | (1,388 | )
|                             | Write-downs              |   |       | (190   | )
|                             | Other                    |   |       |       |  
|                             |                          |   |       |       
|Balance at December 31, 2004 |                          | $ | 7,747 |       
|                             |                          |   |       |       

The Company services real estate loans for others
of $1.11 billion and $423.9 million at
December 31, 2004 and 2003, respectively. These loans are
not included in the consolidated balance sheets. In connection
therewith, the Company held trust funds of approximately
$14.1 million as of December 31, 2004 and 2003, all of
which were segregated in separate accounts and included in the
respective balance sheets. Some agreements with investors to
whom the Company has sold loans have provisions that could
require repurchase of loans under certain circumstances.
Management does not believe that any such repurchases will be
significant.

The following table (dollars in thousands)
presents the fair value of capitalized MSRs as of
December 31, 2004 along with sensitivity analysis related
to two key factors, prepayment speed and discount rate. These
sensitivity analyses should be used with caution as the
calculations were prepared by varying only one factor at a time
and holding all others constant for purposes of the analyses.
Changes in one factor may result in changes in other factors and
such changes might magnify or counteract the sensitivities as
presented. Additionally, changes in fair value based on changes
in an assumption generally cannot be extrapolated because the
relationship of the change in the factor to the change in fair
value may not be linear.

|                                                   |                                                                |   |        |        |  
|-------------------------------------------------- | -------------------------------------------------------------- | - | ------ | ------ | -
|Fair value of mortgage servicing rights            |                                                                | $ | 10,288 |       
|                                                   |                                                                |   |        |       
|Expected weighted-average life (in years)          |                                                                |   | 3.90   |       
|                                                   |                                                                |   |        |       
|Range of prepayment speed assumptions (annual CPR) |                                                                |   | 12%-26 | %     
|Discount rate assumption                           |                                                                |   | 14.21  | %     
|                                                   | Decrease in fair value from 10% adverse CPR change             |   | $      | (735   | )
|                                                   |                                                                |   |        |       
|                                                   | Decrease in fair value from 20% adverse CPR change             |   | $      | (1,244 | )
|                                                   |                                                                |   |        |       
|                                                   | Decrease in fair value from 100 basis point
    adverse change |   | $      | (237   | )
|                                                   |                                                                |   |        |       
|                                                   | Decrease in fair value from 200 basis point
    adverse change |   | $      | (464   | )
|                                                   |                                                                |   |        |       

84



---



##### 



UCBH HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|   |                                            
|-- | -------------------------------------------
|5. | Restrictions on Cash and Due from
    Banks

The Bank is required to maintain a percentage of
its deposit balances as reserves either in cash or on deposit at
the Federal Reserve Bank. At both December 31, 2004 and
2003, the reserve requirement was $6.8 million.



|   |                                              
|-- | ---------------------------------------------
|6. | Investment and Mortgage-backed
    Securities

Federal agency notes, mortgage-backed securities
(MBS), and collateralized mortgage obligations
(CMO) are guaranteed by GNMA, FNMA, or FHLMC.
Substantially all of the securities were rated, as indicated in
the table below, by at least one nationally recognized
statistical rating organization (NRSRO).

The amortized cost and approximate market value
of investment securities and mortgage-backed securities
classified as available for sale and held to maturity at
December 31, 2004, are shown below. Additionally, the
portion of the portfolio with an unrealized loss position is
presented for December 31, 2004, in the following table
(dollars in thousands):

|                                               |                                                                                                      |                                                                      |           |                                                       |         |              |       |        |       |       |         |            |        |       |           |            |         |       |         |            |         |   |        |        |      |   |         |         |        |   |        |        |        |   |         |         |         |   |         |         |        |  
|---------------------------------------------- | ---------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------- | --------- | ----------------------------------------------------- | ------- | ------------ | ----- | ------ | ----- | ----- | ------- | ---------- | ------ | ----- | --------- | ---------- | ------- | ----- | ------- | ---------- | ------- | - | ------ | ------ | ---- | - | ------- | ------- | ------ | - | ------ | ------ | ------ | - | ------- | ------- | ------- | - | ------- | ------- | ------ | -
|                                               |                                                                                                      |                                                                     
|                                               |                                                                                                      | December 31, 2004                                                   
|                                               |                                                                                                      |                                                                     
|                                               |                                                                                                      |                                                                      |           |                                                      
|                                               |                                                                                                      | Total Portfolio                                                      |           | Portion of Portfolio with an Unrealized Loss Position
|                                               |                                                                                                      |                                                                      |           |                                                      
|                                               |                                                                                                      |                                                                      |           |                                                       |         |              |       |       
|                                               |                                                                                                      |                                                                      |           | Less Than 12                                          |         | 12 Months or |       |       
|                                               |                                                                                                      |                                                                      |           | Months                                                |         | More         |       | Total 
|                                               |                                                                                                      |                                                                      |           | Gross                                                 |         | Gross        |       |        |       |       |         |            |        |      
|                                               |                                                                                                      | Amortized                                                            |           | Unrealized                                            |         | Unrealized   |       | Market |       | Fair  |         | Unrealized |        | Fair  |           | Unrealized |         | Fair  |         | Unrealized
|Description                                    |                                                                                                      | Cost                                                                 |           | Gains                                                 |         | Losses       |       | Value  |       | Value |         | Losses     |        | Value |           | Losses     |         | Value |         | Losses    
|                                               |                                                                                                      |                                                                      |           |                                                       |         |              |       |        |       |       |         |            |        |       |           |            |         |       |         |           
|Investment Securities Available for Sale:      |                                                                                                      |                                                                      |           |                                                       |         |              |       |        |       |       |         |            |        |       |           |            |         |       |         |            |         |   |        |        |      |   |         |         |        |   |        |        |        |   |         |         |         |   |         |        
|                                               | Trust Preferred Securities                                                                           |                                                                      | $         | 18,441                                                |         |              | $     | 28     |       |       | $       | (250       | )      |       | $         | 18,219     |         |       | $       | 3,960      |         |   | $      | (40    | )    |   | $       | 9,290   |        |   | $      | (210   | )      |   | $       | 13,250  |         |   | $       | (250    | )     
|                                               | Federal Agency Notes                                                                                 |                                                                      |           | 232,594                                               |         |              |       | 87     |       |       |         | (2,635     | )      |       |           | 230,046    |         |       |         | 152,451    |         |   |        | (478   | )    |   |         | 64,818  |        |   |        | (2,157 | )      |   |         | 217,269 |         |   |         | (2,635  | )     
|                                               |                                                                                                      |                                                                      |           |                                                       |         |              |       |        |       |       |         |            |        |       |           |            |         |       |         |            |         |   |        |        |      |   |         |         |        |   |        |        |        |   |         |         |         |   |         |        
|                                               |                                                                                                      | Total Investment Securities Available for Sale                       |           |                                                       | 251,035 |              |       |        | 115   |       |         |            | (2,885 | )     |           |            | 248,265 |       |         |            | 156,411 |   |        |        | (518 | ) |         |         | 74,108 |   |        |        | (2,367 | ) |         |         | 230,519 |   |         |         | (2,885 | )
|                                               |                                                                                                      |                                                                      |           |                                                       |         |              |       |        |       |       |         |            |        |       |           |            |         |       |         |            |         |   |        |        |      |   |         |         |        |   |        |        |        |   |         |         |         |   |         |        
|Mortgage-backed Securities Available for Sale: |                                                                                                      |                                                                      |           |                                                       |         |              |       |        |       |       |         |            |        |       |           |            |         |       |         |            |         |   |        |        |      |   |         |         |        |   |        |        |        |   |         |         |         |   |         |        
|                                               | FNMA                                                                                                 |                                                                      |           | 366,307                                               |         |              |       | 866    |       |       |         | (4,076     | )      |       |           | 363,097    |         |       |         | 210,437    |         |   |        | (1,957 | )    |   |         | 65,572  |        |   |        | (2,119 | )      |   |         | 276,009 |         |   |         | (4,076  | )     
|                                               | GNMA                                                                                                 |                                                                      |           | 106,501                                               |         |              |       | 79     |       |       |         | (1,508     | )      |       |           | 105,072    |         |       |         | 65,670     |         |   |        | (1,173 | )    |   |         | 12,971  |        |   |        | (335   | )      |   |         | 78,641  |         |   |         | (1,508  | )     
|                                               | FHLMC                                                                                                |                                                                      |           | 288,789                                               |         |              |       | 495    |       |       |         | (3,319     | )      |       |           | 285,965    |         |       |         | 108,720    |         |   |        | (1,131 | )    |   |         | 68,595  |        |   |        | (2,188 | )      |   |         | 177,315 |         |   |         | (3,319  | )     
|                                               | Other                                                                                                |                                                                      |           | 167,719                                               |         |              |       | 81     |       |       |         | (1,059     | )      |       |           | 166,741    |         |       |         | 145,856    |         |   |        | (1,059 | )    |   |         |        |        |   |        |       |        |   |         | 145,856 |         |   |         | (1,059  | )     
|                                               |                                                                                                      |                                                                      |           |                                                       |         |              |       |        |       |       |         |            |        |       |           |            |         |       |         |            |         |   |        |        |      |   |         |         |        |   |        |        |        |   |         |         |         |   |         |        
|                                               | Total Mortgage-backed Securities Available for
    Sale                                              |                                                                      |           | 929,316                                               |         |              |       | 1,521  |       |       |         | (9,962     | )      |       |           | 920,875    |         |       |         | 530,683    |         |   |        | (5,320 | )    |   |         | 147,138 |        |   |        | (4,642 | )      |   |         | 677,821 |         |   |         | (9,962  | )     
|                                               |                                                                                                      |                                                                      |           |                                                       |         |              |       |        |       |       |         |            |        |       |           |            |         |       |         |            |         |   |        |        |      |   |         |         |        |   |        |        |        |   |         |         |         |   |         |        
|                                               | Total Investment Securities Available for Sale
    and Mortgage-backed Securities Available for Sale |                                                                      | $         | 1,180,351                                             |         |              | $     | 1,636  |       |       | $       | (12,847    | )      |       | $         | 1,169,140  |         |       | $       | 687,094    |         |   | $      | (5,838 | )    |   | $       | 221,246 |        |   | $      | (7,009 | )      |   | $       | 908,340 |         |   | $       | (12,847 | )     
|                                               |                                                                                                      |                                                                      |           |                                                       |         |              |       |        |       |       |         |            |        |       |           |            |         |       |         |            |         |   |        |        |      |   |         |         |        |   |        |        |        |   |         |         |         |   |         |        
|Investment Securities Held to Maturity:        |                                                                                                      |                                                                      |           |                                                       |         |              |       |        |       |       |         |            |        |       |           |            |         |       |         |            |         |   |        |        |      |   |         |         |        |   |        |        |        |   |         |         |         |   |         |        
|                                               | Municipal Securities                                                                                 |                                                                      | $         | 215,594                                               |         |              | $     | 7,415  |       |       | $       | (712       | )      |       | $         | 222,297    |         |       | $       | 10,457     |         |   | $      | (75    | )    |   | $       | 19,765  |        |   | $      | (637   | )      |   | $       | 30,222  |         |   | $       | (712    | )     
|Mortgage-backed Securities Held to Maturity:   |                                                                                                      |                                                                      |           |                                                       |         |              |       |        |       |       |         |            |        |       |           |            |         |       |         |            |         |   |        |        |      |   |         |         |        |   |        |        |        |   |         |         |         |   |         |        
|                                               | FNMA                                                                                                 |                                                                      |           | 5,765                                                 |         |              |       |       |       |       |         | (76        | )      |       |           | 5,689      |         |       |         | 5,689      |         |   |        | (76    | )    |   |         |        |        |   |        |       |        |   |         | 5,689   |         |   |         | (76     | )     
|                                               | GNMA                                                                                                 |                                                                      |           | 102,439                                               |         |              |       | 489    |       |       |         | (333       | )      |       |           | 102,595    |         |       |         | 8,396      |         |   |        | (18    | )    |   |         | 12,075  |        |   |        | (315   | )      |   |         | 20,471  |         |   |         | (333    | )     
|                                               | FHLMC                                                                                                |                                                                      |           | 1,404                                                 |         |              |       |       |       |       |         | (16        | )      |       |           | 1,388      |         |       |         | 1,388      |         |   |        | (16    | )    |   |         |        |        |   |        |       |        |   |         | 1,388   |         |   |         | (16     | )     
|                                               |                                                                                                      |                                                                      |           |                                                       |         |              |       |        |       |       |         |            |        |       |           |            |         |       |         |            |         |   |        |        |      |   |         |         |        |   |        |        |        |   |         |         |         |   |         |        
|                                               |                                                                                                      | Total Investment and Mortgage-backed Securities
    Held to Maturity |           |                                                       | 325,202 |              |       |        | 7,904 |       |         |            | (1,137 | )     |           |            | 331,969 |       |         |            | 25,930  |   |        |        | (185 | ) |         |         | 31,840 |   |        |        | (952   | ) |         |         | 57,770  |   |         |         | (1,137 | )
|                                               |                                                                                                      |                                                                      |           |                                                       |         |              |       |        |       |       |         |            |        |       |           |            |         |       |         |            |         |   |        |        |      |   |         |         |        |   |        |        |        |   |         |         |         |   |         |        
|Total securities                               |                                                                                                      | $                                                                    | 1,505,553 |                                                       |         | $            | 9,540 |        |       | $     | (13,984 | )          |        | $     | 1,501,109 |            |         | $     | 713,024 |            |         | $ | (6,023 | )      |      | $ | 253,086 |         |        | $ | (7,961 | )      |        | $ | 966,110 |         |         | $ | (13,984 | )      
|                                               |                                                                                                      |                                                                      |           |                                                       |         |              |       |        |       |       |         |            |        |       |           |            |         |       |         |            |         |   |        |        |      |   |         |         |        |   |        |        |        |   |         |         |         |   |         |        

At December 31, 2004, the carrying value of
the securities was $1.51 billion, and approximates the
market value of $1.50 billion. At December 31, 2003,
the carrying value of the securities was $1.51 billion, and
the market value was $1.51 billion. For the year ended
December 31, 2004, the total unrealized loss on securities
was $4.4 million. The loss on securities that are available
for sale was $11.2 million. The unrealized
$11.2 million loss, net of tax benefit of
$4.8 million, is included as a reduction to
stockholders equity. The

85



---



##### 



UCBH HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|   |                                                            
|-- | -----------------------------------------------------------
|6. | Investment and Mortgage-backed
    Securities  (Continued)

$6.8 million gain between the carrying value
and market value of securities that are held to maturity has not
been recognized in the financial statements for the year ended
December 31, 2004.

As indicated above, certain securities have had
unrealized losses for more than twelve months. There are no
credit concerns with any of these securities and as of
December 31, 2004, the Company has the ability and intent
to hold these securities to maturity. As a result, the Company
has concluded that none of these securities is other than
temporarily impaired.

The amortized cost and approximate market value
of investment securities and mortgage-backed securities
classified as available for sale and held to maturity at
December 31, 2003 are shown below. Additionally, the
portion of the portfolio with an unrealized loss position is
presented for December 31, 2003 below (dollars in
thousands):

|                                               |                                                                                                      |                                                |           |                                                       |         |              |        |        |     |       |         |            |        |       |           |            |         |       |         |            |         |   |         |         |        |   |       |       |       |   |      |      |      |   |         |         |         |   |         |         |        |  
|---------------------------------------------- | ---------------------------------------------------------------------------------------------------- | ---------------------------------------------- | --------- | ----------------------------------------------------- | ------- | ------------ | ------ | ------ | --- | ----- | ------- | ---------- | ------ | ----- | --------- | ---------- | ------- | ----- | ------- | ---------- | ------- | - | ------- | ------- | ------ | - | ----- | ----- | ----- | - | ---- | ---- | ---- | - | ------- | ------- | ------- | - | ------- | ------- | ------ | -
|                                               |                                                                                                      |                                               
|                                               |                                                                                                      | December 31, 2003                             
|                                               |                                                                                                      |                                               
|                                               |                                                                                                      |                                                |           |                                                      
|                                               |                                                                                                      | Total Portfolio                                |           | Portion of Portfolio with an Unrealized Loss Position
|                                               |                                                                                                      |                                                |           |                                                      
|                                               |                                                                                                      |                                                |           |                                                       |         |              |        |       
|                                               |                                                                                                      |                                                |           | Less Than 12                                          |         | 12 Months or |        |       
|                                               |                                                                                                      |                                                |           | Months                                                |         | More         |        | Total 
|                                               |                                                                                                      |                                                |           | Gross                                                 |         | Gross        |        |        |     |       |         |            |        |      
|                                               |                                                                                                      | Amortized                                      |           | Unrealized                                            |         | Unrealized   |        | Market |     | Fair  |         | Unrealized |        | Fair  |           | Unrealized |         | Fair  |         | Unrealized
|Description                                    |                                                                                                      | Cost                                           |           | Gains                                                 |         | Losses       |        | Value  |     | Value |         | Losses     |        | Value |           | Losses     |         | Value |         | Losses    
|                                               |                                                                                                      |                                                |           |                                                       |         |              |        |        |     |       |         |            |        |       |           |            |         |       |         |           
|Investment Securities Available for Sale:      |                                                                                                      |                                                |           |                                                       |         |              |        |        |     |       |         |            |        |       |           |            |         |       |         |            |         |   |         |         |        |   |       |       |       |   |      |      |      |   |         |         |         |   |         |        
|                                               | Trust Preferred Securities                                                                           |                                                | $         | 13,189                                                |         |              | $      | 141    |     |       | $       | (535       | )      |       | $         | 12,795     |         |       | $       | 4,253      |         |   | $       | (248    | )      |   | $     | 4,713 |       |   | $    | (287 | )    |   | $       | 8,966   |         |   | $       | (535    | )     
|                                               | Federal Agency Notes                                                                                 |                                                |           | 222,309                                               |         |              |        | 107    |     |       |         | (3,662     | )      |       |           | 218,753    |         |       |         | 179,196    |         |   |         | (3,662  | )      |   |       |      |       |   |      |     |      |   |         | 179,196 |         |   |         | (3,662  | )     
|                                               | Domestic Debt Securities and Commercial Paper                                                        |                                                |           | 15,144                                                |         |              |        | 41     |     |       |         | (46        | )      |       |           | 15,139     |         |       |         | 2,020      |         |   |         | (46     | )      |   |       |      |       |   |      |     |      |   |         | 2,020   |         |   |         | (46     | )     
|                                               | Asset-backed Securities                                                                              |                                                |           | 16,426                                                |         |              |        | 1      |     |       |         | (143       | )      |       |           | 16,285     |         |       |         | 16,202     |         |   |         | (143    | )      |   |       |      |       |   |      |     |      |   |         | 16,202  |         |   |         | (143    | )     
|                                               | Municipals                                                                                           |                                                |           | 90                                                    |         |              |        |       |     |       |         |           |        |       |           | 90         |         |       |         |           |         |   |         |        |        |   |       |      |       |   |      |     |      |   |         |        |         |   |         |        |       
|                                               |                                                                                                      |                                                |           |                                                       |         |              |        |        |     |       |         |            |        |       |           |            |         |       |         |            |         |   |         |         |        |   |       |       |       |   |      |      |      |   |         |         |         |   |         |        
|                                               |                                                                                                      | Total Investment Securities Available for Sale |           |                                                       | 267,158 |              |        |        | 290 |       |         |            | (4,386 | )     |           |            | 263,062 |       |         |            | 201,671 |   |         |         | (4,099 | ) |       |       | 4,713 |   |      |      | (287 | ) |         |         | 206,384 |   |         |         | (4,386 | )
|                                               |                                                                                                      |                                                |           |                                                       |         |              |        |        |     |       |         |            |        |       |           |            |         |       |         |            |         |   |         |         |        |   |       |       |       |   |      |      |      |   |         |         |         |   |         |        
|Mortgage-backed Securities Available for Sale: |                                                                                                      |                                                |           |                                                       |         |              |        |        |     |       |         |            |        |       |           |            |         |       |         |            |         |   |         |         |        |   |       |       |       |   |      |      |      |   |         |         |         |   |         |        
|                                               | FNMA                                                                                                 |                                                |           | 440,835                                               |         |              |        | 3,433  |     |       |         | (3,815     | )      |       |           | 440,453    |         |       |         | 224,956    |         |   |         | (3,815  | )      |   |       |      |       |   |      |     |      |   |         | 224,956 |         |   |         | (3,815  | )     
|                                               | GNMA                                                                                                 |                                                |           | 79,103                                                |         |              |        | 406    |     |       |         | (667       | )      |       |           | 78,842     |         |       |         | 29,686     |         |   |         | (667    | )      |   |       |      |       |   |      |     |      |   |         | 29,686  |         |   |         | (667    | )     
|                                               | FHLMC                                                                                                |                                                |           | 275,882                                               |         |              |        | 1,435  |     |       |         | (3,377     | )      |       |           | 273,940    |         |       |         | 132,808    |         |   |         | (3,377  | )      |   |       |      |       |   |      |     |      |   |         | 132,808 |         |   |         | (3,377  | )     
|                                               | Other                                                                                                |                                                |           | 163,687                                               |         |              |        | 1,391  |     |       |         | (305       | )      |       |           | 164,773    |         |       |         | 11,899     |         |   |         | (305    | )      |   |       |      |       |   |      |     |      |   |         | 11,899  |         |   |         | (305    | )     
|                                               |                                                                                                      |                                                |           |                                                       |         |              |        |        |     |       |         |            |        |       |           |            |         |       |         |            |         |   |         |         |        |   |       |       |       |   |      |      |      |   |         |         |         |   |         |        
|                                               | Total Mortgage-backed Securities Available for
    Sale                                              |                                                |           | 959,507                                               |         |              |        | 6,665  |     |       |         | (8,164     | )      |       |           | 958,008    |         |       |         | 399,349    |         |   |         | (8,164  | )      |   |       |      |       |   |      |     |      |   |         | 399,349 |         |   |         | (8,164  | )     
|                                               |                                                                                                      |                                                |           |                                                       |         |              |        |        |     |       |         |            |        |       |           |            |         |       |         |            |         |   |         |         |        |   |       |       |       |   |      |      |      |   |         |         |         |   |         |        
|                                               | Total Investment Securities Available for Sale
    and Mortgage-backed Securities Available for Sale |                                                | $         | 1,226,665                                             |         |              | $      | 6,955  |     |       | $       | (12,550    | )      |       | $         | 1,221,070  |         |       | $       | 601,020    |         |   | $       | (12,263 | )      |   | $     | 4,713 |       |   | $    | (287 | )    |   | $       | 605,733 |         |   | $       | (12,550 | )     
|                                               |                                                                                                      |                                                |           |                                                       |         |              |        |        |     |       |         |            |        |       |           |            |         |       |         |            |         |   |         |         |        |   |       |       |       |   |      |      |      |   |         |         |         |   |         |        
|Investment Securities Held to Maturity:        |                                                                                                      |                                                |           |                                                       |         |              |        |        |     |       |         |            |        |       |           |            |         |       |         |            |         |   |         |         |        |   |       |       |       |   |      |      |      |   |         |         |         |   |         |        
|                                               | Municipal Securities                                                                                 |                                                | $         | 184,264                                               |         |              | $      | 4,601  |     |       | $       | (1,130     | )      |       | $         | 187,735    |         |       | $       | 37,761     |         |   | $       | (1,130  | )      |   | $     |      |       |   | $    |     |      |   | $       | 37,761  |         |   | $       | (1,130  | )     
|Mortgage-backed Securities Held to Maturity:   |                                                                                                      |                                                |           |                                                       |         |              |        |        |     |       |         |            |        |       |           |            |         |       |         |            |         |   |         |         |        |   |       |       |       |   |      |      |      |   |         |         |         |   |         |        
|                                               | GNMA                                                                                                 |                                                |           | 99,524                                                |         |              |        | 3      |     |       |         | (814       | )      |       |           | 98,713     |         |       |         | 83,469     |         |   |         | (814    | )      |   |       |      |       |   |      |     |      |   |         | 83,469  |         |   |         | (814    | )     
|                                               | Other                                                                                                |                                                |           | 924                                                   |         |              |        |       |     |       |         |           |        |       |           | 924        |         |       |         |           |         |   |         |         |        |   |       |      |       |   |      |     |      |   |         |        |         |   |         |        |       
|                                               |                                                                                                      |                                                |           |                                                       |         |              |        |        |     |       |         |            |        |       |           |            |         |       |         |            |         |   |         |         |        |   |       |       |       |   |      |      |      |   |         |         |         |   |         |        
|                                               | Total Investment and Mortgage-backed Securities
    Held to Maturity                                 |                                                |           | 284,712                                               |         |              |        | 4,604  |     |       |         | (1,944     | )      |       |           | 287,372    |         |       |         | 121,230    |         |   |         | (1,944  | )      |   |       |      |       |   |      |     |      |   |         | 121,230 |         |   |         | (1,944  | )     
|                                               |                                                                                                      |                                                |           |                                                       |         |              |        |        |     |       |         |            |        |       |           |            |         |       |         |            |         |   |         |         |        |   |       |       |       |   |      |      |      |   |         |         |         |   |         |        
|Total securities                               |                                                                                                      | $                                              | 1,511,377 |                                                       |         | $            | 11,559 |        |     | $     | (14,494 | )          |        | $     | 1,508,442 |            |         | $     | 722,250 |            |         | $ | (14,207 | )       |        | $ | 4,713 |       |       | $ | (287 | )    |      | $ | 726,963 |         |         | $ | (14,494 | )      
|                                               |                                                                                                      |                                                |           |                                                       |         |              |        |        |     |       |         |            |        |       |           |            |         |       |         |            |         |   |         |         |        |   |       |       |       |   |      |      |      |   |         |         |         |   |         |        

As of December 31, 2004 and 2003, the
remaining contractual maturities on investment and
mortgage-backed securities classified as held to maturity and
available for sale are shown below. The remaining contractual
maturities for mortgage-backed securities were allocated
assuming no prepayments. Remaining

86



---



##### 



UCBH HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|   |                                                            
|-- | -----------------------------------------------------------
|6. | Investment and Mortgage-backed
    Securities  (Continued)

maturities will differ from contractual
maturities because borrowers may have the right to prepay
obligations before underlying mortgages mature.

|                    |                                                |                                              |                                                                        |                                                                      |         |           |           |        |         |           |           |   |         |           |           |   |         |           |           | 
|------------------- | ---------------------------------------------- | -------------------------------------------- | ---------------------------------------------------------------------- | -------------------------------------------------------------------- | ------- | --------- | --------- | ------ | ------- | --------- | --------- | - | ------- | --------- | --------- | - | ------- | --------- | --------- | 
|                    |                                                |                                              |                                                                        |                                                                     
|                    |                                                | 2004                                         |                                                                        | 2003                                                                
|                    |                                                |                                              |                                                                        |                                                                     
|                    |                                                | Amortized                                    |                                                                        | Market                                                               |         | Amortized |           | Market
|                    |                                                | Cost                                         |                                                                        | Value                                                                |         | Cost      |           | Value 
|                    |                                                |                                              |                                                                        |                                                                      |         |           |           |       
|                    |                                                |                                             
|                    |                                                | (Dollars in Thousands)                      
|Available for sale: |                                                |                                              |                                                                        |                                                                      |         |           |           |        |         |           |           |   |         |           |           |  
|                    | Investment securities available for sale:      |                                              |                                                                        |                                                                      |         |           |           |        |         |           |           |   |         |           |           |   |        
|                    |                                                | In one year or less                          |                                                                        | $                                                                    | 99,974  |           |           | $      | 99,963  |           |           | $ | 69,960  |           |           | $ | 69,959  |          
|                    |                                                | After one year through five years            |                                                                        |                                                                      | 21,755  |           |           |        | 21,681  |           |           |   | 31,623  |           |           |   | 31,365  |          
|                    |                                                | After five years through ten years           |                                                                        |                                                                      | 110,865 |           |           |        | 108,402 |           |           |   | 152,386 |           |           |   | 148,943 |          
|                    |                                                | After ten years                              |                                                                        |                                                                      | 18,441  |           |           |        | 18,219  |           |           |   | 13,189  |           |           |   | 12,795  |          
|                    |                                                |                                              |                                                                        |                                                                      |         |           |           |        |         |           |           |   |         |           |           |  
|                    |                                                |                                              | Subtotal                                                               |                                                                      |         | 251,035   |           |        |         | 248,265   |           |   |         | 267,158   |           |   |         | 263,062   |          
|                    |                                                |                                              |                                                                        |                                                                      |         |           |           |        |         |           |           |   |         |           |           |  
|                    | Mortgage-backed securities available for sale: |                                              |                                                                        |                                                                      |         |           |           |        |         |           |           |   |         |           |           |   |        
|                    |                                                | In one year or less                          |                                                                        |                                                                      | 1,096   |           |           |        | 1,132   |           |           |   |        |           |           |   |        |          
|                    |                                                | After five years through ten years           |                                                                        |                                                                      | 63,933  |           |           |        | 63,644  |           |           |   | 48,601  |           |           |   | 48,792  |          
|                    |                                                | After ten years                              |                                                                        |                                                                      | 864,287 |           |           |        | 856,099 |           |           |   | 910,906 |           |           |   | 909,216 |          
|                    |                                                |                                              |                                                                        |                                                                      |         |           |           |        |         |           |           |   |         |           |           |  
|                    |                                                |                                              | Subtotal                                                               |                                                                      |         | 929,316   |           |        |         | 920,875   |           |   |         | 959,507   |           |   |         | 958,008   |          
|                    |                                                |                                              |                                                                        |                                                                      |         |           |           |        |         |           |           |   |         |           |           |  
|                    |                                                |                                              | Total investment and mortgage-backed securities
    available for sale |                                                                      | $       | 1,180,351 |           |        | $       | 1,169,140 |           |   | $       | 1,226,665 |           |   | $       | 1,221,070 |          
|                    |                                                |                                              |                                                                        |                                                                      |         |           |           |        |         |           |           |   |         |           |           |  
|                    | Held to maturity:                              |                                              |                                                                        |                                                                      |         |           |           |        |         |           |           |   |         |           |           |   |        
|                    |                                                | Investment securities held to maturity:      |                                                                        |                                                                      |         |           |           |        |         |           |           |   |         |           |           |   |         |          
|                    |                                                | After five years through ten years           |                                                                        | $                                                                    | 328     |           |           | $      | 361     |           |           | $ | 328     |           |           | $ | 371     |          
|                    |                                                | After ten years                              |                                                                        |                                                                      | 215,266 |           |           |        | 221,936 |           |           |   | 183,936 |           |           |   | 187,364 |          
|                    |                                                |                                              |                                                                        |                                                                      |         |           |           |        |         |           |           |   |         |           |           |  
|                    |                                                |                                              |                                                                        | Subtotal                                                             |         |           | 215,594   |        |         |           | 222,297   |   |         |           | 184,264   |   |         |           | 187,735   | 
|                    |                                                |                                              |                                                                        |                                                                      |         |           |           |        |         |           |           |   |         |           |           |  
|                    |                                                | Mortgage-backed securities held to maturity: |                                                                        |                                                                      |         |           |           |        |         |           |           |   |         |           |           |   |         |          
|                    |                                                |                                              | After one year through five years                                      |                                                                      |         |          |           |        |         |          |           |   |         | 10        |           |   |         | 10        |          
|                    |                                                |                                              | After five years through ten years                                     |                                                                      |         |          |           |        |         |          |           |   |         | 1         |           |   |         | 1         |          
|                    |                                                |                                              | After ten years                                                        |                                                                      |         | 109,608   |           |        |         | 109,672   |           |   |         | 100,437   |           |   |         | 99,626    |          
|                    |                                                |                                              |                                                                        |                                                                      |         |           |           |        |         |           |           |   |         |           |           |  
|                    |                                                |                                              | Subtotal                                                               |                                                                      | $       | 109,608   |           |        | $       | 109,672   |           |   | $       | 100,448   |           |   | $       | 99,637    |          
|                    |                                                |                                              |                                                                        |                                                                      |         |           |           |        |         |           |           |   |         |           |           |  
|                    |                                                |                                              |                                                                        | Total investment and mortgage-backed securities
    held to maturity |         | $         | 325,202   |        |         | $         | 331,969   |   |         | $         | 284,712   |   |         | $         | 287,372   | 
|                    |                                                |                                              |                                                                        |                                                                      |         |           |           |        |         |           |           |   |         |           |           |  
|                    |                                                |                                              |                                                                        | Total securities                                                     |         | $         | 1,505,553 |        |         | $         | 1,501,109 |   |         | $         | 1,511,377 |   |         | $         | 1,508,442 | 
|                    |                                                |                                              |                                                                        |                                                                      |         |           |           |        |         |           |           |   |         |           |           |  

Approximately $774.7 million and
$692.8 million of investment and mortgage-backed securities
have been pledged to secure contractual arrangements entered
into by the Company at December 31, 2004 and 2003,
respectively. For the year ended December 31, 2004,
proceeds from the sale of available-for-sale securities totaled
$821.8 million, with gross realized gains of
$14.8 million and gross realized losses of
$2.1 million. Proceeds from the sale of available for sale
securities for the year ended December 31, 2003, totaled
$953.3 million, with gross realized gains of
$18.4 million and gross realized losses of
$7.4 million. For the year ended December 31, 2002,
proceeds from the sale of available-for-sale securities totaled
$953.1 million, with gross realized gains of
$5.1 million and gross realized losses of $1.7 million.

87



---



##### 



UCBH HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|   |                                                            
|-- | -----------------------------------------------------------
|6. | Investment and Mortgage-backed
    Securities  (Continued)

There were no mortgage-backed securities sold
under agreements to repurchase as of December 31, 2004 or
2003 or at any time during 2004. When the Company enters into
these transactions, the obligations generally mature within one
year and generally represent agreements to repurchase the same
securities.



|   |                                                              
|-- | -------------------------------------------------------------
|7. | Federal Home Loan Bank Stock and Other
    Equity Investments

The Company, along with all financial
institutions, must own stock in the Federal Home Loan Bank
(FHLB) in order to have access to FHLBs other
products and services. The stock does not trade in a market, but
may be issued, exchanged, redeemed, and repurchased by the FHLB
only at its stated par value. The stock is redeemable on
5 years written notice, subject to certain
conditions, by the shareholder. The FHLB can redeem stock with
15 days written notice and at quarterly intervals if the
member has stock in excess of 115% of its calculated
requirement. Additionally, the FHLB declares stock or cash
dividends each calendar quarter. The Companys other equity
investments consist of CRA investments (See Note 1).

The following table presents the Companys
FHLB stock and other equity investments as of the periods
indicated (dollars in thousands):

|                         |                                         |              |        |        |  |   |        |        | 
|------------------------ | --------------------------------------- | ------------ | ------ | ------ |  | - | ------ | ------ | 
|                         |                                         |             
|                         |                                         | December 31,
|                         |                                         |             
|                         |                                         | 2004         |        | 2003  
|                         |                                         |              |        |       
|FHLB Stock               |                                         | $            | 25,940 |        |  | $ | 24,931 |       
|Other Equity Investments |                                         |              | 30,927 |        |  |   | 16,385 |       
|                         |                                         |              |        |        |  |   |        |       
|                         | Total FHLB Stock and Equity Investments |              | $      | 56,867 |  |   | $      | 41,316 | 
|                         |                                         |              |        |        |  |   |        |       



|   |      
|-- | -----
|8. | Loans

As of December 31, 2004 and 2003, the
composition of the loan portfolio was as follows (dollars in
thousands):

|                          |                                           |      |           |           |  |   |           |           | 
|------------------------- | ----------------------------------------- | ---- | --------- | --------- |  | - | --------- | --------- | 
|                          |                                           | 2004 |           | 2003     
|                          |                                           |      |           |          
|Commercial:               |                                           |      |           |           |  |   |           |          
|                          | Secured by real estate  nonresidential   |      | $         | 1,951,020 |  |   | $         | 1,709,976 | 
|                          | Secured by real estate  multifamily      |      |           | 865,483   |  |   |           | 1,162,565 | 
|                          | Construction                              |      |           | 291,080   |  |   |           | 293,875   | 
|                          | Business                                  |      |           | 468,220   |  |   |           | 296,100   | 
|                          |                                           |      |           |           |  |   |           |          
|Total commercial loans    |                                           |      | 3,575,803 |           |  |   | 3,462,516 |          
|                          |                                           |      |           |           |  |   |           |          
|Consumer:                 |                                           |      |           |           |  |   |           |          
|                          | Residential mortgage (one to four family) |      |           | 434,323   |  |   |           | 274,392   | 
|                          | Other                                     |      |           | 47,926    |  |   |           | 43,117    | 
|                          |                                           |      |           |           |  |   |           |          
|Total consumer loans      |                                           |      | 482,249   |           |  |   | 317,509   |          
|                          |                                           |      |           |           |  |   |           |          
|Gross loans               |                                           |      | 4,058,052 |           |  |   | 3,780,025 |          
|Net deferred loan fees    |                                           |      | (7,311    | )         |  |   | (8,644    | )        
|                          |                                           |      |           |           |  |   |           |          
|Loans                     |                                           |      | 4,050,741 |           |  |   | 3,771,381 |          
|Allowance for loan losses |                                           |      | (56,472   | )         |  |   | (58,126   | )        
|                          |                                           |      |           |           |  |   |           |          
|Net loans                 |                                           | $    | 3,994,269 |           |  | $ | 3,713,255 |          
|                          |                                           |      |           |           |  |   |           |          

88



---



##### 



UCBH HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



8.     Loans  (Continued)


As of December 31, 2004, loans at fixed
interest rates amounted to $572.4 million, and loans at
variable interest rates amounted to $3.49 billion. Loans of
approximately $12.6 million and $5.9 million were on
nonaccrual status at December 31, 2004 and 2003,
respectively.

As of December 31, 2004, residential
mortgage (one to four family) and multifamily loans with a book
value and market value of $1.47 billion were pledged to
secure FHLB advances (see Note 11).

The following table indicates the Companys
impaired loans for the years ended December 31, 2004, 2003,
and 2002 (dollars in thousands):

|                                                                 |                      |      |        |        |  |      |       |       |  |   |   |   | 
|---------------------------------------------------------------- | -------------------- | ---- | ------ | ------ |  | ---- | ----- | ----- |  | - | - | - | 
|                                                                 |                      | 2004 |        | 2003   |  | 2002
|                                                                 |                      |      |        |        |  |     
|Impaired loans with an allowance                                 |                      | $    | 14,808 |        |  | $    | 4,965 |       |  | $ |  |  
|Impaired loans without an allowance                              |                      |      | 136    |        |  |      |      |       |  |   |  |  
|                                                                 |                      |      |        |        |  |      |       |       |  |   |   |  
|                                                                 | Total impaired loans |      | $      | 14,944 |  |      | $     | 4,965 |  |   | $ |  | 
|                                                                 |                      |      |        |        |  |      |       |       |  |   |   |  
|Allowance for impaired loans under
    SFAS No. 114              |                      | $    | 3,592  |        |  | $    | 2,128 |       |  | $ |  |  
|                                                                 |                      |      |        |        |  |      |       |       |  |   |   |  
|Interest income recognized on impaired loans
    during the year |                      | $    |       |        |  | $    |      |       |  | $ |  |  
|                                                                 |                      |      |        |        |  |      |       |       |  |   |   |  

Our average recorded investment in impaired loans
for the year ended December 31, 2004 was
$17.4 million. All impaired loans as of December 31,
2004 and 2003, were included in nonaccrual loans.

Loans past due ninety days and still accruing as
of December 31, 2004 and 2003, were $3.1 million and
$1.5 million, respectively.

For the years ended December 31, 2004, 2003
and 2002, the activity in the allowance for loan losses and
allowance for losses related to unfunded commitments was as
follows (dollars in thousands):

|                                                        |  |      |        |      |  |      |        |   |  |   |        |  
|------------------------------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|                                                        |  | 2004 |        | 2003 |  | 2002
|                                                        |  |      |        |      |  |     
|Balance at beginning of year:                           |  |      |        |      |  |      |        |   |  |   |        |  
|Allowance for loan losses                               |  | $    | 58,126 |      |  | $    | 48,865 |   |  | $ | 34,550 |  
|Allowance for losses  unfunded
    commitments         |  |      | 2,737  |      |  |      |       |   |  |   |       |  
|                                                        |  |      |        |      |  |      |        |   |  |   |        |  
|Total allowance for losses at beginning of the
    year |  |      | 60,863 |      |  |      | 48,865 |   |  |   | 34,550 |  
|Provision for losses                                    |  |      | 4,202  |      |  |      | 9,967  |   |  |   | 9,673  |  
|Loans charged off                                       |  |      | (4,798 | )    |  |      | (3,349 | ) |  |   | (5,563 | )
|Recoveries of loans previously charged off              |  |      | 145    |      |  |      | 1,352  |   |  |   | 43     |  
|Adjustment  acquired through merger                    |  |      |       |      |  |      | 4,028  |   |  |   | 10,162 |  
|                                                        |  |      |        |      |  |      |        |   |  |   |        |  
|Total allowance for losses at end of year               |  | $    | 60,412 |      |  | $    | 60,863 |   |  | $ | 48,865 |  
|                                                        |  |      |        |      |  |      |        |   |  |   |        |  
|Allowance for loan losses                               |  | $    | 56,472 |      |  | $    | 58,126 |   |  | $ | 48,865 |  
|Allowance for losses  unfunded
    commitments         |  |      | 3,940  |      |  |      | 2,737  |   |  |   |       |  
|                                                        |  |      |        |      |  |      |        |   |  |   |        |  
|Total allowance for losses at end of year               |  | $    | 60,412 |      |  | $    | 60,863 |   |  | $ | 48,865 |  
|                                                        |  |      |        |      |  |      |        |   |  |   |        |  

During the fourth quarter of 2004, the Company
updated certain loan loss risk factors for commercial real
estate and consumer loans. These changes were the result of a
further refinement to the Companys process, including more
detailed analysis of individual borrowers business,
related financial performance and review of rent schedules. As a
result of the refinements to these risk factors designation and
reclassification of $326.0 million in loans held for sale
in December 2004 and the upgrade of previously classified loans
due to

89



---



##### 



UCBH HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



8.     Loans  (Continued)


sustained performance, the Company recorded a
negative provision for loan losses of $626,000 during the fourth
quarter of 2004.

As of December 31, 2004 and 2003, the
composition of the loans held for sale portfolio was as follows
(dollars in thousands):

|                          |                                         |      |         |         |  |   |        |        | 
|------------------------- | --------------------------------------- | ---- | ------- | ------- |  | - | ------ | ------ | 
|                          |                                         | 2004 |         | 2003   
|                          |                                         |      |         |        
|Commercial:               |                                         |      |         |         |  |   |        |       
|                          | Secured by real estate  nonresidential |      | $       | 26,882  |  |   | $      | 14,203 | 
|                          | Secured by real estate  multifamily    |      |         | 295,253 |  |   |        |       | 
|                          | Business                                |      |         | 3,337   |  |   |        | 6,059  | 
|                          |                                         |      |         |         |  |   |        |       
|Gross loans held for sale |                                         |      | 325,472 |         |  |   | 20,262 |       
|Net deferred loan fees    |                                         |      | 535     |         |  |   |       |       
|                          |                                         |      |         |         |  |   |        |       
|Loans held for sale       |                                         | $    | 326,007 |         |  | $ | 20,262 |       
|                          |                                         |      |         |         |  |   |        |       



|   |                       
|-- | ----------------------
|9. | Premises and Equipment

As of December 31, 2004, and 2003, premises
and equipment were as follows (dollars in thousands):

|                                               |       |      |         |        |  |   |         |        | 
|---------------------------------------------- | ----- | ---- | ------- | ------ |  | - | ------- | ------ | 
|                                               |       | 2004 |         | 2003  
|                                               |       |      |         |       
|Land and buildings                             |       | $    | 103,380 |        |  | $ | 104,981 |       
|Leasehold improvements                         |       |      | 25,656  |        |  |   | 17,095  |       
|Equipment, furniture and fixtures              |       |      | 28,251  |        |  |   | 25,163  |       
|                                               |       |      |         |        |  |   |         |       
|                                               |       |      | 157,287 |        |  |   | 147,239 |       
|Less accumulated depreciation and amortization |       |      | (68,049 | )      |  |   | (63,094 | )     
|                                               |       |      |         |        |  |   |         |       
|                                               | Total |      | $       | 89,238 |  |   | $       | 84,145 | 
|                                               |       |      |         |        |  |   |         |       

Total depreciation and amortization expense was
$5.8 million, $5.8 million, and $2.9 million for
the years ended December 31, 2004, 2003 and 2002,
respectively.

Rental income is included in occupancy expense in
the statement of income and totaled $5.9 million,
$6.2 million, and $1.8 million for the years ended
December 31, 2004, 2003 and 2002, respectively. The future
noncancelable minimum lease payment receivables as of
December 31, 2004, are as follows (dollars in thousands):

|                    |       |   |       |        | 
|------------------- | ----- | - | ----- | ------ | 
|2005                |       | $ | 5,030 |       
|2006                |       |   | 3,313 |       
|2007                |       |   | 2,159 |       
|2008                |       |   | 1,645 |       
|2009                |       |   | 1,077 |       
|2010 and thereafter |       |   | 385   |       
|                    |       |   |       |       
|                    | Total |   | $     | 13,609 | 
|                    |       |   |       |       

90



---



##### 



UCBH HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|    |         
|--- | --------
|10. | Deposits

As of December 31, 2004 and 2003, deposit
balances were as follows (dollars in thousands):

|                                        |                     |                |           |           |           |         |      |          |      |   |           |           |           |  |      |      |      |  
|--------------------------------------- | ------------------- | -------------- | --------- | --------- | --------- | ------- | ---- | -------- | ---- | - | --------- | --------- | --------- |  | ---- | ---- | ---- | -
|                                        |                     |                |           |          
|                                        |                     | 2004           |           | 2003     
|                                        |                     |                |           |          
|                                        |                     |                |           | Weighted  |           |         |      | Weighted
|                                        |                     |                |           | Average   |           |         |      | Average 
|                                        |                     | Balance        |           | Rate      |           | Balance |      | Rate    
|                                        |                     |                |           |           |           |         |      |         
|NOW, checking and money market accounts |                     | $              | 1,427,366 |           |           |         | 0.96 | %        |      | $ | 1,026,047 |           |           |  | 0.65 | %   
|Savings accounts                        |                     |                | 1,000,489 |           |           |         | 1.03 |          |      |   | 884,064   |           |           |  | 0.77 |     
|Time deposits:                          |                     |                |           |           |           |         |      |          |      |   |           |           |           |  |      |     
|                                        | Less than $100,000  |                |           | 918,650   |           |         |      | 1.79     |      |   |           | 1,042,843 |           |  |      | 1.73 |     
|                                        | $100,000 or greater |                |           | 1,869,357 |           |         |      | 2.26     |      |   |           | 1,530,567 |           |  |      | 1.82 |     
|                                        |                     |                |           |           |           |         |      |          |      |   |           |           |           |  |      |     
|                                        | Total time deposits |                |           | 2,788,007 |           |         |      | 2.11     |      |   |           | 2,573,410 |           |  |      | 1.79 |     
|                                        |                     |                |           |           |           |         |      |          |      |   |           |           |           |  |      |     
|                                        |                     | Total deposits |           | $         | 5,215,862 |         |      |          | 1.59 | % |           | $         | 4,483,521 |  |      |      | 1.33 | %
|                                        |                     |                |           |           |           |         |      |          |      |   |           |           |           |  |      |     

As of December 31, 2004, remaining
maturities on time deposits were as follows (dollars in
thousands):

|                    |       |   |           |           | 
|------------------- | ----- | - | --------- | --------- | 
|2005                |       | $ | 2,525,310 |          
|2006                |       |   | 239,342   |          
|2007                |       |   | 16,985    |          
|2008                |       |   | 3,239     |          
|2009                |       |   | 3,027     |          
|2010 and thereafter |       |   | 104       |          
|                    |       |   |           |          
|                    | Total |   | $         | 2,788,007 | 
|                    |       |   |           |          

For the years ended December 31, 2004, 2003
and 2002, interest expense on deposits was as follows (dollars
in thousands):

|                                        |       |      |        |        |  |      |        |        |  |   |        |        | 
|--------------------------------------- | ----- | ---- | ------ | ------ |  | ---- | ------ | ------ |  | - | ------ | ------ | 
|                                        |       | 2004 |        | 2003   |  | 2002
|                                        |       |      |        |        |  |     
|NOW, checking and money market accounts |       | $    | 9,295  |        |  | $    | 6,774  |        |  | $ | 5,952  |       
|Savings accounts                        |       |      | 8,451  |        |  |      | 7,191  |        |  |   | 6,582  |       
|Time deposits                           |       |      | 49,979 |        |  |      | 55,153 |        |  |   | 49,083 |       
|Less penalties for early withdrawal     |       |      | (458   | )      |  |      | (394   | )      |  |   | (381   | )     
|                                        |       |      |        |        |  |      |        |        |  |   |        |       
|                                        | Total |      | $      | 67,267 |  |      | $      | 68,724 |  |   | $      | 61,236 | 
|                                        |       |      |        |        |  |      |        |        |  |   |        |       

91



---



##### 



UCBH HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|    |           
|--- | ----------
|11. | Borrowings

For the years ended December 31, 2004, 2003
and 2002, the following short-and long-term borrowings were
outstanding (dollars in thousands):

|                                                                    |                                                                                 |      |   |         |   |      |   |         |   |  |   |         |  
|------------------------------------------------------------------- | ------------------------------------------------------------------------------- | ---- | - | ------- | - | ---- | - | ------- | - |  | - | ------- | -
|                                                                    |                                                                                 | 2004 |   | 2003    |   | 2002
|                                                                    |                                                                                 |      |   |         |   |     
|Short-term borrowings:                                              |                                                                                 |      |   |         |   |      |   |         |   |  |   |        
|FHLB of San Francisco advances and other
    short-term borrowings: |                                                                                 |      |   |         |   |      |   |         |   |  |   |        
|                                                                    | Average balance outstanding                                                     |      | $ | 164,964 |   |      | $ | 76,827  |   |  | $ | 23,606  |  
|                                                                    | Maximum amount outstanding at any month end period                              |      |   | 300,695 |   |      |   | 234,134 |   |  |   | 322,000 |  
|                                                                    | Balance outstanding at end of period                                            |      |   | 72,310  |   |      |   | 234,134 |   |  |   | 77,500  |  
|                                                                    | Weighted average interest rate during the period                                |      |   | 1.30    | % |      |   | 1.41    | % |  |   | 2.40    | %
|                                                                    | Weighted average interest rate at end of period                                 |      |   | 1.22    | % |      |   | 1.00    | % |  |   | 1.13    | %
|                                                                    | Weighted average remaining term to maturity at
    end of period
    (in years) |      |   |        |   |      |   |        |   |  |   |        |  
|Long-term borrowings:                                               |                                                                                 |      |   |         |   |      |   |         |   |  |   |        
|                                                                    | FHLB of San Francisco advances:                                                 |      |   |         |   |      |   |         |   |  |   |         |  
|                                                                    | Average balance outstanding                                                     |      | $ | 299,253 |   |      | $ | 271,688 |   |  | $ | 253,666 |  
|                                                                    | Maximum amount outstanding at any month end period                              |      |   | 335,104 |   |      |   | 274,000 |   |  |   | 285,953 |  
|                                                                    | Balance outstanding at end of period                                            |      |   | 334,952 |   |      |   | 271,408 |   |  |   | 275,874 |  
|                                                                    | Weighted average interest rate during the period                                |      |   | 5.00    | % |      |   | 5.15    | % |  |   | 5.43    | %
|                                                                    | Weighted average interest rate at end of period                                 |      |   | 4.89    | % |      |   | 5.12    | % |  |   | 5.08    | %
|                                                                    | Weighted average remaining term to maturity at
    end of period
    (in years) |      |   | 2.9     |   |      |   | 4.0     |   |  |   | 5.0     |  

The Company maintains a secured credit facility
with the FHLB of San Francisco against which the Company
may take advances. The terms of this credit facility require the
Company to maintain in safekeeping with the FHLB of
San Francisco eligible collateral of at least 100% of
outstanding advances. Included in the long-term borrowings were
$226.0 million of advances maturing in 2008 with provisions
that allow the FHLB of San Francisco, at their option, to
terminate the advances at quarterly intervals at specified
periods ranging from three to five years beyond the advance
dates. As of December 31, 2004, $241.0 million of
these advances may be terminated at the option of the FHLB. The
advances were secured with $309.8 million of
mortgage-backed securities and $1.47 billion of loans. At
December 31, 2004, credit availability under this facility
was approximately $921.5 million.

Future payments due on borrowings subsequent to
December 31, 2004, are as follows (dollars in thousands):

|     |  |   |         | 
|---- |  | - | ------- | 
|2005 |  | $ | 72,310  | 
|2006 |  |   | 45,000  | 
|2007 |  |   | 46,000  | 
|2008 |  |   | 243,952 | 
|     |  |   |         | 
|     |  | $ | 407,262 | 
|     |  |   |         | 

During 2004, the Company increased its unsecured
borrowing line with Wells Fargo Bank to $20.0 million from
the 2002 established unsecured borrowing line of
$10.0 million. The Company has not taken an advance under
the terms of the line. This line is maintained for contingency
liquidity at the holding company level.

92



---



##### 



UCBH HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|    |                        
|--- | -----------------------
|12. | Subordinated Debentures

The Company established special purpose trusts in
1998, 2001, and 2002 for the purpose of issuing Guaranteed
Preferred Beneficial Interests in UCBHs Junior
Subordinated Debentures (Capital Securities). The
trusts exist for the sole purpose of issuing the Capital
Securities and investing the proceeds thereof in Junior
Subordinated Debentures issued by the Company. Payment of
distributions out of the monies held by the trusts and payments
on liquidation of the trusts or the redemption of the Capital
Securities are guaranteed by the Company to the extent the
trusts have funds available thereof. The obligations of the
Company under the guarantees and the Junior Subordinated
Debentures are subordinate and junior in right of payment to all
indebtedness of the Company and will be structurally
subordinated to all liabilities and obligations of the
Companys subsidiaries.

A total of $90.0 million of the proceeds
from the 2002 issuances were used to fund a portion of the
purchase price of the BCC acquisition. The remaining proceeds
from the issuance of the Capital Securities were used to provide
additional capital for the Company. Interest expense on the
Capital Securities was $8.4 million, $8.2 million and
$4.8 million for the years ended December 31, 2004,
2003 and 2002, respectively.

The table below summarizes the outstanding
Capital Securities issued by each special purpose trust and the
debentures issued by UCBH to each trust as of December 31,
2004 (dollars in thousands):

|                                 |  |                    |                |            |  |                |        |       |  |                               |        |          |  |              |                    |              |  |                    |  |                       |       |  |       |  |       |               |  |                                           |  |                 
|-------------------------------- |  | ------------------ | -------------- | ---------- |  | -------------- | ------ | ----- |  | ----------------------------- | ------ | -------- |  | ------------ | ------------------ | ------------ |  | ------------------ |  | --------------------- | ----- |  | ----- |  | ----- | ------------- |  | ----------------------------------------- |  | ----------------
|                                 |  |                    |                |            |  |                |        |       |  |                               |        |          |  |              |                    |             
|                                 |  |                    |                |            |  |                |        |       |  | Capital Securities and Junior |        |          |  |              |                    |             
|                                 |  |                    |                |            |  |                |        |       |  | Subordinated Debentures       |        |          |  |              |                    |             
|                                 |  |                    |                |            |  |                |        |       |  |                               |        |          |  |             
|                                 |  | Capital Securities |                | Principal  |  |                |        |       |  | Annualized                    |        | Current  |  |              |                    | Payable/    
|                                 |  |                    |                | Balance of |  | Not Redeemable |        |       |  | Coupon                        |        | Interest |  | Date of Rate |                    | Distribution
|Trust Name                       |  | Issuance Date      |                | Amount     |  | Debentures     |        | Until |  | Stated Maturity               |        | Rate     |  | Rate         |                    | Change       |  | Dates             
|                                 |  |                    |                |            |  |                |        |       |  |                               |        |          |  |              |                    |              |  |                   
|UCBH Trust Co.                   |  |                    | April 1998     |            |  | $              | 30,000 |       |  | $                             | 30,928 |          |  |              | May 1, 2005        |              |  | May 1, 2028        |  |                       | 9.38% |  |       |  | 9.38% |               |  |                                          |  | May 1 November 1
|                                
|UCBH Capital Trust I             |  |                    | November 2001  |            |  |                | 6,000  |       |  |                               | 6,186  |          |  |              | December 8, 2006   |              |  | December 8, 2031   |  | 6-month LIBOR + 3.80% |       |  | 6.44% |  |       | December 2004 |  | June 8 December 8                        
|                                
|UCBH Holdings Statutory Trust I  |  |                    | March 2002     |            |  |                | 10,000 |       |  |                               | 10,310 |          |  |              | March 26, 2007     |              |  | March 26, 2032     |  | 3-month LIBOR + 3.60% |       |  | 6.15% |  |       | December 2004 |  | March 26 June 26 September 26 December 26
|                                
|UCBH Holdings Statutory Trust II |  |                    | September 2002 |            |  |                | 25,000 |       |  |                               | 25,774 |          |  |              | September 26, 2007 |              |  | September 26, 2032 |  | 3-month LIBOR + 3.40% |       |  | 5.95% |  |       | December 2004 |  | March 26 June 26 September 26 December 26
|                                
|UCBH Capital Trust II            |  |                    | October 2002   |            |  |                | 20,000 |       |  |                               | 20,619 |          |  |              | November 7, 2007   |              |  | November 7, 2032   |  | 3-month LIBOR + 3.45% |       |  | 5.67% |  |       | November 2004 |  | February 7 May 7 August 7 November 7     
|                                
|UCBH Capital Trust III           |  |                    | October 2002   |            |  |                | 18,000 |       |  |                               | 18,557 |          |  |              | November 7, 2007   |              |  | November 7, 2032   |  | 3-month LIBOR + 3.66% |       |  | 5.88% |  |       | November 2004 |  | February 7 May 7 August 7 November 7     
|                                
|UCBH Capital Trust IV            |  |                    | October 2002   |            |  |                | 27,000 |       |  |                               | 27,836 |          |  |              | November 7, 2007   |              |  | November 7, 2032   |  | 3-month LIBOR + 3.45% |       |  | 5.74% |  |       | November 2004 |  | February 7 May 7 August 7 November 7     

The $30.0 million of securities issued in
1998 have a par call in May 2005.

93



---



##### 



UCBH HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|    |                                                             
|--- | ------------------------------------------------------------
|13. | Stockholders Equity and Regulatory
    Capital Requirements

The Company and the Bank are subject to various
regulatory requirements administered by the federal banking
agencies. Failure to meet minimum capital requirements can
initiate certain mandatory and possible additional discretionary
actions by regulators that, if undertaken, could have a direct
material effect on the Companys financial statements.
Under capital adequacy guidelines and the regulatory framework
for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative measures of its
assets, liabilities, and certain off-balance-sheet items as
calculated under regulatory accounting practices. The
Banks capital amounts are also subject to qualitative
judgments by the regulators about components, weightings, and
other factors.

Qualitative measures established by regulation to
ensure capital adequacy require financial institutions to
maintain minimum amounts and ratios (set forth in the table
below) of total and Tier I Capital (as defined in the
regulations) to risk-weighed assets (as defined), and of
Tier I Capital (as defined) to average assets (as defined).
As of December 31, 2004, the Company and the Bank met all
capital adequacy requirements to which they are subject.

As of December 31, 2004, the Bank was
classified as a well capitalized institution under
the regulatory framework for prompt corrective action. To be
classified as well capitalized, the Bank must maintain minimum
total risk-based, Tier I risk-based and Tier I
leverage ratio as set forth in the table. There are no
conditions or events since December 31, 2004, that
management believes have changed the institutions category.

The Companys and the Banks actual
capital amounts and ratios are also presented in the following
table (dollars in thousands):

|                                         |                        |        |   |                   |  |                   |  |                   |   |            |   |         |  |  |  |      |   |  |   |         |  |  |  |       |  
|---------------------------------------- | ---------------------- | ------ | - | ----------------- |  | ----------------- |  | ----------------- | - | ---------- | - | ------- |  |  |  | ---- | - |  | - | ------- |  |  |  | ----- | -
|                                         |                        |        |   |                   |  |                   |  |                   |   |           
|                                         |                        |        |   |                   |  |                   |  |                   |   | To Be Well
|                                         |                        |        |   |                   |  |                   |  | Capitalized Under
|                                         |                        |        |   | For Capital       |  | Prompt Corrective
|                                         |                        | Actual |   | Adequacy Purposes |  | Action Provisions
|                                         |                        |        |   |                   |  |                  
|                                         |                        | Amount |   | Ratio             |  | Amount            |  | Ratio             |   | Amount     |   | Ratio  
|                                         |                        |        |   |                   |  |                   |  |                   |   |            |   |        
|As of December 31, 2004                  |                        |        |   |                   |  |                   |  |                   |   |            |   |         |  |  |  |      |   |  |   |         |  |  |  |      
|Total Capital (to risk-weighted assets)  |                        |        |   |                   |  |                   |  |                   |   |            |   |         |  |  |  |      |   |  |   |         |  |  |  |      
|                                         | United Commercial Bank |        | $ | 578,529           |  |                   |  | 12.67             | % |            | $ | 365,406 |  |  |  | 8.00 | % |  | $ | 456,758 |  |  |  | 10.00 | %
|                                         | UCBH Holdings, Inc.    |        |   | 604,805           |  |                   |  | 13.23             |   |            |   | 365,825 |  |  |  | 8.00 |   |  |   |         |  |  |  |       |  
|Tier I Capital (to risk-weighted assets) |                        |        |   |                   |  |                   |  |                   |   |            |   |         |  |  |  |      |   |  |   |         |  |  |  |      
|                                         | United Commercial Bank |        | $ | 521,393           |  |                   |  | 11.42             | % |            | $ | 182,703 |  |  |  | 4.00 | % |  | $ | 274,055 |  |  |  | 6.00  | %
|                                         | UCBH Holdings, Inc.    |        |   | 547,605           |  |                   |  | 11.98             |   |            |   | 182,912 |  |  |  | 4.00 |   |  |   |         |  |  |  |       |  
|Tier I Capital (to average assets)       |                        |        |   |                   |  |                   |  |                   |   |            |   |         |  |  |  |      |   |  |   |         |  |  |  |      
|                                         | (Leverage Ratio)       |        |   |                   |  |                   |  |                   |   |            |   |         |  |  |  |      |   |  |   |         |  |  |  |       |  
|                                         | United Commercial Bank |        | $ | 521,393           |  |                   |  | 8.49              | % |            | $ | 245,518 |  |  |  | 4.00 | % |  | $ | 306,897 |  |  |  | 5.00  | %
|                                         | UCBH Holdings, Inc.    |        |   | 547,605           |  |                   |  | 8.92              |   |            |   | 245,672 |  |  |  | 4.00 |   |  |   |         |  |  |  |       |  

94



---



##### 



UCBH HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



13.     Stockholders
Equity and Regulatory Capital
Requirements  (Continued)


The following is a reconciliation of capital
under GAAP with regulatory capital at December 31, 2004
(dollars in thousands):

|                               |                                                                       |                |         |                    |   |            |         |                |   |   |         |         |   |   |         |         |  
|------------------------------ | --------------------------------------------------------------------- | -------------- | ------- | ------------------ | - | ---------- | ------- | -------------- | - | - | ------- | ------- | - | - | ------- | ------- | -
|                               |                                                                       |                |         |                   
|                               |                                                                       | Tier I Capital |         | Risk-Based Capital
|                               |                                                                       |                |         |                   
|                               |                                                                       | United         |         |                    |   | United     |         |               
|                               |                                                                       | Commercial     |         | UCBH               |   | Commercial |         | UCBH          
|                               |                                                                       | Bank           |         | Holdings, Inc.     |   | Bank       |         | Holdings, Inc.
|                               |                                                                       |                |         |                    |   |            |         |               
|GAAP Capital                   |                                                                       | $              | 593,800 |                    |   | $          | 484,012 |                |   | $ | 593,800 |         |   | $ | 484,012 |        
|Nonallowable components:       |                                                                       |                |         |                    |   |            |         |                |   |   |         |         |   |   |         |        
|                               | Unrealized losses on securities available for sale                    |                |         | 6,498              |   |            |         | 6,498          |   |   |         | 6,498   |   |   |         | 6,498   |  
|                               | Goodwill                                                              |                |         | (78,130            | ) |            |         | (78,130        | ) |   |         | (78,130 | ) |   |         | (78,130 | )
|                               | Mortgage servicing rights  excess                                    |                |         | (775               | ) |            |         | (775           | ) |   |         | (775    | ) |   |         | (775    | )
|Additional capital components: |                                                                       |                |         |                    |   |            |         |                |   |   |         |         |   |   |         |        
|                               | Subordinated debentures                                               |                |         |                   |   |            |         | 136,000        |   |   |         |        |   |   |         | 136,000 |  
|                               | Allowance for loan losses  limited to
    1.25% of risk-based assets |                |         |                   |   |            |         |               |   |   |         | 57,136  |   |   |         | 57,200  |  
|                               |                                                                       |                |         |                    |   |            |         |                |   |   |         |         |   |   |         |        
|Regulatory capital             |                                                                       | $              | 521,393 |                    |   | $          | 547,605 |                |   | $ | 578,529 |         |   | $ | 604,805 |        
|                               |                                                                       |                |         |                    |   |            |         |                |   |   |         |         |   |   |         |        

The Company and the Bank are prohibited by
federal regulations from paying dividends if the payment would
reduce their regulatory capital below certain minimum
requirements. Following its offering in 1998, the Company
commenced paying dividends in 2000. For the years ended
December 31, 2004, 2003 and 2002, the Company declared cash
dividends totaling $0.16 per share, $0.12 per share,
and $0.10 per share, respectively.

95



---



##### 



UCBH HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|    |                   
|--- | ------------------
|14. | Earnings Per Share

Effective April 8, 2003, the Company
completed a two-for-one stock split in the legal form of a stock
dividend. The following is a reconciliation of the numerator and
denominator of the basic and diluted earnings per share on a
post-split basis. Accordingly, the financial statements for the
year ended December 31, 2002 have been restated to reflect
the effect of the stock split.

|                        |            |                                                  |   |               |  |           |           |            |  |  |   |      | 
|----------------------- | ---------- | ------------------------------------------------ | - | ------------- |  | --------- | --------- | ---------- |  |  | - | ---- | 
|                        |            |                                                 
|                        |            | Years Ended December 31,                        
|                        |            | 2004, 2003, and 2002                            
|                        |            |                                                 
|                        |            | Income                                           |   | Shares        |  | Per Share
|                        |            | (Numerator)                                      |   | (Denominator) |  | Amount   
|                        |            |                                                  |   |               |  |          
|                        |            |                                                 
|                        |            | (Dollars in Thousands, Except Per Share Amounts)
|2004:                   |            |                                                  |   |               |  |           |           |            |  |  |   |     
|Basic:                  |            |                                                  |   |               |  |           |           |            |  |  |   |     
|                        | Net income |                                                  | $ | 85,603        |  |           |           | 45,261,297 |  |  | $ | 1.89 | 
|Effect of stock options |            |                                                  |  |               |  |           | 2,360,014 |            |  |  |   |     
|                        |            |                                                  |   |               |  |           |           |            |  |  |   |     
|Diluted:                |            |                                                  |   |               |  |           |           |            |  |  |   |     
|                        | Net income |                                                  | $ | 85,603        |  |           |           | 47,621,311 |  |  | $ | 1.80 | 
|                        |            |                                                  |   |               |  |           |           |            |  |  |   |     
|2003:                   |            |                                                  |   |               |  |           |           |            |  |  |   |     
|Basic:                  |            |                                                  |   |               |  |           |           |            |  |  |   |     
|                        | Net income |                                                  | $ | 64,638        |  |           |           | 43,585,216 |  |  | $ | 1.48 | 
|Effect of stock options |            |                                                  |  |               |  |           | 2,146,055 |            |  |  |   |     
|                        |            |                                                  |   |               |  |           |           |            |  |  |   |     
|Diluted:                |            |                                                  |   |               |  |           |           |            |  |  |   |     
|                        | Net income |                                                  | $ | 64,638        |  |           |           | 45,731,271 |  |  | $ | 1.41 | 
|                        |            |                                                  |   |               |  |           |           |            |  |  |   |     
|2002:                   |            |                                                  |   |               |  |           |           |            |  |  |   |     
|Basic:                  |            |                                                  |   |               |  |           |           |            |  |  |   |     
|                        | Net income |                                                  | $ | 38,928        |  |           |           | 39,657,766 |  |  | $ | 0.98 | 
|Effect of stock options |            |                                                  |  |               |  |           | 1,857,160 |            |  |  |   |     
|                        |            |                                                  |   |               |  |           |           |            |  |  |   |     
|Diluted:                |            |                                                  |   |               |  |           |           |            |  |  |   |     
|                        | Net income |                                                  | $ | 38,928        |  |           |           | 41,514,926 |  |  | $ | 0.94 | 
|                        |            |                                                  |   |               |  |           |           |            |  |  |   |     

96



---



##### 



UCBH HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|    |                                     
|--- | ------------------------------------
|14. | Earnings Per Share 
    (Continued)

On January 27, 2005, the Company declared a
two-for-one stock split in form of a stock dividend to
shareholders of record as of March 31, 2005 and
distributable on April 12, 2005. The following is an
unaudited pro forma of the numerator and denominator of the
basic diluted earnings per share on a post-split basis for the
periods indicated:

|                        |            |                                                  |   |               |  |           |           |            |  |  |   |      | 
|----------------------- | ---------- | ------------------------------------------------ | - | ------------- |  | --------- | --------- | ---------- |  |  | - | ---- | 
|                        |            |                                                 
|                        |            | Years Ended December 31,                        
|                        |            | 2004, 2003, and 2002                            
|                        |            |                                                 
|                        |            | Income                                           |   | Shares        |  | Per Share
|                        |            | (Numerator)                                      |   | (Denominator) |  | Amount   
|                        |            |                                                  |   |               |  |          
|                        |            |                                                 
|                        |            | (Dollars in Thousands, Except Per Share Amounts)
|2004:                   |            |                                                  |   |               |  |           |           |            |  |  |   |     
|Basic:                  |            |                                                  |   |               |  |           |           |            |  |  |   |     
|                        | Net income |                                                  | $ | 85,603        |  |           |           | 90,522,594 |  |  | $ | 0.95 | 
|Effect of stock options |            |                                                  |  |               |  |           | 4,720,028 |            |  |  |   |     
|                        |            |                                                  |   |               |  |           |           |            |  |  |   |     
|Diluted:                |            |                                                  |   |               |  |           |           |            |  |  |   |     
|                        | Net income |                                                  | $ | 85,603        |  |           |           | 95,242,622 |  |  | $ | 0.90 | 
|                        |            |                                                  |   |               |  |           |           |            |  |  |   |     
|2003:                   |            |                                                  |   |               |  |           |           |            |  |  |   |     
|Basic:                  |            |                                                  |   |               |  |           |           |            |  |  |   |     
|                        | Net income |                                                  | $ | 64,638        |  |           |           | 87,170,432 |  |  | $ | 0.74 | 
|Effect of stock options |            |                                                  |  |               |  |           | 4,292,110 |            |  |  |   |     
|                        |            |                                                  |   |               |  |           |           |            |  |  |   |     
|Diluted:                |            |                                                  |   |               |  |           |           |            |  |  |   |     
|                        | Net income |                                                  | $ | 64,638        |  |           |           | 91,462,542 |  |  | $ | 0.71 | 
|                        |            |                                                  |   |               |  |           |           |            |  |  |   |     
|2002:                   |            |                                                  |   |               |  |           |           |            |  |  |   |     
|Basic:                  |            |                                                  |   |               |  |           |           |            |  |  |   |     
|                        | Net income |                                                  | $ | 38,928        |  |           |           | 79,315,532 |  |  | $ | 0.49 | 
|Effect of stock options |            |                                                  |  |               |  |           | 3,714,320 |            |  |  |   |     
|                        |            |                                                  |   |               |  |           |           |            |  |  |   |     
|Diluted:                |            |                                                  |   |               |  |           |           |            |  |  |   |     
|                        | Net income |                                                  | $ | 38,928        |  |           |           | 83,029,852 |  |  | $ | 0.47 | 
|                        |            |                                                  |   |               |  |           |           |            |  |  |   |     



|    |                    
|--- | -------------------
|15. | Segment Information

In accordance with SFAS No. 131,
Disclosures about Segments of an Enterprise and Related
Information, the Company designates the internal
organization that is used by management for making operating
decisions and assessing performance as the source of the
Companys reportable segments. The Company has determined
that its reportable segments are those that are based on the
Companys method of internal reporting. The Company has
determined that it has three reportable segments, which include
domestic commercial banking, the Hong Kong branch and UCB
Investment Services, Inc. Other consists of the Hong Kong branch
and UCB Investment Services, Inc. The intersegment column
identifies the intersegment activities between the domestic
commercial banking and other. Intersegment activities consist of
funds sold and related interest by the Hong Kong branch to
domestic commercial banking, Hong Kong branch short-term
borrowings and related transfer pricing interest with domestic
commercial banking, and a UCB Investment Services, Inc. deposit
account with domestic commercial banking. Transfer pricing
interest income is based on the Companys internal funds
transfer pricing system, which assigns a cost of funds or a
credit for funds to assets or liabilities based on their type,
maturity or repricing characteristics. UCB Investment Services,
Inc. and the Hong Kong branch commenced operations in the last
half of 2003. The

97



---



##### 



UCBH HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|    |                                      
|--- | -------------------------------------
|15. | Segment Information 
    (Continued)

financial position and results of operations as
of and for the year ended for these two segments are immaterial,
and therefore are included in Domestic Commercial Banking at
that time. The following is segment information as of and for
the years ended December 31, 2004, 2003, 2002 (dollars in
thousands):

|                                      |                               |            |   |           |  |              |   |         |   |  |   |          |   |  |   |           | 
|------------------------------------- | ----------------------------- | ---------- | - | --------- |  | ------------ | - | ------- | - |  | - | -------- | - |  | - | --------- | 
|                                      |                               | Domestic   |   |           |  |              |   |        
|                                      |                               | Commercial |   |           |  |              |   |        
|                                      |                               | Banking    |   | Other     |  | Intersegment |   | Total  
|                                      |                               |            |   |           |  |              |   |        
|For the year ended December 31, 2004: |                               |            |   |           |  |              |   |         |   |  |   |          |   |  |   |          
|                                      | Total interest income         |            | $ | 298,337   |  |              | $ | 5,787   |   |  | $ | (4,060   | ) |  | $ | 300,064   | 
|                                      | Net interest income           |            |   | 208,943   |  |              |   | 1,773   |   |  |   | (3,235   | ) |  |   | 207,481   | 
|                                      | Net income (loss)             |            |   | 91,885    |  |              |   | (3,117  | ) |  |   | (3,165   | ) |  |   | 85,603    | 
|As of December 31, 2004:              |                               |            |   |           |  |              |   |         |   |  |   |          |   |  |   |          
|                                      | Total loans held in portfolio |            |   | 3,939,559 |  |              |   | 111,182 |   |  |   |         |   |  |   | 4,050,741 | 
|                                      | Total assets                  |            |   | 6,186,571 |  |              |   | 484,504 |   |  |   | (355,394 | ) |  |   | 6,315,681 | 
|                                      | Total deposits                |            |   | 4,930,365 |  |              |   | 285,297 |   |  |   |         |   |  |   | 5,215,862 | 
|For the year ended December 31, 2003: |                               |            |   |           |  |              |   |         |   |  |   |          |   |  |   |          
|                                      | Total interest income         |            |   | 260,262   |  |              |   |        |   |  |   |         |   |  |   | 260,262   | 
|                                      | Net interest income           |            |   | 168,548   |  |              |   |        |   |  |   |         |   |  |   | 168,548   | 
|                                      | Net income                    |            |   | 64,638    |  |              |   |        |   |  |   |         |   |  |   | 64,638    | 
|As of December 31, 2003:              |                               |            |   |           |  |              |   |         |   |  |   |          |   |  |   |          
|                                      | Total loans held in portfolio |            |   | 3,771,381 |  |              |   |        |   |  |   |         |   |  |   | 3,771,381 | 
|                                      | Total assets                  |            |   | 5,587,927 |  |              |   |        |   |  |   |         |   |  |   | 5,587,927 | 
|                                      | Total deposits                |            |   | 4,483,521 |  |              |   |        |   |  |   |         |   |  |   | 4,483,521 | 
|For the year ended December 31, 2002: |                               |            |   |           |  |              |   |         |   |  |   |          |   |  |   |          
|                                      | Total interest income         |            |   | 205,178   |  |              |   |        |   |  |   |         |   |  |   | 205,178   | 
|                                      | Net interest income           |            |   | 124,946   |  |              |   |        |   |  |   |         |   |  |   | 124,946   | 
|                                      | Net income                    |            |   | 38,928    |  |              |   |        |   |  |   |         |   |  |   | 38,928    | 
|As of December 31, 2002:              |                               |            |   |           |  |              |   |         |   |  |   |          |   |  |   |          
|                                      | Total loans held in portfolio |            |   | 3,027,810 |  |              |   |        |   |  |   |         |   |  |   | 3,027,810 | 
|                                      | Total assets                  |            |   | 4,853,636 |  |              |   |        |   |  |   |         |   |  |   | 4,853,636 | 
|                                      | Total deposits                |            | $ | 4,006,813 |  |              | $ |        |   |  | $ |         |   |  | $ | 4,006,813 | 



|    |                       
|--- | ----------------------
|16. | Employee Benefit Plans

Stock Option
Plan

In May 1998, the Company adopted a Stock Option
Plan (the Plan) which provides for the granting of
stock options to eligible officers, employees and directors of
the Company and the Bank. The Plan was amended in April 1999 to
increase the number of shares reserved to be issued pursuant to
the Plan from 1,306,666 shares to 1,866,666, on a
post-split basis. The Plan was amended in April 2001 to increase
the number of shares reserved to be issued pursuant to the Plan
from 1,866,666 shares to 3,733,332 shares, on a
post-split basis. The Plan was amended in April 2003 to increase
the number of shares reserved for issuance pursuant to the Plan
from 3,733,332 shares to 9,567,600 shares, on a
post-split basis. The Plan was amended in September 2004 to
increase the number of shares reserved for issuance pursuant to
the Plan from 9,567,600 shares to 11,828,824 shares.

98



---



##### 



UCBH HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|    |                                         
|--- | ----------------------------------------
|16. | Employee Benefit Plans 
    (Continued)

All of the options are exercisable for ten years
following the option grant date and vest over a three-year
period. The following table summarizes the stock option activity
during the years ended December 31, 2004, 2003 and 2002:

|                                                                         |  |           |           |                |  |           |       |                |  |           |           |                |  |   |       |  |  |  |           |   |  |   |       | 
|------------------------------------------------------------------------ |  | --------- | --------- | -------------- |  | --------- | ----- | -------------- |  | --------- | --------- | -------------- |  | - | ----- |  |  |  | --------- | - |  | - | ----- | 
|                                                                         |  |           |           |                |  |          
|                                                                         |  | 2004      |           | 2003           |  | 2002     
|                                                                         |  |           |           |                |  |          
|                                                                         |  |           |           | Weighted       |  |           |       | Weighted       |  |           |           | Weighted      
|                                                                         |  | Number of |           | Average        |  | Number of |       | Average        |  | Number of |           | Average       
|                                                                         |  | Shares    |           | Exercise Price |  | Shares    |       | Exercise Price |  | Shares    |           | Exercise Price
|                                                                         |  |           |           |                |  |           |       |                |  |           |           |               
|Options outstanding, beginning of year                                   |  |           | 4,955,186 |                |  | $         | 13.08 |                |  |           | 4,988,206 |                |  | $ | 10.04 |  |  |  | 5,171,582 |   |  | $ | 8.99  | 
|Granted                                                                  |  |           | 2,752,050 |                |  |           | 37.86 |                |  |           | 798,450   |                |  |   | 27.63 |  |  |  | 538,600   |   |  |   | 16.75 | 
|Canceled or expired                                                      |  |           | (158,543  | )              |  |           | 34.69 |                |  |           | (102,327  | )              |  |   | 18.93 |  |  |  | (72,996   | ) |  |   | 16.64 | 
|Exercised                                                                |  |           | (527,534  | )              |  |           | 11.13 |                |  |           | (729,143  | )              |  |   | 7.45  |  |  |  | (648,980  | ) |  |   | 4.90  | 
|                                                                         |  |           |           |                |  |           |       |                |  |           |           |                |  |   |       |  |  |  |           |   |  |   |       | 
|Options outstanding, end of year                                         |  |           | 7,021,159 |                |  |           | 22.45 |                |  |           | 4,955,186 |                |  |   | 13.07 |  |  |  | 4,988,206 |   |  |   | 10.04 | 
|                                                                         |  |           |           |                |  |           |       |                |  |           |           |                |  |   |       |  |  |  |           |   |  |   |       | 
|Shares exercisable end of year                                           |  |           | 3,774,542 |                |  |           | 11.37 |                |  |           | 2,977,803 |                |  |   | 9.23  |  |  |  | 2,436,316 |   |  |   | 7.12  | 
|Weighted average fair value of options granted
    during the year       |  |           |           |                |  |           | 13.24 |                |  |           |           |                |  |   | 7.70  |  |  |  |           |   |  |   | 5.07  | 
|Market value of stock at December 31, 2004,
    2003 and 2002 period end |  |           |           |                |  | $         | 45.82 |                |  |           |           |                |  | $ | 38.97 |  |  |  |           |   |  | $ | 21.23 | 

For options outstanding at December 31,
2004, the range of exercise prices was as follows:

|               |  |             |           |                  |  |                  |       |             |  |                  |      |  |  |  |           |  |  |   |       | 
|-------------- |  | ----------- | --------- | ---------------- |  | ---------------- | ----- | ----------- |  | ---------------- | ---- |  |  |  | --------- |  |  | - | ----- | 
|               |  | Options     |           | Weighted Average |  | Weighted Average |       | Options     |  | Weighted Average
|Exercise Price |  | Outstanding |           | Exercise Price   |  | Remaining Life   |       | Exercisable |  | Exercise Price  
|               |  |             |           |                  |  |                  |       |             |  |                 
|$3.75-$9.00    |  |             | 1,063,859 |                  |  | $                | 4.12  |             |  |                  | 3.90 |  |  |  | 1,063,859 |  |  | $ | 4.12  | 
|$9.01-$18.00   |  |             | 2,386,409 |                  |  |                  | 12.48 |             |  |                  | 6.20 |  |  |  | 2,312,872 |  |  |   | 12.42 | 
|$18.01-$27.00  |  |             | 577,274   |                  |  |                  | 21.63 |             |  |                  | 7.90 |  |  |  | 260,781   |  |  |   | 20.80 | 
|$27.01-$36.00  |  |             | 381,932   |                  |  |                  | 31.41 |             |  |                  | 8.60 |  |  |  | 125,945   |  |  |   | 31.42 | 
|$36.01-$45.00  |  |             | 2,611,685 |                  |  |                  | 37.89 |             |  |                  | 9.40 |  |  |  | 11,085    |  |  |   | 37.10 | 
|               |  |             |           |                  |  |                  |       |             |  |                  |      |  |  |  |           |  |  |   |       | 
|Total/ Average |  |             | 7,021,159 |                  |  |                  | 22.45 |             |  |                  | 7.30 |  |  |  | 3,774,542 |  |  |   | 11.37 | 
|               |  |             |           |                  |  |                  |       |             |  |                  |      |  |  |  |           |  |  |   |       | 

As allowed by SFAS No. 123, the Company
continues to apply the provisions of APB Opinion No. 25, in
accounting for its stock-based employee compensation
arrangements and discloses the pro forma net loss and loss per
share information as if the fair value method suggested in
SFAS No. 123 had been applied. Please refer to
Note 1 for additional information.

99



---



##### 



UCBH HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|    |                                         
|--- | ----------------------------------------
|16. | Employee Benefit Plans 
    (Continued)

These calculations require the use of option
pricing models, even though such models were developed to
estimate the fair value of freely tradable, fully transferable
options without vesting restrictions, which significantly differ
from the Companys stock option awards. These models as
required by current accounting pronouncements also require
subjective assumptions, including future stock price volatility,
dividend yield, and expected time to exercise, which greatly
affect the calculated values. The following weighted average
assumptions were used in the Black-Scholes option pricing model
for options granted for the years ended December 31, 2004,
2003 and 2002:

|                        |  |      |       |      |  |      |       |   |  |  |       |  
|----------------------- |  | ---- | ----- | ---- |  | ---- | ----- | - |  |  | ----- | -
|                        |  | 2004 |       | 2003 |  | 2002
|                        |  |      |       |      |  |     
|Dividend yield          |  |      | 0.44  | %    |  |      | 0.60  | % |  |  | 0.40  | %
|Volatility              |  |      | 21.99 | %    |  |      | 21.18 | % |  |  | 30.45 | %
|Risk-free interest rate |  |      | 4.24  | %    |  |      | 3.45  | % |  |  | 3.90  | %
|Expected lives (years)  |  |      | 7.6   |      |  |      | 7.4   |   |  |  | 6.5   |  

United
Commercial Bank Savings Plus Plan

The Bank has a 401(k) tax deferred savings plus
plan (401(k) Plan) under which eligible employees
may elect to defer a portion of their salary (up to 15%) as a
contribution to the 401(k) Plan. The Bank matches the
employees contributions at a rate set by the Board of
Directors. The Plan provides for employer contributions of
50 percent of employee contributions for all employees for
the years ended December 31, 2004, 2003 and 2002. For the
years ended December 31, 2004, 2003 and 2002, employer
contributions were limited to $2,000 per participant. The
matching contribution vests ratably over the first five years of
service.

For the years ended December 31, 2004, 2003
and 2002, the Bank contributed $1,049,000, $899,000, and
$646,000, respectively, to the 401(k) Plan.

In connection with the FCB acquisition, former
FCB employees who were eligible to participate were able to
enroll in UCBs 401(k) plan as of July 12, 2003.

In connection with the BCC acquisition, former
BCC employees became participants in the UCB 401(k) Plan as of
January 1, 2003.



|    |                                  
|--- | ---------------------------------
|17. | Federal and State Taxes on Income

Following is a summary of the provision for taxes
on income (dollars in thousands):

|                                |         |                          |        |        |  |      |        |        |  |   |         |        |  
|------------------------------- | ------- | ------------------------ | ------ | ------ |  | ---- | ------ | ------ |  | - | ------- | ------ | -
|                                |         |                         
|                                |         | Years Ended December 31,
|                                |         |                         
|                                |         | 2004                     |        | 2003   |  | 2002
|                                |         |                          |        |        |  |     
|Current tax expense:            |         |                          |        |        |  |      |        |        |  |   |         |       
|                                | Federal |                          | $      | 38,115 |  |      | $      | 21,685 |  |   | $       | 27,296 |  
|                                | State   |                          |        | 8,001  |  |      |        | 4,238  |  |   |         | 8,565  |  
|                                |         |                          |        |        |  |      |        |        |  |   |         |       
|                                |         | $                        | 46,116 |        |  | $    | 25,923 |        |  | $ | 35,861  |       
|                                |         |                          |        |        |  |      |        |        |  |   |         |       
|Deferred tax (benefit) expense: |         |                          |        |        |  |      |        |        |  |   |         |       
|                                | Federal |                          | $      | 2,806  |  |      | $      | 10,542 |  |   | $       | (6,554 | )
|                                | State   |                          |        | 479    |  |      |        | 473    |  |   |         | (5,169 | )
|                                |         |                          |        |        |  |      |        |        |  |   |         |       
|                                |         | $                        | 3,285  |        |  | $    | 11,015 |        |  | $ | (11,723 | )     
|                                |         |                          |        |        |  |      |        |        |  |   |         |       
|                                |         | $                        | 49,401 |        |  | $    | 36,938 |        |  | $ | 24,138  |       
|                                |         |                          |        |        |  |      |        |        |  |   |         |       

100



---



##### 



UCBH HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|    |                                                    
|--- | ---------------------------------------------------
|17. | Federal and State Taxes on
    Income  (Continued)

Deferred tax liabilities (assets) are
comprised of the following (dollars in thousands):

|                             |                                                          |              |         |         |   |   |         |         |  
|---------------------------- | -------------------------------------------------------- | ------------ | ------- | ------- | - | - | ------- | ------- | -
|                             |                                                          |             
|                             |                                                          | Years Ended 
|                             |                                                          | December 31,
|                             |                                                          |             
|                             |                                                          | 2004         |         | 2003   
|                             |                                                          |              |         |        
|Deferred tax liabilities:    |                                                          |              |         |         |   |   |         |        
|                             | Fixed asset basis differences                            |              | $       | 1,582   |   |   | $       | 640     |  
|                             | Deferred loan fees                                       |              |         | 7,248   |   |   |         | 5,084   |  
|                             | FHLB dividends                                           |              |         | 3,149   |   |   |         | 3,769   |  
|                             | Purchase accounting adjustments                          |              |         | 24,692  |   |   |         | 25,311  |  
|                             | Unremitted earnings                                      |              |         | 4,586   |   |   |         | 4,586   |  
|                             | Unrealized gains on available for sale securities        |              |         |        |   |   |         |        |  
|                             | State taxes                                              |              |         | 262     |   |   |         | 305     |  
|                             | Other                                                    |              |         | 3,743   |   |   |         | 1,909   |  
|                             |                                                          |              |         |         |   |   |         |        
|                             |                                                          |              | 45,262  |         |   |   | 41,604  |        
|                             |                                                          |              |         |         |   |   |         |        
|Deferred tax assets:         |                                                          |              |         |         |   |   |         |        
|                             | Loan and OREO loss allowances                            |              |         | (21,429 | ) |   |         | (21,302 | )
|                             | Market value adjustments on certain securities           |              |         | (2,378  | ) |   |         | (2,065  | )
|                             | Unrealized (losses) on available for sale
    securities |              |         | (4,714  | ) |   |         | (2,350  | )
|                             | State taxes                                              |              |         |        |   |   |         |        |  
|                             | Compensation and benefits                                |              |         | (1,204  | ) |   |         | (1,045  | )
|                             | Other                                                    |              |         | (379    | ) |   |         | (605    | )
|                             |                                                          |              |         |         |   |   |         |        
|                             |                                                          |              | (30,104 | )       |   |   | (27,367 | )      
|                             |                                                          |              |         |         |   |   |         |        
|Net deferred tax liabilities |                                                          | $            | 15,158  |         |   | $ | 14,237  |        
|                             |                                                          |              |         |         |   |   |         |        

During the year ended December 31, 2004,
certain amounts were reclassed from the Banks current tax
liability to deferred tax liability to appropriately reflect the
nature of the item.

The components for deferred tax liabilities
(assets) by jurisdiction are as follows (dollars in
thousands):

|                                   |                              |              |   |        |  |  |   |        | 
|---------------------------------- | ---------------------------- | ------------ | - | ------ |  |  | - | ------ | 
|                                   |                              |             
|                                   |                              | Years Ended 
|                                   |                              | December 31,
|                                   |                              |             
|                                   |                              | 2004         |   | 2003  
|                                   |                              |              |   |       
|Net deferred liabilities (assets): |                              |              |   |        |  |  |   |       
|                                   | Federal income tax           |              | $ | 11,820 |  |  | $ | 11,378 | 
|                                   | State franchise tax          |              |   | 3,338  |  |  |   | 2,859  | 
|                                   |                              |              |   |        |  |  |   |       
|                                   | Net deferred tax liabilities |              | $ | 15,158 |  |  | $ | 14,237 | 
|                                   |                              |              |   |        |  |  |   |       

101



---



##### 



UCBH HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|    |                                                    
|--- | ---------------------------------------------------
|17. | Federal and State Taxes on
    Income  (Continued)

The following table reconciles the statutory
income tax rate to the consolidated effective income tax rate:

|                                                                |                                                   |              |      |      |   |      |      |      |   |  |      |      |  
|--------------------------------------------------------------- | ------------------------------------------------- | ------------ | ---- | ---- | - | ---- | ---- | ---- | - |  | ---- | ---- | -
|                                                                |                                                   |             
|                                                                |                                                   | Years Ended 
|                                                                |                                                   | December 31,
|                                                                |                                                   |             
|                                                                |                                                   | 2004         |      | 2003 |   | 2002
|                                                                |                                                   |              |      |      |   |     
|Federal income tax rate                                         |                                                   |              | 35.0 | %    |   |      | 35.0 | %    |   |  | 35.0 | %   
|State franchise tax rate, net of federal income
    tax effects |                                                   |              | 7.0  |      |   |      | 7.0  |      |   |  | 7.0  |     
|                                                                |                                                   |              |      |      |   |      |      |      |   |  |      |     
|Statutory income tax rate                                       |                                                   |              | 42.0 |      |   |      | 42.0 |      |   |  | 42.0 |     
|                                                                |                                                   |              |      |      |   |      |      |      |   |  |      |     
|Increase (reduction) in tax rate resulting
    from:            |                                                   |              |      |      |   |      |      |      |   |  |      |     
|                                                                | California and federal tax credits and incentives |              |      | (3.2 | ) |      |      | (3.8 | ) |  |      | (2.5 | )
|                                                                | Tax exempt income                                 |              |      | (2.3 | ) |      |      | (2.4 | ) |  |      | (1.8 | )
|                                                                | Other, net                                        |              |      | 0.1  |   |      |      | 0.6  |   |  |      | 0.6  |  
|                                                                |                                                   |              |      |      |   |      |      |      |   |  |      |     
|                                                                |                                                   |              | 36.6 | %    |   |      | 36.4 | %    |   |  | 38.3 | %   
|                                                                |                                                   |              |      |      |   |      |      |      |   |  |      |     

The years 2001 through 2003 remain open for
Internal Revenue Service purposes and the years 2000 through
2003 remain open for California Franchise Tax Board purposes.
The 2004 Federal and State tax returns have not yet been filed.

The American Jobs Creation Act of 2004
(AJCA), which was signed by the President of the
United States of America on October 22, 2004, allows the
Company, upon satisfaction of certain conditions, to repatriate
permanently reinvested foreign earnings, as defined by new
Section 965 of the Internal Revenue Code of 1986 (as
amended) (the Code), at an effective tax rate of
5.25%. As of December 31, 2004, the Company has not yet
completed the analysis necessary to determine if such
repatriation for the California Canton International Bank
(Cayman) Ltd. subsidiary in the Cayman Islands is prudent. Since
December 31, 2004, additional guidance has been issued by
the Internal Revenue Service, and the Company is currently
reviewing the guidance to determine if it provides clarification
for the Company to complete its assessment of the financial
statement and tax impact of Code Section 965. The ultimate
impact to the Company which may result from the AJCA and related
potential repatriation of funds from the Cayman Islands
subsidiary is not known and cannot be estimated at this time.



|    |                                                                                           
|--- | ------------------------------------------------------------------------------------------
|18. | Derivative Financial Instruments and Financial
    Instruments with Off-Balance-Sheet Risk

The Company is a party to derivative financial
instruments and financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing
needs of its customers and to reduce its own exposure to
fluctuations in interest rates. The Company does not hold or
issue financial instruments for trading purposes. Financial
instruments in the normal course of business include commitments
to extend and purchase credit, forward commitments to sell
loans, letters of credit, foreign exchange contracts, and
interest-rate caps. Those instruments involve, to varying
degrees, elements of credit and interest-rate risk in excess of
the amount recognized in the statement of financial position.
The contract or notional amounts of those instruments reflects
the extent of involvement the Company has in particular classes
of financial instruments.

The Companys exposure to credit loss in the
event of nonperformance by the other party to the financial
instrument for commitments to extend credit is represented by
the contractual or notional amount of those instruments. The
Company uses the same credit policies in making commitments and
conditional obligations as it does for on-balance-sheet
instruments. For interest-rate swap and cap transactions and
forward commitments to sell loans, the contract or notional
amounts do not represent exposure to credit loss. The Company
controls the credit risk of its interest-rate swap and cap
agreements, foreign exchange contracts, and

102



---



##### 



UCBH HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|    |                                                                                                             
|--- | ------------------------------------------------------------------------------------------------------------
|18. | Derivative Financial Instruments and Financial
    Instruments with Off-Balance-Sheet
    Risk  (Continued)

forward commitments to sell loans through credit
approvals, limits, and monitoring procedures. The Company does
not require collateral or other security to support
interest-rate swap transactions with credit risk.

Contract or notional amounts of derivative
financial instruments and financial instruments with
off-balance-sheet risk as of December 31, 2004 and 2003 are
as follows (dollars in millions):

|                                                                        |                               |                                           |       |      |       |  |      |   |       | 
|----------------------------------------------------------------------- | ----------------------------- | ----------------------------------------- | ----- | ---- | ----- |  | ---- | - | ----- | 
|                                                                        |                               | 2004                                      |       | 2003
|                                                                        |                               |                                           |       |     
|Financial instruments whose contract amounts
    represent credit risk: |                               |                                           |       |      |       |  |      |  
|                                                                        | Commitments to extend credit: |                                           |       |      |       |  |      |   |      
|                                                                        |                               | Consumer (including residential mortgage) |       | $    | 75.6  |  |      | $ | 65.6  | 
|                                                                        |                               | Commercial (excluding construction)       |       |      | 451.9 |  |      |   | 344.2 | 
|                                                                        |                               | Construction                              |       |      | 260.4 |  |      |   | 235.2 | 
|                                                                        |                               | Letters of credit                         |       |      | 44.8  |  |      |   | 39.5  | 
|Foreign exchange contracts receivable                                   |                               |                                           | 176.6 |      |       |  | 17.1 |  
|Foreign exchange contracts payable                                      |                               |                                           | 176.0 |      |       |  | 17.1 |  
|Put options to buy                                                      |                               |                                           | 18.7  |      |       |  |     |  
|Put options to sell                                                     |                               |                                           | 18.7  |      |       |  |     |  
|Commitments to fund CRA investments                                     |                               |                                           | 8.3   |      |       |  | 7.6  |  

Commitments

Commitments to extend credit are agreements to
lend to a customer as long as there is no violation of any
condition established in the contract. Commitments generally
have fixed expiration dates or other termination clauses. The
Company evaluates each customers credit worthiness on a
case-by-case basis. The amount of collateral obtained, if deemed
necessary by the Company upon extension of credit, is based on
managements credit evaluation of the counter party.
Collateral held generally includes residential or commercial
real estate, accounts receivable, or other assets.

Letters of credit are conditional commitments
issued by the Company to guarantee the performance of a customer
to a third party. The credit risk involved in issuing letters of
credit is essentially the same as that involved in extending
loan facilities to customers. These letters of credit are
usually secured by the customers inventories or by
deposits held at the Company.

Foreign exchange contracts are contracts to
purchase or sell currencies in the over-the-counter market. Such
contracts can be either for immediate or forward delivery.
Entering into foreign exchange contract agreements involves the
risk of dealing with counter parties and their ability to meet
the terms of the contracts. The Bank purchases or sells foreign
exchange contracts in order to hedge a balance sheet or
off-balance-sheet foreign exchange position. Additionally, the
Bank purchases and sells foreign exchange contracts for
customers, as long as the foreign exchange risk is fully hedged
with an offsetting position.

Interest-rate caps are interest rate protection
instruments that involve the payment from the seller to the
buyer of an interest differential. This differential represents
the difference between current interest rates and agreed-upon
rate applied to a notional principal amount. Entering into
interest-rate cap agreements involves the risk of dealing with
counter parties and their ability to meet the terms of the
contracts. Notional principal amounts often are used to express
the volume of these transactions, but the amounts potentially
subject to credit risk are much smaller. The Company may be a
purchaser of interest-rate caps and swaps. At December 31,
2004 and 2003, no interest-rate caps or swaps were outstanding.
For the year ended

103



---



##### 



UCBH HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|    |                                                                                                             
|--- | ------------------------------------------------------------------------------------------------------------
|18. | Derivative Financial Instruments and Financial
    Instruments with Off-Balance-Sheet
    Risk  (Continued)

December 31, 2004, interest-rate caps and
swaps impact to interest income was nil. For the year ended
December 31, 2003, interest-rate caps and swaps reduced
interest income by $30,000.

Put options to buy are part of currency-linked
deposits with other financial institutions. At the option of
these third parties, UCB is required to buy a currency at a
predefined exchange rate with another currency. Put options to
sell are part of currency-linked deposits that customers have
placed with UCB. At the option of UCB, the customer is obligated
to buy a currency at a predefined exchange rate with another
currency. The put options to buy and put options to sell, along
with the related currency-linked deposits, offset each other.

As disclosed in Note 1, the Company has CRA
investments of which a portion has been funded or remains
unfunded at year end. Fundings are made upon request by
underlying investee companies based on original commitment
amounts.



|    |                              
|--- | -----------------------------
|19. | Concentrations of Credit Risk

The Companys loan activity is currently
primarily with customers located throughout the State of
California. The majority of residential and commercial real
estate loans are secured by properties located in the State of
California. Commercial real estate loans are generally
originated at 65% or less loan to value. Multifamily loans are
generally originated at 75% or less loan to value. Management
believes that the risk of significant losses is low.



|    |                                                 
|--- | ------------------------------------------------
|20. | Lease Commitments and Contingent
    Liabilities

Lease
Commitments

The Company leases various premises and equipment
under noncancelable operating leases, many of which contain
renewal options and some of which contain escalation clauses.

Future minimum rental payments due each year
under operating leases that have initial or remaining
noncancelable lease terms in excess of one year as of
December 31, 2004, are as follows (dollars in thousands):

|                    |                                 |   |        |        | 
|------------------- | ------------------------------- | - | ------ | ------ | 
|2005                |                                 | $ | 6,025  |       
|2006                |                                 |   | 5,197  |       
|2007                |                                 |   | 4,666  |       
|2008                |                                 |   | 3,907  |       
|2009                |                                 |   | 2,556  |       
|2010 and thereafter |                                 |   | 10,868 |       
|                    |                                 |   |        |       
|                    | Total minimum payments required |   | $      | 33,219 | 
|                    |                                 |   |        |       

Rental expense was approximately
$9.1 million, $6.5 million, and $4.4 million for
the years ended December 31, 2004, 2003 and 2002,
respectively.

Contingent
Liabilities

The Company is subject to pending or threatened
actions and proceedings arising in the normal course of
business. In the opinion of management, the ultimate disposition
of all pending or threatened actions and proceedings will not
have a material adverse effect on the Companys results of
operations or financial condition.

104



---



##### 



UCBH HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|    |                                    
|--- | -----------------------------------
|21. | Fair Value of Financial Instruments

SFAS No. 107, Disclosures about
Fair Value of Financial Instrument, requires all entities
to estimate the fair value of all financial instrument assets,
liabilities, and off-balance-sheet transactions. Fair values are
point-in-time estimates that can change significantly based on
numerous factors. Accordingly, management cannot provide any
assurance that the estimated fair values presented below could
actually be realized. The fair value estimates for financial
instruments were determined as of December 31, 2004 and
2003, by application of the described methods and significant
assumptions.



| |                                    
| | -----------------------------------
| | Cash and Short-term
    Investments

For these short-term instruments, the carrying
value of $208.4 million and $76.8 million at
December 31, 2004 and 2003, respectively, is a reasonable
estimate of fair value.



| |                                              
| | ---------------------------------------------
| | Investment and Mortgage-backed
    Securities

The aggregate fair value of investment and
mortgage-backed securities is $1.50 billion and
$1.51 billion at December 31, 2004 and 2003,
respectively. Fair value equals quoted market price, if
available. If a quoted market price is not available, fair value
is estimated using quoted market prices for similar securities.



| |                 
| | ----------------
| | Loans Receivable

The aggregate fair value of loans receivable is
$3.98 billion and $3.82 billion at December 31,
2004 and 2003, respectively. Fair value is estimated by
discounting the future cash flows using the current rates at
which similar loans would be made to borrowers with similar
credit ratings at the same remaining maturities. In addition,
the allowance for loan losses was considered a reasonable
adjustment for credit risk for the entire portfolio.



| |                    
| | -------------------
| | Loans Held for Sale

The aggregate fair value of multifamily and SBA
loans held for sale are $332.1 million and
$21.9 million at December 31, 2004 and 2003,
respectively. The fair market value of multifamily loans held
for sale is estimated based on recent market loan sale pricing
of like sales, prevailing market interest rates, as well as
weighted average maturity, weighted average life, and
conditional prepayment rates. SBA loans held for sale fair value
is estimated based on recent historical loan sales.



| |                    
| | -------------------
| | Deposit Liabilities

Fair value of demand deposits, savings accounts,
and certain money market deposits is the amount payable on
demand at the reporting date. The fair value of fixed maturity
certificates of deposit is estimated using the rates currently
offered for deposits of similar remaining maturities. The
aggregate fair value of deposits is $5.21 billion and
$4.49 billion at December 31, 2004 and 2003,
respectively.



| |                                                         
| | --------------------------------------------------------
| | Federal Home Loan Bank Advances and
    Other Borrowings

Fair value of Federal Home Loan Bank
advances and other borrowings are estimated using the rates
currently being offered for advances with similar remaining
maturities. The aggregate fair value of Federal Home
Loan Bank advances and other borrowings was
$421.5 million and $529.3 million at December 31,
2004 and 2003, respectively.

105



---



##### 



UCBH HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|    |                                                      
|--- | -----------------------------------------------------
|21. | Fair Value of Financial
    Instruments  (Continued)



| |                        
| | -----------------------
| | Subordinated Debentures

The fair value of the Companys junior
subordinated debentures is estimated using market interest rates
currently being offered for similar unrated debt instruments.
The fair market value of the junior subordinated debentures was
$140.2 million and $138.6 million at December 31,
2004 and 2003, respectively.



| |                       
| | ----------------------
| | Derivative Instruments

As of December 31, 2004 and 2003, the
Company had no derivative instruments designed as hedges,
according to the relevant accounting criteria; see Note 1
for further discussion. The Companys derivative
instruments are accounted for at fair value in the financial
statements, with any gains or losses reflected in current net
income. The fair value of foreign exchange contracts are
recognized and reported as either assets or liabilities on the
balance sheet. The fair value for outstanding contracts was
$584,000 at December 31, 2004 and was nil at
December 31, 2003.



| |                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------
| | Commitments to Extend Credit, Commitments
    to Purchase Loans, Securities Sold But Not Owned, and Options on
    Interest Rate Futures

The fair value of commitments is estimated using
the fees currently charged to enter into similar agreements,
taking into account the remaining terms of the agreements and
the present creditworthiness of the counter parties. For
fixed-rate commitments, fair value also considers the difference
between current levels of interest rates and the committed
rates. Fair values for securities sold but not owned and options
on interest rate futures are based on quoted market prices or
dealer quotes. The fair value of commitments to extend credit
and commitments to purchase loans cannot be readily determined.
The net fair value of put options at December 31, 2004 was
zero. There were no put or call options at December 31,
2003.

106



---



##### 



UCBH HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|    |               
|--- | --------------
|22. | Parent Company

The unconsolidated condensed balance sheets of
UCBH Holdings, Inc. at December 31, 2004 and 2003, are as
follows (dollars in thousands):

CONDENSED BALANCE SHEETS

|                                                                 |                                            |              |         |         |  |   |         |         | 
|---------------------------------------------------------------- | ------------------------------------------ | ------------ | ------- | ------- |  | - | ------- | ------- | 
|                                                                 |                                            |             
|                                                                 |                                            | December 31,
|                                                                 |                                            |             
|                                                                 |                                            | 2004         |         | 2003   
|                                                                 |                                            |              |         |        
|ASSETS                                                          
|Cash and due from banks                                          |                                            | $            | 7,075   |         |  | $ | 5,021   |        
|Investment in subsidiaries                                       |                                            |              | 593,870 |         |  |   | 520,024 |        
|Other assets                                                     |                                            |              | 23,618  |         |  |   | 28,164  |        
|                                                                 |                                            |              |         |         |  |   |         |        
|                                                                 | Total assets                               |              | $       | 624,563 |  |   | $       | 553,209 | 
|                                                                 |                                            |              |         |         |  |   |         |        
|                                                                
|LIABILITIES                                                     
|Accrued interest payable                                         |                                            | $            | 1,101   |         |  | $ | 980     |        
|Other liabilities                                                |                                            |              | 3,450   |         |  |   | 1,763   |        
|Junior subordinated debentures, payable to
    subsidiary trusts |                                            |              | 136,000 |         |  |   | 136,000 |        
|                                                                 |                                            |              |         |         |  |   |         |        
|                                                                 | Total liabilities                          |              | $       | 140,551 |  |   | $       | 138,743 | 
|                                                                 |                                            |              |         |         |  |   |         |        
|                                                                
|STOCKHOLDERS EQUITY                                            
|Common stock                                                     |                                            |              | 456     |         |  |   | 450     |        
|Additional paid-in capital                                       |                                            |              | 203,432 |         |  |   | 208,990 |        
|Subsidiarys accumulated other comprehensive
    (loss) income   |                                            |              | (6,498  | )       |  |   | (3,245  | )      
|Retained earnings                                                |                                            |              | 286,622 |         |  |   | 208,271 |        
|                                                                 |                                            |              |         |         |  |   |         |        
|                                                                 | Total stockholders equity                 |              |         | 484,012 |  |   |         | 414,466 | 
|                                                                 |                                            |              |         |         |  |   |         |        
|                                                                 | Total liabilities and stockholders equity |              | $       | 624,563 |  |   | $       | 553,209 | 
|                                                                 |                                            |              |         |         |  |   |         |        

107



---



##### 



UCBH HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



22.     Parent
Company  (Continued)


The unconsolidated condensed statements of income
of UCBH Holdings, Inc. for the years ended December 31,
2004, 2003 and 2002, are as follows (dollars in thousands):

CONDENSED STATEMENTS OF INCOME

|                                                                                    |               |                                  |         |        |  |      |         |        |  |   |        |        | 
|----------------------------------------------------------------------------------- | ------------- | -------------------------------- | ------- | ------ |  | ---- | ------- | ------ |  | - | ------ | ------ | 
|                                                                                    |               |                                 
|                                                                                    |               | For the Years Ended December 31,
|                                                                                    |               |                                 
|                                                                                    |               | 2004                             |         | 2003   |  | 2002
|                                                                                    |               |                                  |         |        |  |     
|INCOME                                                                             
|Interest income on investment securities                                            |               | $                                |        |        |  | $    |        |        |  | $ | 2      |       
|Dividends from subsidiary                                                           |               |                                  |        |        |  |      |        |        |  |   | 2,000  |       
|                                                                                    |               |                                  |         |        |  |      |         |        |  |   |        |       
|                                                                                    | Total income  |                                  |         |       |  |      |         |       |  |   |        | 2,002  | 
|                                                                                    |               |                                  |         |        |  |      |         |        |  |   |        |       
|                                                                                   
|EXPENSE                                                                            
|Interest expense on junior subordinated debentures                                  |               |                                  | 8,185   |        |  |      | 7,924   |        |  |   | 4,663  |       
|Miscellaneous expense                                                               |               |                                  | 4,985   |        |  |      | 3,712   |        |  |   | 3,275  |       
|                                                                                    |               |                                  |         |        |  |      |         |        |  |   |        |       
|                                                                                    | Total expense |                                  |         | 13,170 |  |      |         | 11,636 |  |   |        | 7,938  | 
|                                                                                    |               |                                  |         |        |  |      |         |        |  |   |        |       
|Income (loss) before taxes and equity in
    undistributed net income of subsidiary |               |                                  | (13,170 | )      |  |      | (11,636 | )      |  |   | (5,936 | )     
|Income tax benefit                                                                  |               |                                  | 4,954   |        |  |      | 4,742   |        |  |   | 3,187  |       
|Equity in undistributed net income of subsidiary                                    |               |                                  | 93,819  |        |  |      | 71,532  |        |  |   | 41,677 |       
|                                                                                    |               |                                  |         |        |  |      |         |        |  |   |        |       
|                                                                                    | Net income    |                                  | $       | 85,603 |  |      | $       | 64,638 |  |   | $      | 38,928 | 
|                                                                                    |               |                                  |         |        |  |      |         |        |  |   |        |       

108



---



##### 



UCBH HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



22.     Parent
Company  (Continued)


The unconsolidated condensed statements of cash
flows of UCBH Holdings, Inc. for the years ended
December 31, 2004, 2003 and 2002, are as follows (dollars
in thousands):

CONDENSED STATEMENTS OF CASH FLOWS

|                                                                                                 |                                                  |                                                 |        |         |       |      |         |         |        |   |          |         |        |  
|------------------------------------------------------------------------------------------------ | ------------------------------------------------ | ----------------------------------------------- | ------ | ------- | ----- | ---- | ------- | ------- | ------ | - | -------- | ------- | ------ | -
|                                                                                                 |                                                  |                                                
|                                                                                                 |                                                  | For the Years Ended December 31,               
|                                                                                                 |                                                  |                                                
|                                                                                                 |                                                  | 2004                                            |        | 2003    |       | 2002
|                                                                                                 |                                                  |                                                 |        |         |       |     
|Cash flow from operating activities:                                                             |                                                  |                                                 |        |         |       |      |         |         |        |   |          |        
|Net income                                                                                       |                                                  | $                                               | 85,603 |         |       | $    | 64,638  |         |        | $ | 38,928   |        
|Adjustments to reconcile net income to net cash
    provided by (used for) operating activities: |                                                  |                                                 |        |         |       |      |         |         |        |   |          |        
|                                                                                                 | Equity in undistributed net income of subsidiary |                                                 |        | (93,819 | )     |      |         | (71,532 | )      |   |          | (41,676 | )     
|                                                                                                 | Depreciation expense                             |                                                 |        | 45      |       |      |         |        |        |   |          |        |       
|                                                                                                 | Changes in operating assets and liabilities:     |                                                 |        |         |       |      |         |         |        |   |          |         |       
|                                                                                                 |                                                  | (Increase) decrease in other assets             |        |         | 9,962 |      |         |         | (1,771 | ) |          |         | (8,105 | )
|                                                                                                 |                                                  | (Decrease) increase in accrued interest payable |        |         | 121   |      |         |         | (244   | ) |          |         | 723    |  
|                                                                                                 |                                                  | Increase in other liabilities                   |        |         | 1,214 |      |         |         | 8,317  |   |          |         | 3,419  |  
|                                                                                                 |                                                  |                                                 |        |         |       |      |         |         |        |   |          |        
|Net cash provided by (used in) operating
    activities                                          |                                                  |                                                 | 3,126  |         |       |      | (592    | )       |        |   | (6,711   | )      
|                                                                                                 |                                                  |                                                 |        |         |       |      |         |         |        |   |          |        
|Cash flow from investing activities:                                                             |                                                  |                                                 |        |         |       |      |         |         |        |   |          |        
|Capital contribution to subsidiary                                                               |                                                  |                                                 | (71    | )       |       |      | (11,000 | )       |        |   | (131,250 | )      
|Acquisition of premises and equipment                                                            |                                                  |                                                 | (46    | )       |       |      |        |         |        |   |         |        
|                                                                                                 |                                                  |                                                 |        |         |       |      |         |         |        |   |          |        
|Net cash used in investing activities                                                            |                                                  |                                                 | (117   | )       |       |      | (11,000 | )       |        |   | (131,250 | )      
|                                                                                                 |                                                  |                                                 |        |         |       |      |         |         |        |   |          |        
|Cash flow from financing activities:                                                             |                                                  |                                                 |        |         |       |      |         |         |        |   |          |        
|Proceeds from issuance of common stock                                                           |                                                  |                                                 | 5,824  |         |       |      | 5,432   |         |        |   | 54,434   |        
|Proceeds from issuance of junior subordinated
    debentures, payable to subsidiary trust        |                                                  |                                                 |       |         |       |      |        |         |        |   | 100,000  |        
|Payment of cash dividend on common stock                                                         |                                                  |                                                 | (6,779 | )       |       |      | (4,732  | )       |        |   | (3,715   | )      
|                                                                                                 |                                                  |                                                 |        |         |       |      |         |         |        |   |          |        
|Net cash provided by (used in) financing
    activities                                          |                                                  |                                                 | (955   | )       |       |      | 700     |         |        |   | 150,719  |        
|                                                                                                 |                                                  |                                                 |        |         |       |      |         |         |        |   |          |        
|Net (decrease) increase in cash and cash
    equivalents                                         |                                                  |                                                 | 2,054  |         |       |      | (10,892 | )       |        |   | 12,758   |        
|Cash and cash equivalents beginning of year                                                      |                                                  |                                                 | 5,021  |         |       |      | 15,913  |         |        |   | 3,155    |        
|                                                                                                 |                                                  |                                                 |        |         |       |      |         |         |        |   |          |        
|Cash and cash equivalents end of year                                                            |                                                  | $                                               | 7,075  |         |       | $    | 5,021   |         |        | $ | 15,913   |        
|                                                                                                 |                                                  |                                                 |        |         |       |      |         |         |        |   |          |        



|    |                           
|--- | --------------------------
|23. | Fourth Quarter Adjustments

During the fourth quarter, the Company identified
accounting errors, primarily relating to accounting for the
purchase consideration for the FCB acquisition, certain
Community Reinvestment Act (CRA) investments,
recognition of rent escalation clauses on operating leases and
gain on sale of SBA loans. These matters are more fully
described below.

The Company determined that the initial
calculation of the purchase price for the acquisition of FCB, as
reported in the 2003 consolidated financial statements, was
based on the Companys common stock value at the per share
price on the closing date of the acquisition when the proper
stock value share price should have been an average stock price
at the announcement date. As a result, $44.2 million of the
purchase price was allocated to goodwill, which represents an
overstatement of $16.8 million. To properly reflect the
fair value of the purchase consideration, the Company recorded
an adjustment in the amount of $16.8 million in the fourth

109



---



##### 



UCBH HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|    |                                             
|--- | --------------------------------------------
|23. | Fourth Quarter
    Adjustments  (Continued)

quarter of 2004, reducing paid in capital, total
stockholders equity, and goodwill by this amount. This
adjustment did not affect the Companys results of
operations or cash flows.

The Company invests in CRA qualified investments
such as affordable housing and small business investment
companies. During the fourth quarter, the company recognized a
liability of $10.4 million, and a corresponding increase in
CRA investments, for delayed equity contributions that are
unconditional and legally binding relating to affordable housing
investments. This adjustment did not affect the Companys
results of operations or cash flows.

The Company determined that recognition of rent
expense for leases with rent holidays or leases with rent
escalation clauses was not recognized on a straight-line basis.
Accordingly, in the fourth quarter the Company recorded a
cumulative adjustment to increase occupancy expense related and
deferred rent by $1.2 million. This also resulted in
recognition of a tax benefit of $490,000.

The Company sells SBA loans and retains the right
to service those loans. The Company determined that it was not
recognizing the gain on sale of such loans pursuant to
FAS 140. Accordingly, the Company recorded a cumulative
adjustment in the fourth quarter to reduce gain on loan sales
and servicing rights by $1.9 million. This also resulted in
recognition of a tax benefit of $793,000.

In addition to the adjustments to occupancy
expense and reduction in gain on sale of SBA loans discussed
above, the Company recorded certain other minor adjustments,
which in the aggregate, resulted in an increase to income before
taxes in the fourth quarter of 2004 of $1.7 million.

These adjustments were immaterial to all prior
period financial statements.



|    |                                                                     
|--- | --------------------------------------------------------------------
|24. | Unaudited Quarterly Condensed Consolidated
    Financial Information

The summarized unaudited quarterly supplemental
consolidated financial information for the years ended
December 31, 2004 and 2003, are as follows (dollars in
thousands, except for earnings per share data):

|                            |                       |               |         |               |  |        |         |       |  |        |         |       |  |        |         |       |  |   |         |      |  |   |         |      |  |   |         |      |  |   |         |      | 
|--------------------------- | --------------------- | ------------- | ------- | ------------- |  | ------ | ------- | ----- |  | ------ | ------- | ----- |  | ------ | ------- | ----- |  | - | ------- | ---- |  | - | ------- | ---- |  | - | ------- | ---- |  | - | ------- | ---- | 
|                            |                       |               |         |              
|                            |                       | 2004 Quarters |         | 2003 Quarters
|                            |                       |               |         |              
|                            |                       | Fourth        |         | Third         |  | Second |         | First |  | Fourth |         | Third |  | Second |         | First
|                            |                       |               |         |               |  |        |         |       |  |        |         |       |  |        |         |      
|Interest income             |                       | $             | 81,564  |               |  | $      | 76,550  |       |  | $      | 71,634  |       |  | $      | 70,316  |       |  | $ | 68,420  |      |  | $ | 66,299  |      |  | $ | 62,761  |      |  | $ | 62,782  |     
|Interest expense            |                       |               | (26,335 | )             |  |        | (23,753 | )     |  |        | (21,719 | )     |  |        | (20,776 | )     |  |   | (21,874 | )    |  |   | (23,226 | )    |  |   | (23,131 | )    |  |   | (23,483 | )   
|                            |                       |               |         |               |  |        |         |       |  |        |         |       |  |        |         |       |  |   |         |      |  |   |         |      |  |   |         |      |  |   |         |     
|Net interest income         |                       |               | 55,229  |               |  |        | 52,797  |       |  |        | 49,915  |       |  |        | 49,540  |       |  |   | 46,546  |      |  |   | 43,073  |      |  |   | 39,630  |      |  |   | 39,299  |     
|Provision for credit losses |                       |               | 626     |               |  |        | (1,644  | )     |  |        | (1,009  | )     |  |        | (2,174  | )     |  |   | (3,323  | )    |  |   | (2,819  | )    |  |   | (2,835  | )    |  |   | (990    | )   
|Noninterest income          |                       |               | 8,828   |               |  |        | 9,808   |       |  |        | 5,384   |       |  |        | 6,857   |       |  |   | 6,880   |      |  |   | 6,532   |      |  |   | 6,079   |      |  |   | 3,712   |     
|Noninterest expense         |                       |               | (27,406 | )             |  |        | (25,981 | )     |  |        | (22,952 | )     |  |        | (22,814 | )     |  |   | (22,713 | )    |  |   | (19,785 | )    |  |   | (17,910 | )    |  |   | (19,800 | )   
|                            |                       |               |         |               |  |        |         |       |  |        |         |       |  |        |         |       |  |   |         |      |  |   |         |      |  |   |         |      |  |   |         |     
|Income before income taxes  |                       |               | 37,277  |               |  |        | 34,980  |       |  |        | 31,338  |       |  |        | 31,409  |       |  |   | 27,390  |      |  |   | 27,001  |      |  |   | 24,964  |      |  |   | 22,221  |     
|Income tax expense          |                       |               | (13,534 | )             |  |        | (13,207 | )     |  |        | (11,070 | )     |  |        | (11,590 | )     |  |   | (8,876  | )    |  |   | (10,233 | )    |  |   | (9,536  | )    |  |   | (8,293  | )   
|                            |                       |               |         |               |  |        |         |       |  |        |         |       |  |        |         |       |  |   |         |      |  |   |         |      |  |   |         |      |  |   |         |     
|Net income                  |                       | $             | 23,743  |               |  | $      | 21,773  |       |  | $      | 20,268  |       |  | $      | 19,819  |       |  | $ | 18,514  |      |  | $ | 16,768  |      |  | $ | 15,428  |      |  | $ | 13,928  |     
|                            |                       |               |         |               |  |        |         |       |  |        |         |       |  |        |         |       |  |   |         |      |  |   |         |      |  |   |         |      |  |   |         |     
|Net income per common share |                       |               |         |               |  |        |         |       |  |        |         |       |  |        |         |       |  |   |         |      |  |   |         |      |  |   |         |      |  |   |         |     
|                            | Basic net income(1)   |               | $       | 0.52          |  |        | $       | 0.48  |  |        | $       | 0.45  |  |        | $       | 0.44  |  |   | $       | 0.41 |  |   | $       | 0.37 |  |   | $       | 0.36 |  |   | $       | 0.33 | 
|                            |                       |               |         |               |  |        |         |       |  |        |         |       |  |        |         |       |  |   |         |      |  |   |         |      |  |   |         |      |  |   |         |     
|                            | Diluted net income(1) |               | $       | 0.50          |  |        | $       | 0.46  |  |        | $       | 0.43  |  |        | $       | 0.42  |  |   | $       | 0.39 |  |   | $       | 0.36 |  |   | $       | 0.35 |  |   | $       | 0.32 | 
|                            |                       |               |         |               |  |        |         |       |  |        |         |       |  |        |         |       |  |   |         |      |  |   |         |      |  |   |         |      |  |   |         |     



---



|    |                                                                                                                                                                                                                                                                                                             
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Effective April 8, 2003, the Company
    completed a two-for-one stock split in the legal form of a stock
    dividend. Accordingly, for the three months ended March 31,
    2003, basic earnings per share and diluted earnings per share
    have been restated to reflect the effect of the stock split.

110