Table of Contents

 

 

 

**UNITED STATES**

**SECURITIES AND EXCHANGECOMMISSION**

**Washington, D.C. 20549**

 

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**FORM 10-Q**

** **

**(Mark One)**

 
| **x**                                | **Quarterly  report pursuant to Section 13 or 15(d) of the Securities Exchange  Act of 1934**                                                                                   |
|--------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **                           | ** **                                                                                                                                                                                |
| ** **                           | **For the quarterly period ended****June 30****, 200****9****.**                                                                                                                     |
| ** **                           | ** **                                                                                                                                                                                |
| **OR**                               |
| ** **                           |
| **o**                                | **Transition  report pursuant to Section 13 or 15(d) of the Securities Exchange  Act of 1934**                                                                                  |
| ** **                           | ** **                                                                                                                                                                                |
| ** **                           | **For the transition period from               to              ** |
| ** **                           | ** **                                                                                                                                                                                |
| **Commission File Number 000-50923** |

 

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**WILSHIREBANCORP, INC.**

(Exact name of registrant as specified in its charter)

 

| **California**                                               | ** ** | **20-0711133**                        |
|--------------------------------------------------------------|------------|---------------------------------------|
| State or other jurisdiction of incorporation or organization |       | I.R.S. Employer Identification Number |
|                                                         |       |                                  |
| **3200 Wilshire Blvd.**                                      |       |                                  |
| **Los Angeles, California**                                  | ** ** | **90010**                             |
| Address of principal executive offices                       |       | Zip Code                              |

** **

**(213)387-3200**

Registrant’s telephonenumber, including area code

 

Securities registered pursuant to Section 12(b) ofthe Act:  **CommonStock, no par value**

 

Securities registered pursuant to Section 12(g) ofthe Act: **None**

 

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Indicateby check mark whether the registrant (1) has filed all reports required tobe filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days.  Yes x   No o

 

Indicateby check mark whether the registrant has submitted electronically and posted onits corporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 ofthis chapter) during the preceding 12 months (or for such shorter period thatthe registrant was required to submit and post such files).   Yes o   No o

 

Indicate by check mark whether the registrant is alarge accelerated filer, an accelerated filer, a non-accelerated filer, or asmaller reporting company.  See thedefinitions of “large accelerated filer,” “accelerated filer” and “smallreporting company” in Rule 12b-2 of the Exchange Act.

 
| Large  accelerated filer | o      |                                          | Accelerated  filer         | x      |
|--------------------------|--------|-----------------------------------------------|----------------------------|--------|
|                     |   |                                          |                       |   |
| Non-accelerated  filer   | o      | (Do not check if a smaller reporting company) | Smaller  reporting company | o      |

 

Indicate by check mark whether the registrant is ashell company (as defined in Rule 12b-2 of the Exchange Act).   Yes o   No x

 

The number of shares of Common Stock of the registrantoutstanding as of July 31,2009 was 29,413,757.

 

 

 

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Table of Contents

** **

**FORM 10-Q**

** **

**INDEX**

** **

**WILSHIRE BANCORP, INC.**

** **
| **Part I.  FINANCIAL INFORMATION** | **1**                                                                                           |
|----------------------------------------------|-------------------------------------------------------------------------------------------------|
|                                         |                                                                                            |   |
| **Item 1.**                                  | **Financial  Statements**                                                                       | **1** |
|                                         |                                                                                            |   |
| **Item 2.**                                  | **Management’s  Discussion and Analysis of Financial Condition and Results of Operations** | **19** |
|                                         |                                                                                            |   |
| **Item 3.**                                  | **Quantitative  and Qualitative Disclosures about  Market Risk**                                | **43** |
|                                         |                                                                                            |   |
| **Item  4.**                                 | **Controls  and Procedures**                                                                    | **45** |
|                                         |                                                                                            |   |
| **Part II.   OTHER INFORMATION**   | **46**                                                                                          |
|                                         |                                                                                            |   |
| **Item  1.**                                 | **Legal  Proceedings**                                                                          | **46** |
|                                         |                                                                                            |   |
| **Item 1A**                                  | **Risk Factors**                                                                                | **46** |
|                                         |                                                                                            |   |
| **Item 2.**                                  | **Unregistered  Sales of Equity Securities and Use of Proceeds**                                | **46** |
|                                         |                                                                                            |   |
| **Item 3.**                                  | **Defaults Upon  Senior Securities**                                                            | **46** |
|                                         |                                                                                            |   |
| **Item 4.**                                  | **Submission of  Matters to a Vote of Security Holders**                                        | **46** |
|                                         |                                                                                            |   |
| **Item  5.**                                 | **Other  Information**                                                                          | **46** |
|                                         |                                                                                            |   |
| SIGNATURES                                   | **48**                                                                                          |

** **

i

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Table of Contents

 

**Part I.  FINANCIALINFORMATION**

 

**Item 1.                   ****Financial Statements**

 

**WILSHIRE BANCORP, INC.**

**CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (DOLLARS INTHOUSANDS)**

 
| ** **                                                                                                                                                                                       | ** ** | **June 30, 2009** | ** ** | **December 31, 2008** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------|------------|----------------------------|------------|
| ** **                                                                                                                                                                                       | ** ** | **(Unaudited)**        | ** ** | ** **                 | ** ** |
| **ASSETS**                                                                                                                                                                                       | ** ** | ** **             | ** ** | ** **                 | ** ** |
| Cash  and due from banks                                                                                                                                                                         |       | $                      | 75,844     |                       | $          | 67,540 |   |
| Federal  funds sold and other cash equivalents                                                                                                                                                   |       | 145,077                |       | 30,001                     |       |
| Cash  and cash equivalents                                                                                                                                                                       |       | 220,921                |       | 97,541                     |       |
|                                                                                                                                                                                             |       |                   |       |                       |       |
| Securities  available for sale, at fair value (amortized cost of $423,340 and $227,429 at  June 30, 2009 and December 31, 2008, respectively)                                          |       | 427,714                |       | 229,136                    |       |
| Securities  held to maturity, at amortized cost (fair value of $121 and $135 at  June 30, 2009 and December 31, 2008, respectively)                                                    |       | 124                    |       | 139                        |       |
| Loans  receivable, net of allowance for loan losses of $38,758 and $29,437 at  June 30, 2009 and December 31, 2008, respectively)                                                      |       | 2,339,989              |       | 2,003,665                  |       |
| Loans  held for sale—at the lower of cost or market                                                                                                                                         |       | 20,960                 |       | 18,427                     |       |
| Federal  Home Loan Bank stock, at cost                                                                                                                                                           |       | 21,040                 |       | 17,537                     |       |
| Other  real estate owned                                                                                                                                                                         |       | 5,956                  |       | 2,663                      |       |
| Due  from customers on acceptances                                                                                                                                                               |       | 251                    |       | 2,213                      |       |
| Cash  surrender value of bank owned life insurance                                                                                                                                               |       | 17,715                 |       | 17,395                     |       |
| Investment  in affordable housing partnerships                                                                                                                                                   |       | 12,228                 |       | 9,019                      |       |
| Bank  premises and equipment                                                                                                                                                                     |       | 12,360                 |       | 11,265                     |       |
| Accrued  interest receivable                                                                                                                                                                     |       | 12,639                 |       | 9,975                      |       |
| Deferred  income taxes                                                                                                                                                                           |       | 14,148                 |       | 12,051                     |       |
| Servicing  assets                                                                                                                                                                                |       | 6,677                  |       | 4,838                      |       |
| Goodwill                                                                                                                                                                                         |       | 6,675                  |       | 6,675                      |       |
| Other  intangible assets                                                                                                                                                                         |       | 2,470                  |       | 1,287                      |       |
| FDIC  loss share indemnification                                                                                                                                                                 |       | 40,235                 |       | —                     |       |
| Other  assets                                                                                                                                                                                    |       | 12,009                 |       | 6,185                      |       |
| TOTAL                                                                                                                                                                                            |       | $                      | 3,174,111  |                       | $          | 2,450,011 |   |
|                                                                                                                                                                                             |       |                   |       |                       |       |
| **LIABILITIES AND SHAREHOLDERS’ EQUITY**                                                                                                                                                    |       |                   |       |                       |       |
| LIABILITIES:                                                                                                                                                                                     |       |                   |       |                       |       |
| Deposits:                                                                                                                                                                                        |       |                   |       |                       |       |
| Noninterest  bearing                                                                                                                                                                             |       | $                      | 367,243    |                       | $          | 277,542 |   |
| Interest  bearing:                                                                                                                                                                               |       |                   |       |                       |       |
| Savings                                                                                                                                                                                          |       | 60,367                 |       | 44,452                     |       |
| Money  market checking and NOW accounts                                                                                                                                                          |       | 614,369                |       | 384,190                    |       |
| Time  deposits of $100,000 or more                                                                                                                                                               |       | 1,136,438              |       | 902,804                    |       |
| Other  time deposits                                                                                                                                                                             |       | 273,186                |       | 203,613                    |       |
| Total  deposits                                                                                                                                                                                  |       | 2,451,603              |       | 1,812,601                  |       |
|                                                                                                                                                                                             |       |                   |       |                       |       |
| Federal  Home Loan Bank borrowings                                                                                                                                                               |       | 331,000                |       | 274,000                    |       |
| Junior  subordinated debentures                                                                                                                                                                  |       | 87,321                 |       | 87,321                     |       |
| Accrued  interest payable                                                                                                                                                                        |       | 11,099                 |       | 6,957                      |       |
| Acceptances  outstanding                                                                                                                                                                         |       | 251                    |       | 2,213                      |       |
| Other  liabilities                                                                                                                                                                               |       | 23,679                 |       | 11,859                     |       |
| Total  liabilities                                                                                                                                                                               |       | 2,904,953              |       | 2,194,951                  |       |
|                                                                                                                                                                                             |       |                   |       |                       |       |
| COMMITMENTS  AND CONTINGENCIES                                                                                                                                                                   |       |                   |       |                       |       |
|                                                                                                                                                                                             |       |                   |       |                       |       |
| SHAREHOLDERS’  EQUITY:                                                                                                                                                                      |       |                   |       |                       |       |
| Preferred  stock, $1,000 par value—authorized, 5,000,000 shares; issued and outstanding,  62,158 shares and 62,158 shares at June 30, 2009 and December 31,  2008, respectively   |       | 59,683                 |       | 59,443                     |       |
| Common  stock, no par value—authorized, 80,000,000 shares; issued and outstanding, 29,413,757  shares and 29,413,757 shares at June 30, 2009 and December 31,  2008, respectively |       | 54,420                 |       | 54,038                     |       |
| Accumulated  other comprehensive income, net of tax                                                                                                                                              |       | 2,669                  |       | 1,239                      |       |
| Retained  earnings                                                                                                                                                                               |       | 152,386                |       | 140,340                    |       |
| Total  shareholders’ equity                                                                                                                                                                 |       | 269,158                |       | 255,060                    |       |
|                                                                                                                                                                                             |       |                   |       |                       |       |
| TOTAL                                                                                                                                                                                            |       | $                      | 3,174,111  |                       | $          | 2,450,011 |   |

 

Seeaccompanying notes to consolidated financial statements.

 

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Table of Contents

 

**WILSHIRE BANCORP, INC.**

**CONSOLIDATED STATEMENTS OF OPERATIONS**

**(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)**

 
| ** **                                                                 | ** ** | **Three Months Ended June 30,** | ** ** | **Six Months Ended June 30,** | ** ** |
|----------------------------------------------------------------------------|------------|--------------------------------------|------------|------------------------------------|------------|
| ** **                                                                 | ** ** | **2009**                             | ** ** | **2008**                           | ** ** | **2009** | ** ** | **2008** | ** ** |
| ** **                                                                 | ** ** | **(Unaudited)**                      | ** ** | **(Unaudited)**                    | ** ** | **(Unaudited)** | ** ** | **(Unaudited)** | ** ** |
| INTEREST  INCOME:                                                          |       |                                 |       |                               |       |   |   |   |   |
| Interest  and fees on loans                                                |       | $                                    | 31,234     |                               | $          | 33,978 |   | $ | 61,428 |   | $ | 69,296 |   |
| Interest  on investment securities                                         |       | 3,194                                |       | 2,638                              |       | 6,136 |   | 5,222 |   |
| Interest  on federal funds sold                                            |       | 777                                  |       | 49                                 |       | 1,066 |   | 129 |   |
| Total  interest income                                                     |       | 35,205                               |       | 36,665                             |       | 68,630 |   | 74,647 |   |
|                                                                       |       |                                 |       |                               |       |   |   |   |   |
| INTEREST  EXPENSE:                                                         |       |                                 |       |                               |       |   |   |   |   |
| Interest  on deposits                                                      |       | 11,776                               |       | 12,864                             |       | 22,958 |   | 27,602 |   |
| Interest  on FHLB advances and other borrowings                            |       | 1,622                                |       | 2,356                              |       | 3,280 |   | 4,399 |   |
| Interest  on junior subordinated debentures                                |       | 826                                  |       | 1,112                              |       | 1,747 |   | 2,569 |   |
| Total  interest expense                                                    |       | 14,224                               |       | 16,332                             |       | 27,985 |   | 34,570 |   |
|                                                                       |       |                                 |       |                               |       |   |   |   |   |
| NET  INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES AND LOAN COMMITMENTS |       | 20,981                               |       | 20,333                             |       | 40,645 |   | 40,077 |   |
|                                                                       |       |                                 |       |                               |       |   |   |   |   |
| PROVISION  FOR LOSSES ON LOANS AND LOAN COMMITMENTS                        |       | 12,100                               |       | 1,400                              |       | 18,800 |   | 2,800 |   |
|                                                                       |       |                                 |       |                               |       |   |   |   |   |
| NET  INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES AND LOAN COMMITMENTS  |       | 8,881                                |       | 18,933                             |       | 21,845 |   | 37,277 |   |
|                                                                       |       |                                 |       |                               |       |   |   |   |   |
| NON-INTEREST  INCOME:                                                      |       |                                 |       |                               |       |   |   |   |   |
| Service  charges on deposit accounts                                       |       | 3,125                                |       | 3,043                              |       | 6,024 |   | 5,791 |   |
| (Loss)  gain on sale of loans                                              |       | 307                                  |       | 918                                |       | (524 | ) | 1,782 |   |
| Loan-related  servicing fees                                               |       | 780                                  |       | 772                                |       | 1,744 |   | 1,448 |   |
| Income  from other earning assets                                          |       | 197                                  |       | 392                                |       | 392 |   | 710 |   |
| FAS  141R gain on bargain purchase                                         |       | 21,679                               |       | —                             |       | 21,679 |   | — |   |
| Other  income                                                              |       | 2,502                                |       | 482                                |       | 3,012 |   | 1,029 |   |
| Total  noninterest income                                                  |       | 28,590                               |       | 5,607                              |       | 32,327 |   | 10,760 |   |
|                                                                       |       |                                 |       |                               |       |   |   |   |   |
| NON-INTEREST  EXPENSES:                                                    |       |                                 |       |                               |       |   |   |   |   |
| Salaries  and employee benefits                                            |       | 5,988                                |       | 7,655                              |       | 12,195 |   | 14,631 |   |
| Occupancy  and equipment                                                   |       | 1,682                                |       | 1,492                              |       | 3,358 |   | 2,917 |   |
| Data  processing                                                           |       | 845                                  |       | 771                                |       | 1,672 |   | 1,536 |   |
| Outsourced  service for customer                                           |       | 210                                  |       | 392                                |       | 478 |   | 841 |   |
| Professional  fees                                                         |       | 575                                  |       | 454                                |       | 917 |   | 954 |   |
| Deposit  insurance premiums                                                |       | 2,178                                |       | 299                                |       | 2,789 |   | 629 |   |
| Other  operating                                                           |       | 2,598                                |       | 1,491                              |       | 4,653 |   | 3,269 |   |
| Total  noninterest expenses                                                |       | 14,076                               |       | 12,554                             |       | 26,062 |   | 24,777 |   |
|                                                                       |       |                                 |       |                               |       |   |   |   |   |
| INCOME  BEFORE INCOME TAXES                                                |       | 23,395                               |       | 11,986                             |       | 28,110 |   | 23,260 |   |
|                                                                       |       |                                 |       |                               |       |   |   |   |   |
| INCOME  TAXES                                                              |       | 9,649                                |       | 4,557                              |       | 11,304 |   | 8,780 |   |
|                                                                       |       |                                 |       |                               |       |   |   |   |   |
| NET  INCOME                                                                |       | $                                    | 13,746     |                               | $          | 7,429 |   | $ | 16,806 |   | $ | 14,480 |   |
|                                                                       |       |                                 |       |                               |       |   |   |   |   |
| Preferred  stock cash dividend and accretion of preferred stock discount   |       | 898                                  |       |                               |       | 1,818 |   |   |   |
| NET  INCOME AVAILABLE TO COMMON SHAREHOLDERS                               |       | $                                    | 12,848     |                               |       |   | $ | 14,988 |   |   |   |
|                                                                       |       |                                 |       |                               |       |   |   |   |   |
| EARNINGS  PER COMMON SHARE:                                                |       |                                 |       |                               |       |   |   |   |   |
| Basic                                                                      |       | $                                    | 0.44       |                               | $          | 0.25 |   | $ | 0.51 |   | $ | 0.49 |   |
| Diluted                                                                    |       | $                                    | 0.44       |                               | $          | 0.25 |   | $ | 0.51 |   | $ | 0.49 |   |
| WEIGHTED-AVERAGE  SHARES OUTSTANDING:                                      |       |                                 |       |                               |       |   |   |   |   |
| Basic                                                                      |       | 29,413,757                           |       | 29,391,177                         |       | 29,413,757 |   | 29,334,024 |   |
| Diluted                                                                    |       | 29,421,247                           |       | 29,414,674                         |       | 29,421,746 |   | 29,392,621 |   |

 

Seeaccompanying notes to consolidated financial statements.

 

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Table of Contents

 

**WILSHIRE BANCORP, INC.**

**CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY**

**(DOLLARS IN THOUSANDS) (UNAUDITED)**

 
| ** **                                                                | ** ** | **Preferred  Stock** | ** ** | **Common  Stock** | ** ** | **Accumulated** | ** ** | ** ** | ** ** |
|---------------------------------------------------------------------------|------------|----------------------|------------|-------------------|------------|-----------------|------------|------------|------------|
| ** **                                                                | ** ** | ** **           | ** ** | ** **        | ** ** | ** **      | ** ** | ** ** | ** ** | **Other** | ** ** | ** ** | ** ** | **Total** | ** ** |
| ** **                                                                | ** ** | **Shares**           | ** ** | ** **        | ** ** | **Shares**      | ** ** | ** ** | ** ** | **Comprehensive** | ** ** | **Retained** | ** ** | **Shareholders’** | ** ** |
| ** **                                                                | ** ** | **Outstanding**      | ** ** | **Amount**        | ** ** | **Outstanding** | ** ** | **Amount** | ** ** | **Income** | ** ** | **Earnings** | ** ** | **Equity** | ** ** |
|                                                                      |       |                 |       |              |       |            |       |       |       |   |   |   |   |   |   |
| BALANCE-January 1,  2008                                             |       | —               |       | $                 | —     |            | 29,253,311 |       | $          | 49,633 |   | $ | 375 |   | $ | 121,778 |   | $ | 171,786 |   |
| Stock options exercised                                                   |       |                 |       |              |       | 137,866         |       | 391        |       |   |   |   |   | 391 |   |
| Cash dividend declared  or accrued                                        |       |                 |       |              |       |            |       |       |       |   | ** ** | ** ** |   |   |   |
| Common stock                                                              |       |                 |       |              |       |            |       |       |       |   |   | (2,939 | ) | (2,939 | ) |
| Stock compensation  expense                                               |       |                 |       |              |       |            |       | 568        |       |   |   |   |   | 568 |   |
| Tax benefit from stock  options exercised                                 |       |                 |       |              |       |            |       | 57         |       |   |   |   |   | 57 |   |
| Cumulative impact of  change in accounting for bank owned life insurance  |       |                 |       |              |       |            |       |       |       |   |   | (1,876 | ) | (1,876 | ) |
| Comprehensive income:                                                     |       |                 |       |              |       |            |       |       |       |   |   |   |   |   |   |
| Net income                                                                |       |                 |       |              |       |            |       |       |       |   |   | 14,480 |   | 14,480 |   |
| Other comprehensive  income:                                              |       |                 |       |              |       |            |       |       |       |   |   |   |   |   |   |
| Change in unrealized  gain on interest-only strips, net of taxes          |       |                 |       |              |       |            |       |       |       | 39 |   |   |   | 39 |   |
| Change in unrealized  gain on securities available for sale, net of taxes |       |                 |       |              |       |            |       |       |       | (820 | ) |   |   | (820 | ) |
| Comprehensive income                                                      |       |                 |       |              |       |            |       |       |       |   |   |   |   | 13,699 |   |
| BALANCE-June 30,  2008                                               |       | —               |       | $                 | —     |            | 29,391,177 |       | $          | 50,649 |   | $ | (406 | ) | $ | 131,443 |   | $ | 181,686 |   |
|                                                                      |       |                 |       |              |       |            |       |       |       |   |   |   |   |   |   |
| BALANCE-January 1,  2009                                             |       | 62,158               |       | $                 | 59,443     |            | 29,413,757 |       | $          | 54,038 |   | $ | 1,239 |   | $ | 140,340 |   | $ | 255,060 |   |
| Stock options exercised                                                   |       |                 |       |              |       |            |       |       |       |   |   |   |   | — |   |
| Cash dividend declared  or accrued                                        |       |                 |       |              |       |            |       |       |       |   | ** ** | ** ** |   | — |   |
| Common stock                                                              |       |                 |       |              |       |            |       |       |       |   |   | (2,941 | ) | (2,941 | ) |
| Preferred stock                                                           |       |                 |       |              |       |            |       |       |       |   |   | (1,554 | ) | (1,554 | ) |
| Stock compensation expense                                                |       |                 |       |              |       |            |       | 382        |       |   |   |   |   | 382 |   |
| Tax benefit from stock  options exercised                                 |       |                 |       |              |       |            |       |       |       |   |   |   |   | — |   |
| Accretion of preferred  stock discount                                    |       |                 |       | 240               |       |            |       |       |       |   |   | (265 | ) | (25 | ) |
| Comprehensive income:                                                     |       |                 |       |              |       |            |       |       |       |   |   |   |   | — |   |
| Net income                                                                |       |                 |       |              |       |            |       |       |       |   |   | 16,806 |   | 16,806 |   |
| Other comprehensive  income:                                              |       |                 |       |              |       |            |       |       |       |   |   |   |   | — |   |
| Change in unrealized  gain on interest-only strips, net of taxes          |       |                 |       |              |       |            |       |       |       | 34 |   |   |   | 34 |   |
| Change in unrealized  gain on securities available for sale, net of taxes |       |                 |       |              |       |            |       |       |       | 1,396 |   |   |   | —

1,396 |   |
| Comprehensive income                                                      |       |                 |       |              |       |            |       |       |       |   |   |   |   | 18,236 |   |
| BALANCE-June 30,  2009                                               |       | 62,158               |       | $                 | 59,683     |            | 29,413,757 |       | $          | 54,420 |   | $ | 2,669 |   | $ | 152,386 |   | $ | 269,158 |   |

 

Seeaccompanying notes to consolidated financial statements.

** **

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**WILSHIRE BANCORP, INC.**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(DOLLARS IN THOUSANDS) (UNAUDITED)**

 
| ** **                                                                         | ** ** | **Six Months Ended June 30,** | ** ** |
|------------------------------------------------------------------------------------|------------|------------------------------------|------------|
| ** **                                                                         | ** ** | **2009**                           | ** ** | **2008** | ** ** |
| CASH  FLOWS FROM OPERATING ACTIVITIES:                                             |       |                               |       |   |   |
| Net  income                                                                        |       | $                                  | 16,806     |   | $ | 14,480 |   |
| Adjustments  to reconcile net income to net cash provided by operating activities: |       |                               |       |   |   |
| Amortization  (accretion) of investment securities                                 |       | 1,861                              |       | 572 |   |
| Depreciation  of bank premises & equipment                                |       | 986                                |       | 886 |   |
| Amortization  of other intangible assets                                           |       | 148                                |       | 148 |   |
| Amortization  of investments in affordable housing partnerships                    |       | 600                                |       | 349 |   |
| Provision  for losses on loans and loan commitments                                |       | 18,800                             |       | 2,800 |   |
| Provision  for other real estate owned losses                                      |       | 359                                |       | — |   |
| Deferred  tax benefit                                                              |       | (3,448                             | )          | (27 | ) |
| Loss  on disposition of bank premises and equipment                                |       | 11                                 |       | 3 |   |
| FAS  141R gain on bargain purchase                                                 |       | (21,679                            | )          | — |   |
| Net  gain on sale of loans                                                         |       | 524                                |       | (1,782 | ) |
| Origination  of loans held for sale                                                |       | (13,801                            | )          | (40,867 | ) |
| Proceeds  from sale of loans held for sale                                         |       | 11,575                             |       | 42,195 |   |
| (Gain)  on sale or call of available for sale securities                           |       | (1,588                             | )          | (3 | ) |
| Decrease  in fair value of serving rights                                          |       | 215                                |       | 566 |   |
| (Gain)  or loss on sale of other real estate owned                                 |       | (402                               | )          | — |   |
| Loss  on sale of repossessed vehicles                                              |       | —                             |       | 1 |   |
| Share-based  compensation expense                                                  |       | 381                                |       | 568 |   |
| Change  in cash surrender value of life insurance                                  |       | (320                               | )          | (286 | ) |
| Servicing  assets capitalized                                                      |       | (159                               | )          | (622 | ) |
| Decrease  in interest-only strips                                                  |       | —                             |       | — |   |
| Increase  in accrued interest receivable                                           |       | (1,170                             | )          | 182 |   |
| Increase  in other assets                                                          |       | (5,954                             | )          | (1,025 | ) |
| Dividends  of Federal Home Loan Bank stock                                         |       | —                             |       | (265 | ) |
| Tax  benefit from exercise of stock options                                        |       | —                             |       | (57 | ) |
| (Decrease)  Increase in accrued interest payable                                   |       | 1,188                              |       | (705 | ) |
| Increase  in other liabilities                                                     |       | 11,020                             |       | 5,714 |   |
| Net  cash provided by operating activities                                         |       | 15,953                             |       | 22,825 |   |
| ** **                                                                         | ** ** | ** **                         | ** ** |   | ** ** |
| CASH  FLOWS FROM INVESTING ACTIVITIES:                                             |       |                               |       |   |   |
| Proceeds  from principal repayment, matured or called securities held to maturity  |       | 15                                 |       | 7,015 |   |
| Purchase  of securities available for sale                                         |       | (259,386                           | )          | (87,096 | ) |
| Proceeds  from matured securities available for sale                               |       | 118,629                            |       | 76,513 |   |
| Net  increase in loans receivable                                                  |       | (79,128                            | )          | (178,682 | ) |
| Proceeds  from sale of other loans                                                 |       | 1,168                              |       | — |   |
| Proceeds  from sale of other real estate owned                                     |       | 3,151                              |       | — |   |
| Proceeds  from sale of repossessed vehicles                                        |       | —                             |       | 10 |   |
| Purchases  of investments in affodable housing partnerships                        |       | (3,810                             | )          | (555 | ) |
| Purchases  of Bank premises and equipment                                          |       | (1,802                             | )          | (695 | ) |
| Purchases  of Federal Home Loan Bank stock                                         |       | —                             |       | (6,080 | ) |
| Proceeds  from disposition of Bank equipment                                       |       | —                             |       | 3 |   |
| Net  cash and cash equivalents acquired from acquisition of Mirae Bank             |       | 5,724                              |       | — |   |
| Net  cash used in investing activities                                             |       | (215,439                           | )          | (189,567 | ) |
|                                                                                    |            |                                    |            |  |  |  |  |

 
| See  accompanying notes to consolidated financial statements. |   |   |   | (continued) |
|---------------------------------------------------------------|--------|--------|--------|-------------|

 

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**WILSHIRE BANCORP, INC.**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(DOLLARS IN THOUSANDS) (UNAUDITED)**

 
| ** **                                                | ** ** | **Six Months Ended June 30,** | ** ** |
|-----------------------------------------------------------|------------|------------------------------------|------------|
| ** **                                                | ** ** | **2009**                           | ** ** | **2008** | ** ** |
| CASH  FLOWS FROM FINANCING ACTIVITIES:                    |       |                               |       |   |   |
| Proceeds  from exercise of stock options                  |       | $                                  | —     |   | $ | 391 |   |
| Payment  of common stock cash dividend                    |       | (2,941                             | )          | (2,932 | ) |
| Payment  of preferred stock cash dividend                 |       | (1,321                             | )          | — |   |
| Increase  (decrease) in Federal Home Loan Bank borrowings |       | (18,500                            | )          | 170,000 |   |
| Tax  benefit from exercise of stock options               |       | —                             |       | 57 |   |
| Net  increase in deposits                                 |       | 345,627                            |       | (23,782 | ) |
| Net  cash provided by financing activities                |       | 322,865                            |       | 143,734 |   |
|                                                      |       |                               |       |   |   |
| NET  INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS     |       | 123,379                            |       | (23,008 | ) |
| CASH  AND CASH EQUIVALENTS—Beginning of year         |       | 97,542                             |       | 92,509 |   |
| CASH  AND CASH EQUIVALENTS—End of year               |       | $                                  | 220,921    |   | $ | 69,501 |   |
|                                                      |       |                               |       |   |   |
| SUPPLEMENTAL  DISCLOSURES OF CASH FLOW INFORMATION:       |       |                               |       |   |   |
| Interest  paid                                            |       | $                                  | 23,744     |   | $ | 35,275 |   |
| Income  taxes paid                                        |       | $                                  | 8,127      |   | $ | 10,180 |   |
|                                                      |       |                               |       |   |   |
| SUPPLEMENTAL  SCHEDULE OF NONCASH INVESTING ACTIVITIES:   |       |                               |       |   |   |
| Transfer  of loans to other real estate owned             |       | $                                  | 5,902      |   | $ | 332 |   |
| Other  assets transferred to Bank premises and equipment  |       | $                                  | 290        |   | $ | 150 |   |
| Net  assets acquired from Mirae Bank (see note 3):        |       |                               |       |   |   |
| Assets  acquired                                          |       | $                                  | 395,646    |   | $ | — |   |
| Liabilities  assumed                                      |       | 373,967                            |       | — |   |
|                                                      |       | 21,679                             |       | — |   |
| SUPPLEMENTAL  SCHEDULE OF NONCASH FINANCING ACTIVITIES:   |       |                               |       |   |   |
| Common  stock cash dividend declared, but not paid        |       | $                                  | 1,471      |   | $ | 1,470 |   |
| Preferred  stock cash dividend declared, but not paid     |       | $                                  | 388        |   | $ | — |   |

 
| See  accompanying notes to consolidated financial statements. |   | (Concluded) |
|---------------------------------------------------------------|--------|-------------|

 

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**WILSHIRE BANCORP, INC.**

 

**Notes to Consolidated Financial Statements**(Unaudited)

 

**Note 1.   Businessof Wilshire Bancorp, Inc.**

** **

WilshireBancorp, Inc. (hereafter, the “Company,” “we,” “us,” or “our”) succeeded to the business andoperations of Wilshire State Bank, a California state-chartered commercial bank(the “Bank”), upon consummation of the reorganization of the Bank into aholding company structure, effective as of August 25, 2004.  The Bank was incorporated under the laws ofthe State of California on May 20, 1980 and commenced operations on December 30,1980.  The Company was incorporated in December 2003 as awholly-owned subsidiary of the Bank for the purposeof facilitating the issuance of trust preferred securities for the Bank andeventually serving as the holding company of the Bank.  The Bank’s shareholders approvedreorganization into a holding company structure at a meeting held on August 25,2004.  As a result of the reorganization,shareholders of the Bank are now shareholders of the Company, and the Bank is adirect wholly-owned subsidiary ofthe Company.

 

Our corporate headquarters and primary bankingfacilities are located at 3200 Wilshire Boulevard, Los Angeles, California90010.  On June 26, 2009, wepurchased substantially all the assets and assumed substantially all theliabilities of Mirae Bank (“Mirae”) from the Federal Deposit Insurance Corporation (“FDIC”),as receiver of Mirae. Mirae operated five commercial banking branches alllocated within the southern California, and these branches were integrated intoour branch network immediately after the acquisition. In addition, wealso have five loan productionoffices utilized primarily for the origination of loans under our SmallBusiness Administration (“SBA”) lending program in Colorado, Georgia, Texas,and Virginia.

 

**Note 2.   Basisof Presentation**

** **

Theconsolidated financial statements have been prepared in accordance with theSecurities and Exchange Commission (“SEC”) rules and regulations forinterim financial reporting and therefore do not necessarily include allinformation and footnote disclosures normally included in annual financialstatements prepared in accordance with accounting principles generally acceptedin the United States of America (“GAAP”). The information provided by these interim financialstatements reflects all adjustments which are, in the opinion of management,necessary for a fair presentation of the Company’s consolidated statements of financial condition as of June 30,2009 and December 31, 2008, the statements of operations for thethree months and six months ended June 30, 2009 and 2008, and the relatedstatements of shareholders’ equity and statements of cash flows for the sixmonths ended June 30, 2009 and 2008. Operating results for interim periodsare not necessarily indicative of operating results for an entire fiscal year.

 

Theunaudited financial statements should be read in conjunction with the auditedfinancial statements and notes thereto included in the Company’s Annual Reporton Form 10-K for the year ended December 31, 2008. The accounting policies used in the preparation of these interimfinancial statements were consistent with those used in the preparation of thefinancial statements for the year ended December 31, 2008.

 

**Note 3.   FederallyAssisted Acquisition of**Mirae Bank

** **

The FDIC placed Mirae under receivership upon Mirae’sclosure by the California Department of Financial Institutions (“DFI”) at theclose of business on June 26, 2009. We purchased substantially all of Mirae’s assets and assumed all ofMirae’s deposits and certain other liabilities. Further, we entered into a losssharing agreement with the FDIC in connection with the Mirae acquisition. Underthe loss sharing agreement, the FDIC will share in the losses on assets coveredunder the agreement, which generally include loans acquired from Mirae andforeclosed loan collateral existing at June 26, 2009 (referred to collectivelyas “covered assets”). With respect to losses of up to $83.0 million on thecovered assets, the FDIC has agreed to reimburse us for 80 percent of thelosses.  On losses exceeding $83.0 million, the FDIC has agreed toreimburse us for 95 percent of the losses.  The loss sharingagreements are subject to our compliance with servicing procedures specified inthe agreements with the FDIC.  Theterm for the FDIC’s loss sharing on single family loans is ten years, and theterm for loss sharing on non-single family loans is five years with respect tolosses and eight years with respect to loss recoveries. As a result of the losssharing agreement with the FDIC, the Company has recorded an indemnificationasset from the FDIC based on the estimated value of the indemnificationagreement of $40.2 million.

 

The Mirae acquisition was accounted for underthe purchase method of accounting in accordance with Statement of FinancialAccounting Standard (“SFAS”) No. 141R, *Business Combinations*.The statement of net assets and assumed liabilities were recorded at theirrespective acquisition date fair values, and identifiable intangible assetswere recorded at fair value. Fair values are preliminary and subject torefinement for up to one year after the closing date of an acquisition asinformation relative to closing date fair values becomes available. A “bargainpurchase gain” totaling $21.7 million resulted from the acquisition and isincluded as a component of noninterest income on the statement of income. Theamount of gain is equal to the amount by which the fair value of assetspurchased exceeded the fair value of liabilities assumed. The estimated fairvalue of the assets purchased and liabilities assumed are presented in thefollowing table:

 

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**Satement of Net Assets Acquired**

 
| ** **                                                                     | ** ** | **June 26,  2009** | ** ** |
|--------------------------------------------------------------------------------|------------|-------------------------|------------|
| ** **                                                                     | ** ** | **(In  thousands)**     | ** ** |
| **Assets**                                                                     |       |                    |       |
| Cash  and cash equivalents                                                     |       | $                       | 5,724      |   |
| Securities                                                                     |       | 55,371                  |       |
| Loans                                                                          |       | 285,685                 |       |
| Core  deposit intangible                                                       |       | 1,330                   |       |
| FDIC  loss-sharing receivable                                                  |       | 40,235                  |       |
| Other  assets                                                                  |       | 7,301                   |       |
| Total  Assets                                                                  |       | 395,646                 |       |
|                                                                           |       |                    |       |
| **Liabilities**                                                                |       |                    |       |
| Deposits                                                                       |       | 293,375                 |       |
| FHLB  borrowings                                                               |       | 75,500                  |       |
| Other  liabilities                                                             |       | 5,092                   |       |
| Total  Liabilities                                                             |       | 373,967                 |       |
|                                                                           |       |                    |       |
| Net  assets acquired                                                           |       | $                       | 21,679     |   |
|                                                                           |       |                    |       |
| Mirae  Bank’s net assets acquired before fair valuation adjustments       |       | $                       | 36,928     |   |
| Adjustments  to reflect assets acquired and liabilities assumed at fair value: |       |                    |       |
| Loans,  net                                                                    |       | (54,964                 | )          |
| Securities                                                                     |       | (1,829                  | )          |
| FDIC  loss share indemnification                                               |       | 40,235                  |       |
| Core  deposit intangible                                                       |       | 1,330                   |       |
| Deposits                                                                       |       | (375                    | )          |
| Servicing  rights                                                              |       | 354                     |       |
| Bargain  purchase gain                                                         |       | $                       | 21,679     |   |

 

**Note 4.   FairValue Measurement for Financial and Non-Financial Assets and Liabilities**

 

We record at fair value various financial andnon-financial instruments for financial reporting, and loan or goodwillimpairment purposes. Pursuant to SFAS No. 157, *Fair ValueMeasurements*, and FinancialAccounting Standards Board (“FASB”) Staff Position (“FSP”)  SFASNo.157-3, *Determiningthe Fair Value of a Financial Asset When the Market for That Asset Is NotActive,*FASB provides adefinition of fair value, establishes a framework for measuring fair value, andrequires expanded disclosures about fair value measurements. Thestandard applies when GAAP requires orallows assets or liabilities to be measured at fair value, and therefore, doesnot expand the use of fair value in any new circumstance, and SFAS No. 157amends, but does not supersede SFAS No. 107, *Disclosureabout Fair Value of Financial Instruments.* SFAS No. 157 definesfair value as the price that would be received to sell an asset or paid totransfer a liability in an arm’s length transaction between market participantsin the markets where we conduct business. SFAS No. 157 clarifies that fairvalue should be based on the assumptions market participants would use whenpricing an asset or liability and establishes a fair value hierarchy thatprioritizes the information used to develop those assumptions. The fair valuehierarchy gives the highest priority to quoted prices available in activemarkets and the lowest priority to data lacking transparency. FSP SFAS No. 157-3further clarifies the application of SFAS No. 157 in a market that is notactive and provides an example to illustrate key considerations in determiningthe fair value of a financial asset when the market for the financial asset isnot active.

 

In February 2008,the FASB issued FSP SFAS No.157-2, which delays the effective date of SFAS No. 157,for nonfinancial assets and nonfinancial liabilities, except for items that arerecognized or disclosed at fair value in the financial statements on arecurring basis. The delay is intended to allow the FASB and constituentsadditional time to consider the effect of various implementation issues thathave arisen, or that may arise, from the application of SFAS No. 157. ThisFSP applies to various nonfinancial assets and liabilities and it defers theeffective date of SFAS No. 157 to such nonfinancial assets and liabilitiesto fiscal years beginning after November 15, 2008, and interim periodswithin those fiscal years for items within the scope of this FSP. We adoptedFSP SFAS No. 157-2 on January 1, 2009, and the adoption of this FSPdid not have a material impact on our consolidated financial statements.

 

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In April 2009, the FASB issued FSP SFAS No.157-4,*Determining Fair Value When the Volume and Level ofActivity for the Asset or Liability Have Significantly Decreased andIdentifying Transactions That Are Not Orderly*, to provide additionalguidance for estimating fair value in accordance with SFAS No. 157, *Fair Value Measurements*,  when the volume and level of activity for theasset or liability have significantly decreased. As some constituents indicatedthat SFAS No. 157 and FSP SFAS No. 157-3, *Determining the Fair Value of a Financial Asset When the Market forThat Asset Is Not Active*, do not provide sufficient guidance on howto determine whether a market for a financial asset that historically wasactive is no longer active and whether a transaction is not orderly. Therefore,this FSP includes guidance on identifying circumstances that indicate atransaction is not orderly. We adopted FSP SFAS No. 157-4 in the secondquarter of 2009 and the adoption of this FSP did not have a material impact onour consolidated financial statements.

 

The fair value inputs ofthe instruments are classified and disclosed in one of the following categoriespursuant to SFAS No. 157:

 

Level 1 — Unadjusted quoted prices in activemarkets for identical assets or liabilities that the reporting entity has theability to access at the measurement date. The quoted price shall not beadjusted for the position size.

 

Level 2 — Pricing inputs are inputs otherthan quoted prices included within Level 1 that are observable for the asset orliability, either directly or indirectly. Fair value is determined through theuse of models or other valuation methodologies, including the use of pricingmatrices. If the asset or liability has a specified (contractual) term, a Level2 input must be observable for substantially the full term of the asset orliability.

 

Level 3 — Pricing inputs are unobservableinputs for the asset or liability. Unobservable inputs shall be used to measurefair value to the extent that observable inputs are not available, therebyallowing for situations in which there is little, if any, market activity forthe asset or liability at the measurement date. The inputs into thedetermination of fair value require significant management judgment orestimation.

 

In certain cases, the inputs used to measurefair value may fall into different levels of the fair value hierarchy. In suchcases, an investment’s level within the fair value hierarchy is based on thelowest level of input that is significant to the fair value measurement. Ourassessment of the significance of a particular input to the fair valuemeasurement in its entirety requires judgment and considers factors specific tothe investment.

 

We used the following methods and assumptions in estimating our fair valuedisclosure for financial instruments. Financial assets and liabilities recordedat fair value on a recurring basis are listed as follows:

 

Measuredon a Recurring Basis

 

Investment securitiesavailable for sale —Investment in available-for-sale securities are recorded at fair valuepursuant to SFAS No. 115, *Accounting for CertainInvestments in Debt and Equity Securities*. Fair value measurement isbased upon quoted prices for similar assets, if available. If quoted prices arenot available, fair values are measured using matrix pricing models, or othermodel-based valuation techniques requiring observable inputs other than quotedprices such as yield curves, prepayment speeds, and default rates. Theinvestment securities available for sale include federal agency securities,mortgage-backed securities, collateralized mortgage obligations, municipalbonds and corporate debt securities. Our existing investment securitiesavailable-for-sale holdings as of June 30, 2009 are measured using matrixpricing models in lieu of direct price quotes and recorded based on Level 2measurement inputs.

 

Servicing assets and interest-only (“I/O”) strips— Small Business Administration (“SBA”) loan servicing assets and interest-onlystrips represent the value associated with servicing SBA loans sold. The valueis determined through a discounted cash flow analysis which uses interestrates, prepayment speeds and delinquency rate assumptions as inputs. All ofthese assumptions require a significant degree of management judgment.Adjustments are only made when the discounted cash flows are less than the carryingvalue. We classify SBA loan servicing assets and I/O strips as recurring withLevel 3 measurement inputs.

 

Servicing liabilities — SBA loanservicing liabilities represent the value associated with servicing SBA loanssold. The value is determined through a discounted cash flow analysis whichuses interest rates, prepayment speeds and delinquency rate assumptions asinputs. All of these assumptions require a significant degree of management judgment.Adjustments are only made when the discounted cash flows are less than thecarrying value. We classify SBA loan servicing liabilities as recurring withLevel 3 measurement inputs.

 

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The table below summarizes the valuation of ourfinancial assets and liabilities by the above SFAS No. 157 fair valuehierarchy levels as of June 30, 2009:

 

**Assets Measured at FairValue on a Recurring Basis**(dollarsin thousands)

 
| ** **             | ** ** | **Fair  Value Measurements Using:** | ** ** |
|------------------------|------------|-------------------------------------|------------|
| ** **             | ** ** | ** **                          | ** ** | **Quoted  Prices in** | ** ** | **Significant  Other** | ** ** | **Significant** | ** ** |
| ** **             | ** ** | **Total  Fair**                     | ** ** | **Active  Markets** | ** ** | **Observable  Inputs** | ** ** | **Unobservable  Inputs** | ** ** |
| ** **             | ** ** | **Value**                           | ** ** | **(Level  1)** | ** ** | **(Level  2)** | ** ** | **(Level  3)** | ** ** |
| Investment             |       |                                |       |   |   |   |   |   |   |
| U.S.  agency bonds     |       | $                                   | 391,788    |   | $ | — |   | $ | 391,788 |   | $ | — |   |
| Municipal  bonds       |       | 33,933                              |       | — |   | 33,933 |   | — |   |
| Corporate  bonds       |       | 1,993                               |       | — |   | 1,993 |   | — |   |
| Servicing  assets      |       | 6,677                               |       | — |   | — |   | 6,677 |   |
| I/O  strips            |       | 741                                 |       | — |   | — |   | 741 |   |
| Servicing  liabilities |       | (464                                | )          | — |   | — |   | (464 | ) |
|                        |            |                                     |            |  |  |  |  |  |  |  |  |  |  |

** **

Financialinstruments measured at fair value on a recurring basis, which were part of theasset balances that were deemed to have Level 3 fair value inputs whendetermining valuation, are identified in the table below by asset category witha summary of changes in fair value for the quarter ended June 30, 2009:

 
| **(dollars in thousands)** | ** ** | **At March 31, 2009** | ** ** | **Realized  Losses in Net  Income** | ** ** | **Unrealized Gains in  Other  Comprehensive  Income** | ** ** | **Net Purchases Sales  and Settlements** | ** ** | **Transfers In/out  of Level 3** | ** ** | **At June 30,  2009** | ** ** | **Net  Cumulative  Unrealized  Gains** | ** ** |
|----------------------------|------------|----------------------------|------------|-------------------------------------|------------|-------------------------------------------------------|------------|------------------------------------------|------------|----------------------------------|------------|-----------------------|------------|----------------------------------------|------------|
|                       |       |                       |       |                                |       |                                                  |       |                                     |       |                             |       |                  |       |                                   |       |
| Servicing assets           |       | $                          | 4,790      |                                | $          | (7                                                    | )          | $                                        | —     |                             | $          | 1,894                 |       | $                                      | —     |   | $ | 6,677 |   | $ | — |   |
| I/O strips                 |       | 661                        |       | (30                                 | )          | 5                                                     |       | 105                                      |       | —                           |       | 741                   |       | (283                                   | )          |
| Servicing liabilities      |       | (333                       | )          | 3                                   |       | —                                                |       | (134                                     | )          | —                           |       | (464                  | )          | —                                 |       |
|                            |            |                            |            |                                     |            |                                                       |            |                                          |            |                                  |            |                       |            |                                        |            |  |  |  |  |  |  |  |

 

Financial instrumentsmeasured at fair value on a recurring basis, which were part of the assetbalances that were deemed to have Level 3 fair value inputs when determiningvaluation, are identified in the table below by asset category with a summaryof changes in fair value for the six months ended June 30, 2009:

 
| **(dollars in thousands)** | ** ** | **At March 31, 2009** | ** ** | **Realized  Losses in Net  Income** | ** ** | **Unrealized Gains in  Other  Comprehensive  Income** | ** ** | **Net Purchases Sales  and Settlements** | ** ** | **Transfers In/out  of Level 3** | ** ** | **At June 30,  2009** | ** ** | **Net  Cumulative  Unrealized  Gains** | ** ** |
|----------------------------|------------|-----------------------|------------|-------------------------------------|------------|-------------------------------------------------------|------------|------------------------------------------|------------|----------------------------------|------------|-----------------------|------------|----------------------------------------|------------|
|                       |       |                  |       |                                |       |                                                  |       |                                     |       |                             |       |                  |       |                                   |       |
| Servicing assets           |       | $                     | 4,838      |                                | $          | (55                                                   | )          | $                                        | —     |                             | $          | 1,894                 |       | $                                      | —     |   | $ | 6,677 |   | $ | — |   |
| I/O strips                 |       | 632                   |       | (55                                 | )          | 59                                                    |       | 105                                      |       | —                           |       | 741                   |       | (283                                   | )          |
| Servicing liabilities      |       | (328                  | )          | (2                                  | )          | —                                                |       | (134                                     | )          | —                           |       | (464                  | )          | —                                 |       |
|                            |            |                       |            |                                     |            |                                                       |            |                                          |            |                                  |            |                       |            |                                        |            |  |  |  |  |  |  |  |

 

Measuredon a Nonrecurring Basis

 

Impaired loans (collateral dependent loans) — Aloan is considered to be impaired when it is probable that all of the principaland interest due under the original underwriting terms of the loan may not becollected. Impairment is measured based on the fair value of the underlyingcollateral, less anticipated sellingcosts. The fair value is determined through appraisals and other matrixpricing models, which require a significant degree of management judgment. Wemeasure impairment on all nonaccrual loans and trouble debt restructured loans,except automobile loans, for which we have established specific reserves aspart of the specific allocated allowance component of the allowance for losseson loans. We record impaired loans as recurring with Level 3 measurementinputs.

 

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REO  —Real estateowned consists principally of properties acquired through foreclosure and arecarried at the lower of cost or estimated fair value less anticipated sellingcosts.

 

Loans purchased from FDIC — The fair of the loanportfolio is determined using a discounted cash flow methodology.  First,we segmented the portfolio into homogeneous groups based on loan type, fixed orvariable rate, credit quality, and payment type. For each of segmented loan group, we projected the principal and interestcash flows, adjusted for applicable prepayments and credit considerations.These cash flows then discounted using an appropriate risk adjusted discountrate.

 

Deposits Assumedfrom FDIC — A discounted cash flow methodology is used tocalculate the fair value of the fixed maturity deposits. As part of thisvaluation process, we segmented the contract-based deposits into distinctmaturity groups (i.e., 0 — 30 days, 31 — 90 days, etc.) and calculated the fairvalue of each maturity group separately. First, cash outflows from each groupof fixed maturity deposits is projected based on the balance, remainingmaturity, yield, and interest compounding frequency of the maturity group.Then, cash outflow is discounted using the market yield on fixedmaturity deposits issued as of the valuation date with similar maturity terms.

 

FDIC Loss ShareIndemnification — The fair value of the FDIC loss sharing indemnification was estimated using the income approach. Loss expectations from the acquired loans were projected overa five year period for non-single family loansand a ten year period for single family loans per the term of the agreement. Under the term of theagreement, the FDIC would reimburse the amount to which is reflected theadjusted loss expectations.

 

Core DepositIntangible— The fair value of core deposit intangible wasestimated using the cost savings method under the income approach. Under this method, the cost savings associated with having thecore deposit balances as compared to an alternative source of funds arediscounted to present value using an appropriate intangible discount rate.

 

Thefollowing table presents the aggregated balance of assets measured at estimatedfair value on a nonrecurring basis through the six months ended June 30, 2009, and the total losses resulting from thesefair value adjustments for the quarter and six months ended June 30, 2009:

 

**Assets Measured at FairValue on a Non-Recurring Basis**(dollarsin thousands)

 
| ** **                       | ** ** | ** **                     | ** ** | ** **             | ** ** | ** **             | ** ** | ** ** | ** ** | **Three Months Ended** | ** ** | **Six Months Ended** | ** ** |
|----------------------------------|------------|--------------------------------|------------|------------------------|------------|------------------------|------------|------------|------------|----------------------------------|------------|--------------------------------|------------|
| ** **                       | ** ** | **Through June 30, 2009** | ** ** | **June 30, 2009** | ** ** | **June 30, 2009** | ** ** |
| ** **                       | ** ** | **Level 1**               | ** ** | **Level 2**       | ** ** | **Level 3**       | ** ** | **Total**  | ** ** | **Total Losses**            | ** ** | **Total Losses**          | ** ** |
| Impaired  loans                  |       | $                              | —     |                   | $          | —                 |       | $          | 62,670     |                             | $          | 62,670                         |       | $ | 5,537 |   | $ | 10,386 |   |
| REO                              |       | —                         |       | —                 |       | 5,956                  |       | 5,956      |       | 155                              |       | 359                            |       |
| Loans  purchased from FDIC       |       | —                         |       | —                 |       | 285,685                |       | 285,685    |       | —                           |       | —                         |       |
| Deposits  assumed from FDIC      |       | —                         |       | —                 |       | 293,374                |       | 293,374    |       | —                           |       | —                         |       |
| FDIC  loss share indemnification |       | —                         |       | —                 |       | 40,235                 |       | 40,235     |       | —                           |       | —                         |       |
| Core  deposit intangible         |       | —                         |       | —                 |       | 1,330                  |       | 1,330      |       | —                           |       | —                         |       |
| Total                            |       | $                              | —     |                   | $          | —                 |       | $          | 689,250    |                             | $          | 689,250                        |       | $ | 5,692 |   | $ | 10,745 |   |

 

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**Note 5.   Investment Securities**

 

The following tablesummarizes the book value, market value and distribution of our investmentsecurities as of the dates indicated:

 

**InvestmentSecurities Portfolio**

**(dollars inthousands)**

 
| ** **                                                 | ** ** | **As of  June 30, 2009** | ** ** | **As of  December 31, 2008** | ** ** |
|------------------------------------------------------------|------------|-------------------------------|------------|-----------------------------------|------------|
| ** **                                                 | ** ** | **Amortized  Cost**           | ** ** | **Market  Value**                 | ** ** | **Unrealized  Gain  (Loss)** | ** ** | **Amortized  Cost** | ** ** | **Market  Value** | ** ** | **Unrealized  Gain  (Loss)** | ** ** |
| Held  to Maturity:                                         |       |                          |       |                              |       |   |   |   |   |   |   |   |   |
| Collateralized  mortgage obligations                       |       | $                             | 124        |                              | $          | 121 |   | $ | (3 | ) | $ | 139 |   | $ | 135 |   | $ | (4 | ) |
| Total  investment securities held to maturity              |       | $                             | 124        |                              | $          | 121 |   | $ | (3 | ) | $ | 139 |   | $ | 135 |   | $ | (4 | ) |
|                                                       |       |                          |       |                              |       |   |   |   |   |   |   |   |   |
| Available  for Sale:                                       |       |                          |       |                              |       |   |   |   |   |   |   |   |   |
| Investment  securities of government sponsored enterprises |       | $                             | 26,897     |                              | $          | 26,735 |   | $ | (162 | ) | $ | 25,952 |   | $ | 26,187 |   | $ | 235 |   |
| Mortgage  backed securities                                |       | 276,594                       |       | 280,282                           |       | 3,688 |   | 124,549 |   | 125,513 |   | 964 |   |
| Collateralized  mortgage obligations                       |       | 82,807                        |       | 84,771                            |       | 1,964 |   | 62,557 |   | 63,303 |   | 746 |   |
| Corporate  securities                                      |       | 2,000                         |       | 1,993                             |       | (7 | ) | 7,048 |   | 6,953 |   | (95 | ) |
| Municipal  securities                                      |       | 35,042                        |       | 33,933                            |       | (1,109 | ) | 7,323 |   | 7,180 |   | (143 | ) |
| Total  investment securities available for sale            |       | $                             | 423,340    |                              | $          | 427,714 |   | $ | 4,374 |   | $ | 227,429 |   | $ | 229,136 |   | $ | 1,707 |   |

 

The following tablesummarizes the maturity and repricing schedule of our investment securities attheir carrying values at June 30, 2009:

 

**Investment Maturities and Repricing Schedule(dollars in thousands)**

 
| ** **                                                 | ** ** | **Within  One  Year** | ** ** | **After  One But  Within Five  Years** | ** ** | **After  Five But  Within Ten  Years** | ** ** | **After  Ten Years** | ** ** | **Total** | ** ** |
|------------------------------------------------------------|------------|-----------------------|------------|----------------------------------------|------------|----------------------------------------|------------|----------------------|------------|-----------|------------|
| Held  to Maturity:                                         |       |                  |       |                                   |       |                                   |       |                 |       |      |       |
| Collateralized  mortgage obligations                       |       | $                     | —     |                                   | $          | 124                                    |       | $                    | —     |      | $          | — |   | $ | 124 |   |
|                                                       |       |                  |       |                                   |       |                                   |       |                 |       |      |       |
| Available  for Sale:                                       |       |                  |       |                                   |       |                                   |       |                 |       |      |       |
| Investment  securities of government sponsored enterprises |       | —                |       | —                                 |       | 23,766                                 |       | 2,969                |       | 26,735    |       |
| Mortgage  backed securities                                |       | 8,449                 |       | 855                                    |       | 2,055                                  |       | 268,924              |       | 280,283   |       |
| Collateralized  mortgage obligations                       |       | 26,184                |       | 50,497                                 |       | 8,089                                  |       | —               |       | 84,770    |       |
| Corporate  securities                                      |       | —                |       | 1,993                                  |       | —                                 |       | —               |       | 1,993     |       |
| Municipal  securities                                      |       | 241                   |       | 129                                    |       | 5,327                                  |       | 28,236               |       | 33,933    |       |
| Total  investment securities available for sale            |       | $                     | 34,874     |                                   | $          | 53,598                                 |       | $                    | 39,237     |      | $          | 300,129 |   | $ | 427,838 |   |

 

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The following table showsour investments’ gross unrealized losses and fair value, aggregated byinvestment category and length of time that individual securities have been ina continuous unrealized loss position, at June 30, 2009 andDecember 31, 2008:

 
| **As of June 30, 2009**                    | ** ** | ** **               | ** **   | ** **                    | ** ** | ** **      | ** ** | ** **                    | ** ** | ** **      | ** ** | ** **                    | ** ** |
|-------------------------------------------------|------------|--------------------------|--------------|-------------------------------|------------|-----------------|------------|-------------------------------|------------|-----------------|------------|-------------------------------|------------|
| **(dollars in thousands)**                      | ** ** | **Less  than 12 months** | ** **   | **12  months or longer**      | ** ** | **Total**       | ** ** |
| **Description  of Securities**                  | ** ** | **Fair  Value**          | ** **   | **Gross  Unrealized  Losses** | ** ** | **Fair  Value** | ** ** | **Gross  Unrealized  Losses** | ** ** | **Fair  Value** | ** ** | **Gross  Unrealized  Losses** | ** ** |
|                                            |       |                     |         |                          |       |            |       |                          |       |            |       |                          |       |
| Securities  of government sponsored enterprises |       | $                        | 22,806       |                          | $          | (159            | )          | $                             | —     |            | $          | —                        |       | $ | 22,806 |   | $ | (159 | ) |
| Collateralized  mortgage obligations            |       | 1,794                    |         | (21                           | )          | —          |       | —                        |       | 1,794           |       | (21                           | )          |
| Mortgage  backed securities                     |       | 46,992                   |         | (100                          | )          | 587             |       | (3                            | )          | 47,579          |       | (103                          | )          |
| Corporate  securities                           |       | —                   |         | —                        |       | 1,994           |       | (7                            | )          | 1,994           |       | (7                            | )          |
| Municipal  securities                           |       | 23,946                   |         | (1,427                        | )          | —          |       | —                        |       | 23,946          |       | (1,427                        | )          |
|                                            |       | $                        |  95,538 |                          | $          | (1,707          | )          | $                             | 2,581      |            | $          | (10                           | )          | $ | 98,119 |   | $ | (1,717 | ) |

 
| **As of December 31, 2008**     | ** ** | ** **               | ** ** | ** **                    | ** ** | ** **      | ** ** | ** **                    | ** ** | ** **      | ** ** | ** **                    | ** ** |
|--------------------------------------|------------|--------------------------|------------|-------------------------------|------------|-----------------|------------|-------------------------------|------------|-----------------|------------|-------------------------------|------------|
| **(dollars in thousands)**           | ** ** | **Less  than 12 months** | ** ** | **12  months or longer**      | ** ** | **Total**       | ** ** |
| **Description  of Securities**       | ** ** | **Fair  Value**          | ** ** | **Gross  Unrealized  Losses** | ** ** | **Fair  Value** | ** ** | **Gross  Unrealized  Losses** | ** ** | **Fair  Value** | ** ** | **Gross  Unrealized  Losses** | ** ** |
| ** **                           | ** ** | ** **               | ** ** | ** **                    | ** ** | ** **      | ** ** | ** **                    | ** ** | ** **      | ** ** | ** **                    | ** ** |
| Collateralized  mortgage obligations |       | $                        | 2,642      |                          | $          | (65             | )          | $                             | 1,591      |            | $          | (17                           | )          | $ | 4,233 |   | $ | (82 | ) |
| Mortgage  backed securities          |       | 12,287                   |       | (300                          | )          | 536             |       | (3                            | )          | 12,823          |       | (303                          | )          |
| Corporate  securities                |       | 5,000                    |       | (49                           | )          | 1,953           |       | (47                           | )          | 6,953           |       | (96                           | )          |
| Municipal  securities                |       | 5,712                    |       | (157                          | )          | —          |       | —                        |       | 5,712           |       | (157                          | )          |
|                                 |       | $                        | 25,641     |                          | $          | (571            | )          | $                             | 4,080      |            | $          | (67                           | )          | $ | 29,721 |   | $ | (638 | ) |

 

As of June 30, 2009,the total unrealized losses less than 12 months old were $1.7 million, andtotal unrealized losses more than 12 months old were $10,000.  The aggregate related fair value ofinvestments with unrealized losses less than 12 months old was $95.5 million atJune 30, 2009, and those with unrealized losses more than 12 months oldwere $2.6 million.  As ofDecember 31, 2008, the total unrealized losses less than 12 months oldwere $571,000 and total unrealized losses more than 12 months old were$67,000.  The aggregate related fairvalue of investments with unrealized losses less than 12 months old was $25.6million at December 31, 2008, and those with unrealized losses more than12 months old were $4.1 million.

 

We evaluate securities forother-than-temporary impairment at least quarterly, and more frequently wheneconomic or market concerns warrant such evaluation. Consideration is given tothe financial condition and near-term prospects of the issuer; the length oftime and the extent to which the fair value has been less than the cost, andour intent and ability to retain our investment in the issuer for a period oftime sufficient to allow for any anticipated recovery in fair value. Inanalyzing an issuer’s financial condition, we consider whether the securitiesare issued by the federal government or its agencies, whether downgrades bybond rating agencies have occurred, and the results of reviews of the issuer’sfinancial condition.

 

Management determined thisunrealized loss did not meet the criteria other-than-temporary impairment atJune 30, 2009 as the investment is rated investment grade and there are nocredit quality concerns of the obligor. The market value decline is deemed tobe due to the current market volatility and is not reflective of management’sexpectations of their ability to fully recover this investment. Interest on thecorporate note has been paid as agreed and management believes this willcontinue in the future and the bond will be repaid in full as scheduled. Forthese reasons, no other-than-temporary impairment was recognized on thecorporate note at June 30, 2009.

 

**Note 6.   Loans**

** **

The loan portfolio that weacquired is covered by the FDIC loss-share agreement, from the Mirae Banktransaction, and thus is referred to as “covered loans.”  All loans, excluding covered loans, areregarded as “non-covered” loans.  Asummary of non-covered loans is presented in the table below:

 

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| ** **                           | ** ** | **Amount  Outstanding (in thousands)** | ** ** |
|--------------------------------------|------------|----------------------------------------|------------|
| ** **                           | ** ** | **June 30,  2009**                | ** ** | **December 31,  2008** | ** ** | **June 30,  2008** | ** ** |
| Non-covered  loans:                  | ** ** | ** **                             | ** ** | ** ** | ** ** | ** ** | ** ** |
| Construction                         |       | $                                      | 40,023     |   | $ | 43,180 |   | $ | 50,563 |   |
| Real  estate secured                 |       | 1,692,392                              |       | 1,599,627 |   | 1,537,992 |   |
| Commercial  and industrial           |       | 369,592                                |       | 389,217 |   | 377,895 |   |
| Consumer                             |       | 17,542                                 |       | 23,669 |   | 25,314 |   |
| Total  loans                         |       | 2,119,549                              |       | 2,055,693 |   | 1,991,764 |   |
| Unearned  Income                     |       | (3,877                                 | )          | (4,164 | ) | (5,163 | ) |
| Gross  loans, net of unearned income |       | 2,115,672                              |       | 2,051,529 |   | 1,986,601 |   |
| Allowance  for losses on loans       |       | (38,758                                | )          | (29,437 | ) | (23,494 | ) |
| Net  loans                           |       | $                                      | 2,076,914  |   | $ | 2,022,092 |   | $ | 1,963,107 |   |

 

In accordance to AICPAStatement of Position “SOP 03-3”, *Accountingfor Certain Loans or Debt Securities Acquired in a Transfer,* thecovered loans were divided into “SOP 03-3 Loans” and “Non-SOP 03-3 Loans”, ofwhich SOP 03-3 loans are loans with evidence of deterioration of credit qualityand that it is probable, at acquisition, the Bank will be unable to collect allcontractually required payments receivable. In contrast, Non-SOP 03-3 loans areall other covered loans that do not qualify as SOP 03-3 loans. In addition, thecovered loans are further categorized into four different loan pools per loantypes: construction, commercial & industrial, real estate secured, andconsumer. The covered loans at the acquisition date of June 26, 2009 arepresented in the following table.

 
| ** **                 | ** ** | **SOP 03-3 Loans**         | ** ** | **Non SOP 03-3 Loans** | ** ** | **Total Convered Loans** | ** ** |
|----------------------------|------------|----------------------------|------------|------------------------|------------|--------------------------|------------|
| ** **                 | ** ** | **(dollars in thousands)** | ** ** |
|                       |       |                       |       |                   |       |                     |       |
| Construction               |       | 494                        |       | —                 |       | 494                      |       |
| Real  estate secured       |       | 28,245                     |       | 176,941                |       | 205,186                  |       |
| Commercial  and industrial |       | $                          | 4,458      |                   | $          | 74,639                   |       | $ | 79,097 |   |
| Consumer                   |       | 115                        |       | 793                    |       | 908                      |       |
|                       |       | $                          | 33,312     |                   | $          | 252,373                  |       | $ | 285,685 |   |

 

The following tablerepresents the non SOP 03-3 loans receivable at the acquisition date ofJune 26, 2009. The amounts include principal only and do not reflectaccrued interest as of the date of acquisition or beyond.

 
| **Non-SOP  03-3 loans receivable**                   | ** ** | **(In  thousands)** | ** ** |
|------------------------------------------------------|------------|---------------------|------------|
| Gross  contractual loan principal payment receivable |       | $                   | 280,454    |   |
| Fair  value adjustment                               |       | (28,081             | )          |
| Fair  value of Non SOP 03-3                          |       | 252,373             |       |
|                                                      |            |                     |            |  |

 

The Company applied the costrecovery method to loans subject to SOP 03-3 at the acquisition date ofJune 26, 2009 due to the uncertainty as to the timing of expected cashflows as reflected in the following table.

 
| ** **                                                      | ** ** | **(In  thousands)** | ** ** |
|-----------------------------------------------------------------|------------|---------------------|------------|
| Contractually  required payments receivable                     |       | $                   | 60,194     |   |
| Estimate  of contractual principal not expected to be collected |       | (26,882             | )          |
| Cash  flows expected to be collected                            |       | 33,312              |       |
| Accretable  difference                                          |       | —              |       |
| Fair  Value of SOP 03-3 loans acquired                          |       | $                   | 33,312     |   |

 

Loans held for sale were$21.0 million, $18.4 million, and $15.0 million at June 30, 2009,December 31, 2008, and June 30, 2008, respectively.

 

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The table below summarizesfor the periods indicated, changes in the allowance for losses on loans arisingfrom loans charged off, recoveries on loans previously charged off, additionsto the allowance and certain ratios related to the allowance for losses onloans and loan commitments:

 

**Allowance for Losses on Loans and Loan Commitments(dollars in thousands)**

 
| ** **                                                                  | ** ** | **Three  Months Ended June 30,** | ** ** | **Six  Months Ended June 30,** | ** ** |
|-----------------------------------------------------------------------------|------------|---------------------------------------|------------|-------------------------------------|------------|
| ** **                                                                  | ** ** | **2009**                              | ** ** | **2008**                            | ** ** | **2009** | ** ** | **2008** | ** ** |
| Allowance  for losses on loans:                                             |       |                                  |       |                                |       |   |   |   |   |
| **Balances at beginning of period**                                         |       | $                                     | 34,156     |                                | $          | 22,072 |   | $ | 29,437 |   | $ | 21,579 |   |
| Actual  charge-offs:                                                        |       |                                  |       |                                |       |   |   |   |   |
| Real  estate secured                                                        |       | 176                                   |       | 40                                  |       | 848 |   | 43 |   |
| Commercial  and industrial                                                  |       | 6,940                                 |       | 1,554                               |       | 8,570 |   | 2,380 |   |
| Consumer                                                                    |       | 356                                   |       | 294                                 |       | 457 |   | 605 |   |
| Total  charge-offs                                                          |       | 7,472                                 |       | 1,888                               |       | 9,875 |   | 3,028 |   |
| **Recoveries on loans previously charged off:**                             |       |                                  |       |                                |       |   |   |   |   |
| Real  estate secured                                                        |       | 1                                     |       | —                              |       | 1 |   | 1 |   |
| Commercial  and industrial                                                  |       | 237                                   |       | 1,591                               |       | 306 |   | 1,684 |   |
| Consumer                                                                    |       | 24                                    |       | 63                                  |       | 68 |   | 91 |   |
| Total  recoveries                                                           |       | 262                                   |       | 1,654                               |       | 375 |   | 1,775 |   |
| Net  loan charge-offs                                                       |       | 7,210                                 |       | 234                                 |       | 9,500 |   | 1,253 |   |
| **Provision for losses on loans**                                           |       | 12,100                                |       | 1,400                               |       | 18,799 |   | 2,800 |   |
| Add:  credit for losses on loan commitments                                 |       | 288                                   |       | (256                                | )          | (22 | ) | (368 | ) |
| **Balances at end of period**                                               |       | $                                     | 38,758     |                                | $          | 23,494 |   | $ | 38,758 |   | $ | 23,494 |   |
| ** **                                                                  |       |                                  |       |                                |       |   |   |   |   |
| Allowance  for losses on loan commitments:                                  |       |                                  |       |                                |       |   |   |   |   |
| **Balances at beginning of period**                                         |       | $                                     | 933        |                                | $          | 1,886 |   | $ | 1,243 |   | $ | 1,998 |   |
| Credit  for losses on loan commitments                                      |       | 288                                   |       | (256                                | )          | (22 | ) | (368 | ) |
| **Balances at end of period**                                               |       | $                                     | 1,221      |                                | $          | 1,630 |   | $ | 1,221 |   | $ | 1,630 |   |
| ** **                                                                  |       |                                  |       |                                |       |   |   |   |   |
| **Ratios:**                                                                 |       |                                  |       |                                |       |   |   |   |   |
| Net  loan charge-offs to average total loans                                |       | 0.34                                  | %          | 0.01                                | %          | 0.46 | % | 0.07 | % |
| Allowance  for losses on loans to total loans at period-end                 |       | 1.62                                  | %          | 1.18                                | %          | 1.62 | % | 1.18 | % |
| Net  loan charge-offs to allowance for losses on loans at period-end        |       | 18.60                                 | %          | 0.99                                | %          | 24.51 | % | 5.33 | % |
| Net  loan charge-offs to provision for losses on loans and loan commitments |       | 59.59                                 | %          | 16.71                               | %          | 50.53 | % | 44.74 | % |

 

The allowance for loanlosses is comprised of specific loss allowances for impaired loans and generalloan loss allowances based on quantitative and qualitative analyses.

 

A loan is impaired when,based on current information and events, it is probable that a creditor will beunable to collect all amounts due according to the contractual terms of the loanagreement. At June 30, 2009, our recorded impaired loans totaled $67.0million, of which $19.1 million had specific reserves of $6.3 million. AtDecember 31, 2008, our recorded impaired loans totaled $28.0 million, ofwhich $16.1 million had specific reserves of $6.2 million.

 

On a quarterly basis, weutilize a classification migration model and individual loan review analysis asstarting points for determining the adequacy of our allowance for losses onloans. Our loss migration analysis tracks a certain number of quarters of loanlosses history to determine historical losses by classification category foreach loan type, except certain loans (automobile, mortgage and credit scoredbased business loans), which are analyzed as homogeneous loan pools. Thesecalculated loss factors are then applied to outstanding loan balances.  Based on Company defined utilization rate ofexposure for unused off-balance sheet loan commitments, such as letters ofcredit, we record a reserve for loan commitments.

 

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**Note 7.   Shareholder’s Equity**

 

***Earnings per Share***

 

Basic earnings per share(“EPS”) excludes dilution and is computed by dividing income available tocommon shareholders by the weighted-average number of common shares outstandingfor the period.  Diluted EPS reflects thepotential dilution that could occur if securities or other contracts to issuecommon stock were exercised or converted into common stock or resulted in theissuance of common stock that would then share in the earnings of the entity.The following table provides the basic and diluted EPS computations for theperiods indicated below:

 
| ** **                                         | ** ** | **Three  months ended** | ** ** | **Six  months ended** | ** ** |
|----------------------------------------------------|------------|-------------------------|------------|-----------------------|------------|
| ** **                                         | ** ** | **June 30,**       | ** ** | **June 30,**     | ** ** |
| **(dollars  in thousands, except per share data)** | ** ** | **2009**                | ** ** | **2008**              | ** ** | **2009** | ** ** | **2008** | ** ** |
| Numerator:                                         |       |                    |       |                  |       |   |   |   |   |
| Net  income available to common shareholders       |       | $                       | 12,848     |                  | $          | 7,429 |   | $ | 14,988 |   | $ | 14,480 |   |
| Denominator:                                       |       |                    |       |                  |       |   |   |   |   |
| Denominator  for basic earnings per share:         |       |                    |       |                  |       |   |   |   |   |
| Weighted-average  shares                           |       | 29,413,757              |       | 29,391,177            |       | 29,413,757 |   | 29,334,024 |   |
| Effect  of dilutive stock option                   |       | 7,490                   |       | 23,497                |       | 7,989 |   | 58,597 |   |
| Denominator  for diluted earnings per share:       |       |                    |       |                  |       |   |   |   |   |
| Dilutive  weighted-average shares outstanding      |       |                    |       |                  |       |   |   |   |   |
|                                               |       | 29,421,247              |       | 29,414,674            |       | 29,421,746 |   | 29,392,621 |   |
| Basic  earnings per share                          |       | $                       | 0.44       |                  | $          | 0.25 |   | $ | 0.51 |   | $ | 0.49 |   |
| Diluted  earnings per share                        |       | $                       | 0.44       |                  | $          | 0.25 |   | $ | 0.51 |   | $ | 0.49 |   |

 

**Note 8.   Business Segment Information**

 

The following disclosureabout segments of the Company is made in accordance with the requirements ofSFAS No. 131, *Disclosures aboutSegments of an Enterprise and Related Information*.  The Company segregates its operations intothree primary segments:  bankingoperations, Small Business Administration (“SBA”) lending services and tradefinance department (“TFD”).  The Companydetermines the operating results of each segment based on an internalmanagement system that allocates certain expenses to each segment.

 

*BankingOperations*-**TheCompany raises funds from deposits and borrowings for loans and investments,and provides lending products, including commercial, consumer and real estateloans to its customers.

 

*SmallBusiness Administration Lending Services*- The SBA department mainlyprovides customers with access to the U.S. SBA guaranteed lending program.

 

*TradeFinance Services*- The trade finance department allows the Company’simport/export customers to handle their international transactions.  Trade finance products include, among others,the issuance and collection of letters of credit, international collection, andimport/export financing.

 

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The following are theresults of operations of the Company’s segments for the periods indicatedbelow:

 
| ** **                                    | ** ** | **Three  Months Ended June 30, 2009** | ** **      | **Three  Months Ended June 30, 2008** | ** ** |
|-----------------------------------------------|------------|--------------------------------------------|-----------------|--------------------------------------------|------------|
| **(dollars  in thousands)**                   | ** ** | **Banking**                                | ** **      | ** **                                 | ** ** | ** ** | ** ** | ** ** | ** ** | **Banking** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Business  Segment**                         | ** ** | **Operations**                             | ** **      | **TFD**                                    | ** ** | **SBA** | ** ** | **Company** | ** ** | **Operations** | ** ** | **TFD** | ** ** | **SBA** | ** ** | **Company** | ** ** |
|                                          |       |                                       |            |                                       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income                           |       | $                                          | 18,190          |                                       | $          | 422 |   | $ | 2,369 |   | $ | 20,981 |   | $ | 16,708 |   | $ | 517 |   | $ | 3,108 |   | $ | 20,333 |   |
| Less provision  (recapture) for credit losses |       | 9,045                                      |            | 1,933                                      |       | 1,122 |   | 12,100 |   | 1,630 |   | (1,733 | ) | 1,503 |   | 1,400 |   |
| Non-interest income                           |       | 27,080                                     |            | 643                                        |       | 867 |   | 28,590 |   | 3,921 |   | 267 |   | 1,419 |   | 5,607 |   |
|                                          |       |                                       |            |                                       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Net revenue                                   |       | 36,225                                     |            | (868                                       | )          | 2,114 |   | 37,471 |   | 18,999 |   | 2,517 |   | 3,024 |   | 24,540 |   |
| Non-interest expenses                         |       | 12,841                                     |            | 674                                        |       | 561 |   | 14,076 |   | 11,496 |   | 249 |   | 809 |   | 12,554 |   |
|                                          |       |                                       |            |                                       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Income before taxes                           |       | $                                          | 23,384          |                                       | $          | (1,542 | ) | $ | 1,553 |   | $ | 23,395 |   | $ | 7,503 |   | $ | 2,268 |   | $ | 2,215 |   | $ | 11,986 |   |
|                                          |       |                                       |            |                                       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Business segment assets                       |       | $                                          | 2,889,579       |                                       | $          | 58,373 |   | $ | 226,159 |   | $ | 3,174,111 |   | $ | 2,160,678 |   | $ | 45,680 |   | $ | 152,954 |   | $ | 2,359,312 |   |
|                                          |       |                                       |            |                                       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| ** **                                    | ** ** | **Six Months Ended June 30, 2009**    | ** **      | **Six Months Ended June 30, 2008**    | ** ** |
| ** **                                    | ** ** | **Banking**                                | ** **      | ** **                                 | ** ** | ** ** | ** ** | ** ** | ** ** | **Banking** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **(dollars in thousands)**                    | ** ** | **Operations**                             | ** **      | **TFD**                                    | ** ** | **SBA** | ** ** | **Company** | ** ** | **Operations** | ** ** | **TFD** | ** ** | **SBA** | ** ** | **Company** | ** ** |
|                                          |       |                                       |            |                                       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income                           |       | $                                          |  35,250    |                                       | $          |  863 |   | $ |  4,532 |   | $ |  40,645 |   | $ |  32,609 |   | $ |  1,137 |   | $ |  6,331 |   | $ |  40,077 |   |
| Less provision for loan  losses               |       | 13,052                                     |            | 2,762                                      |       | 2,986 |   | 18,800 |   | 580 |   | (1,287 | ) | 3,507 |   | 2,800 |   |
| Other operating income                        |       | 29,854                                     |            | 927                                        |       | 1,546 |   | 32,327 |   | 7,449 |   | 541 |   | 2,770 |   | 10,760 |   |
|                                          |       |                                       |            |                                       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Net revenue                                   |       | 52,052                                     |            | (972                                       | )          | 3,092 |   | 54,172 |   | 39,478 |   | 2,965 |   | 5,594 |   | 48,037 |   |
| Less other operating  expenses                |       | 24,118                                     |            | 946                                        |       | 998 |   | 26,062 |   | 22,392 |   | 508 |   | 1,877 |   | 24,777 |   |
|                                          |       |                                       |            |                                       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Income before taxes                           |       | $                                          |  27,934    |                                       | $          |  (1,918 | ) | $ |  2,094 |   | $ |  28,110 |   | $ |  17,086 |   | $ |  2,457 |   | $ |  3,717 |   | $ |  23,260 |   |
|                                          |       |                                       |            |                                       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Total assets                                  |       | $                                          |  2,889,579 |                                       | $          |  58,373 |   | $ |  226,159 |   | $ |  3,174,111 |   | $ |  2,160,678 |   | $ |  45,680 |   | $ |  152,954 |   | $ |  2,359,312 |   |
|                                               |            |                                            |                 |                                            |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

**Note**9.   Commitments and Contingencies

 

We area party to financial instruments with off-balance sheet risk in the normalcourse of business to meet the financing needs of our customers.  These financial instruments includecommitments to extend credit, standby letters of credit, and commercial lettersof credit.  These instruments involve, tovarying degrees, elements of credit and interest rate risk in excess of theamount recognized in the consolidatedstatements of financial condition. Our exposure to credit loss in the event of nonperformance oncommitments to extend credit and standby letters of credit is represented bythe contractual notional amount of those instruments.  We use the same credit policies in makingcommitments and conditional obligations as we do for extending loan facilitiesto customers.  We evaluate eachcustomer’s creditworthiness on a case-by-case basis.  The amount of collateral obtained, if deemednecessary upon extension of credit, is based on our credit evaluation of thecounterparty.  Collateral held varies butmay include accounts receivable,inventory, property, plant, andequipment and income-producing properties. Commitments at June 30,2009 are summarized as follows:

 
| **(dollars  in thousands)**  | ** ** | **June 30, 2009** | ** **    | **December 31, 2008** | ** ** |
|------------------------------|------------|------------------------|---------------|----------------------------|------------|
| ** **                   | ** ** | ** **             | ** **    | ** **                 | ** ** |
| Commitments to extend credit |       | $                      |  199,811 |                       | $          |  153,441 |   |
|                         |       |                   |          |                       |       |
| Standby letters of credit    |       | 13,382                 |          | 12,700                     |       |
|                         |       |                   |          |                       |       |
| Commercial letters of credit |       | 18,410                 |          | 15,133                     |       |
|                              |            |                        |               |                            |            |  |  |

 

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In thenormal course of business, we are involved in various legal claims.  We have reviewed all legal claims against uswith counsel and have taken into consideration the views of such counsel as tothe outcome of the claims.  We do notbelieve the final disposition of all such claims will have a material adverseeffect on our financial position or results of operations.

 

**Note**10. Recent Accounting Pronouncements

** **

In December 2008, the FASB issued FSP SFASNo.132R-1, *Employer’s Disclosures about Postretirement BenefitPlan Asset*, which amends SFAS No. 132R, *Employer’s Disclosures about Pensions and OtherPostretirement Benefits*, to provide guidance on employers’disclosures about plan assets of a defined benefit pension or otherpostretirement plan. The objectives of the disclosures are to provide users offinancial statements with an understanding of the plan investment policies andstrategies regarding investment allocation, major categories of plan assets,use of fair valuation inputs and techniques, effect of fair value measurementsusing significant unobservable inputs (i.e., level 3 inputs), and significantconcentrations of risk within plan assets. FSP SFAS No. 132R-1 iseffective for financial statements issued for fiscal years beginning after December 15,2009, with early adoption permitted. This FSP does not require comparativedisclosures for earlier periods. We are in the process of evaluating the impactthat the adoption of FSP SFAS No. 132R-1 will have on our consolidatedfinancial statements.

 

In April 2009, the FASB issued FSP SFAS No.157-4,*Determining Fair Value When the Volume and Level ofActivity for the Asset or Liability Have Significantly Decreased and IdentifyingTransactions That Are Not Orderly*, to provide additional guidancefor estimating fair value in accordance with SFAS No. 157, *Fair Value Measurements*,  when the volume and level of activity for theasset or liability have significantly decreased. As some constituents indicatedthat SFAS No. 157 and FSP SFAS No. 157-3, *Determining the Fair Value of a Financial Asset When the Market forThat Asset Is Not Active*, do not provide sufficient guidance on howto determine whether a market for a financial asset that historically wasactive is no longer active and whether a transaction is not orderly. Therefore,this FSP includes guidance on identifying circumstances that indicate atransaction is not orderly. FSP SFAS No. 157-4 is effective for interimand annual reporting periods ending after June 15, 2009. If a reportingentity elects to adopt early either FSP SFAS No. 115-2 and SFAS No. 124-2or FSP SFAS No. 107-1 and Accounting Principles Board (“APB”) 28-1, thereporting entity also is required to adopt early this FSP. This FSP does notrequire disclosures for earlier periods presented for comparative purposes atinitial adoption. In periods after initial adoption, this FSP requirescomparative disclosures only for periods ending after initial adoption. Theadoption of FSP SFAS No. 157-4 did not have a material impact on ourconsolidated financial statements.

 

In April 2009, the FASB issued FSP SFAS No.115-2and SFAS No. 124-2, *Recognition andPresentation of Other-Than-Temporary Impairments*, which amends theother-than-temporary impairment (“OTTI”) guidance in the U.S. GAAP for debtsecurities to make the guidance more operational and to improve thepresentation and disclosure of OTTI on debt and equity securities in thefinancial statements. This FSP does not amend existing recognition andmeasurement guidance related to OTTI of equity securities. This FSP alsorequires increased and more timely disclosures sought by investors regardingexpected cash flows, credit losses, and an aging of securities with unrealizedlosses. FSP SFAS No. 115-2 and SFAS No. 124-2 is effective forinterim and annual reporting periods ending after June 15, 2009. If areporting entity elects to adopt early either FSP SFAS No. 157-4 or FSPSFAS No. 107-1 and APB 28-1, the reporting entity also is required toadopt early this FSP. This FSP does not require disclosures for earlier periodspresented for comparative purposes at initial adoption. In periods afterinitial adoption, this FSP requires comparative disclosures only for periodsending after initial adoption. The adoption of FSP SFAS No. 115-2 and SFASNo. 124-2 did not have a material impact on our consolidated financialstatements.

 

In April 2009, the FASB issued FSP SFAS No. 107-1and APB 28-1, *Interim Disclosures about FairValue of Financial Instruments*, amends SFAS No. 107, *Disclosure about Fair Value of Financial Instruments*,to require disclosures about fair value of financial instruments for interimreporting periods of publicly traded companies as well as in annual financialstatements.  This FSP also amends APBOpinion No. 28, *Interim FinancialReporting*, to require those disclosures in summarized financialinformation at interim reporting periods. FSP SFAS No. 107-1 and APB 28-1is effective for interim and annual reporting periods ending after June 15,2009. If a reporting entity elects to adopt early either FSP SFAS No. 157-4or FSP SFAS No. 115-2 and SFAS No. 124-2, the reporting entity alsois required to adopt early this FSP. This FSP does not require disclosures forearlier periods presented for comparative purposes at initial adoption. Inperiods after initial adoption, this FSP requires comparative disclosures onlyfor periods ending after initial adoption. The adoption of FSP SFAS No. 107-1and APB 28-1did not have a material impact on our consolidated financialstatements.

 

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In May 2009, the FASB issued SFAS No. 165, *Subsequent Events*, to establish generalstandards of accounting for and disclosure of events that occur after thebalance sheet date but before financial statements are issued or are availableto be issued. SFAS No. 165 is to be applied to the accounting for anddisclosure of subsequent events, and is applied to both interim and annualfinancial statements. This statement does not apply to subsequent events ortransactions that are within the scope of other applicable GAAP that providedifferent guidance on the accounting treatment for subsequent events ortransactions. SFAS No. 165 is effective for interim or annual financialperiods ending after June 15, 2009. Events that occurredsubsequent to June 30, 2009 have been evaluated by the Company’smanagement in accordance with SFAS 165 through the time of filing this reporton August 10, 2009. Theadoption of SFAS No. 165 did not have a material impact on ourconsolidated financial statements.

 

In June 2009, the FASB issued SFAS No. 166, *Accounting for Transfers of Financial Assets*, an amendment of SFAS No. 140, *Accounting for Transfers and Servicing of Financial Assets andExtinguishments of Liabilities.* This statement is to improve therelevance, representational faithfulness, and comparability of the informationthat a reporting entity provides in its financial statements about a transferof financial assets; the effects of a transfer on its financial position,financial performance and cash flows; and a transferor’s continuinginvolvement, if any, in transferred financial assets. SFAS No. 166addresses (1) practices that have developed since the issuance of SFAS No. 140that are not consistent with the original intent and key requirements of thatstatement, and (2) concerns of financial statement users that many of thefinancial assets (and related obligations) that have been derecognized shouldcontinue to be reported in the financial statements of transferors. SFAS No. 166is effective at the beginning of each reporting entity’s first annual reportingperiod that begins after November 15, 2009, for interim periods withinthat first annual reporting period, and for interim and annual periodsthereafter. Early adoption is prohibited. This statement must be applied totransfers occurring on or after the effective date. However, the disclosureprovisions of this statement should be applied to transfers that occurred bothbefore and after the effective date. Additionally, on and after the effectivedate, the concept of qualifying special-purpose entity (“SPE”) is no longerrelevant for accounting purposes. Therefore, formerly qualifying SPEs, asdefined under previous accounting standards, should be evaluated forconsolidation by reporting entities on and after the effective date inaccordance with the applicable consolidation guidance. We are in the process ofevaluating the impact that the adoption of SFAS No. 166 will have on ourconsolidated financial statements.

 

In June 2009, the FASB issued SFAS No. 167, *Amendments to FASB Interpretation No. 46 (R),*to improve financial reporting by enterprises involved with variable interestentities (“VIEs”). SFAS No. 167 addresses: (1) the effects on certainprovisions of FASB Interpretation No. (“FIN”) 46R, *Consolidationof Variable Interest Entities*, as a result of the elimination of thequalifying SPE concept in SFAS No. 166, and (2) constituent concernsabout the application of certain key provisions of FIN 46R, including those inwhich the accounting and disclosures under FIN 46R do not always provide timelyand useful information about an enterprise’s involvement in a VIE. SFAS No. 167is effective at the beginning of each reporting entity’s first annual reportingperiod that begins after November 15, 2009, for interim periods withinthat first annual reporting period, and for interim and annual periodsthereafter. Early adoption is prohibited. We are in the process of evaluatingthe impact that the adoption of SFAS No. 166 will have on our consolidatedfinancial statements.

 

In June 2009, the FASB issued SFAS No. 168, *The FASB Accounting Standards Codification and theHierarchy of Generally Accepted Accounting Principles, *a replacement of SFAS No. 162, *TheHierarchy of Generally Accepted Accounting Principles*. TheFASB Accounting Standards Codification (“Codification”) will become the sourceof authoritative U.S. GAAP recognized by the FASB to be applied bynongovernmental entities. Rules and interpretive releases of theSecurities and Exchange Commission (“SEC”) under authority of federalsecurities laws are also sources of authoritative GAAP for SEC registrants. Onthe effective date of this statement, the Codification will supersede allthen-existing non-SEC accounting and reporting standards. All othernongrandfathered non-SEC accounting literature not included in the Codificationwill become nonauthoritative.  SFAS No. 168is effective for interim and annual financial statements issued after September 15,2009.  We will adopt SFAS No. 168 inthe third quarter of 2009 and are in the process of evaluating the impact thatthe adoption will have on our consolidated financial statements.

 

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**Item 2.                    Management’s Discussion andAnalysis of Financial Condition and Results of Operations**

 

Thisdiscussionpresentsmanagement’sanalysisofourresultsofoperationsforthethreeandsixmonthsendedJune30,2009and2008,financialconditionasof  June30,2009andDecember31,2008,andincludesthestatisticaldisclosuresrequiredbytheSecuritiesandExchangeCommissionGuide3(“StatisticalDisclosurebyBankHoldingCompanies”).  ThediscussionshouldbereadinconjunctionwithourfinancialstatementsandthenotesrelatedtheretowhichappearelsewhereinthisQuarterlyReportonForm10-Q.

 

Statementscontained in this report that are not purely historical are forward-lookingstatements within the meaning of Section 21E of the Securities ExchangeAct of 1934, as amended, including our expectations, intentions, beliefs, orstrategies regarding the future.  Anystatements in this document about expectations, beliefs, plans, objectives,assumptions or future events or performance are not historical facts and areforward-looking statements. These statements are often, but not always, madethrough the use of words or phrases such as “may,” “should,” “could,”“predict,” “potential,” “believe,” “expect,” “anticipate,” “seek,” “estimate,”“intend,” “plan,” “projection,” and “outlook,” and similar expressions.  Accordingly, these statements involveestimates, assumptions and uncertainties, which could cause actual results todiffer materially from those expressed in them. Any forward-looking statements are qualified in their entirety byreference to the factors discussed throughout this document.  All forward-looking statements concerningeconomic conditions, rates of growth, rates of income or values as may beincluded in this document are based on information available to us on the datesnoted, and we assume no obligation to update any such forward-lookingstatements.  It is important to note thatour actual results may differ materially from those in such forward-lookingstatements due to fluctuations in interest rates, inflation, government regulations,economic conditions, customer disintermediation and competitive product andpricing pressures in the geographic and business areas in which we conductoperations, including our plans, objectives, expectations and intentions andother factors discussed under the section entitled “Risk Factors,” in ourAnnual Report on Form 10-K for the year ended December 31, 2008, including the following:

 

·                  If a significantnumber of clients fail to perform under their loans, our business,profitability, and financial condition would be adversely affected.

 

·                  Increases in ourallowance for loan losses could materially affect our earnings adversely.

 

·                  Bankingorganizations are subject to interest rate risk and variations in interestrates may negatively affect our financial performance.

 

·                  Liquidity riskcould impair our ability to fund operations, meet our obligations as theybecome due and jeopardize our financial condition.

 

·                  The profitability of Wilshire Bancorp will be dependent onthe profitability of the Bank.

 

·                  Wilshire Bancorp relies heavily on the payment of dividendsfrom the Bank.

 

·                  The holders ofdebentures and Series A Preferred Stock have rights that are senior tothose of our common shareholders.

 

·                  Adverse changesin domestic or global economic conditions, especially in California, could havea material adverse effect on our business, growth, and profitability.

 

·                  Recent negativedevelopments in the financial industry and U.S. and global credit markets mayaffect our operations and results.

 

·                  Governmentalresponses to recent market disruptions may be inadequate and may haveunintended consequences.

 

·                  Our operationsmay require us to raise additional capital in the future, but that capital maynot be available or may not be on terms acceptable to us when it is needed.

 

·                  The short-termand long-term impact of the new Basel II capital standards and the forthcomingnew capital rules to be proposed for non-Basel II U.S. banks is uncertain.

 

·                  Maintaining orincreasing our market share depends on market acceptance and regulatoryapproval of new products and services.

 

·                  Significantreliance on loans secured by real estate may increase our vulnerability todownturns in the California real estate market and other variables impactingthe value of real estate.

 

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·                  If we fail toretain our key employees, our growth and profitability could be adverselyaffected.

 

·                  We may be unableto manage future growth.

 

·                  Our expenseswill increase as a result of increases in FDIC insurance premiums.

 

·                  We could beliable for breaches of security in our online banking services.  Fear of security breaches could limit thegrowth of our online services.

 

·                  Our directorsand executive officers beneficially own a significant portion of ouroutstanding common stock.

 

·                  The market for ourcommon stock is limited, and potentially subject to volatile changes in price.

 

·                  We mayexperience goodwill impairment.

 

·                  We facesubstantial competition in our primary market area.

 

·                  Anti-takeoverprovisions of our charter documents may have the effect of delaying orpreventing changes in control or management.

 

·                  We are subjectto significant government regulation and legislation that increase the cost ofdoing business and inhibits our ability to compete.

 

·                  As participantsin the United States Department of the Treasury’s Capital Purchase Program, weare subject to additional regulations and legislation that may not beapplicable to other financial institution competitors.

 

·                  We could benegatively impacted by downturns in the South Korean economy.

 

·                  Additionalshares of our common stock issued in the future could have a dilutive effect.

 

·                  Shares of ourpreferred stock previously issued and preferred stock issued in the futurecould have dilutive and other effects.

 

Thesefactors and the risk factors referred to in our Annual Report on Form 10-Kfor the year ended December 31, 2008 could cause actual results oroutcomes to differ materially from those expressed in any forward-lookingstatements made by us, and you should not place undue reliance on any suchforward-looking statements.  Anyforward-looking statement speaks only as of the date on which it is made and wedo not undertake any obligation to update any forward-looking statement orstatements to reflect events or circumstances after the date on which suchstatement is made or to reflect the occurrence of unanticipated events.  New factors emerge from time to time, and itis not possible for us to predict which will arise.  In addition, we cannot assess the impact ofeach factor on our business or the extent to which any factor, or combinationof factors, may cause actual results to differ materially from those containedin any forward-looking statements.

 

**Acquisition**

** **

**On June 26,2009, we acquired the banking operations of Mirae from the FDIC.  We acquired approximately $395.6 million ofassets and assumed $374.0 million of liabilities. We also entered into losssharing agreements with the FDIC in connection with the Mirae acquisition.  Under the loss sharing agreements, the FDICwill share in the losses on assets covered under the agreements, whichgenerally include loans acquired from Mirae and foreclosed loan collateralexisting at June 26, 2009 (referred to collectively as “coveredassets”).  With respect to losses of upto $83.0 million on the covered assets, the FDIC has agreed to reimburse us for80 percent of the losses.  On losses exceeding $83.0 million, theFDIC has agreed to reimburse us for 95 percent of the losses.  Theloss sharing agreements are subject to our compliance with servicing proceduresspecified in the agreements with the FDIC. The term for the FDIC’s loss sharing on**single family loans is ten years, and the term for loss sharingon non-single family loans is five years with respect to losses and eight years with respect toloss recoveries.

** **

**TheMirae acquisition was accounted for under the purchase method of accounting inaccordance to SFAS No. 1**41R. The Company recorded a SFAS No. 141R bargain purchase gain totaling $21.7 million resulting fromthe acquisition, which is a component of noninterest income on our statement ofincome. The amount of the gain is equal to the amount by which the fair valueof assets purchased exceeded the fair value of liabilities assumed (see note 3of our Consolidated Financial Statements).

 

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**Selected Financial Data**

** **

The following table presents selected historicalfinancial information as of June 30, 2009, December 31, 2008, and June 30,2008 and for the three and six months ended June 30, 2009 and 2008.  In theopinion of our management, the information presented reflects all adjustmentsconsidered necessary for a fair presentation of the results of suchperiods.  The operating results for theinterim periods are not necessarily indicative of our future operating results.

 
| ** **                                                                               | ** ** | **Three months ended June 30,**              | ** **      | **Six months ended June 30,** | ** ** |
|------------------------------------------------------------------------------------------|------------|---------------------------------------------------|-----------------|------------------------------------|------------|
| ** **                                                                               | ** ** | **(Dollars in thousands, except per share data)** | ** **      |
| ** **                                                                               | ** ** | **2009**                                          | ** **      | **2008**                           | ** ** | **2009** | ** ** | **2008** | ** ** |
| Net  income available to common shareholders                                             |       | $                                                 |  12,848    |                               | $          |  7,429 |   | $ |  14,988 |   | $ |  14,480 |   |
| Net  income per common share, basic                                                      |       | 0.44                                              |            | 0.25                               |       | 0.51 |   | 0.49 |   |
| Net  income per common share, diluted                                                    |       | 0.44                                              |            | 0.25                               |       | 0.51 |   | 0.49 |   |
| Net  interest income before provision for loan losses and off-balance sheet  commitments |       | 20,981                                            |            | 20,333                             |       | 40,645 |   | 40,077 |   |
| ** **                                                                               |       |                                              |            |                               |       |   |   |   |   |
| **Average balances:**                                                                    |       |                                              |            |                               |       |   |   |   |   |
| Assets                                                                                   |       | 2,691,465                                         |            | 2,303,278                          |       | 2,608,802 |   | 2,257,288 |   |
| Cash  and cash equivalents                                                               |       | 198,478                                           |            | 75,677                             |       | 152,205 |   | 75,939 |   |
| Investment  securities                                                                   |       | 324,302                                           |            | 228,806                            |       | 305,532 |   | 225,665 |   |
| Net  loans                                                                               |       | 2,060,306                                         |            | 1,911,835                          |       | 2,045,532 |   | 1,870,362 |   |
| Total  deposits                                                                          |       | 2,000,690                                         |            | 1,726,147                          |       | 1,917,049 |   | 1,715,484 |   |
| Shareholders’  equity                                                               |       | 262,437                                           |            | 181,645                            |       | 260,764 |   | 178,488 |   |
| **Performance Ratios:**                                                                  |       |                                              |            |                               |       |   |   |   |   |
| Annualized  return on average assets                                                     |       | 2.04                                              | %               | 1.29                               | %          | 1.29 | % | 1.28 | % |
| Annualized  return on average equity                                                     |       | 20.95                                             | %               | 16.36                              | %          | 12.89 | % | 16.22 | % |
| Net  interest margin                                                                     |       | 3.33                                              | %               | 3.78                               | %          | 3.33 | % | 3.81 | % |
| Efficiency  ratio                                                                        |       | 28.40                                             | %               | 48.39                              | %          | 35.72 | % | 48.74 | % |
| **Capital Ratios:**                                                                      |       |                                              |            |                               |       |   |   |   |   |
| Tier  1 capital to adjusted total assets                                                 |       | 12.30                                             | %               | 10.21                              | %          |   |   |   |   |
| Tier  1 capital to risk-weighted assets                                                  |       | 13.26                                             | %               | 11.55                              | %          |   |   |   |   |
| Total  capital to risk-weighted assets                                                   |       | 14.75                                             | %               | 13.99                              | %          |   |   |   |   |
| ** **                                                                               | ** ** | ** **                                        | ** **      | ** **                         | ** ** | ** ** | ** ** |   | ** ** |
| ** **                                                                               | ** ** | **June 30, 2009**                            | ** **      | **December 31, 2008**         | ** ** | **June 30, 2008** | ** ** | ** ** | ** ** |
| **Period-end balances as of:**                                                           | ** ** | ** **                                        | ** **      | ** **                         | ** ** | ** ** | ** ** | ** ** | ** ** |
| Total  assets                                                                            |       | $                                                 |  3,174,111 |                               | $          |  2,450,011 |   | $ |  2,359,312 |   |   |   |
| Investment  securities                                                                   |       | 427,838                                           |            | 229,275                            |       | 233,226 |   |   |   |
| Total  loans, net of unearned income and allowance for loan losses                       |       | 2,399,707                                         |            | 2,051,528                          |       | 1,986,601 |   |   |   |
| Total  deposits                                                                          |       | 2,451,603                                         |            | 1,812,601                          |       | 1,739,289 |   |   |   |
| Junior  subordinated debentures                                                          |       | 87,321                                            |            | 87,321                             |       | 87,321 |   |   |   |
| FHLB  borrowings                                                                         |       | 331,000                                           |            | 260,000                            |       | 320,000 |   |   |   |
| Shareholders’  equity                                                               |       | 269,158                                           |            | 255,060                            |       | 181,686 |   |   |   |
|                                                                                     |       |                                              |            |                               |       |   |   |   |   |
| **Asset Quality Ratios:**                                                                |       |                                              |            |                               |       |   |   |   |   |
| *(net of SBA guaranteed portion)*                                                        |       |                                              |            |                               |       |   |   |   |   |
| Net  charge-off to average total loans for the quarter                                   |       | 0.34                                              | %               | 2.60                               | %          | 0.01 | % |   |   |
| Non-performing  loans to total loans                                                     |       | 3.74                                              | %               | 0.76                               | %          | 0.83 | % |   |   |
| Non-performing  assets to total loans and other real estate owned                        |       | 3.98                                              | %               | 0.89                               | %          | 0.85 | % |   |   |
| Allowance  for loan losses to total loans                                                |       | 1.62                                              | %               | 1.43                               | %          | 1.18 | % |   |   |
| Allowance  for loan losses to non-performing loans                                       |       | 43.15                                             | %               | 189.27                             | %          | 142.64 | % |   |   |
|                                                                                     |       |                                              |            |                               |       |   |   |   |   |
| **Allowance for Loan Losses (non-covered loans only)**                                   |       |                                              |            |                               |       |   |   |   |   |
| *(net of SBA guaranteed portion)*                                                        |       |                                              |            |                               |       |   |   |   |   |
| Allowance  for Loan Losses                                                               |       | $                                                 |  38,758    |                               |       |   |   |   |   |   |
| Allowance  for Loan Losses/Non-Covered Loans                                             |       | 1.83                                              | %               |                               |       |   |   |   |   |
| Non-Covered  Nonperforming Assets/Non-Covered Loans                                      |       | 2.67                                              | %               |                               |       |   |   |   |   |
| Non-Covered  Nonperforming Loans/Non-Covered Loans                                       |       | 1.95                                              | %               |                               |       |   |   |   |   |
| Allowance  for Loan Losses/Non-Covered Nonperforming Loans                               |       | 68.59                                             | %               |                               |       |   |   |   |   |
|                                                                                          |            |                                                   |                 |                                    |            |  |  |  |  |  |  |  |  |

 

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**ExecutiveOverview**

 

Weoperate community banks doing a general commercial banking business, with ourprimary market encompassing the multi-ethnic population of the Los Angelesmetropolitan area.  Our full-serviceoffices are located primarily in areas where a majority of the businesses areowned by diversified ethnic groups.

 

Wehave also expanded and diversified our business with the focus on ourcommercial and consumer lending divisions. Over the past several years, ournetwork of branches and loan production offices has been expandedgeographically. Pursuant tothe acquisition on June 26, 2009, five commercial banking branches,operated by Mirae and located within the southern California, were integratedinto our branch network immediately after the acquisition. In addition,we also have five loan productionoffices in Aurora, Colorado (the Denver area); Atlanta, Georgia; Dallas, Texas;Houston, Texas; and Annandale, Virginia.

 

**Critical Accounting Policies**

** **

Thediscussion and analysis of our financial condition and results of operations isbased upon our financial statements, which have been prepared in accordancewith GAAP.  The preparation of thesefinancial statements requires management to make estimates and judgments thataffect the reported amounts of assets and liabilities, revenues and expenses,and related disclosures of contingent assets and liabilities at the date of ourfinancial statements.  Actual results maydiffer from these estimates under different assumptions or conditions.

 

Variouselements of our accounting policies, by their nature, are inherently subject toestimation techniques, valuation assumptions and other subjective assessments.We have particularly identified several accounting policies that, due tojudgments, estimates and assumptions inherent in those policies are critical toan understanding of our consolidated financial statements. These policiesrelate to the classification and valuation of investment securities, themethodologies that determine our allowance for losses on loans, the treatmentof non-accrual loans, the valuation of retained interests and servicing assetsrelated to the sales of SBAloans, and the accounting for income tax provisions and the uncertainty inincome taxes. In each area, we have identified the variables most important inthe estimation process. We believe that we have used the best informationavailable to make the estimatesnecessary to value the related assets and liabilities. Actual performance thatdiffers from our estimates and future changes in the key variables could changefuture valuation and could have an impact on our net income.

 

Oursignificant accounting policies are described in greater detail in our 2008 Annual Report on Form 10-K in the“Critical Accounting Policies” section of “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in Note 1 tothe Consolidated Financial Statements (“Summary of Significant AccountingPolicies”) of this report, which are essential to understanding Management’sDiscussion and Analysis of Results of Operations and Financial Condition. Therehas been no material modification to these policies during the quarter ended June 30,2009.

 

**Results of Operations**

** **

**Net Interest Income andNet Interest Margin**

** **

Ourprimary source of revenue is net interest income, which is the differencebetween interest and fees derived from earning assets and interest paid onliabilities obtained to fund those assets. Our net interest income is affected by changes in the level and mix ofinterest-earning assets and interest-bearing liabilities, referred to as volumechanges.  Our net interest income is alsoaffected by changes in the yields earned on assets and rates paid onliabilities, referred to as rate changes. Interest rates charged on our loans are affected principally by thedemand for such loans, the supply of money available for lending purposes andother competitive factors.  Those factorsare, in turn, affected by general economic conditions and other factors beyondour control, such as federal economic policies, the general supply of money inthe economy, legislative tax policies, governmental budgetary matters and theactions of the Federal Reserve Board (“FRB”).

 

Netincome applicable to common shareholders for the second quarter of 2009 was $5.4 million morethan the same quarter of 2008, largely attributable to a SFAS No. 141R bargain purchase gain of $21.7 million in connection with our acquisition of Mirae andhigher net interest income, which was partiallyoffset by higher provision for loan losses, higher noninterest expense and anincrease in income tax provision. A $0.6 million, or 3%, increase in netinterest income was primarily attributableto growth in average balances of loans and lower rates paid on interest-bearingliabilities, and was partiallyoffset by lower yields on loans,higher average balances of interest-bearing liabilities and lower averagebalances of investments. Non-interest income rose $23.0 million, primarily due to the SFAS 141R bargain purchase gain related to our acquisition of Mirae.

 

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Ouraverage interest-earning assets increased to $2.52 billion in the second quarter of 2009, as compared with $2.15 billion in the same quarter of 2008, and average net loans increased to $2.06 billion in the second quarter of2009, as compared with $1.91 billion in the same quarter of 2008. Average interest-bearing depositsincreased to $1.71 billionin the second quarter of 2009, ascompared with $1.42 billion in thesame quarter of 2008. Average FHLBadvances and other borrowings have significantly increased to $408.8 million inthe second quarter of 2009 from $369.2 million in the same quarter oflast year (see “Financial Condition-Deposits and Other Sources of Funds”below), while the average balance on our junior subordinated debentures stayedunchanged at $87.3 million for the second quarter of 2009 and 2008. As aresult, average interest bearing liabilities increased to $2.12 billion in thesecond quarter of 2009, as compared with $1.79 billion in the second quarter of2008.

 

The federal funds rate reductions of 25 and 175 basispoints in second quarter and fourth quarter of 2008, respectively, haveresulted in a decrease inour earning-asset yields as well as our cost of funds. The average yields onour interest-earning assets decreased to 5.62% for the second quarter of 2009 from 6.83% for the second quarter of the prior year. Consistent with the decrease in average yields oninterest-earning assets, the cost of funds for average yields oninterest-earning liabilities also decreased to 2.69% for the secondquarter of 2009 from 3.65% for the prior year’s same quarter. Consequently, ournet interest spread and net interest margin decreased to 2.91% and 3.33%,respectively, for the second quarter of 2009, as compared with 3.17% and 3.78%for the second quarter of the prior year.

 

Our earning-asset yields have decreased in line with our cost of funds. Interest incomedecreased to $35.2 million for the second quarter of 2009, as compared with$36.7 million for the prior year’s same period, while interest expensedecreased to $14.2 million for the second quarter of 2009, as compared with$16.3 million for the quarter a year ago. As a result, net interest incomeincreased to $21.0 million for thesecond quarter in 2009.

 

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The following table setsforth, for the periods indicated, our average balances of assets, liabilitiesand shareholders’ equity, in addition to the major components of net interestincome and net interest margin:

 

**Distribution, Yield and Rate Analysis of NetInterest Income**

**(dollars in thousands)**

** **
| ** **                                                         | ** ** | **For the Quarter Ended June 30,** | ** ** |
|--------------------------------------------------------------------|------------|-----------------------------------------|------------|
| ** **                                                         | ** ** | **2009**                                | ** ** | **2008** | ** ** |
| ** **                                                         | ** ** | **Average********Balance**              | ** ** | **Interest********Income/********Expense** | ** ** | **Annualized********Average********Rate/Yield** | ** ** | **Average********Balance** | ** ** | **Interest********Income/********Expense** | ** ** | **Annualized********Average********Rate/Yield** | ** ** |
| **Assets**:                                                        |       |                                    |       |   |   |   |   |   |   |   |   |   |   |
| Interest-earning  assets:                                          |       |                                    |       |   |   |   |   |   |   |   |   |   |   |
| Net  loans(1)                                                      |       | $                                       | 2,060,306  |   | $ | 31,234 |   | 6.06% |   | $ | 1,911,836 |   | $ | 33,978 |   | 7.11% |   |
| Investment  securities government sponsored agencies               |       | 287,719                                 |       | 2,811 |   | 3.91% |   | 213,961 |   | 2,467 |   | 4.61% |   |
| Other  investment securities(2)                                    |       | 36,583                                  |       | 383 |   | 5.96% |   | 14,845 |   | 171 |   | 4.60% |   |
| Interest  on federal fund sold                                     |       | 133,139                                 |       | 777 |   | 2.34% |   | 8,546 |   | 49 |   | 2.27% |   |
| Total  interest-earning assets                                     |       | 2,517,747                               |       | 35,205 |   | 5.62% |   | 2,149,188 |   | 36,665 |   | 6.82% |   |
| Cash  and due from banks                                           |       | 65,386                                  |       |   |   |   |   | 67,131 |   |   |   |   |   |
| Other  assets                                                      |       | 108,332                                 |       |   |   |   |   | 86,959 |   |   |   |   |   |
| Total  assets                                                      |       | $                                       | 2,691,465  |   |   |   |   |   | $ | 2,303,278 |   |   |   |   |   |
|                                                               |       |                                    |       |   |   |   |   |   |   |   |   |   |   |
| **Liabilities and Shareholders’ Equity:**                     |       |                                    |       |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing  liabilities:                                     |       |                                    |       |   |   |   |   |   |   |   |   |   |   |
| Money  market deposits                                             |       | $                                       | 436,066    |   | 2,774 |   | 2.54% |   | $ | 393,182 |   | 2,998 |   | 3.05% |   |
| Super  NOW deposits                                                |       | 19,142                                  |       | 46 |   | 0.95% |   | 22,533 |   | 76 |   | 1.35% |   |
| Savings  deposits                                                  |       | 48,511                                  |       | 444 |   | 3.66% |   | 35,995 |   | 299 |   | 3.32% |   |
| Time  certificates of deposit in denominations of $100,000 or more |       | 994,514                                 |       | 6,751 |   | 2.72% |   | 795,081 |   | 7,720 |   | 3.88% |   |
| Other  time deposits                                               |       | 210,020                                 |       | 1,761 |   | 3.35% |   | 173,783 |   | 1,771 |   | 4.08% |   |
| FHLB  advances and other borrowings                                |       | 321,434                                 |       | 1,622 |   | 2.02% |   | 281,846 |   | 2,356 |   | 3.34% |   |
| Junior  subordinated debenture                                     |       | 87,321                                  |       | 826 |   | 3.78% |   | 87,321 |   | 1,112 |   | 5.09% |   |
| Total  interest-bearing liabilities                                |       | 2,117,008                               |       | 14,224 |   | 2.69% |   | 1,789,741 |   | 16,332 |   | 3.65% |   |
| Non-interest-bearing  deposits                                     |       | 292,778                                 |       |   |   |   |   | 305,573 |   |   |   |   |   |
| Total  deposits and other borrowings                               |       | 2,409,786                               |       |   |   |   |   | 2,095,314 |   |   |   |   |   |
| Other  liabilities                                                 |       | 18,690                                  |       |   |   |   |   | 26,319 |   |   |   |   |   |
| Shareholders’  equity                                         |       | 262,989                                 |       |   |   |   |   | 181,645 |   |   |   |   |   |
| Total  liabilities and shareholders’ equity                   |       | $                                       | 2,691,465  |   |   |   |   |   | $ | 2,303,278 |   |   |   |   |   |
| Net  interest income                                               |       |                                    |       | $ | 20,981 |   |   |   |   |   | $ | 20,333 |   |   |   |
| Net  interest spread(3)                                            |       |                                    |       |   |   | 2.93% |   |   |   |   |   | 3.17% |   |
| Net  interest margin(4)                                            |       |                                    |       |   |   | 3.36% |   |   |   |   |   | 3.78% |   |

 

----

(1) Net loan fees have been included in the calculation of interest income. Loan feeswere approximately $523,000 and $1,187,000 for the quarters ended June 30,2009 and 2008, respectively. Loans are net of theallowance for losses on loans, deferred fees, unearned income and relateddirect costs, but include those loans placedon non-accrual status.

(2) Interest income on a tax equivalent basis for tax-advantagedincome of $162,000 and $41,000 for the three months ended June 30, 2009and 2008, respectively, were not included in the computation of yields.

(3) Represents the average rate earned on interest-earningassets less the average rate paid on interest-bearing liabilities.

(4) Represents net interest income as a percentage of averageinterest-earning assets.

 

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**Distribution, Yield and Rate Analysis of NetInterest Income**

**(dollars in thousands)**

 
| ** **                                                         | ** ** | **For the Six Months Ended June 30,** | ** ** |
|--------------------------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                                         | ** ** | **2009**                                   | ** ** | **2008** | ** ** |
| ** **                                                         | ** ** | **Average********Balance**                 | ** ** | **Interest********Income/********Expense** | ** ** | **Annualized********Average********Rate/Yield** | ** ** | **Average********Balance** | ** ** | **Interest********Income/********Expense** | ** ** | **Annualized********Average********Rate/Yield** | ** ** |
| **Assets**:                                                        |       |                                       |       |   |   |   |   |   |   |   |   |   |   |
| Interest-earning  assets:                                          |       |                                       |       |   |   |   |   |   |   |   |   |   |   |
| Net  loans(1)                                                      |       | $                                          | 2,045,532  |   | $ | 61,428 |   | 6.01% |   | $ | 1,870,362 |   | $ | 69,296 |   | 7.41% |   |
| Investment  securities government sponsored agencies               |       | 274,746                                    |       | 5,478 |   | 3.99% |   | 209,137 |   | 4,845 |   | 4.63% |   |
| Other  investment securities(2)                                    |       | 30,786                                     |       | 658 |   | 5.96% |   | 16,528 |   | 377 |   | 4.56% |   |
| Interest  on federal fund sold                                     |       | 89,631                                     |       | 1,066 |   | 2.38% |   | 9,199 |   | 129 |   | 2.81% |   |
| Total  interest-earning assets                                     |       | 2,440,695                                  |       | 68,630 |   | 5.65% |   | 2,105,226 |   | 74,647 |   | 7.09% |   |
| Cash  and due from banks                                           |       | 62,598                                     |       |   |   |   |   | 66,741 |   |   |   |   |   |
| Other  assets                                                      |       | 105,509                                    |       |   |   |   |   | 85,321 |   |   |   |   |   |
| Total  assets                                                      |       | $                                          | 2,608,802  |   |   |   |   |   | $ | 2,257,288 |   |   |   |   |   |
|                                                               |       |                                       |       |   |   |   |   |   |   |   |   |   |   |
| **Liabilities and Shareholders’ Equity:**                     |       |                                       |       |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing  liabilities:                                     |       |                                       |       |   |   |   |   |   |   |   |   |   |   |
| Money  market deposits                                             |       | $                                          | 399,602    |   | 5,106 |   | 2.56% |   | $ | 394,888 |   | 6,723 |   | 3.40% |   |
| Super  NOW deposits                                                |       | 19,348                                     |       | 91 |   | 0.94% |   | 22,527 |   | 155 |   | 1.38% |   |
| Savings  deposits                                                  |       | 45,890                                     |       | 837 |   | 3.65% |   | 34,306 |   | 548 |   | 3.19% |   |
| Time  certificates of deposit in denominations of $100,000 or more |       | 964,175                                    |       | 13,420 |   | 2.78% |   | 791,855 |   | 16,519 |   | 4.17% |   |
| Other  time deposits                                               |       | 203,401                                    |       | 3,504 |   | 3.45% |   | 168,888 |   | 3,657 |   | 4.33% |   |
| FHLB  advances and other borrowings                                |       | 324,373                                    |       | 3,280 |   | 2.02% |   | 249,720 |   | 4,399 |   | 3.52% |   |
| Junior  subordinated debenture                                     |       | 87,321                                     |       | 1,747 |   | 4.00% |   | 87,321 |   | 2,569 |   | 5.88% |   |
| Total  interest-bearing liabilities                                |       | 2,044,110                                  |       | 27,985 |   | 2.74% |   | 1,749,505 |   | 34,570 |   | 3.95% |   |
| Non-interest-bearing  deposits                                     |       | 284,804                                    |       |   |   |   |   | 303,019 |   |   |   |   |   |
| Total  deposits and other borrowings                               |       | 2,328,914                                  |       |   |   |   |   | 2,052,524 |   |   |   |   |   |
| Other  liabilities                                                 |       | 18,847                                     |       |   |   |   |   | 26,276 |   |   |   |   |   |
| Shareholders’  equity                                         |       | 261,041                                    |       |   |   |   |   | 178,488 |   |   |   |   |   |
| Total  liabilities and shareholders’ equity                   |       | $                                          | 2,608,802  |   |   |   |   |   | $ | 2,257,288 |   |   |   |   |   |
| Net  interest income                                               |       |                                       |       | $ | 40,645 |   |   |   |   |   | $ | 40,077 |   |   |   |
| Net  interest spread(3)                                            |       |                                       |       |   |   | 2.91% |   |   |   |   |   | 3.14% |   |
| Net  interest margin(4)                                            |       |                                       |       |   |   | 3.36% |   |   |   |   |   | 3.81% |   |

** **

----

(1) Net loan fees have been included in thecalculation of interest income. Loan fees were approximately $1,092,000 and $2,469,000 for the six months ended June 30,2009 and 2008, respectively. Loans are net of theallowance for losses on loans, deferred fees, unearned income and relateddirect costs, but include those loans placedon non-accrual status.

(2) Interest income on a tax equivalent basis for tax-advantagedincome of $259,000 and $83,000 for the six months ended June 30, 2009 and2008, respectively, were not included in the computation of yields.

(3) Represents the average rate earned on interest-earningassets less the average rate paid on interest-bearing liabilities.

(4) Represents net interest income as a percentage of averageinterest-earning assets.

 

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Thefollowing table sets forth, for the periods indicated, the dollar amount ofchanges in interest earned and paid for interest-earning assets andinterest-bearing liabilities, respectively, and the amount of change attributable to changes inaverage daily balances (volume) or changes in average daily interest rates(rate). All yields were calculated without the consideration of tax effects, ifany, and the variances attributable to both the volume and rate changes havebeen allocated to volume and rate changes in proportion to the relationship ofthe absolute dollar amount of the changes in each:

 

**Rate/Volume Analysis of Net Interest Income********(dollars in thousands)**

** **
| ** **                                                         | ** ** | **Three Months Ended June 30,**     | ** ** | **Six Months Ended June 30,**       | ** ** |
|--------------------------------------------------------------------|------------|------------------------------------------|------------|------------------------------------------|------------|
| ** **                                                         | ** ** | **2009 vs. 2008**                        | ** ** | **2009 vs. 2008**                        | ** ** |
| ** **                                                         | ** ** | **Increase (Decrease) Due to Change In** | ** ** | **Increase (Decrease) Due to Change In** | ** ** |
| ** **                                                         | ** ** | **Volume**                               | ** ** | **Rate**                                 | ** ** | **Total** | ** ** | **Volume** | ** ** | **Rate** | ** ** | **Total** | ** ** |
| **Interest income:**                                               |       |                                     |       |                                     |       |   |   |   |   |   |   |   |   |
| Net  loans (1)                                                     |       | $                                        | 2,505      |                                     | $          | (5,249 | ) | $ | (2,744 | ) | $ | 6,083 |   | $ | (13,951 | ) | $ | (7,868 | ) |
| Securities  of U.S. government agencies                            |       | 761                                      |       | (417                                     | )          | 344 |   | 1,374 |   | (741 | ) | 633 |   |
| Other  investment securities                                       |       | 229                                      |       | (17                                      | )          | 212 |   | 306 |   | (25 | ) | 281 |   |
| Interest  on federal fund sold                                     |       | 727                                      |       | 1                                        |       | 728 |   | 960 |   | (23 | ) | 937 |   |
| Total  interest income                                             |       | $                                        | 4,222      |                                     | $          | (5,682 | ) | $ | (1,460 | ) | $ | 8,723 |   | $ | (14,740 | ) | $ | (6,017 | ) |
|                                                               |       |                                     |       |                                     |       |   |   |   |   |   |   |   |   |
| **Interest expense:**                                              |       |                                     |       |                                     |       |   |   |   |   |   |   |   |   |
| Money  market deposits                                             |       | $                                        | 305        |                                     | $          | (529 | ) | $ | (224 | ) | $ | 79 |   | $ | (1,696 | ) | $ | (1,617 | ) |
| Super  NOW deposits                                                |       | (10                                      | )          | (20                                      | )          | (30 | ) | (19 | ) | (45 | ) | (64 | ) |
| Savings  deposits                                                  |       | 112                                      |       | 33                                       |       | 145 |   | 203 |   | 86 |   | 289 |   |
| Time  certificates of deposit in denominations of $100,000 or more |       | 1,672                                    |       | (2,641                                   | )          | (969 | ) | 3,122 |   | (6,221 | ) | (3,099 | ) |
| Other  time deposits                                               |       | 334                                      |       | (344                                     | )          | (10 | ) | 671 |   | (824 | ) | (153 | ) |
| FHLB  advances and other borrowings                                |       | 298                                      |       | (1,032                                   | )          | (734 | ) | 1,085 |   | (2,204 | ) | (1,119 | ) |
| Junior  subordinated debenture                                     |       | —                                   |       | (286                                     | )          | (286 | ) | — |   | (822 | ) | (822 | ) |
| Total  interest expense                                            |       | 2,711                                    |       | (4,819                                   | )          | (2,108 | ) | 5,141 |   | (11,726 | ) | (6,585 | ) |
| Change  in net interest income                                     |       | $                                        | 1,511      |                                     | $          | (863 | ) | $ | 648 |   | $ | 3,582 |   | $ | (3,014 | ) | $ | 568 |   |

 

----

(1) Net loan fees have been included in thecalculation of interest income.  Loanfees were approximately $523,000 and $1,187,000for the quarters ended June 30, 2009 and 2008, respectively, andapproximately $1,092,000 and $2,469,000 for the six months ended June 30,2009 and 2008, respectively.  Net loansare net of the allowance for loan losses, deferred fees, unearned income, andrelated direct costs, but includethose loans placed on non-accrualstatus.

 

**P**rovision for Losses on Loans and LoanCommitments

** **

Given the credit risk inherent in our lending business, we set asideallowances through charges to earnings. Such charges are madenot only for our outstanding loan portfolio, but also for off-balance sheetitems, such as commitments to extend credit or letters of credit.  The charges made for our outstanding loanportfolio are credited to allowance for losses on loans, whereas charges foroff-balance sheet items are credited to reserve for off-balance sheet items,which is presented as a componentof other liabilities.

 

Although we continue to enhance our loan underwritingstandards and maintain proactive credit follow-up procedures, we experienced adeterioration of credit in our loan portfolio because of the weak economy andthe decline in the real estate market. We recordeda provision for losses on loans and loan commitments of $12.1 million in the secondquarter of 2009, as compared with a provision of $1.4million for the prior year’s same quarter.  The provision for loan andoff-balance sheet losses in the first half of 2009 was $18.8 million, ascompared to $2.8 million in the first half of 2008. The increase in theprovision for losses on loans and loancommitments was primarily to keep pace with the continued growth of ourloan portfolio and an increase of non-performing loans (see “FinancialCondition - Nonperforming Assets” below for further discussion). The $1.4 million provision in the secondquarter of 2008 was net of recoveries of $256,000 to the reserves for loancommitments. Our procedures for monitoring the adequacy of the allowancefor losses on loans and loan commitments, as well as detailedinformation concerning the allowance itself, are described in the sectionentitled “Allowance for Losseson Loans and Loan Commitments” below. Losses on Mirae loans purchased from the FDIC are covered by a loss-sharing agreement with the FDIC. Pursuant to SOP 03-3, there isno requirement for the allowance for losses on loans which are purchased at thefair value from FDIC.

 

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**Non-interest Income**

** **

Totalnon-interest income increased to $28.6 million in the second quarter of 2009, as compared with $5.6 million in the samequarter a year ago. Non-interest income as a percentage of averageassets was 1.06% and 0.24% in the second quarter of 2009 and 2008,respectively. The increase was primarily caused by the pre-tax gain of $21.7million related to the Miraeacquisition.

 

Thefollowing table sets forth the various components of our non-interest incomefor the periods indicated:

 

**Non-interest Income(dollars in thousands)**

** **

| ** **                                    | ** ** | **2009**     | ** ** | ** ** | ** ** | **2008**     | ** ** | ** ** | ** ** |
|-----------------------------------------------|------------|--------------|------------|------------|------------|--------------|------------|------------|------------|
| **For Three Months Ended June 30,**      | ** ** | **(Amount)** | ** ** | **(%)**    | ** ** | **(Amount)** | ** ** | **(%)**    | ** ** |
| Service  charges on deposit accounts          |       | $            | 3,125      |       | 10.9       | %            | $          | 3,043      |       | 54.3 | % |
| Loan-related  servicing fees                  |       | 780          |       | 2.7        | %          | 772          |       | 13.8       | %          |
| Gain  on sale of loans                        |       | 307          |       | 1.1        | %          | 918          |       | 16.4       | %          |
| Income  from other earning assets             |       | 197          |       | 0.7        | %          | 392          |       | 7.0        | %          |
| Gain  from acquisition of Mirae Bank          |       | 21,679       |       | 75.8       | %          | —       |       | 0.0        | %          |
| Other  income                                 |       | 2,502        |       | 8.8        | %          | 482          |       | 8.5        | %          |
| Total                                         |       | $            | 28,590     |       | 100.0      | %            | $          | 5,607      |       | 100.0 | % |
| Average  assets                               |       | $            | 2,691,465  |       |       |         | $          | 2,303,278  |       |   |   |
| Non-interest  income as a % of average assets |       |         |       | 1.06       | %          |         |       | 0.24       | %          |

 

| ** **                                    | ** ** | **2009**     | ** **   | ** ** | ** ** | **2008**     | ** ** | ** **   | ** ** |
|-----------------------------------------------|------------|--------------|--------------|------------|------------|--------------|------------|--------------|------------|
| **For Six Months Ended June 30,**        | ** ** | **(Amount)** | ** **   | **(%)**    | ** ** | **(Amount)** | ** ** | **(%)**      | ** ** |
| Service  charges on deposit accounts          |       | $            | 6,024        |       | 18.6       | %            | $          |  5,791  |       | 53.8 | % |
| Loan-related  servicing fees                  |       | 1,744        |         | 5.4        | %          | 1,448        |       | 13.5         | %          |
| Gain  on sale of loans                        |       | (524         | )            | -1.6       | %          | 1,782        |       | 16.6         | %          |
| Income  from other earning assets             |       | 392          |         | 1.2        | %          | 710          |       | 6.6          | %          |
| Gain  from acquisition of Mirae Bank          |       | 21,679       |         | 67.1       | %          | —       |       | 0.0          | %          |
| Other  income                                 |       | 3,012        |         | 9.3        | %          | 1,029        |       | 9.5          | %          |
| Total                                         |       | $            |  32,327 |       | 100.0      | %            | $          |  10,760 |       | 100.0 | % |
| Average  assets                               |       | $            | 2,608,802    |       |       |         | $          | 2,257,288    |       |   |   |
| Non-interest  income as a % of average assets |       |         |         | 1.24       | %          |         |       | 0.48         | %          |

** **

Ourlargest source of non-interest income in the second quarter of 2009 was the pre-tax SFAS 141R bargain purchase gain of $21.7million resulting from our acquisition of Mirae, whichrepresented about 76% of our totalnon-interest income.  The remaining $1.3million increase in non-interest income between the second quarter of 2009 and the same quarter in 2008 was primarilydue to a $1.6 million gain on sale of securities investments, which is includedin other income in the above table.  Wealso recorded gain on sale of SBA loans of $0.3 million in the second quarterof 2009 which was offset by $0.8 million in losses on sale of commercial loansin the first quarter of 2009 resulting in a net loss on the sale of loans of $0.5 million for the six months ended June 30,2009.

 

**Non-interest Expense**

** **

Consistent with changes in our noninterest income, total noninterest expenseincreased to $14.1 million in the second quarter of 2009, from $12.6 million in the same period of 2008.Non-interest expenses as a percentage of average assets were maintained at lowlevels of 0.52% and 0.55% in the first quarter of 2009 and 2008, respectively.Our efficiency ratio was 28.4% in the second quarter of 2009, as compared with48.4% in the same period a year ago.

 

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Thefollowing table sets forth a summary of non-interest expenses for the periodsindicated:

 

**Non-interest Expense**s (dollars in thousands)

** **

| **For the Quarter Ended June 30,**                         | ** ** | **2009** | ** ** | **2008** | ** ** |
|-----------------------------------------------------------------|------------|----------|------------|----------|------------|
| Salaries  and employee benefits                                 |       | $        | 5,988      |     | 51.8       | % | $ | 7,655 |   | 61.0 | % |
| Occupancy  and equipment                                        |       | 1,682    |       | 14.0     | %          | 1,492 |   | 11.9 | % |
| Data  processing                                                |       | 845      |       | 6.9      | %          | 771 |   | 6.2 | % |
| Deposit  insurance premium                                      |       | 2,178    |       | 5.1      | %          | 299 |   | 2.4 | % |
| Professional  fees                                              |       | 575      |       | 2.9      | %          | 454 |   | 3.6 | % |
| Outsourced  service for customer                                |       | 210      |       | 2.2      | %          | 392 |   | 3.1 | % |
| Advertising                                                     |       | 360      |       | 1.9      | %          | 174 |   | 1.4 | % |
| Office  supplies                                                |       | 173      |       | 1.3      | %          | 104 |   | 0.8 | % |
| Communications                                                  |       | 107      |       | 0.9      | %          | 100 |   | 0.8 | % |
| Directors’  fees                                           |       | 98       |       | 0.8      | %          | 105 |   | 0.8 | % |
| Investor  relation expenses                                     |       | 74       |       | 0.4      | %          | 102 |   | 0.8 | % |
| Amortization  of investments in affordable housing partnerships |       | 312      |       | 2.4      | %          | 175 |   | 1.4 | % |
| Amortization  of other intangible assets                        |       | 74       |       | 0.6      | %          | 74 |   | 0.6 | % |
| Other  operating                                                |       | 1,400    |       | 8.8      | %          | 657 |   | 5.2 | % |
| Total                                                           |       | $        | 14,076     |     | 100.0      | % | $ | 12,554 |   | 100.0 | % |
| Average  assets                                                 |       | $        | 2,691,465  |     |       |   | $ | 2,303,278 |   |   |   |
| Non-interest  expenses as a % of average assets                 |       |     |       | 0.52     | %          |   |   | 0.55 | % |
|                                                            |       |     |       |     |       |   |   |   |   |
| **For the  Six Months Ended June 30,**                     | ** ** | **2009** | ** ** | **2008** | ** ** |
| Salaries  and employee benefits                                 |       | $        | 12,195     |     | 46.8       | % | $ | 14,631 |   | 59.0 | % |
| Occupancy  and equipment                                        |       | 3,358    |       | 12.9     | %          | 2,917 |   | 11.8 | % |
| Data  processing                                                |       | 1,672    |       | 6.4      | %          | 1,536 |   | 6.2 | % |
| Deposit  insurance premium                                      |       | 2,789    |       | 10.7     | %          | 629 |   | 2.6 | % |
| Professional  fees                                              |       | 917      |       | 3.5      | %          | 954 |   | 3.9 | % |
| Outsourced  service for customer                                |       | 478      |       | 1.8      | %          | 841 |   | 3.4 | % |
| Advertising                                                     |       | 593      |       | 2.3      | %          | 352 |   | 1.4 | % |
| Office  supplies                                                |       | 333      |       | 1.3      | %          | 321 |   | 1.3 | % |
| Communications                                                  |       | 210      |       | 0.8      | %          | 223 |   | 0.9 | % |
| Directors’  fees                                           |       | 191      |       | 0.7      | %          | 201 |   | 0.8 | % |
| Investor  relation expenses                                     |       | 126      |       | 0.5      | %          | 181 |   | 0.7 | % |
| Amortization  of investments in affordable housing partnerships |       | 600      |       | 2.3      | %          | 349 |   | 1.4 | % |
| Amortization  of other intangible assets                        |       | 148      |       | 0.6      | %          | 148 |   | 0.6 | % |
| Other  operating                                                |       | 2,452    |       | 9.4      | %          | 1,494 |   | 6.0 | % |
| Total                                                           |       | $        | 26,062     |     | 100.0      | % | $ | 24,777 |   | 100.0 | % |
| Average  assets                                                 |       | $        | 2,608,802  |     |       |   | $ | 2,257,288 |   |   |   |
| Non-interest  expenses as a % of average assets                 |       |     |       | 1.00     | %          |   |   | 1.10 | % |

** **

Salariesand employee benefits historically represent more than half of our total non-interest expense andgenerally increase as our branch network and business volume expand. However,due to our continued efforts tostreamline our work force in the second half of 2008, these expenses decreasedto $6.0 million and $12.2 millionin the second quarter and the first half of 2009, respectively, as comparedwith $7.7 million and $14.6 million forthe prior year’s same period.  The decreasewas the result of the tight control of compensationexpense. Although additionalstaffing was necessitated by our third New York office opening in March 2009,we have successfully controlled and maintained the total number of employeeheadcount through effective allocation of our human resources. The number offull-time equivalent employees was increased to 421 as of June 30, 2009,as compared with 364 as of June 30,2008. In addition, our asset growth helped us improve our assets per employeeratio to $7.5 million at June 30, 2009 from $6.5 million at June 30,2008.

 

Occupancyand equipment expenses represent about 14% of our total noninterest expenses.These expenses increased to $1.7 million and $3.4 million in the second quarter and first half of2009, respectively, as compared with $1.5 million and $2.9 million for the same periods a year ago. The increase was primarily attributable to the additionallease expenses for our business growth in the past 12 months, our Flushingbranch office opened in March 2009 and we added five new California branch offices as a result of the Mirae acquisition in June 2009.

 

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Data processing expenses increased to $845,000 and$1.7 million in the second quarter and first half of 2009, respectively, from$771,000 and $1.5 million for the same periods a year ago. The increase in dataprocessing corresponded to the growth of our business.

 

Deposit insurance premium expenses represent TheFinancing Corporation (“FICO”) and FDIC insurance premium assessments. In thesecond quarter and first half of 2009, these expenses totaled $2.2 million and$2.8 million, respectively, as compared with $299,000 and $629,000 for theprior year’s same periods. Recent bank failures coupled with deterioratingeconomic conditions have significantly reduced the FDIC’s deposit insurancefund reserves.  As a result, the FDIC hassignificantly increased its deposit assessment premiums for federally insuredfinancial institutions.  There have alsobeen increases in FDIC assessments resulting from its Temporary LiquidityGuaranty Program (“TLGP”), which temporarily increases the deposit coverageamount for depositors until the end of 2009. In addition, in an effort toimprove its liquidity, FDIC imposed a one-time special assessment of $1.5million in the second quarter of 2009 which was primarily the reason forsubstantially higher expenses in this category in this quarter.

 

Professional fees generally increase as we grow. Theyincreased to $575,000 in the second quarter of 2009 compared to $454,000 forthe same period of the prior year.  Thisincrease was primarily due to fees incurred in relation to our acquisition of Mirae.  Professional fees for the first six months of2009 stayed fairly close to the amountof such fees for the same periodof the prior year.

 

Outsourced service costs for customers are paymentsmade to third parties who provide services that were traditionally paid by theBank’s customers, such as armored car services or bookkeeping services, and arerecouped from their deposit balances maintained with us. Due mainly to theincrease in service activities and the increase in depositors demanding suchservices, our outsourced service costs generally rise in proportion with ourbusiness growth. Nonetheless, as a result of our cost control measures, theseexpenses decreased to $210,000 in the second quarter of 2009, as compared with $392,000 for the prior year’s sameperiod. For the first half of 2009, the expenses were $478,000, as compared to$841,000 for the same period in prior year.

 

Advertising and promotional expenses increased to $360,000 and $593,000 in thesecond quarter and first half of 2009, respectively, as compared with $174,000and $352,000 in the same periods a year ago. These expenses represent marketing activities, such as mediaadvertisements and promotional gifts for customers of newly opened offices,especially in the new areas such as the east coast market in New York and New Jersey. The increases in the currentquarter and first half of 2009 were primarily attributable to our increasedadvertising spending to promote a branch addition in Flushing, New York during March 2009,and five branch additions in California during June 2009.

 

Othernon-interest expenses, such as office supplies, communications, director’sfees, and other miscellaneous expenses, were $2.2 million and $4.1 million for the second quarter andthe first half of 2009, respectively, as compared with $1.3 million and $3.3 million in the same periods a year ago. Theincrease represents a normal growth in association with the growth of ourbusiness activities and was consistent with our expectations.

 

**Provision for IncomeTaxes**

** **

Forthe quarter ended June 30, 2009, we made a provision for income taxes of$9.6 million on pretax net income of $23.4 million, representing an effectivetax rate of 41.2%, as compared with a provision for income taxes of $4.6 million on pretax net income of $12.0 million, representing an effectivetax rate of 38.0% for the same quarter in 2008. For the first half of 2009, we made a provision for income taxes of$11.3 million on pretax net income of $28.1million, representing an effective tax rate of 40.2%, as compared with aprovision for income taxes of $8.8 million on pretax net income of $23.3 million, representing an effectivetax rate of 37.8%, for the sameperiod of 2008.

 

Theeffective tax rates in the second quarter and the first half of 2009 werehigher than those for the prior year’s same periods, due mainly to the $21.7 millionSFAS 141R bargain purchase gainincurred in June 2009 related to the acquisition of Mirae.

 

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** **

**Financial Condition**

** **

**Investment**Portfolio

** **

Investmentsare one of our major sources of interest income and are acquired in accordancewith a written comprehensive investment policyaddressing strategies, types and levels of allowable investments.  Management of our investment portfolio is setin accordance with strategies developed and overseen by our Asset/LiabilityCommittee.  Investment balances,including cash equivalents and interest-bearing deposits in other financialinstitutions, are subject to change over time based on our asset/liabilityfunding needs and interest rate risk management objectives.  Our liquidity levels take into considerationanticipated future cash flows and all available sources of credit and aremaintained at levels management believes are appropriate to assure futureflexibility in meeting anticipated funding needs.

 

*Cash Equivalents and Interest-bearing Deposits inother Financial Institutions*

* *

We buyor sell federal funds and high quality money market instruments, and maintain deposits ininterest-bearing accounts in other financial institutions to help meetliquidity requirements and provide temporary holdings until the funds can be otherwise deployed or invested.

 

*Investment Securities*

* *

Management of our investment securities portfoliofocuses on providing an adequate level of liquidity and establishing a balancedinterest rate-sensitive position, while earning an adequate level of investmentincome without taking undue risk.  As of June 30,2009, our investment portfolio is primarily comprised of United Statesgovernment agency securities, which account for 91% of the entire investmentportfolio.  Our U.S. government agencysecurities holdings are all “prime/conforming” mortgage backed securities, orMBS, and collateralized mortgage obligations, or CMOs, guaranteed by FNMA,FHLMC, or GNMA. GNMAs are considered equivalent to U.S. Treasury securities, asthey are backed by the full faith and credit of the U.S. government. Currently,there are no subprime mortgages in our investment portfolio. Besides the U.S.government agency securities, we also have 8% investment in municipal debtsecurities and 1% investment in corporate debt. Among the 9% of our investmentportfolio that was not comprised of U.S. government securities, 88%, or $31.8million, carry the top two highest “Investment Grade” rating of “Aaa/AAA” or“Aa/AA”, while 10%, or $3.6 million, carry an intermediate “Investment Grade”rating of at least “Baa1/BBB+” or above, and 2%, or 0.6 million, isunrated.  Our investment portfolio doesnot contain any government sponsored enterprises, or GSE preferred securitiesor any distressed corporate securities that requiredother-than-temporary-impairment charges as of June 30, 2009. We classifiedour investment securities as “held-to-maturity” or “available-for-sale”pursuant to SFAS No. 115. Investment securities that we intend to hold until maturity areclassified as held to maturity securities, and all other investment securitiesare classified as available-for-sale. The carrying values of available-for-saleinvestment securities are adjusted for unrealized gains and losses as avaluation allowance and any gain or loss is reported on an after-tax basis as acomponent of other comprehensive income. Declines in the fair value ofheld-to-maturity and available-for-sale investment securities below their costthat are deemed to be other than temporary are reflected in earnings asrealized losses, and there were no such other-than-temporary-impairment in thesecond quarter of 2009. The fair market values of our held-to-maturity andavailable-for-sale investment securities were $0.1 million and $427.7 million, respectively, as of June 30,2009.  We measured and disclosed the fairvalue of available-for-sale investment securities pursuant to SFAS No. 157,FSP SFAS No. 157-3 and FSP SFAS No. 157-4 (see Note 4).

 

Prices from third party pricing services are oftenunavailable for investment securities that are rarely traded or are traded onlyin privately negotiated transactions. As a result, certain investmentsecurities are priced via independent broker quotations which utilize inputsthat may be difficult to corroborate with observable market based data. Additionally,the majority of these independent broker quotations are non-binding. Therefore,we will individually examine those investment securities for the appropriatevaluation methodology based on combination of market approach reflectingcurrent broker prices and a discounted cash flow approach.  As required under Financial AccountingStandards Board (“FASB”) Emerging Issues Task Force (“EITF”) 99-20, *Recognition of Interest Income and Impairment onPurchased and Retained Beneficial Interest in Securitized Financial Assets*,and EITF 99-20-1, *Amendments to theImpairment Guidance of EITF Issue No. 99-20*, we consider allavailable information relevant to the collectability of the security, includinginformation about past events, current conditions, and reasonable andsupportable forecasts, and we consider factors such as remaining payment termsof the security, prepayment speeds, the financial condition of the issuer(s),expected defaults, and the value of any underlying collateral.

 

Thefollowing table summarizes the book value, market value and distribution of ourinvestment securities as of the dates indicated:

 

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** **

**InvestmentSecurities Portfolio**

**(dollarsin thousands)**

** **
| ** **                                                 | ** ** | **As of June 30, 2009** | ** ** | **As of December 31, 2008** | ** ** |
|------------------------------------------------------------|------------|------------------------------|------------|----------------------------------|------------|
| ** **                                                 | ** ** | **Amortized********Cost**    | ** ** | **Market********Value**          | ** ** | **Unrealized********Gain********(Loss)** | ** ** | **Amortized Cost** | ** ** | **Market********Value** | ** ** | **Unrealized********Gain********(Loss)** | ** ** |
| Held  to Maturity:                                         |       |                         |       |                             |       |   |   |   |   |   |   |   |   |
| Collateralized  mortgage obligations                       |       | $                            | 124        |                             | $          | 121 |   | $ | (3 | ) | $ | 139 |   | $ | 135 |   | $ | (4 | ) |
| Total  investment securities held to maturity              |       | $                            | 124        |                             | $          | 121 |   | $ | (3 | ) | $ | 139 |   | $ | 135 |   | $ | (4 | ) |
|                                                       |       |                         |       |                             |       |   |   |   |   |   |   |   |   |
| Available  for Sale:                                       |       |                         |       |                             |       |   |   |   |   |   |   |   |   |
| Investment  securities of government sponsored enterprises |       | $                            | 26,897     |                             | $          | 26,735 |   | $ | (162 | ) | $ | 25,952 |   | $ | 26,187 |   | $ | 235 |   |
| Mortgage  backed securities                                |       | 276,594                      |       | 280,282                          |       | 3,688 |   | 124,549 |   | 125,513 |   | 964 |   |
| Collateralized  mortgage obligations                       |       | 82,807                       |       | 84,771                           |       | 1,964 |   | 62,557 |   | 63,303 |   | 746 |   |
| Corporate  securities                                      |       | 2,000                        |       | 1,993                            |       | (7 | ) | 7,048 |   | 6,953 |   | (95 | ) |
| Municipal  securities                                      |       | 35,042                       |       | 33,933                           |       | (1,109 | ) | 7,323 |   | 7,180 |   | (143 | ) |
| Total  investment securities available for sale            |       | $                            | 423,340    |                             | $          | 427,714 |   | $ | 4,374 |   | $ | 227,429 |   | $ | 229,136 |   | $ | 1,707 |   |

** **

Thefollowing table summarizes the maturity and repricing schedule of ourinvestment securities at their carrying values at June 30, 2009:

 

**Investment Maturities and Repricing Schedule**(dollarsin thousands)

 
| ** **                                                 | ** ** | **Within One  Year** | ** ** | **After One But  Within Five  Years** | ** ** | **After Five But  Within Ten  Years** | ** ** | **After Ten  Years** | ** ** | **Total** | ** ** |
|------------------------------------------------------------|------------|----------------------|------------|---------------------------------------|------------|---------------------------------------|------------|----------------------|------------|-----------|------------|
| Held  to Maturity:                                         |       |                 |       |                                  |       |                                  |       |                 |       |      |       |
| Collateralized  mortgage obligations                       |       | $                    | —     |                                  | $          | 124                                   |       | $                    | —     |      | $          | — |   | $ | 124 |   |
|                                                       |       |                 |       |                                  |       |                                  |       |                 |       |      |       |
| Available  for Sale:                                       |       |                 |       |                                  |       |                                  |       |                 |       |      |       |
| Investment  securities of government sponsored enterprises |       | —               |       | —                                |       | 23,766                                |       | 2,969                |       | 26,735    |       |
| Mortgage  backed securities                                |       | 8,449                |       | 855                                   |       | 2,055                                 |       | 268,924              |       | 280,283   |       |
| Collateralized  mortgage obligations                       |       | 26,184               |       | 50,497                                |       | 8,089                                 |       | —               |       | 84,770    |       |
| Corporate  securities                                      |       | —               |       | 1,993                                 |       | —                                |       | —               |       | 1,993     |       |
| Municipal  securities                                      |       | 241                  |       | 129                                   |       | 5,327                                 |       | 28,236               |       | 33,933    |       |
| Total  investment securities available for sale            |       | $                    | 34,874     |                                  | $          | 53,598                                |       | $                    | 39,237     |      | $          | 300,129 |   | $ | 427,838 |   |

** **

Ourinvestment securities holdings substantially increased to $427.8 million at June 30,2009, as comparedwith holdings of $229.3 million atDecember 31, 2008.  Total investment securities as a percentageof total assets were 13.5% and 9.4% at June 30, 2009 and December 31,2008, respectively.  As of June 30, 2009, investment securities with a carryingvalue of $419.0 million were pledged to secure certain deposits.

 

As of June 30,2009, our investmentsecurities held-to-maturity, which are carried at their amortized costs, stayedrelatively unchanged on a dollar basis at $124,000, ascompared with $139,000 as of December 31, 2008. Our investment securitiesavailable-for-sale, which are stated at their fair market values, increased to$427.7 million at June 30,2009 from $229.2 million at December 31, 2008.

 

Thefollowing table shows our investments’ gross unrealized losses and fair value,aggregated by investment category and length of time that individual securitieshave been in a continuous unrealized loss position, at June 30, 2009 and December 31, 2008:

 

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| **As of June 30, 2009**                         | ** ** | ** **                             | ** **   |
|-------------------------------------------------|------------|----------------------------------------|--------------|
| **(dollars in thousands)**            | ** ** | **Less than 12 months** | ** **   | **12 months or longer** | ** ** | **Total** | ** ** |
| **Description of Securities**         | ** ** | **Fair Value**                    | ** **   | **Gross   Unrealized   Losses** | ** ** | **Fair Value** | ** ** | **Gross   Unrealized  Losses** | ** ** | **Fair Value** | ** ** | **Gross   Unrealized   Losses** | ** ** |
|                                            |       |                                   |         |   |   |   |   |   |   |   |   |   |   |
| Securities  of government sponsored enterprises |       | $                                      | 22,806       |   | $ | (159 | ) | $ | — |   | $ | — |   | $ | 22,806 |   | $ | (159 | ) |
| Collateralized  mortgage obligations            |       | 1,794                                  |         | (21 | ) | — |   | — |   | 1,794 |   | (21 | ) |
| Mortgage  backed securities                     |       | 46,992                                 |         | (100 | ) | 587 |   | (3 | ) | 47,579 |   | (103 | ) |
| Corporate  securities                           |       | —                                 |         | — |   | 1,994 |   | (7 | ) | 1,994 |   | (7 | ) |
| Municipal  securities                           |       | 23,946                                 |         | (1,427 | ) | — |   | — |   | 23,946 |   | (1,427 | ) |
|                                            |       | $                                      |  95,538 |   | $ | (1,707 | ) | $ | 2,581 |   | $ | (10 | ) | $ | 98,119 |   | $ | (1,717 | ) |

 
| **As of December 31, 2008**             | ** ** | ** **                             | ** **   |
|-----------------------------------------|------------|----------------------------------------|--------------|
| **(dollars in thousands)**    | ** ** | **Less than 12 months** | ** **   | **12 months or longer** | ** ** | **Total** | ** ** |
| **Description of Securities** | ** ** | **Fair Value**                    | ** **   | **Gross   Unrealized   Losses** | ** ** | **Fair Value** | ** ** | **Gross   Unrealized  Losses** | ** ** | **Fair Value** | ** ** | **Gross   Unrealized   Losses** | ** ** |
|                                    |       |                                   |         |   |   |   |   |   |   |   |   |   |   |
| Collateralized mortgage  obligations    |       | $                                      |  2,642  |   | $ | (65 | ) | $ | 1,591 |   | $ | (17 | ) | $ | 4,233 |   | $ | (82 | ) |
| Mortgage backed securities              |       | 12,287                                 |         | (300 | ) | 536 |   | (3 | ) | 12,823 |   | (303 | ) |
| Corporate securities                    |       | 5,000                                  |         | (49 | ) | 1,953 |   | (47 | ) | 6,953 |   | (96 | ) |
| Municipal securities                    |       | 5,712                                  |         | (157 | ) | — |   | — |   | 5,712 |   | (157 | ) |
|                                    |       | $                                      |  25,641 |   | $ | (571 | ) | $ | 4,080 |   | $ | (67 | ) | $ | 29,721 |   | $ | (638 | ) |

 

As of June 30,2009, the totalunrealized losses less than 12 months old were $1.7 million, and totalunrealized losses more than 12 months old were $10,000.  The aggregate related fair value ofinvestments with unrealized losses less than 12 months old was $95.5 million at June 30, 2009, and those with unrealized losses morethan 12 months old were $2.6 million.  Asof December 31, 2008, the total unrealized losses less than12 months old were $571,000 andtotal unrealized losses more than 12 months old were $67,000.  The aggregate relatedfair value of investments with unrealized losses less than 12 months old was $25.6 million at December 31, 2008,and those with unrealized losses more than 12 months old were $4.1 million.

 

Declines in thefair value of held-to-maturity and available-for-sale investment securitiesbelow their cost that are deemed to be other than temporary are reflected inearnings as realized losses. In accordance with guidance from FSP SFAS No.115-2and SFAS No. 124-2, *Recognition andPresentation of Other-Than-Temporary Impairments*, the Companyevaluates whether an event or change in circumstances has occurred that mayhave a significant adverse effect on the fair value of the investment (an“impairment indicator”). In evaluating an other-than-temporary impairment(OTTI), the Company utilizes a systematic methodology that includes alldocumentation of the factors considered. All available evidence concerning declines in market values below costare identified and evaluated in a disciplined manner by management.  The steps taken by the Company in evaluatingOTTI are:

 

·                  TheCompany first determines whether impairment has occurred.  A security is considered impaired if its fairvalue is less than its amortized cost basis. If a debt security is impaired, the Company must assess whether itintends to sell the security (i.e., whether a decision to sell the security hasbeen made). If the Company intends to sell the security, an OTTI is consideredto have occurred.

 

·                  Ifthe Company does not intend to sell the security (i.e., a decision to sell thesecurity has not been made), it must assess whether it is more likely than notthat it will be required to sell the security before recovery of the amortizedcost basis of the security.

 

·                  Evenif the Company does not intend to sell the security, an OTTI has occurred ifthe Company does not expect to recover the entire amortized cost basis (i.e.,there is a credit loss).  Under thisanalysis, the Company compares the present value of the cash flows expected tobe collected to the amortized cost basis of the security.

 

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TheCompany believes that impairment exists on securities when their fair value isbelow amortized cost but an impairment loss has not occurred due to the followingreasons:

 

·                  The Company does not have any intent to sellany of the securities that are in an unrealized loss position.

 

·                  It is highly unlikely that the Company willbe forced to sell any of the securities that are in an unrealized loss positionbefore recovery.  The Company’s AssetLiability Committee (ALCO) mandated liquidity ratios are well above the minimumtargets and secondary sources of liquidity are excellent.

 

·                  The Company fully expects to recover theentire amortized cost basis of all the securities that are in an unrealizedloss position.  The basis of thisconclusion is that the unrealized loss positions were caused by changes ininterest rates and interest rate spreads and not by default risk.

 

Thecredit profile of the Company’s investment portfolio is of the highestcaliber.  As of June 30, 2009, ourinvestment portfolio is primarily comprised of United States government agencysecurities, which account for91.5% of theentire investment portfolio. Our U.S. government agency securities holdings areall “prime/conforming” mortgage backed securities, or MBS, and collateralizedmortgage obligations, or CMOs, guaranteed by FNMA, FHLMC, or GNMA. Currently,there are no subprime mortgages in our investment portfolio.  Besides the U.S. government agency securities,we also have 8% investment in municipal debt securities and0.5% investment in corporate debt. Among this8.5% of our investment portfolio that was not comprised of U.S.government securities,88%, or $31.8million carry the top two highest “Investment Grade” rating of “Aaa/AAA”or “Aa/AA”, while10%, or $3.6 million, carryan intermediate “Investment Grade” rating of at least “Baa1/BBB+” or above, and2%, or $0.6 million, is unrated.

 

Municipalbonds and corporate bonds are evaluated by reviewing the credit-worthiness ofthe issuer and general market conditions. The unrealized losses on our investment in municipal and corporateinvestment securities were primarily attributable to both changes in interestrates and a repricing of risk in the market. We have the intent and ability to hold our securities that were in anunrealized loss position at June 30, 2009 until the market value recoversor until the securities mature.

 

**Loan Portfolio**

 

Totalloans are the sum of loans receivable and loans held for sale and reported attheir outstanding principal balances net of any unearned income which isunamortized deferred fees and costs and premiums and discounts.  Interest on loans is accrued daily on a simple interest basis. Totalloans net of unearned income andallowance for losses on loans increased to $2.36 billion at June 30, 2009, as compared with $2.02 billionat December 31, 2008.  Total loansnet of unearned income as a percentage of total assets as of June 30, 2009 and December 31,2008 were 75.6% and 83.7%, respectively.

 

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Thefollowing table sets forth the amount of total loans outstanding and the percentagedistributions in each category, as of the dates indicated:

 

**Distribution of Loansand Percentage Composition of Loan Portfolio**

**(dollarsin thousands)**

 
| ** **                            | ** ** | **Amount Outstanding** | ** ** |
|---------------------------------------|------------|------------------------|------------|
| ** **                            | ** ** | **June 30, 2009** | ** ** | **December 31, 2008** | ** ** |
| Construction                          |       | $                      | 40,517     |   | $ | 43,180 |   |
| Real  estate secured                  |       | 1,897,530              |       | 1,599,627 |   |
| Commercial  and industrial            |       | 448,786                |       | 389,217 |   |
| Consumer                              |       | 18,489                 |       | 23,669 |   |
| Total  loans(1)                       |       | 2,405,322              |       | 2,055,693 |   |
| Unearned  Income                      |       | (5,615                 | )          | (4,164 | ) |
| Gross  loans, net of unearned income  |       | 2,399,707              |       | 2,051,529 |   |
| Allowance  for losses on loans        |       | (38,758                | )          | (29,437 | ) |
| Net  loans                            |       | $                      | 2,360,949  |   | $ | 2,022,092 |   |
|                                  |       |                   |       |   |   |
| Percentage  breakdown of gross loans: |       |                   |       |   |   |
| Construction                          |       | 1.7                    | %          | 2.1 | % |
| Real  estate secured                  |       | 78.9                   | %          | 77.8 | % |
| Commercial  and industrial            |       | 18.7                   | %          | 18.9 | % |
| Consumer                              |       | 0.8                    | %          | 1.2 | % |
| Total  loans                          |       | 100.0                  | %          | 100.0 | % |

 

----

(1) Includes loans held for sale, at the lower ofcost or market, of $21.0 million and $18.0 million at June 30, 2009 and December 31,2008, respectively

 

Real estate secured loans consist primarily ofcommercial real estate loans and are extended to finance the purchase and/orimprovement of commercial real estate or businesses thereon.  The properties may be either user owned orheld for investment purposes. Our loan policy adheres to the real estate loanguidelines set forth by the FDIC.  Thepolicy provides guidelines including, among other things, fair review ofappraisal value, limitation on loan-to-value ratio, and minimum cash flowrequirements to service debt. Loans secured by real estate totaled $1.90 billion and $1.60 billion as of June 30, 2009 and December 31, 2008,respectively.  The real estate securedloans as a percentage of total loans were 79.0% and 77.8% at June 30, 2009 and December 31, 2008,respectively.  Home mortgage loansrepresent a small fraction of our total real estate secured loan portfolio.Total home mortgage loans outstanding were only $41.2 million at June 30,2009 and $42.4 million at December 31, 2008.

 

Commercialand industrial loans include revolving lines of credit as well as term businessloans.  Commercial and industrial loansat June 30, 2009 increased to $448.8 million, as compared with $389.2 million at December 31, 2008. Commercial and industrial loans as a percentage of total loans were 18.7% at June 30, 2009,decreasing from 18.9% at December 31,2008.

 

Consumerloans have historically represented less than 5% of our total loanportfolio.  The majority of consumerloans are concentrated in automobile loans, which we provide as a service onlyto existing customers. As consumer loans present a higher risk potentialcompared to our other loan products, especially given current economicconditions, we have reduced our efforts in consumer lending since 2007. Accordingly, as of June 30, 2009, our volume ofconsumer loans was down by $5.2million from the prior year end. As of June 30,2009, the balance of consumer loans was $18.5 million, or 0.8%of total loans, as compared to $23.7 million, or 1.2% of total loans as of December 31,2008.  Consumer loans as a percentage oftotal loans have historically beennominal.

 

Constructionloans represented less than 5% of our total loan portfolio as of June 30,2009. In response to the current real estate market, which has been experiencing a downward trend sincemid-2007, we have applied stricter loan underwriting policies when making loansin this category. As a result, constructionloans decreased to $40.5 million, or 1.7% of total loans, at the end of thesecond quarter of 2009, as compared with$43.2 million, or 2.1% of totalloans at the end of 2008.

 

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Ourloan terms vary according to loan type. Commercial term loans have typicalmaturities of three to five years and are extended to finance the purchase ofbusiness entities, business equipment, leasehold improvements or to providepermanent working capital.  We generallylimit real estate loan maturities to five to eight years.  Lines of credit, in general, are extended onan annual basis to businesses that need temporary working capital and/orimport/export financing.  We generallyseek diversification in our loan portfolio, and our borrowers are diverse as toindustry, location, and their current and target markets.

 

Thefollowing table shows the contractual maturity distribution and repricingintervals of the outstanding loans in our portfolio, as of June 30, 2009.  In addition, the tableshows the distribution of such loans between those with variable or floatinginterest rates and those with fixed or predetermined interest rates.

 

**Loan Maturities and Repricing Schedule**

**(dollars in thousands)**

 
| ** **                             | ** ** | **At June 30, 2009**  | ** ** |
|----------------------------------------|------------|----------------------------|------------|
| ** **                             | ** ** | **Within********One Year** | ** ** | **After One********But within********Five Years** | ** ** | **After********Five Years** | ** ** | **Total** | ** ** |
| Construction                           |       | $                          | 40,517     |   | $ | — |   | $ | — |   | $ | 40,517 |   |
| Real  estate secured                   |       | 970,595                    |       | 834,940 |   | 91,995 |   | 1,897,530 |   |
| Commercial  and industrial             |       | 431,606                    |       | 16,702 |   | 478 |   | 448,786 |   |
| Consumer                               |       | 15,120                     |       | 3,356 |   | 13 |   | 18,489 |   |
| Total  loans, net of non-accrual loans |       | $                          | 1,457,838  |   | $ | 854,998 |   | $ | 92,486 |   | $ | 2,405,322 |   |
| Loans  with variable interest rates    |       | $                          | 1,227,382  |   | $ | 17,034 |   | $ | — |   | $ | 1,244,416 |   |
| Loans  with fixed interest rates       |       | $                          | 230,456    |   | $ | 837,964 |   | $ | 92,486 |   | $ | 1,160,906 |   |

 

Amajority of the properties that we have taken as collateral are located inSouthern California.  The loans generatedby our loan production offices, which are located outside of our maingeographical market, are generally collateralized by properties in closeproximity to those offices.

 

**Non-performing Assets**

 

Non-performing assets, or NPAs, consist of non-performing loans, or NPLs, restructuredloans, and other NPAs.  NPLs are reported at their outstandingprincipal balances, net of any portionguaranteed by SBA, and consist of loans on non-accrual status and loans90 days or more past due and still accruing interest. Restructured loans areloans of which the terms of repayment have been renegotiated, resulting in areduction or deferral of interest or principal,  Other NPAs consist ofproperties, mainly other real estate owned (OREO), acquired by foreclosure orsimilar means that management intends to offer for sale.

 

On June 26, 2009, we acquired substantially allthe assets and assumed substantially all the liabilities of Mirae from theFDIC.  We also entered into loss sharing agreementswith the FDIC in connection with the Mirae acquisition.  Under the loss sharing agreements, theFDIC will share in the losses on assets covered under the agreements, whichgenerally include loans acquired from Mirae and foreclosed loan collateralexisting at June 26, 2009 (referred to collectively as “covered assets”).  Withrespect to losses of up to $83.0 million on the covered assets, the FDIC hasagreed to reimburse us for 80 percent of the losses.  On lossesexceeding $83.0 million, the FDIC has agreed to reimburse us for 95 percent ofthe losses.  The loss sharing agreements are subject to our followingservicing procedures as specified in the agreements with the FDIC.  The term for the FDIC’s loss sharing onresidential real estate loans is ten years, and the term for loss sharing onnon-residential real estate loans is five years with respect to losses andeight years with respect to loss recoveries.

 

For the purposes of the table below, loans and OREOcovered under the loss sharing agreements with the FDIC are referred to as “coveredloans” and “covered OREO”, respectively. Covered loans and covered OREO were recorded at estimated fair value on June 26,2009.

 

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The following is a summary of covered non-performingloans and OREO on the dates indicated:

 

**Non**-performingCovered Loans and Covered OREO

**(dollars in thousands)**

 
| ** **                                                  | ** ** | **June 30, 2009** | ** ** |
|-------------------------------------------------------------|------------|------------------------|------------|
| **Covered Nonaccrual loans: (1)**                           |       |                   |       |
| Real  estate secured                                        |       | $                      | 4,458      |   |
| Commercial  and industrial                                  |       | 12,098                 |       |
| Consumer                                                    |       | 115                    |       |
| Total                                                       |       | 16,671                 |       |
| **Loans 90 days or more past due and still accruing:**      |       |                   |       |
| Real  estate secured                                        |       | —                 |       |
| Commercial  and industrial                                  |       | —                 |       |
| Consumer                                                    |       | —                 |       |
| Total                                                       |       | —                 |       |
| Troubled  debt restructurings (2)                           |       | 16,641                 |       |
| Total  nonperforming loans                                  |       | 33,312                 |       |
| Repossessed  vehicles                                       |       | —                 |       |
| Other  real estate owned                                    |       | 500                    |       |
| Total  covered nonperforming assets                         |       | $                      | 33,812     |   |
|                                                        |       |                   |       |
| Nonperforming  loans as a percentage of total covered loans |       | 11.73                  | %          |

 

----

(1) During the sixmonths ended June 30, 2009, no interest income related to these loans wasincluded in interest income.

(2) The $16,641,000troubled debt restructurings as of June 30, 2009 represented loans ofwhich terms were renegotiated to provide a reduction interest or principalbecause of deterioration in the financial position of the borrower.

 

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The following table provides information with respectto the components of our non-performing (non-covered) assets as of the dates indicated (the figures in thetable are net of the portion guaranteed by SBA, with the total amounts adjusted and reconciled for the SBAguarantee portion for the gross nonperforming assets):

 

**Non**-performing Non-covered Assets and Restructured Loans

**(dollars in thousands)**

 
| ** **                                                                        | ** ** | **June 30, 2009** | ** ** | **December 31, 2008** | ** ** | **June 30, 2008** | ** ** |
|-----------------------------------------------------------------------------------|------------|------------------------|------------|----------------------------|------------|------------------------|------------|
| **Non-covered Nonaccrual loans: (1)**                                             |       |                   |       |                       |       |                   |       |
| Real  estate secured                                                              |       | $                      | 32,153     |                       | $          | 9,334                  |       | $ | 12,405 |   |
| Commercial  and industrial                                                        |       | 2,789                  |       | 5,874                      |       | 3,797                  |       |
| Consumer                                                                          |       | 90                     |       | 131                        |       | 265                    |       |
| Total                                                                             |       | 35,032                 |       | 15,339                     |       | 16,467                 |       |
| **Loans 90 days or more past due and still accruing:**                            |       |                   |       |                       |       |                   |       |
| Real  estate secured                                                              |       | 111                    |       | —                     |       | —                 |       |
| Commercial  and industrial                                                        |       | 1                      |       | 213                        |       | 4                      |       |
| Consumer                                                                          |       | 16                     |       | —                     |       | —                 |       |
| Total                                                                             |       | 128                    |       | 213                        |       | 4                      |       |
| Troubled  debt restructurings (2)                                                 |       | 21,345                 |       | —                     |       | —                 |       |
| Total  nonperforming loans                                                        |       | 56,505                 |       | 15,552                     |       | 16,471                 |       |
| Repossessed  vehicles                                                             |       | —                 |       | —                     |       | 11                     |       |
| Other  real estate owned                                                          |       | 5,456                  |       | 2,663                      |       | 465                    |       |
| Total  non-covered nonperforming assets, net of SBA guarantee                     |       | 61,961                 |       | 18,215                     |       | 16,947                 |       |
|                                                                              |       |                   |       |                       |       |                   |       |
| Guaranteed  portion of nonperforming SBA loans                                    |       | 9,176                  |       | 7,158                      |       | 8,973                  |       |
| Total  gross non-covered nonperforming assets                                     |       | $                      | 71,137     |                       | $          | 25,373                 |       | $ | 25,920 |   |
|                                                                              |       |                   |       |                       |       |                   |       |
| Nonperforming  loans as a percentage of total non-covered loans                   |       | 2.67                   | %          | 0.76                       | %          | 0.83                   | %          |
| Allowance  for losses on loans as a percentage of non-covered nonperforming loans |       | 68.59                  | %          | 189.27                     | %          | 142.64                 | %          |

 

----

(1) During the sixmonths ended June 30, 2009, no interest income related to these loans wasincluded in interest income.

(2) The $21,345,000troubled debt restructurings as of June 30, 2009 represented loans ofwhich terms were renegotiated to provide a reduction of interest or principalbecause of deterioration in the financial position of the borrower.

 

Loans are generally placed on non-accrual status whenthey become 90 days past due, unless management believes the loan is adequatelycollateralized and in the process of collection.  The past due loans may or may not beadequately collateralized, but collection efforts are continuouslypursued.  Loans may be restructured bymanagement when a borrower has experienced some changes in financial status,causing an inability to meet the original repayment terms, and where we believethe borrower will eventually overcome those circumstances and repay the loan infull.

 

Despite the fact that our loan portfolio continued togrow, our emphasis on asset quality control enabled us to maintain a relativelylow level of NPLs as of June 30, 2009. However, the general economicconditions in the United States as well as the local economies in which we dobusiness have experienced a severe downturn in the housing sector and thetransition to below-trend GDP growth has continued. The downward movement of themacro economic environment affected our borrowers’ strength and ourNPLs, net of SBA guaranteed portion, increased to $56.5 million, or 2.67% ofthe total loans at the end of the second quarter of 2009, as compared with$15.6 million, or 0.76% of the total loans, at the end of 2008. The $40.9million increase of NPLs was comprised of a $19.7 million net increase innon-accrual loans, and a $21.3 million increase in troubled debtrestructurings.

 

Managementalso believes that the reserve provided for non-performing loans, together withthe tangible collateral, were adequate as of June 30, 2009.  See “Allowance for Losses on Loans and Loan Commitments” below for furtherdiscussion.

 

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**A**llowance for Losses on Loans and Loan Commitments

** **

Basedon the credit risk inherent in our lending business, we set aside allowancesthrough charges to earnings.  Suchcharges were not only made for the outstanding loan portfolio, but also foroff-balance sheet loancommitments, such as commitmentsto extend credit or letters of credit.  Charges made for our outstanding loan portfolio were credited to the allowancefor losses on loans, whereas charges related to loan commitments were credited to the reserve for loancommitments, which is presented as a component of other liabilities.

 

Theallowance for losses on loans and loan commitments are maintained at levels that are believed to be adequateby management to absorb estimated probable losses on loans inherent in the loanportfolio. The adequacy of our allowance is determined through periodicevaluations of the loan portfolio and other pertinent factors, which areinherently subjective because the process calls for various significantestimates and assumptions. Among other factors, the estimates involve theamounts and timing of expected future cash flows and fair value of collateralon impaired loans, estimated losses on loans based on historical lossexperience, various qualitative factors, and uncertainties in estimating lossesand inherent risks in the various credit portfolios, which may be subject tosubstantial change.

 

On aquarterly basis, we utilize a classification migration model and individualloan review analysis as starting points for determining the adequacy of ourallowance for losses on loans. Our loss migration analysis tracks a certainnumber of quarters of loan losses history to determine historical losses byclassification category for each loan type, except certain loans (automobile,mortgage and credit scored based business loans), which are analyzed ashomogeneous loan pools. These calculated loss factors are then applied tooutstanding loan balances.  Based on Companydefined utilization rate of exposure for unused off-balance sheet loancommitments, such as letters of credit, we record a reserve for loan commitments.

 

Theindividual loan review analysis is the other part of the allowance allocationprocess, applying specific monitoring policies and procedures in analyzing theexisting loan portfolios. Further allowance assignments are made based ongeneral and specific economic conditions, as well as performance trends withinspecific portfolio segments and individual concentrations of credit.

 

We increased our allowance for losses on loansto $38.8 million at June 30, 2009, representing an increaseof 32.0%, or $9.4 million from $29.4 million at December 31, 2008. With the increase of our non-performing loans, we have increased theratio of allowance for losses on loans to total loans to 1.62%, as compared with the 1.43% retained at the year end of 2008. Managementbelieves that the current ratio of 1.62%is adequate for our loan portfolio.

 

Our allowance for losses on loan commitments stayedconstant at $1.2 million at June 30, 2009, as compared to December 31,2008.

 

Thebeginning balances of allowance for losses on loans and loan commitments forthe first half  of 2009 was $29.4million, as compared with $22.1 million and $21.6 million for the first halfand full year of 2008, respectively. During first half of 2009, the provisionfor losses on loans and loan commitments was $18.8 million, as compared with$2.8 million and $12.1 million from the first half and full year of 2008.Actual charge-offs were$9.9 million for the first half of 2009, as compared with $3.0 million and $7.2million in the first half and full year of 2008.  As a result, the total allowance for losseson loans and loan commitments increased to $38.8 million as of June 30,2009, as compared with $23.5 million and $30.7 million as of June 30, 2008and December 31, 2008, respectively.

 

Thetable below summarizes for the end of the periods indicated, the balance of our allowance for losses on loans andits percent of such loan balance for each type of loan:

 
| ** **                 | ** ** | **Distribution  and Percentage Composition of Allowance for Loan Losses** | ** ** |
|----------------------------|------------|---------------------------------------------------------------------------|------------|
| ** **                 | ** ** | **(dollars  in thousands)**                                               | ** ** |
| ** **                 | ** ** | **June 30, 2009**                                                    | ** ** | **December 31, 2008** | ** ** |
| ** **                 | ** ** | **Reserve Amount**                                                        | ** ** | **Total Loans** | ** ** | **(%)** | ** ** | **Reserve Amount** | ** ** | **Total Loans** | ** ** | **(%)** | ** ** |
| **Applicable to:**         |       |                                                                      |       |   |   |   |   |   |   |   |   |   |   |
| Construction               |       | $                                                                         | 208        |   | $ | 40,517 |   | 0.51 | % | $ | 190 |   | $ | 43,180 |   | 0.44 | % |
| Real  estate secured       |       | 18,093                                                                    |       | 1,897,530 |   | 0.95 | % | 11,628 |   | 1,599,627 |   | 0.73 | % |
| Commercial  and industrial |       | 20,202                                                                    |       | 448,786 |   | 4.50 | % | 17,209 |   | 389,217 |   | 4.44 | % |
| Consumer                   |       | 255                                                                       |       | 18,489 |   | 1.38 | % | 410 |   | 23,669 |   | 1.73 | % |
| Total  allowance           |       | $                                                                         | 38,758     |   | $ | 2,405,322 |   | 1.61 | % | $ | 29,437 |   | $ | 2,055,693 |   | 1.43 | % |

 

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Thetable below summarizes for the periods indicated, changes in the allowance forlosses on loans arising from loans charged off, recoveries on loans previously chargedoff, additions to the allowance and certain ratios related to the allowance forlosses on loans and loan commitments:

 

**Allowance for Losses on Loans and Loan Commitments**

**(dollars in thousands)**

** **
| ** **                                                                  | ** ** | **Three Months Ended June 30,** | ** ** | **Six Months Ended June 30,** | ** ** |
|-----------------------------------------------------------------------------|------------|--------------------------------------|------------|------------------------------------|------------|
| ** **                                                                  | ** ** | **2009**                             | ** ** | **2008**                           | ** ** | **2009** | ** ** | **2008** | ** ** |
| Allowance  for losses on loans:                                             |       |                                 |       |                               |       |   |   |   |   |
| **Balances at beginning of period**                                         |       | $                                    | 34,156     |                               | $          | 22,072 |   | $ | 29,437 |   | $ | 21,579 |   |
| Actual  charge-offs:                                                        |       |                                 |       |                               |       |   |   |   |   |
| Real  estate secured                                                        |       | 176                                  |       | 40                                 |       | 848 |   | 43 |   |
| Commercial  and industrial                                                  |       | 6,940                                |       | 1,554                              |       | 8,570 |   | 2,380 |   |
| Consumer                                                                    |       | 356                                  |       | 294                                |       | 457 |   | 605 |   |
| Total  charge-offs                                                          |       | 7,472                                |       | 1,888                              |       | 9,875 |   | 3,028 |   |
| **Recoveries on loans previously charged off:**                             |       |                                 |       |                               |       |   |   |   |   |
| Real  estate secured                                                        |       | 1                                    |       | —                             |       | 1 |   | 1 |   |
| Commercial  and industrial                                                  |       | 237                                  |       | 1,591                              |       | 306 |   | 1,684 |   |
| Consumer                                                                    |       | 24                                   |       | 63                                 |       | 68 |   | 91 |   |
| Total  recoveries                                                           |       | 262                                  |       | 1,654                              |       | 375 |   | 1,775 |   |
| Net  loan charge-offs                                                       |       | 7,210                                |       | 234                                |       | 9,500 |   | 1,253 |   |
| **Provision for losses on loans**                                           |       | 12,100                               |       | 1,400                              |       | 18,799 |   | 2,800 |   |
| Add:  credit for losses on loan commitments                                 |       | 288                                  |       | (256                               | )          | (22 | ) | (368 | ) |
| **Balances at end of period**                                               |       | $                                    | 38,758     |                               | $          | 23,494 |   | $ | 38,758 |   | $ | 23,494 |   |
| ** **                                                                  |       |                                 |       |                               |       |   |   |   |   |
| Allowance  for losses on loan commitments:                                  |       |                                 |       |                               |       |   |   |   |   |
| **Balances at beginning of period**                                         |       | $                                    | 933        |                               | $          | 1,886 |   | $ | 1,243 |   | $ | 1,998 |   |
| Credit  for losses on loan commitments                                      |       | 288                                  |       | (256                               | )          | (22 | ) | (368 | ) |
| **Balances at end of period**                                               |       | $                                    | 1,221      |                               | $          | 1,630 |   | $ | 1,221 |   | $ | 1,630 |   |
| ** **                                                                  |       |                                 |       |                               |       |   |   |   |   |
| **Ratios:**                                                                 |       |                                 |       |                               |       |   |   |   |   |
| Net  loan charge-offs to average total loans                                |       | 0.34                                 | %          | 0.01                               | %          | 0.46 | % | 0.07 | % |
| Allowance  for losses on loans to total loans at period-end                 |       | 1.62                                 | %          | 1.18                               | %          | 1.62 | % | 1.18 | % |
| Net  loan charge-offs to allowance for losses on loans at period-end        |       | 18.60                                | %          | 0.99                               | %          | 24.51 | % | 5.33 | % |
| Net  loan charge-offs to provision for losses on loans and loan commitments |       | 59.59                                | %          | 16.71                              | %          | 50.53 | % | 44.74 | % |

 

### **Contractual Obligations**

 

Thefollowing table represents our aggregate contractual obligations to make futurepayments (principal andinterest) as of June 30,2009:

 
| **(dollars in thousands)**      | ** ** | **One Year or  Less** | ** ** | **Over One Year********To Three Years** | ** ** | **Over Three Years********To Five Years** | ** ** | **Over Five  Years** | ** ** | **Total** | ** ** |
|---------------------------------|------------|-----------------------|------------|-----------------------------------------|------------|-------------------------------------------|------------|----------------------|------------|-----------|------------|
| FHLB  borrowings                |       | $                     | 218,381    |                                    | $          | 121,361                                   |       | $                    | —     |      | $          | — |   | $ | 339,742 |   |
| Junior  subordinated debentures |       | 2,112                 |       | 2,853                                   |       | 10,745                                    |       | 77,321               |       | 93,031    |       |
| Operating  leases               |       | 2,824                 |       | 3,852                                   |       | 2,791                                     |       | 2,492                |       | 11,959    |       |
| Time  deposits                  |       | 1,384,131             |       | 50,815                                  |       | 102                                       |       | 19                   |       | 1,435,067 |       |
| Total                           |       | $                     | 1,607,448  |                                    | $          | 178,881                                   |       | $                    | 13,638     |      | $          | 79,832 |   | $ | 1,879,799 |   |

 

**Off-Balance Sheet Arrangements**

 

Duringthe ordinary course of business, we provide various forms of credit lines tomeet the financing needs of our customers. These commitments, which represent a credit risk to us, are not shown orstated in any form on our balance sheets.

 

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As of June 30,2009 and December 31,2008, we had commitments to extendcredit of $199.8 million and $153.4 million, respectively.  Obligations under standby letters of creditwere $13.4 million and $12.7 million at June 30, 2009 and December 31, 2008, respectively, and our obligationsunder commercial letters of credit were $18.4 million and $15.1million at such dates, respectively.

 

In thenormal course of business, we are involved in various legal claims. We havereviewed all legal claims against us with counsel and have taken intoconsideration the views of counsel as to the outcome of the claims.  In our opinion, the final disposition of allsuch claims will not have a material adverse effect on our financial positionand results of operations.

 

**Depositsand Other Sources of Funds**

** **

Depositsare our primary source of funds.  Totaldeposits increased to $2.45 billion at June 30, 2009, as compared with $1.81 billion at December 31,2008.

 

Totalnon-time deposits at June 30, 2009 increased to $1.04 billion over thelast six months from $706.2 million at December 31, 2008, while timedeposits increased to $1.41 billion at June 30, 2009 from $1.11 billion atDecember 31, 2008.

 

Theincrease in time deposits was largely due to the success of our marketingcampaign in addition to time deposits acquired from Mirae Bank. We tookadvantage of the low interest rate environment to reduce the interest rates onour time deposits. The average rate that we paid on time deposits indenominations of $100,000 or more for the second quarter and first half of 2009 decreased to 2.72% and 2.78%,respectively, from 3.88% and 4.17% in the same periods of the prior year.  However, in order to keep the interestexpense down, we plan to closely monitor interest rate trends and changes, andour time deposit rates, to maximize our net interest margin and profitability.

 

The following table summarizes the distribution of average dailydeposits and the average daily rates paid for the quarters indicated:

 

**Average Deposits**

**(dollars in thousands)**

 
| ** **                                                         | ** ** | **June 30,  2009**    | ** ** | **December 31,  2008** | ** ** | **June 30,  2008**    | ** ** |
|--------------------------------------------------------------------|------------|----------------------------|------------|-----------------------------|------------|----------------------------|------------|
| **For the  quarters ended:**                                       | ** ** | **Average********Balance** | ** ** | **Average  Rate**           | ** ** | **Average********Balance** | ** ** | **Average  Rate** | ** ** | **Average********Balance** | ** ** | **Average  Rate** | ** ** |
|                                                               |       |                       |       |                        |       |                       |       |   |   |   |   |   |   |
| Demand,  non-interest-bearing                                      |       | $                          | 292,778    | ** **                  | ** ** |                       | $          | 298,163 | ** ** | ** ** |   | $ | 305,573 | ** ** | ** ** | ** ** |
| Money market                                                       |       | 436,066                    |       | 2.54                        | %          | 402,323                    |       | 3.27 | % | 393,182 |   | 3.05 | % |
| Super NOW                                                          |       | 19,142                     |       | 0.95                        | %          | 21,290                     |       | 1.34 | % | 22,533 |   | 1.35 | % |
| Savings                                                            |       | 48,511                     |       | 3.66                        | %          | 38,250                     |       | 3.39 | % | 35,995 |   | 3.32 | % |
| Time certificates of  deposit in denominations of $100,000 or more |       | 994,514                    |       | 2.72                        | %          | 797,404                    |       | 3.74 | % | 795,081 |   | 3.88 | % |
| Other time deposits                                                |       | 210,020                    |       | 3.35                        | %          | 186,639                    |       | 3.93 | % | 173,783 |   | 4.08 | % |
| Total deposits                                                     |       | $                          | 2,001,031  |                        | 2.35       | %                          | $          | 1,744,069 |   | 2.98 | % | $ | 1,726,147 |   | 2.98 | % |

 

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Thescheduled maturities of our time deposits in denominations of $100,000 orgreater at June 30, 2009 were as follows:

 

**Maturities of Time Deposits of $100,000 or More,at**June 30, 2009

**(dollars in thousands)**

** **
| Three months or less                  |   | $       | 610,225   |   |
|---------------------------------------|--------|---------|-----------|--------|
| Over three months through six months  |   | 322,471 |      |
| Over six months through twelve months |   | 168,620 |      |
| Over twelve months                    |   | 35,122  |      |
| Total                                 |   | $       | 1,136,438 |   |

 

Anumber of clients carry deposit balances of more than 1% of our total deposits,but the California State Treasury was the only depositor that had a depositbalance representing more than 5% of our total deposits at June 30, 2009 and December 31, 2008.

 

Inaddition to our regular customer base, we also accept brokered deposits on aselective basis at reasonable interest rates to augment deposit growth.  In thefirst six months of 2009, in spite of the ongoing financial crisis and stiffcompetition for customer deposits among banks within the markets where we dobusiness, we were able to increase non-interest bearing demand deposits to$637.2 million at June 30, 2009 from $277.5 million at December 31,2008. In addition, because of the current low interest rate environment, ourtime deposits of $100,000 or more also increased to $1.14 billion at June 30,2009 from $902.8 million at December 31, 2008.  We expect that interest rates will trendupward when the Federal Reserve Board starts increasing the federal funds rate.To improve our net interest margin as well as to maintain flexibility in ourcost of funds, we will constantly monitor our deposit mix to minimize fundcost.

 

Although deposits are the primary source of fundsfor our lending and investment activities and for general businesspurposes, we may obtain advances from the FHLB as an alternative to retaildeposit funds.  We have historicallyutilized borrowings from the FHLB in order to take advantage of theirflexibility and comparatively low cost. Due to the ongoing credit crisis and stiff competition for customerdeposits among banks, we have increased FHLB borrowing as an alternative tofund our growing loan portfolio. See “LiquidityManagement” below for details relating to the FHLB borrowings program.

 

Thefollowing table is a summary of FHLB borrowings for the quarters indicated:

 
| **(dollars  in thousands)**                  | ** ** | **June 30, 2009** | ** ** | **December 31, 2008** | ** ** |
|----------------------------------------------|------------|------------------------|------------|----------------------------|------------|
| Balance  at quarter-end                      |       | $                      | 331,000    |                       | $          | 260,000 |   |
| Average  balance during the quarter          |       | $                      | 320,484    |                       | $          | 286,213 |   |
| Maximum  amount outstanding at any month-end |       | $                      | 340,000    |                       | $          | 370,000 |   |
| Average  interest rate during the quarter    |       | 2.14                   | %          | 3.23                       | %          |
| Average  interest rate at quarter-end        |       | 2.25                   | %          | 3.16                       | %          |

 

**Asset/Liability Management**

 

Weseek to ascertain optimum and stable utilization of available assets andliabilities as a vehicle to attain our overall business plans and objectives.  In this regard, we focus on measurement andcontrol of liquidity risk, interest rate risk and market risk, capitaladequacy, operation risk and credit risk. See further discussion on these risks in the “Risk Factors” section ofour Annual Report on Form 10-K for the year ended December 31,2008.  Information concerning interestrate risk management is set forth under “Item 3 - Quantitative and QualitativeDisclosures about Market Risk.”

 

**LiquidityManagement**

** **

Maintenanceof adequate liquidity requires that sufficient resources be available at alltimes to meet our cash flow requirements. Liquidity in a banking institution is required primarily to provide fordeposit withdrawals and the credit needs of its customers and to take advantageof investment opportunities as they arise. Liquidity management involves our ability to convert assets into cash orcash equivalents without incurring significant loss, and to raise cash ormaintain funds without incurring excessive additional cost.  For this purpose, we maintain a portion ofour funds in cash and cash equivalents, deposits in other financialinstitutions and loans and securities available for sale.  Our liquid assets at June 30, 2009 and December 31, 2008 totaled approximately $669.6 millionand $345.1 million,respectively.  Our liquidity levelsmeasured as the percentage of liquid assets to total assets were 21.1% and 14.1% at June 30, 2009 and December 31, 2008, respectively.

 

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Our primary sources of liquidity are derived from ourcore operating activities of accepting customer deposits. This funding sourceis augmented by payments of principal and interest on loans, the routineliquidation of securities from the available-for-sale portfolio andsecuritizations of loans. In addition, government programs, such as TLGP, mayinfluence deposit behavior. Primary use of funds include withdrawal of andinterest payments on deposits, originations and purchases of loans, purchasesof investment securities, and payment of operating expenses.

 

As asecondary source of liquidity, we accept broker deposits, federal fundsfacilities, repurchase agreement facilities, and obtain advances from the FHLBto supplement our supply of lendable funds and to meet deposit withdrawalrequirements.  Advances from the FHLB aretypically secured by our loans and stock issued by the FHLB.  Advances are made pursuant to severaldifferent programs.  Each credit programhas its own interest rate and range of maturities.  Depending on the program, limitations on theamount of advances are based either on a fixed percentage of an institution’snet worth or on the FHLB’s assessment of the institution’s creditworthiness. Asof June 30, 2009,our borrowing capacity from the FHLB was about $778.8 million and theoutstanding balance was $331.0million, or approximately 42.5% ofour borrowing capacity.

 

**CapitalResources and Capital Adequacy Requirements**

** **

Historically,our primary source of capital has been internally generated operating incomethrough retained earnings.  In order toensure adequate levels of capital, we conduct ongoing assessments of projectedsources and uses of capital in conjunction with projected increases in assetsand level of risks.  We have considered,and we will continue to consider, additional sources of capital as the needarises, whether through the issuance of additional equity, debt or hybridsecurities. In December of 2008, we received a TroubledAsset Relief Program (“TARP”) investmentfrom the U.S. Treasury in the amount of$62.2 million.

 

We aresubject to various regulatory capital requirements administered by federalbanking agencies. Under capital adequacy guidelines and the regulatoryframework for prompt corrective action, we must meet specific capitalguidelines that rely on quantitative measures of our assets, liabilities andcertain off-balance-sheet items as calculated under regulatory accountingpractices.  Failure to meet minimumcapital requirements can trigger regulatory actions under the prompt correctiveaction rules that could have a material adverse effect on our financialcondition and operations.  Promptcorrective action may include regulatory enforcement actions that restrictdividend payments, require the adoption of remedial measures to increasecapital, terminate FDIC deposit insurance, and mandate the appointment of aconservator or receiver in severe cases. In addition, failure to maintain a well-capitalized status may adverselyaffect the evaluation of regulatory applications for specific transactions andactivities, including acquisitions, continuation and expansion of existingactivities, and commencement of new activities, and could adversely affect ourbusiness relationships with our existing and prospective clients.  The aforementioned regulatory consequencesfor failing to maintain adequate ratios of Tier 1 and Tier 2 capital could havea material adverse effect on our financial condition and results ofoperations.  Our capital amountsand classification are also subject to qualitative judgments by regulatorsabout components, risk weightings, and other factors.  See Part I, Item 1 “Description ofBusiness — Regulation and Supervision — Capital Adequacy Requirements” in ourAnnual Report on Form 10-K for the year ended December 31, 2008 for additional information regardingregulatory capital requirements.

 

As of June 30,2009, we were qualified as a “well capitalized institution” under the regulatoryframework for prompt corrective action. The following table presents the regulatory standards forwell-capitalized institutions, compared to capital ratios as of the datesspecified for the Company and the Bank:

 

**WilshireBancorp, Inc.**

 
| ** **                             | ** ** | **Regulatory  Adequately-  Capitalized** | ** ** | **Regulatory  Well-  Capitalized** | ** ** | **Actual  ratios for the Company as of:** | ** ** |
|----------------------------------------|------------|------------------------------------------|------------|------------------------------------|------------|-------------------------------------------|------------|
| ** **                             | ** ** | **Standards**                            | ** ** | **Standards**                      | ** ** | **June 30****,  2009**               | ** ** | **December 31,  2008** | ** ** | **June 30****,  2008** | ** ** |
| Total capital to risk-weighted assets  |       | 8                                        | %          | 10                                 | %          | 14.75                                     | %          | 17.09 | % | 13.99 | % |
| Tier I capital to risk-weighted assets |       | 4                                        | %          | 6                                  | %          | 13.26                                     | %          | 15.36 | % | 11.55 | % |
| Tier I capital to average assets       |       | 4                                        | %          | 5                                  | %          | 12.30                                     | %          | 13.25 | % | 10.21 | % |

 

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**Wilshire State Bank**

 
| ** **                             | ** ** | **Regulatory  Adequately-Capitalized** | ** ** | **Regulatory  Well-  Capitalized** | ** ** | **Actual ratios for the Bank as of:** | ** ** |
|----------------------------------------|------------|----------------------------------------|------------|------------------------------------|------------|---------------------------------------|------------|
| ** **                             | ** ** | **Standards**                          | ** ** | **Standards**                      | ** ** | **June 30****,  2009**           | ** ** | **December 31, 2008** | ** ** | **June 30****,  2008** | ** ** |
| Total capital to risk-weighted assets  |       | 8                                      | %          | 10                                 | %          | 14.46                                 | %          | 13.59 | % | 13.26 | % |
| Tier I capital to risk-weighted assets |       | 4                                      | %          | 6                                  | %          | 12.97                                 | %          | 11.86 | % | 11.53 | % |
| Tier I capital to average assets       |       | 4                                      | %          | 5                                  | %          | 12.13                                 | %          | 10.24 | % | 10.20 | % |

 

Forthe purposes of our regulatory capital ratio computation, our equity capitalincludes the $62.2 million Series A Preferred Stock issued by the Companyto the U. S. Treasury as part of our participation of the CPP. As of June 30,2009, the Company’s total Tier 1 capital (which includes our equity capital,plus junior subordinated debentures, less goodwill and intangibles) was $324.2million, as compared with $320.4 million as of December 31, 2008. For theBank level, Tier 1 capital was $331.7 million as of June 30, 2009, ascompared with $247.3 million as of December 31, 2008.

 

## **Item 3.**                                                           Quantitativeand Qualitative Disclosures aboutMarket Risk

## ** **

Marketrisk is the risk of loss from adverse changes in market prices and rates.  Our market risk arises primarily frominterest rate risk inherent in lending, investing and deposit taking activities.  Our profitability is affected by fluctuationsin interest rates. A sudden and substantial change in interest rates mayadversely impact our earnings to the extent that the interest rates borne byassets and liabilities do not change at the same speed, to the same extent oron the same basis. We evaluate market risk pursuant to policies reviewed andapproved annually by our Board of Directors. The Board delegates responsibility for market risk management to the Asset &Liability Management (“ALM”) Committee, which reports monthly to the Board onactivities related to market risk management. As part of the management of our market risk, ALM committee may directchanges in the mix of assets and liabilities. To that end, we actively monitor and manage interest rate riskexposures.

 

Interest rate risk management involves development, analysis,implementation and monitoring of earnings to provide stable earnings andcapital levels during periods of changing interest rates.  In the management of interest rate risk, weutilize monthly gap analysis and quarterly simulation modeling to determine thesensitivity of net interest income and economic value sensitivity of thebalance sheet.  These techniques arecomplementary and are used together to provide a more accurate measurement ofinterest rate risk.

 

Gapanalysis measures the repricing mismatches between assets and liabilities.  The interest rate sensitivity gap isdetermined by subtracting the amount of liabilities from the amount of assetsthat reprice in a particular time interval. If repricing assets exceed repricing liabilities in any given timeperiod, we would be deemed to be “asset-sensitive” for that period.  Conversely, if repricing liabilities exceedrepricing assets in a given time period, we would be deemed to be “liability-sensitive”for that period.

 

We usually seek to maintain a balanced position over the period of oneyear to ensure net interest margin stability in times of volatile interestrates.  This is accomplished bymaintaining a similar level of interest-earning assets and interest-payingliabilities available to be repriced within one year.

 

Thechange in net interest income may not always follow the general expectations ofan “asset-sensitive” or a “liability-sensitive” balance sheet during periods ofchanging interest rates.  Thispossibility results from interest rates earned or paid changing by differingincrements and at different time intervals for each type of interest-sensitiveasset and liability.  The interest rategaps reported in the tables arise when assets are funded with liabilitieshaving different repricing intervals. Because these gaps are actively managed and change daily as adjustmentsare made in interest rate views and market outlook, positions at the end of anyperiod may not reflect our interest rate sensitivity in subsequentperiods.  We attempt to balancelonger-term economic views against prospects for short-term interest ratechanges.

 

Although the interest rate sensitivity gap is a usefulmeasurement and contributes to effective asset and liability management, it isdifficult to predict the effect of changing interest rates based solely on thatmeasure.  As a result, the ALM committeealso regularly uses simulation modeling as a tool to measure the sensitivity ofearnings and net portfolio value, or NPV, to interest rate changes.  The NPV is defined as the net present valueof an institution’s existing assets, liabilities and off-balance sheetinstruments.  The simulation modelcaptures all assets, liabilities and off-balance sheet financial instrumentsand accounts for significant variables that are believed to be affected byinterest rates.  These include prepaymentspeeds on loans, cash flows of loans and deposits, principal amortization, calloptions on securities, balance sheet growth assumptions and changes in raterelationships as various rate indices react differently to market rates.

 

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Although the simulation measures the volatility of netinterest income and net portfolio value under immediate increase or decrease ofmarket interest rate scenarios in 100 basis point increments, our main concernis the negative effect of a reasonably-possible worst scenario.  The ALM committee policy prescribes that forthe worst possible rate-changescenario the possible reduction of net interest income and NPV should notexceed 20% of the base net interest income and 25% of the base NPV,respectively.

 

In general, based upon our current mix of deposits,loans and investments, decrease in interest rates would result an increase inour net interest margin and NPV. An increase in interest rates would beexpected to have opposite effect. However, given in the record low interestrate environment, either an increase or decrease in interest rates will resultin higher net interest margin, while either an increase or decrease in interestrates will lower NPV as shown in our simulation measures below.

 

Management believes that the assumptions used toevaluate the vulnerability of our operations to changes in interest ratesapproximate actual experience and considers them reasonable; however, theinterest rate sensitivity of our assets and liabilities and the estimatedeffects of changes in interest rates on our net interest income and NPV couldvary substantially if different assumptions were used or actual experiencediffers from the historical experience on which they are based.

 

Thefollowing table sets forth the interest rate sensitivity of ourinterest-earning assets and interest-bearing liabilities as of June 30,2009 using the interest rate sensitivity gap ratio.  For purposes of the following table, an assetor liability is considered rate-sensitive within a specified period when it canbe repriced or matures within its contractual terms.  Actual payment patterns may differ fromcontractual payment patterns:

 

**Interest Rate Sensitivity Analysis**

**(dollars in thousands)**

 
| ** **                                                                                  | ** ** | **At June 30, 2009**               | ** ** |
|---------------------------------------------------------------------------------------------|------------|-----------------------------------------|------------|
| ** **                                                                                  | ** ** | **Amounts Subject to Repricing Within** | ** ** |
| ** **                                                                                  | ** ** | **0-3 months**                          | ** ** | **3-12 months** | ** ** | **Over**** ****1********to********5********years** | ** ** | **After 5 years** | ** ** | **Total** | ** ** |
| ** **                                                                                  | ** ** | **(Dollars in Thousands)**              | ** ** |
| **Interest-earning assets:**                                                                |       |                                    |       |   |   |   |   |   |   |   |   |
| Gross  loans(1)                                                                             |       | $                                       | 1,296,040  |   | $ | 161,798 |   | $ | 854,998 |   | $ | 92,486 |   | $ | 2,405,322 |   |
| Investment  securities                                                                      |       | 6,577                                   |       | 28,297 |   | 53,598 |   | 339,366 |   | 427,838 |   |
| Federal  funds sold and cash equivalents                                                    |       | 145,077                                 |       | — |   | — |   | — |   | 145,077 |   |
| Interest-earning  deposits                                                                  |       | —                                  |       | — |   | — |   | — |   | — |   |
| Total                                                                                       |       | $                                       | 1,447,694  |   | $ | 190,095 |   | $ | 908,596 |   | $ | 431,852 |   | $ | 2,978,237 |   |
|                                                                                        |       |                                    |       |   |   |   |   |   |   |   |   |
| **Interest-bearing liabilities:**                                                           |       |                                    |       |   |   |   |   |   |   |   |   |
| Savings  deposits                                                                           |       | $                                       | 60,367     |   | $ | — |   | $ | — |   | $ | — |   | $ | 60,367 |   |
| Time  deposits of $100,000 or more                                                          |       | 610,225                                 |       | 491,091 |   | 35,122 |   | — |   | 1,136,438 |   |
| Other  time deposits                                                                        |       | 105,259                                 |       | 153,070 |   | 14,857 |   | — |   | 273,186 |   |
| Other  interest-bearing deposits                                                            |       | 614,369                                 |       | — |   | — |   | — |   | 614,369 |   |
| FHLB  borrowings                                                                            |       | 89,000                                  |       | 124,000 |   | 118,000 |   |   |   | 331,000 |   |
| Junior  Subordinated Debenture                                                              |       | 71,857                                  |       | — |   | 15,464 |   | — |   | 87,321 |   |
| Total                                                                                       |       | $                                       | 1,551,077  |   | $ | 768,161 |   | $ | 183,443 |   | $ | — |   | $ | 2,502,681 |   |
|                                                                                        |       |                                    |       |   |   |   |   |   |   |   |   |
| Interest  rate sensitivity gap                                                              |       | $                                       | (103,383   | ) | $ | (578,066 | ) | $ | 725,153 |   | $ | 431,852 |   | $ | 475,556 |   |
| Cumulative  interest rate sensitivity gap                                                   |       | $                                       | (103,383   | ) | $ | (681,449 | ) | $ | 43,704 |   | $ | 475,556 |   |   |   |
| Cumulative  interest rate sensitivity gap ratio (based on average interest-earning  assets) |       | -3.52                                   | %          | -23.23 | % | 1.49 | % | 16.21 | % |   |   |

 

----

(1) Excludes the gross amount of non-accrual loans ofapproximately $35.0 million at June 30, 2009.

 

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Thefollowing table sets forth our estimated net interest income over a 12-monthperiod and NPV based on the indicated changes in market interest rates as of June 30,2009.  All assets presented in this tableare held-to-maturity or available-for-sale. At June 30, 2009, we had no trading investment securities:

 
| ** **                          | ** ** | **Net Interest Income**                            | ** ** | ** **   | ** ** | ** **                        | ** ** | ** **   | ** ** |
|-------------------------------------|------------|----------------------------------------------------|------------|--------------|------------|-----------------------------------|------------|--------------|------------|
| **Change********(in basis points)** | ** ** | **(next twelve months)****(dollars in thousands)** | ** ** | **% Change** | ** ** | **NPV****(dollars in thousands)** | ** ** | **% Change** | ** ** |
| +200                                |       | $                                                  | 114,585    |         | -1.61      | %                                 | $          | 292,893      |       | -8.39 | % |
| +100                                |       | 115,255                                            |       | -1.03        | %          | 308,662                           |       | -3.46        | %          |
| 0                                   |       | 116,457                                            |       | —       |       | 319,709                           |       | —       |       |
| -100                                |       | 123,471                                            |       | 6.02         | %          | 308,037                           |       | -3.65        | %          |
| -200                                |       | 128,914                                            |       | 10.70        | %          | 293,176                           |       | -8.30        | %          |
|                                     |            |                                                    |            |              |            |                                   |            |              |            |  |  |

 

Our strategies in protecting both net interest incomeand economic value of equity from significant movements in interest ratesinvolve restructuring our investment portfolio and using FHLB advances.  Although our policy also permits us to purchase rate caps and floors and interest rate swaps, we arenot currently engaged in any of those types of transactions.

 

## **Item 4.**                    Controls and Procedures

## ** **

As of June 30,2009, we carried out an evaluation, under the supervision and with theparticipation of our management, including our chief executive officer andchief financial officer, regardingthe effectiveness of the design and operation of our “disclosurecontrols and procedures,” as defined under Exchange Act Rules 13a-15(e) and15d-15(e).

 

Basedon this evaluation, our chief executive officer and chief financial officerconcluded that, as of June 30, 2009, such disclosure controls andprocedures were effective to ensure that information required to be disclosedby us in the reports we file or submit under the Exchange Act is recorded,processed, summarized and reported within the time periods specified in the rules andforms of the SEC, and accumulated and communicated to our management, includingour chief executive officer and chief financial officer, as appropriate toallow timely decisions regarding required disclosure.

 

Indesigning and evaluating the disclosure controls and procedures, our managementrecognized that any controls and procedures, no matter how well designed andoperated, can only provide reasonable assurance in achieving the desired controlobjectives and in reaching a reasonable level of assurance our managementnecessarily was required to apply its judgment in evaluating the cost-benefitrelationship of possible controls and procedures.

 

Therewere no changes in our internal controls over financial reporting during thequarter ended June 30, 2009 that materially affected, or are reasonablylikely to materially affect, our internal controls over financial reporting.

 

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# **Part II.  OTHERINFORMATION**

# ** **

## **Item 1.**         Legal Proceedings

## ** **

In thenormal course of business, we are involved in various legal claims. We havereviewed all legal claims against us with counsel and have taken intoconsideration the views of such counsel as to the outcome of the claims. We donot believe the final disposition of all such claims will have a materialadverse effect on our financial position or results of operations.

 

## **Item 1A. Risk Factors**

## ** **

Thereare no material changes to our risk factors as presented in the Company’s 2008 Form 10-Kunder the heading “Item 1A. Risk Factors.”

 

## **Item 2.**         Unregistered Sales of Equity Securities andUse of Proceeds

## ** **

None.

 

## **Item 3.**         Defaults Upon Senior Securities

## ** **

None.

 

## **Item 4.**         Submission of Matters to a Vote of SecurityHolders

## ** **

At our Annual Meeting of Shareholders held May 27,2009, the following persons were elected as our Class II directors to servethree-year terms expiring at the 2012 Annual Meeting of Shareholders or untiltheir successors are duly elected and qualified:

 

·      MelElliot (25,446,144 votes in favor; 260,944 votes withheld)

 

·      RichardLim (25,449,895 votes in favor; 257,193 votes withheld)

 

·      HarrySiafaris (25,323,652 votes infavor; 383,436 votes withheld)

 

In addition to the foregoing, theterms of the following directors continued after the Annual Meeting:

 

*Class I*

 

·      Steven Koh

 

·      Gapsu Kim

 

·      Lawrence Jeon

 

·      Fred Mautner

 

*Class III*

 

·      Joanne Kim

 

·      Kyu-Hyun Kim

 

·      Young Hi Pak

 

In addition to election of Class II directors in the Annual Meeting,shareholders voted on one proposal:

 

·      Approved;Proposal on the corporation’s named executive officer compensation (24,798,597“For” votes, 807,804 “Against” votes, 100,687 “Abstain” votes)

 

## **Item 5.**         Other Information

## ** **

None.

 

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EXHIBITS

 

**Exhibit Table**

 
| **Reference Number** | ** ** | **Item**                                                                                                                                                                                    | ** ** |
|----------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| ** **           | ** ** | ** **                                                                                                                                                                                  |
| 31.1                 |       | Certification of Chief  Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of  2002                                                                                   |
| 31.2                 |       | Certification of Chief  Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of  2002                                                                                   |
| 32                   |       | Certifications of Chief  Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C.  Section 1350, as Adopted Pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002 |

 

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SIGNATURES

 

Pursuant to therequirement of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned, thereuntoduly authorized.

 
|                       | WILSHIRE BANCORP, INC. |
|----------------------------|------------------------|
|                       |                   |
|                       |                   |
| Date: August 10, 2009 | By:                    | /s/ Alex Ko |
|                       |                   | Alex Ko |
|                       |                   | Chief Financial Officer |
|                       |                   | (Principal Financial  and Accounting Officer) |

 

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