##### 



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,       
|                                                                                |  |                       
|                                                                                |  | 2002                   |           | 2001 |  | 2000 |           | 1999 |  | 1998
|                                                                                |  |                        |           |      |  |      |           |      |  |     
|                                                                                |  |                       
|                                                                                |  | (Dollars in Thousands)
|Financial Condition and Other Data:                                             |  |                        |           |      |  |      |           |      |  |      |           |   |  |   |           |   |  |   |           |  
|Total assets                                                                    |  | $                      | 4,853,636 |      |  | $    | 2,932,043 |      |  | $    | 2,502,119 |   |  | $ | 2,284,800 |   |  | $ | 2,147,332 |  
|Net loans                                                                       |  |                        | 2,978,945 |      |  |      | 2,229,753 |      |  |      | 1,902,921 |   |  |   | 1,667,192 |   |  |   | 1,477,226 |  
|Securities(1)                                                                   |  |                        | 1,581,381 |      |  |      | 593,393   |      |  |      | 487,240   |   |  |   | 512,361   |   |  |   | 587,557   |  
|Deposits                                                                        |  |                        | 4,006,813 |      |  |      | 2,466,152 |      |  |      | 2,064,019 |   |  |   | 1,676,148 |   |  |   | 1,633,895 |  
|Guaranteed preferred beneficial interests in
    junior subordinated debentures |  |                        | 136,000   |      |  |      | 36,000    |      |  |      | 30,000    |   |  |   | 30,000    |   |  |   | 30,000    |  
|Borrowings                                                                      |  |                        | 353,374   |      |  |      | 238,000   |      |  |      | 260,558   |   |  |   | 449,612   |   |  |   | 368,000   |  
|Stockholders equity(2)                                                         |  |                        | 282,637   |      |  |      | 174,124   |      |  |      | 133,645   |   |  |   | 110,107   |   |  |   | 103,638   |  
|Nonperforming assets                                                            |  |                        | 4,654     |      |  |      | 991       |      |  |      | 2,631     |   |  |   | 5,354     |   |  |   | 6,880     |  
|Ratio of equity to assets                                                       |  |                        | 5.82      | %    |  |      | 5.94      | %    |  |      | 5.34      | % |  |   | 4.82      | % |  |   | 4.83      | %

|                                                            |  |                                                   |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|----------------------------------------------------------- |  | ------------------------------------------------- | ------- | ---- |  | ---- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | - |  | - | ------- | -
|                                                            |  |                                                  
|                                                            |  | For the Years Ended December 31,                 
|                                                            |  |                                                  
|                                                            |  | 2002                                              |         | 2001 |  | 2000 |         | 1999 |  | 1998
|                                                            |  |                                                   |         |      |  |      |         |      |  |     
|                                                            |  |                                                  
|                                                            |  | (Dollars in Thousands, Except Earnings Per Share)
|Operating Data:                                             |  |                                                   |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|Interest income                                             |  | $                                                 | 205,178 |      |  | $    | 202,787 |      |  | $    | 186,688 |   |  | $ | 158,683 |   |  | $ | 130,831 |  
|Interest expense                                            |  |                                                   | 80,232  |      |  |      | 104,330 |      |  |      | 103,704 |   |  |   | 87,969  |   |  |   | 78,393  |  
|                                                            |  |                                                   |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|Net interest income                                         |  |                                                   | 124,946 |      |  |      | 98,457  |      |  |      | 82,984  |   |  |   | 70,714  |   |  |   | 52,438  |  
|Provision for loan losses                                   |  |                                                   | 9,673   |      |  |      | 5,620   |      |  |      | 9,765   |   |  |   | 5,645   |   |  |   | 3,412   |  
|                                                            |  |                                                   |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|Net interest income after provision for loan
    losses     |  |                                                   | 115,273 |      |  |      | 92,837  |      |  |      | 73,219  |   |  |   | 65,069  |   |  |   | 49,026  |  
|Noninterest income                                          |  |                                                   | 12,142  |      |  |      | 6,905   |      |  |      | 4,751   |   |  |   | 4,075   |   |  |   | 3,402   |  
|Noninterest expense(3)                                      |  |                                                   | 64,349  |      |  |      | 49,296  |      |  |      | 40,099  |   |  |   | 37,198  |   |  |   | 33,685  |  
|                                                            |  |                                                   |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|Income before taxes                                         |  |                                                   | 63,066  |      |  |      | 50,446  |      |  |      | 37,871  |   |  |   | 31,946  |   |  |   | 18,743  |  
|Income tax expense                                          |  |                                                   | 24,138  |      |  |      | 19,958  |      |  |      | 13,743  |   |  |   | 12,878  |   |  |   | 7,855   |  
|                                                            |  |                                                   |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|Net income                                                  |  | $                                                 | 38,928  |      |  | $    | 30,488  |      |  | $    | 24,128  |   |  | $ | 19,068  |   |  | $ | 10,888  |  
|                                                            |  |                                                   |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|Operating Ratios and Other Data:                            |  |                                                   |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|Return on average assets                                    |  |                                                   | 1.14    | %    |  |      | 1.12    | %    |  |      | 1.02    | % |  |   | 0.87    | % |  |   | 0.60    | %
|Return on average equity                                    |  |                                                   | 18.42   |      |  |      | 19.58   |      |  |      | 20.12   |   |  |   | 18.00   |   |  |   | 12.52   |  
|Interest rate spread(4)                                     |  |                                                   | 3.46    |      |  |      | 3.30    |      |  |      | 3.24    |   |  |   | 3.04    |   |  |   | 2.72    |  
|Net interest margin(4)                                      |  |                                                   | 3.73    |      |  |      | 3.69    |      |  |      | 3.59    |   |  |   | 3.29    |   |  |   | 2.95    |  
|Efficiency ratio(5)                                         |  |                                                   | 46.94   |      |  |      | 46.79   |      |  |      | 45.70   |   |  |   | 49.74   |   |  |   | 60.32   |  
|Noninterest expense to average assets                       |  |                                                   | 1.88    |      |  |      | 1.82    |      |  |      | 1.70    |   |  |   | 1.69    |   |  |   | 1.84    |  
|Asset Quality Data:                                         |  |                                                   |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|Nonperforming assets to total assets                        |  |                                                   | 0.10    | %    |  |      | 0.03    | %    |  |      | 0.11    | % |  |   | 0.23    | % |  |   | 0.32    | %
|Nonperforming loans to total loans                          |  |                                                   | 0.15    |      |  |      | 0.04    |      |  |      | 0.13    |   |  |   | 0.27    |   |  |   | 0.41    |  
|Allowance for loan losses to total loans                    |  |                                                   | 1.61    |      |  |      | 1.53    |      |  |      | 1.50    |   |  |   | 1.16    |   |  |   | 1.00    |  
|Net charge-offs to average gross loans                      |  |                                                   | 0.23    |      |  |      | 0.00    |      |  |      | 0.02    |   |  |   | 0.07    |   |  |   | 0.05    |  
|Bank Regulatory Capital Ratios:                             |  |                                                   |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|Tier I risk-based capital                                   |  |                                                   | 10.26   | %    |  |      | 9.65    | %    |  |      | 9.71    | % |  |   | 10.04   | % |  |   | 10.42   | %
|Total risk-based capital                                    |  |                                                   | 11.52   |      |  |      | 10.91   |      |  |      | 10.97   |   |  |   | 11.29   |   |  |   | 11.61   |  
|Leverage ratio (Tier I capital to total
    average assets) |  |                                                   | 7.57    |      |  |      | 7.26    |      |  |      | 6.95    |   |  |   | 6.58    |   |  |   | 6.25    |  
|Per Share Data:                                             |  |                                                   |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|Basic earnings per share(2)                                 |  | $                                                 | 1.96    |      |  | $    | 1.60    |      |  | $    | 1.29    |   |  | $ | 1.02    |   |  | $ | 0.65    |  
|Diluted earnings per share(2)                               |  |                                                   | 1.88    |      |  |      | 1.53    |      |  |      | 1.24    |   |  |   | 1.01    |   |  |   | 0.63    |  
|Dividends per share                                         |  |                                                   | 0.20    |      |  |      | 0.16    |      |  |      | 0.10    |   |  |   |        |   |  |   |        |  



---



|    |                                                                                                                                                    
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes available for sale securities and held
    to maturity securities.                                                                        
|   
|(2) | In conjunction with the acquisition of Bank of
    Canton of California in October 2002, the Company issued
    1.3 million shares of common stock.
|   
|(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.

15



---



##### 



MANAGEMENTS DISCUSSION AND ANALYSIS
OF

FINANCIAL CONDITION AND RESULTS OF
OPERATIONS


The following Managements Discussion and
Analysis of Financial Condition and Results of Operations
contains statements about the future that may or may not
materialize. When we use words like anticipate,
believe, estimate, may,
intend, or expect, we are speculating
about what will happen in the future. The outcome may be
materially different from our speculations. We believe that
certain factors identified elsewhere in this Annual Report could
cause a different outcome. There may also be other factors that
could cause a different outcome.

The following discussion and analysis is
intended to assist in an understanding of the significant
factors that influence our financial condition at
December 31, 2002 as compared to December 31, 2001. It
also analyzes our results of operations for the year ended
December 31, 2002 as compared to the year ended
December 31, 2001, and for the year ended December 31,
2001 as compared to the year ended December 31, 2000. You
should read the discussion and analysis together with our
financial statements and corresponding notes included in this
Annual Report.

Impact of Critical Accounting
Policies

Our consolidated financial statements are
prepared in accordance with generally accepted accounting
principles 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. These
techniques and judgments are applied in the determination of the
allowance for loan losses, goodwill and core deposit intangible
balances. The Company considers their critical accounting
policies to be the following:



| |   |                                           
| | - | ------------------------------------------
| |  | Investment and mortgage-backed securities;
|
| |  | Loans;                                    
|
| |  | Allowance for loan losses;                
|
| |  | Goodwill and other intangibles; and       
|
| |  | Employee benefit plan (APB 25).           

Recent Accounting Pronouncements

Note 2 to the consolidated financial
statements discusses new accounting policies adopted by the
Company during 2002 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 condition,
results of operations, or liquidity, the impacts are discussed
in the applicable sections of this financial review and notes to
the consolidated financial statements. The Company adopted
SFAS 141, Business Combinations and
SFAS 142, Goodwill and Other Intangibles, and
applied the requirements in connection with the acquisition of
Bank of Canton of California (BCC). The adoption of
the other pronouncements had no material effect to the
Companys financial condition 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 depositors as well as interest
we paid on other borrowings, such as loans from the Federal Home
Loan Bank). Changes in the average amount of interest-earning
assets (generally loans and investments) we hold as well as in
interest-bearing liabilities (generally deposits and other
borrowings) we

16



---



##### 



incur 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 2002 have been
affected by our acquisition of BCC and by the settlement of
litigation during the fourth quarter. The impact of these events
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 compensation, occupancy and
professional fees, and our provision for loan losses). Other
factors beyond our control, such as general economic conditions,
competition from other financial services companies, changes in
interest rates, government and regulatory action and policies,
may also significantly affect our results of operations.

The Bank operates in the commercial and consumer
lending business segments. Through its Commercial Banking
Division, 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 segment, the Bank
offers consumer deposit products including savings accounts,
checking accounts and time deposits. The consumer segment also
originates residential mortgage (one to four family) loans and
home equity lines of credit.

Through the Commercial Banking Division, 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. They are generally amortized over 25 to
30 years or less and have balloon payments in 15 years
or less.

Construction loans are originated generally 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, accounts
receivable and inventory. In addition, the Bank offers small
business loans, for which 75% to 85% of the principal balance is
generally guaranteed by the 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.

Net Income.We
earned $38.9 million in net income in 2002 as compared to
$30.5 million in net income in 2001, an increase of
$8.4 million, or 27.7%. Our return on average assets was
1.14% in 2002, as compared to 1.12% in 2001, and our return on
average equity was 18.42% in 2002, as compared to 19.58% in 2001.

We earned $30.5 million for 2001, as
compared to $24.1 million in net income for 2000. Our
return on average assets was 1.12% for 2001, as compared to
1.02% for 2000, and our return on average equity was 19.58% in
2001, as compared to 20.12% for 2000.

We have experienced steady growth in net income
during the periods presented. The increase in our net income in
2002, as compared to 2001, was primarily the result of an
increase in net interest income from $98.5 million to
$124.9 million for the year, before provision for loan
losses. The reasons for the increase in the net interest income
are discussed below.

17



---



##### 



The provision for loan losses increased from
$5.6 million in 2001 to $9.7 million in 2002,
reflecting the increase in the commercial loan portfolio during
the year and the credit risk inherent in the portfolio. The Bank
uses a systematic methodology to calculate the allowance for
loan losses. By applying this methodology, which takes into
account our loan portfolio mix, credit quality and loan growth,
we determine the appropriateness of our allowance for loan
losses. We adjust the allowance for loan losses by quarterly
provisions charged to earnings.

Partially offsetting the increase in net interest
income was the increase in noninterest expenses from
$49.3 million in 2001 to $64.3 million in 2002. The
increase in our noninterest expenses, as discussed below,
resulted primarily from litigation settlement expenses and
associated legal fees, the additional operating expenses
associated with the acquisition of BCC in October 2002, and
increases in personnel expenses incurred as a result of the
continued expansion of our commercial banking activities.

The increase in our net income in 2001, as
compared to 2000, was mainly the result of an increase in net
interest income from $83.0 million to $98.5 million,
as discussed below.

Net Interest Income and Net Interest Margin.Our net interest margin, calculated on
a fully tax equivalent basis (representing net interest income
as a percentage of average interest-earning assets), improved to
3.79% for 2002 from 3.73% for 2001. Accordingly, our net
interest margin calculated on a nontax equivalent basis improved
to 3.73% for 2002 from 3.69% for 2001. Our net interest income
for 2002 was $124.9 million, an increase of
$26.5 million, or 26.9%, from our net interest income of
$98.5 million for 2001, primarily as a result of the
following factors:



| |   |                                                                                                                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | We increased the average balance of loans in our
    portfolio from $2.06 billion in 2001 to $2.44 billion
    in 2002.                                                                                                                    
|
| |  | We increased our average balance of securities
    from $580.9 million in 2001 to $893.2 million in 2002.                                                                                                                                  
|
| |  | We reduced our average cost of deposits from
    3.88% in 2001 to 2.16% in 2002.                                                                                                                                                           
|
| |  | Partially offsetting the reduction in the deposit
    cost was a decrease in the average yield on securities from
    6.43% in 2001 to 5.38% in 2002, and a decrease in the average
    yield on loans from 7.97% in 2001 to 6.43% in 2002.

Our net interest margin, calculated on a fully
tax equivalent basis, improved to 3.73% for 2001 from 3.62% for
2000. Accordingly, our net interest margin, calculated on a
nontax equivalent basis, improved to 3.69% for 2001 from 3.59%
for 2000. Our net interest income for 2001 was
$98.5 million, an increase of $15.5 million, or 18.6%,
from our net interest income of $83.0 million for 2000,
primarily as a result of the following factors:



| |   |                                                                                                                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | We increased the average balance of loans in our
    portfolio from $1.80 billion in 2000 to $2.06 billion
    in 2001.                                                                                                                    
|
| |  | We increased our average balance of securities
    from $512.1 million in 2000 to $580.9 million in 2001.                                                                                                                                  
|
| |  | We reduced our average cost of deposits from
    4.31% in 2000 to 3.88% in 2001.                                                                                                                                                           
|
| |  | Partially offsetting the reduction in the deposit
    cost was a decrease in the average yield on securities from
    6.67% in 2000 to 6.43% in 2001, and a decrease in the average
    yield on loans from 8.48% in 2000 to 7.97% in 2001.

18



---



##### 



The following table presents, for the periods
indicated, the distribution of our average assets, 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:

|                                                                     |                                                                                 |                                         |      |                                  |      |           |           |            |           |         |         |           |        |            |      |         |      |           |           |            |           |   |         |         |        |  |      |      |      |   |           |           |           |   |         |         |        |  |      |      |      | 
|-------------------------------------------------------------------- | ------------------------------------------------------------------------------- | --------------------------------------- | ---- | -------------------------------- | ---- | --------- | --------- | ---------- | --------- | ------- | ------- | --------- | ------ | ---------- | ---- | ------- | ---- | --------- | --------- | ---------- | --------- | - | ------- | ------- | ------ |  | ---- | ---- | ---- | - | --------- | --------- | --------- | - | ------- | ------- | ------ |  | ---- | ---- | ---- | 
|                                                                     |                                                                                 |                                         |      |                                 
|                                                                     |                                                                                 |                                         |      | For the Years Ended December 31,
|                                                                     |                                                                                 |                                         |      |                                 
|                                                                     |                                                                                 |                                         |      |                                  |      |           |           |           
|                                                                     |                                                                                 | At                                      |      | 2002                             |      | 2001      |           | 2000      
|                                                                     |                                                                                 | December 31,                            |      |                                  |      |           |           |           
|                                                                     |                                                                                 | 2002                                    |      |                                  |      | Interest  |           |            |           |         |         | Interest  |        |            |      |         |      | Interest  |           |           
|                                                                     |                                                                                 |                                         |      | Average                          |      | Income or |           | Average    |           | Average |         | Income or |        | Average    |      | Average |      | Income or |           | Average   
|                                                                     |                                                                                 | Yield/Cost                              |      | Balance                          |      | Expense   |           | Yield/Cost |           | Balance |         | Expense   |        | Yield/Cost |      | Balance |      | Expense   |           | Yield/Cost
|                                                                     |                                                                                 |                                         |      |                                  |      |           |           |            |           |         |         |           |        |            |      |         |      |           |           |           
|                                                                     |                                                                                 |                                        
|                                                                     |                                                                                 | (Dollars in Thousands)                 
|Interest-earning assets:                                             |                                                                                 |                                         |      |                                  |      |           |           |            |           |         |         |           |        |            |      |         |      |           |           |            |           |   |         |         |        |  |      |      |      |   |           |           |           |   |         |         |        |  |      |     
|                                                                     | Loans(1)                                                                        |                                         |      | 5.86                             | %    |           | $         | 2,442,790  |           |         | $       | 156,983   |        |            |      | 6.43    | %    |           | $         | 2,062,419  |           |   | $       | 164,328 |        |  |      | 7.97 | %    |   | $         | 1,799,019 |           |   | $       | 152,494 |        |  |      | 8.48 | %   
|                                                                     | Securities                                                                      |                                         |      | 4.96                             |      |           |           | 893,240    |           |         |         | 48,039    |        |            |      | 5.38    |      |           |           | 580,869    |           |   |         | 37,358  |        |  |      | 6.43 |      |   |           | 512,065   |           |   |         | 34,142  |        |  |      | 6.67 |     
|                                                                     | Other                                                                           |                                         |      |                                 |      |           |           | 10,423     |           |         |         | 156       |        |            |      | 1.50    |      |           |           | 26,243     |           |   |         | 1,101   |        |  |      | 4.20 |      |   |           | 853       |           |   |         | 52      |        |  |      | 6.10 |     
|                                                                     |                                                                                 |                                         |      |                                  |      |           |           |            |           |         |         |           |        |            |      |         |      |           |           |            |           |   |         |         |        |  |      |      |      |   |           |           |           |   |         |         |        |  |      |     
|Total interest-earning assets                                        |                                                                                 |                                         | 5.55 |                                  |      |           | 3,346,453 |            |           |         | 205,178 |           |        |            | 6.13 |         |      |           | 2,669,531 |            |           |   | 202,787 |         |        |  | 7.60 |      |      |   | 2,311,937 |           |           |   | 186,688 |         |        |  | 8.07 |     
|Noninterest-earning assets                                           |                                                                                 |                                         |     |                                  |      |           | 74,632    |            |           |         |        |           |        |            |     |         |      |           | 42,547    |            |           |   |        |         |        |  |     |      |      |   | 48,877    |           |           |   |        |         |        |  |     |     
|                                                                     |                                                                                 |                                         |      |                                  |      |           |           |            |           |         |         |           |        |            |      |         |      |           |           |            |           |   |         |         |        |  |      |      |      |   |           |           |           |   |         |         |        |  |      |     
|Total assets                                                         |                                                                                 |                                         | 5.31 |                                  |      | $         | 3,421,085 |            |           | $       | 205,178 |           |        |            | 6.00 |         |      | $         | 2,712,078 |            |           | $ | 202,787 |         |        |  | 7.48 |      |      | $ | 2,360,814 |           |           | $ | 186,688 |         |        |  | 7.91 |     
|                                                                     |                                                                                 |                                         |      |                                  |      |           |           |            |           |         |         |           |        |            |      |         |      |           |           |            |           |   |         |         |        |  |      |      |      |   |           |           |           |   |         |         |        |  |      |     
|Interest-bearing liabilities:                                        |                                                                                 |                                         |      |                                  |      |           |           |            |           |         |         |           |        |            |      |         |      |           |           |            |           |   |         |         |        |  |      |      |      |   |           |           |           |   |         |         |        |  |      |     
|                                                                     | Deposits:                                                                       |                                         |      |                                  |      |           |           |            |           |         |         |           |        |            |      |         |      |           |           |            |           |   |         |         |        |  |      |      |      |   |           |           |           |   |         |         |        |  |      |      |     
|                                                                     |                                                                                 | NOW, checking and money market accounts |      |                                  | 1.29 |           |           | $          | 389,303   |         |         | $         | 5,952  |            |      |         | 1.53 |           |           | $          | 236,002   |   |         | $       | 5,080  |  |      |      | 2.15 |   |           | $         | 153,192   |   |         | $       | 3,144  |  |      |      | 2.05 | 
|                                                                     |                                                                                 | Savings accounts                        |      |                                  | 1.10 |           |           |            | 521,050   |         |         |           | 6,582  |            |      |         | 1.26 |           |           |            | 405,271   |   |         |         | 8,229  |  |      |      | 2.03 |   |           |           | 304,601   |   |         |         | 6,954  |  |      |      | 2.28 | 
|                                                                     |                                                                                 | Time deposits                           |      |                                  | 2.45 |           |           |            | 1,752,021 |         |         |           | 48,702 |            |      |         | 2.78 |           |           |            | 1,501,202 |   |         |         | 74,126 |  |      |      | 4.94 |   |           |           | 1,254,088 |   |         |         | 66,905 |  |      |      | 5.33 | 
|                                                                     |                                                                                 |                                         |      |                                  |      |           |           |            |           |         |         |           |        |            |      |         |      |           |           |            |           |   |         |         |        |  |      |      |      |   |           |           |           |   |         |         |        |  |      |     
|                                                                     | Total deposits                                                                  |                                         |      | 2.03                             |      |           |           | 2,662,374  |           |         |         | 61,236    |        |            |      | 2.30    |      |           |           | 2,142,475  |           |   |         | 87,435  |        |  |      | 4.08 |      |   |           | 1,711,881 |           |   |         | 77,003  |        |  |      | 4.50 |     
|                                                                     |                                                                                 |                                         |      |                                  |      |           |           |            |           |         |         |           |        |            |      |         |      |           |           |            |           |   |         |         |        |  |      |      |      |   |           |           |           |   |         |         |        |  |      |     
|                                                                     | Borrowings                                                                      |                                         |      | 4.22                             |      |           |           | 277,272    |           |         |         | 14,343    |        |            |      | 5.17    |      |           |           | 256,650    |           |   |         | 14,051  |        |  |      | 5.47 |      |   |           | 403,661   |           |   |         | 23,889  |        |  |      | 5.92 |     
|                                                                     | Guaranteed preferred beneficial interests in
    junior subordinated debentures |                                         |      | 6.21                             |      |           |           | 63,300     |           |         |         | 4,653     |        |            |      | 7.35    |      |           |           | 30,554     |           |   |         | 2,844   |        |  |      | 9.31 |      |   |           | 30,000    |           |   |         | 2,812   |        |  |      | 9.38 |     
|                                                                     |                                                                                 |                                         |      |                                  |      |           |           |            |           |         |         |           |        |            |      |         |      |           |           |            |           |   |         |         |        |  |      |      |      |   |           |           |           |   |         |         |        |  |      |     
|Total interest-bearing liabilities                                   |                                                                                 |                                         | 2.35 |                                  |      |           | 3,002,946 |            |           |         | 80,232  |           |        |            | 2.67 |         |      |           | 2,429,679 |            |           |   | 104,330 |         |        |  | 4.29 |      |      |   | 2,145,542 |           |           |   | 103,704 |         |        |  | 4.83 |     
|                                                                     |                                                                                 |                                         |      |                                  |      |           |           |            |           |         |         |           |        |            |      |         |      |           |           |            |           |   |         |         |        |  |      |      |      |   |           |           |           |   |         |         |        |  |      |     
|Noninterest-bearing deposits                                         |                                                                                 |                                         |      |                                  |      |           | 166,809   |            |           |         |         |           |        |            |      |         |      |           | 109,160   |            |           |   |         |         |        |  |      |      |      |   | 76,002    |           |           |   |         |         |        |  |      |     
|Other noninterest-bearing liabilities                                |                                                                                 |                                         |      |                                  |      |           | 39,992    |            |           |         |         |           |        |            |      |         |      |           | 17,514    |            |           |   |         |         |        |  |      |      |      |   | 19,347    |           |           |   |         |         |        |  |      |     
|Stockholders equity                                                 |                                                                                 |                                         |      |                                  |      |           | 211,338   |            |           |         |         |           |        |            |      |         |      |           | 155,725   |            |           |   |         |         |        |  |      |      |      |   | 119,923   |           |           |   |         |         |        |  |      |     
|                                                                     |                                                                                 |                                         |      |                                  |      |           |           |            |           |         |         |           |        |            |      |         |      |           |           |            |           |   |         |         |        |  |      |      |      |   |           |           |           |   |         |         |        |  |      |     
|Total liabilities and stockholders equity                           |                                                                                 |                                         |      |                                  |      | $         | 3,421,085 |            |           |         |         |           |        |            |      |         |      | $         | 2,712,078 |            |           |   |         |         |        |  |      |      |      | $ | 2,360,814 |           |           |   |         |         |        |  |      |     
|                                                                     |                                                                                 |                                         |      |                                  |      |           |           |            |           |         |         |           |        |            |      |         |      |           |           |            |           |   |         |         |        |  |      |      |      |   |           |           |           |   |         |         |        |  |      |     
|Net interest income/net interest rate spread(2)                      |                                                                                 |                                         | 3.20 | %                                |      |           |           |            |           | $       | 124,946 |           |        |            | 3.46 | %       |      |           |           |            |           | $ | 98,457  |         |        |  | 3.30 | %    |      |   |           |           |           | $ | 82,984  |         |        |  | 3.24 | %   
|                                                                     |                                                                                 |                                         |      |                                  |      |           |           |            |           |         |         |           |        |            |      |         |      |           |           |            |           |   |         |         |        |  |      |      |      |   |           |           |           |   |         |         |        |  |      |     
|Net interest-earning assets/ net interest
    margin(3)              |                                                                                 |                                         | 3.41 | %                                |      | $         | 343,507   |            |           |         |         |           |        |            | 3.73 | %       |      | $         | 239,851   |            |           |   |         |         |        |  | 3.69 | %    |      | $ | 166,395   |           |           |   |         |         |        |  | 3.59 | %   
|                                                                     |                                                                                 |                                         |      |                                  |      |           |           |            |           |         |         |           |        |            |      |         |      |           |           |            |           |   |         |         |        |  |      |      |      |   |           |           |           |   |         |         |        |  |      |     
|Ratio of interest-earning assets to
    interest-bearing liabilities |                                                                                 |                                         | 1.10 | x                                |      |           | 1.11      | x          |           |         |         |           |        |            |      |         |      |           | 1.10      | x          |           |   |         |         |        |  |      |      |      |   | 1.08      | x         |           |   |         |         |        |  |      |     
|                                                                     |                                                                                 |                                         |      |                                  |      |           |           |            |           |         |         |           |        |            |      |         |      |           |           |            |           |   |         |         |        |  |      |      |      |   |           |           |           |   |         |         |        |  |      |     



---



|    |                                                                                                                                                                  
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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.                                                               

19



---



##### 



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.

|                                           |                                                                                 |                                                            |         |                            |         |     |          |          |          |      |        |        |         |   |        |        |        |   |        |        |        |   |        |        |        | 
|------------------------------------------ | ------------------------------------------------------------------------------- | ---------------------------------------------------------- | ------- | -------------------------- | ------- | --- | -------- | -------- | -------- | ---- | ------ | ------ | ------- | - | ------ | ------ | ------ | - | ------ | ------ | ------ | - | ------ | ------ | ------ | 
|                                           |                                                                                 |                                                            |         |                           
|                                           |                                                                                 | For the Year Ended                                         |         | For the Year Ended        
|                                           |                                                                                 | December 31, 2002                                          |         | December 31, 2001         
|                                           |                                                                                 | Compared to the Year Ended                                 |         | Compared to the Year Ended
|                                           |                                                                                 | December 31, 2001                                          |         | December 31, 2000         
|                                           |                                                                                 |                                                            |         |                           
|                                           |                                                                                 | Volume                                                     |         | Rate                       |         | Net |          | Volume   |          | Rate |        | Net   
|                                           |                                                                                 |                                                            |         |                            |         |     |          |          |          |      |        |       
|                                           |                                                                                 |                                                           
|                                           |                                                                                 | (Dollars in Thousands)                                    
|Interest income:                           |                                                                                 |                                                            |         |                            |         |     |          |          |          |      |        |        |         |   |        |        |        |   |        |        |        |   |        |       
|                                           | Loans                                                                           |                                                            | $       | 150,125                    |         |     | $        | (157,470 | )        |      | $      | (7,345 | )       |   | $      | 20,056 |        |   | $      | (8,222 | )      |   | $      | 11,834 |       
|                                           | Securities                                                                      |                                                            |         | 15,359                     |         |     |          | (4,678   | )        |      |        | 10,681 |         |   |        | 4,367  |        |   |        | (1,151 | )      |   |        | 3,216  |       
|                                           | Other                                                                           |                                                            |         | (457                       | )       |     |          | (488     | )        |      |        | (945   | )       |   |        | 1,060  |        |   |        | (11    | )      |   |        | 1,049  |       
|                                           |                                                                                 |                                                            |         |                            |         |     |          |          |          |      |        |        |         |   |        |        |        |   |        |        |        |   |        |       
|                                           |                                                                                 | Total interest income on interest-earning assets           |         |                            | 165,027 |     |          |          | (162,636 | )    |        |        | 2,391   |   |        |        | 25,483 |   |        |        | (9,384 | ) |        |        | 16,099 | 
|                                           |                                                                                 |                                                            |         |                            |         |     |          |          |          |      |        |        |         |   |        |        |        |   |        |        |        |   |        |       
|Interest expense:                          |                                                                                 |                                                            |         |                            |         |     |          |          |          |      |        |        |         |   |        |        |        |   |        |        |        |   |        |       
|                                           | Deposits:                                                                       |                                                            |         |                            |         |     |          |          |          |      |        |        |         |   |        |        |        |   |        |        |        |   |        |        |       
|                                           |                                                                                 | NOW, checking, and money market accounts                   |         |                            | 1,574   |     |          |          | (702     | )    |        |        | 872     |   |        |        | 1,775  |   |        |        | 161    |   |        |        | 1,936  | 
|                                           |                                                                                 | Savings accounts                                           |         |                            | 5,104   |     |          |          | (6,751   | )    |        |        | (1,647  | ) |        |        | 1,916  |   |        |        | (641   | ) |        |        | 1,275  | 
|                                           |                                                                                 | Time deposits                                              |         |                            | 15,735  |     |          |          | (41,159  | )    |        |        | (25,424 | ) |        |        | 11,606 |   |        |        | (4,385 | ) |        |        | 7,221  | 
|                                           | Borrowings                                                                      |                                                            |         | 931                        |         |     |          | (639     | )        |      |        | 292    |         |   |        | (8,160 | )      |   |        | (1,678 | )      |   |        | (9,838 | )     
|                                           | Guaranteed preferred beneficial interests in
    junior subordinated debentures |                                                            |         | 2,251                      |         |     |          | (442     | )        |      |        | 1,809  |         |   |        | 51     |        |   |        | (19    | )      |   |        | 32     |       
|                                           |                                                                                 |                                                            |         |                            |         |     |          |          |          |      |        |        |         |   |        |        |        |   |        |        |        |   |        |       
|                                           |                                                                                 | Total interest expense on interest-bearing
    liabilities |         |                            | 25,595  |     |          |          | (49,693  | )    |        |        | (24,098 | ) |        |        | 7,188  |   |        |        | (6,562 | ) |        |        | 626    | 
|                                           |                                                                                 |                                                            |         |                            |         |     |          |          |          |      |        |        |         |   |        |        |        |   |        |        |        |   |        |       
|Increase (decrease) in net interest income |                                                                                 | $                                                          | 139,432 |                            |         | $   | (112,943 | )        |          | $    | 26,489 |        |         | $ | 18,295 |        |        | $ | (2,822 | )      |        | $ | 15,473 |       
|                                           |                                                                                 |                                                            |         |                            |         |     |          |          |          |      |        |        |         |   |        |        |        |   |        |        |        |   |        |       

Provision for Loan Losses.For the year ended December 31,
2002, our provision for loan losses was $9.7 million, an
increase of $4.1 million from our provision of
$5.6 million for the previous year. The increase in our
provision for 2002 was a result of the growth in the commercial
loan portfolio during the year and credit risk inherent in the
portfolio. For the year ended December 31, 2001, our
provision for loan losses was $5.6 million, a decrease of
$4.1 million from our provision of $9.8 million for
the previous year. The Bank uses a systematic methodology to
calculate the allowance for loan losses. 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.

20



---



##### 



Noninterest Income.Below we set forth the composition of
our noninterest income for the periods indicated:

|                                        |  |                                  |        |      |  |      |       |  |  |   |       | 
|--------------------------------------- |  | -------------------------------- | ------ | ---- |  | ---- | ----- |  |  | - | ----- | 
|                                        |  |                                 
|                                        |  | For the Years Ended December 31,
|                                        |  |                                 
|                                        |  | 2002                             |        | 2001 |  | 2000
|                                        |  |                                  |        |      |  |     
|                                        |  |                                 
|                                        |  | (Dollars in Thousands)          
|Commercial banking fees                 |  | $                                | 4,845  |      |  | $    | 3,324 |  |  | $ | 2,515 | 
|Service charges on deposit accounts     |  |                                  | 1,704  |      |  |      | 1,342 |  |  |   | 1,000 | 
|Gain on sale of securities              |  |                                  | 3,398  |      |  |      | 602   |  |  |   | 135   | 
|Gain on sale of loans                   |  |                                  | 1,838  |      |  |      | 1,445 |  |  |   | 858   | 
|Loan servicing and miscellaneous income |  |                                  | 357    |      |  |      | 192   |  |  |   | 243   | 
|                                        |  |                                  |        |      |  |      |       |  |  |   |       | 
|Total noninterest income                |  | $                                | 12,142 |      |  | $    | 6,905 |  |  | $ | 4,751 | 
|                                        |  |                                  |        |      |  |      |       |  |  |   |       | 

Our noninterest income increased by
$5.2 million, or 75.8%, to $12.1 million for the year
ended December 31, 2002, from $6.9 million for the
preceding year. The increase is primarily due to collecting more
commercial banking fees in 2002, resulting from the continued
growth of our Commercial Banking Division, increased gains on
sales of securities, and increased small business loan sales in
2002, resulting from a higher origination volume.

Our noninterest income increased by
$2.2 million, or 45.3%, to $6.9 million for the year
ended December 31, 2001, from $4.8 million for the
preceding year. The increase is primarily due to increased small
business loan sales in 2001, resulting from a higher origination
volume and also due to collecting more commercial banking fees
during 2001, the result of the continued growth of our
Commercial Banking Division.

Noninterest Expense.Below is a table outlining the
components of our noninterest expense for the periods indicated:

|                                          |  |                                  |        |      |  |      |        |   |  |   |        |  
|----------------------------------------- |  | -------------------------------- | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|                                          |  |                                 
|                                          |  | For the Years Ended December 31,
|                                          |  |                                 
|                                          |  | 2002                             |        | 2001 |  | 2000
|                                          |  |                                  |        |      |  |     
|                                          |  |                                 
|                                          |  | (Dollars in Thousands)          
|Personnel                                 |  | $                                | 29,965 |      |  | $    | 24,959 |   |  | $ | 19,847 |  
|Occupancy                                 |  |                                  | 5,326  |      |  |      | 5,303  |   |  |   | 4,939  |  
|Data processing                           |  |                                  | 3,463  |      |  |      | 2,878  |   |  |   | 2,284  |  
|Furniture and equipment                   |  |                                  | 2,614  |      |  |      | 2,723  |   |  |   | 2,350  |  
|Professional fees and contracted services |  |                                  | 5,626  |      |  |      | 3,848  |   |  |   | 2,297  |  
|Deposit insurance                         |  |                                  | 467    |      |  |      | 393    |   |  |   | 344    |  
|Communication                             |  |                                  | 726    |      |  |      | 593    |   |  |   | 491    |  
|Foreclosed assets expense                 |  |                                  | 2      |      |  |      | 11     |   |  |   | 80     |  
|Intangible amortization                   |  |                                  | 227    |      |  |      |       |   |  |   |       |  
|Litigation settlement expense             |  |                                  | 6,750  |      |  |      |       |   |  |   |       |  
|Miscellaneous expense                     |  |                                  | 9,183  |      |  |      | 8,588  |   |  |   | 7,467  |  
|                                          |  |                                  |        |      |  |      |        |   |  |   |        |  
|Total noninterest expense                 |  | $                                | 64,349 |      |  | $    | 49,296 |   |  | $ | 40,099 |  
|                                          |  |                                  |        |      |  |      |        |   |  |   |        |  
|Efficiency ratio                          |  |                                  | 46.94  | %    |  |      | 46.79  | % |  |   | 45.70  | %
|Noninterest expenses to average assets    |  |                                  | 1.88   |      |  |      | 1.82   |   |  |   | 1.70   |  

Our noninterest expense increased to
$64.3 million for 2002, from $49.3 million for 2001,
an increase of $15.1 million, or 30.5%. The higher expenses
in 2002 resulted primarily from litigation settlement expense of
$6.75 million and $1.8 million of associated legal
fees, which are included in professional fees, a
$5.0 million increase in personnel expenses due to the
additional staffing required to support the growth of the
Banks commercial banking business, and operating expenses
associated with the BCC acquisition on October 28, 2002.
Professional fees for 2002 of $5.6 million represented an
increase of $1.8 million from $3.8 million in

21



---



##### 



2001, reflecting primarily the legal fees
associated with defending the litigation that was settled in
2002. Miscellaneous expenses increased from $8.6 million in
2001 to $9.2 million in 2002, primarily as a result of
increases in expenses associated with the BCC acquisition,
merchant card processing, insurance, bank service fees, and
travel.


Our noninterest expense increased to
$49.3 million for 2001 from $40.1 million for 2000, an
increase of $9.2 million, or 22.9%. The higher expenses in
2001 primarily resulted from a $5.1 million increase in
personnel expenses due to the additional staffing required to
support the growth of the Banks commercial banking
business. Professional fees for 2001 of $3.8 million
represented an increase of $1.5 million over
$2.3 million in 2000, reflecting increased legal expenses.
Miscellaneous expenses increased from $7.5 million in 2000
to $8.6 million in 2001, primarily as a result of increases
in insurance, travel, office supplies, and contribution
expenses. Expense increases related to the increased commercial
banking activities.

Provision for Income Taxes.During 2002, we recorded a
$24.1 million provision for income taxes, which resulted in
an effective tax rate of 38.3%, compared with 39.6% for the year
ended December 31, 2001. The decrease in the effective tax
rate resulted primarily from the realization of tax benefits
from the Banks lending activities in Enterprise Zones,
which are areas in California designated by the California
Technology, Trade and Commerce Agency as being economically
depressed. Taxpayers that conduct business activities within
these boundaries may qualify for special tax benefits.
Additionally, the effective tax rate decreased due to a $350,000
tax benefit resulting from a California state tax law change in
which half of the cumulative loan losses through
December 31, 2001 taken for state income tax purposes were
permanently forgiven. During 2001, we recorded a
$20.0 million provision for income taxes, which resulted in
an effective tax rate of 39.6%. The effective tax rate in both
years is lower than the expected combined federal and state
statutory rates of 42.1%, due to the effect of the Enterprise
Zone Tax Credits and the effect of the municipal securities,
which are not fully taxable.

Financial Condition

The size of the balance sheet increased from
$2.93 billion at December 31, 2001, to
$4.85 billion at December 31, 2002, an increase of
$1.92 billion, or 65.5%. On October 28, 2002, the
Company completed the acquisition of BCC, with
$1.45 billion in assets, for $220.0 million, of which
$168.8 million was paid in cash, and 1.3 million new
common shares were issued. The BCC acquisition was the primary
reason for the increase in the size of the balance sheet. During
2002, the balance sheet increased by $467.8 million as a
result of internal growth. Of this increase, $248.4 million
resulted primarily from the increase in the size of our loan
portfolio.

Our loan portfolio increased from
$2.26 billion at December 31, 2001 to
$3.03 billion at December 31, 2002, an increase of
$763.5 million, or 33.7%. The portfolio increased primarily
as a result of the acquisition of BCC and the origination of
loans for portfolio retention during 2002, partially offset by
the internal securitizations of loans.

Total loans included in the December 31,
2002 loan portfolio that were acquired from BCC, were
$515.1 million. Total new loan commitments in 2002, as
detailed below, were $1.46 billion and were primarily
commercial loans. During 2002, the Bank internally securitized a
total of $188.4 million of residential (one to four family)
loans and $126.5 million of multifamily loans. In an
internal securitization, the Bank securitizes its loans with
Fannie Mae loans that are held in the residential mortgage (one
to four family) and multifamily loan portfolios and retains the
resulting securities in the available for sale portfolio.
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, increased from
$593.4 million at December 31, 2001 to
$1.58 billion at December 31, 2002. This represented
an increase of $988.0 million, or 166.5%. The securities
portfolio increased primarily as a result of the BCC acquisition
and the internal securitizations of loans. BCC had a securities
portfolio of $865.0 million as of the acquisition date.
That portfolio was substantially restructured in the fourth
quarter of 2002, as discussed below. At

22



---



##### 



December 31, 2002, approximately
$312.3 million of securities from the internal
securitizations remain in the securities portfolio.


The size of the balance sheet increased from
$2.50 billion at December 31, 2000 to
$2.93 billion at December 31, 2001. This increase of
$429.9 million, or 17.2%, resulted primarily from the
increase in the size of our loan portfolio. Our loan portfolio
increased from $1.93 billion at December 31, 2000 to
$2.26 billion at December 31, 2001. This increase of
$332.5 million, or 17.2%, resulted from the growth in
commercial loans. The new loan commitments and year-end balances
are discussed in detail below. Our securities portfolio
increased from $487.2 million at December 31, 2000, to
$593.4 million at December 31, 2001, an increase of
$106.2 million, or 21.8%, primarily as a result of the
securities from an internal securitization. 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. In 2001, the Bank securitized $109.6 million
of residential mortgage (one to four family) loans. In addition,
securities that were purchased during the year largely offset
the runoff of the existing portfolio.

During 2001, we funded the $429.9 million of
new assets, primarily with an increase in our deposits. Our
deposits grew by $402.1 million, or 19.5%, to
$2.47 billion at December 31, 2001. This deposit
growth is discussed in more detail below. We reduced our
borrowings by $22.6 million, or 8.7%, to
$238.0 million at December 31, 2001.

Loan Portfolio.We
originated commercial real estate loans of $355.7 million
in 2002, as compared to $310.1 million in 2001, and
multifamily originations increased to $480.9 million in
2002, as compared with $256.8 million in 2001. Construction
commitments totaled $269.8 million in 2002, compared with
$251.7 million in 2001. Additionally, we made commitments
for commercial loans of $193.8 million in 2002, as compared
to $205.9 million in 2001. We originated
$128.4 million of residential mortgage (one to four family)
loans during 2002, as compared with $126.3 million during
2001.

The table below 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,       
|                                           |                   |                       
|                                           |                   |                        |           |           |  |        |       |        |   |       
|                                           |                   | 2002                   |           | 2001      |  | 2000   |       | 1999   |   | 1998  
|                                           |                   |                        |           |           |  |        |       |        |   |       
|                                           |                   | Amount                 |           | %         |  | Amount |       | %      |   | Amount |           | %         |  | Amount |       | %      |   | Amount |           | %        
|                                           |                   |                        |           |           |  |        |       |        |   |        |           |           |  |        |       |        |   |        |           |          
|                                           |                   |                       
|                                           |                   | (Dollars in Thousands)
|Commercial:                                |                   |                        |           |           |  |        |       |        |   |        |           |           |  |        |       |        |   |        |           |           |  |  |       |        |   |   |           |           |  |  |       |        |   |   |           |           |  |  |       |       
|Secured by real estate  nonresidential    |                   | $                      | 1,279,809 |           |  |        | 42.20 | %      |   | $      | 798,882   |           |  |        | 35.22 | %      |   | $      | 597,981   |           |  |  | 30.91 | %      |   | $ | 435,061   |           |  |  | 25.77 | %      |   | $ | 229,693   |           |  |  | 15.39 | %     
|Secured by real estate  multifamily       |                   |                        | 914,630   |           |  |        | 30.16 |        |   |        | 677,271   |           |  |        | 29.86 |        |   |        | 514,697   |           |  |  | 26.61 |        |   |   | 423,838   |           |  |  | 25.11 |        |   |   | 346,967   |           |  |  | 23.26 |       
|Construction                               |                   |                        | 216,218   |           |  |        | 7.13  |        |   |        | 182,558   |           |  |        | 8.05  |        |   |        | 131,878   |           |  |  | 6.82  |        |   |   | 89,710    |           |  |  | 5.31  |        |   |   | 61,486    |           |  |  | 4.12  |       
|Business                                   |                   |                        | 261,787   |           |  |        | 8.63  |        |   |        | 163,628   |           |  |        | 7.21  |        |   |        | 99,401    |           |  |  | 5.14  |        |   |   | 59,332    |           |  |  | 3.52  |        |   |   | 46,240    |           |  |  | 3.10  |       
|                                           |                   |                        |           |           |  |        |       |        |   |        |           |           |  |        |       |        |   |        |           |           |  |  |       |        |   |   |           |           |  |  |       |        |   |   |           |           |  |  |       |       
|                                           | Total commercial  |                        |           | 2,672,444 |  |        |       | 88.12  |   |        |           | 1,822,339 |  |        |       | 80.34  |   |        |           | 1,343,957 |  |  |       | 69.48  |   |   |           | 1,007,941 |  |  |       | 59.71  |   |   |           | 684,386   |  |  |       | 45.87  |  
|                                           |                   |                        |           |           |  |        |       |        |   |        |           |           |  |        |       |        |   |        |           |           |  |  |       |        |   |   |           |           |  |  |       |        |   |   |           |           |  |  |       |       
|Consumer:                                  |                   |                        |           |           |  |        |       |        |   |        |           |           |  |        |       |        |   |        |           |           |  |  |       |        |   |   |           |           |  |  |       |        |   |   |           |           |  |  |       |       
|Residential mortgage (one to four family)  |                   |                        | 311,067   |           |  |        | 10.25 |        |   |        | 430,057   |           |  |        | 18.96 |        |   |        | 574,219   |           |  |  | 29.68 |        |   |   | 665,923   |           |  |  | 39.45 |        |   |   | 790,789   |           |  |  | 53.01 |       
|Other                                      |                   |                        | 49,372    |           |  |        | 1.63  |        |   |        | 16,003    |           |  |        | 0.70  |        |   |        | 16,288    |           |  |  | 0.84  |        |   |   | 14,248    |           |  |  | 0.84  |        |   |   | 16,711    |           |  |  | 1.12  |       
|                                           |                   |                        |           |           |  |        |       |        |   |        |           |           |  |        |       |        |   |        |           |           |  |  |       |        |   |   |           |           |  |  |       |        |   |   |           |           |  |  |       |       
|                                           | Total consumer    |                        |           | 360,439   |  |        |       | 11.88  |   |        |           | 446,060   |  |        |       | 19.66  |   |        |           | 590,507   |  |  |       | 30.52  |   |   |           | 680,171   |  |  |       | 40.29  |   |   |           | 807,500   |  |  |       | 54.13  |  
|                                           |                   |                        |           |           |  |        |       |        |   |        |           |           |  |        |       |        |   |        |           |           |  |  |       |        |   |   |           |           |  |  |       |        |   |   |           |           |  |  |       |       
|                                           | Total gross loans |                        |           | 3,032,883 |  |        |       | 100.00 | % |        |           | 2,268,399 |  |        |       | 100.00 | % |        |           | 1,934,464 |  |  |       | 100.00 | % |   |           | 1,688,112 |  |  |       | 100.00 | % |   |           | 1,491,886 |  |  |       | 100.00 | %
|                                           |                   |                        |           |           |  |        |       |        |   |        |           |           |  |        |       |        |   |        |           |           |  |  |       |        |   |   |           |           |  |  |       |        |   |   |           |           |  |  |       |       
|Net deferred loan origination (fees) costs |                   |                        | (5,073    | )         |  |        |       |        |   |        | (4,096    | )         |  |        |       |        |   |        | (2,642    | )         |  |  |       |        |   |   | (1,417    | )         |  |  |       |        |   |   | 262       |           |  |  |       |       
|                                           |                   |                        |           |           |  |        |       |        |   |        |           |           |  |        |       |        |   |        |           |           |  |  |       |        |   |   |           |           |  |  |       |        |   |   |           |           |  |  |       |       
|Loans                                      |                   |                        | 3,027,810 |           |  |        |       |        |   |        | 2,264,303 |           |  |        |       |        |   |        | 1,931,822 |           |  |  |       |        |   |   | 1,686,695 |           |  |  |       |        |   |   | 1,492,148 |           |  |  |       |       
|Allowance for loan losses                  |                   |                        | (48,865   | )         |  |        |       |        |   |        | (34,550   | )         |  |        |       |        |   |        | (28,901   | )         |  |  |       |        |   |   | (19,503   | )         |  |  |       |        |   |   | (14,922   | )         |  |  |       |       
|                                           |                   |                        |           |           |  |        |       |        |   |        |           |           |  |        |       |        |   |        |           |           |  |  |       |        |   |   |           |           |  |  |       |        |   |   |           |           |  |  |       |       
|                                           | Total net loans   |                        | $         | 2,978,945 |  |        |       |        |   |        | $         | 2,229,753 |  |        |       |        |   |        | $         | 1,902,921 |  |  |       |        |   |   | $         | 1,667,192 |  |  |       |        |   |   | $         | 1,477,226 |  |  |       |        |  
|                                           |                   |                        |           |           |  |        |       |        |   |        |           |           |  |        |       |        |   |        |           |           |  |  |       |        |   |   |           |           |  |  |       |        |   |   |           |           |  |  |       |       

23



---



##### 



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

|                  |                                                |                        |           |         |           |      |           |         |           |   |         |         |         | 
|----------------- | ---------------------------------------------- | ---------------------- | --------- | ------- | --------- | ---- | --------- | ------- | --------- | - | ------- | ------- | ------- | 
|                  |                                                | 2002                   |           | 2001    |           | 2000
|                  |                                                |                        |           |         |           |     
|                  |                                                |                       
|                  |                                                | (Dollars in Thousands)
|Commercial:       |                                                |                        |           |         |           |      |           |         |           |   |         |        
|                  | Secured by real estate 
    nonresidential(1) |                        | $         | 355,662 |           |      | $         | 310,087 |           |   | $       | 248,396 |        
|                  | Secured by real estate  multifamily(1)        |                        |           | 480,934 |           |      |           | 256,797 |           |   |         | 128,581 |        
|                  | Construction                                   |                        |           | 269,771 |           |      |           | 251,740 |           |   |         | 202,482 |        
|                  | Business                                       |                        |           | 193,847 |           |      |           | 205,916 |           |   |         | 96,053  |        
|                  |                                                |                        |           |         |           |      |           |         |           |   |         |        
|                  |                                                | Total commercial loans |           |         | 1,300,214 |      |           |         | 1,024,540 |   |         |         | 675,512 | 
|Consumer:         |                                                |                        |           |         |           |      |           |         |           |   |         |        
|                  | Residential mortgage (one to four family)(1)   |                        |           | 128,371 |           |      |           | 126,277 |           |   |         | 34,682  |        
|                  | Home equity and other                          |                        |           | 32,198  |           |      |           | 18,464  |           |   |         | 14,989  |        
|                  |                                                |                        |           |         |           |      |           |         |           |   |         |        
|                  |                                                | Total consumer loans   |           |         | 160,569   |      |           |         | 144,741   |   |         |         | 49,671  | 
|                  |                                                |                        |           |         |           |      |           |         |           |   |         |        
|Total commitments |                                                | $                      | 1,460,783 |         |           | $    | 1,169,281 |         |           | $ | 725,183 |        
|                  |                                                |                        |           |         |           |      |           |         |           |   |         |        



---



|    |                                                                                                                                              
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------
|(1) | For nonresidential, multifamily, and residential
    mortgage (one to four family) loans, substantially all
    commitments have been funded.

As a result of our acquisition of BCC and our
continued focus on commercial lending activities, loan growth
remained concentrated in our commercial loan portfolio, which
totaled $2.67 billion at December 31, 2002, a 46.6%
increase from $1.82 billion at December 31, 2001. Of
this increase, $399.0 million results from the BCC
acquisition. Our commercial loan portfolio increased 35.6%
during 2001 from $1.34 billion at December 31, 2000,
to $1.82 billion at December 31, 2001.

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 small business
loans generally have monthly repricing terms. Commercial real
estate loans generally reprice each month or are intermediate
fixed, meaning that the loans have interest rates which are
fixed for a period, typically five years, and then generally
reprice monthly or become due and payable.

As a result of our acquisition of BCC and the
change in the type of loan originations, the loans which reprice
or mature within the next year increased to $1.90 billion
at December 31, 2002, from $1.49 billion at
December 31, 2001.

The loans which reprice or mature within the next
year increased to $1.49 billion at December 31, 2001
from $1.05 billion at December 31, 2000.

The table below sets forth the estimated
repricing of our loan portfolio at December 31, 2002.
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.

24



---



##### 



The rate of loan prepayment varies from time to
time, depending upon various factors, including market interest
rates.


|                              |                                           |                        |   |             |           |             |   |            |         |              |   |              |         |       |   |         |         |  |   |         |         |  |   |        |        |   |           |           |           | 
|----------------------------- | ----------------------------------------- | ---------------------- | - | ----------- | --------- | ----------- | - | ---------- | ------- | ------------ | - | ------------ | ------- | ----- | - | ------- | ------- |  | - | ------- | ------- |  | - | ------ | ------ | - | --------- | --------- | --------- | 
|                              |                                           |                       
|                              |                                           | At December 31, 2002  
|                              |                                           |                       
|                              |                                           |                        |   | 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   |                        | $ | 848,281     |           |             | $ | 85,560     |         |              | $ | 55,025       |         |       | $ | 256,791 |         |  | $ | 34,152  |         |  | $ |       |        |   | $         | 1,279,809 |          
|                              | Secured by real estate  multifamily      |                        |   | 504,528     |           |             |   | 25,106     |         |              |   | 41,771       |         |       |   | 120,314 |         |  |   | 222,911 |         |  |   |       |        |   |           | 914,630   |          
|                              | Construction                              |                        |   | 192,626     |           |             |   | 23,592     |         |              |   |             |         |       |   |        |         |  |   |        |         |  |   |       |        |   |           | 216,218   |          
|                              | Business                                  |                        |   | 255,497     |           |             |   | 3,141      |         |              |   | 2,575        |         |       |   |        |         |  |   |        |         |  |   | 574    |        |   |           | 261,787   |          
|                              |                                           |                        |   |             |           |             |   |            |         |              |   |              |         |       |   |         |         |  |   |         |         |  |   |        |        |   |           |          
|                              |                                           | Total commercial       |   |             | 1,800,932 |             |   |            | 137,399 |              |   |              | 99,371  |       |   |         | 377,105 |  |   |         | 257,063 |  |   |        | 574    |   |           |           | 2,672,444 | 
|                              |                                           |                        |   |             |           |             |   |            |         |              |   |              |         |       |   |         |         |  |   |         |         |  |   |        |        |   |           |          
|Consumer:                     |                                           |                        |   |             |           |             |   |            |         |              |   |              |         |       |   |         |         |  |   |         |         |  |   |        |        |   |           |          
|                              | Residential mortgage (one to four family) |                        |   | 53,400      |           |             |   | 8,079      |         |              |   | 30,943       |         |       |   | 26,568  |         |  |   | 129,994 |         |  |   | 62,053 |        |   |           | 311,067   |          
|                              | Other                                     |                        |   | 48,906      |           |             |   | 389        |         |              |   | 66           |         |       |   | 11      |         |  |   |        |         |  |   |       |        |   |           | 49,372    |          
|                              |                                           |                        |   |             |           |             |   |            |         |              |   |              |         |       |   |         |         |  |   |         |         |  |   |        |        |   |           |          
|                              |                                           | Total consumer         |   |             | 102,336   |             |   |            | 8,468   |              |   |              | 31,009  |       |   |         | 26,579  |  |   |         | 129,994 |  |   |        | 62,053 |   |           |           | 360,439   | 
|                              |                                           |                        |   |             |           |             |   |            |         |              |   |              |         |       |   |         |         |  |   |         |         |  |   |        |        |   |           |          
|                              |                                           | Total gross loans      |   | $           | 1,903,268 |             |   | $          | 145,867 |              |   | $            | 130,380 |       |   | $       | 403,684 |  |   | $       | 387,057 |  |   | $      | 62,627 |   |           | $         | 3,032,883 | 
|                              |                                           |                        |   |             |           |             |   |            |         |              |   |              |         |       |   |         |         |  |   |         |         |  |   |        |        |   |           |          
|Net deferred origination fees |                                           |                        |   |             |           |             |   |            |         |              |   |              |         |       |   |         |         |  |   |         |         |  |   |        |        |   | (5,073    | )        
|                              |                                           |                        |   |             |           |             |   |            |         |              |   |              |         |       |   |         |         |  |   |         |         |  |   |        |        |   |           |          
|Loans                         |                                           |                        |   |             |           |             |   |            |         |              |   |              |         |       |   |         |         |  |   |         |         |  |   |        |        |   | 3,027,810 |          
|Allowance for loan losses     |                                           |                        |   |             |           |             |   |            |         |              |   |              |         |       |   |         |         |  |   |         |         |  |   |        |        |   | (48,865   | )        
|                              |                                           |                        |   |             |           |             |   |            |         |              |   |              |         |       |   |         |         |  |   |         |         |  |   |        |        |   |           |          
|Net loans                     |                                           |                        |   |             |           |             |   |            |         |              |   |              |         |       |   |         |         |  |   |         |         |  |   |        |        | $ | 2,978,945 |          
|                              |                                           |                        |   |             |           |             |   |            |         |              |   |              |         |       |   |         |         |  |   |         |         |  |   |        |        |   |           |          

The following table sets forth the contractual
maturity of gross loans at December 31, 2002. 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, 2002  
|                              |                                           |                       
|                              |                                           |                        |   | 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   |                        | $ | 20,200      |         |             | $ | 85,592     |         |              | $ | 190,022      |         |       | $ | 910,828 |           |  | $ | 57,394  |         |  | $ | 15,773  |         |   | $         | 1,279,809 |          
|                              | Secured by real estate  multifamily      |                        |   | 1,729       |         |             |   | 1,628      |         |              |   | 3,529        |         |       |   | 231,538 |           |  |   | 657,648 |         |  |   | 18,558  |         |   |           | 914,630   |          
|                              | Construction                              |                        |   | 184,829     |         |             |   | 30,264     |         |              |   |             |         |       |   |        |           |  |   |        |         |  |   | 1,125   |         |   |           | 216,218   |          
|                              | Business                                  |                        |   | 203,845     |         |             |   | 24,845     |         |              |   | 17,877       |         |       |   | 11,862  |           |  |   | 1,828   |         |  |   | 1,530   |         |   |           | 261,787   |          
|                              |                                           |                        |   |             |         |             |   |            |         |              |   |              |         |       |   |         |           |  |   |         |         |  |   |         |         |   |           |          
|                              |                                           | Total commercial       |   |             | 410,603 |             |   |            | 142,329 |              |   |              | 211,428 |       |   |         | 1,154,228 |  |   |         | 716,870 |  |   |         | 36,986  |   |           |           | 2,672,444 | 
|                              |                                           |                        |   |             |         |             |   |            |         |              |   |              |         |       |   |         |           |  |   |         |         |  |   |         |         |   |           |          
|Consumer:                     |                                           |                        |   |             |         |             |   |            |         |              |   |              |         |       |   |         |           |  |   |         |         |  |   |         |         |   |           |          
|                              | Residential mortgage (one to four family) |                        |   | 272         |         |             |   | 2,688      |         |              |   | 5,950        |         |       |   | 24,797  |           |  |   | 143,313 |         |  |   | 134,047 |         |   |           | 311,067   |          
|                              | Other                                     |                        |   | 7,264       |         |             |   | 389        |         |              |   | 192          |         |       |   | 124     |           |  |   | 5,764   |         |  |   | 35,639  |         |   |           | 49,372    |          
|                              |                                           |                        |   |             |         |             |   |            |         |              |   |              |         |       |   |         |           |  |   |         |         |  |   |         |         |   |           |          
|                              |                                           | Total consumer         |   |             | 7,536   |             |   |            | 3,077   |              |   |              | 6,142   |       |   |         | 24,921    |  |   |         | 149,077 |  |   |         | 169,686 |   |           |           | 360,439   | 
|                              |                                           |                        |   |             |         |             |   |            |         |              |   |              |         |       |   |         |           |  |   |         |         |  |   |         |         |   |           |          
|                              |                                           | Total gross loans      |   | $           | 418,139 |             |   | $          | 145,406 |              |   | $            | 217,570 |       |   | $       | 1,179,149 |  |   | $       | 865,947 |  |   | $       | 206,672 |   |           | $         | 3,032,883 | 
|                              |                                           |                        |   |             |         |             |   |            |         |              |   |              |         |       |   |         |           |  |   |         |         |  |   |         |         |   |           |          
|Net deferred origination fees |                                           |                        |   |             |         |             |   |            |         |              |   |              |         |       |   |         |           |  |   |         |         |  |   |         |         |   | (5,073    | )        
|                              |                                           |                        |   |             |         |             |   |            |         |              |   |              |         |       |   |         |           |  |   |         |         |  |   |         |         |   |           |          
|Loans                         |                                           |                        |   |             |         |             |   |            |         |              |   |              |         |       |   |         |           |  |   |         |         |  |   |         |         |   | 3,027,810 |          
|Allowance for loan losses     |                                           |                        |   |             |         |             |   |            |         |              |   |              |         |       |   |         |           |  |   |         |         |  |   |         |         |   | (48,865   | )        
|                              |                                           |                        |   |             |         |             |   |            |         |              |   |              |         |       |   |         |           |  |   |         |         |  |   |         |         |   |           |          
|Net loans                     |                                           |                        |   |             |         |             |   |            |         |              |   |              |         |       |   |         |           |  |   |         |         |  |   |         |         | $ | 2,978,945 |          
|                              |                                           |                        |   |             |         |             |   |            |         |              |   |              |         |       |   |         |           |  |   |         |         |  |   |         |         |   |           |          

25



---



##### 



The following table sets forth the dollar amount
of all loans and mortgage-backed securities for which final
payment is not due until after December 31, 2003:

|                                           |                                           |                             |           |            |         |       |           |           |           |   |           |           |           | 
|------------------------------------------ | ----------------------------------------- | --------------------------- | --------- | ---------- | ------- | ----- | --------- | --------- | --------- | - | --------- | --------- | --------- | 
|                                           |                                           |                            
|                                           |                                           | Due After December 31, 2003
|                                           |                                           |                            
|                                           |                                           | Fixed                       |           | Adjustable |         | Total
|                                           |                                           |                             |           |            |         |      
|                                           |                                           |                            
|                                           |                                           | (Dollars in Thousands)     
|Commercial:                                |                                           |                             |           |            |         |       |           |           |           |   |           |          
|                                           | Secured by real estate  nonresidential   |                             | $         | 108,247    |         |       | $         | 1,151,362 |           |   | $         | 1,259,609 |          
|                                           | Secured by real estate  multifamily      |                             |           | 182,483    |         |       |           | 730,418   |           |   |           | 912,901   |          
|                                           | Construction                              |                             |           |           |         |       |           | 31,389    |           |   |           | 31,389    |          
|                                           | Business                                  |                             |           | 4,411      |         |       |           | 53,531    |           |   |           | 57,942    |          
|                                           |                                           |                             |           |            |         |       |           |           |           |   |           |          
|                                           |                                           | Total commercial            |           |            | 295,141 |       |           |           | 1,966,700 |   |           |           | 2,261,841 | 
|                                           |                                           |                             |           |            |         |       |           |           |           |   |           |          
|Consumer:                                  |                                           |                             |           |            |         |       |           |           |           |   |           |          
|                                           | Residential mortgage (one to four family) |                             |           | 211,169    |         |       |           | 99,626    |           |   |           | 310,795   |          
|                                           | Other                                     |                             |           | 466        |         |       |           | 41,642    |           |   |           | 42,108    |          
|                                           |                                           |                             |           |            |         |       |           |           |           |   |           |          
|                                           |                                           | Total consumer              |           |            | 211,635 |       |           |           | 141,268   |   |           |           | 352,903   | 
|Total loans                                |                                           |                             | 506,776   |            |         |       | 2,107,968 |           |           |   | 2,614,744 |          
|Mortgage-backed securities                 |                                           |                             | 970,103   |            |         |       | 382,407   |           |           |   | 1,352,510 |          
|                                           |                                           |                             |           |            |         |       |           |           |           |   |           |          
|Total loans and mortgage-backed securities |                                           | $                           | 1,476,879 |            |         | $     | 2,490,375 |           |           | $ | 3,967,254 |          
|                                           |                                           |                             |           |            |         |       |           |           |           |   |           |          

Nonperforming Assets and Other Real Estate
Owned.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) consists of real estate acquired by us
through foreclosure.

26



---



##### 



The following table sets forth information
regarding our nonperforming assets at the dates indicated:

|                                                                            |             |                                           |                            |      |       |           |       |      |     |           |      |   |       |           |      |   |       |           |       |   |       |           | 
|--------------------------------------------------------------------------- | ----------- | ----------------------------------------- | -------------------------- | ---- | ----- | --------- | ----- | ---- | --- | --------- | ---- | - | ----- | --------- | ---- | - | ----- | --------- | ----- | - | ----- | --------- | 
|                                                                            |             |                                          
|                                                                            |             | At December 31,                          
|                                                                            |             |                                          
|                                                                            |             | 2002                                      |                            | 2001 |       | 2000      |       | 1999 |     | 1998     
|                                                                            |             |                                           |                            |      |       |           |       |      |     |          
|                                                                            |             |                                          
|                                                                            |             | (Dollars in Thousands)                   
|Nonaccrual loans:                                                           |             |                                           |                            |      |       |           |       |      |     |           |      |   |       |           |      |   |       |           |       |  
|                                                                            | Commercial: |                                           |                            |      |       |           |       |      |     |           |      |   |       |           |      |   |       |           |       |   |      
|                                                                            |             | Secured by real estate  nonresidential   |                            | $    |      |           |       | $    |    |           |      | $ | 740   |           |      | $ | 3,806 |           |       | $ | 2,663 |          
|                                                                            |             | Secured by real estate  multifamily      |                            |      |      |           |       |      | 210 |           |      |   |      |           |      |   |      |           |       |   |      |          
|                                                                            |             | Construction                              |                            |      | 4,533 |           |       |      |    |           |      |   | 104   |           |      |   | 104   |           |       |   | 104   |          
|                                                                            |             | Business                                  |                            |      | 68    |           |       |      |    |           |      |   |      |           |      |   |      |           |       |   |      |          
|                                                                            |             |                                           |                            |      |       |           |       |      |     |           |      |   |       |           |      |   |       |           |       |  
|                                                                            |             |                                           | Total commercial           |      |       | 4,601     |       |      |     | 210       |      |   |       | 844       |      |   |       | 3,910     |       |   |       | 2,767     | 
|                                                                            |             |                                           |                            |      |       |           |       |      |     |           |      |   |       |           |      |   |       |           |       |  
|                                                                            | Consumer:   |                                           |                            |      |       |           |       |      |     |           |      |   |       |           |      |   |       |           |       |   |      
|                                                                            |             | Residential mortgage (one to four family) |                            |      |      |           |       |      | 781 |           |      |   | 1,672 |           |      |   | 722   |           |       |   | 3,341 |          
|                                                                            |             | Other                                     |                            |      | 53    |           |       |      |    |           |      |   |      |           |      |   |      |           |       |   |      |          
|                                                                            |             |                                           |                            |      |       |           |       |      |     |           |      |   |       |           |      |   |       |           |       |  
|                                                                            |             |                                           | Total consumer             |      |       | 53        |       |      |     | 781       |      |   |       | 1,672     |      |   |       | 722       |       |   |       | 3,341     | 
|                                                                            |             |                                           |                            |      |       |           |       |      |     |           |      |   |       |           |      |   |       |           |       |  
|                                                                            |             |                                           | Total nonaccrual loans     |      |       | 4,654     |       |      |     | 991       |      |   |       | 2,516     |      |   |       | 4,632     |       |   |       | 6,108     | 
|Other real estate owned (OREO)                                              |             |                                           |                           |      |       |           |      |      |     |           | 115  |   |       |           | 722  |   |       |           | 772   |  
|                                                                            |             |                                           |                            |      |       |           |       |      |     |           |      |   |       |           |      |   |       |           |       |  
|                                                                            |             |                                           | Total nonperforming assets |      | $     | 4,654     |       |      | $   | 991       |      |   | $     | 2,631     |      |   | $     | 5,354     |       |   | $     | 6,880     | 
|                                                                            |             |                                           |                            |      |       |           |       |      |     |           |      |   |       |           |      |   |       |           |       |  
|Nonperforming assets to total assets                                        |             |                                           | 0.10                       | %    |       |           | 0.03  | %    |     |           | 0.11 | % |       |           | 0.23 | % |       |           | 0.32  | %
|Nonaccrual loans to total loans                                             |             |                                           | 0.15                       |      |       |           | 0.04  |      |     |           | 0.13 |   |       |           | 0.27 |   |       |           | 0.41  |  
|Nonperforming assets to total loans and OREO                                |             |                                           | 0.15                       |      |       |           | 0.04  |      |     |           | 0.14 |   |       |           | 0.32 |   |       |           | 0.46  |  
|                                                                            |             |                                           | Total loans                |      | $     | 3,027,810 |       |      | $   | 2,264,303 |      |   | $     | 1,931,822 |      |   | $     | 1,686,695 |       |   | $     | 1,492,148 | 
|                                                                            |             |                                           |                            |      |       |           |       |      |     |           |      |   |       |           |      |   |       |           |       |  
|Gross income not recognized on nonaccrual loans                             |             | $                                         | 211                        |      |       | $         | 24    |      |     | $         | 116  |   |       | $         | 201  |   |       | $         | 135   |  
|Accruing loans contractually past due
    90 days or more                   |             |                                           | 4,302                      |      |       |           | 1,269 |      |     |           |     |   |       |           |     |   |       |           |      |  
|Loans classified as troubled debt restructurings
    but not included above |             |                                           |                           |      |       |           |      |      |     |           |     |   |       |           |     |   |       |           | 1,251 |  

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.                                                                                                                                                                                    

In addition to the nonaccrual loans described
above, the Company had $25.5 million of classified loans at
December 31, 2002. Classified loans (classified
loans) are defined as those we classify substandard,
doubtful

27



---



##### 



or loss, as defined above. The $25.5 million
of classified loans that are categorized as substandard consist
of $19.0 million of construction loans, $2.5 million
of multifamily loans, $1.9 million of commercial real
estate loans, $2.0 million of commercial loans, and $38,000
of other consumer loans. With the exception of the loans
described above and the classified loans, we are not aware of
any other loans as of December 31, 2002 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. Despite our efforts, it is impossible
for us to accurately predict the extent to which economic
conditions in our market areas may worsen, or to estimate the
full impact that such changes may have on our loan portfolio. We
cannot assure you that no other loans will become 90 days
or more past due, be placed on nonaccrual status, or become
impaired, restructured or OREO in the future. 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 on a scope basis. The firm is
comprised of former bank regulators and former bankers. They
made no material recommendation for changes to our
classifications as a result of their review.


The ratio of nonperforming assets to total assets
was 0.10% at December 31, 2002, compared with 0.03% at
December 31, 2001. Total nonperforming assets were
$4.7 million at December 31, 2002, compared with
$991,000 at December 31, 2001. At December 31, 2002,
there were no significant nonperforming loans from the BCC
portfolio. We reduced the total nonperforming assets to $991,000
at December 31, 2001 from $2.6 million at
December 31, 2000. This reduction of $1.6 million, or
62.3%, resulted primarily from the payoff of loans that were
classified as nonperforming as of December 31, 2000 and
from returning loans that had previously been nonperforming to
accrual status after a period of sustained performance.

When we acquire OREO, we record it at the lower
of its carrying value or its fair value less estimated disposal
costs. Any write-down of OREO is charged to earnings. There was
no OREO at December 31, 2002 or at December 31, 2001.

Allowance for Loan Losses.We have established a formal process
for establishing an adequate allowance for loan losses. This
process results in an allowance that has two components:
allocated and unallocated. To determine the allocated component,
we arrive at estimates by analyzing certain individual loans
(including impaired loans) and analyzing loans in groups. For
the loans we analyze individually, we may use third-party
information, such as appraisals, to help supplement our internal
analysis. For the loans we analyze in groups, such as
residential mortgage (one to four family) loans, we review
delinquency trends, charge-off experience, the makeup of our
loan portfolio, current economic conditions, regional trends in
collateral values, as well as other factors.

We use the unallocated portion of the allowance
to compensate for the inexact nature of estimating an adequate
allowance for incurred loan losses, economic uncertainties, and
other factors. Our loan portfolio also undergoes an internal
asset review, and portions are examined by our government
regulators. We incorporate the results of these examinations
into our assessments.

Our allowance for loan losses is increased by
provisions for loan losses, which are charged against earnings,
and is reduced by charge-offs, net of any recoveries. Loans are
charged off when they are classified as a loss. For
any loan which is deemed classified, we perform an impairment
assessment and charge off the amount by which the recorded loan
amount exceeds the value of the property securing the loan,
unless the loan is both well secured and in the process of
collection. We generally record recoveries of amounts that have
been previously charged off only to the extent that we receive
cash.

While we use all available evidence in
determining whether we believe our allowance for loan losses is
adequate, future additions to the allowance will be subject to
our continuing evaluation of the inherent risks in our
portfolio. We may need to make additional provisions for loan
losses if the economy declines or asset quality deteriorates.
Also, our regulators review our allowance as part of their
examinations. Although they can require us to adjust our
allowance as a result of such examinations, they have not done
so in any of the years presented. We believe, however, that our
allowance for loan losses is adequate to provide for estimated
losses inherent in our loan portfolio.

28



---



##### 



The following table sets forth information
concerning our allowance for loan losses for the dates indicated:

|                                             |             |                                           |                   |      |       |       |        |      |     |      |        |   |     |     |        |   |     |       |        |   |     |     | 
|-------------------------------------------- | ----------- | ----------------------------------------- | ----------------- | ---- | ----- | ----- | ------ | ---- | --- | ---- | ------ | - | --- | --- | ------ | - | --- | ----- | ------ | - | --- | --- | 
|                                             |             |                                          
|                                             |             | For the Years Ended December 31,         
|                                             |             |                                          
|                                             |             | 2002                                      |                   | 2001 |       | 2000  |        | 1999 |     | 1998
|                                             |             |                                           |                   |      |       |       |        |      |     |     
|                                             |             |                                          
|                                             |             | (Dollars in Thousands)                   
|Allowance for loan losses:                   |             |                                           |                   |      |       |       |        |      |     |      |        |   |     |     |        |   |     |       |        |  
|Balance beginning of period                  |             | $                                         | 34,550            |      |       | $     | 28,901 |      |     | $    | 19,503 |   |     | $   | 14,922 |   |     | $     | 12,142 |  
|                                             |             |                                           |                   |      |       |       |        |      |     |      |        |   |     |     |        |   |     |       |        |  
|Acquired allowance for loan losses           |             |                                           | 10,162            |      |       |       |       |      |     |      |       |   |     |     |       |   |     |       |       |  
|Provision for loan losses                    |             |                                           | 9,673             |      |       |       | 5,620  |      |     |      | 9,765  |   |     |     | 5,645  |   |     |       | 3,412  |  
|Charge-offs:                                 |             |                                           |                   |      |       |       |        |      |     |      |        |   |     |     |        |   |     |       |        |  
|                                             | Commercial: |                                           |                   |      |       |       |        |      |     |      |        |   |     |     |        |   |     |       |        |   |    
|                                             |             | Secured by real estate  nonresidential   |                   |      |      |       |        |      |    |      |        |   | 551 |     |        |   | 380 |       |        |   | 359 |    
|                                             |             | Secured by real estate  multifamily      |                   |      |      |       |        |      |    |      |        |   |    |     |        |   |    |       |        |   |    |    
|                                             |             | Construction                              |                   |      | 2,172 |       |        |      |    |      |        |   |    |     |        |   |    |       |        |   |    |    
|                                             |             | Business                                  |                   |      | 3,337 |       |        |      | 121 |      |        |   | 165 |     |        |   | 689 |       |        |   |    |    
|                                             |             |                                           |                   |      |       |       |        |      |     |      |        |   |     |     |        |   |     |       |        |  
|                                             |             |                                           | Total commercial  |      |       | 5,509 |        |      |     | 121  |        |   |     | 716 |        |   |     | 1,069 |        |   |     | 359 | 
|                                             |             |                                           |                   |      |       |       |        |      |     |      |        |   |     |     |        |   |     |       |        |  
|                                             | Consumer:   |                                           |                   |      |       |       |        |      |     |      |        |   |     |     |        |   |     |       |        |   |    
|                                             |             | Residential mortgage (one to four family) |                   |      |      |       |        |      |    |      |        |   | 37  |     |        |   | 9   |       |        |   | 135 |    
|                                             |             | Other                                     |                   |      | 54    |       |        |      |    |      |        |   | 164 |     |        |   | 120 |       |        |   | 187 |    
|                                             |             |                                           |                   |      |       |       |        |      |     |      |        |   |     |     |        |   |     |       |        |  
|                                             |             |                                           | Total consumer    |      |       | 54    |        |      |     |     |        |   |     | 201 |        |   |     | 129   |        |   |     | 322 | 
|                                             |             |                                           |                   |      |       |       |        |      |     |      |        |   |     |     |        |   |     |       |        |  
|                                             |             |                                           | Total charge-offs |      |       | 5,563 |        |      |     | 121  |        |   |     | 917 |        |   |     | 1,198 |        |   |     | 681 | 
|                                             |             |                                           |                   |      |       |       |        |      |     |      |        |   |     |     |        |   |     |       |        |  
|Recoveries:                                  |             |                                           |                   |      |       |       |        |      |     |      |        |   |     |     |        |   |     |       |        |  
|                                             | Commercial: |                                           |                   |      |       |       |        |      |     |      |        |   |     |     |        |   |     |       |        |   |    
|                                             |             | Secured by real estate  nonresidential   |                   |      |      |       |        |      |    |      |        |   | 535 |     |        |   |    |       |        |   |    |    
|                                             |             | Secured by real estate  multifamily      |                   |      |      |       |        |      |    |      |        |   |    |     |        |   | 114 |       |        |   |    |    
|                                             |             | Construction                              |                   |      |      |       |        |      |    |      |        |   |    |     |        |   |    |       |        |   |    |    
|                                             |             | Business                                  |                   |      | 13    |       |        |      | 68  |      |        |   |    |     |        |   |    |       |        |   |    |    
|                                             |             |                                           |                   |      |       |       |        |      |     |      |        |   |     |     |        |   |     |       |        |  
|                                             |             |                                           | Total commercial  |      |       | 13    |        |      |     | 68   |        |   |     | 535 |        |   |     | 114   |        |   |     |    | 
|                                             |             |                                           |                   |      |       |       |        |      |     |      |        |   |     |     |        |   |     |       |        |  
|                                             | Consumer:   |                                           |                   |      |       |       |        |      |     |      |        |   |     |     |        |   |     |       |        |   |    
|                                             |             | Residential mortgage (one to four family) |                   |      |      |       |        |      |    |      |        |   |    |     |        |   |    |       |        |   | 25  |    
|                                             |             | Other                                     |                   |      | 30    |       |        |      | 82  |      |        |   | 15  |     |        |   | 20  |       |        |   | 24  |    
|                                             |             |                                           |                   |      |       |       |        |      |     |      |        |   |     |     |        |   |     |       |        |  
|                                             |             |                                           | Total consumer    |      |       | 30    |        |      |     | 82   |        |   |     | 15  |        |   |     | 20    |        |   |     | 49  | 
|                                             |             |                                           |                   |      |       |       |        |      |     |      |        |   |     |     |        |   |     |       |        |  
|                                             |             |                                           | Total recoveries  |      |       | 43    |        |      |     | 150  |        |   |     | 550 |        |   |     | 134   |        |   |     | 49  | 
|                                             |             |                                           |                   |      |       |       |        |      |     |      |        |   |     |     |        |   |     |       |        |  
|Balance at end of period                     |             | $                                         | 48,865            |      |       | $     | 34,550 |      |     | $    | 28,901 |   |     | $   | 19,503 |   |     | $     | 14,922 |  
|                                             |             |                                           |                   |      |       |       |        |      |     |      |        |   |     |     |        |   |     |       |        |  
|Allowance for loan losses to ending loans    |             |                                           | 1.61              | %    |       |       | 1.53   | %    |     |      | 1.50   | % |     |     | 1.16   | % |     |       | 1.00   | %
|Net charge-offs to average loans outstanding |             |                                           | 0.23              |      |       |       | 0.00   |      |     |      | 0.02   |   |     |     | 0.07   |   |     |       | 0.05   |  

During 2002, we increased the allowance for loan
losses to $48.9 million from $34.6 million at
December 31, 2001, an increase of $14.3 million, or
41.4%. This increase is 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 $9.7 million coupled with the
$8.9 million for allowance for loan losses from BCC, net of
net charge-offs of $5.5 million during the year. BCCs
allowance at the acquisition date of $8.9 million was
increased by $1.2 million by the Company to reflect a loss
from the sale of a problem loan acquired from BCC. The loan was
identified during the due diligence process, and the loss was
factored into the acquisition cost.

29



---



##### 



During 2001, we increased the allowance for loan
losses to $34.6 million from $28.9 million at
December 31, 2000, an increase of $5.6 million, or
19.5%. This increase was due primarily to the continued growth
of the commercial loan portfolio and the resulting increase in
the risk profile inherent in the loan portfolio. This increased
allowance resulted from a loan loss provision of
$5.6 million and net recoveries of $29,000 during the year.

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,       
|                                |                                           |                       
|                                |                                           |                        |        |        |        |        |        |       |       |       
|                                |                                           | 2002                   |        | 2001   |        | 2000   |        | 1999  |       | 1998  
|                                |                                           |                        |        |        |        |        |        |       |       |       
|                                |                                           | Amount                 |        | %      |        | Amount |        | %     |       | Amount |        | %      |        | Amount |        | %     |       | Amount |        | %     
|                                |                                           |                        |        |        |        |        |        |       |       |        |        |        |        |        |        |       |       |        |        |       
|                                |                                           |                       
|                                |                                           | (Dollars in Thousands)
|Allocated:                      |                                           |                        |        |        |        |        |        |       |       |        |        |        |        |        |        |       |       |        |        |        |        |  |        |       |       |   |        |       |        |  |        |       |       |   |        |       |       |  |        |      
|Commercial:                     |                                           |                        |        |        |        |        |        |       |       |        |        |        |        |        |        |       |       |        |        |        |        |  |        |       |       |   |        |       |        |  |        |       |       |   |        |       |       |  |        |      
|                                | Secured by real estate  nonresidential   |                        | $      | 18,647 |        |        |        | 42.20 | %     |        | $      | 11,435 |        |        |        | 35.22 | %     |        | $      | 10,321 |        |  |        | 30.91 | %     |   | $      | 5,823 |        |  |        | 25.77 | %     |   | $      | 2,847 |       |  |        | 15.39 | %    
|                                | Secured by real estate  multifamily      |                        |        | 8,977  |        |        |        | 30.16 |       |        |        | 6,087  |        |        |        | 29.86 |       |        |        | 4,572  |        |  |        | 26.61 |       |   |        | 2,919 |        |  |        | 25.11 |       |   |        | 2,237 |       |  |        | 23.26 |      
|                                | Construction                              |                        |        | 9,275  |        |        |        | 7.13  |       |        |        | 4,654  |        |        |        | 8.05  |       |        |        | 3,646  |        |  |        | 6.82  |       |   |        | 2,903 |        |  |        | 5.31  |       |   |        | 1,547 |       |  |        | 4.12  |      
|                                | Business                                  |                        |        | 7,017  |        |        |        | 8.63  |       |        |        | 4,401  |        |        |        | 7.21  |       |        |        | 2,788  |        |  |        | 5.14  |       |   |        | 1,259 |        |  |        | 3.52  |       |   |        | 837   |       |  |        | 3.10  |      
|                                |                                           |                        |        |        |        |        |        |       |       |        |        |        |        |        |        |       |       |        |        |        |        |  |        |       |       |   |        |       |        |  |        |       |       |   |        |       |       |  |        |      
|                                |                                           | Total commercial       |        |        | 43,916 |        |        |       | 88.12 |        |        |        | 26,577 |        |        |       | 80.34 |        |        |        | 21,327 |  |        |       | 69.48 |   |        |       | 12,904 |  |        |       | 59.71 |   |        |       | 7,468 |  |        |       | 45.87 | 
|                                |                                           |                        |        |        |        |        |        |       |       |        |        |        |        |        |        |       |       |        |        |        |        |  |        |       |       |   |        |       |        |  |        |       |       |   |        |       |       |  |        |      
|Consumer:                       |                                           |                        |        |        |        |        |        |       |       |        |        |        |        |        |        |       |       |        |        |        |        |  |        |       |       |   |        |       |        |  |        |       |       |   |        |       |       |  |        |      
|                                | Residential mortgage (one to four family) |                        |        | 1,555  |        |        |        | 10.25 |       |        |        | 2,187  |        |        |        | 18.96 |       |        |        | 2,930  |        |  |        | 29.68 |       |   |        | 1,709 |        |  |        | 39.45 |       |   |        | 2,184 |       |  |        | 53.01 |      
|                                | Other                                     |                        |        | 635    |        |        |        | 1.63  |       |        |        | 183    |        |        |        | 0.70  |       |        |        | 173    |        |  |        | 0.84  |       |   |        | 192   |        |  |        | 0.84  |       |   |        | 276   |       |  |        | 1.12  |      
|                                |                                           |                        |        |        |        |        |        |       |       |        |        |        |        |        |        |       |       |        |        |        |        |  |        |       |       |   |        |       |        |  |        |       |       |   |        |       |       |  |        |      
|                                |                                           | Total consumer         |        |        | 2,190  |        |        |       | 11.88 |        |        |        | 2,370  |        |        |       | 19.66 |        |        |        | 3,103  |  |        |       | 30.52 |   |        |       | 1,901  |  |        |       | 40.29 |   |        |       | 2,460 |  |        |       | 54.13 | 
|                                |                                           |                        |        |        |        |        |        |       |       |        |        |        |        |        |        |       |       |        |        |        |        |  |        |       |       |   |        |       |        |  |        |       |       |   |        |       |       |  |        |      
|Total allocated                 |                                           |                        | 46,106 |        |        |        | 100.00 | %     |       |        | 28,947 |        |        |        | 100.00 | %     |       |        | 24,430 |        |        |  | 100.00 | %     |       |   | 14,805 |       |        |  | 100.00 | %     |       |   | 9,928  |       |       |  | 100.00 | %    
|                                |                                           |                        |        |        |        |        |        |       |       |        |        |        |        |        |        |       |       |        |        |        |        |  |        |       |       |   |        |       |        |  |        |       |       |   |        |       |       |  |        |      
|Unallocated                     |                                           |                        | 2,759  |        |        |        |        |       |       |        | 5,603  |        |        |        |        |       |       |        | 4,471  |        |        |  |        |       |       |   | 4,698  |       |        |  |        |       |       |   | 4,994  |       |       |  |        |      
|                                |                                           |                        |        |        |        |        |        |       |       |        |        |        |        |        |        |       |       |        |        |        |        |  |        |       |       |   |        |       |        |  |        |       |       |   |        |       |       |  |        |      
|Total allowance for loan losses |                                           | $                      | 48,865 |        |        |        |        |       |       | $      | 34,550 |        |        |        |        |       |       | $      | 28,901 |        |        |  |        |       |       | $ | 19,503 |       |        |  |        |       |       | $ | 14,922 |       |       |  |        |      
|                                |                                           |                        |        |        |        |        |        |       |       |        |        |        |        |        |        |       |       |        |        |        |        |  |        |       |       |   |        |       |        |  |        |       |       |   |        |       |       |  |        |      

30



---



##### 



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

|                                               |                            |                        |   |         |           |           |   |         |           |           |   |         |         |  |   |         |         |  |   |         |         |  |   |        |         | 
|---------------------------------------------- | -------------------------- | ---------------------- | - | ------- | --------- | --------- | - | ------- | --------- | --------- | - | ------- | ------- |  | - | ------- | ------- |  | - | ------- | ------- |  | - | ------ | ------- | 
|                                               |                            |                       
|                                               |                            | At December 31,       
|                                               |                            |                       
|                                               |                            |                        |   |         |           |          
|                                               |                            | 2002                   |   | 2001    |           | 2000     
|                                               |                            |                        |   |         |           |          
|                                               |                            | Amortized              |   | Market  |           | Amortized |   | Market  |           | Amortized |   | Market 
|                                               |                            | Cost                   |   | Value   |           | Cost      |   | Value   |           | Cost      |   | Value  
|                                               |                            |                        |   |         |           |           |   |         |           |           |   |        
|                                               |                            |                       
|                                               |                            | (Dollars in Thousands)
|Investment securities available for sale:      |                            |                        |   |         |           |           |   |         |           |           |   |         |         |  |   |         |         |  |   |         |         |  |   |       
|                                               | Trust Preferred Securities |                        | $ | 62,313  |           |           | $ | 58,176  |           |           | $ | 100,327 |         |  | $ | 89,929  |         |  | $ | 101,149 |         |  | $ | 82,670 |        
|                                               | Federal Agency Notes       |                        |   | 45,252  |           |           |   | 45,304  |           |           |   | 36,507  |         |  |   | 36,378  |         |  |   |        |         |  |   |       |        
|                                               | Foreign Debt Securities    |                        |   | 8,017   |           |           |   | 8,014   |           |           |   |        |         |  |   |        |         |  |   |        |         |  |   |       |        
|                                               | Asset-backed Securities    |                        |   | 5,826   |           |           |   | 5,739   |           |           |   | 12,018  |         |  |   | 12,012  |         |  |   |        |         |  |   |       |        
|                                               | Municipals                 |                        |   | 360     |           |           |   | 360     |           |           |   |        |         |  |   |        |         |  |   |        |         |  |   |       |        
|                                               |                            |                        |   |         |           |           |   |         |           |           |   |         |         |  |   |         |         |  |   |         |         |  |   |       
|                                               |                            | Total                  |   | $       | 121,768   |           |   | $       | 117,593   |           |   | $       | 148,852 |  |   | $       | 138,319 |  |   | $       | 101,149 |  |   | $      | 82,670  | 
|                                               |                            |                        |   |         |           |           |   |         |           |           |   |         |         |  |   |         |         |  |   |         |         |  |   |       
|Mortgage-backed securities available for sale: |                            |                        |   |         |           |           |   |         |           |           |   |         |         |  |   |         |         |  |   |         |         |  |   |       
|                                               | FNMA                       |                        | $ | 577,731 |           |           | $ | 590,373 |           |           | $ | 206,902 |         |  | $ | 206,777 |         |  | $ | 91,426  |         |  | $ | 89,210 |        
|                                               | GNMA                       |                        |   | 280,263 |           |           |   | 286,153 |           |           |   | 145,091 |         |  |   | 145,395 |         |  |   | 92,353  |         |  |   | 91,737 |        
|                                               | FHLMC                      |                        |   | 289,094 |           |           |   | 289,959 |           |           |   | 47,747  |         |  |   | 46,928  |         |  |   |        |         |  |   |       |        
|                                               | Other                      |                        |   | 184,919 |           |           |   | 185,309 |           |           |   | 4,504   |         |  |   | 4,502   |         |  |   | 63,672  |         |  |   | 62,537 |        
|                                               |                            |                        |   |         |           |           |   |         |           |           |   |         |         |  |   |         |         |  |   |         |         |  |   |       
|                                               |                            | Total                  |   | $       | 1,332,007 |           |   | $       | 1,351,794 |           |   | $       | 404,244 |  |   | $       | 403,602 |  |   | $       | 247,451 |  |   | $      | 243,484 | 
|                                               |                            |                        |   |         |           |           |   |         |           |           |   |         |         |  |   |         |         |  |   |         |         |  |   |       
|Investment securities held to maturity:        |                            |                        |   |         |           |           |   |         |           |           |   |         |         |  |   |         |         |  |   |         |         |  |   |       
|                                               | Municipals                 |                        | $ | 111,049 |           |           | $ | 113,637 |           |           | $ | 50,444  |         |  | $ | 49,667  |         |  | $ | 43,648  |         |  | $ | 43,097 |        
|                                               |                            |                        |   |         |           |           |   |         |           |           |   |         |         |  |   |         |         |  |   |         |         |  |   |       
|Mortgage-backed securities held to maturity:   |                            |                        |   |         |           |           |   |         |           |           |   |         |         |  |   |         |         |  |   |         |         |  |   |       
|                                               | FNMA                       |                        | $ |        |           |           | $ |        |           |           | $ |        |         |  | $ |        |         |  | $ | 80,662  |         |  | $ | 77,576 |        
|                                               | FHLMC                      |                        |   |        |           |           |   |        |           |           |   |        |         |  |   |        |         |  |   | 35,725  |         |  |   | 34,257 |        
|                                               | Other                      |                        |   | 945     |           |           |   | 945     |           |           |   | 1,028   |         |  |   | 1,028   |         |  |   | 1,051   |         |  |   | 1,051  |        
|                                               |                            |                        |   |         |           |           |   |         |           |           |   |         |         |  |   |         |         |  |   |         |         |  |   |       
|                                               |                            | Total                  |   | $       | 945       |           |   | $       | 945       |           |   | $       | 1,028   |  |   | $       | 1,028   |  |   | $       | 117,438 |  |   | $      | 112,884 | 
|                                               |                            |                        |   |         |           |           |   |         |           |           |   |         |         |  |   |         |         |  |   |         |         |  |   |       
|                                               |                            | Total securities       |   | $       | 1,565,769 |           |   | $       | 1,583,969 |           |   | $       | 604,568 |  |   | $       | 592,616 |  |   | $       | 509,686 |  |   | $      | 482,135 | 
|                                               |                            |                        |   |         |           |           |   |         |           |           |   |         |         |  |   |         |         |  |   |         |         |  |   |       

At December 31, 2002, the carrying value of
the securities was $1.57 billion, and the market value was
$1.58 billion. At December 31, 2001, the carrying
value of the securities was $604.6 million, and the market
value was $592.6 million. At December 31, 2002, the
total unrealized gain on securities was $18.2 million. Of
this total, $15.6 million relates to securities that are
available for sale. The unrealized $15.6 million gain, net
of tax of $9.1 million, is included as an addition to
stockholders equity. The $2.6 million difference
between the carrying value and market value of securities that
are held to maturity has not been recognized in the financial
statements as of December 31, 2002.

Securities, including available for sale and held
to maturity, were $1.58 billion at December 31, 2002,
compared with $593.4 million at December 31, 2001. The
increase of $988.0 million, or 166.5%, in the securities
portfolio results primarily from the acquisition of BCC and
internal loan securitizations discussed above. At the time it
was acquired by the Company, BCC had a securities portfolio of
$865.0 million. To better manage the institutions
risk-based capital, we substantially restructured the BCC
portfolio by selling certain securities and purchasing new ones.
Total securities sales during the fourth quarter of 2002
relating to the BCC portfolio were $722.3 million. We
replaced the securities which were sold by purchasing
$708.7 million of new securities.

31



---



##### 



The following table presents the carrying value,
weighted average yields and contractual maturities of our
securities at December 31, 2002:

|                                               |                         |                        |     |                |        |                  |      |                 |      |          |    |          |        |          |      |          |      |          |         |          |         |  |      |      |      |   |         |   |           |  |      |   |      |   |         |        |           |  |      |      |      | 
|---------------------------------------------- | ----------------------- | ---------------------- | --- | -------------- | ------ | ---------------- | ---- | --------------- | ---- | -------- | -- | -------- | ------ | -------- | ---- | -------- | ---- | -------- | ------- | -------- | ------- |  | ---- | ---- | ---- | - | ------- | - | --------- |  | ---- | - | ---- | - | ------- | ------ | --------- |  | ---- | ---- | ---- | 
|                                               |                         |                       
|                                               |                         | At December 31, 2002  
|                                               |                         |                       
|                                               |                         |                        |     |                |        |                  |      |                
|                                               |                         |                        |     | After One Year |        | After Five Years |      |                
|                                               |                         |                        |     | Through        |        | Through          |      |                 |      |         
|                                               |                         | Within One Year        |     | Five Years     |        | Ten Years        |      | After Ten Years |      | Total   
|                                               |                         |                        |     |                |        |                  |      |                 |      |         
|                                               |                         | Book                   |     | Weighted       |        | Book             |      | Weighted        |      | Book     |    | Weighted |        | Book     |      | Weighted |      | Book     |         | 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                     |                         | $                      |    |                |        |                  |     | %               |      | $        |   |          |        |          |     | %        |      | $        |        |          |         |  |     | %    |      | $ | 58,176  |   |           |  | 8.47 | % |      | $ | 58,176  |        |           |  | 8.47 | %   
|                                               | Federal Agency Notes    |                        |     | 5,127          |        |                  |      | 1.49            |      |          |    | 20,238   |        |          |      | 1.82     |      |          |         | 19,939   |         |  |      | 4.62 |      |   |         |  |           |  |      |  |      |   |         | 45,304 |           |  |      | 3.01 |     
|                                               | Foreign Debt Securities |                        |     | 8,014          |        |                  |      | 2.68            |      |          |    |         |        |          |      |         |      |          |         |         |         |  |      |     |      |   |         |  |           |  |      |  |      |   |         | 8,014  |           |  |      | 2.68 |     
|                                               | Asset-backed Securities |                        |     |               |        |                  |      |                |      |          |    | 5,739    |        |          |      | 3.36     |      |          |         |         |         |  |      |     |      |   |         |  |           |  |      |  |      |   |         | 5,739  |           |  |      | 3.36 |     
|                                               | Municipals              |                        |     | 265            |        |                  |      | 2.81            |      |          |    |         |        |          |      |         |      |          |         | 95       |         |  |      | 4.25 |      |   |         |  |           |  |      |  |      |   |         | 360    |           |  |      | 3.19 |     
|                                               |                         |                        |     |                |        |                  |      |                 |      |          |    |          |        |          |      |          |      |          |         |          |         |  |      |      |      |   |         |   |           |  |      |   |      |   |         |        |           |  |      |     
|                                               |                         | Total                  |     |                | 13,406 |                  |      |                 | 2.23 |          |    |          | 25,977 |          |      |          | 2.16 |          |         |          | 20,034  |  |      |      | 4.61 |   |         |   | 58,176    |  |      |   | 8.47 |   |         |        | 117,593   |  |      |      | 5.71 | 
|                                               |                         |                        |     |                |        |                  |      |                 |      |          |    |          |        |          |      |          |      |          |         |          |         |  |      |      |      |   |         |   |           |  |      |   |      |   |         |        |           |  |      |     
|Mortgage-backed securities available for sale: |                         |                        |     |                |        |                  |      |                 |      |          |    |          |        |          |      |          |      |          |         |          |         |  |      |      |      |   |         |   |           |  |      |   |      |   |         |        |           |  |      |     
|FNMA                                           |                         |                        | 229 |                |        |                  | 3.36 | %               |      |          |   |          |        |          |     |          |      |          | 138,967 |          |         |  | 5.81 |      |      |   | 451,177 |   |           |  | 5.31 |   |      |   | 590,373 |        |           |  | 5.43 |     
|GNMA                                           |                         |                        |    |                |        |                  |     |                 |      |          |   |          |        |          |     |          |      |          |        |          |         |  |     |      |      |   | 286,154 |   |           |  | 5.96 |   |      |   | 286,154 |        |           |  | 5.96 |     
|FHLMC                                          |                         |                        |    |                |        |                  |     |                 |      |          |   |          |        |          |     |          |      |          |        |          |         |  |     |      |      |   | 289,958 |   |           |  | 4.68 |   |      |   | 289,958 |        |           |  | 4.68 |     
|Other                                          |                         |                        |    |                |        |                  |     |                 |      |          |   |          |        |          |     |          |      |          |        |          |         |  |     |      |      |   | 185,309 |   |           |  | 3.02 |   |      |   | 185,309 |        |           |  | 3.02 |     
|                                               |                         |                        |     |                |        |                  |      |                 |      |          |    |          |        |          |      |          |      |          |         |          |         |  |      |      |      |   |         |   |           |  |      |   |      |   |         |        |           |  |      |     
|                                               |                         | Total                  |     |                | 229    |                  |      |                 | 3.36 | %        |    |          |       |          |      |          |     |          |         |          | 138,967 |  |      |      | 5.81 |   |         |   | 1,212,598 |  |      |   | 4.96 |   |         |        | 1,351,794 |  |      |      | 5.05 | 
|                                               |                         |                        |     |                |        |                  |      |                 |      |          |    |          |        |          |      |          |      |          |         |          |         |  |      |      |      |   |         |   |           |  |      |   |      |   |         |        |           |  |      |     
|Investment securities held to maturity:        |                         |                        |     |                |        |                  |      |                 |      |          |    |          |        |          |      |          |      |          |         |          |         |  |      |      |      |   |         |   |           |  |      |   |      |   |         |        |           |  |      |     
|Municipals                                     |                         |                        |    |                |        |                  |     |                 |      |          |   |          |        |          |     |          |      |          |        |          |         |  |     |      |      |   | 111,049 |   |           |  | 3.06 |   |      |   | 111,049 |        |           |  | 3.06 |     
|                                               |                         |                        |     |                |        |                  |      |                 |      |          |    |          |        |          |      |          |      |          |         |          |         |  |      |      |      |   |         |   |           |  |      |   |      |   |         |        |           |  |      |     
|Mortgage-backed securities held to maturity:   |                         |                        |     |                |        |                  |      |                 |      |          |    |          |        |          |      |          |      |          |         |          |         |  |      |      |      |   |         |   |           |  |      |   |      |   |         |        |           |  |      |     
|Other mortgage-backed securities               |                         |                        |    |                |        |                  |     |                 |      |          | 17 |          |        |          | 7.38 |          |      |          | 1       |          |         |  | 1.46 |      |      |   | 927     |   |           |  | 7.46 |   |      |   | 945     |        |           |  | 7.45 |     
|                                               |                         |                        |     |                |        |                  |      |                 |      |          |    |          |        |          |      |          |      |          |         |          |         |  |      |      |      |   |         |   |           |  |      |   |      |   |         |        |           |  |      |     
|                                               |                         | Total securities       |     | $              | 13,635 |                  |      |                 | 2.25 | %        |    | $        | 25,994 |          |      |          | 2.16 |          |         | $        | 159,002 |  |      |      | 5.66 |   |         | $ | 1,382,750 |  |      |   | 4.96 |   |         | $      | 1,581,381 |  |      |      | 4.96 | 
|                                               |                         |                        |     |                |        |                  |      |                 |      |          |    |          |        |          |      |          |      |          |         |          |         |  |      |      |      |   |         |   |           |  |      |   |      |   |         |        |           |  |      |     

Deposits.Deposits
have traditionally been our primary source of funds to use in
lending and investment activities. At December 31, 2002,
62.4% of our deposits were time deposits, 20.3% were NOW, demand
deposit and money market accounts, and 17.3% were savings
accounts. By comparison, at December 31, 2001, 64.4% of our
deposits were time deposits, 17.3% were NOW, demand deposit and
money market accounts, and 18.3% were savings accounts.

We obtain our deposits primarily from the
communities we serve. No material portion of our deposits is
from or is dependent upon any one person or industry. At
December 31, 2002, less than 8% of our deposits were held
by customers located outside of the United States. Additionally,
at that date the 100 depositors with the largest aggregate
average deposit balances made up less than 17% of our total
deposits. Our business is not seasonal in nature. We accept
deposits over $100,000 from customers. Included in the figure
for time deposits at December 31, 2002 is
$1.39 billion of deposits of $100,000 or greater, compared
to $717.3 million at December 31, 2001. Such deposits
made up 34.8% of total deposits at December 31, 2002,
compared to 29.1% at December 31, 2001. At
December 31, 2002 and 2001, we did not have any brokered
deposits.

Our average cost of deposits during 2002 was
2.16% as compared to 3.88% for 2001 and 4.31% for 2000. At
December 31, 2001, our average interest rate paid on
deposits was 1.90%.

In conjunction with the BCC acquisition, which
closed on October 28, 2002, the Bank acquired
$1.25 billion in deposits. Of that total,
$333.1 million were represented by core deposits and
$913.5 million by time deposits. Core deposits include NOW,
checking, and money market accounts and savings accounts. Core
deposits increased 71.5% to $1.50 billion at the end of
2002, compared to $877.1 million for the year ended

32



---



##### 



December 31, 2001. This growth in core
deposits resulted primarily from the acquisition of BCC, the
Banks continued focus on developing new commercial
relationships, and further expansion into the Banks retail
niche market, the ethnic Chinese community. Time deposits
increased 57.5% to $2.50 billion at December 31, 2002,
from $1.59 billion at December 31, 2001, also as a
result of the acquisition of BCC and expansion into the
Banks retail niche market.


In December 2002, the Bank completed the
acquisition of certain assets and liabilities of a bank branch
in Brooklyn, New York. The total deposits acquired were
$13.5 million, of which $6.8 million were core
deposits, and $6.7 million were certificates of deposit.

Core deposits increased 38.7% to
$877.1 million at the end of 2001, compared to
$632.3 million for the year ended December 31, 2000.
This growth in core deposits resulted primarily from the
Banks continued focus on developing new and expanding
existing commercial and consumer relationships in the ethnic
Chinese community, its retail niche market. Time deposits
increased 11.0% to $1.59 billion at December 31, 2001
from $1.43 billion at December 31, 2000, also as a
result of expansion into the Banks retail niche market.
Total deposits increased 19.5% to $2.47 billion at
December 31, 2001 from $2.06 billion at
December 31, 2000.

The following table presents the time to maturity
of the time deposit accounts at December 31, 2002:

|                        |  |                        |           | 
|----------------------- |  | ---------------------- | --------- | 
|Maturity Period         |  | Amount                
|                        |  |                       
|                        |  | (Dollars in Thousands)
|Within one year         |  | $                      | 2,142,024 | 
|One through three years |  |                        | 354,340   | 
|Thereafter              |  |                        | 6,009     | 
|                        |  |                        |           | 
|                        |  | $                      | 2,502,373 | 
|                        |  |                        |           | 

At December 31, 2002, the Bank had
$1.39 billion in certificate accounts in amounts of
$100,000 or more maturing as follows:

|                         |       |                        |         |           | 
|------------------------ | ----- | ---------------------- | ------- | --------- | 
|Maturity Period          |       | Amount                
|                         |       |                       
|                         |       | (Dollars in Thousands)
|Three months or less     |       | $                      | 436,852 |          
|Over 3 through 6 months  |       |                        | 227,909 |          
|Over 6 through 12 months |       |                        | 525,418 |          
|Over 12 months           |       |                        | 202,561 |          
|                         |       |                        |         |          
|                         | Total |                        | $       | 1,392,740 | 
|                         |       |                        |         |          

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. 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, 2002, we had $353.4 million
of advances outstanding and $238.0 million outstanding at
December 31, 2001. The increase in the outstanding
borrowings related primarily to the acquisition of BCC for which
we borrowed $80.6 million. At December 31, 2002, we
had $605.2 million of additional FHLB borrowings that we
could utilize.

Included in the $353.4 million of FHLB
advances as of December 31, 2002 were $77.5 million of
short-term, fixed-rate advances that mature within one year. Of
the $275.9 million in long-term advances,
$59.9 million mature between 2004 and 2008. An additional
$216.0 million of the advances mature in 2008 with
provisions which 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
original advance dates. As of December 31, 2002,
$136.0 million of these advances may be terminated at the
option of the FHLB.

33



---



##### 



During 2002, the Company established a borrowing
line of $10.0 million with Wells Fargo Bank for liquidity
purposes. The interest rate on the line is 2.45%. The Company
has taken no advances under the terms of the line.

Guaranteed Preferred Beneficial Interests in
Junior 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 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.

The Company had $136.0 million of TPS
outstanding at December 31, 2002, compared with
$36.0 million at December 31, 2001. The proceeds of
the 2002 issuances were primarily used to fund the acquisition
of BCC in October 2002.

Contractual Obligation and Off-Balance Sheet
Arrangements.The following table
presents, as of December 31, 2002, the Companys
significant contractual obligations by payment date. The payment
amounts represent those amounts contractually due to the
recipient. Further discussion of the nature of each obligation
is included in the referenced note to the consolidated financial
statements.

|                                                                                |  |                 |    |      |  |      |           |                        |  |      |         |      |  |                |        |  |  |   |        |  |  |   |       |  |  |   |         | 
|------------------------------------------------------------------------------- |  | --------------- | -- | ---- |  | ---- | --------- | ---------------------- |  | ---- | ------- | ---- |  | -------------- | ------ |  |  | - | ------ |  |  | - | ----- |  |  | - | ------- | 
|                                                                                |  |                
|                                                                                |  | Payments Due In
|                                                                                |  |                
|                                                                                |  | Note            |    | 2003 |  | 2004 |           | 2005                   |  | 2006 |         | 2007 |  | 2008 and after
|                                                                                |  |                 |    |      |  |      |           |                        |  |      |         |      |  |               
|                                                                                |  |                 |    |      |  |      |           |                        |  |     
|                                                                                |  |                 |    |      |  |      |           | (Dollars in Thousands) |  |     
|Time deposits                                                                   |  |                 | 8  |      |  | $    | 2,142,024 |                        |  | $    | 339,397 |      |  | $              | 14,943 |  |  | $ | 3,221  |  |  | $ | 2,782 |  |  | $ | 6       | 
|Borrowings                                                                      |  |                 | 9  |      |  |      | 77,500    |                        |  |      | 4,000   |      |  |                | 6,000  |  |  |   | 16,019 |  |  |   | 6,000 |  |  |   | 243,855 | 
|Guaranteed preferred beneficial interests in
    junior subordinated debentures |  |                 | 10 |      |  |      |          |                        |  |      |        |      |  |                |       |  |  |   |       |  |  |   |      |  |  |   | 136,000 | 
|Lease payment commitments                                                       |  |                 | 18 |      |  |      | 4,549     |                        |  |      | 3,313   |      |  |                | 2,637  |  |  |   | 2,051  |  |  |   | 1,732 |  |  |   | 7,316   | 

The following table presents significant
commitments at December 31, 2002 (dollars in millions):

|                                      |                                           |      |      |       | 
|------------------------------------- | ----------------------------------------- | ---- | ---- | ----- | 
|                                      |                                           | 2002
|                                      |                                           |     
|Commitments to extend credit:         |                                           |      |      |      
|                                      | Consumer (including residential mortgage) |      | $    | 86.5  | 
|                                      | Commercial (excluding construction)       |      |      | 342.1 | 
|                                      | Construction                              |      |      | 188.6 | 
|                                      | Letters of credit                         |      |      | 49.1  | 
|Foreign exchange contracts receivable |                                           |      | 10.2 |      
|Foreign exchange contracts payable    |                                           |      | 10.2 |      
|Commitments to purchase securities    |                                           |      | 17.3 |      

Stockholders Equity.On October 28, 2002, the Company
issued 1.3 million common shares with an aggregate value of
$51.2 million in conjunction with the acquisition of BCC.
Total common shares outstanding at December 31, 2002 were
21.0 million, compared with 19.4 million outstanding
at December 31, 2001.

Liquidity and Capital Resources.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

34



---



##### 



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, 2002, we had
$2.14 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, 2002, both the Company and
the Bank met all of their regulatory capital requirements with
risk-based capital ratios of 11.52% and 10.95%, respectively.

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 of changes in interest rates that
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 may 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, and determine an
appropriate level of risk. Our Board of Directors has adopted
guidelines within which we manage our interest rate risk, trying
to minimize to the extent practical our vulnerability to changes
in interest rates.

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 projects the effect that changes in interest
rates will have 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. The change in NPV measures our
vulnerability to changes in interest rates by estimating the
change in the market value of our assets, liabilities and
off-balance-sheet items as a result of an instantaneous change
in the general level of interest rates.

As market interest rates decrease, the average
maturities of our loans and investment securities shorten due to
quicker prepayments, causing a relatively moderate increase in
their value. Our deposit accounts have 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
maturities of our loans and securities lengthen 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. The net effect is a decline in NPV.

We may use certain derivative financial
instruments, 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. As of December 31, 2002,
there were no derivative financial instruments being used.

35



---



##### 



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, 2002 and 2001 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.

|                                         |  |                                          |         |          |  |          |         |   |  |  |        |  
|---------------------------------------- |  | ---------------------------------------- | ------- | -------- |  | -------- | ------- | - |  |  | ------ | -
|                                         |  |                                         
|Change in Interest Rates in Basis Points |  | Net Portfolio Value at December 31, 2002
|                                         |  |                                         
|(Rate Shock)                             |  | Amount                                   |         | $ Change |  | % Change
|                                         |  |                                          |         |          |  |         
|                                         |  |                                         
|                                         |  | (Dollars in Thousands)                  
|200                                      |  | $                                        | 380,195 |          |  | $        | (84,116 | ) |  |  | -18.12 | %
|100                                      |  |                                          | 433,780 |          |  |          | (30,531 | ) |  |  | -6.58  |  
|0                                        |  |                                          | 464,311 |          |  |          |        |   |  |  |       |  
|(100)                                    |  |                                          | 474,999 |          |  |          | 10,688  |   |  |  | 2.30   |  
|(200)                                    |  |                                          | 433,416 |          |  |          | (30,895 | ) |  |  | -6.65  |  

|                                         |  |                                          |         |          |  |          |         |   |  |  |        |  
|---------------------------------------- |  | ---------------------------------------- | ------- | -------- |  | -------- | ------- | - |  |  | ------ | -
|                                         |  |                                         
|Change in Interest Rates in Basis Points |  | Net Portfolio Value at December 31, 2001
|                                         |  |                                         
|(Rate Shock)                             |  | Amount                                   |         | $ Change |  | % Change
|                                         |  |                                          |         |          |  |         
|                                         |  |                                         
|                                         |  | (Dollars in Thousands)                  
|200                                      |  | $                                        | 310,107 |          |  | $        | (67,573 | ) |  |  | -17.89 | %
|100                                      |  |                                          | 351,964 |          |  |          | (25,716 | ) |  |  | -6.81  |  
|0                                        |  |                                          | 377,679 |          |  |          |        |   |  |  |       |  
|(100)                                    |  |                                          | 405,250 |          |  |          | 27,570  |   |  |  | 7.30   |  
|(200)                                    |  |                                          | 393,271 |          |  |          | 15,592  |   |  |  | 4.13   |  

The NPV model that we use has some shortcomings.
We have to make certain assumptions that 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.

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 24, 2003, the stock
closed at $41.81. The common stocks high and low bid price
for each of the four quarters ended December 31, 2002 and
December 31, 2001 were as follows:

|                                 |  |         |       |         |  |         |       |         |  |         |       |         |  |         |       |         |  |   |       |  |  |   |       |  |  |   |       |  |  |   |       | 
|-------------------------------- |  | ------- | ----- | ------- |  | ------- | ----- | ------- |  | ------- | ----- | ------- |  | ------- | ----- | ------- |  | - | ----- |  |  | - | ----- |  |  | - | ----- |  |  | - | ----- | 
|                                 |  | 2002    |       | 2002    |  | 2002    |       | 2002    |  | 2001    |       | 2001    |  | 2001    |       | 2001   
|                                 |  | Fourth  |       | Third   |  | Second  |       | First   |  | Fourth  |       | Third   |  | Second  |       | First  
|                                 |  | Quarter |       | Quarter |  | Quarter |       | Quarter |  | Quarter |       | Quarter |  | Quarter |       | Quarter
|                                 |  |         |       |         |  |         |       |         |  |         |       |         |  |         |       |        
|High bid price during quarter(1) |  | $       | 43.42 |         |  | $       | 43.05 |         |  | $       | 40.78 |         |  | $       | 35.98 |         |  | $ | 31.75 |  |  | $ | 32.50 |  |  | $ | 30.35 |  |  | $ | 28.38 | 
|Low bid price during quarter(1)  |  | $       | 33.71 |         |  | $       | 35.65 |         |  | $       | 35.96 |         |  | $       | 27.48 |         |  | $ | 25.70 |  |  | $ | 26.64 |  |  | $ | 20.94 |  |  | $ | 20.63 | 



---



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

As of December 31, 2002, there were 12,305
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 $0.16 per share in 2001 and $0.20 per share
in 2002.

36



---



##### 



[PRICEWATERHOUSECOOPERS LOGO]

REPORT OF INDEPENDENT ACCOUNTANTS

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

In our opinion, the accompanying consolidated
balance sheets and the related consolidated statements of
income, of changes in stockholders equity and of cash
flows present fairly, in all material respects, the financial
position of UCBH Holdings, Inc. and its subsidiaries (the
Company) at December 31, 2002 and 2001, and the
results of their operations and their cash flows for each of the
three years in the period ended December 31, 2002, 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 auditing standards generally
accepted in the United States of America, which require that we
plan and perform the audits to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit 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.

PricewaterhouseCoopers LLP

San Francisco, California

February 10, 2003


37



---



##### 



UCBH HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)


|                                                                                                                                                                                                                            |                                            |              |           |           |  |   |           |           | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------------ | --------- | --------- |  | - | --------- | --------- | 
|                                                                                                                                                                                                                            |                                            |             
|                                                                                                                                                                                                                            |                                            | December 31,
|                                                                                                                                                                                                                            |                                            |             
|                                                                                                                                                                                                                            |                                            | 2002         |           | 2001     
|                                                                                                                                                                                                                            |                                            |              |           |          
|ASSETS                                                                                                                                                                                                                     
|Cash and due from banks                                                                                                                                                                                                     |                                            | $            | 58,954    |           |  | $ | 32,606    |          
|Investment and mortgage-backed securities
    available for sale, at fair value                                                                                                                                             |                                            |              | 1,469,387 |           |  |   | 541,921   |          
|Investment and mortgage-backed securities held to
    maturity (fair value $114,582 at December 31, 2002 and
    $50,695 at December 31, 2001)                                                                              |                                            |              | 111,994   |           |  |   | 51,472    |          
|Federal Home Loan Bank stock and other equity
    securities                                                                                                                                                                |                                            |              | 40,162    |           |  |   | 22,989    |          
|Loans                                                                                                                                                                                                                       |                                            |              | 3,027,810 |           |  |   | 2,264,303 |          
|Allowance for loan losses                                                                                                                                                                                                   |                                            |              | (48,865   | )         |  |   | (34,550   | )        
|                                                                                                                                                                                                                            |                                            |              |           |           |  |   |           |          
|Net loans                                                                                                                                                                                                                   |                                            |              | 2,978,945 |           |  |   | 2,229,753 |          
|                                                                                                                                                                                                                            |                                            |              |           |           |  |   |           |          
|Accrued interest receivable                                                                                                                                                                                                 |                                            |              | 22,641    |           |  |   | 16,593    |          
|Premises and equipment, net                                                                                                                                                                                                 |                                            |              | 81,697    |           |  |   | 19,669    |          
|Goodwill                                                                                                                                                                                                                    |                                            |              | 46,052    |           |  |   |          |          
|Intangible assets                                                                                                                                                                                                           |                                            |              | 10,734    |           |  |   |          |          
|Other assets                                                                                                                                                                                                                |                                            |              | 33,070    |           |  |   | 17,040    |          
|                                                                                                                                                                                                                            |                                            |              |           |           |  |   |           |          
|                                                                                                                                                                                                                            | Total assets                               |              | $         | 4,853,636 |  |   | $         | 2,932,043 | 
|                                                                                                                                                                                                                            |                                            |              |           |           |  |   |           |          
|LIABILITIES                                                                                                                                                                                                                
|Deposits                                                                                                                                                                                                                    |                                            | $            | 4,006,813 |           |  | $ | 2,466,152 |          
|Borrowings                                                                                                                                                                                                                  |                                            |              | 353,374   |           |  |   | 238,000   |          
|Guaranteed preferred beneficial interests in
    junior subordinated debentures                                                                                                                                             |                                            |              | 136,000   |           |  |   | 36,000    |          
|Accrued interest payable                                                                                                                                                                                                    |                                            |              | 11,659    |           |  |   | 4,080     |          
|Other liabilities                                                                                                                                                                                                           |                                            |              | 63,423    |           |  |   | 13,687    |          
|                                                                                                                                                                                                                            |                                            |              |           |           |  |   |           |          
|                                                                                                                                                                                                                            | Total liabilities                          |              |           | 4,571,269 |  |   |           | 2,757,919 | 
|                                                                                                                                                                                                                            |                                            |              |           |           |  |   |           |          
|Commitments and contingencies                                                                                                                                                                                               |                                            |              |          |           |  |   |          |          
|STOCKHOLDERS EQUITY                                                                                                                                                                                                       
|Preferred stock, $.01 par value, authorized
    10,000,000 shares, none issued and outstanding                                                                                                                              |                                            |              |          |           |  |   |          |          
|Common stock, $.01 par value, authorized
    90,000,000 shares at December 31, 2002 and at
    December 31, 2001, shares issued and outstanding 21,009,364
    at December 31, 2002 and 19,359,282 at December 31,
    2001 |                                            |              | 210       |           |  |   | 194       |          
|Additional paid-in capital                                                                                                                                                                                                  |                                            |              | 124,440   |           |  |   | 66,685    |          
|Accumulated other comprehensive income (loss)                                                                                                                                                                               |                                            |              | 9,053     |           |  |   | (6,481    | )        
|Retained earnings  substantially
    restricted                                                                                                                                                                            |                                            |              | 148,664   |           |  |   | 113,726   |          
|                                                                                                                                                                                                                            |                                            |              |           |           |  |   |           |          
|                                                                                                                                                                                                                            | Total stockholders equity                 |              |           | 282,367   |  |   |           | 174,124   | 
|                                                                                                                                                                                                                            |                                            |              |           |           |  |   |           |          
|                                                                                                                                                                                                                            | Total liabilities and stockholders equity |              | $         | 4,853,636 |  |   | $         | 2,932,043 | 
|                                                                                                                                                                                                                            |                                            |              |           |           |  |   |           |          

The accompanying notes are an integral part of
these financial statements.

38



---



##### 



UCBH HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in Thousands, Except for Per Share
Data)


|                             |                                                                                 |                                                         |        |         |         |      |        |         |         |   |        |         |         | 
|---------------------------- | ------------------------------------------------------------------------------- | ------------------------------------------------------- | ------ | ------- | ------- | ---- | ------ | ------- | ------- | - | ------ | ------- | ------- | 
|                             |                                                                                 |                                                        
|                             |                                                                                 | For the Years Ended December 31,                       
|                             |                                                                                 |                                                        
|                             |                                                                                 | 2002                                                    |        | 2001    |         | 2000
|                             |                                                                                 |                                                         |        |         |         |     
|Interest income:             |                                                                                 |                                                         |        |         |         |      |        |         |         |   |        |        
|                             | Loans                                                                           |                                                         | $      | 156,983 |         |      | $      | 164,328 |         |   | $      | 152,494 |        
|                             | Funds sold and securities purchased under
    agreements to resell              |                                                         |        | 156     |         |      |        | 1,101   |         |   |        | 52      |        
|                             | Investment and mortgage-backed securities                                       |                                                         |        | 48,039  |         |      |        | 37,358  |         |   |        | 34,142  |        
|                             |                                                                                 |                                                         |        |         |         |      |        |         |         |   |        |        
|                             |                                                                                 | Total interest income                                   |        |         | 205,178 |      |        |         | 202,787 |   |        |         | 186,688 | 
|                             |                                                                                 |                                                         |        |         |         |      |        |         |         |   |        |        
|Interest expense:            |                                                                                 |                                                         |        |         |         |      |        |         |         |   |        |        
|                             | Deposits                                                                        |                                                         |        | 61,236  |         |      |        | 87,435  |         |   |        | 77,003  |        
|                             | Short-term borrowings                                                           |                                                         |        | 565     |         |      |        | 972     |         |   |        | 10,947  |        
|                             | Guaranteed preferred beneficial interests in
    junior subordinated debentures |                                                         |        | 4,653   |         |      |        | 2,844   |         |   |        | 2,812   |        
|                             | Long-term borrowings                                                            |                                                         |        | 13,778  |         |      |        | 13,079  |         |   |        | 12,942  |        
|                             |                                                                                 |                                                         |        |         |         |      |        |         |         |   |        |        
|                             |                                                                                 | Total interest expense                                  |        |         | 80,232  |      |        |         | 104,330 |   |        |         | 103,704 | 
|                             |                                                                                 |                                                         |        |         |         |      |        |         |         |   |        |        
|                             |                                                                                 | Net interest income                                     |        |         | 124,946 |      |        |         | 98,457  |   |        |         | 82,984  | 
|Provision for loan losses    |                                                                                 |                                                         | 9,673  |         |         |      | 5,620  |         |         |   | 9,765  |        
|                             |                                                                                 |                                                         |        |         |         |      |        |         |         |   |        |        
|                             |                                                                                 | Net interest income after provision for loan
    losses |        |         | 115,273 |      |        |         | 92,837  |   |        |         | 73,219  | 
|                             |                                                                                 |                                                         |        |         |         |      |        |         |         |   |        |        
|Noninterest income:          |                                                                                 |                                                         |        |         |         |      |        |         |         |   |        |        
|                             | Commercial banking fees                                                         |                                                         |        | 4,845   |         |      |        | 3,324   |         |   |        | 2,515   |        
|                             | Service charges on deposits                                                     |                                                         |        | 1,704   |         |      |        | 1,342   |         |   |        | 1,000   |        
|                             | Gain on sale of securities                                                      |                                                         |        | 3,398   |         |      |        | 602     |         |   |        | 135     |        
|                             | Gain on sale of loans                                                           |                                                         |        | 1,838   |         |      |        | 1,445   |         |   |        | 858     |        
|                             | Miscellaneous income                                                            |                                                         |        | 357     |         |      |        | 192     |         |   |        | 243     |        
|                             |                                                                                 |                                                         |        |         |         |      |        |         |         |   |        |        
|                             |                                                                                 | Total noninterest income                                |        |         | 12,142  |      |        |         | 6,905   |   |        |         | 4,751   | 
|                             |                                                                                 |                                                         |        |         |         |      |        |         |         |   |        |        
|Noninterest expense:         |                                                                                 |                                                         |        |         |         |      |        |         |         |   |        |        
|                             | Personnel                                                                       |                                                         |        | 29,965  |         |      |        | 24,959  |         |   |        | 19,847  |        
|                             | Occupancy                                                                       |                                                         |        | 5,326   |         |      |        | 5,303   |         |   |        | 4,939   |        
|                             | Data processing                                                                 |                                                         |        | 3,463   |         |      |        | 2,878   |         |   |        | 2,284   |        
|                             | Furniture and equipment                                                         |                                                         |        | 2,614   |         |      |        | 2,723   |         |   |        | 2,350   |        
|                             | Professional fees and contracted services                                       |                                                         |        | 5,626   |         |      |        | 3,848   |         |   |        | 2,297   |        
|                             | Deposit insurance                                                               |                                                         |        | 467     |         |      |        | 393     |         |   |        | 344     |        
|                             | Communication                                                                   |                                                         |        | 726     |         |      |        | 593     |         |   |        | 491     |        
|                             | Foreclosed assets                                                               |                                                         |        | 2       |         |      |        | 11      |         |   |        | 80      |        
|                             | Intangible amortization                                                         |                                                         |        | 227     |         |      |        |        |         |   |        |        |        
|                             | Litigation settlement                                                           |                                                         |        | 6,750   |         |      |        |        |         |   |        |        |        
|                             | Miscellaneous expense                                                           |                                                         |        | 9,183   |         |      |        | 8,588   |         |   |        | 7,467   |        
|                             |                                                                                 |                                                         |        |         |         |      |        |         |         |   |        |        
|                             |                                                                                 | Total noninterest expense                               |        |         | 64,349  |      |        |         | 49,296  |   |        |         | 40,099  | 
|                             |                                                                                 |                                                         |        |         |         |      |        |         |         |   |        |        
|Income before taxes          |                                                                                 |                                                         | 63,066 |         |         |      | 50,446 |         |         |   | 37,871 |        
|Income tax expense           |                                                                                 |                                                         | 24,138 |         |         |      | 19,958 |         |         |   | 13,743 |        
|                             |                                                                                 |                                                         |        |         |         |      |        |         |         |   |        |        
|                             |                                                                                 | Net income                                              |        | $       | 38,928  |      |        | $       | 30,488  |   |        | $       | 24,128  | 
|                             |                                                                                 |                                                         |        |         |         |      |        |         |         |   |        |        
|Basic earnings per share     |                                                                                 | $                                                       | 1.96   |         |         | $    | 1.60   |         |         | $ | 1.29   |        
|                             |                                                                                 |                                                         |        |         |         |      |        |         |         |   |        |        
|Diluted earnings per share   |                                                                                 | $                                                       | 1.88   |         |         | $    | 1.53   |         |         | $ | 1.24   |        
|                             |                                                                                 |                                                         |        |         |         |      |        |         |         |   |        |        
|Dividends declared per share |                                                                                 | $                                                       | 0.20   |         |         | $    | 0.16   |         |         | $ | 0.10   |        
|                             |                                                                                 |                                                         |        |         |         |      |        |         |         |   |        |        

The accompanying notes are an integral part of
these financial statements.

39



---



##### 



UCBH HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2002, 2001,
AND 2000


(Dollars in Thousands)


|                             |                                                                                       |              |            |            |  |               |     |                  |  |               |         |               |   |        |         |        |  |   |         |        |   |   |         |        |   |  |   |        | 
|---------------------------- | ------------------------------------------------------------------------------------- | ------------ | ---------- | ---------- |  | ------------- | --- | ---------------- |  | ------------- | ------- | ------------- | - | ------ | ------- | ------ |  | - | ------- | ------ | - | - | ------- | ------ | - |  | - | ------ | 
|                             |                                                                                       |              |            |            |  | Accumulated   |     |                  |  |               |         |              
|                             |                                                                                       | Common Stock |            | Additional |  | Other         |     |                  |  | Total         |         |              
|                             |                                                                                       |              |            | Paid-in    |  | Comprehensive |     | Retained         |  | Stockholders |         | Comprehensive
|                             |                                                                                       | Shares       |            | Amount     |  | Capital       |     | Income (Loss)(1) |  | Earnings      |         | Equity        |   | Income
|                             |                                                                                       |              |            |            |  |               |     |                  |  |               |         |               |   |       
|Balance at December 31, 1999 |                                                                                       |              | 18,666,666 |            |  | $             | 93  |                  |  | $             | 59,485  |               |   | $      | (13,419 | )      |  | $ | 63,948  |        |   | $ | 110,107 |        |   |  |   |       
|                             | Net income                                                                            |              |            |           |  |               |     |                 |  |               |         |              |   |        |         |       |  |   |         | 24,128 |   |   |         | 24,128 |   |  | $ | 24,128 | 
|                             | Other comprehensive income (loss) net of
    tax(1)                                   |              |            |           |  |               |     |                 |  |               |         |              |   |        |         | 400    |  |   |         |       |   |   |         | 400    |   |  |   | 400    | 
|                             |                                                                                       |              |            |            |  |               |     |                  |  |               |         |               |   |        |         |        |  |   |         |        |   |   |         |        |   |  |   |       
|                             | Comprehensive income                                                                  |              |            |           |  |               |     |                 |  |               |         |              |   |        |         |       |  |   |         |       |   |   |         |       |   |  | $ | 24,528 | 
|                             |                                                                                       |              |            |            |  |               |     |                  |  |               |         |               |   |        |         |        |  |   |         |        |   |   |         |        |   |  |   |       
|                             | Stock options exercised, including related tax
    benefit                            |              |            | 82,942     |  |               |     | 1                |  |               |         | 881           |   |        |         |       |  |   |         |       |   |   |         | 882    |   |  |   |        | 
|                             | Cash dividend $0.10 share                                                             |              |            |           |  |               |     |                 |  |               |         |              |   |        |         |       |  |   |         | (1,872 | ) |   |         | (1,872 | ) |  |   |        | 
|                             |                                                                                       |              |            |            |  |               |     |                  |  |               |         |               |   |        |         |        |  |   |         |        |   |   |         |        |   |  |   |       
|Balance at December 31, 2000 |                                                                                       |              | 18,749,608 |            |  |               | 94  |                  |  |               | 60,366  |               |   |        | (13,019 | )      |  |   | 86,204  |        |   |   | 133,645 |        |   |  |   |       
|                             |                                                                                       |              |            |            |  |               |     |                  |  |               |         |               |   |        |         |        |  |   |         |        |   |   |         |        |   |  |   |       
|                             | Net income                                                                            |              |            |           |  |               |     |                 |  |               |         |              |   |        |         |       |  |   |         | 30,488 |   |   |         | 30,488 |   |  | $ | 30,488 | 
|                             | Other comprehensive income, net of tax(1)                                             |              |            |           |  |               |     |                 |  |               |         |              |   |        |         | 6,538  |  |   |         |       |   |   |         | 6,538  |   |  |   | 6,538  | 
|                             |                                                                                       |              |            |            |  |               |     |                  |  |               |         |               |   |        |         |        |  |   |         |        |   |   |         |        |   |  |   |       
|                             | Comprehensive income                                                                  |              |            |           |  |               |     |                 |  |               |         |              |   |        |         |       |  |   |         |       |   |   |         |       |   |  | $ | 37,026 | 
|                             |                                                                                       |              |            |            |  |               |     |                  |  |               |         |               |   |        |         |        |  |   |         |        |   |   |         |        |   |  |   |       
|                             | Stock options exercised, including related tax
    benefit                            |              |            | 609,674    |  |               |     | 6                |  |               |         | 6,413         |   |        |         |       |  |   |         |       |   |   |         | 6,419  |   |  |   |        | 
|                             | Cash dividend $0.16 per share                                                         |              |            |           |  |               |     |                 |  |               |         |              |   |        |         |       |  |   |         | (2,966 | ) |   |         | (2,966 | ) |  |   |        | 
|                             | Stock split                                                                           |              |            |           |  |               |     | 94               |  |               |         | (94           | ) |        |         |       |  |   |         |       |   |   |         |       |   |  |   |        | 
|                             |                                                                                       |              |            |            |  |               |     |                  |  |               |         |               |   |        |         |        |  |   |         |        |   |   |         |        |   |  |   |       
|Balance at December 31, 2001 |                                                                                       |              | 19,359,282 |            |  |               | 194 |                  |  |               | 66,685  |               |   |        | (6,481  | )      |  |   | 113,726 |        |   |   | 174,124 |        |   |  |   |       
|                             |                                                                                       |              |            |            |  |               |     |                  |  |               |         |               |   |        |         |        |  |   |         |        |   |   |         |        |   |  |   |       
|                             | Net income                                                                            |              |            |           |  |               |     |                 |  |               |         |              |   |        |         |       |  |   |         | 38,928 |   |   |         | 38,928 |   |  | $ | 38,928 | 
|                             | Other comprehensive income, net of tax(1)                                             |              |            |           |  |               |     |                 |  |               |         |              |   |        |         | 15,534 |  |   |         |       |   |   |         | 15,534 |   |  |   | 15,534 | 
|                             |                                                                                       |              |            |            |  |               |     |                  |  |               |         |               |   |        |         |        |  |   |         |        |   |   |         |        |   |  |   |       
|                             | Comprehensive income                                                                  |              |            |           |  |               |     |                 |  |               |         |              |   |        |         |       |  |   |         |       |   |   |         |       |   |  | $ | 54,462 | 
|                             |                                                                                       |              |            |            |  |               |     |                  |  |               |         |               |   |        |         |        |  |   |         |        |   |   |         |        |   |  |   |       
|                             | Stock options exercised, including related tax
    benefit                            |              |            | 324,490    |  |               |     | 3                |  |               |         | 6,518         |   |        |         |       |  |   |         |       |   |   |         | 6,521  |   |  |   |        | 
|                             | Cash dividend $0.20 per share                                                         |              |            |           |  |               |     |                 |  |               |         |              |   |        |         |       |  |   |         | (3,990 | ) |   |         | (3,990 | ) |  |   |        | 
|                             | Issuance of shares in connection with acquisition
    of Bank of Canton of California |              |            | 1,325,592  |  |               |     | 13               |  |               |         | 51,237        |   |        |         |       |  |   |         |       |   |   |         | 51,250 |   |  |   |        | 
|                             |                                                                                       |              |            |            |  |               |     |                  |  |               |         |               |   |        |         |        |  |   |         |        |   |   |         |        |   |  |   |       
|Balance at December 31, 2002 |                                                                                       |              | 21,009,364 |            |  | $             | 210 |                  |  | $             | 124,440 |               |   | $      | 9,053   |        |  | $ | 148,664 |        |   | $ | 282,367 |        |   |  |   |       
|                             |                                                                                       |              |            |            |  |               |     |                  |  |               |         |               |   |        |         |        |  |   |         |        |   |   |         |        |   |  |   |       



---



|    |                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------
|(1) | Accumulated Other Comprehensive Income includes
    after tax net unrealized gains (losses) on securities
    available for sale.

The accompanying notes are an integral part of
these financial statements.

40



---



##### 



UCBH HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH
FLOWS

(Dollars in Thousands)


|                                                                                                                           |                                                                                                           |                                                             |                                           |           |            |          |        |          |          |          |        |          |        |          |  
|-------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------- | ----------------------------------------- | --------- | ---------- | -------- | ------ | -------- | -------- | -------- | ------ | -------- | ------ | -------- | -
|                                                                                                                           |                                                                                                           |                                                            
|                                                                                                                           |                                                                                                           | For the Years Ended December 31,                           
|                                                                                                                           |                                                                                                           |                                                            
|                                                                                                                           |                                                                                                           | 2002                                                        |                                           | 2001      |            | 2000    
|                                                                                                                           |                                                                                                           |                                                             |                                           |           |            |         
|Operating activities:                                                                                                      |                                                                                                           |                                                             |                                           |           |            |          |        |          |          |          |        |         
|                                                                                                                           | Net income                                                                                                |                                                             | $                                         | 38,928    |            |          | $      | 30,488   |          |          | $      | 24,128   |       
|                                                                                                                           | Adjustments to reconcile net income to net cash
    provided by (used for) operating activities:          |                                                             |                                           |           |            |          |        |          |          |          |        |          |       
|                                                                                                                           |                                                                                                           | Provision for loan losses                                   |                                           |           | 9,673      |          |        |          | 5,620    |          |        |          | 9,765  |         
|                                                                                                                           |                                                                                                           | (Decrease) increase in accrued interest receivable          |                                           |           | 6,466      |          |        |          | 320      |          |        |          | (2,285 | )       
|                                                                                                                           |                                                                                                           | Amortization of purchase price adjustments                  |                                           |           | (1,027     | )        |        |          |         |          |        |          |       |         
|                                                                                                                           |                                                                                                           | Amortization of core deposit intangible                     |                                           |           | 227        |          |        |          |         |          |        |          |       |         
|                                                                                                                           |                                                                                                           | Depreciation and amortization of premises and
    equipment |                                           |           | 2,901      |          |        |          | 2,579    |          |        |          | 2,575  |         
|                                                                                                                           |                                                                                                           | (Increase) decrease in other assets                         |                                           |           | (2,110     | )        |        |          | (6,118   | )        |        |          | 1,209  |         
|                                                                                                                           |                                                                                                           | Increase (decrease) in other liabilities                    |                                           |           | 11,307     |          |        |          | 6,378    |          |        |          | (7,022 | )       
|                                                                                                                           |                                                                                                           | (Decrease) increase in accrued interest payable             |                                           |           | (1,422     | )        |        |          | (1,068   | )        |        |          | 1,517  |         
|                                                                                                                           |                                                                                                           | Gain on sale of loans, securities and other assets          |                                           |           | (5,236     | )        |        |          | (2,047   | )        |        |          | (993   | )       
|                                                                                                                           |                                                                                                           | Other, net                                                  |                                           |           | 2,134      |          |        |          | 1,772    |          |        |          | 940    |         
|                                                                                                                           |                                                                                                           |                                                             |                                           |           |            |          |        |          |          |          |        |         
|                                                                                                                           |                                                                                                           |                                                             | Net cash provided by operating activities |           |            | 61,841   |        |          |          | 37,924   |        |          |        | 29,834   |  
|                                                                                                                           |                                                                                                           |                                                             |                                           |           |            |          |        |          |          |          |        |         
|Investing activities:                                                                                                      |                                                                                                           |                                                             |                                           |           |            |          |        |          |          |          |        |         
|                                                                                                                           | Acquisition, net of cash acquired                                                                         |                                                             |                                           | (130,489  | )          |          |        |         |          |          |        |         |       
|                                                                                                                           | Investments and mortgage-backed securities,
    available for sale:                                       |                                                             |                                           |           |            |          |        |          |          |          |        |          |       
|                                                                                                                           |                                                                                                           | Principal payments and maturities                           |                                           |           | 306,982    |          |        |          | 174,489  |          |        |          | 29,771 |         
|                                                                                                                           |                                                                                                           | Purchases                                                   |                                           |           | (1,070,856 | )        |        |          | (309,879 | )        |        |          | (4,872 | )       
|                                                                                                                           |                                                                                                           | Sales                                                       |                                           |           | 953,141    |          |        |          | 156,229  |          |        |          | 2,387  |         
|                                                                                                                           |                                                                                                           | Called                                                      |                                           |           | 92,073     |          |        |          |         |          |        |          |       |         
|                                                                                                                           | Investments and mortgage-backed securities, held
    to maturity:                                         |                                                             |                                           |           |            |          |        |          |          |          |        |          |       
|                                                                                                                           |                                                                                                           | Principal payments and maturities                           |                                           |           | 83         |          |        |          | 1,789    |          |        |          | 32,233 |         
|                                                                                                                           |                                                                                                           | Purchases                                                   |                                           |           | (74,440    | )        |        |          | (10,062  | )        |        |          | (1,834 | )       
|                                                                                                                           | Loans originated and purchased, net of principal
    collections                                          |                                                             |                                           | (641,986  | )          |          |        | (487,024 | )        |          |        | (288,179 | )     
|                                                                                                                           | Proceeds from the sale of loans                                                                           |                                                             |                                           | 75,283    |            |          |        | 44,880   |          |          |        | 16,991   |       
|                                                                                                                           | Purchases of premises and other equipment                                                                 |                                                             |                                           | (1,402    | )          |          |        | (1,731   | )        |          |        | (1,440   | )     
|                                                                                                                           | Proceeds from the sale of other assets                                                                    |                                                             |                                           |          |            |          |        | 190      |          |          |        | 996      |       
|                                                                                                                           |                                                                                                           |                                                             |                                           |           |            |          |        |          |          |          |        |         
|                                                                                                                           |                                                                                                           |                                                             | Net cash used in investment activities    |           |            | (491,611 | )      |          |          | (431,119 | )      |          |        | (213,947 | )
|                                                                                                                           |                                                                                                           |                                                             |                                           |           |            |          |        |          |          |          |        |         
|Financing activities:                                                                                                      |                                                                                                           |                                                             |                                           |           |            |          |        |          |          |          |        |         
|                                                                                                                           | Net increase in demand deposits, NOW, money
    market and savings accounts                               |                                                             |                                           | 287,454   |            |          |        | 244,783  |          |          |        | 174,157  |       
|                                                                                                                           | Net (decrease) increase in time deposits                                                                  |                                                             |                                           | (9,307    | )          |          |        | 157,350  |          |          |        | 213,714  |       
|                                                                                                                           | Increase (decrease) in long-term borrowings                                                               |                                                             |                                           | 16,000    |            |          |        | (5,000   | )        |          |        | 5,000    |       
|                                                                                                                           | Increase (decrease) in short-term borrowings                                                              |                                                             |                                           | 62,500    |            |          |        | (17,558  | )        |          |        | (194,054 | )     
|                                                                                                                           | Proceeds from issuance of common stock                                                                    |                                                             |                                           | 3,185     |            |          |        | 4,674    |          |          |        | 623      |       
|                                                                                                                           | Payment of cash dividend on common stock                                                                  |                                                             |                                           | (3,714    | )          |          |        | (2,661   | )        |          |        | (1,403   | )     
|                                                                                                                           | Proceeds from issuance of guaranteed preferred
    beneficial interests in junior subordinated debentures |                                                             |                                           | 100,000   |            |          |        | 6,000    |          |          |        |         |       
|                                                                                                                           |                                                                                                           |                                                             |                                           |           |            |          |        |          |          |          |        |         
|                                                                                                                           |                                                                                                           |                                                             | Net cash provided by financing activities |           |            | 456,118  |        |          |          | 387,588  |        |          |        | 198,037  |  
|                                                                                                                           |                                                                                                           |                                                             |                                           |           |            |          |        |          |          |          |        |         
|Net increase (decrease) in cash and cash
    equivalents                                                                   |                                                                                                           |                                                             | 26,348                                    |           |            |          | (5,607 | )        |          |          | 13,924 |         
|Cash and cash equivalents at the beginning of the
    year                                                                 |                                                                                                           |                                                             | 32,606                                    |           |            |          | 38,213 |          |          |          | 24,289 |         
|                                                                                                                           |                                                                                                           |                                                             |                                           |           |            |          |        |          |          |          |        |         
|Cash and cash equivalents at the end of the year                                                                           |                                                                                                           | $                                                           | 58,954                                    |           |            | $        | 32,606 |          |          | $        | 38,213 |         
|                                                                                                                           |                                                                                                           |                                                             |                                           |           |            |          |        |          |          |          |        |         
|Supplemental disclosure of cash flow information:                                                                          |                                                                                                           |                                                             |                                           |           |            |          |        |          |          |          |        |         
|                                                                                                                           | Cash paid during the year for interest                                                                    |                                                             | $                                         | 81,654    |            |          | $      | 105,398  |          |          | $      | 102,187  |       
|                                                                                                                           | Cash paid during the year for income taxes                                                                |                                                             |                                           | 32,271    |            |          |        | 22,300   |          |          |        | 18,629   |       
|Supplemental schedule of noncash investing and
    financing activities:                                                   |                                                                                                           |                                                             |                                           |           |            |          |        |          |          |          |        |         
|                                                                                                                           | Loans transferred to foreclosed property                                                                  |                                                             |                                           |          |            |          |        | 48       |          |          |        | 382      |       
|                                                                                                                           | Securities transferred to held to maturity                                                                |                                                             |                                           |          |            |          |        |         |          |          |        |         |       
|                                                                                                                           | Loans securitized                                                                                         |                                                             |                                           | 315,234   |            |          |        | 109,635  |          |          |        | 24,944   |       
|                                                                                                                           | Securities transferred to available for sale
    securities(1)                                            |                                                             |                                           |          |            |          |        | 116,387  |          |          |        |         |       
|Acquisition of Bank of Canton of California and
    Brooklyn, New York branch accounted for using the purchase
    method: |                                                                                                           |                                                             |                                           |           |            |          |        |          |          |          |        |         
|                                                                                                                           | Fair value of assets acquired                                                                             |                                                             |                                           | 1,555,880 |            |          |        |         |          |          |        |         |       
|                                                                                                                           | Fair value of liabilities assumed                                                                         |                                                             |                                           | 1,331,214 |            |          |        |         |          |          |        |         |       
|                                                                                                                           |                                                                                                           |                                                             |                                           |           |            |          |        |          |          |          |        |         
|                                                                                                                           | Cash paid and common stock issued                                                                         |                                                             |                                           | 224,666   |            |          |        |         |          |          |        |         |       
|                                                                                                                           | Less common stock issued                                                                                  |                                                             |                                           | (51,250   | )          |          |        |         |          |          |        |         |       
|                                                                                                                           |                                                                                                           |                                                             |                                           |           |            |          |        |          |          |          |        |         
|                                                                                                                           | Cash paid                                                                                                 |                                                             |                                           | 173,416   |            |          |        |         |          |          |        |         |       



---



|    |                                                                                                             
|--- | ------------------------------------------------------------------------------------------------------------
|(1) | Such securities were transferred from held to
    maturity securities when SFAS No. 133 was adopted in 2001.

The accompanying notes are an integral part of
these financial statements.

41



---



##### 



UCBH HOLDINGS, INC.

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 that conducts its
business through its principal subsidiary, United Commercial
Bank (the Bank), 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.

Principles of
Consolidation and Presentation

The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries.
Substantially all loans are originated for the Companys
portfolio and held for investment. All significant intercompany
balances and transactions have been eliminated in consolidation.
Certain reclassifications have been made to prior years
consolidated financial statements to conform to the
December 31, 2002 presentation.

On April 11, 2001, the Company completed its
first 2-for-1 stock split. Accordingly, the financial statements
for all years presented have been restated to reflect the effect
of this stock split. As further discussed in Note 12 of the
consolidated financial statements, on January 9, 2003, the
Company declared its second two-for-one stock split in the legal
form of a stock dividend for shareholders of record as of
March 31, 2003.

Risks and
Uncertainties

In the normal course of its business, the Company
encounters two significant types of risk: economic and
regulatory. There are three main components of economic risk:
interest rate risk, credit risk and market risk. The Company is
subject to interest rate risk to the degree that its
interest-bearing liabilities mature or reprice at different
speeds, or on a different basis, than its interest-earning
assets. Incorporated into interest rate risk is prepayment risk.
Prepayment risk is the risk associated with the prepayment of
assets, and the write-off of premiums associated with those
assets, if any, should interest rates fall significantly. Credit
risk is the risk of default, primarily in the Companys
loan portfolio that results from the borrowers inability
or unwillingness to make contractually required payments. Market
risk reflects changes in the value of securities, the value of
collateral underlying loans receivable and the valuation of real
estate owned.

The Company is subject to the regulations of
various governmental agencies. These regulations may change
significantly and can restrict the growth of the Company and the
Bank as a result of capital requirements. The Company also
undergoes periodic examinations by the regulatory agencies,
which may subject it to further changes with respect to asset
valuations, amounts of required loss allowances and operating
restrictions. Such changes may result from the regulators
judgments based on information available to them at the time of
their examination.

Use of
Estimates in Preparation of Financial Statements

The preparation of financial statements in
conformity with generally accepted accounting principles
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
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

42



---



##### 



UCBH HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



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


considers all highly liquid debt instruments with
original maturities when purchased of three months or less to be
cash equivalents.

Securities
Purchased Under Agreements to Resell

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. Also 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. 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 maturity date 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.

Loans

Loans are carried at the principal balance
outstanding adjusted for the amortization of premiums and the
accretion of discounts. Premiums and discounts are recognized as
an adjustment of loan yield by the interest method based on the
contractual term of the 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.

Loan origination fees, net of certain direct
origination costs, are deferred and recognized as an adjustment
of the loan yield over the contractual life of the loan.
Amortization of deferred loan fees is discontinued on
nonperforming loans.

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.

43



---



##### 



UCBH HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



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


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, 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 continuous 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 forecasted economic conditions,
overall portfolio quality, review of specific problem loans, and
historical loan loss experience. The allowance for loan losses
is based on estimates, and ultimate losses may vary from the
current estimates. These estimates are reviewed periodically
and, as adjustments become necessary, they are reported in
earnings in the period in which they become known. The allowance
is increased by provisions charged to expense and reduced by
loan losses, net of recoveries.

The determination of the allowance for loan
losses is based on estimates that are susceptible to changes in
the economic environment and market conditions. Management
believes that, as of December 31, 2002 and 2001, the
allowance for loan losses is adequate based on information
currently available. 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.

44



---



##### 



UCBH HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



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


Goodwill and
Other Intangibles

In accordance with SFAS No. 142,
Goodwill and Other Intangibles, goodwill resulting
from the Companys acquisition of BCC will not be expensed
over a fixed period of time, but will be tested for impairment
at least annually. Identifiable intangible assets, namely core
deposit intangibles related to the BCC acquisition and the
purchase of certain assets and liabilities of a bank branch in
Brooklyn, New York, are amortized over their estimated period of
benefit determined to be seven years.

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.

Interest Rate
Cap and Swap Agreements

The Company periodically enters into interest
rate cap and swap agreements as a means of managing its interest
rate exposure. The Company implemented SFAS No. 133,
Accounting for Derivative Instruments and Hedging
Activities, as amended by SFAS No. 138, effective
January 1, 2001. In accordance with the provisions of SFAS
No. 133, interest rate cap and swap agreements are
recognized in the statement of financial position, measured at
fair value. Changes in fair value of the derivatives are
included in current period results of operations or in other
comprehensive income.

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
tax return.

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 considers the possible dilutive
effect of instruments, such as convertible debt, convertible
preferred stock, and stock options.

Transfers of
Financial Assets

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

45



---



##### 



UCBH HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



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


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. These originated mortgage
servicing rights are based on the relative fair values of the
servicing rights and underlying loans and are amortized over the
period of the related loan servicing income stream. The Company
assesses servicing assets for impairment in accordance with the
provisions of SFAS No. 140. For the years presented,
servicing assets and the related amortization were not material.

Segment
Information

The Company adopted SFAS No. 131,
Disclosures about Segments of an Enterprise and Related
Information, on January 1, 1998. The Company
designates the internal organization that is used by management
for making operating decision 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 adoption of
SFAS No. 131 did not affect the consolidated results of
operations or consolidated financial position as previously
reported.

2.     Recent
Accounting Pronouncements

Business
Combinations

In June 2001, the FASB issued SFAS No. 141,
Business Combinations. The standard concludes that
all business combinations within the scope of the statement will
be accounted for using the purchase method. Previously, the
pooling-of-interests method was required whenever certain
criteria were met. Because those criteria did not distinguish
economically dissimilar transactions, similar business
combinations were accounted for using different methods that
produced dramatically different financial statement results.
SFAS No. 141 requires separate recognition of intangible
assets apart from goodwill if they meet one of two criteria, the
contractual-legal criterion or the separability criterion. SFAS
No. 141 also requires the disclosure of the primary reasons
for a business combination and the allocation of the purchase
price paid to the assets acquired and liabilities assumed by
major balance sheet caption. The provisions of SFAS No. 141
apply to all business combinations initiated after June 30,
2001.

Goodwill and
Other Intangible Assets

In June 2001, the FASB also issued SFAS
No. 142, Goodwill and Other Intangible Assets.
It addresses how intangible assets that are acquired
individually or within a group of assets (but not those acquired
in a business combination) should be accounted for in the
financial statements upon their acquisition. SFAS No. 142
adopts a more aggregate view of goodwill and bases the
accounting on the units of the combined entity into which an
acquired entity is aggregated. SFAS No. 142 also prescribes
that goodwill and intangible assets that have indefinite useful
lives will not be amortized, but rather tested at least annually
for impairment. Intangible assets that have definite lives will
continue to be amortized over their useful lives, but no longer
with the constraint of the 40-year ceiling. SFAS No. 142
provides specific guidance for the testing of goodwill for
impairment which may require re-measurement of the fair value of
the reporting unit. Additional ongoing financial statement
disclosures are also required.

The provisions of the statement are required to
be applied starting with fiscal years beginning after
December 15, 2001. The statement is required to be applied
at the beginning of the fiscal year and applied to all goodwill
and other intangible assets recognized in the financials at that
date. Impairment losses are to be reported as resulting from a
change in accounting principle.

46



---



##### 



UCBH HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



2.     Recent
Accounting Pronouncements  (Continued)


Accounting
for Asset Retirement Obligations

In June 2001, the FASB issued SFAS No. 143,
Accounting for Asset Retirement Obligations. This
statement addresses financial accounting and reporting for
obligations associated with the retirement of tangible
long-lived assets and the associated asset retirement costs.
This statement requires that the fair value of a liability for
an asset retirement obligation be recognized in the period in
which it is incurred if a reasonable estimate of fair value can
be made. The associated asset retirement costs are capitalized
as part of the carrying amount of the long-lived asset.

This statement is effective for financial
statements issued for fiscal years beginning after June 15,
2002. The Company does not expect the adoption of SFAS
No. 143 to have a material impact on the financial
condition or operating results of the Company.

Impairment or
Disposal of Long-Lived Assets

In August 2001, the FASB issued SFAS
No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets. SFAS No. 144 establishes a single
accounting model for the impairment or disposal of long-lived
assets, including discontinued operations. SFAS No. 144
supersedes SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of, and APB Opinion No. 30, Reporting
the Results of Operations  Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual
and Infrequently Occurring Events and Transactions. The
provisions of SFAS No. 144 are effective in fiscal years
beginning after December 15, 2001, with early adoption
permitted, and in general are to be applied prospectively.

This statement is effective for financial
statements issued for fiscal years beginning after
December 15, 2001. The Company does not expect the adoption
of SFAS No. 144 to have a material impact on the financial
condition or operating results of the Company.

Gains and
Losses from Extinguishment of Debt

In April 2002, the FASB issued SFAS No. 145,
Rescission of FASB Statements No. 4, 44, and 64,
Amendment of FASB Statement No. 13, and Technical
Corrections. Among other provisions, SFAS No. 145
rescinds SFAS No. 4, Reporting Gains and Losses from
Extinguishment of Debt. Accordingly, gains or losses from
extinguishment of debt shall not be reported as extraordinary
items unless the extinguishment qualifies as an extraordinary
item under the criteria of APB No. 30. Gains or losses from
extinguishment of debt that do not meet the criteria of APB
No. 30 should be reclassified to income from continuing
operations in all prior periods presented.

This statement is effective for fiscal years
beginning after May 15, 2002. We do not expect the adoption
of SFAS No. 145 to have a material impact on our financial
position or results of operations.

Costs
Associated with Exit or Disposal Activities

In June 2002, the FASB issued SFAS No. 146,
Accounting for Costs Associated with Exit or Disposal
Activities. SFAS No. 146 requires that a liability
for a cost associated with an exit or disposal activity be
recognized when the liability is incurred and nullifies the
guidance of EITF No. 94-3, Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in
Restructuring), which recognized a liability for an exit
cost at the date of an entitys commitment to an exit plan.
SFAS No. 146 requires that the initial measurement of a
liability be at fair value.

47



---



##### 



UCBH HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



2.     Recent
Accounting Pronouncements  (Continued)


This statement will be effective for exit or
disposal activities that are initiated after December 31,
2002. The Company does not expect the adoption of SFAS
No. 146 to have a material impact on the financial
condition or operating results of the Company.

Accounting
Acquisitions of Certain Financial Institutions

In October 2002, the FASB issued SFAS
No. 147 which provides guidance on the application of the
purchase method to acquisitions of financial institutions.
Except for transactions between two or more mutual enterprise,
this statement removes acquisitions of financial institutions
from the scope of both Statement 72 and Interpretation 9
and requires that those transactions be accounted for in
accordance with FASB No. 141, Business
Combinations, and No. 142, Goodwill and Other
Intangible Assets. SFAS No. 147 became effective upon
issuance and requires companies to cease amortization of
unidentified intangible assets associated with certain branch
acquisitions and reclassify these assets to goodwill. In
addition, this statement amends FASB No. 144,
Accounting for the Impairment or Disposal of Long-Lived
Assets, to include in its scope long-term
customer-relationship intangible assets of financial
institutions, such as depositor and borrower relationship
intangible assets and credit cardholder intangible assets and
thus subject those intangible assets to the same undiscounted
cash flow recoverability test and impairment loss recognition
and measurement provisions required for other long-lived assets.

The Company does not have any assets subject to
the specialized accounting guidance provided in SFAS No. 72
or SFAS No. 147.

Guarantees

In November 2002, the FASB issued FASB
Interpretation No. 45 (FIN No. 45),
Guarantors Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of Indebtedness of
Others. This interpretation expands the disclosures to be
made by a guarantor in its financial statements about its
obligations under certain guarantees and requires the guarantor
to recognize a liability for the fair value of an obligation
assumed under a guarantee.

The recognition requirements of FIN No. 45
are to be applied prospectively to guarantees issued or modified
after December 31, 2002.

Accounting
for Stock-Based Compensation

In December 2002, the FASB issued SFAS
No. 148, Accounting for Stock-Based
Compensation  Transition and Disclosure, which
provides guidance on alternative methods of transition for an
entity that voluntarily changes to the fair value based method
of accounting stock-based employee compensation. It also amends
the disclosure provision of that statement to require prominent
disclosure about the effects on reported net income of an
entitys accounting policy decisions with respect to
stock-based employee compensation. Finally, this statement
amends APB Opinion No. 28, Interim Financial
Reporting, to require disclosure about those effects in
interim financial information.

The Company elects to continue accounting for
stock-based compensation in accordance with APB Opinion
No. 25.

48



---



##### 



UCBH HOLDINGS, INC.


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, 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 VIE in which an enterprise holds a
variable interest that is acquired before February 1, 2003.

3.     Business
Combinations

On October 28, 2002, the Company acquired
all of the outstanding shares of Bank of Canton of California, a
California banking corporation (BCC) in exchange for
cash and the Companys common stock. Effective immediately
upon acquisition, the Company transferred all of the shares of
BCC to UCB, pursuant to the terms of the agreement dated as of
the date of the closing by and between the Company and UCB.
Immediately following the transfer of the BCC shares to UCB, BCC
was merged with and into UCB, with UCB as the sole surviving
entity. The merger was effected under the charter and insurance
of deposits of UCB, and UCB, as the surviving entity, will
continue to operate as the wholly-owned subsidiary of the
Company under the name United Commercial Bank.

The acquisition was accounted for using the
purchase method of accounting in accordance with SFAS
No. 141, Business Combinations. The results of
BCCs operations have been included in the consolidated
financial statements since that date. The aggregate purchase
price was $220,000,000 including cash of $168,750,000 and the
Companys common stock valued at $51,250,000. The valuation
of common stock was based upon the average of the per share
closing prices on the Nasdaq of the Companys common stock
during the twenty consecutive trading days prior to closing. The
cash portion of the purchase price was funded by the
Companys issuance of $90.0 million in trust preferred
securities and the borrowing by its wholly-owned subsidiary UCB
of $80.6 million from the Federal Home Loan Bank of San
Francisco (FHLB).

In accordance with SFAS No. 141, the assets
acquired and liabilities assumed were recorded by the Company 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 $55.6 million. This
amount was recognized as intangible assets, consisting of
goodwill of $46.1 million and a core deposit intangible of
$9.5 million.

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 on a regular basis. The $46.1 million
goodwill was assigned to the consumer segment in the amount of
$33.6 million and the commercial segment in the amount of
$12.4 million. None of the goodwill is expected to be
deductible for income tax purposes. Identifiable intangible
assets, namely core deposit intangibles of $9.5 million,
are amortized over their estimated period of benefit determined
to be seven years. Amortization expense for the core deposit
intangible was $227,000 for the period from the acquisition date
through December 31, 2002, representing the accumulated
amortization at that date.

49



---



##### 



UCBH HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



3.     Business
Combinations  (Continued)


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

|                          |                           |   |           |           | 
|------------------------- | ------------------------- | - | --------- | --------- | 
|Cash and cash equivalents |                           | $ | 42,815    |          
|Securities                |                           |   | 865,366   |          
|Loans, net                |                           |   | 506,604   |          
|Premises and equipment    |                           |   | 62,592    |          
|Goodwill                  |                           |   | 46,052    |          
|Core deposit intangible   |                           |   | 9,541     |          
|Other assets              |                           |   | 20,929    |          
|                          |                           |   |           |          
|                          | Total assets acquired     |   | $         | 1,553,899 | 
|                          |                           |   |           |          
|Deposits                  |                           |   | 1,249,999 |          
|Borrowings                |                           |   | 36,953    |          
|Other liabilities         |                           |   | 30,400    |          
|                          |                           |   |           |          
|                          | Total liabilities assumed |   | $         | 1,317,352 | 
|                          |                           |   |           |          
|                          | Net assets acquired       |   | $         | 236,547   | 
|                          |                           |   |           |          

At the date of BCC acquisition, the
Companys management determined the estimated fair values
of assets acquired and liabilities assumed. The fair value
determination of properties and core deposit intangible amounted
to $62.6 million and $9.5 million, respectively and
was based upon independent appraiser valuation. The professional
service fees with regard of acquisition were reflected as paid.
The Companys management estimated the fair value of
certain liabilities assumed based upon its best knowledge at the
time which resulted in fair value with a range from
$7.6 million to $9.5 million. This consists primarily
of employee severance of $850,000 to $2.0 million, tax
liability of $4.6 million, contractual early termination
penalties of $250,000 to $750,000, and other liabilities of
$1.9 million to $2.1 million. The Company is in the
process of calculating the fair value on a number of properties
with operating lease contracts. The future minimum lease
payments on these properties is $3.9 million.

Unaudited pro forma consolidated results of
operations for the years ended December 31, 2002 and 2001
as though BCC had been acquired as of January 1, 2001
follow (dollars in thousands):

|                           |  |      |         |      |  |   |         | 
|-------------------------- |  | ---- | ------- | ---- |  | - | ------- | 
|                           |  | 2002 |         | 2001
|                           |  |      |         |     
|Net interest income        |  | $    | 140,546 |      |  | $ | 116,428 | 
|Net income                 |  |      | 43,881  |      |  |   | 34,319  | 
|Basic earnings per share   |  | $    | 2.10    |      |  | $ | 1.68    | 
|Diluted earnings per share |  | $    | 2.01    |      |  | $ | 1.61    | 

4.     Restrictions
on Cash and Due from Banks

The Bank is required to maintain a percentage of
its deposits as reserves either in cash or on deposit at the
Federal Reserve Bank. As of December 31, 2002 and 2001, the
reserve requirements were $1.2 million and
$0.6 million, respectively.

50



---



##### 



UCBH HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

5.     Investment and
Mortgage-backed Securities

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, 2002 and 2001 are shown below (dollars in
thousands):

|                                               |                            |                                                                        |   |            |           |            |   |        |        |  |   |       |       |  |   |         |           | 
|---------------------------------------------- | -------------------------- | ---------------------------------------------------------------------- | - | ---------- | --------- | ---------- | - | ------ | ------ |  | - | ----- | ----- |  | - | ------- | --------- | 
|                                               |                            |                                                                       
|                                               |                            | 2002                                                                  
|                                               |                            |                                                                       
|                                               |                            |                                                                        |   | Gross      |           | Gross      |   |       
|                                               |                            | Amortized                                                              |   | Unrealized |           | Unrealized |   | Market
|                                               |                            | Cost                                                                   |   | Gains      |           | Losses     |   | Value 
|                                               |                            |                                                                        |   |            |           |            |   |       
|Investment securities available for sale:      |                            |                                                                        |   |            |           |            |   |        |        |  |   |       |       |  |   |        
|                                               | Trust Preferred Securities |                                                                        | $ | 62,313     |           |            | $ | 6      |        |  | $ | 4,143 |       |  | $ | 58,176  |          
|                                               | Federal Agency Notes       |                                                                        |   | 45,252     |           |            |   | 55     |        |  |   | 3     |       |  |   | 45,304  |          
|                                               | Foreign Debt Securities    |                                                                        |   | 8,017      |           |            |   |       |        |  |   | 3     |       |  |   | 8,014   |          
|                                               | Asset-backed Securities    |                                                                        |   | 5,826      |           |            |   |       |        |  |   | 87    |       |  |   | 5,739   |          
|                                               | Municipals                 |                                                                        |   | 360        |           |            |   |       |        |  |   |      |       |  |   | 360     |          
|                                               |                            |                                                                        |   |            |           |            |   |        |        |  |   |       |       |  |   |        
|                                               |                            | Total investment securities available for sale                         |   |            | 121,768   |            |   |        | 61     |  |   |       | 4,236 |  |   |         | 117,593   | 
|                                               |                            |                                                                        |   |            |           |            |   |        |        |  |   |       |       |  |   |        
|Mortgage-backed securities available for sale: |                            |                                                                        |   |            |           |            |   |        |        |  |   |       |       |  |   |        
|                                               | FNMA                       |                                                                        |   | 577,731    |           |            |   | 13,380 |        |  |   | 738   |       |  |   | 590,373 |          
|                                               | GNMA                       |                                                                        |   | 280,263    |           |            |   | 5,890  |        |  |   |      |       |  |   | 286,153 |          
|                                               | FHLMC                      |                                                                        |   | 289,094    |           |            |   | 1,736  |        |  |   | 871   |       |  |   | 289,959 |          
|                                               | Other                      |                                                                        |   | 184,919    |           |            |   | 485    |        |  |   | 95    |       |  |   | 185,309 |          
|                                               |                            |                                                                        |   |            |           |            |   |        |        |  |   |       |       |  |   |        
|                                               |                            | Total mortgage-backed securities available for
    sale                |   |            | 1,332,007 |            |   |        | 21,491 |  |   |       | 1,704 |  |   |         | 1,351,794 | 
|                                               |                            |                                                                        |   |            |           |            |   |        |        |  |   |       |       |  |   |        
|                                               |                            | Total investment and mortgage-backed securities
    available for sale |   | $          | 1,453,775 |            |   | $      | 21,552 |  |   | $     | 5,940 |  |   | $       | 1,469,387 | 
|                                               |                            |                                                                        |   |            |           |            |   |        |        |  |   |       |       |  |   |        
|Investment securities held to maturity:        |                            |                                                                        |   |            |           |            |   |        |        |  |   |       |       |  |   |        
|                                               | Municipal Securities       |                                                                        | $ | 111,049    |           |            | $ | 2,793  |        |  | $ | 205   |       |  | $ | 113,637 |          
|                                               |                            |                                                                        |   |            |           |            |   |        |        |  |   |       |       |  |   |        
|Mortgage-backed securities held to maturity:   |                            |                                                                        |   |            |           |            |   |        |        |  |   |       |       |  |   |        
|                                               | Other                      |                                                                        |   | 945        |           |            |   |       |        |  |   |      |       |  |   | 945     |          
|                                               |                            |                                                                        |   |            |           |            |   |        |        |  |   |       |       |  |   |        
|                                               |                            | Total investment and mortgage-backed securities
    held to maturity   |   | $          | 111,994   |            |   | $      | 2,793  |  |   | $     | 205   |  |   | $       | 114,582   | 
|                                               |                            |                                                                        |   |            |           |            |   |        |        |  |   |       |       |  |   |        

51



---



##### 



UCBH HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



5.     Investment and
Mortgage-backed
Securities  (Continued)


|                                               |                            |                                                                        |   |            |         |            |   |        |       |  |   |        |        |  |   |         |         | 
|---------------------------------------------- | -------------------------- | ---------------------------------------------------------------------- | - | ---------- | ------- | ---------- | - | ------ | ----- |  | - | ------ | ------ |  | - | ------- | ------- | 
|                                               |                            |                                                                       
|                                               |                            | 2001                                                                  
|                                               |                            |                                                                       
|                                               |                            |                                                                        |   | Gross      |         | Gross      |   |       
|                                               |                            | Amortized                                                              |   | Unrealized |         | Unrealized |   | Market
|                                               |                            | Cost                                                                   |   | Gains      |         | Losses     |   | Value 
|                                               |                            |                                                                        |   |            |         |            |   |       
|Investment securities available for sale:      |                            |                                                                        |   |            |         |            |   |        |       |  |   |        |        |  |   |        
|                                               | Trust Preferred Securities |                                                                        | $ | 100,327    |         |            | $ |       |       |  | $ | 10,398 |        |  | $ | 89,929  |        
|                                               | Federal Agency Notes       |                                                                        |   | 36,507     |         |            |   | 68     |       |  |   | 197    |        |  |   | 36,378  |        
|                                               | Asset-backed Securities    |                                                                        |   | 12,018     |         |            |   | 22     |       |  |   | 28     |        |  |   | 12,012  |        
|                                               |                            |                                                                        |   |            |         |            |   |        |       |  |   |        |        |  |   |        
|                                               |                            | Total investment securities available for sale                         |   |            | 148,852 |            |   |        | 90    |  |   |        | 10,623 |  |   |         | 138,319 | 
|                                               |                            |                                                                        |   |            |         |            |   |        |       |  |   |        |        |  |   |        
|Mortgage-backed securities available for sale: |                            |                                                                        |   |            |         |            |   |        |       |  |   |        |        |  |   |        
|                                               | FNMA                       |                                                                        |   | 206,902    |         |            |   | 2,303  |       |  |   | 2,428  |        |  |   | 206,777 |        
|                                               | GNMA                       |                                                                        |   | 145,091    |         |            |   | 427    |       |  |   | 123    |        |  |   | 145,395 |        
|                                               | FHLMC                      |                                                                        |   | 47,747     |         |            |   | 38     |       |  |   | 857    |        |  |   | 46,928  |        
|                                               | Other                      |                                                                        |   | 4,504      |         |            |   |       |       |  |   | 2      |        |  |   | 4,502   |        
|                                               |                            |                                                                        |   |            |         |            |   |        |       |  |   |        |        |  |   |        
|                                               |                            | Total mortgage-backed securities available for
    sale                |   |            | 404,244 |            |   |        | 2,768 |  |   |        | 3,410  |  |   |         | 403,602 | 
|                                               |                            |                                                                        |   |            |         |            |   |        |       |  |   |        |        |  |   |        
|                                               |                            | Total investment and mortgage-backed securities
    available for sale |   | $          | 553,096 |            |   | $      | 2,858 |  |   | $      | 14,033 |  |   | $       | 541,921 | 
|                                               |                            |                                                                        |   |            |         |            |   |        |       |  |   |        |        |  |   |        
|Investment securities held to maturity:        |                            |                                                                        |   |            |         |            |   |        |       |  |   |        |        |  |   |        
|                                               | Municipal Securities       |                                                                        | $ | 50,444     |         |            | $ | 35     |       |  | $ | 812    |        |  | $ | 49,667  |        
|                                               |                            |                                                                        |   |            |         |            |   |        |       |  |   |        |        |  |   |        
|Mortgage-backed securities held to maturity:   |                            |                                                                        |   |            |         |            |   |        |       |  |   |        |        |  |   |        
|                                               | Other                      |                                                                        |   | 1,028      |         |            |   |       |       |  |   |       |        |  |   | 1,028   |        
|                                               |                            |                                                                        |   |            |         |            |   |        |       |  |   |        |        |  |   |        
|                                               |                            | Total investment and mortgage-backed securities
    held to maturity   |   | $          | 51,472  |            |   | $      | 35    |  |   | $      | 812    |  |   | $       | 50,695  | 
|                                               |                            |                                                                        |   |            |         |            |   |        |       |  |   |        |        |  |   |        

As of December 31, 2002, remaining
maturities on investment and mortgage-backed securities
classified as held to maturity and available for sale were as
follows (dollars in thousands):

|                    |                                                |                                              |                                                                        |                                                                      |           |           |         |   |           |           |         | 
|------------------- | ---------------------------------------------- | -------------------------------------------- | ---------------------------------------------------------------------- | -------------------------------------------------------------------- | --------- | --------- | ------- | - | --------- | --------- | ------- | 
|                    |                                                |                                             
|                    |                                                | 2002                                        
|                    |                                                |                                             
|                    |                                                | Amortized                                    |                                                                        | Market                                                              
|                    |                                                | Cost                                         |                                                                        | Value                                                               
|                    |                                                |                                              |                                                                        |                                                                     
|Available for sale: |                                                |                                              |                                                                        |                                                                      |           |           |         |  
|                    | Investment securities available for sale:      |                                              |                                                                        |                                                                      |           |           |         |   |          
|                    |                                                | In one year or less                          |                                                                        | $                                                                    | 13,397    |           |         | $ | 13,406    |          
|                    |                                                | After one year through five years            |                                                                        |                                                                      | 26,027    |           |         |   | 25,977    |          
|                    |                                                | After five years through ten years           |                                                                        |                                                                      | 20,031    |           |         |   | 20,034    |          
|                    |                                                | After ten years                              |                                                                        |                                                                      | 62,313    |           |         |   | 58,176    |          
|                    |                                                |                                              |                                                                        |                                                                      |           |           |         |  
|                    |                                                |                                              | Subtotal                                                               |                                                                      |           | 121,768   |         |   |           | 117,593   |        
|                    |                                                |                                              |                                                                        |                                                                      |           |           |         |  
|                    | Mortgage-backed securities available for sale: |                                              |                                                                        |                                                                      |           |           |         |   |          
|                    |                                                | In one year or less                          |                                                                        |                                                                      | 228       |           |         |   | 229       |          
|                    |                                                | After five years through ten years           |                                                                        |                                                                      | 134,923   |           |         |   | 138,967   |          
|                    |                                                | After ten years                              |                                                                        |                                                                      | 1,196,856 |           |         |   | 1,212,598 |          
|                    |                                                |                                              |                                                                        |                                                                      |           |           |         |  
|                    |                                                |                                              | Subtotal                                                               |                                                                      |           | 1,332,007 |         |   |           | 1,351,794 |        
|                    |                                                |                                              |                                                                        |                                                                      |           |           |         |  
|                    |                                                |                                              | Total investment and mortgage-backed securities
    available for sale |                                                                      | $         | 1,453,775 |         |   | $         | 1,469,387 |        
|                    |                                                |                                              |                                                                        |                                                                      |           |           |         |  
|                    | Held to maturity:                              |                                              |                                                                        |                                                                      |           |           |         |   |          
|                    |                                                | Investment securities held to maturity:      |                                                                        |                                                                      |           |           |         |   |           |          
|                    |                                                |                                              | After ten years                                                        |                                                                      | $         | 111,049   |         |   | $         | 113,637   |        
|                    |                                                |                                              |                                                                        |                                                                      |           |           |         |  
|                    |                                                | Mortgage-backed securities held to maturity: |                                                                        |                                                                      |           |           |         |   |           |          
|                    |                                                |                                              | After one year through five years                                      |                                                                      |           | 17        |         |   |           | 17        |        
|                    |                                                |                                              | After five years through ten years                                     |                                                                      |           | 1         |         |   |           | 1         |        
|                    |                                                |                                              | After ten years                                                        |                                                                      |           | 927       |         |   |           | 927       |        
|                    |                                                |                                              |                                                                        |                                                                      |           |           |         |  
|                    |                                                |                                              |                                                                        | Total mortgage-backed securities held to maturity                    |           | $         | 945     |   |           | $         | 945     | 
|                    |                                                |                                              |                                                                        |                                                                      |           |           |         |  
|                    |                                                |                                              |                                                                        | Total investment and mortgage-backed securities
    held to maturity |           | $         | 111,994 |   |           | $         | 114,582 | 
|                    |                                                |                                              |                                                                        |                                                                      |           |           |         |  

52



---



##### 



UCBH HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



5.     Investment and
Mortgage-backed
Securities  (Continued)


Approximately $573.5 million and
$279.8 million of investment and mortgage-backed securities
have been pledged to secure contractual arrangements entered
into by the Company at December 31, 2002 and 2001,
respectively. Proceeds from the sale of available for sale
securities during 2002 totaled $953.1 million, with gross
realized gains of $5.1 million and gross realized losses of
$1.7 million. During 2001, proceeds from the sale of
available for sale securities totaled $156.2 million, with
gross realized gains of $1.0 million and gross realized
losses of $400,000. During 2000, proceeds from the sale of
available for sale securities totaled $2.4 million, with
gross realized gains of $222,000 and gross realized loses of
$87,000.

There were no mortgage-backed securities sold
under agreements to repurchase as of December 31, 2002 or
2001 or at any time during 2002. When the Company enters into
these transactions, the obligations generally mature within one
year and generally represent agreements to repurchase the same
securities.

6.     Loans

As of December 31, 2002 and 2001, the
composition of the loan portfolio was as follows (dollars in
thousands):

|                          |                                           |      |           |           |  |   |           |         | 
|------------------------- | ----------------------------------------- | ---- | --------- | --------- |  | - | --------- | ------- | 
|                          |                                           | 2002 |           | 2001     
|                          |                                           |      |           |          
|Commercial:               |                                           |      |           |           |  |   |           |        
|                          | Secured by real estate  nonresidential   |      | $         | 1,279,809 |  |   | $         | 798,882 | 
|                          | Secured by real estate  multifamily      |      |           | 914,630   |  |   |           | 677,271 | 
|                          | Construction                              |      |           | 216,218   |  |   |           | 182,558 | 
|                          | Business                                  |      |           | 261,787   |  |   |           | 163,628 | 
|                          |                                           |      |           |           |  |   |           |        
|Total commercial loans    |                                           |      | 2,672,444 |           |  |   | 1,822,339 |        
|                          |                                           |      |           |           |  |   |           |        
|Consumer:                 |                                           |      |           |           |  |   |           |        
|                          | Residential mortgage (one to four family) |      |           | 311,067   |  |   |           | 430,057 | 
|                          | Other                                     |      |           | 49,372    |  |   |           | 16,003  | 
|                          |                                           |      |           |           |  |   |           |        
|Total consumer loans      |                                           |      | 360,439   |           |  |   | 446,060   |        
|                          |                                           |      |           |           |  |   |           |        
|Gross loans               |                                           |      | 3,032,883 |           |  |   | 2,268,399 |        
|Net deferred loan fees    |                                           |      | (5,073    | )         |  |   | (4,096    | )      
|                          |                                           |      |           |           |  |   |           |        
|Loans                     |                                           |      | 3,027,810 |           |  |   | 2,264,303 |        
|Allowance for loan losses |                                           |      | (48,865   | )         |  |   | (34,550   | )      
|                          |                                           |      |           |           |  |   |           |        
|Net loans                 |                                           | $    | 2,978,945 |           |  | $ | 2,229,753 |        
|                          |                                           |      |           |           |  |   |           |        

As of December 31, 2002, loans at fixed
interest rates amounted to $522.5 million, and loans at
variable interest rates amounted to $2.51 billion. Included
in the $2.51 billion of variable interest rates is
$490.6 million of loans that have reached their contractual
floor and are treated as fixed-rate loans for the interest rate
sensitivity. Loans of approximately $4.7 million and
$991,000 were on nonaccrual status at December 31, 2002 and
2001, respectively.

As of December 31, 2002, residential
mortgage (one to four family) and multifamily loans with a book
value and market value of $1.03 billion were pledged to
secure FHLB advances (see Note 9). The Company serviced real
estate loans for others, excluding loans internally securitized,
of $112.6 million and $70.2 million at
December 31, 2002 and 2001, respectively. These loans are
not included in the consolidated balance sheets. In connection
therewith, the Company held trust funds of approximately
$16.9 million and $6.3 million as of

53



---



##### 



UCBH HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



6.     Loans  (Continued)


December 31, 2002 and 2001, respectively,
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 which could
require repurchase of loans under certain circumstances.
Management does not believe that any such repurchases will be
significant.

As indicated in the following table, the Company
had no impaired loans for the years ended December 31,
2002, 2001, and 2000:

|                                                                 |                      |      |   |      |  |      |   |   |  |   |   |   | 
|---------------------------------------------------------------- | -------------------- | ---- | - | ---- |  | ---- | - | - |  | - | - | - | 
|                                                                 |                      | 2002 |   | 2001 |  | 2000
|                                                                 |                      |      |   |      |  |     
|Impaired loans with an allowance                                 |                      | $    |  |      |  | $    |  |   |  | $ |  |  
|Impaired loans without an allowance                              |                      |      |  |      |  |      |  |   |  |   |  |  
|                                                                 |                      |      |   |      |  |      |   |   |  |   |   |  
|                                                                 | Total impaired loans |      | $ |     |  |      | $ |  |  |   | $ |  | 
|                                                                 |                      |      |   |      |  |      |   |   |  |   |   |  
|Allowance for impaired loans under SFAS
    No. 114              |                      | $    |  |      |  | $    |  |   |  | $ |  |  
|                                                                 |                      |      |   |      |  |      |   |   |  |   |   |  
|Interest income recognized on impaired loans
    during the year |                      | $    |  |      |  | $    |  |   |  | $ |  |  
|                                                                 |                      |      |   |      |  |      |   |   |  |   |   |  

For the years ended December 31, 2002, 2001,
and 2000, the activity in the allowance for loan losses was as
follows (dollars in thousands):

|                                   |  |      |        |      |  |      |        |   |  |   |        |  
|---------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|                                   |  | 2002 |        | 2001 |  | 2000
|                                   |  |      |        |      |  |     
|Balance at beginning of year       |  | $    | 34,550 |      |  | $    | 28,901 |   |  | $ | 19,503 |  
|Acquired allowance for loan losses |  |      | 10,162 |      |  |      |       |   |  |   |       |  
|Provision for loan losses          |  |      | 9,673  |      |  |      | 5,620  |   |  |   | 9,765  |  
|Loans charged off                  |  |      | (5,563 | )    |  |      | (121   | ) |  |   | (917   | )
|Recoveries                         |  |      | 43     |      |  |      | 150    |   |  |   | 550    |  
|                                   |  |      |        |      |  |      |        |   |  |   |        |  
|Balance at end of year             |  | $    | 48,865 |      |  | $    | 34,550 |   |  | $ | 28,901 |  
|                                   |  |      |        |      |  |      |        |   |  |   |        |  

54



---



##### 



UCBH HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

7.     Premises and
Equipment

As of December 31, 2002, and 2001, premises
and equipment were as follows (dollars in thousands):

|                                               |       |      |         |        |  |   |         |        | 
|---------------------------------------------- | ----- | ---- | ------- | ------ |  | - | ------- | ------ | 
|                                               |       | 2002 |         | 2001  
|                                               |       |      |         |       
|Land and buildings                             |       | $    | 105,153 |        |  | $ | 20,346  |       
|Leasehold improvements                         |       |      | 15,161  |        |  |   | 9,350   |       
|Equipment, furniture and fixtures              |       |      | 20,230  |        |  |   | 12,090  |       
|                                               |       |      |         |        |  |   |         |       
|                                               |       |      | 140,544 |        |  |   | 41,786  |       
|Less accumulated depreciation and amortization |       |      | (58,847 | )      |  |   | (22,117 | )     
|                                               |       |      |         |        |  |   |         |       
|                                               | Total |      | $       | 81,697 |  |   | $       | 19,669 | 
|                                               |       |      |         |        |  |   |         |       

Total depreciation and amortization expense was
$2.9 million for year ended December 31, 2002, and
$2.6 million for the year ended December 31, 2001.
Amortization expense included $129,000 amortization expense of
the fair value write-up in connection with the Bank of Canton of
California acquisition.

In connection with the BCC acquisition, the
Company, through its wholly-owned subsidiary, Bank of Canton of
California Building Corporation, owns a high-rise office
building at 555 Montgomery Street in the Financial District
of San Francisco, California. At December 31, 2002, the
building is recorded at a fair value of $51.5 million with
monthly amortization of $136,000. The Company occupies a portion
of the office building and it leases the remaining space in the
building.

Rental income was $1.8 million for year
ended December 31, 2002, which includes two months of
income in the amount of $727,000 from the Bank of Canton of
California Building Corporation since acquisition at
October 28, 2002. The future noncancellable minimum lease
payments receivable as of December 31, 2002 are as follows
(dollars in thousands):

|                    |       |   |       |        | 
|------------------- | ----- | - | ----- | ------ | 
|2003                |       | $ | 4,904 |       
|2004                |       |   | 3,828 |       
|2005                |       |   | 2,604 |       
|2006                |       |   | 1,444 |       
|2007                |       |   | 865   |       
|2008 and thereafter |       |   | 330   |       
|                    |       |   |       |       
|                    | Total |   | $     | 13,975 | 
|                    |       |   |       |       

55



---



##### 



UCBH HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

8.     Deposits

As of December 31, 2002 and 2001, deposit
balances were as follows (dollars in thousands):

|                                        |                     |                |         |           |           |         |      |          |      |   |         |           |           |  |      |      |      | 
|--------------------------------------- | ------------------- | -------------- | ------- | --------- | --------- | ------- | ---- | -------- | ---- | - | ------- | --------- | --------- |  | ---- | ---- | ---- | 
|                                        |                     |                |         |          
|                                        |                     | 2002           |         | 2001     
|                                        |                     |                |         |          
|                                        |                     |                |         | Weighted  |           |         |      | Weighted
|                                        |                     |                |         | Average   |           |         |      | Average 
|                                        |                     | Balance        |         | Rate      |           | Balance |      | Rate    
|                                        |                     |                |         |           |           |         |      |         
|NOW, checking and money market accounts |                     | $              | 813,122 |           |           |         | 0.86 | %        |      | $ | 427,338 |           |           |  | 1.19 | %   
|Savings accounts                        |                     |                | 691,318 |           |           |         | 1.10 |          |      |   | 449,735 |           |           |  | 1.41 |     
|Time deposits:                          |                     |                |         |           |           |         |      |          |      |   |         |           |           |  |      |     
|                                        | Less than $100,000  |                |         | 1,109,633 |           |         |      | 2.36     |      |   |         | 871,754   |           |  |      | 3.62 |     
|                                        | $100,000 or greater |                |         | 1,392,740 |           |         |      | 2.53     |      |   |         | 717,325   |           |  |      | 3.80 |     
|                                        |                     |                |         |           |           |         |      |          |      |   |         |           |           |  |      |     
|                                        | Total time deposits |                |         | 2,502,373 |           |         |      | 2.45     |      |   |         | 1,589,079 |           |  |      | 3.70 |     
|                                        |                     |                |         |           |           |         |      |          |      |   |         |           |           |  |      |     
|                                        |                     | Total deposits |         | $         | 4,006,813 |         |      |          | 1.90 |   |         | $         | 2,466,152 |  |      |      | 2.85 | 
|                                        |                     |                |         |           |           |         |      |          |      |   |         |           |           |  |      |     

As of December 31, 2002, remaining
maturities on time deposits were as follows (dollars in
thousands):

|                     |       |   |           |           | 
|-------------------- | ----- | - | --------- | --------- | 
|2003                 |       | $ | 2,142,024 |          
|2004                 |       |   | 339,397   |          
|2005                 |       |   | 14,943    |          
|2006                 |       |   | 3,221     |          
|2007                 |       |   | 2,782     |          
|Aggregate thereafter |       |   | 6         |          
|                     |       |   |           |          
|                     | Total |   | $         | 2,502,373 | 
|                     |       |   |           |          

For the years ended December 31, 2002, 2001,
and 2000, interest expense on deposits was as follows (dollars
in thousands):

|                                        |       |      |        |        |  |      |        |        |  |   |        |        | 
|--------------------------------------- | ----- | ---- | ------ | ------ |  | ---- | ------ | ------ |  | - | ------ | ------ | 
|                                        |       | 2002 |        | 2001   |  | 2000
|                                        |       |      |        |        |  |     
|NOW, checking and money market accounts |       | $    | 5,952  |        |  | $    | 5,080  |        |  | $ | 3,144  |       
|Savings accounts                        |       |      | 6,582  |        |  |      | 8,229  |        |  |   | 6,954  |       
|Time deposits                           |       |      | 49,083 |        |  |      | 74,422 |        |  |   | 67,287 |       
|Less penalties for early withdrawal     |       |      | (381   | )      |  |      | (296   | )      |  |   | (382   | )     
|                                        |       |      |        |        |  |      |        |        |  |   |        |       
|                                        | Total |      | $      | 61,236 |  |      | $      | 87,435 |  |   | $      | 77,003 | 
|                                        |       |      |        |        |  |      |        |        |  |   |        |       

Time deposit interest expense includes a benefit
of $948,000 related to amortization of fair value premium in
connection with the Bank of Canton of California acquisition.
The premium is related to fixed maturity deposits and is
amortized to interest expense over the remaining deposit
maturities of one year.

56



---



##### 



UCBH HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

9.     Borrowings

For the years ended December 31, 2002 and
2001, the following short- and long-term borrowings were
outstanding (dollars in thousands):

|                                  |                                                                             |      |   |         |   |  |   |         |  
|--------------------------------- | --------------------------------------------------------------------------- | ---- | - | ------- | - |  | - | ------- | -
|                                  |                                                                             | 2002 |   | 2001   
|                                  |                                                                             |      |   |        
|Short-term borrowings:            |                                                                             |      |   |         |   |  |   |        
|FHLB of San Francisco advances:   |                                                                             |      |   |         |   |  |   |        
|                                  | Average balance outstanding                                                 |      | $ | 23,606  |   |  | $ | 18,768  |  
|                                  | Maximum amount outstanding at any month-end period                          |      |   | 322,000 |   |  |   | 39,177  |  
|                                  | Balance outstanding at end of period                                        |      |   | 77,500  |   |  |   | 5,000   |  
|                                  | Weighted average interest rate during the period                            |      |   | 2.40    | % |  |   | 5.60    | %
|                                  | Weighted average interest rate at end of period                             |      |   | 1.13    | % |  |   | 6.52    | %
|                                  | Weighted average remaining term to maturity at
    end of period (in years) |      |   | 0       |   |  |   | 0       |  
|FRB direct investment borrowings: |                                                                             |      |   |         |   |  |   |        
|                                  | Average balance outstanding                                                 |      | $ |        |   |  | $ | 710     |  
|                                  | Maximum amount outstanding at any month-end period                          |      |   |        |   |  |   | 10,000  |  
|                                  | Balance outstanding at end of period                                        |      |   |        |   |  |   |        |  
|                                  | Weighted average interest rate during the period                            |      |   |        | % |  |   | 5.56    | %
|                                  | Weighted average interest rate at end of period                             |      |   |        | % |  |   |        | %
|Long-term borrowings:             |                                                                             |      |   |         |   |  |   |        
|                                  | FHLB of San Francisco advances:                                             |      |   |         |   |  |   |         |  
|                                  | Average balance outstanding                                                 |      | $ | 253,666 |   |  | $ | 237,171 |  
|                                  | Maximum amount outstanding at any month-end period                          |      |   | 285,953 |   |  |   | 238,000 |  
|                                  | Balance outstanding at end of period                                        |      |   | 275,874 |   |  |   | 233,000 |  
|                                  | Weighted average interest rate during the period                            |      |   | 5.43    | % |  |   | 5.51    | %
|                                  | Weighted average interest rate at end of period                             |      |   | 5.08    | % |  |   | 5.44    | %
|                                  | Weighted average remaining term to maturity at
    end of period (in years) |      |   | 5       |   |  |   | 6       |  

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
$216.0 million of advances maturing in 2008 with provisions
which 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, 2002, $136.0 million of
these advances may be terminated at the option of the FHLB. The
advances were secured with mortgage-backed securities and loans.
At December 31, 2002, credit availability under this
facility was approximately $605.2 million.

The Company established a borrowing line of
$10.0 million with Wells Fargo Bank in 2002. As of
December 31, 2002, the Company has taken no advances under
the terms of the line.

In December of 1998, the Bank entered into the
Treasury Investment Program with the Federal Reserve Bank of San
Francisco. This borrowing line allowed the Bank to utilize
deposits made to the U.S. Treasury for federal tax payments
until the Treasury needed the funds. This borrowing line had to
be fully collateralized at all times. In March of 2001, the Bank
discontinued its participation in the Treasury Investment
Program.

57



---



##### 



UCBH HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|    |                                                                                               
|--- | ----------------------------------------------------------------------------------------------
|10. | Guaranteed Preferred Beneficial Interests in
    Junior Subordinated Debentures of the Company

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 Bank. Interest expense on the Capital
Securities was $4.8 million for the year ended
December 31, 2002 and $2.8 million for the year ended
December 31, 2001 and 2000.

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,
2002 (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% |       |  | 5.78% |  |       | December 2002 |  | 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% |       |  | 5.39% |  |       | December 2002 |  | 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% |       |  | 5.22% |  |       | December 2002 |  | 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% |       |  | 5.23% |  |       | February 2003 |  | February 6
    May 6
    August 6
    November 6     
|UCBH Capital Trust III           |  |                    | October 2002   |            |  |                | 18,000 |       |  |                               | 18,557 |          |  |              | November 7, 2007   |              |  | November 7, 2032   |  | 3-month LIBOR+ 3.66% |       |  | 5.44% |  |       | February 2003 |  | February 6
    May 6
    August 6
    November 6     
|UCBH Capital Trust IV            |  |                    | October 2002   |            |  |                | 27,000 |       |  |                               | 27,836 |          |  |              | November 7, 2007   |              |  | November 7, 2032   |  | 3-month LIBOR+ 3.45% |       |  | 5.27% |  |       | February 2003 |  | February 7
    May 7
    August 7
    November 7     

58



---



##### 



UCBH HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

11.     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 possibly 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).
Management believes, as of December 31, 2002, that the
Company and the Bank met all capital adequacy requirements to
which they are subject.

As of December 31, 2002, 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, 2002 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, 2002                                 |                        |        |   |                   |  |                   |  |                   |   |            |   |         |  |  |  |      |   |  |   |         |  |  |  |      
|Total Capital (to risk-weighted assets)                 |                        |        |   |                   |  |                   |  |                   |   |            |   |         |  |  |  |      |   |  |   |         |  |  |  |      
|                                                        | United Commercial Bank |        | $ | 364,460           |  |                   |  | 11.52             | % |            | $ | 253,150 |  |  |  | 8.00 | % |  | $ | 316,437 |  |  |  | 10.00 | %
|                                                        | UCBH Holdings, Inc.    |        |   | 347,201           |  |                   |  | 10.95             |   |            |   | 253,551 |  |  |  | 8.00 |   |  |   |         |  |  |  |       |  
|Tier I Capital (to risk-weighted assets)                |                        |        |   |                   |  |                   |  |                   |   |            |   |         |  |  |  |      |   |  |   |         |  |  |  |      
|                                                        | United Commercial Bank |        | $ | 324,790           |  |                   |  | 10.26             | % |            | $ | 126,575 |  |  |  | 4.00 | % |  | $ | 189,862 |  |  |  | 6.00  | %
|                                                        | UCBH Holdings, Inc.    |        |   | 307,470           |  |                   |  | 9.70              |   |            |   | 126,775 |  |  |  | 4.00 |   |  |   |         |  |  |  |       |  
|Tier I Capital (to average assets) (Leverage
    Ratio) |                        |        |   |                   |  |                   |  |                   |   |            |   |         |  |  |  |      |   |  |   |         |  |  |  |      
|                                                        | United Commercial Bank |        | $ | 324,790           |  |                   |  | 7.57              | % |            | $ | 171,679 |  |  |  | 4.00 | % |  | $ | 214,599 |  |  |  | 5.00  | %
|                                                        | UCBH Holdings, Inc.    |        |   | 307,470           |  |                   |  | 7.15              |   |            |   | 171,896 |  |  |  | 4.00 |   |  |   |         |  |  |  |       |  

59



---



##### 



UCBH HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



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


The following is a reconciliation of capital
under Generally Accepted Accounting Principles
(GAAP) with regulatory capital at December 31,
2002 (dollars in thousands):

|                               |                                                                                 |                |         |                    |   |            |         |                |   |   |         |         |   |   |         |         |  
|------------------------------ | ------------------------------------------------------------------------------- | -------------- | ------- | ------------------ | - | ---------- | ------- | -------------- | - | - | ------- | ------- | - | - | ------- | ------- | -
|                               |                                                                                 |                |         |                   
|                               |                                                                                 | Tier I Capital |         | Risk-Based Capital
|                               |                                                                                 |                |         |                   
|                               |                                                                                 | United         |         |                    |   | United     |         |               
|                               |                                                                                 | Commercial     |         | UCBH               |   | Commercial |         | UCBH          
|                               |                                                                                 | Bank           |         | Holdings, Inc.     |   | Bank       |         | Holdings, Inc.
|                               |                                                                                 |                |         |                    |   |            |         |               
|GAAP Capital                   |                                                                                 | $              | 390,792 |                    |   | $          | 282,367 |                |   | $ | 390,792 |         |   | $ | 282,367 |        
|Nonallowable components:       |                                                                                 |                |         |                    |   |            |         |                |   |   |         |         |   |   |         |        
|                               | Unrealized (gains) on securities available
    for sale                         |                |         | (9,053             | ) |            |         | (9,053         | ) |   |         | (9,053  | ) |   |         | (9,053  | )
|                               | Goodwill                                                                        |                |         | (56,786            | ) |            |         | (56,786        | ) |   |         | (56,786 | ) |   |         | (56,786 | )
|                               | Mortgage servicing rights  excess                                              |                |         | (163               | ) |            |         | (163           | ) |   |         | (163    | ) |   |         | (163    | )
|Additional capital components: |                                                                                 |                |         |                    |   |            |         |                |   |   |         |         |   |   |         |        
|                               | Guaranteed preferred beneficial interests in
    junior subordinated debentures |                |         |                   |   |            |         | 91,105         |   |   |         |        |   |   |         | 91,105  |  
|                               | Allowance for loan losses  limited to
    1.25% of risk-based assets           |                |         |                   |   |            |         |               |   |   |         | 39,670  |   |   |         | 39,731  |  
|                               |                                                                                 |                |         |                    |   |            |         |                |   |   |         |         |   |   |         |        
|Regulatory capital             |                                                                                 | $              | 324,790 |                    |   | $          | 307,470 |                |   | $ | 364,460 |         |   | $ | 347,201 |        
|                               |                                                                                 |                |         |                    |   |            |         |                |   |   |         |         |   |   |         |        

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. During 2000, 2001 and 2002,
the Company declared dividends totaling $0.10 per share, $0.16
per share and $0.20 per share, respectively.

60



---



##### 



UCBH HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

12.     Earnings Per
Share

On January 9, 2003, the Company declared a
two-for-one stock split in the legal form of a stock dividend
for shareholders of record as of March 31, 2003, which will
be payable on April 8, 2003. The following is a
reconciliation of the numerator and denominator of the basic and
diluted earnings per share on a pre-split basis.

|                        |            |                                                  |   |               |  |           |         |            |  |  |   |      | 
|----------------------- | ---------- | ------------------------------------------------ | - | ------------- |  | --------- | ------- | ---------- |  |  | - | ---- | 
|                        |            |                                                 
|                        |            | Years Ended December 31,                        
|                        |            | 2002, 2001, and 2000                            
|                        |            |                                                 
|                        |            | Income                                           |   | Shares        |  | Per Share
|                        |            | (Numerator)                                      |   | (Denominator) |  | Amount   
|                        |            |                                                  |   |               |  |          
|                        |            |                                                 
|                        |            | (Dollars in Thousands, Except Per Share Amounts)
|2002:                   |            |                                                  |   |               |  |           |         |            |  |  |   |     
|Basic:                  |            |                                                  |   |               |  |           |         |            |  |  |   |     
|                        | Net income |                                                  | $ | 38,928        |  |           |         | 19,828,883 |  |  | $ | 1.96 | 
|Effect of stock options |            |                                                  |  |               |  |           | 928,580 |            |  |  |   |     
|                        |            |                                                  |   |               |  |           |         |            |  |  |   |     
|Diluted:                |            |                                                  |   |               |  |           |         |            |  |  |   |     
|                        | Net income |                                                  | $ | 38,928        |  |           |         | 20,757,463 |  |  | $ | 1.88 | 
|                        |            |                                                  |   |               |  |           |         |            |  |  |   |     
|2001:                   |            |                                                  |   |               |  |           |         |            |  |  |   |     
|Basic:                  |            |                                                  |   |               |  |           |         |            |  |  |   |     
|                        | Net income |                                                  | $ | 30,488        |  |           |         | 19,073,388 |  |  | $ | 1.60 | 
|Effect of stock options |            |                                                  |  |               |  |           | 904,503 |            |  |  |   |     
|                        |            |                                                  |   |               |  |           |         |            |  |  |   |     
|Diluted:                |            |                                                  |   |               |  |           |         |            |  |  |   |     
|                        | Net income |                                                  | $ | 30,488        |  |           |         | 19,977,891 |  |  | $ | 1.53 | 
|                        |            |                                                  |   |               |  |           |         |            |  |  |   |     
|2000:                   |            |                                                  |   |               |  |           |         |            |  |  |   |     
|Basic:                  |            |                                                  |   |               |  |           |         |            |  |  |   |     
|                        | Net income |                                                  | $ | 24,128        |  |           |         | 18,708,878 |  |  | $ | 1.29 | 
|Effect of stock options |            |                                                  |  |               |  |           | 734,300 |            |  |  |   |     
|                        |            |                                                  |   |               |  |           |         |            |  |  |   |     
|Diluted:                |            |                                                  |   |               |  |           |         |            |  |  |   |     
|                        | Net income |                                                  | $ | 24,128        |  |           |         | 19,443,178 |  |  | $ | 1.24 | 
|                        |            |                                                  |   |               |  |           |         |            |  |  |   |     

61



---



##### 



UCBH HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



12.     Earnings Per
Share  (Continued)


The following is an unaudited pro forma
reconciliation of the numerator and denominator of the basic and
diluted earnings per share on a post-split basis:

|                        |            |                                                  |   |               |  |           |           |            |  |  |   |      | 
|----------------------- | ---------- | ------------------------------------------------ | - | ------------- |  | --------- | --------- | ---------- |  |  | - | ---- | 
|                        |            |                                                 
|                        |            | Years Ended December  31,                       
|                        |            | 2002, 2001, and 2000                            
|                        |            |                                                 
|                        |            | Income                                           |   | Shares        |  | Per Share
|                        |            | (Numerator)                                      |   | (Denominator) |  | Amount   
|                        |            |                                                  |   |               |  |          
|                        |            |                                                 
|                        |            | (Dollars in Thousands, Except Per Share Amounts)
|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 | 
|                        |            |                                                  |   |               |  |           |           |            |  |  |   |     
|2001:                   |            |                                                  |   |               |  |           |           |            |  |  |   |     
|Basic:                  |            |                                                  |   |               |  |           |           |            |  |  |   |     
|                        | Net income |                                                  | $ | 30,488        |  |           |           | 38,146,776 |  |  | $ | 0.80 | 
|Effect of stock options |            |                                                  |  |               |  |           | 1,809,006 |            |  |  |   |     
|                        |            |                                                  |   |               |  |           |           |            |  |  |   |     
|Diluted:                |            |                                                  |   |               |  |           |           |            |  |  |   |     
|                        | Net income |                                                  | $ | 30,488        |  |           |           | 39,955,782 |  |  | $ | 0.76 | 
|                        |            |                                                  |   |               |  |           |           |            |  |  |   |     
|2000:                   |            |                                                  |   |               |  |           |           |            |  |  |   |     
|Basic:                  |            |                                                  |   |               |  |           |           |            |  |  |   |     
|                        | Net income |                                                  | $ | 24,128        |  |           |           | 37,417,756 |  |  | $ | 0.64 | 
|Effect of stock options |            |                                                  |  |               |  |           | 1,468,600 |            |  |  |   |     
|                        |            |                                                  |   |               |  |           |           |            |  |  |   |     
|Diluted:                |            |                                                  |   |               |  |           |           |            |  |  |   |     
|                        | Net income |                                                  | $ | 24,128        |  |           |           | 38,886,356 |  |  | $ | 0.62 | 
|                        |            |                                                  |   |               |  |           |           |            |  |  |   |     

62



---



##### 



UCBH HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

13.     Segment
Information

The Company adopted SFAS No. 131
Disclosures about Segments of an Enterprise and Related
Information, on January 1, 1998. 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 adoption
of SFAS No. 131 did not affect the consolidated results of
operations or consolidated financial position as previously
reported.

The Company has determined that its reportable
segments are those that are based on the Companys method
of internal reporting, which disaggregates its business into two
reportable segments: Consumer Banking and Commercial Banking.
These segments serve consumers and businesses principally
located in California. Historically, our customer base has been
primarily the ethnic Chinese communities located mainly in the
San Francisco Bay Area, Sacramento/ Stockton and Greater Los
Angeles.

The financial results of the Companys
operating segments are presented on an accrual basis. There are
no significant differences between the accounting policies of
the segments as compared to the Companys consolidated
financial statements. The Company evaluates the performance of
its segments and allocates resources to them based on interest
income, interest expense and net interest income. There are no
material intersegment revenues.

Following is segment information of the Company
for the years ended December 31, 2002, 2001, and 2000:

|     |                                                            |                        |   |           |  |       |   |           |  |  |   |           | 
|---- | ---------------------------------------------------------- | ---------------------- | - | --------- |  | ----- | - | --------- |  |  | - | --------- | 
|     |                                                            | Commercial             |   | Consumer  |  | Total
|     |                                                            |                        |   |           |  |      
|     |                                                            |                       
|     |                                                            | (Dollars in Thousands)
|2002 |                                                            |                        |   |           |  |       |   |           |  |  |   |          
|     | Net interest income (before provision for loan
    losses) |                        | $ | 83,690    |  |       | $ | 41,256    |  |  | $ | 124,946   | 
|     | Segment net income                                         |                        |   | 28,282    |  |       |   | 10,646    |  |  |   | 38,928    | 
|     | Segment total assets                                       |                        |   | 2,650,485 |  |       |   | 2,203,131 |  |  |   | 4,853,636 | 
|2001 |                                                            |                        |   |           |  |       |   |           |  |  |   |          
|     | Net interest income (before provision for loan
    losses) |                        | $ | 58,771    |  |       | $ | 39,686    |  |  | $ | 98,457    | 
|     | Segment net income                                         |                        |   | 22,749    |  |       |   | 7,739     |  |  |   | 30,488    | 
|     | Segment total assets                                       |                        |   | 1,804,500 |  |       |   | 1,127,543 |  |  |   | 2,932,043 | 
|2000 |                                                            |                        |   |           |  |       |   |           |  |  |   |          
|     | Net interest income (before provision for loan
    losses) |                        | $ | 36,465    |  |       | $ | 46,519    |  |  | $ | 82,984    | 
|     | Segment net income                                         |                        |   | 12,111    |  |       |   | 12,017    |  |  |   | 24,128    | 
|     | Segment total assets                                       |                        |   | 1,333,256 |  |       |   | 1,168,863 |  |  |   | 2,502,119 | 

14.     Employee
Benefit Plans

Stock Option
Plan

In May 1998, the Company adopted a Stock Option
Plan (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.

63



---



##### 



UCBH HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



14.     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, 2002, and 2001:

|                                                                   |  |           |           |                |  |           |       |                |  |  |           |   |  |   |       | 
|------------------------------------------------------------------ |  | --------- | --------- | -------------- |  | --------- | ----- | -------------- |  |  | --------- | - |  | - | ----- | 
|                                                                   |  |           |           |               
|                                                                   |  | 2002      |           | 2001          
|                                                                   |  |           |           |               
|                                                                   |  |           |           | Weighted       |  |           |       | Weighted      
|                                                                   |  | Number    |           | Average        |  | Number    |       | Average       
|                                                                   |  | of Shares |           | Exercise Price |  | of Shares |       | Exercise Price
|                                                                   |  |           |           |                |  |           |       |               
|Options outstanding, beginning of year                             |  |           | 2,585,791 |                |  | $         | 17.97 |                |  |  | 1,760,732 |   |  | $ | 8.09  | 
|Granted                                                            |  |           | 269,300   |                |  |           | 33.50 |                |  |  | 1,633,550 |   |  |   | 24.62 | 
|Canceled or expired                                                |  |           | (36,498   | )              |  |           | 33.27 |                |  |  | (198,817  | ) |  |   | 21.86 | 
|Exercised                                                          |  |           | (324,490  | )              |  |           | 9.79  |                |  |  | (609,674  | ) |  |   | 7.67  | 
|                                                                   |  |           |           |                |  |           |       |                |  |  |           |   |  |   |       | 
|Options outstanding, end of year                                   |  |           | 2,494,103 |                |  |           | 20.07 |                |  |  | 2,585,791 |   |  |   | 17.57 | 
|                                                                   |  |           |           |                |  |           |       |                |  |  |           |   |  |   |       | 
|Shares exercisable end of year                                     |  |           | 1,218,158 |                |  |           | 14.23 |                |  |  | 845,098   |   |  |   | 7.77  | 
|Weighted average fair value of options granted
    during the year |  |           |           |                |  |           | 10.14 |                |  |  |           |   |  |   | 10.33 | 
|Market value of stock at December 31, 2002
    and 2001 period end |  |           |           |                |  | $         | 42.45 |                |  |  |           |   |  | $ | 28.44 | 

For options outstanding at December 31,
2002, 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  
|               |  |             |           |                  |  |                  |       |             |  |                 
|$ 7.50-$10.00  |  |             | 826,365   |                  |  | $                | 8.38  |             |  |                  | 6.02 |  |  |  | 763,045   |  |  | $ | 8.03  | 
|$10.01-$20.00  |  |             |          |                  |  |                  |      |             |  |                  |     |  |  |  |          |  |  |   |      | 
|$20.01-$30.00  |  |             | 1,535,072 |                  |  |                  | 24.90 |             |  |                  | 8.37 |  |  |  | 453,111   |  |  |   | 24.59 | 
|$30.01-$40.00  |  |             | 132,666   |                  |  |                  | 36.85 |             |  |                  | 9.51 |  |  |  | 2,002     |  |  |   | 31.05 | 
|               |  |             |           |                  |  |                  |       |             |  |                  |      |  |  |  |           |  |  |   |       | 
|Total/ Average |  |             | 2,494,103 |                  |  |                  | 20.07 |             |  |                  | 7.65 |  |  |  | 1,218,158 |  |  |   | 14.23 | 
|               |  |             |           |                  |  |                  |       |             |  |                  |      |  |  |  |           |  |  |   |       | 

In October 1995, the FASB issued SFAS
No. 123, Accounting for Stock-Based
Compensation. This statement establishes a new fair value
based accounting method for stock-based compensation for plans
and encourages, but does not require, employers to adopt the new
method in place for the provisions of Accounting Principles
Board (APB) Release No. 25. Companies may
continue to apply the accounting provisions of APB No. 25
in determining net income. However, they must apply the
disclosure requirements of SFAS No. 123 for all grants
issued after 1994. The Company elected to apply the provisions
of APB No. 25 in accounting for the employee stock plan
described above. Accordingly, no compensation cost has been
recognized for stock options granted under the Plan.

64



---



##### 



UCBH HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



14.     Employee
Benefit Plans  (Continued)


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
following table. The impact of outstanding nonvested stock
options has been excluded from the pro forma calculation.

|                            |             |                     |   |        |  |  |   |        | 
|--------------------------- | ----------- | ------------------- | - | ------ |  |  | - | ------ | 
|                            |             | 2002                |   | 2001  
|                            |             |                     |   |       
|                            |             |                    
|                            |             | (Dollars in        
|                            |             | Thousands, Except  
|                            |             | Earnings Per Share)
|Net income:                 |             |                     |   |        |  |  |   |       
|                            | As reported |                     | $ | 38,928 |  |  | $ | 30,488 | 
|                            | Pro forma   |                     |   | 35,515 |  |  |   | 28,074 | 
|Basic earnings per share:   |             |                     |   |        |  |  |   |       
|                            | As reported |                     |   | 1.96   |  |  |   | 1.60   | 
|                            | Pro forma   |                     |   | 1.79   |  |  |   | 1.47   | 
|Diluted earnings per share: |             |                     |   |        |  |  |   |       
|                            | As reported |                     |   | 1.88   |  |  |   | 1.53   | 
|                            | Pro forma   |                     |   | 1.71   |  |  |   | 1.41   | 

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 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 in 2002, 2001, and 2000:

|                        |  |      |       |      |  |      |       |   |  |  |       |  
|----------------------- |  | ---- | ----- | ---- |  | ---- | ----- | - |  |  | ----- | -
|                        |  | 2002 |       | 2001 |  | 2000
|                        |  |      |       |      |  |     
|Dividend yield          |  |      | 0.40  | %    |  |      | 0.60  | % |  |  | 1.30  | %
|Volatility              |  |      | 30.45 | %    |  |      | 43.31 | % |  |  | 35.16 | %
|Risk-free interest rate |  |      | 3.90  | %    |  |      | 4.80  | % |  |  | 6.30  | %
|Expected lives (years)  |  |      | 6.5   |      |  |      | 6.5   |   |  |  | 5.0   |  

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
2000, 2001 and 2002. For 2000, 2001 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, 2002, 2001,
and 2000, the Bank contributed $646,000, $475,000, and $433,000,
respectively, to the 401(k) Plan.

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

65



---



##### 



UCBH HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

15.     Federal and
State Taxes on Income

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

|                                |         |                          |         |        |   |      |         |        |   |   |        |        |  
|------------------------------- | ------- | ------------------------ | ------- | ------ | - | ---- | ------- | ------ | - | - | ------ | ------ | -
|                                |         |                         
|                                |         | Years Ended December 31,
|                                |         |                         
|                                |         | 2002                     |         | 2001   |   | 2000
|                                |         |                          |         |        |   |     
|Current tax expense:            |         |                          |         |        |   |      |         |        |   |   |        |       
|                                | Federal |                          | $       | 27,296 |   |      | $       | 24,450 |   |   | $      | 15,539 |  
|                                | State   |                          |         | 8,565  |   |      |         | 7,421  |   |   |        | 3,409  |  
|                                |         |                          |         |        |   |      |         |        |   |   |        |       
|                                |         |                          | 35,861  |        |   |      | 31,871  |        |   |   | 18,948 |       
|                                |         |                          |         |        |   |      |         |        |   |   |        |       
|Deferred tax (benefit) expense: |         |                          |         |        |   |      |         |        |   |   |        |       
|                                | Federal |                          |         | (6,554 | ) |      |         | (9,262 | ) |   |        | (4,152 | )
|                                | State   |                          |         | (5,169 | ) |      |         | (2,651 | ) |   |        | (1,053 | )
|                                |         |                          |         |        |   |      |         |        |   |   |        |       
|                                |         |                          | (11,723 | )      |   |      | (11,913 | )      |   |   | (5,205 | )     
|                                |         |                          |         |        |   |      |         |        |   |   |        |       
|                                |         | $                        | 24,138  |        |   | $    | 19,958  |        |   | $ | 13,743 |       
|                                |         |                          |         |        |   |      |         |        |   |   |        |       

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

|                                      |                                                    |                          |         |         |   |   |         |         |  
|------------------------------------- | -------------------------------------------------- | ------------------------ | ------- | ------- | - | - | ------- | ------- | -
|                                      |                                                    |                         
|                                      |                                                    | Years Ended December 31,
|                                      |                                                    |                         
|                                      |                                                    | 2002                     |         | 2001   
|                                      |                                                    |                          |         |        
|Deferred tax liabilities:             |                                                    |                          |         |         |   |   |         |        
|                                      | Fixed asset basis differences                      |                          | $       | 1,604   |   |   |         |        |  
|                                      | Deferred loan fees                                 |                          |         | 3,857   |   |   |         | 3,092   |  
|                                      | FHLB dividends                                     |                          |         | 3,443   |   |   |         | 2,866   |  
|                                      | Purchase accounting adjustments                    |                          |         | 20,044  |   |   |         | 39      |  
|                                      | Market value adjustments on certain and securities |                          |         |        |   |   |         | 831     |  
|                                      | Other                                              |                          |         | 779     |   |   |         | 514     |  
|                                      |                                                    |                          |         |         |   |   |         |        
|                                      |                                                    |                          | 29,727  |         |   |   | 7,342   |        
|                                      |                                                    |                          |         |         |   |   |         |        
|Deferred tax assets:                  |                                                    |                          |         |         |   |   |         |        
|                                      | Loan and OREO loss allowances                      |                          |         | (16,423 | ) |   |         | (12,034 | )
|                                      | Fixed asset basis differences                      |                          |         |        |   |   |         | (999    | )
|                                      | Market value adjustments on certain and securities |                          |         | (1,457  | ) |   |         | (4,693  | )
|                                      | State taxes                                        |                          |         | (1,922  | ) |   |         | (3,192  | )
|                                      | Compensation and benefits                          |                          |         | (1,500  | ) |   |         | (323    | )
|                                      | Other                                              |                          |         | (449    | ) |   |         | (224    | )
|                                      |                                                    |                          |         |         |   |   |         |        
|                                      |                                                    |                          | (21,751 | )       |   |   | (21,465 | )      
|                                      |                                                    |                          |         |         |   |   |         |        
|Net deferred tax liabilities (assets) |                                                    | $                        | 7,976   |         |   | $ | (14,123 | )      
|                                      |                                                    |                          |         |         |   |   |         |        

66



---



##### 



UCBH HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



15.     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,
|                                                                |                                                   |             
|                                                                |                                                   | 2002         |      | 2001 |   | 2000
|                                                                |                                                   |              |      |      |   |     
|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 |              |      | (2.5 | ) |      |      | (1.3 | ) |  |      | (2.9 | )
|                                                                | Tax exempt income                                 |              |      | (1.8 | ) |      |      | (1.3 | ) |  |      | (1.6 | )
|                                                                | Amortization of intangibles                       |              |      |     |   |      |      |     |   |  |      | 0.1  |  
|                                                                | Other, net                                        |              |      | 0.6  |   |      |      | 0.2  |   |  |      | (1.3 | )
|                                                                |                                                   |              |      |      |   |      |      |      |   |  |      |     
|                                                                |                                                   |              | 38.3 | %    |   |      | 39.6 | %    |   |  | 36.3 | %   
|                                                                |                                                   |              |      |      |   |      |      |      |   |  |      |     

The Companys assets and liabilities
included the following amounts related to income taxes (dollars
in thousands):

|                                     |                     |              |        |       |   |   |         |         |  
|------------------------------------ | ------------------- | ------------ | ------ | ----- | - | - | ------- | ------- | -
|                                     |                     |             
|                                     |                     | Years Ended 
|                                     |                     | December 31,
|                                     |                     |             
|                                     |                     | 2002         |        | 2001 
|                                     |                     |              |        |      
|Net deferred liability (asset):      |                     |              |        |       |   |   |         |        
|                                     | Federal income tax  |              | $      | 8,618 |   |   | $       | (11,851 | )
|                                     | State franchise tax |              |        | (642  | ) |   |         | (2,272  | )
|                                     |                     |              |        |       |   |   |         |        
|                                     |                     |              | 7,976  |       |   |   | (14,123 | )      
|(Prepaid income taxes) taxes payable |                     |              | 13,521 |       |   |   | 6,359   |        
|                                     |                     |              |        |       |   |   |         |        
|                                     |                     | $            | 21,497 |       |   | $ | (7,764  | )      
|                                     |                     |              |        |       |   |   |         |        

The years 1999 through 2001 remain open for
Internal Revenue Service purposes and the years 1998 through
2001 remain open for California Franchise Tax Board purposes.
The 2002 Federal and State tax returns have not yet been filed.

16.     Derivative
Financial Instrument 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

67



---



##### 



UCBH HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|    |                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------
|16. | Derivative Financial Instrument and Financial
    Instruments with Off-Balance-Sheet
    Risk  (Continued)

Company controls the credit risk of its
interest-rate swap and cap agreements, foreign exchange
contracts, and 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, 2002 and 2001 are
as follows (dollars in millions):

|                                                                                               |                                       |                                           |      |      |       |  |      |   |       | 
|---------------------------------------------------------------------------------------------- | ------------------------------------- | ----------------------------------------- | ---- | ---- | ----- |  | ---- | - | ----- | 
|                                                                                               |                                       | 2002                                      |      | 2001
|                                                                                               |                                       |                                           |      |     
|Financial instruments whose contract amounts
    represent credit risk:                        |                                       |                                           |      |      |       |  |      |  
|                                                                                               | Commitments to extend credit:         |                                           |      |      |       |  |      |   |      
|                                                                                               |                                       | Consumer (including residential mortgage) |      | $    | 86.5  |  |      | $ | 26.1  | 
|                                                                                               |                                       | Commercial (excluding construction)       |      |      | 342.1 |  |      |   | 220.6 | 
|                                                                                               |                                       | Construction                              |      |      | 188.6 |  |      |   | 182.7 | 
|                                                                                               |                                       | Letters of credit                         |      |      | 49.1  |  |      |   | 23.5  | 
|Foreign exchange contracts receivable                                                          |                                       |                                           | 10.2 |      |       |  |     |  
|Foreign exchange contracts payable                                                             |                                       |                                           | 10.2 |      |       |  |     |  
|Commitments to purchase securities                                                             |                                       |                                           | 17.3 |      |       |  | 11.8 |  
|Financial instruments whose notional or contract
    amounts exceed the amount of credit risk: |                                       |                                           |      |      |       |  |      |  
|                                                                                               | Interest-rate cap and swap agreements |                                           | $    |     |       |  | $    |  |      

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 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

68



---



##### 



UCBH HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|    |                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------
|16. | Derivative Financial Instrument and Financial
    Instruments with Off-Balance-Sheet
    Risk  (Continued)

December 31, 2002 and 2001, no interest rate
caps or swaps were outstanding. For the year ended
December 31, 2001, interest rate caps and swaps positively
impacted net interest income by $118,000.

17.     Concentrations
of Credit Risk

The Companys loan activity is primarily
with customers located throughout the State of California.
Substantially all residential and commercial real estate loans
are secured by properties located in the State of California and
are originated at 80% loan-to-value or less. Management believes
that the risk of significant losses in excess of underlying
collateral value is low.

18.     Lease
Commitments and Contingent Liabilities

Lease
Commitments

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

Future minimum rental payments, which do not
include common area costs, due each year under existing
operating leases that have initial or remaining noncancellable
lease terms in excess of one year as of December 31, 2002,
are payable as follows (dollars in thousands):

|                     |                                 |   |       |        | 
|-------------------- | ------------------------------- | - | ----- | ------ | 
|2003                 |                                 | $ | 4,549 |       
|2004                 |                                 |   | 3,313 |       
|2005                 |                                 |   | 2,637 |       
|2006                 |                                 |   | 2,051 |       
|2007                 |                                 |   | 1,732 |       
|Aggregate thereafter |                                 |   | 7,316 |       
|                     |                                 |   |       |       
|                     | Total minimum payments required |   | $     | 21,598 | 
|                     |                                 |   |       |       

Rental expense was approximately
$4.4 million, $3.8 million, and $3.6 million for
the years ended December 31, 2002, 2001, and 2000,
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 operations
or financial condition.

19.     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, 2002 and
2001, by application of the described methods and significant
assumptions.

69



---



##### 



UCBH HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



19.     Fair Value of
Financial Instruments  (Continued)


Cash and
Short-term Investments

For these short-term instruments, the carrying
value of $59.0 million at December 31, 2002 and
$32.6 million at December 31, 2001 is a reasonable
estimate of fair value.

Investment
and Mortgage-backed Securities

The aggregate fair value of investment and
mortgage-backed securities is $1.62 billion at
December 31, 2002 and $615.6 million at
December 31, 2001. 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
$3.07 billion at December 31, 2002 and
$2.35 billion at December 31, 2001. 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.

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 $4.03 billion at
December 31, 2002 and $2.50 billion at
December 31, 2001.

Federal Home
Loan Bank Advances and Other Borrowings

Fair value of Federal Home Loan Bank advances and
other borrowings is 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 at December 31, 2002 was
$381.0 million and $239.1 million at December 31,
2001.

Guaranteed
Preferred Beneficial Interests in Junior 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
$135.7 million at December 31, 2002 and
$33.2 million at December 31, 2001.



| |                                          
| | -----------------------------------------
| | Interest Rate Cap and Swap
    Agreements

The fair value of the cap and swap agreements
used for hedging purposes is the estimated amount that the
Company would receive or pay to terminate the agreements at the
reporting date, taking into account current interest rates and
the current creditworthiness of the cap counter parties. There
were no cap or swap agreements as of December 31, 2002 or
December 31, 2001.



| |                           
| | --------------------------
| | Foreign Exchange Contracts

The fair value of foreign exchange contracts are
recognized and reported as either assets or liabilities on the
balance sheet. At December 31, 2002, the fair value for
outstanding contracts was $12,000. There were no foreign
exchange contracts at December 31, 2001.

70



---



##### 



UCBH HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



19.     Fair Value of
Financial Instruments  (Continued)




| |                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------
| | 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.
There were no put or call options at December 31, 2002 or
December 31, 2001.

20.     Parent
Company

Condensed unconsolidated financial information of
UCBH Holdings, Inc. is presented below.

CONDENSED BALANCE SHEET

(Dollars in Thousands)


|                                                                 |                                            |                     |         |         |  |   |         |         | 
|---------------------------------------------------------------- | ------------------------------------------ | ------------------- | ------- | ------- |  | - | ------- | ------- | 
|                                                                 |                                            |                    
|                                                                 |                                            | For the Years Ended
|                                                                 |                                            | December 31,       
|                                                                 |                                            |                    
|                                                                 |                                            | 2002                |         | 2001   
|                                                                 |                                            |                     |         |        
|ASSETS                                                          
|Cash and due from banks                                          |                                            | $                   | 15,913  |         |  | $ | 3,155   |        
|Investment in subsidiaries                                       |                                            |                     | 390,924 |         |  |   | 202,331 |        
|Other assets                                                     |                                            |                     | 14,104  |         |  |   | 6,132   |        
|                                                                 |                                            |                     |         |         |  |   |         |        
|                                                                 | Total assets                               |                     | $       | 420,941 |  |   | $       | 211,618 | 
|                                                                 |                                            |                     |         |         |  |   |         |        
|LIABILITIES                                                     
|Accrued interest payable                                         |                                            | $                   | 1,224   |         |  | $ | 501     |        
|Other liabilities                                                |                                            |                     | 1,350   |         |  |   | 993     |        
|Junior subordinated debentures, payable to
    subsidiary trusts |                                            |                     | 136,000 |         |  |   | 36,000  |        
|                                                                 |                                            |                     |         |         |  |   |         |        
|                                                                 | Total liabilities                          |                     |         | 138,574 |  |   |         | 37,494  | 
|                                                                 |                                            |                     |         |         |  |   |         |        
|STOCKHOLDERS EQUITY                                            
|Common stock                                                     |                                            |                     | 210     |         |  |   | 194     |        
|Additional paid-in capital                                       |                                            |                     | 124,440 |         |  |   | 66,685  |        
|Subsidiarys accumulated other comprehensive
    income          |                                            |                     | 9,053   |         |  |   | (6,481  | )      
|Retained earnings                                                |                                            |                     | 148,664 |         |  |   | 113,726 |        
|                                                                 |                                            |                     |         |         |  |   |         |        
|                                                                 | Total stockholders equity                 |                     |         | 282,367 |  |   |         | 174,124 | 
|                                                                 |                                            |                     |         |         |  |   |         |        
|                                                                 | Total liabilities and stockholders equity |                     | $       | 420,941 |  |   | $       | 211,618 | 
|                                                                 |                                            |                     |         |         |  |   |         |        

71



---



##### 



UCBH HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



20.     Parent
Company  (Continued)


CONDENSED STATEMENT OF INCOME

(Dollars in Thousands)


|                                                                                    |               |                                  |        |        |  |      |        |        |  |   |        |        | 
|----------------------------------------------------------------------------------- | ------------- | -------------------------------- | ------ | ------ |  | ---- | ------ | ------ |  | - | ------ | ------ | 
|                                                                                    |               |                                 
|                                                                                    |               | For the Years Ended December 31,
|                                                                                    |               |                                 
|                                                                                    |               | 2002                             |        | 2001   |  | 2000
|                                                                                    |               |                                  |        |        |  |     
|INCOME                                                                             
|Interest income on investment securities                                            |               | $                                | 2      |        |  | $    | 56     |        |  | $ | 59     |       
|Dividends from subsidiary                                                           |               |                                  | 2,000  |        |  |      | 800    |        |  |   | 5,600  |       
|                                                                                    |               |                                  |        |        |  |      |        |        |  |   |        |       
|                                                                                    | Total income  |                                  |        | 2,002  |  |      |        | 856    |  |   |        | 5,659  | 
|                                                                                    |               |                                  |        |        |  |      |        |        |  |   |        |       
|EXPENSE                                                                            
|Interest expense on junior subordinated debentures                                  |               |                                  | 4,663  |        |  |      | 2,845  |        |  |   | 2,812  |       
|Miscellaneous expense                                                               |               |                                  | 3,275  |        |  |      | 2,562  |        |  |   | 1,878  |       
|                                                                                    |               |                                  |        |        |  |      |        |        |  |   |        |       
|                                                                                    | Total expense |                                  |        | 7,938  |  |      |        | 5,407  |  |   |        | 4,690  | 
|                                                                                    |               |                                  |        |        |  |      |        |        |  |   |        |       
|Income (loss) before taxes and equity in
    undistributed net income of subsidiary |               |                                  | (5,936 | )      |  |      | (4,551 | )      |  |   | 969    |       
|Income tax benefit                                                                  |               |                                  | 3,187  |        |  |      | 2,135  |        |  |   | 1,789  |       
|Equity in undistributed net income of subsidiary                                    |               |                                  | 41,677 |        |  |      | 32,904 |        |  |   | 21,370 |       
|                                                                                    |               |                                  |        |        |  |      |        |        |  |   |        |       
|                                                                                    | Net income    |                                  | $      | 38,928 |  |      | $      | 30,488 |  |   | $      | 24,128 | 
|                                                                                    |               |                                  |        |        |  |      |        |        |  |   |        |       

72



---



##### 



UCBH HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



20.     Parent
Company  (Continued)


CONDENSED STATEMENT OF CASH FLOWS

(Dollars in Thousands)


|                                                                                          |                                                                                                  |                                                  |                                                         |      |         |          |        |   |         |        |        |   |         |      |  
|----------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------ | ------------------------------------------------ | ------------------------------------------------------- | ---- | ------- | -------- | ------ | - | ------- | ------ | ------ | - | ------- | ---- | -
|                                                                                          |                                                                                                  |                                                 
|                                                                                          |                                                                                                  | For the Years Ended December 31,                
|                                                                                          |                                                                                                  |                                                 
|                                                                                          |                                                                                                  | 2002                                             |                                                         | 2001 |         | 2000    
|                                                                                          |                                                                                                  |                                                  |                                                         |      |         |         
|OPERATING ACTIVITIES                                                                     
|Net income                                                                                |                                                                                                  | $                                                | 38,928                                                  |      |         | $        | 30,488 |   |         | $      | 24,128 |  
|                                                                                          | Adjustments to reconcile net income to net cash
    provided by (used for) operating activities: |                                                  |                                                         |      |         |          |        |   |         |        |        |   |        
|                                                                                          |                                                                                                  | Equity in undistributed net income of subsidiary |                                                         |      | (41,676 | )        |        |   | (32,904 | )      |        |   | (21,370 | )   
|                                                                                          |                                                                                                  | Decrease (increase) in other assets              |                                                         |      | (8,105  | )        |        |   | 164     |        |        |   | (2,050  | )   
|                                                                                          |                                                                                                  | Increase in accrued interest payable             |                                                         |      | 723     |          |        |   | 31      |        |        |   |        |     
|                                                                                          |                                                                                                  | Increase (decrease) in other liabilities         |                                                         |      | 3,419   |          |        |   | 1,823   |        |        |   | 112     |     
|                                                                                          |                                                                                                  |                                                  |                                                         |      |         |          |        |   |         |        |        |  
|                                                                                          |                                                                                                  |                                                  | Net cash used for operating activities                  |      |         | (6,711   | )      |   |         | (398   | )      |   |         | 820  |  
|                                                                                          |                                                                                                  |                                                  |                                                         |      |         |          |        |   |         |        |        |  
|INVESTING ACTIVITIES                                                                     
|Maturities of investments available for sale                                              |                                                                                                  |                                                  |                                                        |      |         |          |       |   |         |        |       |  
|Capital contribution to subsidiary                                                        |                                                                                                  |                                                  | (131,250                                                | )    |         |          | (5,000 | ) |         |        |       |  
|                                                                                          |                                                                                                  |                                                  |                                                         |      |         |          |        |   |         |        |        |  
|                                                                                          |                                                                                                  |                                                  | Net cash provided by (used in) investing
    activities |      |         | (131,250 | )      |   |         | (5,000 | )      |   |         |     |  
|                                                                                          |                                                                                                  |                                                  |                                                         |      |         |          |        |   |         |        |        |  
|FINANCING ACTIVITIES                                                                     
|Proceeds from issuance of common stock                                                    |                                                                                                  |                                                  | 54,434                                                  |      |         |          | 4,674  |   |         |        | 623    |  
|Proceeds from issuance of junior subordinated
    debentures, payable to subsidiary trust |                                                                                                  |                                                  | 100,000                                                 |      |         |          | 6,000  |   |         |        |       |  
|Payment of cash dividend on common stock                                                  |                                                                                                  |                                                  | (3,715                                                  | )    |         |          | (2,661 | ) |         |        | (1,403 | )
|                                                                                          |                                                                                                  |                                                  |                                                         |      |         |          |        |   |         |        |        |  
|                                                                                          |                                                                                                  |                                                  | Net cash (used in) provided by financing
    activities |      |         | 150,719  |        |   |         | 8,013  |        |   |         | (780 | )
|                                                                                          |                                                                                                  |                                                  |                                                         |      |         |          |        |   |         |        |        |  
|Net increase (decrease) in cash and cash
    equivalents                                  |                                                                                                  |                                                  | 12,758                                                  |      |         |          | 2,615  |   |         |        | 40     |  
|Cash and cash equivalents beginning of year                                               |                                                                                                  |                                                  | 3,155                                                   |      |         |          | 540    |   |         |        | 500    |  
|                                                                                          |                                                                                                  |                                                  |                                                         |      |         |          |        |   |         |        |        |  
|Cash and cash equivalents end of year                                                     |                                                                                                  | $                                                | 15,913                                                  |      |         | $        | 3,155  |   |         | $      | 540    |  
|                                                                                          |                                                                                                  |                                                  |                                                         |      |         |          |        |   |         |        |        |  

73



---



##### 



UNAUDITED SUPPLEMENTAL INFORMATION

UCBH Holdings, Inc.



| |                                                           
| | ----------------------------------------------------------
| | Quarterly Condensed Consolidated Financial
    Information

|                            |                    |                                                   |        |               |  |        |        |       |  |        |        |       |  |        |        |       |  |   |        |      |  |   |        |      |  |   |        |      |  |   |        |      | 
|--------------------------- | ------------------ | ------------------------------------------------- | ------ | ------------- |  | ------ | ------ | ----- |  | ------ | ------ | ----- |  | ------ | ------ | ----- |  | - | ------ | ---- |  | - | ------ | ---- |  | - | ------ | ---- |  | - | ------ | ---- | 
|                            |                    |                                                   |        |              
|                            |                    | 2002 Quarters                                     |        | 2001 Quarters
|                            |                    |                                                   |        |              
|                            |                    | Fourth                                            |        | Third         |  | Second |        | First |  | Fourth |        | Third |  | Second |        | First
|                            |                    |                                                   |        |               |  |        |        |       |  |        |        |       |  |        |        |      
|                            |                    |                                                  
|                            |                    | (Dollars in Thousands, Except Earnings Per Share)
|Interest income             |                    | $                                                 | 59,425 |               |  | $      | 49,930 |       |  | $      | 48,440 |       |  | $      | 47,382 |       |  | $ | 49,083 |      |  | $ | 51,315 |      |  | $ | 51,460 |      |  | $ | 50,929 |     
|Interest expense            |                    |                                                   | 23,631 |               |  |        | 18,409 |       |  |        | 18,581 |       |  |        | 19,610 |       |  |   | 22,683 |      |  |   | 25,948 |      |  |   | 27,567 |      |  |   | 28,132 |     
|                            |                    |                                                   |        |               |  |        |        |       |  |        |        |       |  |        |        |       |  |   |        |      |  |   |        |      |  |   |        |      |  |   |        |     
|Net interest income         |                    |                                                   | 35,794 |               |  |        | 31,521 |       |  |        | 29,859 |       |  |        | 27,772 |       |  |   | 26,400 |      |  |   | 25,367 |      |  |   | 23,893 |      |  |   | 22,797 |     
|                            |                    |                                                   |        |               |  |        |        |       |  |        |        |       |  |        |        |       |  |   |        |      |  |   |        |      |  |   |        |      |  |   |        |     
|Provision for credit losses |                    |                                                   | 3,157  |               |  |        | 2,742  |       |  |        | 2,887  |       |  |        | 887    |       |  |   | 1,831  |      |  |   | 2,084  |      |  |   | 952    |      |  |   | 753    |     
|Noninterest income          |                    |                                                   | 3,594  |               |  |        | 2,594  |       |  |        | 4,037  |       |  |        | 1,919  |       |  |   | 2,098  |      |  |   | 1,853  |      |  |   | 1,688  |      |  |   | 1,266  |     
|Noninterest expense         |                    |                                                   | 16,284 |               |  |        | 19,802 |       |  |        | 14,522 |       |  |        | 13,743 |       |  |   | 13,232 |      |  |   | 12,138 |      |  |   | 12,176 |      |  |   | 11,751 |     
|                            |                    |                                                   |        |               |  |        |        |       |  |        |        |       |  |        |        |       |  |   |        |      |  |   |        |      |  |   |        |      |  |   |        |     
|Income before income taxes  |                    |                                                   | 19,947 |               |  |        | 11,571 |       |  |        | 16,487 |       |  |        | 15,061 |       |  |   | 13,436 |      |  |   | 12,998 |      |  |   | 12,453 |      |  |   | 11,559 |     
|Income tax expense          |                    |                                                   | 7,243  |               |  |        | 4,243  |       |  |        | 6,659  |       |  |        | 5,993  |       |  |   | 5,202  |      |  |   | 5,200  |      |  |   | 5,025  |      |  |   | 4,531  |     
|                            |                    |                                                   |        |               |  |        |        |       |  |        |        |       |  |        |        |       |  |   |        |      |  |   |        |      |  |   |        |      |  |   |        |     
|Net income                  |                    | $                                                 | 12,704 |               |  | $      | 7,328  |       |  | $      | 9,828  |       |  | $      | 9,068  |       |  | $ | 8,234  |      |  | $ | 7,798  |      |  | $ | 7,428  |      |  | $ | 7,028  |     
|                            |                    |                                                   |        |               |  |        |        |       |  |        |        |       |  |        |        |       |  |   |        |      |  |   |        |      |  |   |        |      |  |   |        |     
|Net income per common share |                    |                                                   |        |               |  |        |        |       |  |        |        |       |  |        |        |       |  |   |        |      |  |   |        |      |  |   |        |      |  |   |        |     
|                            | Basic net income   |                                                   | $      | 0.62          |  |        | $      | 0.37  |  |        | $      | 0.50  |  |        | $      | 0.47  |  |   | $      | 0.43 |  |   | $      | 0.41 |  |   | $      | 0.39 |  |   | $      | 0.37 | 
|                            | Diluted net income |                                                   |        | 0.59          |  |        |        | 0.36  |  |        |        | 0.48  |  |        |        | 0.45  |  |   |        | 0.41 |  |   |        | 0.39 |  |   |        | 0.37 |  |   |        | 0.36 | 

74