**UNITED
      STATES**  **SECURITIES
      AND EXCHANGE COMMISSION**




**Washington,
      D.C. 20549**









**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 September 30, 2007.**




**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**







**WILSHIRE
      BANCORP, 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
                telephone number, including area
                code




Securities
      registered pursuant to Section 12(b) of the Act: **Common
      Stock, no par value**




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







Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days.Yes  x No
o




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


Large
      accelerated filer  o Accelerated
      filer  x Non-accelerated
      filer  o




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




The
      number of shares of Common Stock of the registrant outstanding as of October
      31,
      2007 was 29,332,071.









**FORM
      10-Q**


**INDEX**


**WILSHIRE
      BANCORP, INC.**


FINANCIAL
                  INFORMATION
              **1****Item
                  1.**
              **Financial
                  Statements**
              **1****Item
                  2.**
              **Management’s
                  Discussion and Analysis of Financial Condition and Results of
                  Operations**
              **12****Item
                  3.**
              **Quantitative
                  and Qualitative Disclosures about Market Risk**
              **38****Item
                  4.**
              **Controls
                  and Procedures**
              **40**Part
                  II.OTHER
                  INFORMATION
              **41****Item
                  1.**
              **Legal
                  Proceedings**
              **41****Item
                  1A.**
              **Risk
                  Factors**
              **41********Item
                  2.**
              **Unregistered
                  Sales of Equity Securities and Use of Proceeds**
              **41********Item
                  3.**
              **Defaults
                  Upon Senior Securities**
              **41****Item
                  4.**
              **Submission
                  of Matters to a Vote of Security Holders**
              **41****Item
                  5.**
              **Other
                  Information**
              **41****Item
                  6.**
              **Exhibits**
              **42****SIGNATURES**
              **43**




i


**FINANCIAL
      INFORMATION**




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




**WILSHIRE
      BANCORP, INC.**


**CONSOLIDATED
      STATEMENTS OF FINANCIAL CONDITION**


**(UNAUDITED)**




**September 30, 2007**
              
              **December 31, 2006****ASSETS**Cash
                  and due from banks
              
              $
              83,417,954
              
              $
              75,243,346Federal
                  funds sold and other cash equivalents
              
              
              20,003,546
              
              
              130,003,268Cash
                  and cash equivalents
              
              
              103,421,500
              
              
              205,246,614Securities
                  available for sale, at fair value (amortized cost of $195,608,502
                  and
                  $168,662,357 at September 30, 2007 and December 31, 2006,
                  respectively)
              
              
              195,332,732
              
              
              167,837,734Securities
                  held to maturity, at amortized cost (fair value of $11,345,085
                  and
                  $14,445,714 at September 30, 2007 and December 31, 2006,
                  respectively)
              
              
              11,390,115
              
              
              14,620,870Interest-only
                  strips, at fair value (amortized cost of $549,267 and $1,008,064
                  at
                  September 30, 2007 and December 31, 2006, respectively)
              
              
              834,669
              
              
              1,130,006Loans
                  held for sale—at the lower of cost or market
              
              
              11,137,138
              
              
              5,496,421Loans
                  receivable, net of allowance for loan losses of $20,902,052 and
                  $18,654,082 at September 30, 2007 and December 31, 2006,
                  respectively
              
              
              1,692,586,055
              
              
              1,536,388,815Bank
                  premises and equipment—net
              
              
              10,541,834
              
              
              10,464,600Federal
                  Home Loan Bank stock, at cost
              
              
              8,582,100
              
              
              7,541,700Accrued
                  interest receivable
              
              
              10,393,880
              
              
              10,049,265Other
                  real estate owned—net
              
              
              611,800
              
              
              138,000Deferred
                  income taxes—net
              
              
              9,446,455
              
              
              9,722,008Servicing
                  assets
              
              
              5,060,048
              
              
              5,080,466Due
                  from customers on acceptances
              
              
              4,002,635
              
              
              2,385,134Cash
                  surrender value of life insurance
              
              
              16,079,335
              
              
              15,635,773Goodwill
              
              
              6,674,772
              
              
              6,674,772Core
                  deposit intangible
              
              
              1,402,237
              
              
              1,532,485Favorable
                  lease intangible
              
              
              259,324
              
              
              352,231Other
                  assets
              
              
              13,050,239
              
              
              8,186,927TOTAL
              
              $
              2,100,806,868
              
              $
              2,008,483,821**LIABILITIES
                  AND SHAREHOLDERS’ EQUITY**LIABILITIES:Deposits:Noninterest
                  bearing
              
              $
              308,446,209
              
              $
              319,310,552Interest
                  bearing:Savings
              
              
              30,647,089
              
              
              29,019,943Time
                  deposits of $100,000 or more
              
              
              755,159,319
              
              
              812,105,950Other
                  time deposits
              
              
              139,073,697
              
              
              160,933,032Money
                  market accounts and other
              
              
              514,831,293
              
              
              430,603,175Total
                  deposits
              
              
              1,748,157,607
              
              
              1,751,972,652Federal
                  Home Loan Bank borrowings
              
              
              70,000,000
              
              
              20,000,000Junior
                  subordinated debentures
              
              
              87,321,000
              
              
              61,547,000Accrued
                  interest payable
              
              
              11,534,538
              
              
              12,006,124Acceptances
                  outstanding
              
              
              4,002,635
              
              
              2,385,134Other
                  liabilities
              
              
              11,643,424
              
              
              10,937,886Total
                  liabilities
              
              
              1,932,659,204
              
              
              1,858,848,796COMMITMENTS
                  AND CONTINGENCIES (Note 7)SHAREHOLDERS’
                  EQUITY:Preferred
                  stock, no par value—authorized, 5,000,000 shares; issued and outstanding,
                  noneCommon
                  stock, no par value—authorized, 80,000,000 shares; issued, 29,371,696
                  shares and 29,197,420 shares at September 30, 2007 and December
                  31,2006;
                  and outstanding, 29,332,071 shares and 29,197,420 shares at at
                  September
                  30, 2007and December 31, 2006, respectively (Note 3)
              
              $
              50,811,069
              
              $
              49,122,536Accumulated
                  other comprehensive income(loss), net of tax
                  expense(benefit)
              
              
              5,449
              
              
              (407,612
              )Retained
                  earnings
              
              
              117,741,541
              
              
              100,920,101Less
                  Treasury Stock, at Cost; 39,625 shares and 0 share at September
                  30, 2007
                  and December 31, 2006, respectively
              
              
              (410,395
              )
              
              -Total
                  shareholders’ equity
              
              
              168,147,664
              
              
              149,635,025TOTAL
              
              $
              2,100,806,868
              
              $
              2,008,483,821


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


1




**WILSHIRE
      BANCORP, INC.**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**(UNAUDITED)**




**Three Months Ended September 30,**
              
              **Nine Months Ended September 30,****2007**
              
              **2006**
              
              **2007**
              
              **2006**INTEREST
                  INCOME:Interest
                  and fees on loans
              
              $
              37,092,819
              
              $
              33,995,238
              
              $
              107,578,144
              
              $
              93,270,573Interest
                  on investment securities and deposits in other financial
                  institutions
              
              
              2,697,882
              
              
              2,361,562
              
              
              7,333,776
              
              
              6,375,372Interest
                  on federal funds sold and other cash equivalents
              
              
              678,546
              
              
              1,107,452
              
              
              2,765,812
              
              
              3,496,369Total
                  interest income
              
              
              40,469,247
              
              
              37,464,252
              
              
              117,677,732
              
              
              103,142,314INTEREST
                  EXPENSE:Deposits
              
              
              17,763,505
              
              
              15,845,581
              
              
              52,368,924
              
              
              41,743,221Interest
                  on other borrowings
              
              
              1,767,922
              
              
              1,515,500
              
              
              4,426,953
              
              
              4,579,447Total
                  interest expense
              
              
              19,531,427
              
              
              17,361,081
              
              
              56,795,877
              
              
              46,322,668NET
                  INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES AND LOAN
                  COMMITMENTS
              
              
              20,937,820
              
              
              20,103,171
              
              
              60,881,855
              
              
              56,819,646PROVISION
                  FOR LOSSES ON LOANS AND LOAN COMMITMENTS
              
              
              4,100,000
              
              
              2,800,000
              
              
              10,230,000
              
              
              5,060,000NET
                  INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES AND LOAN
                  COMMITMENTS
              
              
              16,837,820
              
              
              17,303,171
              
              
              50,651,855
              
              
              51,759,646NONINTEREST
                  INCOME:Service
                  charges on deposit accounts
              
              
              2,397,629
              
              
              2,544,642
              
              
              7,189,145
              
              
              7,140,893Gain
                  on sale of loans
              
              
              1,583,588
              
              
              3,454,753
              
              
              5,727,341
              
              
              8,859,768Loan-related
                  servicing fees
              
              
              478,294
              
              
              538,349
              
              
              1,169,251
              
              
              1,431,185Loan
                  referral fees
              
              
              -
              
              
              22,470
              
              
              -
              
              
              70,117Loan
                  packaging fees
              
              
              29,270
              
              
              111,943
              
              
              64,820
              
              
              346,177Income
                  from other earning assets
              
              
              293,355
              
              
              267,946
              
              
              845,613
              
              
              764,583Other
                  income
              
              
              445,550
              
              
              367,639
              
              
              1,697,629
              
              
              1,039,471Total
                  noninterest income
              
              
              5,227,686
              
              
              7,307,742
              
              
              16,693,799
              
              
              19,652,194NONINTEREST
                  EXPENSES:Salaries
                  and employee benefits
              
              
              5,827,429
              
              
              6,326,931
              
              
              17,227,765
              
              
              17,547,717Occupancy
                  and equipment
              
              
              1,316,950
              
              
              1,257,473
              
              
              3,886,947
              
              
              3,225,312Data
                  processing
              
              
              816,871
              
              
              674,870
              
              
              2,326,713
              
              
              1,829,751Loan
                  referral fees
              
              
              370,742
              
              
              326,935
              
              
              1,220,838
              
              
              1,269,861Outsourced
                  service for customers
              
              
              491,964
              
              
              301,177
              
              
              1,315,324
              
              
              932,272Advertising
                  and promotional
              
              
              255,157
              
              
              400,972
              
              
              652,933
              
              
              958,830Professional
                  fees
              
              
              390,997
              
              
              343,328
              
              
              969,822
              
              
              835,481Office
                  supplies
              
              
              150,183
              
              
              171,440
              
              
              470,392
              
              
              482,129Directors’
                  fees
              
              
              146,000
              
              
              147,900
              
              
              419,550
              
              
              394,368Communications
              
              
              119,318
              
              
              107,002
              
              
              353,725
              
              
              339,754Investor
                  relations
              
              
              55,050
              
              
              60,011
              
              
              239,105
              
              
              170,454Deposit
                  insurance premiums
              
              
              275,591
              
              
              47,874
              
              
              647,831
              
              
              137,740Amortization
                  of core deposit intangible
              
              
              43,416
              
              
              43,416
              
              
              130,248
              
              
              64,159Amortization
                  of favorable lease intangible
              
              
              31,309
              
              
              31,309
              
              
              92,907
              
              
              45,943Other
                  operating
              
              
              755,894
              
              
              294,137
              
              
              2,201,342
              
              
              1,781,907Total
                  noninterest expenses
              
              
              11,046,871
              
              
              10,534,775
              
              
              32,155,442
              
              
              30,015,678INCOME
                  BEFORE INCOME TAX PROVISION
              
              
              11,018,635
              
              
              14,076,138
              
              
              35,190,212
              
              
              41,396,162INCOME
                  TAX PROVISION
              
              
              4,374,732
              
              
              5,257,761
              
              
              13,883,172
              
              
              16,339,793NET
                  INCOME
              
              $
              6,643,903
              
              $
              8,818,377
              
              $
              21,307,040
              
              $
              25,056,369EARNINGS
                  PER SHARE:Basic
              
              $
              0.23
              
              $
              0.30
              
              $
              0.73
              
              $
              0.87Diluted
              
              $
              0.23
              
              $
              0.30
              
              $
              0.72
              
              $
              0.86





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


2




**WILSHIRE
      BANCORP, INC.**




**CONSOLIDATED
      STATEMENTS OF SHAREHOLDERS’ EQUITY**


**(UNAUDITED)**





**Common
                Stock**
            
            **Accumulated****Gross Shares**
            
            
            
            
            
            
            
            **Other**
            
            
            
            **Treasury**
            
            **Total****Issued and**
            
            **Treasury**
            
            **Shares**
            
            
            
            **Comprehensive**
            
            **Retained**
            
            **Stock,**
            
            **Shareholders’****Outstanding**
            
            **Shares**
            
            **Outstanding**
            
            **Amount**
            
            **Income (Loss)**
            
            **Earnings**
            
            **at Cost**
            
            **Equity**BALANCE—January
                1, 2006
            
            
            28,630,600
            
            
            
            
            
            28,630,600
            
            $
            41,340,448
            
            $
            (1,026,202
            )
            $
            72,789,622
            
            $
            -
            
            $
            113,103,868Stock
                options exercised
            
            
            207,340
            
            
            
            
            
            207,340
            
            
            359,832
            
            
            
            
            
            
            
            
            
            
            
            359,832Cash
                dividend declared
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (4,351,309
            )
            
            
            
            
            (4,351,309
            )Stock
                compensation expense
            
            
            
            
            
            
            
            
            
            
            
            345,424
            
            
            
            
            
            
            
            
            
            
            
            345,424Tax
                benefit from stock options exercised
            
            
            
            
            
            
            
            
            
            
            
            899,249
            
            
            
            
            
            
            
            
            
            
            
            899,249Shares
                issued for acquisition of Liberty Bank of New York
            
            
            328,110
            
            
            
            
            
            328,110
            
            
            5,936,593
            
            
            
            
            
            
            
            
            
            
            
            5,936,593Comprehensive
                income:Net
                income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            25,056,369
            
            
            
            
            
            25,056,369Other
                comprehensive income:Change
                in unrealized gain on interest-only strips
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            70,762
            
            
            
            
            
            
            
            
            70,762Change
                in unrealized gain on securities available for sale
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            332,673
            
            
            
            
            
            
            
            
            332,673Comprehensive
                income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            $
            25,459,804BALANCE—September
                30, 2006
            
            
            29,166,050
            
            
            -
            
            
            29,166,050
            
            $
            48,881,546
            
            $
            (622,767
            )
            $
            93,494,682
            
            $
            -
            
            $
            141,753,461





**Common
                Stock**
            
            **Accumulated****Gross Shares**
            
            
            
            
            
            
            
            **Other**
            
            
            
            **Treasury**
            
            **Total****Issued and**
            
            **Treasury**
            
            **Shares**
            
            
            
            **Comprehensive**
            
            **Retained**
            
            **Stock,**
            
            **Shareholders’****Outstanding**
            
            **Shares**
            
            **Outstanding**
            
            **Amount**
            
            **Income (Loss)**
            
            **Earnings**
            
            **at Cost**
            
            **Equity**BALANCE—January
                1, 2007
            
            
            29,197,420
            
            
            
            
            
            29,197,420
            
            $
            49,122,536
            
            $
            (407,612
            )
            $
            100,920,101
            
            $
            -
            
            $
            149,635,025Stock
                options exercised
            
            
            174,276
            
            
            
            
            
            174,276
            
            
            115,187
            
            
            
            
            
            
            
            
            
            
            
            115,187Cash
                dividend declared
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (4,403,634
            )
            
            
            
            
            (4,403,634
            )Stock
                compensation expense
            
            
            
            
            
            
            
            
            
            
            
            286,899
            
            
            
            
            
            
            
            
            
            
            
            286,899Tax
                benefit from stock options exercised
            
            
            
            
            
            
            
            
            
            
            
            1,286,447
            
            
            
            
            
            
            
            
            
            
            
            1,286,447Stock
                repurchase
            
            
            
            
            
            (39,625
            )
            
            (39,625
            )
            
            
            
            
            
            
            
            
            
            
            (410,395
            )
            
            (410,395
            )Cumulative
                impact of change in accounting for uncertainties in income taxes
                (FIN 48 -
                see Note 9)
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (161,583
            )
            
            
            
            
            (161,583
            )Cumulative
                impact of chage in accounting for fair valuation method adoption
                (FAS 156
                - see Note 9)
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            79,617
            
            
            
            
            
            79,617Comprehensive
                income:Net
                income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            21,307,040
            
            
            
            
            
            21,307,040Other
                comprehensive income:Change
                      in unrealized gain on interest-only
                      strips
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            94,731
            
            
            
            
            
            
            
            
            94,731Change
                in unrealized gain on securities available for sale
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            318,330
            
            
            
            
            
            
            
            
            318,330Comprehensive
                income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            $
            21,720,101BALANCE—September
                30, 2007
            
            
            29,371,696
            
            
            (39,625
            )
            
            29,332,071
            
            $
            50,811,069
            
            $
            5,449
            
            $
            117,741,541
            
            $
            (410,395
            )
            $
            168,147,664





**Nine
                Months Ended September 30,****2007**
            
            **2006**DISCLOSURE
                OF RECLASSIFICATION AMOUNTS WITHIN ACCUMULATED OTHER COMPREHENSIVE
                INCOME:Net
                      unrealized gains on securities available for sale arising during
                      period
            
            $
            548,853
            
            $
            573,573Less
                income tax expense
            
            
            230,523
            
            
            240,900Net
                unrealized gains on securities available for sale
            
            $
            318,330
            
            $
            332,673Net
                      unrealized gains on interest-only strips arising during
                      period
            
            $
            163,459
            
            $
            34,087Less
                reclassification adjustment for impairment
            
            
            -
            
            
            (88,020
            )Less
                income tax expense
            
            
            68,728
            
            
            51,345Net
                unrealized gains on interest-only strips
            
            $
            94,731
            
            $
            70,762





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


3




**WILSHIRE
      BANCORP, INC.**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**(UNAUDITED)**





**Nine
                Months Ended September 30,****2007**
            
            **2006**CASH
                FLOWS FROM OPERATING ACTIVITIES:Net
                income
            
            $
            21,307,040
            
            $
            25,056,369Adjustments
                    to reconcile net income to net cash provided by operating
                    activities:Accretion
                and amortization of investment securities
            
            
            (114,469
            )
            
            (25,417
            )Depreciation
                of premises & equipment
            
            
            1,204,514
            
            
            964,901Amortization
                of core deposit intangible
            
            
            130,248
            
            
            64,159Amortization
                of favorable lease intangible
            
            
            92,907
            
            
            45,943Provision
                for losses on loans and loan commitments
            
            
            10,230,000
            
            
            5,060,000Deferred
                tax benefit provision
            
            
            (23,699
            )
            
            (1,672,984
            )Loss
                on disposition of bank premises and equipment
            
            
            9,268
            
            
            9,766Net
                gain on sale of loans
            
            
            (5,727,341
            )
            
            (8,859,768
            )Origination
                of loans held for sale
            
            
            (115,684,929
            )
            
            (135,128,236
            )Proceeds
                from sale of loans held for sale
            
            
            115,171,162
            
            
            161,111,088Increase
                in servicing assets per fair valuation
            
            
            (392,120
            )
            
            -Recovery
                of valuation allowance of servicing asset
            
            
            -
            
            
            (172,462
            )Increase
                in servicing liability per fair valuation
            
            
            59,217
            
            
            -Impairment
                on interest-only strips
            
            
            -
            
            
            88,020Loss
                on sale of repossessed vehicles
            
            
            32,463
            
            
            -Loss
                on sale of other real estate owned
            
            
            (125,109
            )
            
            (9,326
            )Tax
                benefit from exercise of stock options
            
            
            (1,286,447
            )
            
            (899,249
            )Stock-based
                compensation cost
            
            
            286,899
            
            
            345,424Change
                in cash surrender value of life insurance
            
            
            (443,562
            )
            
            (437,381
            )Servicing
                assets capitalized
            
            
            (1,350,558
            )
            
            (1,835,065
            )Servicing
                assets amortization
            
            
            1,900,476
            
            
            1,453,338Decrease
                in interest-only strips
            
            
            458,794
            
            
            274,192Decrease
                in accrued interest receivable
            
            
            (344,615
            )
            
            (2,820,784
            )Increase
                in other assets
            
            
            (5,087,079
            )
            
            (827,177
            )Dividends
                of Federal Home Loan Bank stock
            
            
            (308,100
            )
            
            (241,300
            )(Decrease)
                increase in accrued interest payable
            
            
            (471,586
            )
            
            4,630,914Increase
                (decrease) in other liabilities
            
            
            532,750
            
            
            (892,027
            )Net
                cash provided by operating activities
            
            
            20,056,124
            
            
            45,282,938CASH
                FLOWS FROM INVESTING ACTIVITIES:Purchase
                of securities available for sale
            
            
            (83,109,596
            )
            
            (48,934,543
            )Proceeds
                    from principal repayment, matured or called securities held to
                    maturity
            
            
            3,230,701
            
            
            2,236,771Proceeds
                from matured securities available for sale
            
            
            56,277,975
            
            
            20,868,151Net
                increase in loans receivable
            
            
            (171,295,558
            )
            
            (249,571,090
            )Proceeds
                from sale of loans
            
            
            5,384,851
            
            
            10,490,470Proceeds
                from sale of repossessed vehicles
            
            
            89,631
            
            
            -Proceeds
                from sale of other real estate owned
            
            
            871,282
            
            
            108,145Purchases
                of Bank premises and equipment
            
            
            (1,317,764
            )
            
            (1,455,526
            )Proceeds
                from disposition of bank equipment
            
            
            166,248
            
            
            250Purchase
                of Federal Home Loan Bank stock
            
            
            (732,300
            )
            
            (1,015,300
            )Acquisition
                of Liberty Bank, net of cash and cash equivalents acquired
            
            
            -
            
            
            5,906,249Net
                cash used in investing activities
            
            
            (190,434,530
            )
            
            (261,366,423
            )





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


(continued)





4




**WILSHIRE
      BANCORP, INC.**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**(UNAUDITED)**





**Nine
                Months Ended September 30,****2007**
            
            **2006**CASH
                FLOWS FROM FINANCING ACTIVITIES:Proceeds
                from exercise of stock options
            
            $
            115,187
            
            $
            359,832Payment
                of cash dividend
            
            
            (4,396,902
            )
            
            (4,038,231
            )Increase
                (decrease) in Federal Home Loan Bank borrowings
            
            
            50,000,000
            
            
            (41,000,000
            )Proceeds
                from issuance of junior subordinated debentures
            
            
            25,774,000
            
            
            -Purchase
                of treasury stock
            
            
            (410,395
            )
            
            -Tax
                benefit from exercise of stock options
            
            
            1,286,447
            
            
            899,249Net
                increase in deposits
            
            
            (3,815,045
            )
            
            201,489,295Net
                cash provided by financing activities
            
            
            68,553,292
            
            
            157,710,145NET
                    DECREASE IN CASH AND CASH EQUIVALENTS
            
            
            (101,825,114
            )
            
            (58,373,340
            )CASH
                AND CASH EQUIVALENTS—Beginning of period
            
            
            205,246,614
            
            
            194,208,056CASH
                AND CASH EQUIVALENTS—End of period
            
            $
            103,421,500
            
            $
            135,834,716SUPPLEMENTAL
                    DISCLOSURES OF CASH FLOW INFORMATION:Interest
                paid
            
            $
            57,267,463
            
            $
            43,635,781Income
                taxes paid
            
            $
            14,509,837
            
            $
            17,202,211SUPPLEMENTAL
                    SCHEDULE OF NONCASH OPERATING ACTIVITIES:Other
                    assets transferred to Bank premises and
                    equipment
            
            $
            139,500
            
            $
            -Transfer
                of loans to other real estate owned
            
            $
            1,257,800
            
            $
            -SUPPLEMENTAL
                    SCHEDULE OF NONCASH FINANCING ACTIVITIES:Cash
                dividend declared, but not paid
            
            $
            1,466,604
            
            $
            1,458,303





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





5





**WILSHIRE
      BANCORP, INC.**




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




**Note
      1.**  **Business
      of Wilshire Bancorp, Inc.**




Wilshire
      Bancorp, Inc. (hereafter, the “Company,” “we,” “us,” or “our”) succeeded to the
      business and operations of Wilshire State Bank, a California state-chartered
      commercial bank (the “Bank”), upon consummation of the reorganization of the
      Bank into a holding company structure, effective as of August 25, 2004. The
      Bank
      was incorporated under the laws of the State of California on May 20, 1980
      and
      commenced operations on December 30, 1980. The Company was incorporated in
      December 2003 as a wholly-owned subsidiary of the Bank for the purpose of
      facilitating the issuance of trust preferred securities for the Bank and
      eventually serving as the holding company of the Bank. The Bank’s shareholders
      approved a reorganization 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 a direct wholly-owned
      subsidiary of the Company.




Our
      corporate headquarters and primary banking facilities are located at 3200
      Wilshire Boulevard, Los Angeles, California 90010. In addition , we
      have  19
      full-service Bank branch offices in Southern California, Texas, New York, and
      New Jersey. We also have 8 loan production offices utilized primarily for the
      origination of loans under our Small Business Administration (“SBA”) lending
      program in Georgia, Washington, Texas, Nevada, Colorado, Virginia, New Jersey,
      and California.




**Note
      2.**  **Basis
      of Presentation**




The
      financial statements have been prepared in accordance with the Securities and
      Exchange Commission (“SEC”) rules and regulations for interim financial
      reporting and therefore do not necessarily include all information and footnote
      disclosures normally included in annual financial statements prepared in
      accordance with accounting principles generally accepted in the United States
      of
      America (“GAAP”). The information provided by these interim financial statements
      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 September 30, 2007 and December 31, 2006, the related statements
      of operations and shareholders’ equity for the three months and nine months
      ended September 30, 2007 and 2006, and the consolidated statements of cash
      flows
      for the nine months ended September 30, 2007 and 2006. Such adjustments are
      of a
      normal recurring nature unless otherwise disclosed in the Form 10-Q. Operating
      results for interim periods are not necessarily indicative of operating results
      for an entire fiscal year.




The
      unaudited financial statements should be read in conjunction with the audited
      financial statements and notes thereto included in the Company’s Annual Report
      on Form 10-K for the year ended December 31, 2006. The accounting policies
      used
      in the preparation of these interim financial statements were consistent with
      those used in the preparation of the financial statements for the year ended
      December 31, 2006, unless otherwise noted.




**Note
      3.**  **Shareholders’
      Equity**




***Earnings
      per Share***




Basic
      earnings per share (“EPS”) excludes dilution and is computed by dividing income
      available to common shareholders by the weighted-average number of common shares
      outstanding for the period. Diluted EPS reflects the potential dilution that
      could occur if securities or other contracts to issue common stock were
      exercised or converted into common stock or resulted in the issuance of common
      stock that would then share in the earnings of the entity.





6





The
      following table provides the basic and diluted EPS computations for the periods
      indicated below:




**Three
                months ended**
              **September
                30,**
            
            **Nine
                months ended**
              **September
                30,****2007**
            
            **2006**
            
            **2007**
            
            **2006**Numerator:Net
                income - numerator for basic earnings per share and diluted earnings
                per
                share-income available to common stockholders
            
            $
            6,643,903
            
            $
            8,818,377
            
            $
            21,307,040
            
            $
            25,056,369Denominator:Denominator
                for basic earnings per share:
              Weighted-average
                shares
            
            
            29,350,499
            
            
            29,137,027
            
            
            29,355,694
            
            
            28,922,416Effect
                of dilutive securities:Stock
                option dilution
            
            
            104,271
            
            
            321,565
            
            
            114,023
            
            
            351,045Denominator
                for diluted earnings per share:Adjusted
                weighted-average shares and assumed conversions
            
            
            29,454,770
            
            
            29,458,592
            
            
            29,469,717
            
            
            29,273,461Basic
                earnings per share
            
            $
            0.23
            
            $
            0.30
            
            $
            0.73
            
            $
            0.87Diluted
                earnings per share
            
            $
            0.23
            
            $
            0.30
            
            $
            0.72
            
            $
            0.86




***Stock
      Repurchase Program***




In
      July
      2007, the Company’s Board of Directors authorized a stock repurchase program to
      repurchase up to $10 million of the Company’s common stock until July 31, 2008.
      As of September 30, 2007, 39,625 shares have been repurchased under this program
      amounting to $410,000.




***Stock
      Based Compensation***




During
      1997, the Bank established the 1997 stock option plan (“1997 Plan”) that
      provides for the issuance of options to purchase up to 6,499,800 shares of
      its
      authorized but unissued common stock to managerial employees and directors.
      In
      connection with the holding company reorganization, the options granted under
      the 1997 Plan are exercisable into shares of the Company’s common stock.
      Exercise prices may not be less than the fair market value at the date of grant.
      This 1997 Plan completed its ten-year term and expired in May 2007, with 542,116
      previously granted options outstanding as of September 30, 2007. Options granted
      through 2005 under this stock option plan expire not more than 10 years after
      the date of grant, but options granted after 2005 expire not more than 5 years
      after the date of grant.




On
      January 1, 2006, the Company adopted the statement of financial accounting
      standards (“SFAS”) No. 123R, using the prospective method. The adoption of SFAS
      No. 123R resulted in incremental stock-based compensation expense of $78,000
      and
      $195,000 for the three months ended September 30, 2007 and 2006, respectively.
      For the nine months ended September 30, 2007 and 2006, the incremental
      stock-based compensation expense was $287,000 and $345,000, respectively, and
      accordingly decreased the periodic income before income taxes by the respective
      amounts and their effects on basic or diluted earnings per share was negligible.
      For the nine months ended September 30, 2007 and 2006, cash provided by
      operating activities decreased by $1,286,000 and $900,000, respectively, and
      cash provided by financing activities increased by identical amounts related
      to
      excess tax benefits from stock-based payment arrangements.




The
      Company has issued stock options to employees under stock-based compensation
      plans. Stock options are issued at the current market price on the date of
      grant. The vesting period and contractual term are determined at the time of
      grant, but the contractual term may not exceed 10 years from the date of grant.
      The grant date fair value of each option award is estimated on the date of
      grant
      using the Black-Scholes option valuation model that uses the assumptions noted
      below. The expected life (estimated period of time outstanding) of options
      was
      estimated using the simple method in accordance with SFAS No. 123R. The expected
      volatility was based on historical volatility for a period equal to the stock
      option’s expected life. The risk-free rate is based on the U.S. Treasury yield
      curve in effect at the time of grant.





7





For
      the
      nine months ended September 30, 2007, there were no stock options granted,
      but
      112,000 and 187,000 options were granted during the third quarter and nine
      months ended September 30, 2006. The weighted average fair value of options
      granted for the third quarter and nine months ended September 30, 2006 was
      $5.36
      and $5.26, respectively. The
      fair
      value of each option grant is estimated on the date of grant using the
      Black-Scholes option-pricing model with the following assumptions:




**Three
                Months Ended**
            
            **Nine
                Months Ended****September
                30,**
            
            **September
                30,****2007**
            
            **2006**
            
            **2007**
            
            **2006**Expected
                life1
            
            
            -
            
            
            3.5
                years
            
            
            -
            
            
            3.5
                yearsExpected
                volatility2
            
            
            -
            
            
            32.61
            %
            
            -
            
            
            32.89
            %Expected
                dividend yield
            
            
            -
            
            
            1.04
            %
            
            -
            
            
            1.06
            %Risk-free
                interest rate3
            
            
            -
            
            
            4.70
            %
            
            -
            
            
            4.70
            %




A
      summary
      of activity for the Company’s stock options as of and for the nine months ended
      September 30, 2007 is presented below:




**Shares**
            
            **Weighted**
              **Average**
              **Exercise**
              **Price**
            
            **Weighted**
              **Average**
              **Remaining**
              **Contractual**
              **term**
              **(in
                years)**
            
            **Aggregate**
              **Intrinsic**
              **Value**Outstanding
                at January 1, 2007
            
            
            737,892
            
            $
            9.48Granted
            
            
            -
            
            
            -
            
            
            [DoExercised
            
            
            (174,276
            )
            
            0.66Forfeited
            
            
            (21,500
            )
            
            15.11Outstanding
                at September 30, 2007
            
            
            542,116
            
            
            12.09
            
            
            5.27
            
            $
            1,490,550Options
                exercisable at September 30, 2007
            
            
            367,976
            
            
            9.64
            
            
            5.33
            
            $
            1,490,550





The
      following table summarizes information about stock options outstanding as of
      September 30, 2007:




**Options
                Outstanding**
            
            **Options
                Exercisable****Weighted****Weighted**
            
            **Average**
            
            
            
            **Weighted****Number
                of**
            
            **Average**
            
            **Remaining**
            
            **Number
                of**
            
            **Average****Outstanding**
            
            **Exercise**
            
            **Contractual**
            
            **Exercisable**
            
            **Exercise****Range
                of Exercise Prices**
            
            
            **Options**
            
            
            **Price**
            
            
            **Life**
            
            
            **Options**
            
            
            **Price**$1.00
                to $1.99
            
            
            40,000
            
            $
            1.39
            
            
            3.22
                years
            
            
            40,000
            
            $
            1.39$2.00
                to $2.99
            
            
            91,966
            
            
            2.57
            
            
            4.65
                years
            
            
            91,966
            
            
            2.57$3.00
                to $4.99
            
            
            52,000
            
            
            4.53
            
            
            5.84
                years
            
            
            52,000
            
            
            4.53$13.00
                to $14.99
            
            
            52,000
            
            
            13.73
            
            
            7.52
                years
            
            
            30,400
            
            
            13.74$15.00
                to $16.99
            
            
            123,250
            
            
            15.21
            
            
            7.46
                years
            
            
            80,210
            
            
            15.22$17.00
                to $19.99
            
            
            182,900
            
            
            18.79
            
            
            3.75
                years
            
            
            73,400
            
            
            18.79$1.00
                to $19.99
            
            
            542,116
            
            
            12.09
            
            
            5.27
                years
            
            
            367,976
            
            
            9.64




During
      the three and nine months ended September 30, 2007 and 2006, information related
      to stock options is presented as follows:




****
            
            **Three
                Months Ended**
            
            **Nine
                Months Ended****September
                30,**
            
            **September
                30,****2007**
            
            **2006**
            
            **2007**
            
            **2006**Total
                intrinsic value of options exercised
            
            $
            -
            
            $
            686,304
            
            $
            3,100,522
            
            $
            3,287,642Total
                fair value of options vested
            
            
            132,459
            
            
            158,914
            
            
            329,903
            
            
            300,496Weighted
                average fair value of options granted during the period
            
            
            -
            
            
            5.36
            
            
            -
            
            
            5.26




As
      of
      September 30, 2007, total unrecognized compensation cost related to stock
      options amounted to $312,000, which is expected to be recognized over a weighted
      average period of 1.33 years.





1 The
      expected life (estimated period of time outstanding) of stock options granted
      was estimated using the historical exercise behavior of employees.


2  The
      expected volatility was based on historical volatility for a period equal to
      the
      stock option’s expected life.


3 The
      risk-free rate is based on the U.S. Treasury yield curve in effect at the time
      of grant.





8





A
      summary
      of the status and changes of the Company’s nonvested shares related to the
      Company’s stock plans as of and during the nine months ended September 30, 2007
      is presented below:




******Shares**
            
            **Weighted Average**
              **Grant date**
              **Fair value**Nonvested
                at January 1, 2007
            
            
            274,360
            
            $
            3.99Granted
            
            
            -
            
            
            -Vested
            
            
            (85,020
            )
            
            3.88Forfeited
                on unvested shares
            
            
            (15,200
            )
            
            2.92Nonvested
                at September 30, 2007
            
            
            174,140
            
            $
            4.13




**Note** **4.**  **Junior
      Subordinated Debentures; Trust Preferred Securities**




In
      July
      2007, the Company organized its wholly owned subsidiary, Wilshire Statutory
      Trust IV, which issued $25 million in trust preferred securities. The Company
      then purchased all of the common interest in the Wilshire Statutory Trust IV
      ($774,000) and issued the Junior Subordinated Debenture in the amount of $25.8
      million to the Wilshire Statutory Trust IV with terms substantially similar
      to
      the trust preferred securities in exchange for the proceeds from the issuance
      of
      the Wilshire Statutory Trust IV’s trust preferred securities and common
      securities. The securities issued by Wilshire Statutory Trust IV will mature
      on
      July 10, 2037 and the rate of interest on these securities was 7.07% at
      September 30, 2007, which adjusts quarterly based on the three-month Libor
      plus
      138 basis points. The interests on the securities are payable on a quarterly
      basis, and no scheduled payments of principal are due prior to maturity. 
The junior subordinated debentures issued qualify as Tier I capital for
      regulatory reporting purposes subject a certain limitation of Federal Reserve
      Board.




**Note** **5.**  **Goodwill
      and Other Intangible Assets**




In
      July
      2001, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 141, *Business
      Combinations* ,
      and
      SFAS No. 142, *Goodwill
      and Other Intangible Assets.* Under
      these standards, goodwill and other intangible assets deemed to have indefinite
      lives are no longer amortized but are subject to annual impairment tests. Other
      intangible assets will continue to be amortized over their useful
      lives.




Prior
      to
      our acquisition of Liberty Bank of New York in May 2006, the Company did not
      have any material intangible assets other than loan servicing rights. The loan
      servicing rights are subject to amortization and were $5,060,000 and $5,237,000
      (net of $2,017,000 and $1,756,000 accumulated amortization, respectively) as
      of
      September 30, 2007 and 2006, respectively. Amortization expenses for servicing
      rights were $543,000 and $467,000 for the three months ended September 30,
      2007
      and 2006, respectively, and 1,900,000 and $1,453,000 for the nine months ended
      September 30, 2007 and 2006, respectively. In connection with the acquisition
      of
      Liberty Bank of New York, the Company recorded core deposit intangibles and
      favorable lease intangibles. As of September 30, 2007, those intangible assets
      were $1,402,000 and $259,000, respectively, net of $238,000 and $170,000
      accumulated amortizations, respectively. Amortization expenses for those
      intangible assets were $75,000 and $75,000 for the three months ended September
      30, 2007 and 2006, and $223,000 and $110,000 for the nine months ended September
      30, 2007 and 2006, respectively. We estimate the combined amortization expenses,
      excluding the effect of unexpected reversal of servicing rights, to be
      approximately $1.2 million annually for the next five fiscal years.




The
      acquisition also caused the Company to record goodwill valued at approximately
      $6.7 million, which is subject to annual impairment testing. The Company has
      selected December 31 as the annual testing date, and there was no indication
      of
      impairment as of September 30, 2007.




**Note** **6.**  **Business Segment Information**




The
      following disclosure about segments of the Company is made in accordance with
      the requirements of SFAS No. 131, *Disclosures
      about Segments of an Enterprise and Related Information* .
      The
      Company segregates its operations into three primary segments: banking
      operations, trade finance services (“TFS”) and Small Business Administration
      lending services. The Company determines the operating results of each segment
      based on an internal management system that allocates certain expenses to each
      segment.





9





*Banking
      Operations* - ** The
      Company provides lending products, including commercial, consumer and real
      estate loans to its customers.




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




*Small
      Business Administration Lending Services* -
      The SBA
      department mainly provides customers with access to the U.S. SBA guaranteed
      lending program.




The
      following are the results of operations of the Company’s segments for the
      periods indicated below:




**(Dollars
                in Thousands)**
            
            **Three
                Months Ended September 30, 2007**
            
            **Three
                Months Ended September 30, 2006****Business
                Segment**
            
            **Banking**
              **Operations**
            
            **TFS**
            
            **SBA**
            
            **Total**
            
            **Banking****Operations**
            
            **TFS**
            
            **SBA**
            
            **Total**Net
                interest income
            
            $
            16,020
            
            $
            758
            
            $
            4,160
            
            $
            20,938
            
            $
            16,260
            
            $
            716
            
            $
            3,127
            
            $
            20,103Less
                provision for loan losses
            
            
            1,693
            
            
            1,549
            
            
            858
            
            
            4,100
            
            
            1,582
            
            
            1,111
            
            
            107
            
            
            2,800Other
                operating income
            
            
            3,165
            
            
            275
            
            
            1,788
            
            
            5,228
            
            
            3,205
            
            
            368
            
            
            3,735
            
            
            7,308Net
                revenue
            
            
            17,492
            
            
            (516
            )
            
            5,090
            
            
            22,066
            
            
            17,883
            
            
            (27
            )
            
            6,755
            
            
            24,611Other
                operating expenses
            
            
            9,390
            
            
            287
            
            
            1,370
            
            
            11,047
            
            
            9,316
            
            
            240
            
            
            979
            
            
            10,535Income
                before taxes
            
            $
            8,102
            
            $
            (803
            )
            $
            3,720
            
            $
            11,019
            
            $
            8,567
            
            $
            (267
            )
            $
            5,776
            
            $
            14,076Business
                segment assets
            
            $
            1,882,810
            
            $
            46,871
            
            $
            171,126
            
            $
            2,100,807
            
            $
            1,709,789
            
            $
            52,270
            
            $
            147,854
            
            $
            1,909,913





**(Dollars
                in Thousands)**
            
            **Nine
                Months Ended September 30, 2007**
            
            **Nine
                Months Ended September 30, 2006****Business
                Segment**
            
            **Banking****Operations**
            
            **TFS**
            
            **SBA**
            
            **Total**
            
            **Banking****Operations**
            
            **TFS**
            
            **SBA**
            
            **Total**Net
                interest income
            
            $
            45,839
            
            $
            2,460
            
            $
            12,583
            
            $
            60,882
            
            $
            46,566
            
            $
            2,213
            
            $
            8,041
            
            $
            56,820Less
                provision for loan losses
            
            
            5,822
            
            
            3,135
            
            
            1,273
            
            
            10,230
            
            
            2,805
            
            
            1,345
            
            
            910
            
            
            5,060Other
                operating income
            
            
            9,626
            
            
            987
            
            
            6,080
            
            
            16,693
            
            
            8,933
            
            
            1,190
            
            
            9,529
            
            
            19,652Net
                revenue
            
            
            49,643
            
            
            312
            
            
            17,390
            
            
            67,345
            
            
            52,694
            
            
            2,058
            
            
            16,660
            
            
            71,412Other
                operating expenses
            
            
            27,694
            
            
            760
            
            
            3,701
            
            
            32,155
            
            
            25,255
            
            
            729
            
            
            4,032
            
            
            30,016Income
                before taxes
            
            $
            21,949
            
            $
            (448
            )
            $
            13,689
            
            $
            35,190
            
            $
            27,439
            
            $
            1,329
            
            $
            12,628
            
            $
            41,396Business
                segment assets
            
            $
            1,882,810
            
            $
            46,871
            
            $
            171,126
            
            $
            2,100,807
            
            $
            1,709,789
            
            $
            52,270
            
            $
            147,854
            
            $
            1,909,913




**Note** **7.**  **Commitments
      and Contingencies**




We
      are a
      party to financial instruments with off-balance sheet risk in the normal course
      of business to meet the financing needs of our customers. These financial
      instruments include commitments to extend credit, standby letters of credit,
      and
      commercial letters of credit. These instruments involve, to varying degrees,
      elements of credit and interest rate risk in excess of the amount recognized
      in
      the consolidated statements of financial condition. Our exposure to credit
      loss
      in the event of nonperformance on commitments to extend credit and standby
      letters of credit is represented by the contractual notional amount of those
      instruments. We use the same credit policies in making commitments and
      conditional obligations as we do for extending loan facilities to customers.
      We
      evaluate each customer’s creditworthiness on a case-by-case basis. The amount of
      collateral obtained, if deemed necessary upon extension of credit, is based
      on
      our credit evaluation of the counterparty. Collateral held varies but may
      include accounts receivable, inventory, property, plant, and equipment and
      income-producing properties. Commitments at September 30, 2007 are summarized
      as
      follows:




Commitments
                to extend credit
            
            $
            293,741,469Standby
                letters of credit
            
            $
            9,547,452Commercial
                letters of credit
            
            $
            12,990,462





10





As
      part
      of our asset and liability management strategy, we may engage in derivative
      financial instruments, such as interest rate swaps, with the overall goal of
      minimizing the impact of interest rate fluctuations on our net interest margin.
      Interest rate swaps involve the exchange of fixed-rate and variable-rate
      interest payment obligations without the exchange of the underlying notional
      amounts.




In
      the
      normal course of business, we are involved in various legal claims. We have
      reviewed all legal claims against us with counsel and have taken into
      consideration the views of such counsel as to the outcome of the claims. In
      our
      opinion, the final disposition of all such claims will not have a material
      adverse effect on our financial position and results of operations.




**Note** **8.**  **Acquisition
      of a Branch**




In
      July
      2007, the Bank acquired a branch of Royal Bank America (“Seller”) in Fort Lee,
      New Jersey in exchange for the Bank’s branch at Flushing, New York. In this
      transaction, the Bank purchased selected fixed assets and assumed selected
      liabilities, including a portion of Seller’s time deposits. As consideration,
      the Bank gave to the Seller the selected intangible and fixed assets, and
      selected liabilities, including a portion of time deposits, intangible
      liabilities, and lease obligation. The amounts involved in this transaction
      were
      insignificant except the time deposits exchanged both in the amount of
      approximately $6 million and the transaction were accounted for as an exchange
      of assets and liabilities.




**Note** **9.**  **Recent
      Accounting Pronouncements**




In
      March
      2006, the FASB issued SFAS No. 156, *Accounting
      for Servicing of Financial Assets* ,
      which
      amends the guidance in SFAS No. 140. SFAS No. 156 requires that an entity
      separately recognize a servicing asset or a servicing liability when it
      undertakes an obligation to service a financial asset under a servicing contract
      in certain situations. Such servicing assets or servicing liabilities are
      required to be measured initially at fair value, if practicable. SFAS No. 156
      also allows an entity to measure its servicing assets and servicing liabilities
      subsequently using either the amortization method, which existed under SFAS
      No.
      140, or the fair value measurement method. SFAS No. 156 is effective for the
      Company in the fiscal year beginning January 1, 2007. On January 1, 2007, we
      adopted SFAS No. 156. Upon this adoption, the Company selected a fair value
      measurement method to subsequently measure its servicing assets and liabilities
      and recognized the net increase in their fair value of $80,000, net of tax
      effects, as an adjustment to the beginning balance of retained
      earnings.




In
      June
      2006, the FASB issued Interpretation No. 48, *Accounting
      for Uncertainty in Income Taxes* (“FIN
      48”) which supplements SFAS No. 109, *Accounting
      for Income Taxes* ,
      by
      defining the confidence level that a tax position must meet in order to be
      recognized in the financial statements. The interpretation requires that the
      tax
      effects of a position be recognized only if it is “more-likely-than-not” to be
      sustained based solely on its technical merits as of the reporting date. The
      more-likely-than-not threshold represents a positive assertion by management
      that a company is entitled to the economic benefits of a tax position. If a
      tax
      position is not considered more-likely-than-not to be sustained based solely
      on
      its technical merits, no benefits of the position are to be recognized.
      Moreover, the more-likely-than-not threshold must continue to be met in each
      reporting period to support continued recognition of a benefit. At adoption,
      companies must adjust their financial statements to reflect only those tax
      positions that are more-likely-than-not to be sustained as of the adoption
      date.
      Any necessary adjustment would be recorded directly to retained earnings in
      the
      period of adoption and reported as a change in accounting principle. On January
      1, 2007, we adopted FIN 48. Upon this adoption, the Company recognized an
      increase in the liability for unrecognized tax benefit of $162,000, which was
      accounted for as a decrease to the beginning balance of retained earnings.




In
      September 2006, the FASB issued SFAS No. 157, *Fair
      Value Measurements* ,
      which
      defines fair value, establishes a framework for measuring fair value in
      accordance with GAAP, and expands disclosures about fair value measurements.
      The
      Company will adopt SFAS No. 157 for financial statements issued for fiscal
      years
      beginning after November 15, 2007, and interim periods with those fiscal years.
      The transition adjustment, measured as the difference between the carrying
      amounts and the fair values of those financial instruments at the date SFAS
      No.
      157 is initially applied, should be recognized as a cumulative-effect adjustment
      to the opening balance of retained earnings for the fiscal year in which this
      Statement is initially applied. We are in the process of evaluating the impact
      of this adoption on the consolidated financial statements.





11





In
      September 2006, the FASB issued SFAS No. 158, *Employers’
      Accounting for Defined Benefit Pension and Other Postretirement
      Plans* ,
      which
      requires employers to fully recognize obligations associated with
      single-employer defined benefit pension, retiree healthcare and other
      postretirement plans in their financial statements. The provisions of SFAS
      No.
      158 require employers to (a) recognize in their statement of financial position
      an asset for a plan's overfunded status or a liability for a plan’s underfunded
      status; (b) measure a plan’s assets and its obligations that determine its
      funded status as of the end of the employer's fiscal year (with limited
      exceptions); and (c) recognize changes in the funded status of a defined benefit
      postretirement plan in the year in which the changes occur. These changes will
      be reported in comprehensive income in the statement of changes in stockholders’
equity. Statement No. 158 applies to plan sponsors that are public and private
      companies and nongovernmental not-for-profit organizations. The requirement
      to
      recognize the funded status of a benefit plan and the disclosure requirements
      are effective as of the end of the fiscal year ending after December 15, 2006
      for entities with publicly traded equity securities, and at the end of the
      fiscal year ending after June 15, 2007 for all other entities. The requirement
      to measure plan assets and benefit obligations as of the date of the employer's
      fiscal year-end statement of financial position is effective for fiscal years
      ending after December 15, 2008. On January 1, 2007, we adopted SFAS No. 158.
      The
      adoption of SFAS 158 did not have a material effect on the Company’s
      consolidated financial statements.




In
      September 2006, the Securities and Exchange Commission issued Staff Accounting
      Bulletin (SAB) No. 108, *Quantifying
      Financial Misstatements* ,
      which
      expresses the Staff’s views regarding the process of quantifying financial
      statement misstatements. Registrants are required to quantify the impact of
      correcting all misstatements, including both the carryover and reversing effects
      of prior year misstatements, on the current year financial statements. The
      techniques most commonly used in practice to accumulate and quantify
      misstatements are generally referred to as the “rollover” (current year income
      statement perspective) and “iron curtain” (year-end balance perspective)
      approaches. The financial statements would require adjustment when either
      approach results in quantifying a misstatement that is material, after
      considering all relevant quantitative and qualitative factors. This guidance
      is
      effective for annual financial statements covering the first fiscal year ending
      after November 15, 2006. The adoption of SAB No. 108 did not have a material
      effect on the consolidated financial statements.




In
      February 2007, the FASB issued SFAS No. 159, *The
      Fair Value Option for Financial Assets and Financial
      Liabilities* ,
      which
      permits all entities to choose to measure eligible items at fair value at
      specified election dates. A business entity shall report unrealized gains and
      losses on items for which the fair value option has been elected in earnings
      at
      each subsequent reporting date. This statement shall be effective as of the
      beginning of each reporting entity’s first fiscal year after November 15, 2007.
      We are in the process of evaluating the impact of this adoption on the
      consolidated financial statements.




**Note** **10.**  **Reclassifications**




A
      reclassification, related to tax benefit from exercise of stock options in
      the
      statement of cash flows, was made to the prior periods’ presentation to conform
      to the current year’s presentation.




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




This
      discussion presents management’s analysis of our results of operations and
      financial condition as of and for the three and nine months ended September
      30,
      2007 and 2006, respectively, and includes the statistical disclosures required
      by the Securities and Exchange Commission Guide 3 (“Statistical Disclosure by
      Bank Holding Companies”). The discussion should be read in conjunction with our
      financial statements and the notes related thereto which appear elsewhere in
      this Quarterly Report on Form 10-Q.




Statements
      contained in this report that are not purely historical are forward-looking
      statements within the meaning of Section 21E of the Securities Exchange Act
      of
      1934, as amended, including our expectations, intentions, beliefs, or strategies
      regarding the future. Any
      statements in this document about expectations, beliefs, plans, objectives,
      assumptions or future events or performance are not historical facts and are
      forward-looking statements. These statements are often, but not always, made
      through 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 involve estimates, assumptions and uncertainties, which could cause
      actual results to differ materially from those expressed in them. Any
      forward-looking statements are qualified in their entirety by reference to
      the
      factors discussed throughout this document. All
      forward-looking statements concerning economic conditions, rates of growth,
      rates of income or values as may be included in this document are based on
      information available to us on the dates noted, and we assume no obligation
      to
      update any such forward-looking statements. It is important to note that our
      actual results may differ materially from those in such forward-looking
      statements due to fluctuations in interest rates, inflation, government
      regulations, economic conditions, customer disintermediation and competitive
      product and pricing pressures in the geographic and business areas in which
      we
      conduct operations, including our plans, objectives, expectations and intentions
      and other factors discussed under the section entitled “Risk Factors,” in our
      Annual Report on Form 10-K for the year ended December 31, 2006, including
      the
      following:


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




12




·
            Our
                current level of interest rate spread may decline in the
                future.




·
            The
                holders of recently issued debentures have rights that are senior
                to those
                of our shareholders.




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




·
            Maintaining
                or increasing our market share depends on market acceptance and regulatory
                approval of new products and
                services.




·
            Significant
                reliance on loans secured by real estate may increase our vulnerability
                to
                downturns in the California real estate market and other variables
                impacting the value of real estate.




·
            If
                we fail to retain our key employees, our growth and profitability
                could be
                adversely affected.




·
            We
                may be unable to manage future
                growth.




·
            Increases
                in our allowance for loan lossescould
                materially adversely affect our earnings.




·
            We
                could be liable for breaches of security in our online banking services.
                Fear of security breaches could limit the growth of our online services.




·
            Our
                directors and executive officers beneficially own a significant portion
                of
                our outstanding common stock.




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




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




·
            Shares
                of our preferred stock issued in the future could have dilutive and
                other
                effects.




·
            We
                face substantial competition in our primary market
                area.




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




·
            Wilshire
                Bancorp relies heavily on the payment of dividends from the Bank.




·
            Anti-takeover
                provisions of our charter documents may have the effect of delaying
                or
                preventing changes in control or management.




·
            We
                are subject to significant government regulation and legislation
                that
                increase the cost of doing business and inhibits our ability to
                compete.




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




These
      factors and the risk factors referred to in our Annual Report on Form 10-K
      for
      the year ended December 31, 2006 could cause actual results or outcomes to
      differ materially from those expressed in any forward-looking statements made
      by
      us, and you should not place undue reliance on any such forward-looking
      statements. Any forward-looking statement speaks only as of the date on which
      it
      is made and we do not undertake any obligation to update any forward-looking
      statement or statements to reflect events or circumstances after the date on
      which such statement is made or to reflect the occurrence of unanticipated
      events. New factors emerge from time to time, and it is not possible for us
      to
      predict which will arise. In addition, we cannot assess the impact of each
      factor on our business or the extent to which any factor, or combination of
      factors, may cause actual results to differ materially from those contained
      in
      any forward-looking statements.





13





**Selected
      Financial Data**




The
      following table presents selected historical financial information (unaudited)
      as of and for the three and nine months ended September 30, 2007 and 2006.
      In
      the opinion of our management, the information presented reflects all
      adjustments considered necessary for a fair presentation of the results of
      such
      periods. The operating results for the interim periods are not necessarily
      indicative of our future operating results.




**Three months ended September 30,**
            
            **Nine months ended September 30,****(Dollars in
                thousands, except per share data)****2007**
            
            **2006**
            
            **2007**
            
            **2006**Net
                income
            
            $
            6,644
            
            $
            8,818
            
            $
            21,307
            
            $
            25,056Net
                income per share, basic
            
            
            0.23
            
            
            0.30
            
            
            0.73
            
            
            0.87Net
                income per share, diluted
            
            
            0.23
            
            
            0.30
            
            
            0.72
            
            
            0.86Net
                interest income
            
            
            20,938
            
            
            20,103
            
            
            60,882
            
            
            56,820**Average
                balances:**Assets
            
            
            2,075,790
            
            
            1,893,185
            
            
            2,021,416
            
            
            1,790,659Cash
                and cash equivalents
            
            
            116,849
            
            
            146,381
            
            
            132,561
            
            
            157,854Investment
                debt securities
            
            
            206,974
            
            
            207,553
            
            
            193,982
            
            
            193,576Net
                loans
            
            
            1,667,899
            
            
            1,460,959
            
            
            1,613,867
            
            
            1,369,249Total
                deposits
            
            
            1,772,434
            
            
            1,633,097
            
            
            1,742,712
            
            
            1,530,630Shareholders’
                equity
            
            
            167,015
            
            
            138,454
            
            
            161,367
            
            
            128,346**Performance
                Ratios:**Annualized
                return on average assets
            
            
            1.28
            %
            
            1.86
            %
            
            1.41
            %
            
            1.87
            %Annualized
                return on average equity
            
            
            15.91
            %
            
            25.48
            %
            
            17.61
            %
            
            26.03
            %Net
                interest margin
            
            
            4.35
            %
            
            4.59
            %
            
            4.32
            %
            
            4.57
            %Efficiency
                ratio1
            
            
            42.22
            %
            
            38.43
            %
            
            41.45
            %
            
            39.25
            %**Capital
                Ratios:**Tier
                1 capital to adjusted total assets
            
            
            10.41
            %
            
            9.59
            %Tier
                1 capital to risk-weighted assets
            
            
            12.18
            %
            
            11.60
            %Total
                capital to risk-weighted assets
            
            
            15.06
            %
            
            13.66
            %





**Period-end
                balances as of:**
            
            **September 30,**
              **2007**
            
            **December 31,**
              **2006**
            
            **September 30,**
              **2006**Total
                assets
            
            $
            2,100,807
            
            $
            2,008,484
            
            $
            1,909,913Investment
                securities
            
            
            206,723
            
            
            182,459
            
            
            203,049Total
                loans, net of unearned income
            
            
            1,724,625
            
            
            1,560,539
            
            
            1,509,883Total
                deposits
            
            
            1,748,158
            
            
            1,751,973
            
            
            1,661,451Junior
                subordinated debentures
            
            
            87,321
            
            
            61,547
            
            
            61,547FHLB
                borrowings
            
            
            70,000
            
            
            20,000
            
            
            20,000Shareholders’
                equity
            
            
            168,148
            
            
            149,635
            
            
            141,753**Asset
                Quality Ratios:**Net
                charge-off (recoveries) to average total loans for the
                quarter
            
            
            0.14
            %
            
            0.06
            %
            
            0.05
            %Non-performing
                loans to total loans
            
            
            0.48
            %
            
            0.44
            %
            
            0.47
            %Non-performing
                assets to total loans and other real estate owned
            
            
            0.52
            %
            
            0.45
            %
            
            0.49
            %Allowance
                for loan losses to total loans
            
            
            1.21
            %
            
            1.20
            %
            
            1.22
            %Allowance
                for loan losses to non-performing loans
            
            
            251.48
            %
            
            272.38
            %
            
            259.50
            %





**Executive
      Overview**




**Introduction**




Wilshire
      Bancorp, Inc. succeeded to the business and operations of Wilshire State Bank
      upon consummation of the reorganization of the Bank into a holding company
      structure, effective as of August 25, 2004. Prior to the completion of the
      reorganization, the Bank was subject to the information, reporting and proxy
      statement requirements of the Exchange Act pursuant to the regulations of its
      primary regulator, the Federal Deposit Insurance Corporation, or FDIC.
      Accordingly, the Bank filed annual and quarterly reports, proxy statements
      and
      other information with the FDIC. Pursuant to Rule 12g-3 of the Securities
      Exchange Act of 1934, as amended, or Exchange Act, the Company has succeeded
      to
      the reporting obligations of the Bank and the reporting obligations of the
      Bank
      to the FDIC have terminated. Filings by the Company under the Exchange Act,
      like
      this Form 10-Q, are to be made with the Securities and Exchange Commission,
      or
      SEC. Note that while we refer generally to the “Company” throughout this filing,
      all references to the Company prior to August 25, 2004, except where otherwise
      indicated, are to the Bank.





1  Represents
      the ratio of non-interest expense to the sum of net interest income before
      provision for loan losses and non-interest income .





14





We
      operate community banks in the general commercial banking business, with our
      primary market encompassing the multi-ethnic population of the Los Angeles
      metropolitan area. Our full-service offices are located primarily in areas
      where
      a majority of the businesses are owned by Korean-speaking immigrants, with
      many
      of the remaining businesses owned by Hispanic and other minority
      groups.




At
      September 30, 2007, we had approximately $2.10 billion in assets, $1.72 billion
      in total loans, and $1.75 billion in deposits.




We
      have
      also expanded and diversified our business with the focus on our commercial
      and
      consumer lending divisions. Over the past several years, our network of branches
      and loan production offices has been expanded geographically. We currently
      maintain 19 full-service branch banking offices in Southern California, Texas,
      New York, and New Jersey and 8 separate loan production offices in Seattle,
      Washington; Milpitas, California (the San Jose area); Annandale, Virginia;
      Las
      Vegas, Nevada; Aurora, Colorado (the Denver area); Atlanta, Georgia; Houston,
      Texas; and Fort Lee, New Jersey.




In
      December 2002, the Bank issued $10 million of its 2002 Junior Subordinated
      Debentures. Subsequently, the Company, as a wholly-owned subsidiary in 2003
      and
      as a parent company of the Bank in 2005 and 2007, issued a total of $77,321,000
      of Junior Subordinated Debentures in connection with $75,000,000 of trust
      preferred securities issued by statutory trusts wholly-owned by the Company.
      We
      believe that the supplemental capital raised in connection with the issuance
      of
      these debentures allowed us to achieve and maintain status as a well-capitalized
      institution and sustained our continued growth.




In
      July
      2007, the Company implemented a stock repurchase program whereby the Company
      may
      repurchase up to an aggregate of $10 million worth of shares of its common
      stock
      from time to time until July 31, 2008. Thus far, 39,625 shares have been
      repurchased under this program amounting to $410,000. We believe this program
      represents an efficient way to manage capital as well as affirming our optimism
      for the long term value for shareholders.




We
      have
      experienced significant balance sheet growth in the past several years. In
      the
      fourth quarter of 2006, we implemented new strategy to focus on loan credit
      quality and to develop a stronger core-deposit foundation, which resulted in
      more moderate balance sheet growth during 2007. Our management believes that
      this strategy will continue to improve our cost of funds, decrease
      non-performing loans, and enhance shareholder value.




**Third** **Quarter 2007 Key Performance Indicators**




We
      believe the following were key indicators of our performance for operations
      during the third quarter of 2007:




·
            With
                our continuing core-deposit campaign, time deposits declined by 3.6%
                year-to-year from the end of third quarter of 2006 through the end
                of
                third quarter of 2007 while non-time deposits grew 16.4% over the
                same
                period.




·
            Under
                our new strategy of disciplined loan growth, our total loans grew
                in a
                more controlled way by 10.5% to $1.72 billion at the end of the third
                quarter of 2007, as compared with $1.56 billion at the end of
                2006.




·
            Although
                our cost of funds stabilized this quarter, our net interest margin
                decreased to 4.35% from 4.52% in the preceding quarter, mainly due
                to the
                absence of additional interest income we had in the preceding quarter
                by
                collecting interest on some loans previously placed on a non-accrual
                status.




·
            Our
                non-performing assets, net of the portion guaranteed by the U.S.
                government, increased to $9.0 million at the end of the third quarter
                of
                2007 from $8.5 million three months ago and is still higher than
                $7.1
                million at the end of 2006. However, our credit quality continued
                to
                improve with $14.4 million in total delinquent loans, net of the
                portion
                guaranteed by the U.S. government, which represented 0.84% of total
                loans
                at the end of the third quarter of 2007 as compared with 2.1% at
                the end
                of 2006.




·
            Total
                non-interest income decreased by 28.5% to $5.2 million in the third
                quarter of 2007, as compared with $7.3 million in the third quarter
                of
                2006, mainly due to the reduction of gains on loan sales.




15




·
            Although
                operating expenses were up slightly due to our New York/New Jersey
                expansion and the efficiency ratio was slightly up from 38.4% in
                the third
                quarter of 2006, our efficiency ratio was well managed at 42.2% in
                the
                third quarter of 2007, which is around our targeted range of
                40.0%.




Primarily
      due to a substantial rise in our provision for loan losses caused by the
      increased loan charge-offs and the reduction of the gains on sales of SBA loans,
      our net income decreased to $6.6 million, or $0.23 per diluted common share,
      for
      the third quarter of 2007, from $8.8 million, or $0.30 per diluted common share,
      in the third quarter of 2006.




**200** **7
      Outlook**




As
      we
      look ahead to the remainder of 2007, the economies and real estate markets
      in
      our primary market areas will continue to be significant determinants of the
      quality of our assets in future periods and thus our results of operations,
      liquidity and financial condition. We continue to anticipate that the weakened
      national economy will remain throughout the next quarters, largely created
      by
      the housing market fallout and credit quality problems. Responding to this
      difficult environment, we have enhanced our loan underwriting standards to
      be
      more stringent and made it more difficult to allow exceptions from our loan
      policy. We expect loan quality to continually improve through the end of 2007,
      although loan growth will be moderate, having shifted our focus from growth
      to
      asset quality management.




Our
      focus
      on net interest margin management will continue. It
      is our
      expectation that the strategic change toward more moderate loan growth will
      make
      our funding needs subside and our reliance on high-cost deposits to decline.
      With the Federal Reserve Board’s rate cut of 0.5% in September of 2007, our
      margins may initially decrease in the fourth quarter of 2007 since our GAP
      model
      indicates that we are in a slightly asset-sensitive position for the first
      three-month timeframe where deposit costs reprice somewhat slower than our
      earning assets. However, the extent of margin compression, if any, seems
      negligible beyond the fourth quarter of 2007 as we are in a liability-sensitive
      position over a twelve-month timeframe. See “Item 3. Quantitative and
      Qualitative Disclosures about Market Risk” below for further discussion. We
      also
      believe that our expansion into the
      East
      Coast market of the United States, together
      with our core deposit campaign that already brought some positive results in
      the
      first three quarters of 2007, will benefit our net interest margin going
      forward.




Notwithstanding
      the overall slower national economy, we believe that there will be continued
      growth in our primary market areas, which includes the Korean-American business
      sectors located in Southern California, Texas, and the greater New York
      metropolitan area, due mainly to the anticipated capital influx from the
      Republic of Korea. Therefore, we believe that we will continue to grow, but
      at a
      more controlled pace than we had experienced in the past few years.




We
      opened
      a new branch in July of 2007 in Fort Lee, New Jersey, which will allow us to
      offer greater convenience to both new and existing customers in the
      East
      Coast market of the United States . We
      believe that this New Jersey branch, together with the existing New York
      branches, will be a critical part of our expansion strategy, especially in
      the
      East Coast market due to its high level of small business activity and diverse
      population. We plan to open a second branch early next year in Palisades Park,
      New Jersey, which is another key location to our geographic expansion in that
      area, and we will continue to pursue opportunities for growth through *de
      novo* branching and regional loan production offices.




In
      addition, we will continue to focus on streamlining our operations so that
      our
      expenses grow more slowly than the overall growth of our business. Unfortunately,
      the increase in our loan loss provision as well as the decrease in gain on
      sale
      of loans resulted in lower profit levels in the third quarter compared to our
      historically higher profit levels in the last few years, despite our overall
      improvements . Although
      our profit recovery has been delayed, we expect profit levels to improve to
      be
      back on track in the near future as our correction processes and our modified
      growth strategy both continue to materialize **.**




**Critical
      Accounting Policies**




The
      discussion and analysis of our financial condition and results of operations
      is
      based upon our financial statements, which have been prepared in accordance
      with
      GAAP. The preparation of these financial statements requires management to
      make
      estimates and judgments that affect the reported amounts of assets and
      liabilities, revenues and expenses, and related disclosures of contingent assets
      and liabilities at the date of our financial statements. Actual results may
      differ from these estimates under different assumptions or
      conditions.




16




Various
      elements of our accounting policies, by their nature, are inherently subject
      to
      estimation techniques, valuation assumptions and other subjective assessments.
      In particular, we have identified six accounting policies that, due to
      judgments, estimates and assumptions inherent in those policies are critical
      to
      an understanding of our consolidated financial statements. These policies relate
      to the classification and valuation of investment securities, the methodologies
      that determine our allowance for loan losses, the treatment of non-accrual
      loans, the valuation of properties acquired through foreclosure, the valuation
      of retained interests and servicing assets related to the sales of SBA loans,
      and the treatment and valuation of stock-based compensation. In each area,
      we
      have identified the variables most important in the estimation process. We
      have
      used the best information available to make the estimates necessary to value
      the
      related assets and liabilities. Actual performance that differs from our
      estimates and future changes in the key variables could change future valuation
      and impact net income.




Our
      significant accounting policies are described in greater detail in our 2006
      Annual Report on Form 10-K in the “Critical Accounting Policies” section of
“Management’s Discussion and Analysis of Financial Condition and Result of
      Operations” and in Note 1 to the Consolidated Financial Statements-“Significant
      Accounting Policies” which are essential to understanding Management’s
      Discussion and Analysis of Results of Operations and Financial Condition. There
      has been no material modification to these policies during the quarter ended
      September 30, 2007.




**Results
      of Operations**




**Net
      Interest Income and Net Interest Margin**




Our
      primary source of revenue is net interest income, which is the difference
      between interest and fees derived from earning assets and interest paid on
      liabilities obtained to fund those assets. Our net interest income is affected
      by changes in the level and mix of interest-earning assets and interest-bearing
      liabilities, referred to as volume changes. Our net interest income is also
      affected by changes in the yields earned on assets and rates paid on
      liabilities, referred to as rate changes. Interest rates charged on our loans
      are affected principally by the demand for such loans, the supply of money
      available for lending purposes and competitive factors. Those factors are,
      in
      turn, affected by general economic conditions and other factors beyond our
      control, such as federal economic policies, the general supply of money in
      the
      economy, legislative tax policies, governmental budgetary matters and the
      actions of the Federal Reserve Board.




Average
      interest-earning assets increased  by
      10.1%
      to $1.93 billion in the third quarter of 2007, as compared with $1.75 billion
      in
      the same quarter of 2006 and average net loans increased by 14.2% to $1.67
      billion in the third quarter of 2007, as compared with $1.46 billion in the
      same
      quarter of 2006. Our average interest-bearing deposits also increased by 10.6%
      to $1.45 billion in the third quarter of 2007, as compared with $1.31 billion
      in
      the same quarter of 2006. Average other borrowings increased by 12.6% to $109.0
      million in the third quarter of 2007 from $96.8 million in the prior year’s same
      quarter. (see “Financial Condition-Deposits and Other Sources of Funds” below).




The
      strong competition in our local market decreased our earning-asset yields and
      pushed up our cost of funds. The average yields on our interest-earning assets
      decreased to 8.40% for the third quarter of 2007 from 8.56% for the third
      quarter of the prior year and increased our cost of funds to 5.01% in the third
      quarter of 2007 from 4.94% for the prior year’s same quarter. Although interest
      income grew 8.0% to $40.5 million for the third quarter of 2007, as compared
      with $37.5 million for the prior year’s same period, it was outpaced by a 12.5%
      increase in interest expense. Interest expense increased to $19.5 million for
      the third quarter of 2007, as compared with $17.4 million for the prior year’s
      same period. Our net interest margin and spread decreased to 4.35% and 3.39%,
      respectively, in the third quarter of 2007, as compared with 4.59% and 3.62
      %,
      respectively, for the prior year’s same quarter.




For
      the
      first nine months of 2007, average interest-earning assets and average net
      loans
      increased to $1.88 billion and $1.61 billion, respectively, as compared with
      $1.66 billion and $1.37 billion for the prior year’s same period. For the first
      nine months of 2007, average interest-bearing liabilities and the average
      interest-bearing deposit portfolio also increased to $1.52 billion and $1.43
      billion, respectively, as compared with $1.33 billion and $1.22 billion for
      the
      prior year’s same period. The Federal Reserve Board’s rate increase in 2006
      increased the average yields on interest-earning assets slightly to 8.36% for
      the first nine months of 2007 from 8.29% for the prior year’s same period. Such
      actions however increased our cost of funds to a greater extent to 4.99% for
      the
      first nine months of 2007 from 4.64% for the prior year’s same period. Our
      normal business growth resulted in an increase in net interest income by $4.1
      million, or 7.2%, to $60.9 million in the first nine months of 2007 as compared
      with $56.8 million for the prior year’s same period. With the increase in the
      cost of funds greater than the increase of earning-asset yields over the above
      periods in comparison, our net interest margin and spread were under some
      pressure and decreased to 4.32% and 3.36%, respectively, in the first nine
      months of 2007, as compared with 4.57% and 3.65%, respectively, for the prior
      year’s same period.




17




In
      2007,
      our continuing deposit campaign for transactional accounts brought some positive
      results and lowered the ratio of time deposits over total deposits to 51.2%
      at
      the end of the third quarter from 55.5% at the end of 2006. As a result, despite
      continuing stiff competition for deposits in our local market, we were able
      to
      stabilize our fund cost in 2007 which has risen
      each quarter of 2006. Management
      believes that our expansion into the
      East
      Coast market of the United States together with the Federal Reserve Board’s
      recent rate-cut will
      help
      improve our fund costs further and eventually our margins.




The
      following table sets forth, for the periods indicated, our average balances
      of
      assets, liabilities and shareholders’ equity, in addition to the major
      components of net interest income and net interest margin (all yields were
      calculated without the consideration of tax effects, if any):




**Distribution,
      Yield and Rate Analysis of Net Interest Income**




**For
                  the Quarter Ended September 30,****2007**
              
              **2006****(****Dollars
                  in Thousands)****Average**
                **Balance**
              
              **Interest**
                **Income/**
                **Expense**
              
              **Annualized**
                **Average**
                **Rate/Yield**
              
              **Average**
                **Balance**
              
              **Interest**
                **Income/**
                **Expense**
              
              **Annualized**
                **Average**
                **Rate/Yield****Assets**:Interest-earning
                  assets:Net
                  loans1
              
              $
              1,667,899
              
              $
              37,093
              
              
              8.90
              %
              $
              1,460,959
              
              $
              33,995
              
              
              9.31
              %Securities
                  of U.S. government agencies
              
              
              181,787
              
              
              2,353
              
              
              5.18
              %
              
              184,688
              
              
              2,086
              
              
              4.52
              %Other
                  investment securities
              
              
              27,433
              
              
              344
              
              
              5.02
              %
              
              22,865
              
              
              271
              
              
              4.73
              %Overnight
                  investments
              
              
              49,601
              
              
              679
              
              
              5.47
              %
              
              81,626
              
              
              1,107
              
              
              5.43
              %Interest-earning
                  deposits
              
              
              -
              
              
              -
              
              
              -
              
              
              500
              
              
              5
              
              
              4.29
              %Total
                  interest-earning assets
              
              
              1,926,720
              
              
              40,469
              
              
              8.40
              %
              
              1,750,638
              
              
              37,464
              
              
              8.56
              %Cash
                  and due from banks
              
              
              67,248
              
              
              
              
              
              
              
              
              64,755Other
                  assets
              
              
              81,822
              
              
              
              
              
              
              
              
              77,792Total
                  assets
              
              $
              2,075,790
              
              
              
              
              
              
              
              $
              1,893,185**Liabilities
                  and Shareholders’ Equity:**Interest-bearing
                  liabilities:Money
                  market deposits
              
              $
              474,122
              
              $
              5,475
              
              
              4.62
              %
              $
              375,030
              
              $
              4,078
              
              
              4.35
              %Super
                  NOW deposits
              
              
              22,317
              
              
              70
              
              
              1.26
              %
              
              20,550
              
              
              65
              
              
              1.26
              %Savings
                  deposits
              
              
              29,790
              
              
              186
              
              
              2.50
              %
              
              25,856
              
              
              95
              
              
              1.47
              %Time
                  certificates of deposit indenominations
                  of $100,000 or more
              
              
              780,463
              
              
              10,276
              
              
              5.27
              %
              
              726,287
              
              
              9,652
              
              
              5.32
              %Other
                  time deposits
              
              
              142,877
              
              
              1,756
              
              
              4.92
              %
              
              162,464
              
              
              1,955
              
              
              4.81
              %Total
                  interest-bearing deposits
              
              
              1,449,569
              
              
              17,763
              
              
              4.90
              %
              
              1,310,187
              
              
              15,845
              
              
              4.84
              %Other
                  borrowings
              
              
              109,049
              
              
              1,768
              
              
              6.48
              %
              
              96,824
              
              
              1,516
              
              
              6.26
              %Total
                  interest-bearing liabilities
              
              
              1,558,618
              
              
              19,531
              
              
              5.01
              %
              
              1,407,011
              
              
              17,361
              
              
              4.94
              %Non-interest-bearing
                  deposits
              
              
              322,865
              
              
              
              
              
              
              
              
              322,911Total
                  deposits and other borrowings
              
              
              1,881,483
              
              
              
              
              
              1,729,922Other
                  liabilities
              
              
              27,292
              
              
              
              
              
              
              
              
              24,809Shareholders’
                  equity
              
              
              167,015
              
              
              
              
              
              
              
              
              138,454Total
                  liabilities and shareholders’ equity
              
              $
              2,075,790
              
              
              
              
              
              
              
              $
              1,893,185Net
                  interest income
              
              
              
              
              $
              20,938
              
              
              
              
              
              
              
              $
              20,103Net
                  interest spread2
              
              
              
              
              
              
              
              
              3.39
              %
              
              
              
              
              
              
              
              3.62
              %Net
                  interest margin3
              
              
              
              
              
              
              
              
              4.35
              %
              
              
              
              
              
              
              
              4.59
              %








1 Net loan
      fees have been included in the calculation of interest income. Loan fees were
      approximately $1,757,000 and $1,561,000 for the quarters ended September 30,
      2007 and 2006, respectively, and approximately $5,281,000 and $4,663,000 for
      the
      nine months ended September 30, 2007 and 2006, respectively. Net loans are
      net
      of the allowance for loan losses, deferred fees, unearned income and related
      direct costs, but include those loans placed on non-accrual status.


2 Represents the average rate earned on interest-earning assets less the average
      rate paid on interest-bearing liabilities.


3 Represents net interest income as a percentage of average interest-earning
      assets.





18





**Distribution,
      Yield and Rate Analysis of Net Interest Income**


**For
                  the Nine Months Ended September 30,****2007**
              
              **2006****(Dollars
                  in Thousands)****Average**
                **Balance**
              
              **Interest**
                **Income/**
                **Expense**
              
              **Annualized**
                **Average**
                **Rate/Yield**
              
              **Average**
                **Balance**
              
              **Interest**
                **Income/**
                **Expense**
              
              **Annualized**
                **Average**
                **Rate/Yield****Assets**:Interest-earning
                  assets:Net
                  loans1
              
              $
              1,613,867
              
              $
              107,578
              
              
              8.89
              %
              $
              1,369,249
              
              $
              93,271
              
              
              9.08
              %Securities
                  of U.S. government agencies
              
              
              168,580
              
              
              6,320
              
              
              5.00
              %
              
              173,633
              
              
              5,653
              
              
              4.34
              %Other
                  investment securities
              
              
              27,184
              
              
              1,014
              
              
              4.97
              %
              
              19,942
              
              
              706
              
              
              4.72
              %Overnight
                  investments
              
              
              68,190
              
              
              2,766
              
              
              5.41
              %
              
              95,250
              
              
              3,496
              
              
              4.89
              %Interest-earning
                  deposits
              
              
              -
              
              
              -
              
              
              -
              
              
              500
              
              
              16
              
              
              4.25
              %Total
                  interest-earning assets
              
              
              1,877,821
              
              
              117,678
              
              
              8.36
              %
              
              1,658,574
              
              
              103,142
              
              
              8.29
              %Cash
                  and due from banks
              
              
              64,371
              
              
              
              
              
              
              
              
              62,605Other
                  assets
              
              
              79,224
              
              
              
              
              
              
              
              
              69,480Total
                  assets
              
              $
              2,021,416
              
              
              
              
              
              
              
              $
              1,790,659**Liabilities
                  and Shareholders’ Equity:**Interest-bearing
                  liabilities:Money
                  market deposits
              
              $
              434,001
              
              $
              14,796
              
              
              4.55
              %
              
              346,755
              
              
              10,808
              
              
              4.16
              %Super
                  NOW deposits
              
              
              21,803
              
              
              195
              
              
              1.19
              %
              
              21,235
              
              
              188
              
              
              1.18
              %Savings
                  deposits
              
              
              29,368
              
              
              492
              
              
              2.23
              %
              
              23,773
              
              
              211
              
              
              1.19
              %Time
                  certificates of deposit indenominations
                  of $100,000 or more
              
              
              789,478
              
              
              31,284
              
              
              5.28
              %
              
              678,061
              
              
              25,399
              
              
              4.99
              %Other
                  time deposits
              
              
              151,310
              
              
              5,602
              
              
              4.94
              %
              
              153,336
              
              
              5,137
              
              
              4.47
              %Total
                  interest-bearing deposits
              
              
              1,425,960
              
              
              52,369
              
              
              4.90
              %
              
              1,223,160
              
              
              41,743
              
              
              4.55
              %Other
                  borrowings
              
              
              91,334
              
              
              4,427
              
              
              6.46
              %
              
              107,937
              
              
              4,579
              
              
              5.66
              %Total
                  interest-bearing liabilities
              
              
              1,517,294
              
              
              56,796
              
              
              4.99
              %
              
              1,331,097
              
              
              46,322
              
              
              4.64
              %Non-interest-bearing
                  deposits
              
              
              316,752
              
              
              
              
              
              
              
              
              307,470Total
                  deposits and other borrowings
              
              
              1,834,046
              
              
              
              
              
              
              
              
              1,638,567Other
                  liabilities
              
              
              26,003
              
              
              
              
              
              
              
              
              23,746Shareholders’
                  equity
              
              
              161,367
              
              
              
              
              
              
              
              
              128,346Total
                  liabilities and shareholders’ equity
              
              $
              2,021,416
              
              
              
              
              
              
              
              $
              1,790,659Net
                  interest income
              
              
              
              
              $
              60,882
              
              
              
              
              
              
              
              $
              56,820Net
                  interest spread2
              
              
              
              
              
              
              
              
              3.36
              %
              
              
              
              
              
              
              
              3.65
              %Net
                  interest margin3
              
              
              
              
              
              
              
              
              4.32
              %
              
              
              
              
              
              
              
              4.57
              %







1  Net
      loan
      fees have been included in the calculation of interest income. Loan fees were
      approximately $1,757,000 and $1,561,000 for the quarters ended September 30,
      2007 and 2006, respectively, and approximately $5,281,000 and $4,663,000 for
      the
      nine months ended September 30, 2007 and 2006, respectively. Net
      loans
      are net of the allowance for loan losses, deferred fees, unearned income, and
      related direct costs, but include those loans placed on non-accrual
      status.


2 Represents the average rate earned on interest-earning assets less the average
      rate paid on interest-bearing liabilities.


3 Represents net interest income as a percentage of average interest-earning
      assets.





19





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




**Rate/Volume
      Analysis of Net Interest Income**


**(Dollars
      in Thousands)**


**Three
                  Months Ended September 30,**
                **2007
                  vs. 2006**
                **Increase
                  (Decrease) Due to Change In**
              
              **Nine
                  Months Ended September 30,**
                **2007
                  vs. 2006**
                **Increase
                  (Decrease) Due to Change In**Volume
              
              Rate
              
              Total
              
              Volume
              
              Rate
              
              Total**Interest
                income:**Net
                  loans1
              
              $
              4,653
              
              $
              (1,555
              )
              $
              3,098
              
              $
              16,344
              
              $
              (2,037
              )
              $
              14,307Securities
                  of U.S. government agencies
              
              
              (33
              )
              
              300
              
              
              267
              
              
              (168
              )
              
              835
              
              
              667Other
                  investment securities
              
              
              56
              
              
              17
              
              
              73
              
              
              268
              
              
              40
              
              
              308Overnight
                  Investments
              
              
              (437
              )
              
              9
              
              
              (428
              )
              
              (1,069
              )
              
              339
              
              
              (730
              )Interest-earning
                  deposits
              
              
              (5
              )
              
              -
              
              
              (5
              )
              
              (16
              )
              
              -
              
              
              (16
              )Total
                  interest income
              
              
              4,234
              
              
              (1,229
              )
              
              3,005
              
              
              15,359
              
              
              (823
              )
              
              14,536**Interest
                  expense:**Money
                  market deposits
              
              $
              1,131
              
              $
              266
              
              $
              1,397
              
              $
              2,905
              
              $
              1,083
              
              $
              3,988Super
                  NOW deposits
              
              
              5
              
              
              -
              
              
              5
              
              
              5
              
              
              2
              
              
              7Savings
                  deposits
              
              
              16
              
              
              75
              
              
              91
              
              
              59
              
              
              222
              
              
              281Time
                  certificates of deposit in denominations
                  of $100,000 or more
              
              
              715
              
              
              (91
              )
              
              624
              
              
              4,352
              
              
              1,533
              
              
              5,885Other
                  time deposits
              
              
              (240
              )
              
              41
              
              
              (199
              )
              
              (69
              )
              
              534
              
              
              465Other
                  borrowings
              
              
              196
              
              
              56
              
              
              252
              
              
              (756
              )
              
              604
              
              
              (152
              )Total
                  interest expense
              
              
              1,823
              
              
              347
              
              
              2,170
              
              
              6,496
              
              
              3,978
              
              
              10,474Change
                  in net interest income
              
              $
              2,411
              
              $
              (1,576
              )
              $
              835
              
              $
              8,863
              
              $
              (4,801
              )
              $
              4,062




**P** **rovision
      for Loan Losses**




Due
      to
      the credit risk inherent in our lending business, we set aside allowances
      through charges to earnings. Such charges are made not only for our outstanding
      loan portfolio, but also for off-balance sheet items, such as commitments to
      extend credits or letters of credit. The charges made for our outstanding loan
      portfolio were credited to allowance for loan losses, whereas charges for
      off-balance sheet items were credited to reserve for off-balance sheet items,
      which is presented as a component of other liabilities.




Prior
      to
      2007, our stringent loan underwriting standard and proactive credit follow-up
      procedures had helped us to successfully curb an increase of the provision
      for
      loan losses despite our rapid loan growth. **** However,
      our clean-up process of the credit portfolio has increased loan charge-offs
      in
      2007 and we increased and recorded a provision for loan losses of $4.1 million
      in the third quarter of 2007 as compared to a provision of $2.8 million for
      the
      prior year’s same quarter. The provision for loan losses in the first nine
      months of 2007 was $10.2 million, as compared to $5.1 million in the first
      nine
      months of 2006. See “Financial Condition - Allowance for Loan Losses” below for
      further discussion. Included in such provision was $220,000 and $35,000
      provision to the reserve for off-balance-sheet items in the third quarter of
      2007 and 2006, respectively, and $1,174,000 and $351,000 provision to the
      reserve for off-balance-sheet items for the first nine months of 2007 and 2006,
      respectively. The procedures for monitoring the adequacy of the allowance for
      loan losses, as well as detailed information concerning the allowance itself,
      are described in the section entitled “Allowance for Loan Losses”
below.





1  Net
      loan
      fees have been included in the calculation of interest income. Loan fees were
      approximately $1,757,000 and $1,561,000 for the quarters ended September 30,
      2007 and 2006, respectively, and approximately $5,281,000 and $4,663,000 for
      the
      nine months ended September 30, 2007 and 2006, respectively. Net loans are
      net
      of the allowance for loan losses, unearned income and related direct
      costs.





20





**Non-interest** **Income**




Total
      non-interest income decreased by 28.5% to $5.2 million in the third quarter
      of
      2007 as compared with $7.3 million for the prior year’s same quarter, due mainly
      to the decrease of gain on sale of loans. Non-interest income as a percentage
      of
      average assets also decreased to 0.25% for the third quarter of 2007 from 0.40%
      for the prior year’s same period. For the first nine months of 2007, total
      non-interest income decreased by 15.1% to $16.7 million as compared with $19.7
      million in the same period of 2006, and such nine-month non-interest income
      of
      2007 and 2006 represent 0.83% and 1.11% of average assets, respectively. We
      currently earn non-interest income from various sources, including an income
      stream provided by bank-owned life insurance (“BOLI”) in the form of an increase
      in cash surrender value.




The
      following table sets forth the various components of our non-interest income
      for
      the periods indicated:




**Non-interest
      Income**


**(Dollars
      in thousands)**




**For
                Three Months Ended September 30,**
            
            ******2007**
            
            ******2006****(Amount)**
            
            **(%)**
            
            **(Amount)**
            
            **(%)**Service
                charges on deposit accounts
            
            $
            2,398
            
            
            45.9
            %
            $
            2,545
            
            
            34.8
            %Gain
                on sale of loans
            
            
            1,584
            
            
            30.3
            %
            
            3,455
            
            
            47.3
            %Loan-related
                servicing income
            
            
            478
            
            
            9.1
            %
            
            538
            
            
            7.4
            %Loan
                referral fee income
            
            
            -
            
            
            0.0
            %
            
            22
            
            
            0.3
            %SBA
                loan packaging fee
            
            
            29
            
            
            0.6
            %
            
            112
            
            
            1.5
            %Income
                from other earning assets
            
            
            293
            
            
            5.6
            %
            
            268
            
            
            3.7
            %Other
                income
            
            
            446
            
            
            8.5
            %
            
            368
            
            
            5.0
            %Total
            
            $
            5,228
            
            
            100.0
            %
            $
            7,308
            
            
            100.0
            %Average
                assets
            
            $
            2,075,790
            
            
            
            
            $
            1,893,185Non-interest
                income as a % of average assets
            
            
            
            
            
            0.25
            %
            
            
            
            
            0.39
            %




**For
                Nine Months Ended September 30,**
            
            ******2007**
            
            ******2006****(Amount)**
            
            **(%)**
            
            **(Amount)**
            
            **(%)**Service
                charges on deposit accounts
            
            $
            7,189
            
            
            43.0
            %
            $
            7,141
            
            
            36.3
            %Gain
                on sale of loans
            
            
            5,727
            
            
            34.3
            %
            
            8,860
            
            
            45.1
            %Loan-related
                servicing income
            
            
            1,169
            
            
            7.0
            %
            
            1,431
            
            
            7.3
            %Loan
                referral fee income
            
            
            -
            
            
            0.0
            %
            
            70
            
            
            0.4
            %SBA
                loan packaging fee
            
            
            65
            
            
            0.4
            %
            
            346
            
            
            1.8
            %Income
                from other earning assets
            
            
            846
            
            
            5.1
            %
            
            765
            
            
            3.9
            %Other
                income
            
            
            1,698
            
            
            10.2
            %
            
            1,039
            
            
            5.2
            %Total
            
            $
            16,694
            
            
            100.0
            %
            $
            19,652
            
            
            100.0
            %Average
                assets
            
            $
            2,021,416
            
            
            
            
            $
            1,790,659Non-interest
                income as a % of average assets
            
            
            
            
            
            0.83
            %
            
            
            
            
            1.10
            %




Our
      largest source of non-interest income in 2007 has been the service charge income
      on deposit accounts, which generally increases as our number of transactional
      accounts increases. However, they decreased to $2.4 million in the third quarter
      of 2007 as compared to $2.5 million in the third quarter of 2006 due mainly
      to
      the increase in waiving of service charges resulting from higher competition
      for
      deposit customers. In the first nine months of 2007, this income source
      increased slightly to $7.2 million as compared to $7.1 million for the prior
      year’s same period which was mainly caused by an increase in the number of
      transactional accounts. We constantly review service charge rates and the
      managers’ authority to waive them to maximize service charge income while
      maintaining a competitive position.




Our
      second largest source of non-interest income for the third quarter of 2007
      was
      the gain on the sale of loans, which decreased to $1.6 million and $5.7 million
      in the third quarter and the first nine months of 2007 from $3.5 million and
      $8.9 million, respectively, for the prior year’s same periods. This non-interest
      income is derived primarily from the sale of the guaranteed portion of SBA
      loans. We sell the portion of SBA loans guaranteed under the SBA 7(a) program
      in
      government securities secondary markets and retain servicing rights. Although
      our expanded SBA marketing network continues to increase our overall SBA loan
      production levels, the gain on sale of the guaranteed SBA loans decreased to
      $1.6 million and $5.0 million in the third quarter and the first nine months
      of
      2007, as compared with $2.1 million and $7.4 million, respectively, for the
      prior year’s same periods. This decrease was mainly due to the lowered sales
      premium on SBA loans caused by the faster prepayments of SBA loans. The average
      sales premium we received in the first nine months of 2007 was 7.04%, as
      compared with 8.12% for the prior year’s same period. We also recognize gains
      from the sale of residential mortgage loans and such sales gain decreased in
      2007 due to the slow-down of the residential mortgage market. Mainly for credit
      risk management purposes, we sometimes sell the unguaranteed portion of SBA
      loans, but the resulting gains are not considered a stable source of
      non-interest income. These gains were none and $601,000, respectively, in the
      third quarter and the first nine months of 2007 as compared with $1.3 million
      and $1.3 million, respectively, in the prior year’s same periods.





21





The
      third
      largest source of non-interest income was loan-related servicing income. This
      fee income consists of trade-financing fees and servicing fees on SBA loans
      sold. With the expansion of our trade-financing activities and the growth of
      our
      servicing loan portfolio, this fee income has generally increased in the past.
      However, in the third quarter and first nine months of 2007, it decreased to
      $478,000 and $1.2 million, respectively, as compared with $538,000 and $1.4
      million for the prior year’s same periods. Such decrease was mainly caused by
      the significant reduction in servicing rights on sold SBA loans which were
      paid
      off before their maturities in 2007. The servicing fee income on sold loans
      is
      credited when we collect the monthly payments on the sold loans we are servicing
      and charged by the monthly amortization of servicing rights that we capitalize
      upon sale of the related loans. Such servicing rights are also charged against
      the fee income account when the sold loans are paid off before the related
      servicing rights are fully amortized. For the first nine months of 2007, $1.4
      million of servicing assets were charged back to this income account by the
      early pay-offs as compared to $1.1 million for the prior year’s same period.




Income
      from other earning assets represents income from earning assets other than
      interest-earning assets, such as dividend income on FHLB stock ownership and
      increases in cash surrender value of BOLI. For the third quarter and the first
      nine months of 2007, it increased to $293,000 and $846,000, respectively, as
      compared with $268,000 and $765,000, respectively, for the prior year’s same
      periods. These increases were primarily attributable to the increased
      acquisition of FHLB stock as required by the new Capital Plan of the Federal
      Home Loan Bank of San Francisco that went into effect on April 1, 2004.




Non-interest
      income, other than the categories specifically addressed above, represents
      income from miscellaneous sources, such as SBA loan packaging fees and checkbook
      sales income, and generally increases as our business activities grow. For
      the
      third quarter and the first nine months of 2007, this miscellaneous income
      amounted to $475,000 and $1.8 million, respectively, as compared with $502,000
      and $1.5 million, respectively, for the prior year’s same periods, due mainly to
      the appreciation of intangible assets. We recognized $333,000 as other income
      for the net increase of fair value on servicing assets/liabilities, which are
      recorded at fair value in accordance with SFAS No. 156, which became effective
      on January 1, 2007.




**Non-interest** **Expense**




Total
      non-interest expense was $11.0 million in the third quarter of 2007 as compared
      with $10.5 million in the third quarter of 2006, and increased by 4.9% to $32.2
      million in the first nine months of 2007 from $30.0 million in the prior year’s
      same period. Our continuing efforts to optimize our operating expenses, however,
      have decreased the ratio of non-interest expense as a percentage of average
      assets to 0.53% and 1.59% for the third quarter and the first nine months of
      2007 as compared with 0.56% and 1.68%, respectively, for the prior year’s same
      periods. We believe that our efforts in cost-cutting and revenue diversification
      have improved our operational efficiency. We maintained our efficiency ratio
      (the ratio of non-interest expense to the sum of net interest income before
      provision for loan losses and total non-interest income) at relatively low
      levels of 42.2% and 41.5% in the third quarter and the first nine months of
      2007, respectively, as compared with 38.4% and 39.3%, respectively, in the
      prior
      year’s same periods.




The
      following table sets forth a summary of non-interest expenses for the periods
      indicated:





22





**Non-interest
      Expense** **s**


**(Dollars
      in thousands)**




**For
                the Quarter Ended September 30,**
            
            **2007**
            
            **2006****(Amount)**
            
            **(%)**
            
            **(Amount)**
            
            **(%)**Salaries
                and employee benefits
            
            $
            5,827
            
            
            52.7
            %
            $
            6,327
            
            
            60.1
            %Occupancy
                and equipment
            
            
            1,317
            
            
            11.9
            %
            
            1,257
            
            
            11.9
            %Data
                processing
            
            
            817
            
            
            7.4
            %
            
            675
            
            
            6.4
            %Loan
                referral fee
            
            
            371
            
            
            3.4
            %
            
            327
            
            
            3.1
            %Professional
                fees
            
            
            391
            
            
            3.5
            %
            
            343
            
            
            3.3
            %Directors’
                fees
            
            
            146
            
            
            1.3
            %
            
            148
            
            
            1.4
            %Office
                supplies
            
            
            150
            
            
            1.4
            %
            
            171
            
            
            1.6
            %Other
                real estate owned
            
            
            -
            
            
            0.0
            %
            
            1
            
            
            0.0
            %Advertising
            
            
            255
            
            
            2.3
            %
            
            401
            
            
            3.8
            %Communications
            
            
            119
            
            
            1.1
            %
            
            107
            
            
            1.0
            %Deposit
                insurance premium
            
            
            276
            
            
            2.5
            %
            
            48
            
            
            0.4
            %Outsourced
                service for customer
            
            
            492
            
            
            4.5
            %
            
            301
            
            
            2.9
            %Amortization
                of intangibles
            
            
            75
            
            
            0.7
            %
            
            75
            
            
            0.7
            %Investor
                relation expenses
            
            
            55
            
            
            0.5
            %
            
            60
            
            
            0.6
            %Other
                operating
            
            
            756
            
            
            6.8
            %
            
            293
            
            
            2.8
            %Total
            
            $
            11,047
            
            
            100.0
            %
            $
            10,535
            
            
            100.0
            %Average
                assets
            
            $
            2,075,790
            
            
            
            
            $
            1,893,185Non-interest
                expenses as a % of average assets
            
            
            
            
            
            0.53
            %
            
            
            
            
            0.56
            %




**For
                the Nine Months Ended September 30,**
            
            **2007**
            **2006****(Amount**)****
            
            
            **(**%)****
            
            
            **(Amount**)****
            
            
            **(**%)****Salaries
                and employee benefits
            
            $
            17,228
            
            
            53.6
            %
            $
            17,548
            
            
            58.5
            %Occupancy
                and equipment
            
            
            3,887
            
            
            12.1
            %
            
            3,225
            
            
            10.7
            %Data
                processing
            
            
            2,327
            
            
            7.2
            %
            
            1,830
            
            
            6.1
            %Loan
                referral fee
            
            
            1,221
            
            
            3.8
            %
            
            1,270
            
            
            4.2
            %Professional
                fees
            
            
            970
            
            
            3.0
            %
            
            835
            
            
            2.8
            %Directors’
                fees
            
            
            419
            
            
            1.3
            %
            
            394
            
            
            1.3
            %Office
                supplies
            
            
            470
            
            
            1.5
            %
            
            482
            
            
            1.6
            %Other
                real estate owned
            
            
            -
            
            
            0.0
            %
            
            13
            
            
            0.0
            %Advertising
                and promotional expenses
            
            
            653
            
            
            2.0
            %
            
            959
            
            
            3.2
            %Communications
            
            
            354
            
            
            1.1
            %
            
            340
            
            
            1.1
            %Deposit
                insurance premium
            
            
            648
            
            
            2.0
            %
            
            138
            
            
            0.5
            %Outsourced
                service for customer
            
            
            1,315
            
            
            4.1
            %
            
            932
            
            
            3.1
            %Amortization
                of intangibles
            
            
            223
            
            
            0.7
            %
            
            110
            
            
            0.4
            %Investor
                relation expenses
            
            
            239
            
            
            0.7
            %
            
            170
            
            
            0.6
            %Other
                operating
            
            
            2,201
            
            
            6.9
            %
            
            1,769
            
            
            5.9
            %Total
            
            $
            32,155
            
            
            100.0
            %
            $
            30,016
            
            
            100.0
            %Average
                assets
            
            $
            2,021,416
            
            
            
            
            $
            1,790,659Non-interest
                expenses as a % of average assets
            
            
            
            
            
            1.59
            %
            
            
            
            
            1.68
            %




Salaries
      and employee benefits usually represent more than half of our total non-interest
      expenses. For the three months and nine months ended September 30, 2007,
      salaries and employee benefits totaled $5.8 million and $17.2 million,
      respectively, as compared with $6.3 million and $17.5 million for the prior
      year’s same periods, representing a decrease of 7.9% and 1.8%, respectively,
      from the prior year’s comparable periods. Such decreases were the result of
      lower profit sharing in the form of bonuses normally paid out to employees
      based
      on the Company’s overall performance. With the growth of our business,
      especially the opening of the new Fort Lee, New Jersey branch in July, the
      number of full-time equivalent employees increased to 358 as of September 30,
      2007 from 326 as of September 30, 2006. Our efforts to promote efficient
      operations maintained assets per employee of $5.9 million at both September
      30,
      2007 and 2006.




Primarily
      due to the expansion of our branch network, including the Fort Lee branch
      opening, occupancy and equipment expenses as a percentage of total non-interest
      expenses increased to approximately 12.0% in the first nine months of 2007
      from
      approximately 10.7% in the prior year’s same period. Such expenses totaled $1.3
      million and $3.9 million, respectively, for the third quarter and first nine
      months of 2007, as compared with $1.3 million and $3.2 million for the prior
      year’s same periods.





23





Data
      processing expenses increased to $817,000 and $2.3 million, respectively, for
      the third quarter and the first nine months of 2007, as compared with $675,000
      and $1.8 million for the prior year’s same periods. These increases correspond
      to the overall growth of our business.




Loan
      referral fees are paid to brokers who refer loans to us, mostly SBA loans.
      Although we also pay referral fees for some qualified commercial loans, referral
      fee expenses generally correspond to our SBA loan production level since most
      SBA loans are referred by brokers. These referral fees increased to $371,000
      in
      the third quarter of 2007 from $327,000 from the prior year’s same quarter, but
      decreased slightly to $1.2 million in the first nine months of 2007 from $1.3
      million from the prior year’s same period.




Professional
      fees generally increase as we grow. Professional fees increased to $391,000
      and
      $970,000, respectively, in the third quarter and first nine months of 2007
      as
      compared with $343,000 and $835,000, respectively, for the prior year’s same
      periods. We expect these expenditures will continue to be significant as we
      address the enhanced SEC and NASDAQ corporate governance requirements and the
      local regulation of the states in which we recently commenced business
      operations.




Advertising
      and promotional expenses  decreased
      somewhat to $255,000 and $653,000 in the third quarter and the first nine months
      of 2007, respectively, as compared with $401,000 and $959,000 for the prior
      year’s same periods. These decreases can be attributed to the reduction of
      initial marketing activities incurred upon the initiation of our New York area
      operations in the first nine months of 2006.




Deposit
      insurance premium expense increased to $276,000 and $648,000 in the third
      quarter and first nine months of 2007, respectively, as compared with $48,000
      and $138,000 from the prior year’s same periods. Such increases was caused by
      the assessment related changes implemented as a result of the Federal Deposit
      Insurance Reform Act of 2005, beginning January 1, 2007.




Outsourced
      service costs for customers are payments made to third parties who provide
      services that were traditionally provided by banks to their customers, such
      as
      armored car services or bookkeeping services, and are recouped from the earnings
      credits earned by the respective depositors on their balances maintained with
      us. Due mainly to the increase in service activities and the increase in
      depositors demanding such services, such as escrow accounts and brokerage
      accounts, these expenses increased to $492,000 and $1,315,000 in the third
      quarter and the first nine months of 2007, respectively, as compared with
      $301,000 and $932,000, respectively, for the prior year’s same
      periods.




Investor
      relations expenses represent costs for providing services to our existing and
      prospective shareholders, such as NASDAQ listing fees, fees for an outside
      investor relations company and various promotional material costs. Mainly due
      to
      our expanded activities, these expenses amounted to $55,000 and $239,000,
      respectively, in the third quarter and the first nine months of 2007, as
      compared with $60,000 and $170,000, respectively, for the prior year’s same
      periods.




Non-interest
      expenses other than the categories specifically addressed above, such as office
      supplies and FDIC assessments, generally increase as our overall business grows.
      These miscellaneous expenses increased to $1.2 million and $3.7 million,
      respectively, in the third quarter and the first nine months of 2007, as
      compared with $795,000 million and $3.1 million, respectively, for the prior
      year’s same periods. These increase were mainly caused by the fact that we
      recognized more operational losses and more amortization expenses of intangibles
      acquired in the second quarter of 2006 upon the acquisition of Liberty Bank
      of
      New York.




Generally,
      non-interest expenses have increased in recent years as a result of rapid asset
      growth and expansion of our office network and products, all requiring
      substantial increases in staff, as well as additional occupancy and data
      processing costs. We anticipate that non-interest expense will continue to
      increase as we continue to grow. However, we remain committed to cost-control
      and operational efficiency, and we expect to keep these increases to a minimum
      relative to our growth.




**Provision
      for Income Taxes**




For
      the
      quarter ended September 30, 2007, we made a provision for income taxes of $4.4
      million on pretax net income of $11.0 million, representing an effective tax
      rate of 39.7%, as compared with a provision for income taxes of $5.3 million
      on
      pretax net income of $14.1 million, representing an effective tax rate of 37.4%,
      for the same quarter of 2006. The effective tax rates in the third quarter
      of
      2006 were slightly lower, due mainly to the change in estimate of the 2005
      tax
      liability. We filed our 2005 income tax returns in the third quarter of 2006
      and
      the actual income tax liability on the 2005 return decreased by approximately
      $400,000 from the provision we recognized in 2005. For the first nine months
      of
      2007, we made a provision for income taxes of $13.9 million on pretax net income
      of $35.2 million, representing an effective tax rate of 39.5%, as compared
      with
      a provision for income taxes of $16.3 million on pretax net income of $41.4
      million, representing an effective tax rate of 39.5%, for the same period of
      2006.





24





Our
      effective tax rates were one to two percentage points lower than statutory
      rates
      due to state tax benefits derived from doing business in an Enterprise Zone
      and
      our ownership of BOLI and Low Income Housing Tax Credit Funds (see “Financial
      Condition -- Other Earning Assets” for further discussion). Generally, income
      tax expense is the sum of two components: current tax expense and deferred
      tax
      expense (benefit). Current tax expense is calculated by applying the current
      tax
      rate to taxable income. Deferred tax expense accounts for the change in deferred
      tax assets (liabilities) from year to year. Deferred income tax assets and
      liabilities represent the tax effects, based on current tax law, of future
      deductible or taxable amounts attributable to events that have been recognized
      in the financial statements. Because we traditionally recognize substantially
      more expenses in our financial statements than we have been allowed to deduct
      for taxes, we generally have a net deferred tax asset. At September 30, 2007
      and
      December 31, 2006, we had net deferred tax assets of $9.4 million and $9.7
      million, respectively.




We
      believe that we have adequately provided or paid for income tax issues not
      yet
      resolved with federal, state and foreign tax authorities. Based upon
      consideration of all relevant facts and circumstances, we do not believe the
      ultimate resolution of tax issues for all open tax periods will have a
      materially adverse effect upon our results of operations or financial
      condition.




**Financial
      Condition**




**Loan
      Portfolio**




Total
      loans are the sum of loans receivable and loans held for sale reported at their
      outstanding principal balances, net of any unearned income which is unamortized
      deferred fees, costs, premiums, and discounts. Total loans net of unearned
      income increased by $164.1 million, or 10.5%, to $1.72 billion at September
      30,
      2007, as compared with $1.56 billion at December 31, 2006. Total loans net
      of
      unearned income as a percentage of total assets as of September 30, 2007 and
      December 31, 2006 were 82.1% and 77.7%, respectively.




The
      following table sets forth the amount of total loans outstanding and the
      percentage distributions in each category, as of the dates
      indicated:




**Distribution
      of Loans and Percentage Composition of Loan Portfolio**





**Amount
                Outstanding****(Dollars
                in Thousands)****September 30, 2007**
            
            **December 31, 2006**Construction
            
            $
            61,167
            
            $
            46,285Real
                estate secured
            
            
            1,322,371
            
            
            1,183,030Commercial
                and industrial
            
            
            302,679
            
            
            278,165Consumer
            
            
            38,408
            
            
            53,059Total
                loans
            
            $
            1,724,625
            
            $
            1,560,539Participation
                loans sold and serviced by the Company
            
            $
            333,964
            
            $
            336,652Construction
            
            
            3.50
            %
            
            3.00
            %Real
                estate secured
            
            
            76.70
            %
            
            75.80
            %Commercial
                and industrial
            
            
            17.60
            %
            
            17.80
            %Consumer
            
            
            2.20
            %
            
            3.40
            %Total
                loans
            
            
            100.00
            %
            
            100.00
            %




Real
      estate secured loans consist primarily of commercial real estate loans and
      are
      extended to finance the purchase or improvement of commercial real estate or
      businesses thereon. The properties may be either user owned or for investment
      purposes. Our loan policy adheres to the real estate loan guidelines set forth
      by the FDIC. The policy provides guidelines including, among other things,
      fair
      review of appraisal value, limitation on loan-to-value ratio and minimum cash
      flow requirements to service debt. Loans secured by real estate equaled $1.32
      billion and $1.18 billion as of September 30, 2007 and December 31, 2006,
      respectively. The real estate secured loans as a percentage of total loans
      were
      76.7% and 75.8% at September 30, 2007 and December 31, 2006, respectively.
      Since
      2003, we have been actively involved in residential mortgage lending. We offer
      a
      wide selection of residential mortgage programs, including non-traditional
      mortgages such as interest only and payment option adjustable rate mortgages.
      Most of our salable loans are transferred to the secondary market while we
      retain a portion on our books as portfolio loans. Our total home mortgage loan
      portfolio outstanding was $40.6 million at December 31, 2006 and $37.0 million
      at September 30, 2007, and we have deemed its effect on our credit risk profile
      to be immaterial. The residential mortgage loans with unconventional terms
      such
      as interest-only mortgages and option adjustable rate mortgages at September
      30,
      2007 were $3.8 million and $1.1 million, respectively, inclusive of loans held
      temporarily for sale or refinancing, as compared with $4.6 million and $1.1
      million, respectively, at December 31, 2006.





25





Commercial
      and industrial loans include revolving lines of credit as well as term business
      loans. Commercial and industrial loans at September 30, 2007 increased to $302.7
      million, as compared with $278.2 million at December 31, 2006. However,
      commercial and industrial loans as a percentage of total loans decreased
      slightly to 17.6% at September 30, 2007, from 17.8% at December 31, 2006.
      Increasing commercial and industrial loans is a part of our marketing strategy
      to target relationship-based accounts, such as unsecured business and commercial
      loans.




Consumer
      loans have historically represented less than 5% of our total loan portfolio.
      The majority of consumer loans are concentrated in automobile loans, which
      we
      formerly provided as a service only to existing customers. With our target
      marketing since 2003, consumer loans continued to increase to $53.1 million
      at
      December 31, 2006, but we subsequently slowed down the auto loan financing
      for
      credit risk management purposes. As a result, this portfolio decreased to $38.4
      million at September 30, 2007. **** Management
      anticipates further increases in other types of consumer loans going forward,
      although no assurance can be given that this increase will occur.




Construction
      loans generally have represented 5% or less of our total loan portfolio and
      are
      extended as a temporary financing vehicle only. In the third quarter of 2004,
      we
      formed a construction loan department by appointing a construction loan
      specialist as its manager. Since then, construction loans increased to $46.3
      million at the end of 2006, and increased to $61.2 million at the end of the
      third quarter of 2007, representing 3.5% of total loans. We expect to expand
      our
      construction lending activities with this specialized capacity.




Our
      loan
      terms vary according to loan type. Commercial term loans have typical maturities
      of three to five years and are extended to finance the purchase of business
      entities, business equipment, leasehold improvements or to provide permanent
      working capital. SBA guaranteed loans usually have longer maturities of 8 to
      25
      years. We generally limit real estate loan maturities to five to eight years.
      Lines of credit, in general, are extended on an annual basis to businesses
      that
      need temporary working capital and/or import/export financing. We generally
      seek
      diversification in our loan portfolio, and our borrowers are diverse as to
      industry, location, and their current and target markets.




The
      following table shows the contractual maturity distribution and repricing
      intervals of the outstanding loans in our portfolio, as of September 30, 2007.
      In addition, the table shows the distribution of such loans between those with
      variable or floating interest rates and those with fixed or predetermined
      interest rates. The table excludes the gross amount of non-accrual loans of
      $15.9 million, and includes unearned income and deferred fees totaling $7.4
      million at September 30, 2007:




**Loan
      Maturities and Repricing Schedule**





**At
                September 30, 2007****Within**
              **One
                Year**
            
            **After
                One**
              **But
                Within**
              **Five
                Years**
            
            **After**
              **Five
                Years**
            
            **Total****(Dollars
                in Thousands)**Construction
            
            $
            61,167
            
            $
            -
            
            $
            -
            
            $
            61,167Real
                estate secured
            
            
            832,039
            
            
            419,842
            
            
            60,905
            
            
            1,312,786Commercial
                and industrial
            
            
            289,723
            
            
            10,415
            
            
            3,738
            
            
            303,876Consumer
            
            
            22,882
            
            
            15,400
            
            
            -
            
            
            38,282Total
                loans, net of non-accrual loans
            
            $
            1,205,811
            
            $
            445,657
            
            $
            64,643
            
            $
            1,716,111Loans
                with variable (floating) interest rates
            
            $
            1,145,521
            
            $
            24,610
            
            $
            -
            
            $
            1,170,131Loans
                with predetermined (fixed) interest rates
            
            $
            60,290
            
            $
            421,047
            
            $
            64,643
            
            $
            545,980





26





The
      majority of the properties taken as collateral are located in Southern
      California. The loans generated by our loan production offices, which are
      located outside of our main geographical market, are generally collateralized
      by
      properties in close proximity to those offices. We employ stricter guidelines
      regarding the use of collateral located in less familiar market areas.




**Non-performing
      Assets**




Non-performing
      assets, or NPAs, consist of non-performing loans, or NPLs, and other
      non-performing assets, or other NPAs. NPLs are reported at their outstanding
      principal balances, net of any portion guaranteed by U.S. government and consist
      of loans on non-accrual status, loans 90 days or more past due and still
      accruing interest, loans restructured, where the terms of repayment have been
      renegotiated resulting in a reduction or deferral of interest or principal,
      Other NPAs consist of properties, mainly other real estate owned (OREO) and
      repossessed vehicles, acquired by foreclosure or similar means that management
      intends to offer for sale.




The
      following table provides information with respect to the components of our
      non-performing assets as of the dates indicated (the figures in the table are
      net of the portion guaranteed by the U.S. Government):




**Non-performing
      Assets**


**(Dollars
      in Thousands)**





**September 30, 2007**
            
            **December 31, 2006**
            
            **September 30, 2006****Nonaccrual
                loans:****1**Real
                estate secured
            
            $
            6,014
            
            $
            2,530
            
            $
            3,122Commercial
                and industrial
            
            
            2,037
            
            
            2,342
            
            
            2,058Consumer
            
            
            126
            
            
            930
            
            
            580Total
            
            
            8,177
            
            
            5,802
            
            
            5,760**Loans
                90 days or more past due (as to principal or interest) and still****accruing:**Construction
            
            
            -
            
            
            -
            
            
            -Real
                estate secured
            
            
            -
            
            
            209
            
            
            761Commercial
                and industrial
            
            
            5
            
            
            838
            
            
            520Consumer
            
            
            130
            
            
            -
            
            
            56Total
            
            
            135
            
            
            1,047
            
            
            1,337**Restructured
                loans:****2**Real
                estate secured
            
            
            -
            
            
            -
            
            
            -Commercial
                and industrial
            
            
            -
            
            
            -
            
            
            -Consumer
            
            
            -
            
            
            -
            
            
            -Total
            
            
            -
            
            
            -
            
            
            -Total
                non-performing loans (“NPLs”)
            
            
            8,312
            
            
            6,849
            
            
            7,097Repossessed
                vehicles
            
            
            58
            
            
            95
            
            
            -Other
                real estate owned (“OREO”)
            
            
            612
            
            
            138
            
            
            242Total
                non-performing assets (“NPAs”)
            
            $
            8,982
            
            $
            7,082
            
            $
            7,339NPLs
                as a % of total loans
            
            
            0.48
            %
            
            0.44
            %
            
            0.47
            %NPAs
                as a % of total loans, OREO, and repossessed vehicles
            
            
            0.45
            %
            
            0.49
            %
            
            0.52
            %Allowance
                for loan losses as a % of NPLs
            
            
            251.48
            %
            
            272.38
            %
            
            259.51
            %





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





1  During
      the three months ended September 30, 2007 and 2006, no interest income related
      to these loans was included in net income. Additional interest income of
      approximately $1.6 million would have been recorded during the three months
      ended September 30, 2007 if these loans had been paid in accordance with their
      original terms and had been outstanding throughout the three months ended
      September 30, 2007 or, if not outstanding throughout the three months ended
      September 30, 2007, since origination.


2  A
      “restructured loan” is defined as a loan in which the terms were renegotiated to
      provide a reduction or deferral of interest or principal because of
      deterioration in the financial position of the borrower.





27




Our
      continued emphasis on asset quality control enabled us to maintain a relatively
      low level of NPLs prior to 2007. However, the general economic condition of
      the
      United States as well as the local economies in which we do business
      has shown a slowdown as the housing sector cooled since 2006. This transition
      of
      the economy affected our borrowers’ strength and four large loans placed in
      non-accrual status in the aggregate amount of $13.1 million increased our
      non-performing loans to $20.3 million, or 1.25% of loans as of March 31, 2007.
      Most of them were paid-off or brought current as planned during the second
      quarter of 2007 and, by the end of the third quarter of 2007, we successfully
      decreased the level of NPLs to $8.3 million or 0.48% of gross loans which is
      higher than $6.9 million or 0.44% at December 31, 2006 and $7.1 million or
      0.47%
      at September 30, 2006.




The
      relatively low level of NPLs and delinquent loans supports management’s belief
      that the increase of non-performing loans in the beginning of 2007 did not
      reflect a trend nor the overall quality of our loan portfolio considering the
      fact that total delinquent loans over 30 days, net of the portion guaranteed
      by
      the U.S. government, were insignificant as of September 30, 2007. Management
      also believes that the reserve provided for non-performing loans, together
      with
      the tangible collateral, were adequate as of September 30, 2007. See “Allowance
      for Loan Losses” below for further discussion. Except as disclosed above, as of
      September 30, 2007, management was not aware of any material credit problems
      of
      borrowers that would cause it to have serious doubts about the ability of a
      borrower to comply with the present loan payment terms. However, no assurance
      can be given that credit problems may exist that may not have been brought
      to
      the attention of management.




In
      the
      third quarter of 2007, we foreclosed a commercial property in the amount of
      $612,000 and therefore our other NPAs at September 30, 2007 increased to
      $670,000 together with a few repossessed vehicles as compared with $233,000
      at
      the end of 2006 ,
      which
      consisted of one OREO which was sold at a small loss in January 2007 and a
      few
      repossessed vehicles. At September 30, 2006, we had two OREO in other NPAs,
      in
      an amount of $242,000, which were subsequently sold without significant losses.
      Together with other NPAs, the ratio of NPAs as a percentage of total loans
      and
      other NPAs increased to 0.52% at September 30, 2007, as compared with 0.45%
      at
      December 31, 2006 and 0.49% at September 30, 2006.




**A** **llowance
      for Loan Losses**




In
      anticipation of credit risk inherent in our lending business, we set aside
      allowances through charges to earnings. Such charges were not only made for
      the
      outstanding loan portfolio, but also for off-balance sheet items, such as
      commitments to extend credit or letters of credit. Charges made for our
      outstanding loan portfolio were credited to the allowance for loan losses,
      whereas charges for off-balance sheet items were credited to the reserve for
      off-balance sheet items, which is presented as a component of other liabilities




In
      order
      to keep pace with the increase of loan charge-offs and the growth of our loan
      portfolio, we increased our allowance for loan losses to $20.9 million at
      September 30, 2007, representing an increase of 12.1%, or $2.2 million from
      $18.7 million at the end of 2006 and an increase of 13.5% or $2.5 million from
      $18.5 million at September 30, 2006. With the increase of our non-performing
      loans, our allowance requirements have increased and we have maintained the
      ratio of allowance for loan losses to total loans slightly over 1.20% since
      the
      third quarter-end of 2006, a bit higher than the 1.1% retained prior to the
      third quarter of 2006. Management believes that the current ratio of 1.21%
      is in
      line with our peer group average and adequate for our loan portfolio because
      the
      level of total NPLs as of September 30, 2007 was relatively low at 0.48% of
      total loans.




With
      the
      economic transition addressed in “Non-performing Assets” above, the net
      charge-offs in the third quarter and first nine months of 2007 increased to
      $2.4
      million and $6.8 million, respectively, compared to $706,000 and $892,000,
      respectively, in the same periods of 2006. Such increases were mainly caused
      by
      charge-offs of one large commercial loan in the amount of $3.1 million and
      $1.4
      million consumer loan charge-offs, the majority of which were written-off in
      the
      first quarter of 2007 for automobile loans, including automobile inventory
      financing, extended in connection with two used car dealers who closed down
      their businesses in 2006. The net charge-offs represent 0.14% and 0.42% of
      average total loans in the third quarter and first nine months of 2007,
      respectively. The rise in loan charge-offs in the recent period and the growth
      of our loan portfolio has required more provision for loan losses. The provision
      for loan losses is discussed in the section entitled “Results of Operations -
      Provision for Loan Losses”, above.





28





As
      of
      September 30, 2007 and December 31, 2006, our allowance for loan losses
      consisted of amounts allocated to three phases of our methodology for assessing
      loan loss allowances as follows:




**Phase
                of Methodology**
            
            **As of:**
              **September 30, 2007**
            
            **As of:**
              **December 31, 2006**Specific
                review of individual loans
            
            $
            2,347,998
            
            $
            1,779,560Review
                of pools of loans with similar characteristics
            
            
            14,842,835
            
            
            13,424,657Quantitative
                reserve for loan pools with various risk factors
            
            
            3,711,219
            
            
            3,449,865Total
                allowance for loan losses
            
            $
            20,902,052
            
            $
            18,654,082





The
      table
      below summarizes for the end of the periods indicated, the balance of allowance
      for loan losses and its percent of such loan balance for each type of
      loan: ****





**Distribution
                and Percentage Composition of Allowance for Loan
                Losses****(Dollars
                in thousands)****Balance
                as of**
            
            **September
                30, 2007**
            
            **December
                31, 2006**Applicable
                to:
            
            
            **Reserve**
              **Amount**
            
            
            **Total**
              **Loans**
            
            
            **(**%)****
            
            
            **Reserve**
              **Amount**
            
            
            **Total**
              **Loans**
            
            
            **(%)**Construction
                loans
            
            $
            581
            
            $
            61,167
            
            
            0.95
            %
            $
            352
            
            $
            46,285
            
            
            0.76
            %Real
                estate secured
            
            $
            13,370
            
            $
            1,322,371
            
            
            1.01
            %
            $
            9,933
            
            $
            1,183,030
            
            
            0.84
            %Commercial
                and industrial
            
            $
            6,215
            
            $
            302,679
            
            
            2.05
            %
            $
            7,164
            
            $
            278,165
            
            
            2.58
            %Consumer
            
            $
            736
            
            $
            38,408
            
            
            1.92
            %
            $
            1,205
            
            $
            53,059
            
            
            2.27
            %Total
                Allowance
            
            $
            20,902
            
            $
            1,724,625
            
            
            1.21
            %
            $
            18,654
            
            $
            1,560,539
            
            
            1.20
            %




The
      table
      below summarizes for the periods indicated, loan balances at the end of each
      period, the daily averages during the period, changes in the allowance for
      loan
      losses arising from loans charged off, recoveries on loans previously charged
      off, additions to the allowance and certain ratios related to the allowance
      for
      loan losses:




**Allowance
      for Loan Losses**


**(Dollars
      in Thousands)**


**As
                    of and for the period of**
                
                **Three
                    months ended September 30,**
                
                **Nine
                    months ended September 30,****2007**
                
                **2006**
                
                **2007**
                
                **2006****Balances:**Average
                    total loans outstanding during period
                
                $
                1,687,978
                
                $
                1,477,773
                
                $
                1,632,483
                
                $
                1,384,858Total
                    loans (net of unearned income)
                
                
                1,724,625
                
                
                1,509,883
                
                
                1,724,625
                
                
                1,509,883**Allowance
                    for loan losses:****Balances
                    at beginning of period**
                
                
                19,378
                
                
                16,358
                
                
                18,654
                
                
                13,999**Actual
                    charge-offs:**Real
                    estate secured
                
                
                99
                
                
                131
                
                
                262
                
                
                138Commercial
                    and industrial
                
                
                2,131
                
                
                321
                
                
                5,383
                
                
                669Consumer
                
                
                251
                
                
                263
                
                
                1,370
                
                
                382Total
                    charge-offs
                
                
                2,481
                
                
                715
                
                
                7,015
                
                
                1,189**Recoveries
                    on loans previously charged off:**Real
                    estate secured
                
                
                -
                
                
                -
                
                
                -
                
                
                145Commercial
                    and industrial
                
                
                2
                
                
                8
                
                
                18
                
                
                146Consumer
                
                
                123
                
                
                1
                
                
                189
                
                
                5Total
                    recoveries
                
                
                125
                
                
                9
                
                
                207
                
                
                297Net
                    charge-offs (recoveries)
                
                
                2,356
                
                
                706
                
                
                6,808
                
                
                892**Allowance
                    for loan losses acquired in LBNY acquisition**
                
                
                -
                
                
                -
                
                
                -
                
                
                601**Provision
                    for loan losses**
                
                
                4,100
                
                
                2,800
                
                
                10,230
                
                
                5,060**Less:
                    Provision for losses in off-balance sheet items**
                
                
                220
                
                
                35
                
                
                1,174
                
                
                351**Balances
                    at end of period**
                
                $
                20,902
                
                $
                18,417
                
                $
                20,902
                
                $
                18,417**Ratios:**Net
                    loan charge-offs to average total loans
                
                
                0.14
                %
                
                0.05
                %
                
                0.42
                %
                
                0.06
                %Allowance
                    for loan losses to total loans at period-end
                
                
                1.21
                %
                
                1.22
                %
                
                1.21
                %
                
                1.22
                %Net
                    loan charge-offs to allowance for loan losses
                
                
                11.27
                %
                
                3.84
                %
                
                32.57
                %
                
                4.85
                %Net
                    loan charge-offs to provision for loan losses
                
                
                57.46
                %
                
                25.24
                %
                
                66.55
                %
                
                17.64
                %





29




**Contractual
      Obligations**




The
      following table represents our aggregate contractual obligations to make future
      payments (principal and interest) as of September 30, 2007:





**(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
            
            $
            70,402
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            70,402Junior
                subordinated debentures
            
            
            5,721
            
            
            7,871
            
            
            3,194
            
            
            87,321
            
            
            104,107Operating
                leases
            
            
            2,881
            
            
            4,722
            
            
            2,604
            
            
            3,375
            
            
            13,582Time
                deposits
            
            
            919,976
            
            
            2,089
            
            
            -
            
            
            10
            
            
            922,075Total
            
            $
            998,980
            
            $
            14,682
            
            $
            5,798
            
            $
            90,706
            
            $
            1,110,166





**Off-Balance
      Sheet Arrangements**




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




As
      of
      September 30, 2007 and December 31, 2006, we had commitments to extend credit
      of
      $293.7 million and $141.2 million, respectively. Obligations under standby
      letters of credit were $9.6 million and $9.5 million at September 30, 2007
      and
      December 31, 2006, respectively, and our obligations under commercial letters
      of
      credit were $13.0 million and $14.8 million at such dates, respectively. The
      effect on our revenues, expenses, cash flows and liquidity from the unused
      portion of the commitments to provide credit cannot be reasonably predicted
      because there is no guarantee that the lines of credit will be used.




In
      the
      normal course of business, we are involved in various legal claims. We have
      reviewed all legal claims against us with counsel and have taken into
      consideration the views of counsel as to the outcome of the claims. In our
      opinion, the final disposition of all such claims will not have a material
      adverse effect on our financial position and results of operations.




**Investment
      Activities**




Investments
      are one of our major sources of interest income and are acquired in accordance
      with a written comprehensive investment policy addressing strategies, types
      and
      levels of allowable investments. This investment policy is reviewed at least
      annually by the Board of Directors. Management of our investment portfolio
      is
      set in accordance with strategies developed and overseen by our Asset/Liability
      Committee. Investment balances, including cash equivalents and interest-bearing
      deposits in other financial institutions, are subject to change over time based
      on our asset/liability funding needs and interest rate risk management
      objectives. Our liquidity levels take into consideration anticipated future
      cash
      flows and all available sources of credits and are maintained at levels
      management believes are appropriate to assure future flexibility in meeting
      anticipated funding needs.




*Cash
      Equivalents and Interest-bearing Deposits in other Financial
      Institutions*




We
      sell
      federal funds, purchase securities under agreements to resell and high quality
      money market instruments, and deposit interest-bearing accounts in other
      financial institutions to help meet liquidity requirements and provide temporary
      holdings until the funds can be otherwise deployed or invested. As of September
      30, 2007 and December 31, 2006, we had $20.5 million and $130.0 million,
      respectively, in federal funds sold and repurchase agreements, and in
      interest-bearing deposits in other financial institutions.




*Investment
      Securities*




Management
      of our investment securities portfolio focuses on providing an adequate level
      of
      liquidity and establishing an interest rate-sensitive position, while earning
      an
      adequate level of investment income without taking undue risk. We classify
      our
      investment securities as “held-to-maturity” or “available-for-sale.” Investment
      securities that we intend to hold until maturity are classified as
      held-to-maturity securities, and all other investment securities are classified
      as available-for-sale. The carrying values of available-for-sale investment
      securities are adjusted for unrealized gains or losses as a valuation allowance
      and any gain or loss is reported on an after-tax basis as a component of other
      comprehensive income.





30





The
      following table summarizes the book value and market value and distribution
      of
      our investment securities as of the dates indicated:




**Investment
      Securities Portfolio**


**(Dollars
      in Thousands)**





**As
                of September 30, 2007**
            
            **As
                of December 31, 2006****Amortized**
              **Cost**
            
            **Market
                Value**
            
            **Amortized**
              **Cost**
            
            **Market
                Value**Held
                to Maturity:Securities
                of government sponsored  enterprises
            
            $
            11,000
            
            $
            10,971
            
            $
            14,000
            
            $
            13,845Collateralized
                mortgage obligation.
            
            
            170
            
            
            155
            
            
            196
            
            
            181Municipal
                securities
            
            
            220
            
            
            219
            
            
            425
            
            
            419Available
                for Sale:Securities
                of government sponsored  enterprises
            
            
            106,877
            
            
            107,115
            
            
            87,809
            
            
            87,511Mortgage
                backed securities
            
            
            16,145
            
            
            16,125
            
            
            21,033
            
            
            20,917Collateralized
                mortgage obligation
            
            
            47,466
            
            
            47,126
            
            
            38,650
            
            
            38,260Corporate
                securities
            
            
            17,396
            
            
            17,326
            
            
            13,445
            
            
            13,387Municipal
                securities
            
            
            7,725
            
            
            7,641
            
            
            7,725
            
            
            7,763Total
                investment securities
            
            $
            206,999
            
            $
            206,678
            
            $
            183,283
            
            $
            182,283





The
      following table summarizes the maturity and repricing schedule of our investment
      securities at their carrying values and their weighted average yields (without
      the consideration of tax effects, if any) at September 30, 2007:




**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****Amount**
            
            **Yield**
            
            **Amount**
            
            **Yield**
            
            **Amount**
            
            **Yield**
            
            **Amount**
            
            **Yield**
            
            **Amount**
            
            **Yield****Held
              to Maturity:**Securities
                of government sponsored enterprises
            
            $
            4,000
            
            
            5.11
            %
            $
            5,000
            
            
            4.62
            %
            
            2,000
            
            
            4.46
            %
            $
            -
            
            
            -
            
            $
            11,000
            
            
            4.77
            %Mortgage
                backed securities
            
            
            -
            
            
            -
            
            
            170
            
            
            3.98
            %
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            170
            
            
            3.98
            %Municipal
                securities
            
            
            220
            
            
            4.18
            %
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            220
            
            
            4.18
            %**Available-for-sale:**Securities
                of government sponsored enterprises
            
            
            17,000
            
            
            4.91
            %
            
            90,115
            
            
            5.32
            %
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            107,115
            
            
            5.26
            %Mortgage
                backed securities
            
            
            11,363
            
            
            5.16
            %
            
            2,857
            
            
            4.74
            %
            
            799
            
            
            5.57
            %
            
            1,106
            
            
            6.03
            %
            
            16,125
            
            
            5.16
            %Collateralized
                mortgage obligation
            
            
            4,398
            
            
            5.23
            %
            
            42,728
            
            
            5.22
            %
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            47,126
            
            
            5.22
            %Corporate
                securities
            
            
            5,336
            
            
            4.33
            %
            
            10,032
            
            
            5.48
            %
            
            1,958
            
            
            4.46
            %
            
            -
            
            
            -
            
            
            17,326
            
            
            5.01
            %Municipal
                securities
            
            
            399
            
            
            7.14
            %
            
            -
            
            
            -
            
            
            2,241
            
            
            3.72
            %
            
            5,001
            
            
            4.06
            %
            
            7,641
            
            
            4.12
            %Total
                investment securities
            
            $
            42,716
            
            
            4.97
            %
            $
            150,902
            
            
            5.27
            %
            $
            6,998
            
            
            4.35
            %
            $
            6,107
            
            
            4.42
            %
            $
            206,723
            
            
            5.15
            %




Our
      investment securities holdings increased by $24.3 million, or 13.3%, to $206.7
      million at September 30, 2007, compared to holdings of $182.5 million at
      December 31, 2006. Total investment securities as a percentage of total assets
      were 9.8% and 9.1% at September 30, 2007 and December 31, 2006, respectively.
      As
      of September 30, 2007, investment securities having a carrying value of $182.4
      million were pledged to secure certain deposits.





31





As
      of
      September 30, 2007, held-to-maturity securities, which are carried at their
      amortized costs, decreased to $11.4 million from $14.6 million at December
      31,
      2006. However, available-for-sale securities, which are stated at their fair
      market values, increased to $195.3 million at September 30, 2007 from $167.8
      million at December 31, 2006. Such increase reflects our strategy for improving
      our liquidity level using available-for-sale securities, in addition to
      immediately available funds, the majority of which are maintained in the form
      of
      overnight investments.




The
      following table shows our investments’ gross unrealized losses and fair value,
      aggregated by investment category and length of time that individual securities
      have been in a continuous unrealized loss position, at September 30, 2007 and
      December 31, 2006:




**As
                of September 30, 2007**
            
            **(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
            
            $
            -
            
            $
            -
            
            $
            14,925
            
            $
            (74
            )
            $
            14,925
            
            $
            (74
            )Collateralized
                mortgage obligation
            
            
            14,085
            
            
            (31
            )
            
            11,955
            
            
            (362
            )
            
            26,040
            
            
            (393
            )Mortgage
                backed securities
            
            
            4,551
            
            
            (21
            )
            
            3,766
            
            
            (49
            )
            
            8,317
            
            
            (70
            )Corporate
                securities
            
            
            10,250
            
            
            (59
            )
            
            1,958
            
            
            (41
            )
            
            12,208
            
            
            (100
            )Municipal
                securities
            
            
            2,247
            
            
            (43
            )
            
            3,564
            
            
            (65
            )
            
            5,811
            
            
            (108
            )$
            31,133
            
            $
            (154
            )
            $
            36,168
            
            $
            (591
            )
            $
            67,301
            
            $
            (745
            )




**As
                of December 31, 2006**
            
            **(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 governmentsponsored
                enterprises
            
            $
            17,972
            
            $
            (24
            )
            $
            64,484
            
            $
            (497
            )
            $
            82,456
            
            $
            (521
            )Collateralized
                mortgage obligation
            
            
            12,066
            
            
            (31
            )
            
            17,455
            
            
            (383
            )
            
            29,521
            
            
            (414
            )Mortgage
                backed securities
            
            
            1,740
            
            
            (5
            )
            
            10,834
            
            
            (204
            )
            
            12,574
            
            
            (209
            )Corporate
                securities
            
            
            -
            
            
            -
            
            
            2,929
            
            
            (68
            )
            
            2,929
            
            
            (68
            )Municipal
                securities
            
            
            -
            
            
            -
            
            
            3,802
            
            
            (34
            )
            
            3,802
            
            
            (34
            )$
            31,778
            
            $
            (60
            )
            $
            99,504
            
            $
            (1,186
            )
            $
            131,282
            
            $
            (1,246
            )




As
      of
      September 30, 2007, the total unrealized losses less than 12 months old were
      $154,000, and total unrealized losses more than 12 months old were $591,000.
      The
      aggregate related fair value of investments with unrealized losses less than
      12
      months old was $31.1 million at September 30, 2007, and those with unrealized
      losses more than 12 months old were $36.2 million. As of December 31, 2006,
      the
      total unrealized losses less than 12 months old were $60,000 and total
      unrealized losses more than 12 months old were $1.2 million. The aggregate
      related fair value of investments with unrealized losses less than 12 months
      old
      was $31.8 million at December 31, 2006, and those with unrealized losses more
      than 12 months old were $99.5 million.




Declines
      in the fair value of held-to-maturity and available-for-sale securities below
      their cost that are deemed to be other than temporary are reflected in earnings
      as realized losses. In estimating other-than-temporary impairment losses, we
      consider, among other things, (i) the length of time and the extent to which
      the
      fair value has been less than cost, (ii) the financial condition and near-term
      prospects of the issuer, and (iii) our intent and ability to retain our
      investment in the issuer for a period of time sufficient to allow for any
      anticipated recovery in fair value.





32





We
      have
      the ability and intent to hold the securities classified as held-to-maturity
      until they mature, at which time we expect to receive full value for the
      securities. Furthermore, as of September 30, 2007, we also had the ability
      and
      intent to hold the securities classified as available-for-sale for a period
      of
      time sufficient for a recovery of cost. The unrealized losses were largely
      due
      to increases in market interest rates over the yields available at the time
      the
      underlying securities were purchased. The fair value is expected to recover
      as
      the bonds approach their maturity date or repricing date or if market yields
      for
      such investments decline. We do not believe any of the securities are impaired
      due to reasons of credit quality. Accordingly, as of September 30, 2007, we
      believe the impairments detailed in the table above were temporary, and no
      impairment loss has been realized in our consolidated statements of
      operations.




**Other
      Earning Assets**




For
      various business purposes, we make investments in earning assets other than
      the
      interest-earning securities discussed above. Before 2003, the only other earning
      assets held by us were insignificant amounts of FHLB stock and the cash
      surrender value on the BOLI.




During
      2003, in an effort to provide additional benefits aimed at retaining key
      employees, while generating a tax-exempt non-interest income stream, we
      purchased $10.5 million in BOLI from insurance carriers rated AA or above.
      We
      are the owner and the primary beneficiary of the life insurance policies and
      recognize the increase of the cash surrender value of the policies as tax-exempt
      other income. In the second quarter of 2005, we purchased an additional $3.0
      million of BOLI.




In
      2003,
      we invested in two low-income housing tax credit funds, or LIHTCFs, to promote
      our participation in CRA activities. We committed to invest, over two to three
      years, a total of $3 million to two different LIHTCF - $1 million in Apollo
      California Tax Credit Fund XXII, LP, and $2 million in Hudson Housing Los
      Angeles Revitalization Fund, LP. In 2006, in order to promote our CRA activities
      in each of the assessment areas in Dallas, New York, and Los Angeles, we also
      committed to invest an additional $1 million, $2 million, and $3 million in
      WNC
      Institutional Tax Credit Fund XXI, WNC Institutional Tax Credit Fund X New
      York
      Series 7, and WNC Institutional Tax Credit Fund X California Series 6,
      respectively. We receive the returns on these investments, over the fifteen
      years following the said two to three-year investment periods in the form of
      tax
      credits and tax deductions.




The
      balances of other earning assets as of September 30, 2007 and December 31,
      2006
      were as follows:




**Type**
            
            Balance as of
              September 30, 2007
            
            Balance as of
              December 31, 2006BOLI
            
            $
            16,079,335
            
            $
            15,636,000LIHTCF
            
            
            5,383,955
            
            
            4,206,000Federal
                Home Loan Bank Stock
            
            
            8,582,100
            
            
            7,542,000




**Deposits
      and Other Sources of Funds**




*Deposits*




Deposits
      are our primary source of funds. Total deposits at September 30, 2007 and
      December 31, 2006 were both $1.75 billion.




Since
      2006, our niche market depositor’s preference in time deposits bearing
      relatively high interest rates decreased the level of deposits in transactional
      accounts. Therefore, our reliance on time deposits to fund our lending continued
      to increase in 2006. In the fourth quarter of 2006, we implemented a new
      strategy to moderate balance sheet growth and initiated a deposit campaign
      to
      increase non-time deposits and improve our funding cost. This campaign increased
      our non-time deposits by $75.0 million in the first nine months of 2007 while
      decreasing time deposits by $78.8 million in the same period. Our average cost
      of interest-bearing liabilities was slightly lowered to 5.01% in the third
      quarter of 2007 from 5.03% in the last quarter of 2006 after rising in each
      quarter of 2006. We believe that our regional diversification into the Texas
      and
      New York/New Jersey markets will also help reduce our time deposit reliance
      level going forward.




The
      average rate paid on time deposits in denominations of $100,000 or more for
      the
      third quarter and the first nine months of 2007 increased to 5.27% and 5.28%,
      respectively, as compared with 5.32% and 4.99%, respectively, for the same
      periods in the prior year. See “Net Interest Income and Net Interest Margin” for
      further discussion.





33





The
      following tables summarize the distribution of average daily deposits and the
      average daily rates paid for the quarters indicated:




**Average
      Deposits**


**(Dollars
      in Thousands)**




**For
                the quarters ended:**
            
            **September
                30, 2007**
            
            **December
                31, 2006**
            
            **September
                30, 2006****Average**
              **Balance**
            
            **Average**
              **Rate**
            
            **Average**
              **Balance**
            
            **Average**
              **Rate**
            
            **Average**
              **Balance**
            
            **Average**
              **Rate**Demand,
                non-interest-bearing
            
            $
            322,865
            
            
            
            
            $
            317,630
            
            
            
            
            $
            322,910Money
                market
            
            
            474,122
            
            
            4.62
            %
            
            385,823
            
            
            4.50
            %
            
            375,030
            
            
            4.35
            %Super
                NOW
            
            
            22,317
            
            
            1.26
            %
            
            19,719
            
            
            1.16
            %
            
            20,550
            
            
            1.26
            %Savings
            
            
            29,790
            
            
            2.50
            %
            
            29,007
            
            
            1.66
            %
            
            25,856
            
            
            1.47
            %Time
                certificates of deposit indenominations
                of $100,000 or more
            
            
            780,463
            
            
            5.27
            %
            
            791,800
            
            
            5.40
            %
            
            726,287
            
            
            5.32
            %Other
                time deposit
            
            
            142,877
            
            
            4.92
            %
            
            162,876
            
            
            4.90
            %
            
            162,464
            
            
            4.81
            %Total
                deposits
            
            $
            1,772,434
            
            
            4.01
            %
            $
            1,706,855
            
            
            4.03
            %
            $
            1,633,097
            
            
            3.88
            %





The
      scheduled maturities of our time deposits in denominations of $100,000 or
      greater at September 30, 2007 were as follows:




**Maturities
      of Time Deposits of $100,000 or More, at September 30, 200** **7**


**(Dollars
      in Thousands)**





Three
                months or less
            
            $
            392,101Over
                three months through six months
            
            
            211,434Over
                six months through twelve months
            
            
            150,391Over
                twelve months
            
            
            1,233Total
            
            $
            755,159




Because
      our client base is comprised primarily of commercial and industrial accounts,
      individual account balances are generally higher than those of consumer-oriented
      banks. A number of clients carry deposit balances of more than 1% of our total
      deposits, but the California State Treasury was the only depositor which had
      a
      deposit balance of more than 5% of total deposits at September 30, 2007 and
      December 31, 2006.




We
      accept
      brokered deposits on a selective basis at reasonable interest rates to augment
      deposit growth. We have reduced these deposits to $2.1 million at September
      30,
      2007 from $6.3 million at December 31, 2006 in order to limit our reliance
      on
      non-core funding sources. Most of the brokered deposits will mature within
      one
      year. Since brokered deposits are generally less stable forms of deposits,
      we
      closely monitor growth from this non-core funding source.




*FHLB
      Borrowings*




Although
      deposits are the primary source of funds for our lending and investment
      activities and for general business purposes, we may obtain advances from the
      FHLB as an alternative to retail deposit funds. Since 2002, we have increased
      borrowings from the FHLB in order to take advantage of their flexibility and
      reasonably low cost. See “Liquidity Management” below for details relating to
      the FHLB borrowings program.





34





The
      following table is a summary of FHLB borrowings for the quarters indicated
      (dollars in thousands):





**September 30, 2007**
            
            **December 31, 2006**Balance
                at quarter-end
            
            $
            70,000
            
            $
            20,000Average
                balance during the quarter
            
            $
            22,174
            
            $
            20,000Maximum
                amount outstanding at any month-end
            
            $
            70,000
            
            $
            20,000Average
                interest rate during the quarter
            
            
            4.16
            %
            
            3.68
            %Average
                interest rate at quarter-end
            
            
            4.43
            %
            
            3.68
            %





*Junior
      Subordinated Debentures; Trust Preferred Securities*




In
      December 2002, the Bank issued $10 million of the 2002 Junior Subordinated
      Debentures. Subsequently, the Company, as a wholly owned subsidiary in 2003
      and
      as a parent company of the Bank in 2005 and 2007, issued a total of $77,321,000
      of Junior Subordinated Debentures in connection with a $75,000,000 trust
      preferred securities issuance by statutory trusts wholly owned by the Company.




2002
      Bank Level Junior Subordinated Debenture .
      In
      December 2002, the Bank issued a $10 million Junior Subordinated Debenture
      (the
“2002 debenture”). The interest rate payable on the 2002 debenture was 8.30% at
      September 30, 2007, which rate adjusts quarterly to the three-month LIBOR plus
      3.10%. The 2002 debenture will mature on December 26, 2012. Interest on the
      2002
      debenture is payable quarterly and no scheduled payments of principal are due
      prior to maturity. The Bank may redeem the 2002 debenture in whole or in part
      prior to maturity on or after December 26, 2007.




The
      2002
      debenture is treated as Tier 2 capital for Bank regulatory capital purposes.
      Likewise, on a consolidated basis, the 2002 debenture also is treated as Tier
      2
      capital for Company level capital purposes under current FRB capital guidelines.




2003
      Junior Subordinated Debenture; Trust Preferred Securities
      Issuance .
      In
      December 2003, Wilshire Bancorp was formed as a wholly-owned subsidiary of
      the
      Bank, in order to raise additional capital funds through the issuance of trust
      preferred securities. Prior to the completion of the August 2004 bank holding
      company reorganization, Wilshire Bancorp organized its wholly owned subsidiary,
      Wilshire Statutory Trust I, which issued $15 million in trust preferred
      securities. Wilshire Bancorp then purchased all of the common interest in the
      Wilshire Statutory Trust I ($464,000) and issued the 2003 Junior Subordinated
      Debenture (the “2003 debenture”) in the amount of approximately $15.5 million to
      the Wilshire Statutory Trust I with terms substantially similar to the 2003
      trust preferred securities in exchange for the proceeds from the issuance of
      the
      Wilshire Statutory Trust I’s 2003 trust preferred securities and common
      securities. Wilshire Bancorp subsequently deposited the proceeds from the 2003
      debenture in a depository account at the Bank and infused $14.5 million as
      additional equity capital to the Bank immediately following the holding company
      reorganization. The rate of interest on the 2003 debenture and related trust
      preferred securities was 8.54% at September 30, 2007, which adjusts quarterly
      to
      the three-month LIBOR plus 2.85%. The 2003 debenture and related trust preferred
      securities will mature on December 17, 2033. The interest on both the 2003
      debenture and related trust preferred securities is payable quarterly and no
      scheduled payments of principal are due prior to maturity. Wilshire Bancorp
      may
      redeem the 2003 debenture (and in turn the trust preferred securities) in whole
      or in part prior to maturity on or after December 17, 2008.




March
      2005 Junior Subordinated Debenture; Trust Preferred Securities
      Issuance .
      In
      March 2005, Wilshire Bancorp organized its wholly owned subsidiary, Wilshire
      Statutory Trust II, which issued $20 million in trust preferred securities.
      Wilshire Bancorp then purchased all of the common interest in the Wilshire
      Statutory Trust II ($619,000) and issued the 2005 Junior Subordinated Debenture
      (the “March 2005 debenture”) in the amount of $20.6 million to the Wilshire
      Statutory Trust II with terms substantially similar to the March 2005 trust
      preferred securities in exchange for the proceeds from the issuance of the
      Wilshire Statutory Trust II’s March 2005 trust preferred securities and common
      securities. Wilshire Bancorp subsequently deposited the proceeds from the March
      2005 debenture in a depository account at the Bank and infused $14 million
      as
      additional equity capital to the Bank. The rate of interest on the March 2005
      debenture and related trust preferred securities was 7.48% at September 30,
      2007, which adjusts quarterly to the three-month LIBOR plus 1.79%. The March
      2005 debenture and related trust preferred securities will mature on March
      17,
      2035. The interest on both the March 2005 debenture and related trust preferred
      securities are payable quarterly and no scheduled payments of principal are
      due
      prior to maturity. Wilshire Bancorp may redeem the March 2005 debenture (and
      in
      turn the trust preferred securities) in whole or in part prior to maturity
      on or
      after March 17, 2010.





35





September
      2005 Junior Subordinated Debenture; Trust Preferred Securities
      Issuance .
      In
      September 2005, Wilshire Bancorp organized its wholly owned subsidiary, Wilshire
      Statutory Trust III (“Wilshire Trust III”), which issued $15 million in trust
      preferred securities.   Wilshire Statutory Trust III, a subsidiary of
      Wilshire Bancorp, purchased $15.5 million of Wilshire Bancorp’s Junior
      Subordinated Debt Securities (the “September 2005 debenture”), payable in 2035.
      Until September 15, 2010, the securities will be fixed at a 6.07% annual
      interest rate, thereafter converting to a floating rate of three-month LIBOR
      plus 1.40%, resetting quarterly. Wilshire Bancorp may defer the payment of
      interest at any time for a period up to twenty consecutive quarters, provided
      the deferral period does not extend past the stated maturity. Except upon the
      occurrence of certain events resulting in a change in the capital treatment
      or
      tax treatment of the Subordinated Debentures or resulting in Wilshire Trust
      being deemed to be an investment company required to register under the
      Investment Company Act of 1940, we may not redeem the Subordinated Debentures
      until after September 15, 2010.




July
      2007 Junior Subordinated Debenture; Trust Preferred Securities
      Issuance .
      In July
      2007, Wilshire Bancorp organized its wholly owned subsidiary, Wilshire Statutory
      Trust IV, which issued $25 million in trust preferred securities. Wilshire
      Bancorp then purchased all of the common interest in the Wilshire Statutory
      Trust IV ($774,000) and issued the 2007 Junior Subordinated Debenture (the
“July
      2007 debenture”) in the amount of $25.8 million to the Wilshire Statutory Trust
      IV with terms substantially similar to the July 2007 trust preferred securities
      in exchange for the proceeds from the issuance of the Wilshire Statutory Trust
      IV’s July 2007 trust preferred securities and common securities. Wilshire
      Bancorp subsequently deposited the proceeds from the July 2007 debenture in
      a
      depository account at the Bank. The rate of interest on the July 2007 debenture
      and related trust preferred securities was 7.07% at September 30, 2007, which
      adjusts quarterly to the three-month LIBOR plus 1.38%. The July 2007 debenture
      and related trust preferred securities will mature on July 10, 2037. The
      interest on both the July 2007 debenture and related trust preferred securities
      are payable quarterly and no scheduled payments of principal are due prior
      to
      maturity. Wilshire Bancorp may redeem the July 2007 debenture (and in turn
      the
      trust preferred securities) in whole or in part prior to maturity on or after
      July 10, 2012.




Payments
      of distributions on the trust preferred securities and payments on redemption
      of
      the trust preferred securities are guaranteed by Wilshire Bancorp. The junior
      subordinated debentures are senior to our shares of common stock. As a result,
      in the event of our bankruptcy, dissolution or liquidation, the holder of the
      junior subordinated debentures must be satisfied before any distributions can
      be
      made to the holders of our common stock. We have the right to defer
      distributions on the junior subordinated debentures and related trust preferred
      securities for up to five years, during which time no dividends may be paid
      to
      holders of our common stock.




On
      March
      1, 2005, the Federal Reserve Board adopted a final rule that allows continued
      inclusion of trust preferred securities in the Tier 1 capital of bank holding
      companies, subject to stricter quantitative limits. Under the final rule, bank
      holding companies may include trust preferred securities in Tier 1 capital
      in an
      amount (together with other restricted core capital elements) equal to 25%
      of
      the sum of core capital elements (including restricted core capital elements)
      net of goodwill less any associated deferred tax liability. Amounts in excess
      of
      these limits will generally be included in Tier 2 capital. For purposes of
      this
      rule, restricted core capital elements are generally to be comprised of
      qualifying cumulative perpetual preferred stock and related surplus, minority
      interest related to qualifying cumulative perpetual preferred stock directly
      issued by a consolidated U.S. depository institution or foreign bank subsidiary,
      minority interest related to qualifying common stock or qualifying cumulative
      perpetual preferred stock directly issued by a consolidated subsidiary that
      is
      neither a U.S. depository institution or a foreign bank and qualifying trust
      preferred securities.




The
      final
      rule provides a transition period for bank holding companies to come into
      compliance with these new capital restrictions. Accordingly, while the final
      rule became effective on April 11, 2005, for practical purposes, bank holding
      companies will have until September 30, 2009 (an extension of the September
      30,
      2007 transition period under the proposed rule) to come into compliance with
      the
      final rule’s capital restrictions due to the transition period. In extending the
      transition period to 2009, the Federal Reserve noted that the extended period
      will provide bank holding companies with existing trust preferred securities
      with call features after the first five years an opportunity to restructure
      their capital elements in order to conform to the limitations of the final
      rule.




Under
      the
      final rule, as of September 30, 2007, Wilshire Bancorp would have been able
      to
      count $56.0 million of total trust preferred securities as Tier 1 capital,
      leaving $19.0 million as Tier 2 capital.





36





**Asset/Liability
      Management**




We
      seek
      to ascertain optimum and stable utilization of available assets and liabilities
      as a vehicle to attain our overall business plans and objectives. In this
      regard, we focus on measurement and control of liquidity risk, interest rate
      risk and market risk, capital adequacy, operation risk and credit risk. See
      further discussion on these risks in the “Risk Factors” section of our Annual
      Report on Form 10-K for the year ended December 31, 2006. Information concerning
      interest rate risk management is set forth under “Item 3. Quantitative and
      Qualitative Disclosures about Market Risk.”




**Liquidity
      Management**




Maintenance
      of adequate liquidity requires that sufficient resources be available at all
      times to meet our cash flow requirements. Liquidity in a banking institution
      is
      required primarily to provide for deposit withdrawals and the credit needs
      of
      its customers and to take advantage of investment opportunities as they arise.
      Liquidity management involves our ability to convert assets into cash or cash
      equivalents without incurring significant loss, and to raise cash or maintain
      funds without incurring excessive additional cost. For this purpose, we maintain
      a portion of our funds in cash and cash equivalents, deposits in other financial
      institutions and loans and securities available for sale. Our liquid assets
      at
      September 30, 2007 and December 31, 2006 totaled approximately $309.9 million
      and $378.6 million, respectively. Our liquidity level measured as the percentage
      of liquid assets to total assets was 14.8% and 18.8% at September 30, 2007
      and
      December 31, 2006, respectively.




As
      a
      secondary source of liquidity, we rely on advances from the FHLB to supplement
      our supply of lendable funds and to meet deposit withdrawal requirements.
      Advances from the FHLB are typically secured by our mortgage loans and stock
      issued by the FHLB. Advances are made pursuant to several different programs.
      Each credit program has its own interest rate and range of maturities. Depending
      on the program, limitations on the amount of advances are based either on a
      fixed percentage of an institution’s net worth or on the FHLB’s assessment of
      the institution’s creditworthiness. While this fund provides flexibility and low
      cost, we limit our use to 50% of borrowing capacity, as such borrowing does
      not
      qualify as core funds. As of September 30, 2007, our borrowing capacity from
      the
      FHLB was about $450.8 million and the outstanding balance was $70 million,
      or
      approximately 15.5% of our borrowing capacity. As of September 30, 2007, we
      also
      maintained a guideline to purchase up to $25 million and $10 million in federal
      funds with Bank of the West and Union Bank of California,
      respectively.




**Capital
      Resources and Capital Adequacy Requirements**




Historically,
      our primary source of capital has been internally generated operating income
      through retained earnings. In order to ensure adequate levels of capital, we
      conduct ongoing assessments of projected sources and uses of capital in
      conjunction with projected increases in assets and level of risks. We have
      considered, and we will continue to consider, additional sources of capital
      as
      the need arises, whether through the issuance of additional equity, debt or
      hybrid securities.




We
      are
      subject to various regulatory capital requirements administered by federal
      banking agencies. Under capital adequacy guidelines and the regulatory framework
      for prompt corrective action, we must meet specific capital guidelines that
      rely
      on quantitative measures of our assets, liabilities and certain
      off-balance-sheet items as calculated under regulatory accounting practices. Failure
      to meet minimum capital requirements can trigger regulatory actions under
      the
      prompt corrective action rules that
      could have a material adverse effect on our financial condition and
      operations. Prompt
      corrective action may include regulatory enforcement actions that restrict
      dividend payments, require the adoption of remedial measures to increase
      capital, terminate FDIC deposit insurance, and mandate the appointment of a
      conservator or receiver in severe cases. In addition, failure to maintain a
      well-capitalized status may adversely affect the evaluation of regulatory
      applications for specific transactions and activities, including acquisitions,
      continuation and expansion of existing activities, and commencement of new
      activities, and could adversely affect our business relationships with our
      existing and prospective clients. The aforementioned regulatory consequences
      for
      failing to maintain adequate ratios of Tier 1 and Tier 2 capital could have
      a
      material adverse effect on our financial condition and results of
      operations. Our
      capital amounts and classification are also subject to qualitative judgments
      by
      regulators about components, risk weightings, and other factors. See Part I,
      Item 1 “Description of Business -- Regulation and Supervision -- Capital
      Adequacy Requirements” in our Annual Report on Form 10-K for the year ended
      December 31, 2006 for additional information regarding regulatory capital
      requirements.





37





As
      of
      September 30, 2007, we were qualified as a “well capitalized institution” under
      the regulatory framework for prompt corrective action. The following table
      presents the regulatory standards for well-capitalized institutions, compared
      to
      capital ratios as of the dates specified for the Company and the Bank:


**Wilshire
                    Bancorp, Inc.**
                
                **Regulatory**
                  **Well-**
                
                **Regulatory**
                  **Adequately-**
                
                **Actual ratios for the Company as of:****Capitalized****Standards**
                
                **Capitalized****Standards**
                
                **September 30,**
                  **2007**
                
                **December 31,**
                  **2006**
                
                **September 30,**
                  **2006**Total
                    capital to risk-weighted assets
                
                
                10
                %
                
                8
                %
                
                15.06
                %
                
                13.63
                %
                
                13.66
                %Tier
                    I capital to risk-weighted assets
                
                
                6
                %
                
                4
                %
                
                12.18
                %
                
                11.81
                %
                
                11.60
                %Tier
                    I capital to adjusted average assets
                
                
                5
                %
                
                4
                %
                
                10.41
                %
                
                9.79
                %
                
                9.59
                %
 
 **Wilshire State Bank**
              
              **Regulatory**
                **Well-**
              
              **Regulatory**
                **Adequately-**
              
              **Actual ratios for the Bank as of:****Capitalized****Standards**
              
              **Capitalized**
                **Standards**
              
              **September 30,**
                **2007**
              
              **December 31,**
                **2006**
              
              **September 30,**
                **2006**Total capital
                  to risk-weighted assets
              
              
              10
              %
              
              8
              %
              
              13.84
              %
              
              13.51
              %
              
              13.33
              %Tier
                  I capital to risk-weighted assets
              
              
              6
              %
              
              4
              %
              
              12.03
              %
              
              11.68
              %
              
              11.44
              %Tier
                  I capital to adjusted average assets
              
              
              5
              %
              
              4
              %
              
              10.29
              %
              
              9.69
              %
              
              9.46
              %




At
      September 30, 2007, total shareholders’ equity increased by $18.5 million, after
      declaring cash dividends of $4.4 million and netting the treasury shares the
      Company owned, to $168.1 million from $149.6 million at December 31, 2006.
      Such additional capital was primarily derived from internally generated
      operating income ($21.3 million). Our equity also increased by the share-based
      compensation, cumulative effects in change of accounting principles, and other
      comprehensive income. In the third quarter of 2007, the Company adopted the
      2007
      stock repurchase program which permits the repurchase of up to $10 million
      worth
      of shares of the Company’s common stock from time to time until July 31, 2008
      and bought back 39,625 shares of the Company and owned them as treasury stock
      in
      the amount of $410,000 at September 30, 2007.




For
      the
      regulatory capital ratio computation purpose, the Junior Subordinated Debentures
      of $87.3 million, which consists of $10 million issued by the Bank and $77.3
      million issued by the Company in connection with the issuance of $75 million
      trust preferred securities, were taken into consideration. At December 31,
      2006
      before the issuance the July 2007 debentures, Wilshire Bancorp accounted for
      $50.0 million of such securities as Tier 1 capital and $10.0 million as Tier
      2
      capital. With the issuance of July 2007 debentures in the third quarter of
      2007,
      the portion qualified for Tier 1 capital increased to $56 million and the
      portion for Tier 2 increased to $29.0 million. For the Bank level, only the
      $10
      million debenture issued by the Bank in 2002 is treated as Tier 2 capital.
      See
“Deposits and Other Sources of Funds” for further discussion regarding the
      capital treatment of subordinated debentures and the trust preferred securities.




**Item
                3.**
            **Quantitative
                and Qualitative Disclosures about Market
                Risk**




Market
      risk is the risk of loss from adverse changes in market prices and rates. Our
      market risk arises primarily from interest rate risk inherent in lending,
      investing and deposit taking activities. We evaluate market risk pursuant to
      policies reviewed and approved annually by our Board of Directors. The Board
      delegates responsibility for market risk management to the Asset & Liability
      Management Committee (“ALCO”), which reports monthly to the Board on activities
      related to market risk management. As part of the management of our market
      risk,
      ALCO may direct changes in the mix of assets and liabilities. To that end,
      we
      actively monitor and manage interest rate risk exposures.




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




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





38





The
      significant balance of non-interest-bearing deposits puts us in an overall
      asset-sensitive position and we strategically plan a significant three-month
      positive gap to meet any unanticipated funding needs by maintaining a large
      portion of funds obtained from non-interest-bearing deposits in overnight
      investments and other cash equivalents. In general, based upon our mix of
      deposits, loans and investments, increases in interest rates would be expected
      to increase our net interest margin. Decreases in interest rates would be
      expected to have the opposite effect. However, we usually seek to maintain
      a
      balanced position over the period of one year to ensure net interest margin
      stability in times of volatile interest rates. This is accomplished by
      maintaining a similar level of interest-earning assets and interest-paying
      liabilities available to be repriced within one year. At September 30, 2007,
      our
      position appeared balanced for a one-year timeframe with a negligible sensitive
      cumulative gap (minus 16.1% of average interest-earning assets). We do not
      anticipate a major change in our net interest margin as we expect such repricing
      gap, if occurring, to be eliminated within a year.




The
      change in net interest income may not always follow the general expectations
      of
      an “asset-sensitive” or a “liability-sensitive” balance sheet during periods of
      changing interest rates. This possibility results from interest rates earned or
      paid changing by differing increments and at different time intervals for each
      type of interest-sensitive asset and liability. The interest rate gaps reported
      in the tables arise when assets are funded with liabilities having different
      repricing intervals. Since these gaps are actively managed and change daily
      as
      adjustments are made in interest rate views and market outlook, positions at
      the
      end of any period may not reflect our interest rate sensitivity in subsequent
      periods. We attempt to balance longer-term economic views against prospects
      for
      short-term interest rate changes.




Although
      the interest rate sensitivity gap is a useful measurement and contributes to
      effective asset and liability management, it is difficult to predict the effect
      of changing interest rates based solely on that measure. As a result, the Asset
      & Liability Management (ALM) committee also regularly uses simulation
      modeling as a tool to measure the sensitivity of earnings and net portfolio
      value, or NPV, to interest rate changes. The NPV is defined as the net present
      value of an institution’s existing assets, liabilities and off-balance sheet
      instruments. The simulation model captures all assets, liabilities and
      off-balance sheet financial instruments and accounts for significant variables
      that are believed to be affected by interest rates. These include prepayment
      speeds on loans, cash flows of loans and deposits, principal amortization,
      call
      options on securities, balance sheet growth assumptions and changes in rate
      relationships as various rate indices react differently to market
      rates.




Although
      the simulation measures the volatility of net interest income and net portfolio
      value under immediate increase or decrease of market interest rate scenarios
      in
      100 basis point increments, our main concern is the negative effect of a
      reasonably-possible worst scenario. The ALM policy prescribes that for the
      worst
      possible rate-change scenario the possible reduction of net interest income
      and
      NPV should not exceed 20% of the base net interest income and 25% of the base
      NPV, respectively.




As
      our
      simulation measures indicate below, the net interest income increases
      (decreases) as market interest rates rise (fall), since we were in an overall
      asset-sensitive position with a 3.87% positive gap for the three-month timeframe
      and 17.89% cumulative positive gap for a whole portfolios. The NPV increases
      (decreases) as interest income increases (decreases) since the change in cash
      flows has a greater impact on the change in the NPV than does the change in
      the
      discount rate. However the extent of such changes was within the tolerance
      level
      prescribed by our ALM policy due partly to the near-balanced cumulative gap
      for
      the one-year timeframe.




Management
      believes that the assumptions used to evaluate the vulnerability of our
      operations to changes in interest rates approximate actual experience and
      considers them reasonable; however, the interest rate sensitivity of our assets
      and liabilities and the estimated effects of changes in interest rates on our
      net interest income and NPV could vary substantially if different assumptions
      were used or actual experience differs from the historical experience on which
      they are based.




The
      following table sets forth the interest rate sensitivity of our interest-earning
      assets and interest-bearing liabilities as of September 30, 2007 using the
      interest rate sensitivity gap ratio. For purposes of the following table, an
      asset or liability is considered rate-sensitive within a specified period when
      it can be repriced or matures within its contractual terms. Actual payment
      patterns may differ from contractual payment patterns:





39





**Interest
      Rate Sensitivity Analysis**


**(Dollars
      in Thousands)**




**At
                September 30, 2007****Amounts
                Subject to Repricing Within****Interest-earning
                assets:**
            
            
            **0-3 months**
            
            
            **3-12 months**
            
            
            **Over 1 to 5 years**
            
            
            **After 5 years**
            
            
            **Total**Gross
                loans1
            
            $
            1,158,605
            
            $
            47,206
            
            $
            445,657
            
            $
            64,643
            
            $
            1,716,111Investment
                securities
            
            
            13,873
            
            
            28,843
            
            
            150,902
            
            
            13,105
            
            
            206,723Federal
                funds sold and cash equivalentsagreement
                to resell
            
            
            20,004
            
            
            -
            
            
            -
            
            
            -
            
            
            20,004Interest-earning
                deposits
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Total
            
            $
            1,192,482
            
            $
            76,049
            
            $
            596,559
            
            $
            77,748
            
            $
            1,942,838**Interest-bearing
                liabilities:**Savings
                deposits
            
            
            30,647
            
            
            -
            
            
            -
            
            
            -
            
            
            30,647Time
                deposits of $100,000 or more
            
            
            392,100
            
            
            361,826
            
            
            1,233
            
            
            -
            
            
            755,159Other
                time deposits
            
            
            58,308
            
            
            80,019
            
            
            742
            
            
            5
            
            
            139,074Other
                interest-bearing deposits
            
            
            514,831
            
            
            -
            
            
            -
            
            
            -
            
            
            514,831Other
                borrowingsdemand
                deposits
            
            
            50,000
            
            
            20,000
            
            
            -
            
            
            -
            
            
            70,000Subordinate
                Debentures
            
            $
            71,857
            
            
            -
            
            
            15,464
            
            
            -
            
            
            87,321Total
            
            $
            1,117,743
            
            $
            461,845
            
            $
            17,439
            
            $
            5
            
            $
            1,597,032Interest
                rate sensitivity gap
            
            $
            74,739
            
            
            ($
                385,796
            )
            $
            579,120
            
            $
            77,743
            
            $
            345,806Cumulative
                interest rate sensitivity gap
            
            $
            74,739
            
            
            ($
                311,057
            )
            $
            268,063
            
            $
            345,806Cumulative
                interest rate sensitivity gap ratio (based on average interest-earning
                assets)
            
            
            3.87
            %
            
            -16.10
            %
            
            13.87
            %
            
            17.89
            %




The
      following table sets forth our estimated net interest income over a 12-month
      period and NPV based on the indicated changes in market interest rates as of
      September 30, 2007. All assets presented in this table are held-to-maturity
      or
      available-for-sale. At September 30, 2007, we had no trading securities:




**(Dollars
        in Thousands)**


**Change**
            
            **Net Interest Income****(in Basis Points)**
            
            **(next twelve months)**
            
            **% Change**
            
            **NPV**
            
            **% Change**+200
            
            
            97,755
            
            
            5.7
            %
            
            266,433
            
            
            4.8
            %+100
            
            
            95,361
            
            
            3.1
            %
            
            262,334
            
            
            3.2
            %0
            
            
            92,453
            
            
            -
            
            
            254,298
            
            
            --100
            
            
            88,090
            
            
            -4.7
            %
            
            238,140
            
            
            -6.4
            %-200
            
            
            82,395
            
            
            -10.9
            %
            
            214,472
            
            
            -15.7
            %




Our
      strategies in protecting both net interest income and economic value of equity
      from significant movements in interest rates involve 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 are not
      currently engaged in any of these types of transactions.




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




As
      of
      September 30, 2007, we carried out an evaluation, under the supervision and
      with
      the participation of our management, including our chief executive officer
      and
      chief financial officer, regarding the effectiveness of the design and operation
      of our “disclosure controls and procedures,” as defined under Exchange Act Rules
      13a-15(e) and 15d-15(e).




Based
      on
      this evaluation, our chief executive officer and chief financial officer
      concluded that, as of September 30, 2007, such disclosure controls and
      procedures were effective to ensure that information required to be disclosed
      by
      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 and forms of the Securities and Exchange Commission, and accumulated
      and
      communicated to our management, including our chief executive officer and chief
      financial officer, as appropriate to allow timely decisions regarding required
      disclosure.




In
      designing and evaluating the disclosure controls and procedures, our management
      recognized that any controls and procedures, no matter how well designed and
      operated, can only provide reasonable assurance in achieving the desired control
      objectives and in reaching a reasonable level of assurance our management
      necessarily was required to apply its judgment in evaluating the cost-benefit
      relationship of possible controls and procedures.




There
      were no changes in our internal controls over financial reporting during the
      quarter ended September 30, 2007 that materially affected, or are reasonably
      likely to materially affect, our internal controls over financial
      reporting.





1 Excludes
      the gross amount of non-accrual loans of approximately $15.9 million at
      September 30, 2007.





40




**Part
      II.**  **OTHER
      INFORMATION**




**Item
      1.**  **** **Legal
      Proceedings**




Not
      applicable.




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




Not
      applicable.




**Item
      2.**  **** **Unregistered
      Sales of Equity Securities and Use of Proceeds**




In
      July
      2007, the Company’s Board of Directors authorized a stock repurchase program to
      repurchase up to $10 million of the Company’s common stock until July 31, 2008.
      As of September 30, 2007, 39,625 shares have been repurchased under this program
      in open-market transactions amounting to $410,000. Detail for the share
      repurchase transactions conducted during the third quarter of 2007 appears
      below.




Issuer
                Purchases of Equity SecuritiesPeriod
            
            (a)
              Total number of
              shares (or units)
              purchased
            
            (b)
              Average price paid
              per share (or unit)
            
            (c)
              Total number of
              shares (or units)
              purchased as part of
              publicly announced
              plans or programs
            
            (d)
              Approximate dollar
              value of shares (or
              units) that may yet be
              purchased under the
              plans or programsJuly
                1, 2007 -July
                31, 2007
            
            
            -
            
            
            -
            
            
            -
            
            
            -August
                1, 2007 - August 31, 2007
            
            
            39,625
            
            $
            10.36
            
            
            39,625
            
            $
            9,590,000September
                1, 2007 - September 30, 2007
            
            
            -
            
            
            -
            
            
            -
            
            
            -Total
            
            
            39,625
            
            $
            10.36
            
            
            39,625
            
            $
            9,590,000





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




Not
      applicable.




**Item
      4.**  **** **Submission
      of Matters to a Vote of Security Holders**




None.




**Item
      5.**  **** **Other
      Information**




Not
      applicable.





41





**Item
        6.**  **** **EXHIBITS**


**Exhibit
      Table**





**Reference**
              **Number**
            
            **Item**4.12
            
            Indenture
                by and between Wilshire Bancorp, Inc. and LaSalle Bank National
                Association dated as of July 10, 2007.4.13
            
            Amended
                and Restated Declaration of Trust by and among LaSalle National Trust
                Delaware, LaSalle Bank National Association, Wilshire Bancorp, Inc.,
                Soo
                Bong Min and Brian E. Cho dated as of July 10, 2007.4.14
            
            Guarantee
                Agreement by and between Wilshire Bancorp, Inc. and LaSalle Bank
                National
                Association dated as of July 10, 2007.11
            
            Statement
                Regarding Computation of Net Earnings per Share131.1
            
            Certification
                of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act of 200231.2
            
            Certification
                of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act of 200232
            
            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







1  The
      information required by this Exhibit is incorporated by reference from Note
      3 of
      the Company’s Financial Statements included herein.




42





**SIGNATURES**


Pursuant
      to the requirement of the Securities Exchange Act of 1934, the registrant has
      duly caused this report to be signed on its behalf by the undersigned, thereunto
      duly authorized.




WILSHIRE
              BANCORP, INC.Date:
                November 9, 2007
            By:
            /s/
                Brian E. ChoBrian
                E. ChoExecutive
                Vice President and Chief Financial Officer(Principal
                Financial and Accounting Officer)





43