Table of Contents

 

 

 

**SECURITIES AND EXCHANGECOMMISSION**

**Washington,D.C. 20549**

 

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**FORM 10-Q**

 

**(Mark One)**

 
| **x**      | **Quarterly report pursuant to Section 13 or  15(d) of the Securities Exchange Act of 1934** |
|------------|--------------------------------------------------------------------------------------------------------|
| ** ** | ** **                                                                                             |
| ** ** | **For the quarterly period ended****June 30, 2010****.**                                          |

 

**OR**

 
| **o**      | **Transition report pursuant to Section 13 or  15(d) of the Securities Exchange Act of 1934**                                                                                                                                    |
|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** ** | ** **                                                                                                                                                                                                                                 |
| ** ** | **For the transition period from                    to                  ** |

 

**CommissionFile Number 000-50923**

 

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**WILSHIRE BANCORP, INC.**

(Exact name of registrantas specified in its charter)

 

| **California**                                                | ** ** | **20-0711133**                         |
|---------------------------------------------------------------|------------|----------------------------------------|
| State or other  jurisdiction of incorporation or organization |       | I.R.S. Employer  Identification Number |

 

| **3200  Wilshire Blvd.**                |       |      |
|-----------------------------------------|------------|-----------|
| **Los  Angeles, California**            | ** ** | **90010** |
| Address of principal  executive offices |       | Zip Code  |

 

**(213)387-3200**

Registrant’s telephonenumber, including area code

 

**Nochange**

(Former name, formeraddress, and former fiscal year, if changed since last report)

 

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Indicate by check mark whether the registrant (1) hasfiled all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for suchshorter period that the registrant was required to file such reports), and (2) hasbeen subject to such filing requirements for the past 90 days.  Yes x  Noo

 

Indicate by check mark whether the registrant hassubmitted electronically and posted on its corporate Web site, if any, everyInteractive Data File required to be submitted and posted pursuant to Rule 405of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (orfor such shorter period that the registrant was required to submit and postsuch files).  Yes o  Noo

 

Indicate by check mark whetherthe registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or a smaller reporting company.  See the definitions of “large acceleratedfiler,” “accelerated filer” and “small reporting company” in Rule 12b-2 ofthe Exchange Act.

 

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

 

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

 

The number of shares of Common Stock of the registrantoutstanding as of July 30,2010 was 29,486,734.

 

 

 

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Table of Contents

 

**FOR 10-Q**

 

**INDEX**

 

**WILSHIRE BANCORP, INC.**

 
| **Part I. FINANCIAL INFORMATION** | **1**                                                                                           |
|----------------------------------------|-------------------------------------------------------------------------------------------------|
|                                   |                                                                                            |   |
| **Item 1.**                            | **Financial  Statements**                                                                       | **1** |
|                                   |                                                                                            |   |
| **Item 2.**                            | **Management’s  Discussion and Analysis of Financial Condition and Results of Operations** | **21** |
|                                   |                                                                                            |   |
| **Item 3.**                            | **Quantitative  and Qualitative Disclosures about  Market Risk**                                | **46** |
|                                   |                                                                                            |   |
| **Item 4.**                            | **Controls and  Procedures**                                                                    | **48** |
|                                   |                                                                                            |   |
| **Part II.OTHER INFORMATION**     | **49**                                                                                          |
|                                   |                                                                                            |   |
| **Item 1.**                            | **Legal  Proceedings**                                                                          | **49** |
|                                   |                                                                                            |   |
| **Item 1A**                            | **Risk Factors**                                                                                | **49** |
|                                   |                                                                                            |   |
| **Item 2.**                            | **Unregistered  Sales of Equity Securities and Use of Proceeds**                                | **49** |
|                                   |                                                                                            |   |
| **Item 3.**                            | **Defaults  Upon Senior Securities**                                                            | **49** |
|                                   |                                                                                            |   |
| **Item 4.**                            | **(Removed and  Reserved)**                                                                | **49** |
|                                   |                                                                                            |   |
| **Item 5.**                            | **Other  Information**                                                                          | **49** |
| ** **                             | ** **                                                                                      | ** ** |
| **Item 6.**                            | **Exhibits**                                                                                    | **49** |
|                                   |                                                                                            |   |
| **SIGNATURES**                         | **50**                                                                                          |

 

i

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Table of Contents

 

**Part I.  FINANCIALINFORMATION**

 

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

 

**WILSHIRE BANCORP, INC.**

**CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION**

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

 
| ** **                                                                                                                                                                                       | ** ** | **June 30, 2010** | ** ** | **December 31, 2009** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------|------------|---------------------------------|------------|
| **ASSETS**                                                                                                                                                                                       | ** ** | ** **                  | ** ** | ** **                      | ** ** |
| Cash and due from banks                                                                                                                                                                          |       | $                           | 134,707    |                            | $          | 155,753 |   |
| Federal funds sold and other  cash equivalents                                                                                                                                                   |       | 224,005                     |       | 80,004                          |       |
| Cash and cash equivalents                                                                                                                                                                        |       | 358,712                     |       | 235,757                         |       |
|                                                                                                                                                                                             |       |                        |       |                            |       |
| Securities available for sale,  at fair value (amortized cost of $498,991 and $651,095 at June 30, 2010  and December 31, 2009, respectively)                                          |       | 506,381                     |       | 651,318                         |       |
| Securities held to maturity,  at amortized cost (fair value of $102 and $109 at June 30, 2010 and  December 31, 2009, respectively)                                                    |       | 96                          |       | 109                             |       |
| Loans receivable (net of  allowance for loan losses of $91,419 and $62,130 at June 30, 2010 and  December 31, 2009, respectively)                                                      |       | 2,346,638                   |       | 2,329,078                       |       |
| Loans held for sale—at the  lower of cost or market                                                                                                                                         |       | 16,965                      |       | 36,233                          |       |
| Federal Home Loan Bank                                                                                                                                                                           |       | 20,075                      |       | 20,850                          |       |
| Other real estate owned                                                                                                                                                                          |       | 6,540                       |       | 3,797                           |       |
| Due from customers on  acceptances                                                                                                                                                               |       | 611                         |       | 945                             |       |
| Cash surrender value of bank  owned life insurance                                                                                                                                               |       | 18,354                      |       | 18,037                          |       |
| Investment in affordable  housing partnerships                                                                                                                                                   |       | 29,665                      |       | 13,732                          |       |
| Bank premises and equipment                                                                                                                                                                      |       | 13,741                      |       | 12,660                          |       |
| Accrued interest receivable                                                                                                                                                                      |       | 13,427                      |       | 15,266                          |       |
| Deferred income taxes                                                                                                                                                                            |       | 28,199                      |       | 18,684                          |       |
| Servicing assets                                                                                                                                                                                 |       | 6,655                       |       | 6,898                           |       |
| Goodwill                                                                                                                                                                                         |       | 6,675                       |       | 6,675                           |       |
| Core deposits intangibles                                                                                                                                                                        |       | 1,829                       |       | 2,013                           |       |
| FDIC loss share indemnification                                                                                                                                                                  |       | 28,538                      |       | 33,775                          |       |
| Other assets                                                                                                                                                                                     |       | 33,993                      |       | 30,170                          |       |
| TOTAL                                                                                                                                                                                            |       | $                           | 3,437,094  |                            | $          | 3,435,997 |   |
|                                                                                                                                                                                             |       |                        |       |                            |       |
| **LIABILITIES:**                                                                                                                                                                                 |       |                        |       |                            |       |
| Deposits:                                                                                                                                                                                        |       |                        |       |                            |       |
| Non-interest bearing                                                                                                                                                                             |       | $                           | 427,793    |                            | $          | 385,188 |   |
| Interest bearing:                                                                                                                                                                                |       |                        |       |                            |       |
| Savings                                                                                                                                                                                          |       | 77,011                      |       | 71,601                          |       |
| Money market and NOW accounts                                                                                                                                                                    |       | 931,311                     |       | 932,063                         |       |
| Time deposits of $100,000 or  more                                                                                                                                                               |       | 752,656                     |       | 795,679                         |       |
| Other time deposits                                                                                                                                                                              |       | 712,698                     |       | 643,684                         |       |
| Total deposits                                                                                                                                                                                   |       | 2,901,469                   |       | 2,828,215                       |       |
|                                                                                                                                                                                             |       |                        |       |                            |       |
| Federal Home Loan Bank  advances and other borrowings                                                                                                                                            |       | 145,306                     |       | 232,000                         |       |
| Junior subordinated debentures                                                                                                                                                                   |       | 87,321                      |       | 87,321                          |       |
| Accrued interest payable                                                                                                                                                                         |       | 5,461                       |       | 5,865                           |       |
| Acceptances outstanding                                                                                                                                                                          |       | 611                         |       | 945                             |       |
| Other liabilities                                                                                                                                                                                |       | 29,491                      |       | 15,515                          |       |
| Total liabilities                                                                                                                                                                                |       | 3,169,659                   |       | 3,169,861                       |       |
|                                                                                                                                                                                             |       |                        |       |                            |       |
| **SHAREHOLDERS’ EQUITY:**                                                                                                                                                                   |       |                        |       |                            |       |
| Preferred stock, $1,000 par  value—authorized, 5,000,000 shares; issued and outstanding, 62,158 shares at  June 30, 2010 and December 31, 2009                                    |       | 60,186                      |       | 59,931                          |       |
| Common stock, no par  value—authorized, 80,000,000 shares; issued and outstanding, 29,486,734  shares and 29,415,657 shares at June 30, 2010 and December 31,  2009, respectively |       | 55,370                      |       | 54,918                          |       |
| Accumulated other  comprehensive income, net of tax                                                                                                                                              |       | 4,554                       |       | 326                             |       |
| Retained earnings                                                                                                                                                                                |       | 147,325                     |       | 150,961                         |       |
| Total shareholders’ equity                                                                                                                                                                  |       | 267,435                     |       | 266,136                         |       |
|                                                                                                                                                                                             |       |                        |       |                            |       |
| TOTAL                                                                                                                                                                                            |       | $                           | 3,437,094  |                            | $          | 3,435,997 |   |

 

See accompanying notes to consolidated financial statements.

 

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Table of Contents

 

**WILSHIRE BANCORP, INC.**

**CONSOLIDATED STATEMENTS OF OPERATIONS**

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

 
| ** **                                                                       | ** ** | **Three Months Ended June 30,** | ** ** | **Six Months Ended June 30,** | ** ** |
|----------------------------------------------------------------------------------|------------|-----------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                                                       | ** ** | **2010**                                            | ** ** | **2009**                                          | ** ** | **2010** | ** ** | **2009** | ** ** |
| ** **                                                                       | ** ** | ** **                                          | ** ** | ** **                                        | ** ** | ** ** | ** ** | ** ** | ** ** |
| INTEREST INCOME:                                                                 |       |                                                |       |                                              |       |   |   |   |   |
| Interest and fees on loans                                                       |       | $                                                   | 36,079     |                                              | $          | 31,234 |   | $ | 71,383 |   | $ | 61,428 |   |
| Interest on investment securities                                                |       | 4,756                                               |       | 3,194                                             |       | 10,371 |   | 6,136 |   |
| Interest on federal funds sold                                                   |       | 294                                                 |       | 777                                               |       | 676 |   | 1,066 |   |
| Total interest income                                                            |       | 41,129                                              |       | 35,205                                            |       | 82,430 |   | 68,630 |   |
|                                                                             |       |                                                |       |                                              |       |   |   |   |   |
| INTEREST EXPENSE:                                                                |       |                                                |       |                                              |       |   |   |   |   |
| Interest on deposits                                                             |       | 10,476                                              |       | 11,776                                            |       | 21,650 |   | 22,958 |   |
| Interest on FHLB advances and other borrowings                                   |       | 750                                                 |       | 1,622                                             |       | 1,670 |   | 3,280 |   |
| Interest on junior subordinated debentures                                       |       | 664                                                 |       | 826                                               |       | 1,313 |   | 1,747 |   |
| Total interest expense                                                           |       | 11,890                                              |       | 14,224                                            |       | 24,633 |   | 27,985 |   |
|                                                                             |       |                                                |       |                                              |       |   |   |   |   |
| NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES AND LOAN  COMMITMENTS       |       | 29,239                                              |       | 20,981                                            |       | 57,797 |   | 40,645 |   |
|                                                                             |       |                                                |       |                                              |       |   |   |   |   |
| PROVISION FOR LOAN LOSSES AND LOAN COMMITMENTS                                   |       | 32,200                                              |       | 12,100                                            |       | 49,200 |   | 18,800 |   |
|                                                                             |       |                                                |       |                                              |       |   |   |   |   |
| NET INTEREST (LOSS) INCOME  AFTER PROVISION FOR LOAN LOSSES AND LOAN COMMITMENTS |       | (2,961                                              | )          | 8,881                                             |       | 8,597 |   | 21,845 |   |
|                                                                             |       |                                                |       |                                              |       |   |   |   |   |
| NON-INTEREST INCOME:                                                             |       |                                                |       |                                              |       |   |   |   |   |
| Service charges on deposit accounts                                              |       | 3,215                                               |       | 3,125                                             |       | 6,439 |   | 6,024 |   |
| Gain (loss) on sale of loans                                                     |       | 1,444                                               |       | 307                                               |       | 1,480 |   | (524 | ) |
| Gain on sale of securities                                                       |       | 3,658                                               |       | 1,575                                             |       | 6,142 |   | 1,588 |   |
| FAS 141R gain on bargain  purchase                                               |       | —                                              |       | 21,679                                            |       | — |   | 21,679 |   |
| Loan-related servicing fees                                                      |       | 810                                                 |       | 780                                               |       | 1,849 |   | 1,744 |   |
| Other income                                                                     |       | 751                                                 |       | 1,124                                             |       | 1,753 |   | 1,816 |   |
| Total non-interest income                                                        |       | 9,878                                               |       | 28,590                                            |       | 17,663 |   | 32,327 |   |
|                                                                             |       |                                                |       |                                              |       |   |   |   |   |
| NON-INTEREST EXPENSES:                                                           |       |                                                |       |                                              |       |   |   |   |   |
| Salaries and employee benefits                                                   |       | 7,284                                               |       | 5,988                                             |       | 14,399 |   | 12,195 |   |
| Occupancy and equipment                                                          |       | 1,946                                               |       | 1,682                                             |       | 4,127 |   | 3,358 |   |
| Deposit insurance premiums                                                       |       | 1,113                                               |       | 2,178                                             |       | 2,189 |   | 2,789 |   |
| Professional fees                                                                |       | 1,395                                               |       | 575                                               |       | 2,387 |   | 917 |   |
| Data processing                                                                  |       | 690                                                 |       | 845                                               |       | 1,327 |   | 1,672 |   |
| Other operating                                                                  |       | 3,704                                               |       | 2,808                                             |       | 6,393 |   | 5,131 |   |
| Total non-interest expenses                                                      |       | 16,132                                              |       | 14,076                                            |       | 30,822 |   | 26,062 |   |
|                                                                             |       |                                                |       |                                              |       |   |   |   |   |
| (LOSS) INCOME BEFORE INCOME  TAXES                                               |       | (9,215                                              | )          | 23,395                                            |       | (4,562 | ) | 28,110 |   |
| INCOME TAX (BENEFIT) PROVISION                                                   |       | (5,551                                              | )          | 9,649                                             |       | (4,213 | ) | 11,304 |   |
| NET (LOSS) INCOME                                                                |       | (3,664                                              | )          | 13,746                                            |       | (349 | ) | 16,806 |   |
|                                                                             |       |                                                |       |                                              |       |   |   |   |   |
| Preferred stock cash dividend and accretion of  preferred stock                  |       | 906                                                 |       | 898                                               |       | 1,809 |   | 1,818 |   |
|                                                                             |       |                                                |       |                                              |       |   |   |   |   |
| NET (LOSS) INCOME AVAILABLE TO  COMMON SHAREHOLDERS                              |       | $                                                   | (4,570     | )                                                 | $          | 12,848 |   | $ | (2,158 | ) | $ | 14,988 |   |
|                                                                             |       |                                                |       |                                              |       |   |   |   |   |
| LOSS/EARNINGS PER COMMON SHARE  INFORMATION                                      |       |                                                |       |                                              |       |   |   |   |   |
| Basic                                                                            |       | $                                                   | (0.15      | )                                                 | $          | 0.44 |   | $ | (0.07 | ) | $ | 0.51 |   |
| Diluted                                                                          |       | $                                                   | (0.15      | )                                                 | $          | 0.44 |   | $ | (0.07 | ) | $ | 0.51 |   |
| WEIGHTED-AVERAGE COMMON SHARES  OUTSTANDING:                                     |       |                                                |       |                                              |       |   |   |   |   |
| Basic                                                                            |       | 29,487,994                                          |       | 29,413,757                                        |       | 29,486,011 |   | 29,413,757 |   |
| Diluted                                                                          |       | 29,487,994                                          |       | 29,421,247                                        |       | 29,486,011 |   | 29,421,746 |   |
|                                                                             |       |                                                |       |                                              |       |   |   |   |   |
| COMMON STOCK CASH DIVIDEND  DECLARED:                                            |       |                                                |       |                                              |       |   |   |   |   |
| Cash dividend declared on  common shares                                         |       | $                                                   | —     |                                              | $          | 1,477 |   | $ | 1,477 |   | $ | 2,941 |   |
| Cash dividend declared per  common share                                         |       | $                                                   | —     |                                              | $          | 0.05 |   | $ | 0.05 |   | $ | 0.10 |   |

 

See accompanying notes to consolidated financial statements.

 

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Table of Contents

 

**WILSHIRE BANCORP, INC.**

**CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY**

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

 
| ** **                                                                   | ** ** | ** **               | ** ** | ** **            | ** **   | ** **         | ** ** | ** ** | ** ** | **Accumulated**        | ** ** | ** **   | ** ** | ** **             | ** ** |
|------------------------------------------------------------------------------|------------|--------------------------|------------|-----------------------|--------------|--------------------|------------|------------|------------|------------------------|------------|--------------|------------|------------------------|------------|
| ** **                                                                   | ** ** | **Preferred Stock** | ** ** | **Common Stock** | ** **   | **Other**          | ** ** | ** ** | ** ** | **Total**              | ** ** |
| ** **                                                                   | ** ** | **Numbers**              | ** ** | ** **            | ** **   | **Numbers**        | ** ** | ** ** | ** ** | **Comprehensive**      | ** ** | **Retained** | ** ** | **Shareholders’** | ** ** |
| ** **                                                                   | ** ** | **of Shares**       | ** ** | **Amount**            | ** **   | **of Shares** | ** ** | **Amount** | ** ** | **Income (Loss)** | ** ** | **Earnings** | ** ** | **Equity**             | ** ** |
| BALANCE—January 1, 2009                                            |       | 62,158                   |       | $                     |  59,443 |               | 29,413,757 |       | $          |  54,038           |       | $            | 1,239      |                   | $          |  140,340 |   | $ | 255,060 |   |
| Stock options exercised                                                      |       |                     |       |                  |         |               |       |       |       |                   |       |         |       | —                 |       |
| Cash dividend declared                                                       |       |                     |       |                  |         |               |       |       |       |                   |       |         |       |                   |       |
| Common stock                                                                 |       |                     |       |                  |         |               |       |       |       |                   |       | (2,941       | )          | (2,941                 | )          |
| Preferred stock                                                              |       |                     |       |                  |         |               |       |       |       |                   |       | (1,554       | )          | (1,554                 | )          |
| Share-based compensation  expense                                            |       |                     |       |                  |         |               |       | 382        |       |                   |       |         |       | 382                    |       |
| Tax benefit from stock options  exercised                                    |       |                     |       |                  |         |               |       |       |       |                   |       |         |       | —                 |       |
| Accretion of discount on preferred stock                                     |       |                     |       | 240                   |         |               |       |       |       |                   |       | (265         | )          | (25                    | )          |
| Comprehensive income:                                                        |       |                     |       |                  |         |               |       |       |       |                   |       |         |       |                   |       |
| Net income                                                                   |       |                     |       |                  |         |               |       |       |       |                   |       | 16,806       |       | 16,806                 |       |
| Other comprehensive income:                                                  |       |                     |       |                  |         |               |       |       |       |                   |       |         |       |                   |       |
| Net change in unrealized gain  on interest-only strips (net of tax)          |       |                     |       |                  |         |               |       |       |       | 34                     |       |         |       | 34                     |       |
| Net change in unrealized gain  on securities available for sale (net of tax) |       |                     |       |                  |         |               |       |       |       | 1,396                  |       |         |       | 1,396                  |       |
| Comprehensive income                                                         |       |                     |       |                  |         |               |       |       |       |                   |       |         |       | 18,236                 |       |
| BALANCE—June 30, 2009                                              |       | 62,158                   |       | $                     |  59,683 |               | 29,413,757 |       | $          |  54,420           |       | $            | 2,669      |                   | $          |  152,386 |   | $ | 269,158 |   |
|                                                                         |       |                     |       |                  |         |               |       |       |       |                   |       |         |       |                   |       |
| BALANCE—January 1, 2010                                            |       | 62,158                   |       | $                     |  59,931 |               | 29,415,657 |       | $          |  54,918           |       | $            | 326        |                   | $          |  150,961 |   | $ | 266,136 |   |
| Stock options exercised                                                      |       |                     |       |                  |         | 71,077             |       | 98         |       |                   |       |         |       | 98                     |       |
| Cash dividend declared                                                       |       |                     |       |                  |         |               |       |       |       |                   |       |         |       |                   |       |
| Common stock                                                                 |       |                     |       |                  |         |               |       |       |       |                   |       | (1,477       | )          | (1,477                 | )          |
| Preferred stock                                                              |       |                     |       |                  |         |               |       |       |       |                   |       | (1,555       | )          | (1,555                 | )          |
| Share-based compensation  expense                                            |       |                     |       |                  |         |               |       | 352        |       |                   |       |         |       | 352                    |       |
| Tax benefit from stock options  exercised                                    |       |                     |       |                  |         |               |       | 2          |       |                   |       |         |       | 2                      |       |
| Accretion of discount on  preferred stock                                    |       |                     |       | 255                   |         |               |       |       |       |                   |       | (255         | )          | —                 |       |
| Comprehensive income:                                                        |       |                     |       |                  |         |               |       |       |       |                   |       |         |       |                   |       |
| Net loss                                                                     |       |                     |       |                  |         |               |       |       |       |                   |       | (349         | )          | (349                   | )          |
| Other comprehensive income:                                                  |       |                     |       |                  |         |               |       |       |       |                   |       |         |       |                   |       |
| Net change in unrealized gain on interest-only strips (net of tax)           |       |                     |       |                  |         |               |       |       |       | (28                    | )          |         |       | (28                    | )          |
| Net change in unrealized gain  on securities available for sale (net of tax) |       |                     |       |                  |         |               |       |       |       | 4,256                  |       |         |       | 4,256                  |       |
| Comprehensive income                                                         |       |                     |       |                  |         |               |       |       |       |                   |       |         |       | 3,878                  |       |
| BALANCE—June 30, 2010                                              |       | 62,158                   |       | $                     |  60,186 |               | 29,486,734 |       | $          |  55,370           |       | $            | 4,554      |                   | $          |  147,325 |   | $ | 267,435 |   |

 

See accompanying notes to consolidated financial statements.

 

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**WILSHIRE BANCORP, INC.**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

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

 
| ** **                                                                                  | ** ** | **Six Months Ended June 30,** | ** ** |
|---------------------------------------------------------------------------------------------|------------|------------------------------------|------------|
| ** **                                                                                  | ** ** | **2010**                           | ** ** | **2009** | ** ** |
| CASH FLOWS FROM OPERATING  ACTIVITIES:                                                      |       |                               |       |   |   |
| Net (loss) income                                                                           |       | $                                  | (349       | ) | $ | 16,806 |   |
| Adjustments to reconcile net  income to net cash provided by operating activities:          |       |                               |       |   |   |
| Amortization of investment  securities                                                      |       | 3,116                              |       | 1,861 |   |
| Depreciation and amortization  of Bank premises and equipment                               |       | 1,043                              |       | 986 |   |
| Accretion of discount on  acquired loans                                                    |       | (2,758                             | )          | — |   |
| Amortization of core deposit  intangibles                                                   |       | 184                                |       | 148 |   |
| Amortization of investments in  affordable housing partnerships                             |       | —                             |       | 600 |   |
| Provision for losses on loans  and loan commitments                                         |       | 49,200                             |       | 18,800 |   |
| Provision for other real  estate owned losses                                               |       | 227                                |       | 359 |   |
| Deferred tax benefit                                                                        |       | (12,405                            | )          | (3,448 | ) |
| Loss on disposition of bank  premises and equipment                                         |       | 4                                  |       | 11 |   |
| FAS 141R gain on bargain purchase                                                           |       | —                             |       | (21,679 | ) |
| Net realized (gain) loss on  sale of loans held for sale                                    |       | (1,480                             | )          | 524 |   |
| Proceeds from sale of loans                                                                 |       | 11,844                             |       | 11,575 |   |
| Origination of loans held for sale                                                          |       | (53,134                            | )          | (13,801 | ) |
| Net realized gain on sale of available for sale securities                                  |       | (6,142                             | )          | (1,588 | ) |
| Change in unrealized  appreciation on serving assets                                        |       | 552                                |       | 215 |   |
| Net realized loss (gain) on sale of other real estate owned                                 |       | 85                                 |       | (402 | ) |
| Share-based compensation  expense                                                           |       | 352                                |       | 381 |   |
| Change in cash surrender value of life insurance                                            |       | (317                               | )          | (320 | ) |
| Servicing assets capitalized                                                                |       | (309                               | )          | (159 | ) |
| Decrease (increase) in accrued interest receivable                                          |       | 1,839                              |       | (1,170 | ) |
| Increase in other assets                                                                    |       | (26,060                            | )          | (5,954 | ) |
| (Decrease) increase in accrued  interest payable                                            |       | (404                               | )          | 1,188 |   |
| Increase in other liabilities                                                               |       | 16,998                             |       | 11,020 |   |
| Net cash (used) provided by  operating activities                                           |       | (17,914                            | )          | 15,953 |   |
| ** **                                                                                  | ** ** | ** **                         | ** ** | ** ** | ** ** |
| CASH FLOWS FROM INVESTING  ACTIVITIES:                                                      |       |                               |       |   |   |
| Proceeds from principal  repayment, matured or called securities held to maturity           |       | 14                                 |       | 15 |   |
| Purchase of securities available for sale                                                   |       | (437,551                           | )          | (259,386 | ) |
| Proceeds from principal  repayments, matured, called, or sold securities available for sale |       | 592,680                            |       | 118,629 |   |
| Net increase in loans receivable                                                            |       | (27,642                            | )          | (79,128 | ) |
| Receipt of FDIC loss share indemnification                                                  |       | 8,409                              |       | — |   |
| Proceeds from sale of other  loans                                                          |       | 20,052                             |       | 1,168 |   |
| Proceeds from sale of other  real estate owned                                              |       | 4,229                              |       | 3,151 |   |
| Purchases of investments in affordable housing partnerships                                 |       | (2,553                             | )          | (3,810 | ) |
| Loss of investment in  affordable housing partnerships                                      |       | 803                                |       | — |   |
| Purchases of premise and equipment                                                          |       | (505                               | )          | (1,802 | ) |
| Redemption  of Federal Home Loan Bank Stock                                                 |       | 775                                |       |   |   |
| Net  cash and cash equivalents acquired from acquisition of Mirae Bank                      |       | —                             |       | 5,724 |   |
| Net cash provided by (used) in investing activities                                         |       | 158,711                            |       | (215,439 | ) |
|                                                                                             |            |                                    |            |  |  |  |  |

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

 

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**WILSHIRE BANCORP, INC.**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

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

 
| ** **                                                            | ** ** | **Six Months Ended June 30,** | ** ** |
|-----------------------------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                                            | ** ** | **2010**                                          | ** ** | **2009** | ** ** |
| CASH FLOWS FROM FINANCING  ACTIVITIES:                                |       |                                              |       |   |   |
| Proceeds from exercise of  stock options                              |       | $                                                 | 98         |   | $ | — |   |
| Payment of cash dividend on common stock                              |       | (2,948                                            | )          | (2,941 | ) |
| Payment of cash dividend on preferred stock                           |       | (1,554                                            | )          | (1,321 | ) |
| Increase in Federal Home Loan Bank advances and other borrowings      |       | 43,897                                            |       | 57,000 |   |
| Decrease in Federal Home Loan Bank advances and other borrowings      |       | (130,591                                          | )          | (75,500 | ) |
| Tax benefit from exercise of  stock option                            |       | 2                                                 |       | — |   |
| Net increase in deposits                                              |       | 73,254                                            |       | 345,627 |   |
| Net cash (used) provided by  financing activities                     |       | (17,842                                           | )          | 322,865 |   |
|                                                                  |       |                                              |       |   |   |
| NET INCREASE IN CASH AND CASH  EQUIVALENTS                            |       | 122,955                                           |       | 123,379 |   |
|                                                                  |       |                                              |       |   |   |
| CASH AND CASH  EQUIVALENTS—Beginning of period                   |       | 235,757                                           |       | 97,542 |   |
| CASH AND CASH EQUIVALENTS—End  of period                         |       | $                                                 | 358,712    |   | $ | 220,921 |   |
|                                                                  |       |                                              |       |   |   |
| SUPPLEMENTAL DISCLOSURES OF  CASH FLOW INFORMATION:                   |       |                                              |       |   |   |
| Interest paid                                                         |       | $                                                 | 25,036     |   | $ | 23,744 |   |
| Income taxes paid                                                     |       | $                                                 | 16,310     |   | $ | 8,127 |   |
|                                                                  |       |                                              |       |   |   |
| SUPPLEMENTAL SCHEDULE OF  NONCASH INVESTING AND FINANCING ACTIVITIES: |       |                                              |       |   |   |
| Real estate acquired through  foreclosures                            |       | $                                                 | 6,627      |   | $ | 5,902 |   |
| Note financing for OREO sales                                         |       | $                                                 | —     |   | $ | 225 |   |
| Note financing for sale of  other loans                               |       | $                                                 | 33,840     |   | $ | 8,825 |   |
| Other assets transferred to  Bank premises and equipment              |       | $                                                 | 1,623      |   | $ | 290 |   |
| Common stock cash dividend  declared, but not paid                    |       | $                                                 | —     |   | $ | 1,471 |   |
| Preferred stock cash dividend  declared, but not paid                 |       | $                                                 | 388        |   | $ | 388 |   |

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

 

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**WILSHIREBANCORP, INC.**

 

**Notes toConsolidated Financial Statements****(Unaudited)**

 

**Note 1.****  ****Business of WilshireBancorp, Inc.**

 

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

 

Our corporate headquarters andprimary banking facilities are located at 3200 Wilshire Boulevard, Los Angeles,California 90010.  On June 26, 2009,we purchased substantially all the assets and assumed substantially all theliabilities of Mirae Bank (“Mirae”) from the Federal Deposit InsuranceCorporation (“FDIC”), as receiver of Mirae Bank.  Mirae Bank previously operated fivecommercial banking branches, all located within southern California, and thesebranches were integrated into our existing branch network following theacquisition. Inaddition, we also have sixloan production offices utilized primarily for the origination of loans underour Small Business Administration (“SBA”) lending program in Colorado, Georgia,Texas (2 offices), Virginia, and New Jersey.

 

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

 

The consolidated financial statements have been preparedin accordance with the Securities and Exchange Commission (“SEC”) rules andregulations for interim financial reporting and therefore do not necessarilyinclude all information and footnote disclosures normally included in annualfinancial statements prepared in accordance with accounting principlesgenerally accepted in the United States of America (“GAAP”).The information provided by these interim financial statements reflect alladjustments which are, in the opinion of management, necessary for a fairpresentation of the Company’s consolidated statements of financialcondition as of June 30, 2010 and December 31, 2009, the statements ofoperations for the three and six months ended June 30, 2010 and June 30,2009, and the related statements of shareholders’ equity and statements of cashflows for the six months ended June 30, 2010 and June 30, 2009.Operating results for interim periods are not necessarily indicative ofoperating results for an entire fiscal year.

 

TheFinancial Accounting Standards Board’s (“FASB’s”) Accounting StandardsCodification (“ASC”) became effective on July 1, 2009. At that date, theASC became the FASB’s officially recognized source of authoritative GAAPapplicable to all public and non-public non-governmental entities, supersedingexisting FASB, American Institute of Certified Public Accountants (“AICPA”),Emerging Issues Task Force (“EITF”) and related literature. Rules andinterpretive releases of the SEC under the authority of federal securities lawsare also sources of authoritative GAAP for SEC registrants. All otheraccounting literature is considered non-authoritative. The switch to the ASCaffects the way companies refer to GAAP in financial statements and accountingpolicies. Citing particular content in the ASC involves specifying the uniquenumeric path to the content through the Topic, Subtopic, Section andParagraph structure.

 

The unaudited financial statements should be read inconjunction with the audited financial statements and notes thereto included inthe Company’s Annual Report on Form 10-K for the year ended December 31,2009. The effective tax rate for the three ending June 30, 2010 wascalculated using actual year to date pretax income in effective tax ratecalculations.  In periods prior to June 30,2010, the Company used estimated annualized pretax income to calculate theeffective tax rate. This change led to a higher tax rate for quarter ending June 30,2010 compared to previous quarter.  Allother accounting policies used in the preparation of these interim financialstatements were consistent with those used in the preparation of the financialstatements for the year ended December 31, 2009.

 

**Note 3.****  ****Federally Assisted Acquisition of****Mirae****Bank**

 

The FDIC placed Mirae Bankunder receivership upon Mirae Bank’s closure by the California Department ofFinancial Institutions (“DFI”) at the close of business on June 26,2009.  We purchased substantially all of MiraeBank’s assets and assumed all of Mirae Bank’s deposits and certain otherliabilities. Further, we entered into loss sharing agreements with the FDIC inconnection with the Mirae Bank acquisition. Under the loss sharing agreements,the FDIC will share in the losses on assets covered under the agreement, whichgenerally include loans acquired from Mirae Bank and foreclosed loan collateralexisting at June 26, 2009 (referred to collectively as “covered assets”).

 

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Withthe acquisition of Mirae Bank, the Bank entered into loss-sharing agreementswith the FDIC for amounts receivable under the agreements. The Companyaccounted for the receivable balances under the loss-sharing agreements as anFDIC indemnification asset in accordance with ASC 805 (formerly FAS 141R Business Combinations).  The FDIC indemnification is accounted for andcalculated by adding the present value of all the cash flows that the Companyexpected to collect from the FDIC on the date of the acquisition as stated inthe loss-sharing agreement. As expected and actual cash flows increase anddecrease from what was expected at the time of acquisition, the FDICindemnification will decrease and increase, respectively.  When covered loans are paid-off and sold, theFDIC indemnification asset is reduced and is offset with interest income.Covered loans that become impaired, increases in the indemnification asset.

 

The table below summarizes thechanges to the FDIC loss share indemnification in the second quarter and firsthalf of 2010:

 
| **(Dollars in Thousands)**                | ** ** | **Three Months Ending********June 30, 2010** | ** ** | **Six Months Ending********June 30, 2010** | ** ** |
|-----------------------------------------------------|------------|------------------------------------------------------------------|------------|----------------------------------------------------------------|------------|
|                                                |       |                                                             |       |                                                           |       |
| Beginning  balance of FDIC indemnification          |       | $                                                                | 33,329     |                                                           | $          | 33,775 |   |
| Decrease  (increase) from provision for loan losses |       | (3,140                                                           | )          | 2,691                                                          |       |
| Payments  received from FDIC                        |       | (4,981                                                           | )          | (10,243                                                        | )          |
| Increase  resulting from charge-offs                |       | 3,330                                                            |       | 2,315                                                          |       |
| Ending  balance of FDIC indemnification             |       | $                                                                | 28,538     |                                                           | $          | 28,538 |   |

 

**Note 4.****  ****Fair Value Measurement for Financial and Non-FinancialAssets and Liabilities**

 

ASC 820 “Fair Value Measurementand Disclosure” (formerly SFAS No. 157, *Fair ValueMeasurements)*, provides a definition of fair value, establishes aframework for measuring fair value, and requires expanded disclosures aboutfair value measurements. ASC820 defines fair value as the price that would be received to sell an assetor paid to transfer a liability in an arm’s length transaction between marketparticipants in the markets where the Company conducts business. ASC 820 clarifies that fair value shouldbe based on the assumptions market participants would use when pricing an assetor liability and establishes a fair value hierarchy that prioritizes theinformation used to develop those assumptions. The fair value hierarchy givesthe highest priority to quoted prices available in active markets and thelowest priority to data lacking transparency.

 

The fair value inputs of theinstruments are classified and disclosed in one of the following categoriespursuant to ASC820:

 

Level 1 — Unadjusted quoted prices in active markets for identical assets or liabilitiesthat the reporting entity has the ability to access at the measurement date.The quoted price shall not be adjusted for the blockage factor (i.e., size ofthe position relative to trading volume).

 

Level 2 — Pricing inputs are inputs other than quoted prices included within Level 1that are observable for the asset or liability, either directly or indirectly.Fair value is determined through the use of models or other valuation methodologies,including the use of pricing matrices. If the asset or liability has aspecified (contractual) term, a Level 2 input must be observable forsubstantially the full term of the asset or liability.

 

Level 3 — Pricing inputs are inputs unobservable for the asset or liability.Unobservable inputs shall be used to measure fair value to the extent thatobservable inputs are not available, thereby allowing for situations in whichthere is little, if any, market activity for the asset or liability at the measurementdate. The inputs into the determination of fair value require significantmanagement judgment or estimation.

 

In certain cases, the inputs usedto measure fair value may fall into different levels of the fair valuehierarchy. In such cases, an investment’s level within the fair value hierarchyis based on the lowest level of input that is significant to the fair valuemeasurement. Our assessment of the significance of a particular input to thefair value measurement in its entirety requires judgment and considers factorsspecific to the investment.

 

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In accordance with ASC 820-10,the Company uses the following methods and assumptions in estimating our fairvalue disclosure for financial instruments. Financial assets and liabilitiesrecorded at fair value on a recurring and non-recurring basis are listed asfollows:

 

Securities available for sale — Investment inavailable-for-sale securities are recorded at their fair values pursuant to ASC 320-10 (SFAS No. 115, *Accounting for Certain Investments in Debt and Equity Securities)*.Fair value measurement is based upon quoted prices for similar assets, ifavailable. If quoted prices are not available, fair values are measured usingmatrix pricing models, or other model-based valuation techniques requiringobservable inputs other than quoted prices such as yield curves, prepaymentspeeds, and default rates. The securities available for sale include federalagency securities, mortgage-backed securities, collateralized mortgageobligations, municipal bonds and corporate debt securities. Our existinginvestment available-for-sale security holdings as of June 30, 2010 are measuredusing matrix pricing models in lieu of direct price quotes and recorded basedon Level 2 measurement inputs.

 

Collateral dependent impaired loans — A loan is considered to be impaired when it isprobable that all of the principal and interest due under the originalunderwriting terms of the loan may not be collected. Fair value of collateraldependent loans is measured based on the fair value of the underlyingcollateral. The fair value is determined by management in part through the useof appraisals or by actual selling prices for loans that are under contract tosell. It is the Company’s policy to update appraisals on all collateraldependent impaired loans every six months or less.

 

We order appraisals for allloans that have been identified by Company management as non-performing orpotentially non-performing at month-end following such identification.Thereafter, the Company’s Credit Administrator Clerk monitors all of ourcollateral dependent impaired loans and other non-performing loans on a monthlybasis to ensure that updated appraisals are ordered and received at least everysix months. Appraisal reports are typically received by the Company on a timelybasis, and we have not experienced significant delays during this process. Oncean appraisal is received, if there is a difference between the updatedappraisal value and the balance of the loan, we will either record a specialvaluation allowance for that difference, or we will charge-off the differencein accordance with our loan policy. We do not charge-off or make specialallowances for only a portion of the difference between the appraisal value andthe balance of the loan.

 

For any loan that has alreadybeen partially charged-off, after we receive an updated appraisal, there willbe no change in the classification of that loan unless it satisfies our policyguidelines for returning a non-performing loan to a performing loan. If thefair value in an updated appraisal is determined to be higher than the loanbalance after a charge-off has occurred, no further action is taken

 

The Company records impairmentson all nonaccrual loans and trouble debt restructured loans based on thevaluation methods above with the exception of automobile loans.  Automobile loans are assessed based on ahomogenous pool of loans and the Company has established specific reserveswhich is a component of the allowance for loan losses. The Company recordsimpaired loans as non-recurring with Level 3 measurement inputs.

 

Otherreal estate owned (“OREO”) — Other real estate owned or “OREO”, consistsprincipally of properties acquired through foreclosures. The fair values ofOREOs are recorded at the lower of carrying value of the loan or estimated fairvalue at the time of foreclosure.  Fairvalues are determined by management in part by using third party appraisals andwritten offers that have been accepted. Management periodically performsvaluations on OREO properties for fair valuation.  Any subsequent declines in the fair value ofthe OREO property after the date of transfer are recorded as a write-down ofthe asset.  However, in accordance withASC 820-10 fair value disclosures for financial instruments, OREO are measuredat fair value. The Company records OREO as non-recurring with Level 3measurement inputs.

 

Servicing assetsand interest-only strips—SBA loan servicing assets and interest-only strips represent the valueassociated with servicing SBA loans sold. The value is determined through adiscounted cash flow analysis which uses discount rates, prepayment speeds anddelinquency rate assumptions as inputs. All of these assumptions require asignificant degree of management judgment. The fair market valuation isperformed on a quarterly basis for servicing assets while I/O strips aremeasures at the lower of cost or fair value. The Company classifies SBA loanservicing assets and interest-only strips as recurring with Level 3 measurementinputs.

 

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Servicing liabilities—SBA loan servicingliabilities represent the value associated with servicing SBA loans sold. Thevalue is determined through a discounted cash flow analysis which uses discountrates, prepayment speeds and delinquency rate assumptions as inputs. All ofthese assumptions require a significant degree of management judgment. The fairmarket valuation is performed on a quarterly basis. The Company classifies SBAloan servicing liabilities as recurring with Level 3 measurement inputs.

 

The table below summarizes thevaluation of our financial assets and liabilities by the above ASC 820-10 fairvalue hierarchy levels as of June 30, 2010 and December 31, 2009:

 

**Assets Measured at Fair Value on a Recurring Basis****(Dollarsin Thousands****)**

 
| ** **                                      | ** ** | **Fair Value Measurements Using:** | ** ** |
|-------------------------------------------------|------------|---------------------------------------------------|------------|
| **As of June 30, 2010**     | ** ** | **Total Fair  Value**                        | ** ** | **Quoted Prices in  Active Markets  (Level 1)** | ** ** | **Significant Other  Observable Inputs  (Level 2)** | ** ** | **Significant  Unobservable Inputs  (Level 3)** | ** ** |
| Investments                                     |       |                                              |       |   |   |   |   |   |   |
| Securities  of government sponsored enterprises |       | $                                                 | 175,955    |   | $ | — |   | $ | 175,955 |   | $ | — |   |
| Mortgage  backed securities                     |       | 43,298                                            |       | — |   | 43,298 |   | — |   |
| Collateralized mortgage obligations             |       | 242,630                                           |       | — |   | 242,630 |   | — |   |
| Corporate  securities                           |       | 2,019                                             |       | — |   | 2,019 |   | — |   |
| Municipal bonds                                 |       | 42,479                                            |       | — |   | 42,479 |   | — |   |
| Servicing assets                                |       | 6,655                                             |       | — |   | — |   | 6,655 |   |
| Interest-only strips                            |       | 632                                               |       | — |   | — |   | 632 |   |
| Servicing liabilities                           |       | (406                                              | )          | — |   | — |   | (406 | ) |
| Total                                           |       | $                                                 | 513,262    |   | $ | — |   | $ | 506,381 |   | $ | 6,881 |   |

 
| ** **                                      | ** ** | **Fair Value Measurements Using:** | ** ** |
|-------------------------------------------------|------------|---------------------------------------------------|------------|
| **As of December 31, 2009** | ** ** | **Total Fair  Value**                        | ** ** | **Quoted Prices in  Active Markets  (Level 1)** | ** ** | **Significant Other  Observable Inputs  (Level 2)** | ** ** | **Significant  Unobservable Inputs  (Level 3)** | ** ** |
| Investments                                     |       |                                              |       |   |   |   |   |   |   |
| Securities  of government sponsored enterprises |       | $                                                 | 155,382    |   | $ | — |   | $ | 155,382 |   | $ | — |   |
| Mortgage  backed securities                     |       | 131,711                                           |       | — |   | 131,711 |   | — |   |
| Collateralized mortgage obligations             |       | 319,554                                           |       | — |   | 319,554 |   | — |   |
| Corporate  securities                           |       | 2,017                                             |       | — |   | 2,017 |   | — |   |
| Municipal bonds                                 |       | 42,654                                            |       | — |   | 42,654 |   | — |   |
| Servicing assets                                |       | 6,898                                             |       | — |   | — |   | 6,898 |   |
| Interest-only strips                            |       | 724                                               |       | — |   | — |   | 724 |   |
| Servicing liabilities                           |       | (407                                              | )          | — |   | — |   | (407 | ) |
| Total                                           |       | $                                                 | 658,533    |   | $ | — |   | $ | 651,318 |   | $ | 7,215 |   |

 

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Financial instruments measured at fair value on arecurring basis, which were part of the asset balances that were deemed to haveLevel 3 fair value inputs when determining valuation, are identified in thetable below by asset category with a summary of changes in fair value for thethree and six months ended on June 30, 2010 and June 30, 2009:

 
| **(Dollars in Thousands)** | ** ** | **At March 31,  2010** | ** ** | **Net Realized********Losses in  Net Income** | ** ** | **Unrealized********Loss in Other  Comprehensive********Income** | ** ** | **Net  Purchases,  Sales and  Settlements** | ** ** | **Transfers  In/out of  Level 3** | ** ** | **At June 30,  2010** | ** ** | **Net Cumulative********Unrealized********Loss in Other  Comprehensive********Income** | ** ** |
|--------------------------------------|------------|----------------------------------|------------|--------------------------------------------------------------|------------|----------------------------------------------------------------------------|------------|--------------------------------------------------|------------|---------------------------------------------|------------|---------------------------------|------------|-------------------------------------------------------------------------------------------------------|------------|
| Servicing assets                     |       | $                                | 6,715      |                                                         | $          | (369                                                                       | )          | $                                                | —     |                                        | $          | 309                             |       | $                                                                                                     | —     |   | $ | 6,655 |   | $ | — |   |
| Interest-only strips                 |       | 667                              |       | (21                                                          | )          | (14                                                                        | )          | —                                           |       | —                                      |       | 632                             |       | (272                                                                                                  | )          |
| Servicing liabilities                |       | (392                             | )          | (14                                                          | )          | —                                                                     |       | —                                           |       | —                                      |       | (406                            | )          | —                                                                                                |       |
|                                      |            |                                  |            |                                                              |            |                                                                            |            |                                                  |            |                                             |            |                                 |            |                                                                                                       |            |  |  |  |  |  |  |  |

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

 
| **(Dollars in Thousands)** | ** ** | **At December  31, 2009** | ** ** | **Net Realized********Losses in  Net Income** | ** ** | **Unrealized********Loss in Other  Comprehensive********Income** | ** ** | **Net  Purchases,  Sales and  Settlements** | ** ** | **Transfers  In/out of  Level 3** | ** ** | **At June 30,  2010** | ** ** | **Net Cumulative********Unrealized********Loss in Other  Comprehensive********Income** | ** ** |
|--------------------------------------|------------|-------------------------------------|------------|--------------------------------------------------------------|------------|----------------------------------------------------------------------------|------------|--------------------------------------------------|------------|---------------------------------------------|------------|---------------------------------|------------|-------------------------------------------------------------------------------------------------------|------------|
| Servicing assets                     |       | $                                   | 6,898      |                                                         | $          | (552                                                                       | )          | $                                                | —     |                                        | $          | 309                             |       | $                                                                                                     | —     |   | $ | 6,655 |   | $ | — |   |
| Interest-only strips                 |       | 724                                 |       | (43                                                          | )          | (49                                                                        | )          | —                                           |       | —                                      |       | 632                             |       | (272                                                                                                  | )          |
| Servicing liabilities                |       | (407                                | )          | 1                                                            |       | —                                                                     |       | —                                           |       | —                                      |       | (406                            | )          | —                                                                                                |       |
|                                      |            |                                     |            |                                                              |            |                                                                            |            |                                                  |            |                                             |            |                                 |            |                                                                                                       |            |  |  |  |  |  |  |  |

 
| **(Dollars in Thousands)** | ** ** | **At December  31, 2008** | ** ** | **Net Realized********Losses in  Net Income** | ** ** | **Unrealized********Loss in Other  Comprehensive********Income** | ** ** | **Net  Purchases,  Sales and  Settlements** | ** ** | **Transfers  In/out of  Level 3** | ** ** | **At June 30,  2009** | ** ** | **Net Cumulative********Unrealized********Loss in Other  Comprehensive********Income** | ** ** |
|--------------------------------------|------------|-------------------------------------|------------|--------------------------------------------------------------|------------|----------------------------------------------------------------------------|------------|--------------------------------------------------|------------|---------------------------------------------|------------|---------------------------------|------------|-------------------------------------------------------------------------------------------------------|------------|
| Servicing assets                     |       | $                                   | 4,838      |                                                         | $          | (55                                                                        | )          | $                                                | —     |                                        | $          | 1,894                           |       | $                                                                                                     | —     |   | $ | 6,677 |   | $ | — |   |
| Interest-only strips                 |       | 632                                 |       | (55                                                          | )          | 59                                                                         |       | 105                                              |       | —                                      |       | 741                             |       | (283                                                                                                  | )          |
| Servicing liabilities                |       | (328                                | )          | 2                                                            |       | —                                                                     |       | (134                                             | )          | —                                      |       | (464                            | )          | —                                                                                                |       |
|                                      |            |                                     |            |                                                              |            |                                                                            |            |                                                  |            |                                             |            |                                 |            |                                                                                                       |            |  |  |  |  |  |  |  |

 

The following tables present theaggregated balance of assets measured at estimated fair value on anon-recurring basis at June 30, 2010 and December 31, 2009, and thetotal losses resulting from these fair value adjustments for the year-to dateperiods ended June 30, 2010 and December 31, 2009:

 

**As of June 30, 2010**

 
| **(Dollars in Thousands)** | ** ** | **Level 1** | ** ** | **Level 2** | ** ** | **Level 3** | ** ** | **Total** | ** ** | **Net YTD Realized  Losses in Net  Income** | ** ** |
|--------------------------------------|------------|------------------|------------|------------------|------------|------------------|------------|-----------|------------|-----------------------------------------------------------------|------------|
| Collateral dependent impaired loans  |       | $                | —     |             | $          | —           |       | $         | 142,729    |                                                            | $          | 142,729 |   | $ | 17,256 |   |
| OREO                                 |       | —           |       | —           |       | 6,778            |       | 6,778     |       | 278                                                             |       |
| Total                                |       | $                | —     |             | $          | —           |       | $         | 149,507    |                                                            | $          | 149,507 |   | $ | 17,534 |   |

 

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**As of December 31, 2009**

 
| **(Dollars in Thousands)** | ** ** | **Level 1** | ** ** | **Level 2** | ** ** | **Level 3** | ** ** | **Total** | ** ** | **Net YTD Realized  Losses in Net Income** | ** ** |
|--------------------------------------|------------|------------------|------------|------------------|------------|------------------|------------|-----------|------------|---------------------------------------------------------------------|------------|
| Collateral dependent impaired loans  |       | $                | —     |             | $          | —           |       | $         | 128,764    |                                                                | $          | 128,764 |   | $ | 10,250 |   |
| OREO                                 |       | —           |       | —           |       | 4,031            |       | 4,031     |       | 435                                                                 |       |
| Total                                |       | $                | —     |             | $          | —           |       | $         | 132,795    |                                                                | $          | 132,795 |   | $ | 10,685 |   |

 

**Note 5.****  ****Investment Securities**

 

The following table summarizes the amortized cost,market value, net unrealized gain (loss), and distribution of our investment securitiesas of the dates indicated:

 

**Investment Securities Portfolio**

**(Dollars in Thousands)**

 
| ** **                                      | ** ** | **As of June 30, 2010** | ** ** | **As of December 31, 2009** | ** ** |
|-------------------------------------------------|------------|---------------------------------------------|------------|-------------------------------------------------|------------|
| ** **                                      | ** ** | **Amortized  Cost**                         | ** ** | **Market  Value**                               | ** ** | **Net  Unrealized  Gain** | ** ** | **Amortized  Cost** | ** ** | **Market  Value** | ** ** | **Net  Unrealized  Gain (Loss)** | ** ** |
| Held to Maturity:                               |       |                                        |       |                                            |       |   |   |   |   |   |   |   |   |
| Collateralized mortgage  obligations            |       | $                                           | 96         |                                            | $          | 102 |   | $ | 6 |   | $ | 109 |   | $ | 109 |   | $ | — |   |
| Total investment  securities held to maturity   |       | $                                           | 96         |                                            | $          | 102 |   | $ | 6 |   | $ | 109 |   | $ | 109 |   | $ | — |   |
|                                            |       |                                        |       |                                            |       |   |   |   |   |   |   |   |   |
| Available for Sale:                             |       |                                        |       |                                            |       |   |   |   |   |   |   |   |   |
| Securities of government  sponsoredenterprises  |       | $                                           | 174,738    |                                            | $          | 175,955 |   | $ | 1,217 |   | $ | 156,879 |   | $ | 155,382 |   | $ | (1,497 | ) |
| Mortgage backed  securities                     |       | 41,491                                      |       | 43,298                                          |       | 1,807 |   | 131,617 |   | 131,711 |   | 94 |   |
| Collateralized mortgage  obligations            |       | 239,138                                     |       | 242,630                                         |       | 3,492 |   | 318,531 |   | 319,554 |   | 1,023 |   |
| Corporate securities                            |       | 2,000                                       |       | 2,019                                           |       | 19 |   | 2,000 |   | 2,017 |   | 17 |   |
| Municipal securities                            |       | 41,624                                      |       | 42,479                                          |       | 855 |   | 42,068 |   | 42,654 |   | 586 |   |
| Total investment  securities available for sale |       | $                                           | 498,991    |                                            | $          | 506,381 |   | $ | 7,390 |   | $ | 651,095 |   | $ | 651,318 |   | $ | 223 |   |

 

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The following table summarizes the maturity andrepricing schedule of our investment securities at their market values at June 30,2010:

 

**InvestmentMaturities and Repricing Schedule********(Dollarsin Thousands****)**

 
| ** **                                      | ** ** | **Within One Year** | ** ** | **After One &  Within Five  Years** | ** ** | **After Five &  Within Ten  Years** | ** ** | **After Ten Years** | ** ** | **Total** | ** ** |
|-------------------------------------------------|------------|-------------------------------|------------|--------------------------------------------------------|------------|--------------------------------------------------------|------------|-------------------------------|------------|-----------|------------|
| Held to Maturity:                               |       |                          |       |                                                   |       |                                                   |       |                          |       |      |       |
| Collateralized mortgage  obligations            |       | $                             | —     |                                                   | $          | 102                                                    |       | $                             | —     |      | $          | — |   | $ | 102 |   |
| Total investment  securities held to maturity   |       | $                             | —     |                                                   | $          | 102                                                    |       | $                             | —     |      | $          | — |   | $ | 102 |   |
|                                            |       |                          |       |                                                   |       |                                                   |       |                          |       |      |       |
| Available for Sale:                             |       |                          |       |                                                   |       |                                                   |       |                          |       |      |       |
| Securities of  government sponsoredenterprises  |       | $                             | —     |                                                   | $          | —                                                 |       | $                             | 175,955    |      | $          | — |   | $ | 175,955 |   |
| Mortgage backed  securities                     |       | 7,138                         |       | 63                                                     |       | 3,897                                                  |       | 32,200                        |       | 43,298    |       |
| Collateralized mortgage  obligations            |       | 6,100                         |       | 236,530                                                |       | —                                                 |       | —                        |       | 242,630   |       |
| Corporate securities                            |       | —                        |       | 2,019                                                  |       | —                                                 |       | —                        |       | 2,019     |       |
| Municipal securities                            |       | —                        |       | 732                                                    |       | 5,863                                                  |       | 35,884                        |       | 42,479    |       |
| Total investment  securities available for sale |       | $                             | 13,238     |                                                   | $          | 239,344                                                |       | $                             | 185,715    |      | $          | 68,084 |   | $ | 506,381 |   |

 

Thefollowing table shows the gross unrealized losses and fair values of ourinvestments, aggregated by investment category and length of time thatindividual securities have been in a continuous unrealized loss positions, at June 30,2010 and December 31, 2009:

 

**As of June 30, 2010**

(Dollarsin Thousands)

 
| ** **                                      | ** ** | **Less than 12 months** | ** ** | **12 months or longer** | ** ** | **Total**       | ** ** |
|-------------------------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|-----------------|------------|
| ** **                                      | ** ** | ** **                             | ** ** | **Gross**                              | ** ** | ** **      | ** ** | **Gross** | ** ** | ** ** | ** ** | **Gross** | ** ** |
| ** **                                      | ** ** | ** **                             | ** ** | **Unrealized**                         | ** ** | ** **      | ** ** | **Unrealized** | ** ** | ** ** | ** ** | **Unrealized** | ** ** |
| **Description of Securities (AFS)****(1)**      | ** ** | **Fair  Value**                        | ** ** | **Losses**                             | ** ** | **Fair  Value** | ** ** | **Losses** | ** ** | **Fair  Value** | ** ** | **Losses** | ** ** |
|                                            |       |                                   |       |                                   |       |            |       |   |   |   |   |   |   |
| Securities  of government sponsored enterprises |       | $                                      | —     |                                   | $          | —          |       | $ | — |   | $ | — |   | $ | — |   | $ | — |   |
| Mortgage-backed  securities                     |       | —                                 |       | —                                 |       | —          |       | — |   | — |   | — |   |
| Collateralized  mortgage obligations            |       | 2,011                                  |       | (15                                    | )          | —          |       | — |   | 2,011 |   | (15 | ) |
| Corporate  securities                           |       | —                                 |       | —                                 |       | —          |       | — |   | — |   | — |   |
| Municipal securities                            |       | 4,175                                  |       | (207                                   | )          | 7,688           |       | (129 | ) | 11,863 |   | (336 | ) |
|                                            |       | $                                      | 6,187      |                                   | $          | (222            | )          | $ | 7,688 |   | $ | (129 | ) | $ | 13,874 |   | $ | (351 | ) |

 

**As of December 31, 200****9**

(Dollarsin Thousands)

 
| ** **                                                      | ** ** | **Less than 12 months** | ** ** | **12 months or longer** | ** ** | **Total**           | ** ** |
|-----------------------------------------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|---------------------|------------|
| ** **                                                      | ** ** | ** **                             | ** ** | **Gross**                              | ** ** | ** **          | ** ** | **Gross** | ** ** | ** ** | ** ** | **Gross** | ** ** |
| ** **                                                      | ** ** | ** **                             | ** ** | **Unrealized**                         | ** ** | ** **          | ** ** | **Unrealized** | ** ** | ** ** | ** ** | **Unrealized** | ** ** |
| **Description of Securities (AFS) ****(1)** | ** ** | **Fair Value**                    | ** ** | **Losses**                             | ** ** | **Fair Value** | ** ** | **Losses** | ** ** | **Fair Value** | ** ** | **Losses** | ** ** |
|                                                            |       |                                   |       |                                   |       |                |       |   |   |   |   |   |   |
| Securities  of government sponsored enterprises                 |       | $                                      | 110,296    |                                   | $          | (1,600              | )          | $ | — |   | $ | — |   | $ | 110,296 |   | $ | (1,600 | ) |
| Mortgage-backed  securities                                     |       | 85,313                                 |       | (726                                   | )          | —              |       | — |   | 85,313 |   | (726 | ) |
| Collateralized  mortgage obligations                            |       | 145,622                                |       | (975                                   | )          | —              |       | — |   | 145,622 |   | (975 | ) |
| Corporate  securities                                           |       | —                                 |       | —                                 |       | —              |       | — |   | — |   | — |   |
| Municipal securities                                            |       | 18,783                                 |       | (505                                   | )          | —              |       | — |   | 18,783 |   | (505 | ) |
|                                                            |       | $                                      | 360,014    |                                   | $          | (3,806              | )          | $ | — |   | $ | — |   | $ | 360,014 |   | $ | (3,806 | ) |

 

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(1) The Company had no held tomaturity investment securities with unrealized losses at June 30, 2010 andDecember 31, 2009.

 

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At June 30,2010, the total unrealized losses less than 12 months old were $222,000 andtotal unrealized losses more than 12 months old were $129,000 for the sameperiod.  The aggregate related fair valueof investments with unrealized losses less than 12 months old was $6.2 million at June 30,2010, and $7.7 million with unrealized losses more than 12 months old.  As of December 31, 2009, the total unrealizedlosses less than 12 months old were $3.8 million,and there were no unrealized losses more than 12 months old. The aggregaterelated fair value of investments with unrealized losses less than 12 monthsold was $360.0 million at December 31, 2009.

 

Credit related declines in thefair value of securities below their cost that are deemed to be other thantemporary are reflected in earnings as realized losses.  In estimating other-than-temporary impairmentlosses, we consider, among other things, (i) the length of time and theextent to which the fair value has been less than cost, (ii) the financialcondition and near-term prospects of the issuer, and (iii) our intent andability to retain our investment in the issuer for a period of time sufficientto allow for any anticipated recovery in fair value. Securities with marketvalue of approximately $250.5 million and $220.9 million were pledged to securepublic deposits for other purposes required or permitted by law at June 30,2010 and December 31, 2009 respectively

 

Management determined that any individual unrealized loss as of June 30,2010 did not represent an other-than-temporary impairment.  The unrealized losses on ourgovernment-sponsored enterprises (“GSE”) bonds, GSE collateralized mortgage obligations(“CMOs”), and GSE mortgage backed securities (“MBSs”) were attributable to bothchanges in interest rate (U.S. Treasury curve) and a repricing of risk (spreadswidening against risk-fee rate) in the market. We do not own any non-agencyMBSs or CMOs. All GSE bonds, GSE CMOs, and GSE MBSs are backed by U.S.Government Sponsored and Federal Agencies and therefore rated “Aaa/AAA.”  We have no exposure to the “Subprime Market”in the form of Asset Backed Securities, (“ABSs”), and Collateralized Debt Obligations,(“CDOs”) that are below investment grade. We have the intent and ability to hold the securities in an unrealizedloss position at June 30, 2010 until the market value recovers or thesecurities mature.

 

Municipal bonds and corporatebonds are evaluated by reviewing the credit-worthiness of the issuer and marketconditions. The unrealized losses on our municipal and corporate securitieswere primarily attributable to both changes in interest rates and a repricingof risk in the market.  We have theintent and ability to hold the securities in an unrealized loss position at June 30,2010 until the market value recovers or the securities mature.

 

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**Note****6****.   Loans**

 

The loans in the portfolio as a result of the MiraeBank acquisition are covered by the FDIC loss-share agreements and such loansare referred to herein as “covered loans.”  All loans other than the coveredloans are referred to herein as “non-covered loans.”  A summary of covered and non-covered loans ispresented in the table below:

 

**Covered & Non-Covered Loans**

 
| ** **                          | ** ** | **(Dollars in Thousands)** | ** ** |
|-------------------------------------|------------|--------------------------------------|------------|
| ** **                          | ** ** | **June 30, 2010**          | ** ** | **December 31, 2009** | ** ** | **June 30, 2009** | ** ** |
| Non-covered loans:                  | ** ** | ** **                           | ** ** | ** ** | ** ** | ** ** | ** ** |
| Construction                        |       | $                                    | 59,376     |   | $ | 48,371 |   | $ | 40,023 |   |
| Real estate secured                 |       | 1,830,387                            |       | 1,783,638 |   | 1,692,344 |   |
| Commercial and industrial           |       | 316,370                              |       | 325,034 |   | 369,689 |   |
| Consumer                            |       | 18,265                               |       | 16,626 |   | 17,581 |   |
| Total loans                         |       | 2,224,398                            |       | 2,173,669 |   | 2,119,637 |   |
| Unearned Income                     |       | (5,007                               | )          | (5,311 | ) | -5,615 |   |
| Gross loans, net of unearned income |       | 2,219,391                            |       | 2,168,358 |   | 2,114,022 |   |
| Allowance for losses on loans       |       | (87,412                              | )          | (61,377 | ) | -38,758 |   |
| Net loans                           |       | $                                    | 2,131,979  |   | $ | 2,106,981 |   | $ | 2,075,264 |   |
|                                |       |                                 |       |   |   |   |   |
| Covered loans:                      |       |                                 |       |   |   |   |   |
| Construction                        |       | $                                    | —     |   | $ | — |   | $ | 494 |   |
| Real estate secured                 |       | 179,124                              |       | 196,066 |   | 205,186 |   |
| Commercial and industrial           |       | 56,357                               |       | 62,409 |   | 79,097 |   |
| Consumer                            |       | 150                                  |       | 608 |   | 908 |   |
| Total loans                         |       | 235,631                              |       | 259,083 |   | 285,685 |   |
| Allowance for losses on loans       |       | (4,007                               | )          | (753 | ) | — |   |
| Net loans                           |       | $                                    | 231,624    |   | $ | 258,330 |   | $ | 285,685 |   |
|                                |       |                                 |       |   |   |   |   |
| Total loans:                        |       |                                 |       |   |   |   |   |
| Construction                        |       | $                                    | 59,376     |   | $ | 48,371 |   | $ | 40,517 |   |
| Real estate secured                 |       | 2,009,511                            |       | 1,979,704 |   | 1,897,530 |   |
| Commercial and industrial           |       | 372,727                              |       | 387,443 |   | 448,786 |   |
| Consumer                            |       | 18,415                               |       | 17,234 |   | 18,489 |   |
| Total loans                         |       | 2,460,029                            |       | 2,432,752 |   | 2,405,322 |   |
| Unearned Income                     |       | (5,007                               | )          | (5,311 | ) | (5,615 | ) |
| Gross loans, net of unearned income |       | 2,455,022                            |       | 2,427,441 |   | 2,399,707 |   |
| Allowance for losses on loans       |       | (91,419                              | )          | (62,130 | ) | (38,758 | ) |
| Net loans                           |       | $                                    | 2,363,603  |   | $ | 2,365,311 |   | $ | 2,360,949 |   |

 

Inaccordance with ASC 310-30 (formerly AICPA Statement of Position “SOP 03-3”, *Accounting for Certain Loans or Debt SecuritiesAcquired in a Transfer*)*,*the covered loans were divided into “SOP 03-3 Loans” and “Non-SOP 03-3 Loans”, of which SOP 03-3 loans areloans with evidence of deterioration of credit quality and it was probable, atthe time of acquisition, that the Bank will be unable tocollect all contractually required payments receivable. In contrast, Non-SOP 03-3 loans areall other covered loans that do not qualify as SOP 03-3 loans. In addition, the coveredloans are further categorized into four different loan poolsby loan type: construction, commercial & industrial,real estate secured, and consumer.

 

The difference between contractually required paymentsat acquisition and the cash flows expected to be collected at acquisition isreferred to as the non-accretable difference which is included in the carryingamount of the loans. Subsequent decreases to the expected cash flows willgenerally result in a provision for loan losses. Subsequent increases in cashflows result in a reversal of the provision for loan losses to the extent ofprior charges, or a reversal of the non-accretable difference with a positiveimpact on interest income. Further, any excess of cash flows expected atacquisition over the estimated fair value is referred to as the accretableyield and is recognized into interest income over the remaining life of theloan when there is a reasonable expectation about the amount and timing of suchcash flows.

 

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The following table represents the carry value of SOP03-3 and non SOP 03-3 loans acquired from Mirae Bank at June 30, 2010:

 
| **(Dollars in Thousands)** | ** ** | **June 30, 2010** | ** ** | **December 31,2009** | ** ** |
|--------------------------------------|------------|-----------------------------|------------|---------------------------|------------|
|                                 |       |                        |       |                      |       |
| Non SOP 03-3 loans                   |       | $                           | 230,072    |                      | $          | 248,204 |   |
| SOP 03-3 loans                       |       | 5,559                       |       | 10,879                    |       |
| Total  outstanding balance           |       | 235,631                     |       | 259,083                   |       |
| Allowance  related to these loans    |       | (4,007                      | )          | (753                      | )          |
| Carrying amount, net of  allowance   |       | $                           | 231,624    |                      | $          | 258,330 |   |

 

The following table represents the balance of SOP 03-3acquired loans from Mirae Bank for which it was probable at the time of theacquisition that all of the contractually required payments would not becollected:

 
| **(Dollars in Thousands)** | ** ** | **June 30, 2010** | ** ** | **December 31, 2009** | ** ** |
|--------------------------------------|------------|-----------------------------|------------|---------------------------------|------------|
|                                 |       |                        |       |                            |       |
| Breakdown of SOP 03-3 Loans          |       |                        |       |                            |       |
| Real Estate loans                    |       | $                           | 3,943      |                            | $          | 6,881 |   |
| Commercial loans                     |       | $                           | 1,616      |                            | $          | 3,998 |   |

 

Loans acquired from the acquisition of Mirae Bank werediscounted based on estimated cashflows to be received at June 26,2009.  Discount on acquired loans totaled$54.9 million at acquisition.  In thesecond quarter and first half of 2010, discount accretion on acquired loans of$1.2 million was recorded as interest income as follows:

 
| ** **                              | ** ** | **Three Months Ended** | ** ** | **Six Months Ended** | ** ** |
|-----------------------------------------|------------|----------------------------------|------------|--------------------------------|------------|
| **(Dollars in Thousands)**    | ** ** | **June 30, 2010**      | ** ** | **June 30, 2010**    | ** ** |
|                                    |       |                             |       |                           |       |
| Beginning  balance of discount on loans |       | $                                | 24,729     |                           | $          | 30,846 |   |
| Discount  accretion income recognized   |       | (1,200                           | )          | (2,471                         | )          |
| Disposals  related to charge-offs       |       | (1,570                           | )          | (6,129                         | )          |
| Disposals  related to loan sales        |       | (1,377                           | )          | (1,664                         | )          |
| Carrying  amount, net of allowance      |       | $                                | 20,582     |                           | $          | 20,582 |   |

 

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The table below summarizes for the periods indicated,changes in the allowance for losses on loans arising from loans charged-off,recoveries on loans previously charged-off, additions to the allowance andcertain ratios related to the allowance for losses on loans and loancommitments:

 

**Allowancefor Losses on Loans and Loan Commitments**

**(Dollarsin Thousands)**

 
| ** **                                                                  | ** ** | **Three Months Ended June 30,** | ** ** | **Six Months Ended June 30,** | ** ** |
|-----------------------------------------------------------------------------|------------|-----------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                                                  | ** ** | **2010**                                            | ** ** | **2009**                                          | ** ** | **2010** | ** ** | **2009** | ** ** |
| **Balances:**                                                               |       |                                                |       |                                              |       |   |   |   |   |
| **Allowance for loan losses:**                                              |       |                                                |       |                                              |       |   |   |   |   |
| Balances at beginning of period                                             |       | $                                                   | 79,576     |                                              | $          | 34,156 |   | $ | 62,130 |   | $ | 29,437 |   |
| **Actual charge-offs: ***                                                   |       |                                                |       |                                              |       |   |   |   |   |
| Real estate secured                                                         |       | 12,864                                              |       | 176                                               |       | 17,237 |   | 848 |   |
| Commercial and industrial                                                   |       | 4,214                                               |       | 6,940                                             |       | 5,554 |   | 8,570 |   |
| Consumer                                                                    |       | 80                                                  |       | 356                                               |       | 195 |   | 457 |   |
| Total charge-offs                                                           |       | 17,158                                              |       | 7,472                                             |       | 22,986 |   | 9,875 |   |
|                                                                        |       |                                                |       |                                              |       |   |   |   |   |
| **Recoveries on loans previously charged off:**                             |       |                                                |       |                                              |       |   |   |   |   |
| Real estate secured                                                         |       | 13                                                  |       | 1                                                 |       | 24 |   | 1 |   |
| Commercial and industrial                                                   |       | 795                                                 |       | 237                                               |       | 1,263 |   | 306 |   |
| Consumer                                                                    |       | 64                                                  |       | 24                                                |       | 98 |   | 68 |   |
| Total recoveries                                                            |       | 872                                                 |       | 262                                               |       | 1,385 |   | 375 |   |
|                                                                        |       |                                                |       |                                              |       |   |   |   |   |
| Net  loan charge-offs                                                       |       | 16,286                                              |       | 7,210                                             |       | 21,601 |   | 9,500 |   |
|                                                                        |       |                                                |       |                                              |       |   |   |   |   |
| FDIC  Indemnification                                                       |       | (3,140                                              | )          | —                                            |       | 2,691 |   | — |   |
| Provision  for losses on loan and loan commitments                          |       | 31,269                                              |       | 11,812                                            |       | 48,199 |   | 18,821 |   |
| Balances  at end of period                                                  |       | $                                                   | 91,419     |                                              | $          | 38,758 |   | $ | 91,419 |   | $ | 38,758 |   |
| **Allowance for loan commitments:**                                         |       |                                                |       |                                              |       |   |   |   |   |
| Balances at beginning of year                                               |       | $                                                   | 2,585      |                                              | $          | 933 |   | $ | 2,515 |   | $ | 1,243 |   |
| Provision  for losses (recovery) on loan commitments                        |       | 931                                                 |       | 288                                               |       | 1,001 |   | (22 | ) |
| Balance  at end of period                                                   |       | $                                                   | 3,516      |                                              | $          | 1,221 |   | $ | 3,516 |   | $ | 1,221 |   |
|                                                                        |       |                                                |       |                                              |       |   |   |   |   |
| **Ratios**:                                                                 |       |                                                |       |                                              |       |   |   |   |   |
| Net loan charge-offs to  average total loans                                |       | 0.69                                                | %          | 0.34                                              | %          | 0.91 | % | 0.46 | % |
| Allowance for loan losses to  total loans at end of period                  |       | 3.72                                                | %          | 1.62                                              | %          | 3.72 | % | 1.62 | % |
| Net loan charge-offs to  allowance for loan losses at end of period         |       | 17.81                                               | %          | 18.60                                             | %          | 23.63 | % | 24.51 | % |
| Net loan charge-offs to  provision for losses on loans and loan commitments |       | 50.58                                               | %          | 59.59                                             | %          | 43.90 | % | 50.53 | % |

 

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*            Charge-off amount for thethree months ended June 30, 2010 includes net charge-offs of covered loansamounting to $969,000, which represents gross covered loan charge-offs of $3.7million less FDIC receivable portion of $2.7 million and charge-off amount forthe six months ended June 30, 2010 includes net charge-offs of coveredloans amounting to $1.0 million, which represents gross covered loancharge-offs of $7.7 million less FDIC receivable portion of $6.7 million

 

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Thetable below summarizes for the end of the periods indicated, the balance of ourallowance for losses on loans and the percent of such loan balances for eachloan type:

 

**Distribution and PercentageComposition of Allowance for Loan Losses**

**(Dollars in Thousands)**

 
| ** **                | ** ** | **June 30, 2010** | ** ** | **December 31, 2009** | ** ** |
|---------------------------|------------|------------------------|------------|----------------------------|------------|
| ** **                | ** ** | **Reserve**            | ** ** | **Gross Loans**            | ** ** | **(%)** | ** ** | **Reserve** | ** ** | **Gross Loans** | ** ** | **(%)** | ** ** |
| Applicable to:            |       |                   |       |                       |       |   |   |   |   |   |   |   |   |
| Construction              |       | $                      | 1,060      |                       | $          | 59,376 |   | 1.79 | % | $ | 411 |   | $ | 48,371 |   | 0.85 | % |
| Real estate secured       |       | 64,621                 |       | 2,009,511                  |       | 3.22 | % | 34,458 |   | 1,979,704 |   | 1.74 | % |
| Commercial and industrial |       | 25,594                 |       | 372,727                    |       | 6.87 | % | 27,059 |   | 387,443 |   | 6.98 | % |
| Consumer                  |       | 144                    |       | 18,415                     |       | 0.78 | % | 202 |   | 17,234 |   | 1.17 | % |
| Total allowance           |       | $                      | 91,419     |                       | $          | 2,460,029 |   | 3.72 | % | $ | 62,130 |   | $ | 2,432,752 |   | 2.55 | % |

 

The allowance for loan losses is comprised of specificloss allowances for impaired loans and general loan loss allowances based on quantitativeand qualitative analyses.

 

A loan is impaired when, based on current informationand events, it is probable that the Company will be unable to collect all amountsdue according to the contractual terms of the loan agreement. At June 30,2010, our recorded impaired loans totaled $170.2 million, of which $120.3million had specific reserves of $25.6 million. At December 31, 2009, ourrecorded impaired loans totaled $165.2 million, of which $84.2 million hadspecific reserves of $15.6 million.

 

On a quarterly basis, we utilize a classificationmigration model and individual loan impairment as starting points fordetermining the adequacy of our allowance for losses on loans. Our lossmigration analysis tracks a certain number of quarters of loan loss history todetermine historical losses by classification category for each loan type,except for certain loans (automobile, mortgage and credit scored based businessloans), which are analyzed as homogeneous loan pools. These calculated lossfactors are then applied to outstanding loan balances.  Based on a Company defined utilization rateof exposure for unused off-balance sheet loan commitments, such as letters ofcredit, we record a reserve for loan commitments.

 

**Note****7****.   Shareholders’ Equity**

 

***Earnings perShare***

 

Basic earnings per share (“EPS”) excludes dilution andis calculated by dividing income available to commonshareholders by the weighted-average number of common shares outstanding forthe period.  Diluted EPS reflects thepotential dilution that could occur if securities or other contracts to issuecommon stock were exercised or converted into common stock or resulted in theissuance of common stock that would then share in the earnings of the Company. Thefollowing table provides the basic and diluted EPS computations for the periodsindicated below:

 
| ** **                                                | ** ** | **For the Three Months Ended June 30,** | ** ** | **For the Six Months Ended June 30,** | ** ** |
|-----------------------------------------------------------|------------|-----------------------------------------------------------------------|------------|---------------------------------------------------------------------|------------|
| **(Dollars  in Thousands, Except per Share Data)**        | ** ** | **2010**                                                              | ** ** | **2009**                                                            | ** ** | **2010** | ** ** | **2009** | ** ** |
| Numerator:                                                |       |                                                                  |       |                                                                |       |   |   |   |   |
| Net (loss) income  available to common shareholders       |       | $                                                                     |       | (4,570                                                              | )          | $ | 12,848 |   | $ | (2,158 | ) | $ | 14,988 |   |
| Denominator:                                              |       |                                                                  |       |                                                                |       |   |   |   |   |
| Denominator  for basic earnings per share:                |       |                                                                  |       |                                                                |       |   |   |   |   |
| Weighted-average  shares                                  |       | 29,487,994                                                            |       | 29,413,757                                                          |       | 29,486,011 |   | 29,413,757 |   |
| Effect of dilutive  securities:                           |       |                                                                  |       |                                                                |       |   |   |   |   |
| Stock option dilution                                     |       | —                                                                |       | 7,490                                                               |       | — |   | 7,989 |   |
| Denominator for diluted  earnings per share:              |       |                                                                  |       |                                                                |       |   |   |   |   |
| Adjusted weighted-average  shares andassumed  conversions |       | 29,487,994                                                            |       | 29,421,247                                                          |       | 29,486,011 |   | 29,421,746 |   |
| Basic earnings per share                                  |       | $                                                                     |       | (0.15                                                               | )          | $ | 0.44 |   | $ | (0.07 | ) | $ | 0.51 |   |
| Diluted earnings per share                                |       | $                                                                     |       | (0.15                                                               | )          | $ | 0.44 |   | $ | (0.07 | ) | $ | 0.51 |   |

 

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**Note****8****.****   ****Business Segment Reporting**

 

The following disclosure about segments of the Companyis made in accordance with the requirements of ASC 280 (formerly SFASNo. 131, *Disclosures about Segments ofan Enterprise and Related Information)*.  The Company segregates its operations intothree primary segments:  bankingoperations, SBA lending services, and trade finance services (“TFS”).  The Company determines the operating resultsof each segment based on an internal management system that allocates certainexpenses to each segment.

 

*Banking Operations (“Operations”)*—**The Companyraises funds from deposits and borrowings for loans and investments, andprovides lending products, including commercial, consumer, and real estateloans to its customers.

 

*Small Business AdministrationLending Services*— The SBA department mainlyprovides customers with access to the U.S. SBA guaranteed lending program.

 

*Trade Finance Services*— Our TFSprimarily deals in letters of credit issued to customers whose businessesinvolve the international sale of goods. A letter of credit is an arrangement (usually expressed in letter form)whereby the Company, at the request of and in accordance with customersinstructions, undertakes to reimburse or cause to reimburse a third party,  provided that certain documents are presentedin strict compliance with its terms and conditions.  Simply put, a bank is pledging its credit onbehalf of the customer. The Company’s TFS offers the following types of lettersof credit to customers:

 

·      Commercial — Anundertaking by the issuing bank to pay for a commercial transaction.

 

·      Standby — Anundertaking by the issuing bank to pay for the non-performance of applicant.

 

·      Revocable —Letter of credit that can be modified or cancelled by the issuing bank at anytime with notice to the beneficiary (does not provide beneficiary with a firmpromise of payment).

 

·      Irrevocable —Letters of credit that cannot be altered or cancelled without mutual consent ofall parties.

 

·      Sight — Letterof credit requiring payment upon presentation of conforming shipping documents.

 

·      Usance — Letterof credit which allows the buyer to delay payment up to a designated number ofdays after presentation of shipping documents.

 

·      Import — Letterof credit issued to assist customers in purchasing goods from overseas.

 

·      Export — Letterof credit issued to assist customers selling goods from overseas.

 

·      Transferable —Letter of credit which allows the beneficiary to transfer their right, in partof full, to another party.

 

·      Non-transferable— Letter of credit which does not allows the beneficiary to transfer theirright, in part of full, to another.

 

Our TFS services include theissuance and negotiation of letters of credit, as well as the handling ofdocumentary collections. On the export side, we provide advising andnegotiation of commercial letters of credit, and we transfer and issueback-to-back letters of credit. We also provide importers with trade financelines of credit, which allow for issuance of commercial letters of credit andfinancing of documents received under such letters of credit, as well asdocuments received under documentary collections. Exporters are assistedthrough export lines of credit as well as through immediate financing of cleandocuments presented under export letters of credit.

 

The following are the results of operations of theCompany’s segments for the three months ended June 30, 2010 and 2009indicated below:

 
| **(Dollars in Thousands)**       | ** ** | **Three Months Ended June 30, 2010** | ** ** |
|--------------------------------------------|------------|---------------------------------------------------------------|------------|
| **Business Segments**                 | ** ** | **Operations**                                                | ** ** | **TFS** | ** ** | **SBA** | ** ** | **Company** | ** ** |
| Net interest income                        |       | $                                                             | 25,867     |   | $ | 680 |   | $ | 2,692 |   | $ | 29,239 |   |
| Less provision (recovery) for  loan losses |       | 31,952                                                        |       | 339 |   | (91 | ) | 32,200 |   |
| Non-interest income                        |       | 7,790                                                         |       | 266 |   | 1,822 |   | 9,878 |   |
| Non-interest expense                       |       | 14,627                                                        |       | 471 |   | 1,034 |   | 16,132 |   |
| (Loss) income before income  taxes         |       | $                                                             | (12,922    | ) | $ | 136 |   | $ | 3,571 |   | $ | (9,215 | ) |
| Total assets                               |       | $                                                             | 3,186,092  |   | $ | 45,395 |   | $ | 205,607 |   | $ | 3,437,094 |   |

 
| **(Dollars in Thousands)** | ** ** | **Three Months Ended June 30, 2009** | ** ** |
|--------------------------------------|------------|---------------------------------------------------------------|------------|
| **Business Segments**           | ** ** | **Operations**                                                | ** ** | **TFS** | ** ** | **SBA** | ** ** | **Company** | ** ** |
| Net interest income                  |       | $                                                             | 18,190     |   | $ | 422 |   | $ | 2,369 |   | $ | 20,981 |   |
| Less provision for loan losses       |       | 9,045                                                         |       | 1,933 |   | 1,122 |   | 12,100 |   |
| Non-interest income                  |       | 27,080                                                        |       | 643 |   | 867 |   | 28,590 |   |
| Non-interest expense                 |       | 12,841                                                        |       | 674 |   | 561 |   | 14,076 |   |
| Income (loss) before income  taxes   |       | $                                                             | 23,384     |   | $ | (1,542 | ) | $ | 1,553 |   | $ | 23,395 |   |
| Total assets                         |       | $                                                             | 2,889,579  |   | $ | 58,373 |   | $ | 226,159 |   | $ | 3,174,111 |   |

 

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The following are the results of operations of theCompany’s segments for the six months ended June 30, 2010 and 2009indicated below:

 
| **(Dollars in Thousands)**       | ** ** | **Six Months Ended June 30, 2010** | ** ** |
|--------------------------------------------|------------|-------------------------------------------------------------|------------|
| **Business Segments**                 | ** ** | **Operations**                                              | ** ** | **TFS** | ** ** | **SBA** | ** ** | **Company** | ** ** |
| Net interest income                        |       | $                                                           | 51,452     |   | $ | 1,234 |   | $ | 5,111 |   | $ | 57,797 |   |
| Less provision (recovery) for  loan losses |       | 44,172                                                      |       | (532 | ) | 5,560 |   | 49,200 |   |
| Non-interest income                        |       | 14,542                                                      |       | 508 |   | 2,613 |   | 17,663 |   |
| Non-interest expense                       |       | 28,237                                                      |       | 907 |   | 1,678 |   | 30,822 |   |
| (Loss) income before income  taxes         |       | $                                                           | (6,415     | ) | $ | 1,367 |   | $ | 486 |   | $ | (4,562 | ) |
| Total assets                               |       | $                                                           | 3,186,092  |   | $ | 45,395 |   | $ | 205,607 |   | $ | 3,437,094 |   |

 
| **(Dollars in Thousands)** | ** ** | **Six Months Ended June 30, 2009** | ** ** |
|--------------------------------------|------------|-------------------------------------------------------------|------------|
| **Business Segments**           | ** ** | **Operations**                                              | ** ** | **TFS** | ** ** | **SBA** | ** ** | **Company** | ** ** |
| Net interest income                  |       | $                                                           | 35,250     |   | $ | 863 |   | $ | 4,532 |   | $ | 40,645 |   |
| Less provision for loan losses       |       | 13,052                                                      |       | 2,762 |   | 2,986 |   | 18,800 |   |
| Non-interest income                  |       | 29,854                                                      |       | 927 |   | 1,546 |   | 32,327 |   |
| Non-interest expense                 |       | 24,118                                                      |       | 946 |   | 998 |   | 26,062 |   |
| Income (loss) before income  taxes   |       | $                                                           | 27,934     |   | $ | (1,918 | ) | $ | 2,094 |   | $ | 28,110 |   |
| Total assets                         |       | $                                                           | 2,889,579  |   | $ | 58,373 |   | $ | 226,159 |   | $ | 3,174,111 |   |

 

**Note****9****.****   ****Commitments and Contingencies**

 

We are a party to financial instruments withoff-balance sheet risk in the normal course of business to meet the financingneeds of our customers.  These financialinstruments include commitments to extend credit, standby letters of credit,and commercial letters of credit.  Theseinstruments involve, to varying degrees, elements of credit and interest raterisk in excess of the amount recognized in the consolidated statementsof financial condition.  Our exposure tocredit loss in the event of nonperformance on commitments to extend credit andstandby letters of credit is represented by the contractual notional amount ofthose instruments.  We use the samecredit policies in making commitments and conditional obligations as we do forextending loan facilities to customers. We evaluate each customer’s creditworthiness on a case-by-casebasis.  The amount of collateralobtained, if deemed necessary upon extension of credit, is based on our creditevaluation of the counterparty.  Thetypes of collateral that we hold varies, but may include accounts receivable, inventory, property, plant, andequipment and income-producing properties.

 

Commitments at June 30, 2010 aresummarized as follows:

 
| **(Dollars in Thousands)**                                    | ** ** | **June 30, 2010** | ** ** | **December 31, 2009** | ** ** |
|-------------------------------------------------------------------------|------------|-----------------------------|------------|---------------------------------|------------|
| Commitments  to extend credit                                           |       | $                           | 270,758    |                            | $          | 238,238 |   |
| Standby  letters of credit                                              |       | 9,325                       |       | 13,044                          |       |
| Commercial  letters of credit                                           |       | 10,935                      |       | 10,236                          |       |
| Commitments  to fund Low Income Housing Tax Credits (“LIHTC”) |       | 14,182                      |       | 11,492                          |       |
|                                                                         |            |                             |            |                                 |            |  |  |

 

In the normal course of business, we are involved invarious legal claims.  We have reviewedall legal claims against us with counsel and have taken into consideration theviews of such counsel as to the outcome of the claims.  We do not believe the final disposition ofall such claims will have a material adverse effect on our financial positionor results of operations.

 

**Note****10****.****   ****Recent Accounting Pronouncements**

 

In December 2009, FASBissued ASU 2009-16, “Transfers and Servicing (Topic 860): Accounting forTransfers of Financial Assets.” Update 2009-16 will require more informationregarding transferred financial assets, including securitization transactions,and where entities have continuing exposure to risks related to transferredfinancial assets.  The Company adoptedthis standard as of January 1, 2010. As a result of certain recourse provisions that are included in the saleof SBA guaranteed loans, of the classification of sold SBA guarantee portionsare recorded as secured borrowings and the gain from the sale of such loans aredeferred until such recourse provisions are reassessed.

 

In January 2010, FASBissued Accounting Standards Update 2010-06, “Improving Disclosures about FairValue Measurements.” ASU 2010-06 will require reporting entities to make newdisclosures about (a) amounts and reasons for significant transfers in andout of Level 1 and Level 2 fair value measurements, (b) Input andvaluation techniques used to measure fair value for both recurring andnonrecurring fair value measurements that fall in either Level 2 or Level 3 and(c) information on purchases, sales, issuances and settlements in the rollforward of activity in Level 3 fair value measures. The new and reviseddisclosures are effective for interim and annual reporting periods beginningafter December 15, 2009 except for disclosures about purchases, sales,issuances and settlements in the roll forward of activity in Level 3 fair valuemeasures, which are effective for fiscal years beginning afterDecember 15, 2010. The adoption of ASU 2010-06 effective for reportingperiods after December 15, 2009 did not have a material impact on theconsolidated financial statements. The Company is still evaluating the impactof the remainder of ASU 2010-06 effective for fiscal years beginning afterDecember 15, 2010.

 

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In February 2010, FASBissued ASU 2010-09, and amendment of ASC 855 (formerly Statement No. 165,Subsequent Events).  ASC 855 was issuedto establish general standards of accounting for and disclosure of events thatoccur after the balance sheet date but before the financial statements are issuedor are available to be issued. ASC Topic 2010-09 amends ASC 855 by adding the “SECfile,” and “revised financial statements” to the ASC Master Glossary whileremoving the definition of “public entity” from the glossary. The amendmentalso exempts SEC filers from disclosing the date through which subsequentevents have been evaluated and require SEC files and conduit debt obligors toevaluate subsequent events through the date the financial statements areissued.  ASU 2010-09 is effective as ofthe issue date for financial statements that are issued, available to beissued, or revised. The adoption of ASU 2010-09 did not have a material impacton the consolidated financial statements.

 

In April 2010, FASB issuedASU 2010-18 “Effect of a LoanModification When the Loan is Part of a Pool that is Accounted for as aSingle Asset,” which is effective for modifications of loans accountedfor within pools under Subtopic 310-30 occurring in the first interim or annualperiod ending after July 15, 2010. Under the amendments, modifications ofloans that are accounted for within a pool do not result in the removal ofthose loans from the pool even if the modification of those loans wouldotherwise be considered a troubled debt restructuring. An entity will continueto be required to consider whether the pool of assets in which the loan isincluded is impaired if expected cash flows for the pool change. The Companydoes not expect ASU 2010-18 to have a material impact on its consolidatedfinancial statement.

 

In July 2010, FASB issuedASU 2010-20 “Disclosures about theCredit Quality of Financing Receivables and the Allowance for Credit Losses” toimprove disclosures about the credit quality of financing receivables and theallowance for credit losses.  Companieswill be required to provide more information about the credit quality of theirfinancing receivables in the disclosures to financial statements, such as aginginformation and credit quality indicators. Both new and existing disclosuresmust be disaggregated by portfolio segment or class.  The disaggregation of information is based onhow a company develops its allowance for credit losses and how it manages itscredit exposure.  Required disclosures asof the end of a reporting period are effective for periods ending on or after December 15,2010, while required disclosures about activity that occurs during a reportingperiod are effective for periods beginning on or after December 15, 2010.The Company does not expect ASU 2010-20 to have a material impact on itsconsolidated financial statement.

 

**Note****11****.****   ****Tax Provision**

 

Due to the high degree of variability in the Company’sestimated annual effective tax rate when considering the range of projectedincome for the remainder of the year, the Company has determined that theactual year-to-date effective tax rate is the best estimate of the annualeffective tax rate.  As a result of thischange, the tax rates for the quarter and six months ended June 30, 2010have increased compared to prior periods as the Company realized large taxbenefits compared to net loss.  For thequarter ended June 30, 2010, we had an income tax benefit of $5.6 millionon a pretax net loss of $9.2 million, representing an effective tax rate of60.2%, as compared with a provision for income taxes of $9.6 million on pretaxnet income of $23.3 million, representing an effective tax rate of 41.2% forthe same quarter in 2009.  For the firsthalf of 2010, we recorded a tax benefit of $4.2 million on a pretax net loss of$4.6 million representing an effective tax rate of 92.3% compared to a taxprovision of $11.3 million on pretax income of $28.1 which resulting ineffective tax rate of 40.2% for the same period in 2009.

 

**Note****12****.****   ****Subsequent Events**

 

The Company evaluated subsequent events through thedate the financial statements were issued. As of the issue date of thisreport, the Company did not have any subsequent events to report.

 

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

 

This discussion presents management’s analysis of ourresults of operations for the six months ended June 30, 2010 and June 30, 2009,financial condition as of June 30, 2010 and December 31, 2009, and includes thestatistical disclosures required by the Securities and Exchange CommissionGuide 3 (“Statistical Disclosure by Bank Holding Companies”).  The discussion should be read in conjunctionwith our financial statements and the notes related thereto which appearelsewhere in this Quarterly Report on Form 10-Q.

 

Statements contained in this report that are notpurely historical are forward-looking statements within the meaning of Section21E of the Securities Exchange Act of 1934, as amended, including ourexpectations, intentions, beliefs, or strategies regarding the future.  Any statements in this document about expectations,beliefs, plans, objectives, assumptions or future events or performance are nothistorical facts and are forward-looking statements. These statements areoften, 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 involveestimates, assumptions and uncertainties, which could cause actual results todiffer materially from those expressed in them. Any forward-looking statements are qualified in their entirety byreference to the factors discussed throughout this document.  All forward-looking statements concerningeconomic conditions, rates of growth, rates of income or values as may beincluded in this document are based on information available to us on the datesnoted, and we assume no obligation to update any such forward-lookingstatements.  It is important to note thatour actual results may differ materially from those in such forward-lookingstatements due to fluctuations in interest rates, inflation, governmentregulations, economic conditions, customer disintermediation, and competitiveproduct and pricing pressures in the geographic and business areas in which weconduct operations, including our plans, objectives, expectations andintentions and other factors discussed under the section entitled “RiskFactors,” in our Annual Report on Form 10-K for the year ended December 31, 2009, including thefollowing:

 

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

 

·      Increasesin our allowance for loan losses could materially affect our earningsadversely.

 

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

 

·      Liquidityrisk could impair our ability to fund operations, meet our obligations as they becomedue and jeopardize our financial condition.

 

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

 

·      Wilshire Bancorp reliesheavily on the payment of dividends from the Bank.

 

·      Theholders of debentures and Series A Preferred Stock have rights that are seniorto those of our common shareholders.

 

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

 

·      Recentnegative developments in the financial industry and U.S. and global creditmarkets may affect our operations and results.

 

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

 

·      Ouroperations may require us to raise additional capital in the future, but thatcapital may not be available or may not be on terms acceptable to us when it isneeded.

 

·      Maintainingor increasing our market share depends on market acceptance and regulatory approvalof new products and services.

 

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

 

·      Ifwe fail to retain our key employees, our growth and profitability could beadversely affected.

 

·      Wemay be unable to manage future growth.

 

·      Ourexpenses will increase as a result of increases in FDIC insurance premiums.

 

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·      Wecould be liable for breaches of security in our online banking services.  Fear of security breaches could limit thegrowth of our online services.

 

·      Ourdirectors and executive officers beneficially own a significant portion of ouroutstanding common stock.

 

·      Themarket for our common stock is limited, and potentially subject to volatilechanges in price.

 

·      Wemay experience goodwill impairment.

 

·      Weface substantial competition in our primary market area.

 

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

 

·      We are subject tosignificant government regulation and legislation that increase the cost ofdoing business and inhibits our ability to compete, including the unexpectedimpact of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

 

·      As participants in theUnited States Department of the Treasury’s Capital Purchase Program, we aresubject to additional regulations and legislation that may not be applicable toother financial institution competitors.

 

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

 

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

 

·      Shares of our preferredstock previously issued and preferred stock issued in the future could havedilutive and other effects.

 

These factors and the risk factors referred to in ourAnnual Report on Form 10-K for the year ended December 31, 2009 could causeactual results or outcomes to differ materially from those expressed in anyforward-looking statements made by us, and you should not place undue relianceon any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it ismade and we do not undertake any obligation to update any forward-lookingstatement or statements to reflect events or circumstances after the date onwhich such statement is made or to reflect the occurrence of unanticipatedevents.  New factors emerge from time totime, and it is not possible for us to predict which will arise.  In addition, we cannot assess the impact ofeach factor on our business or the extent to which any factor, or combinationof factors, may cause actual results to differ materially from those containedin any forward-looking statements.

 

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**SelectedFinancial Data**

 

The following table presentsselected historical financial information for the three months ended June 30,2010, December 31, 2009, and June 30, 2009. In the opinion of management, theinformation presented reflects all adjustments considered necessary for a fairpresentation of the results of such periods. The operating results for the interim periods are not necessarilyindicative of our future operating results.

 
| ** **                                                                 | ** ** | **Three months ended June 30,** | ** ** | **Six months ended June 30,** | ** ** |
|----------------------------------------------------------------------------|------------|---------------------------------|------------|-------------------------------|------------|
| **(Dollars in thousands, except per  share data) (unaudited)**             | ** ** | **2010**                        | ** ** | **2009**                      | ** ** | **2010** | ** ** | **2009** | ** ** |
| Net (loss) income  available to common shareholders                        |       | $                               | (4,570     | )                             | $          | 12,848 |   | $ | (2,158 | ) | $ | 14,988 |   |
| Net (loss) income per  common share, basic                                 |       | (0.15                           | )          | 0.44                          |       | (0.07 | ) | 0.51 |   |
| Net (loss) income per  common share, diluted                               |       | (0.15                           | )          | 0.44                          |       | (0.07 | ) | 0.51 |   |
| Net interest income  before provision for loan losses and loan commitments |       | 29,239                          |       | 20,981                        |       | 57,797 |   | 40,645 |   |
| ** **                                                                 |       |                            |       |                          |       |   |   |   |   |
| **Average  balances:**                                                     |       |                            |       |                          |       |   |   |   |   |
| Assets                                                                     |       | 3,475,151                       |       | 2,691,465                     |       | 3,446,551 |   | 2,608,802 |   |
| Cash and cash  equivalents                                                 |       | 268,062                         |       | 198,478                       |       | 242,283 |   | 152,205 |   |
| Investment securities                                                      |       | 647,782                         |       | 324,302                       |       | 656,526 |   | 305,532 |   |
| Net loans                                                                  |       | 2,367,860                       |       | 2,060,306                     |       | 2,367,714 |   | 2,045,532 |   |
| Total deposits                                                             |       | 2,939,513                       |       | 2,001,031                     |       | 2,913,161 |   | 1,917,220 |   |
| Shareholders’ equity                                                  |       | 275,452                         |       | 262,437                       |       | 274,378 |   | 260,764 |   |
| **Performance  Ratios:**                                                   |       |                            |       |                          |       |   |   |   |   |
| Annualized return on  average assets                                       |       | -0.42                           | %          | 2.04                          | %          | -0.02 | % | 1.29 | % |
| Annualized return on  average equity                                       |       | -5.32                           | %          | 20.95                         | %          | -0.25 | % | 12.89 | % |
| Net interest margin                                                        |       | 3.71                            | %          | 3.36                          | %          | 3.68 | % | 3.36 | % |
| Efficiency ratio                                                           |       | 41.24                           | %          | 28.40                         | %          | 40.85 | % | 35.72 | % |
| **Capital  Ratios:**                                                       |       |                            |       |                          |       |   |   |   |   |
| Tier 1 capital to  adjusted total assets                                   |       | 9.51                            | %          | 12.30                         | %          |   |   |   |   |
| Tier 1 capital to  risk-weighted assets                                    |       | 13.72                           | %          | 13.26                         | %          |   |   |   |   |
| Total capital to  risk-weighted assets                                     |       | 15.17                           | %          | 14.75                         | %          |   |   |   |   |
|                                                                            |            |                                 |            |                               |            |  |  |  |  |  |  |  |  |

 
| ** **                                                         | ** ** | **June 30, 2010** | ** ** | **December 31, 2009** | ** ** | **June 30, 2009** | ** ** | ** ** | ** ** |
|--------------------------------------------------------------------|------------|-----------------------------|------------|---------------------------------|------------|-----------------------------|------------|------------|------------|
| **Year to date balances as of:**          |       |                        |       |                            |       |                        |       |       |       |
| Total assets                                                       |       | $                           | 3,437,094  |                            | $          | 3,435,997                   |       | $          | 3,174,111  |   |   |   |
| Investment securities                                              |       | 506,477                     |       | 651,427                         |       | 427,838                     |       |       |       |
| Total loans, net of  unearned income and allowance for loan losses |       | 2,363,603                   |       | 2,427,441                       |       | 2,399,707                   |       |       |       |
| Total deposits                                                     |       | 2,901,469                   |       | 2,828,215                       |       | 2,451,603                   |       |       |       |
| Junior subordinated  debentures                                    |       | 87,321                      |       | 87,321                          |       | 87,321                      |       |       |       |
| FHLB advances                                                      |       | 118,000                     |       | 232,000                         |       | 331,000                     |       |       |       |
| Total common equity                                                |       | 207,249                     |       | 206,205                         |       | 269,158                     |       |       |       |
|                                                               |       |                        |       |                            |       |                        |       |       |       |
| **Asset  Quality Ratios:**                                         |       |                        |       |                            |       |                        |       |       |       |
| *(net  of SBA guaranteed portion)*                                 |       |                        |       |                            |       |                        |       |       |       |
| Net charge-off to  average total loans for the quarter             |       | 0.69                        | %          | 0.74                            | %          | 0.34                        | %          |       |       |
| Non-performing loans to  gross loans                               |       | 3.38                        | %          | 2.92                            | %          | 3.74                        | %          |       |       |
| Non-performing assets  to total loans and other real estate owned  |       | 3.64                        | %          | 3.07                            | %          | 3.98                        | %          |       |       |
| Allowance for loan  losses to total loans                          |       | 3.72                        | %          | 2.56                            | %          | 1.62                        | %          |       |       |
| Allowance for loan  losses to non-performing loans                 |       | 109.99                      | %          | 87.78                           | %          | 43.15                       | %          |       |       |
|                                                                    |            |                             |            |                                 |            |                             |            |            |            |  |  |  |

 

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**Executive Overview**

 

We operate a community bank engaged in the commercialbanking business, with our primary market encompassing the multi-ethnicpopulation of the Los Angeles metropolitan area.  Our full-service offices are locatedprimarily in areas where a majority of the businesses are owned by diversifiedethnic groups.

 

We have also expanded our business with the focus onour commercial and consumer lending divisions. Over the past several years, ournetwork of branches and loan production offices has been expandedgeographically. Pursuantto the acquisition on June 26, 2009, five commercial banking branches, formerlyoperated by Mirae and located within southern California, were integrated intoour branch network, although four of the branches were eventually closed due totheir proximity to our existing branches. In the first quarter of 2010, anadditional branch in Van Nuys, California was opened.  Wealso have six loan production offices in Aurora, Colorado; Atlanta, Georgia; Dallas,Texas; Houston, Texas; Annandale, Virginia and Fort Lee, New Jersey.

 

**CriticalAccounting Policies**

 

The discussion and analysis of our financial conditionand results of operations is based upon our financial statements, which havebeen prepared in accordance with GAAP. The preparation of these financial statements requires management tomake estimates and judgments that affect the reported amounts of assets andliabilities, revenues and expenses, and related disclosures of contingentassets and liabilities at the date of our financial statements.  Actual results may differ from these estimatesunder different assumptions or conditions.

 

Various elements of our accounting policies, by theirnature, are inherently subject to estimation techniques, valuation assumptions,and other subjective assessments. We have identified several accountingpolicies that, due to judgments, estimates, and assumptions inherent in thosepolicies are critical to an understanding of our consolidated financialstatements. These policies relate to the classification and valuation ofinvestment securities, the methodologies that determine our allowance forlosses on loans, the treatment of non-accrual loans, the valuation of retainedinterests and servicing assets related to the sales of SBAloans, and the accounting for income tax provisions and the uncertainty inincome taxes. In each area, we have identified the variables most important inthe estimation process. We believe that we have used the best informationavailable to make the estimates necessary to value the related assets andliabilities. Actual performance that differs from our estimates and futurechanges in the key variables could change future valuation and could have animpact on our net income.

 

Our significant accounting policies are described ingreater detail in our 2009 Annual Report on Form 10-K in the “CriticalAccounting Policies” section of “Management’sDiscussion and Analysis of FinancialCondition and Results of Operations”,which are essential to understanding Management’s Discussion and Analysis ofResults of Operations and Financial Condition. There has been no material modificationto these policies during the quarter ended June 30, 2010.

 

**Resultsof 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 assetsand interest paid on liabilities obtained to fund those assets.  Our net interest income is affected bychanges in the level and mix of interest-earning assets and interest-bearingliabilities, referred to as volume changes. Our net interest income is also affected by changes in the yields earnedon assets and rates paid on liabilities, referred to as rate changes.  Interest rates charged on our loans areaffected principally by the demand for such loans, the supply of moneyavailable for lending purposes, and other competitive factors.  Those factors are, in turn, affected bygeneral economic conditions and other factors beyond our control, such asfederal economic policies, the general supply of money in the economy,legislative tax policies, governmental budgetary matters, and the actions ofthe Federal Reserve Board (“FRB”).

 

Net interest income before provision for losses onloans and loan commitments increased by $8.2 million or 39.4%, to $29.2 millionin the second quarter of 2010, compared to $21.0 million in the second quarterof 2009.  Net interest margin of 3.71% inthe second quarter of 2010 was increased by 38 basis points from net interestmargin of 3.36% in the previous year largely due to a decrease of 1.1% in totalcost of deposits during the same period. The increase in net interest incomewas a result of an increase in net interest income in addition to a decrease ininterest expense.

 

Interest income increased by $5.9 million, or 16.8%,to $41.1 million in second quarter of 2010 compared to $35.2 million in thesecond quarter of 2009.  The increase ininterest income was primarily due to higher average balances in our loanportfolio and in our U.S. government agency securities portfolio, and theaccretion of discounted loans. Average loan balances increased by $307.5million to $2.4 billion in the second quarter of 2010, compared to $2.1 billionin the second quarter of 2009.  Thisincrease was primarily due to loans acquired as a result of the acquisition ofMirae Bank on June 26, 2009.  The averagebalances of investment securities not including fed funds sold increased from$324.3 million to $647.8 million from the second quarter of 2009 to 2010.  Due to the lower rate environment coupledwith a decrease in investment spreads to treasuries bonds, the overall taxequivalent yield on investments decreased from 3.94% at the quarter ending June30, 2009 to 3.08% at June 30, 2010.

 

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Interest expense decreased by $2.3 million, or 16.4%,to $11.9 million in the second quarter of 2010 compared to $14.2 million in thesecond quarter of 2009, although average balances of our interest bearingliabilities increased by $621.9 million to $2.7 billion in the second quarterof 2010 from $2.1 billion at the second quarter of 2009.  The increase in interest bearing liabilitiesis attributable to an increase in deposits amounting to $804.5 million from thesecond quarter of 2009 to 2010, while the Federal Home Loan Bank (“FHLB”) andother borrowings decreased by $182.6 million during the same period.  Total cost of interest bearing liabilitiesdecreased from 2.69% at the end of the second quarter 2009 to 1.73% at the endof the second quarter of 2010, a decrease of 96 basis points.  The decrease resulted from an improveddeposits mix as core deposits to total deposits increased, and interest ratereductions on interest bearing deposits.

 

The following table sets forth,for the periods indicated, our average balances of assets, liabilities andshareholders’ equity, in addition to the major components of net interestincome and net interest margin for the quarter ended June 30, 2010:

 

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

**(Dollarsin Thousands)**

 
| ** **                                       | ** ** | **Three Months Ended June 30,** | ** ** |
|--------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                       | ** ** | **2010**                                            | ** ** | **200****9** | ** ** |
| ** **                                       | ** ** | **Average  Balance**                                | ** ** | **Interest  Income/  Expense** | ** ** | **Average  Rate/Yield** | ** ** | **Average  Balance** | ** ** | **Interest  Income/  Expense** | ** ** | **Average  Rate/Yield** | ** ** |
| **Assets:**                                      |       |                                                |       |   |   |   |   |   |   |   |   |   |   |
| Earning  assets:                                 |       |                                                |       |   |   |   |   |   |   |   |   |   |   |
| Net  loans (1)                                   |       | $                                                   | 2,367,860  |   | $ | 36,079 |   | 6.09 | % | $ | 2,060,306 |   | $ | 31,234 |   | 6.06 | % |
| Securities of government  sponsored enterprises  |       | 603,539                                             |       | 4,287 |   | 2.84 | % | 287,719 |   | 2,811 |   | 3.91 | % |
| Other investment securities (2)                  |       | 44,243                                              |       | 469 |   | 6.38 | % | 36,583 |   | 383 |   | 5.96 | % |
| Federal funds sold                               |       | 158,584                                             |       | 294 |   | 0.74 | % | 133,139 |   | 777 |   | 2.34 | % |
| Total interest-earning assets                    |       | 3,174,226                                           |       | 41,129 |   | 5.21 | % | 2,517,747 |   | 35,205 |   | 5.62 | % |
| Total  non-interest-earning assets               |       | 300,925                                             |       |   |   |   |   | 173,718 |   |   |   |   |   |
| Total  assets                                    |       | $                                                   | 3,475,151  |   |   |   |   |   | $ | 2,691,465 |   |   |   |   |   |
|                                             |       |                                                |       |   |   |   |   |   |   |   |   |   |   |
| **Liabilities and Shareholders’ Equity:**   |       |                                                |       |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing  liabilities:                   |       |                                                |       |   |   |   |   |   |   |   |   |   |   |
| Money  market deposits                           |       | $                                                   | 972,096    |   | $ | 3,542 |   | 1.46 | % | $ | 436,066 |   | $ | 2,774 |   | 2.54 | % |
| Super NOW deposits                               |       | 22,019                                              |       | 26 |   | 0.47 | % | 19,142 |   | 46 |   | 0.95 | % |
| Savings deposits                                 |       | 75,677                                              |       | 617 |   | 3.26 | % | 48,511 |   | 444 |   | 3.66 | % |
| Time deposits of $100,000 or  more               |       | 751,094                                             |       | 2,762 |   | 1.47 | % | 994,514 |   | 6,751 |   | 2.72 | % |
| Other time deposits                              |       | 702,866                                             |       | 3,529 |   | 2.01 | % | 210,020 |   | 1,761 |   | 3.35 | % |
| FHLB  advances and other borrowings              |       | 138,805                                             |       | 750 |   | 2.16 | % | 321,434 |   | 1,622 |   | 2.02 | % |
| Junior subordinated debenture                    |       | 87,321                                              |       | 664 |   | 3.04 | % | 87,321 |   | 826 |   | 3.78 | % |
| Total  interest-bearing liabilities              |       | 2,749,878                                           |       | 11,890 |   | 1.73 | % | 2,117,008 |   | 14,224 |   | 2.69 | % |
| Non-interest-bearing  liabilities:               |       |                                                |       |   |   |   |   |   |   |   |   |   |   |
| Non-interest-bearing  deposits                   |       | 415,761                                             |       |   |   |   |   | 292,778 |   |   |   |   |   |
| Other  liabilities                               |       | 34,060                                              |       |   |   |   |   | 19,242 |   |   |   |   |   |
| Total non-interest-bearing  liabilities          |       | 449,821                                             |       |   |   |   |   | 312,020 |   |   |   |   |   |
| Shareholders’  equity                       |       | 275,452                                             |       |   |   |   |   | 262,437 |   |   |   |   |   |
| Total  liabilities and shareholders’ equity |       | $                                                   | 3,475,151  |   |   |   |   |   | $ | 2,691,465 |   |   |   |   |   |
| Net  interest income                             |       |                                                |       | $ | 29,239 |   |   |   |   |   | $ | 20,981 |   |   |   |
| Net  interest spread (3)                         |       |                                                |       |   |   | 3.48 | % |   |   |   |   | 2.93 | % |
| Net  interest margin (4)                         |       |                                                |       |   |   | 3.71 | % |   |   |   |   | 3.36 | % |

 

----

(1)   Net loan fees are included in the calculation ofinterest income. Net loanfees were approximately $687,000 and $523,000 for the quarters ended June 30, 2010 and 2009,respectively.  Loans are net of theallowance for loan losses, deferred fees, unearned income, and related directcosts, but include loans placed on non-accrual status.

(2)   Represents tax equivalent yields, non-taxequivalent yields for 2010 and 2009 were 4.24% and 4.19%, respectively.

(3)   Represents the average rate earned oninterest-earning assets less the average rate paid on interest-bearingliabilities.

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

 

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The following table sets forth,for the periods indicated, our average balances of assets, liabilities andshareholders’ equity, in addition to the major components of net interestincome and net interest margin for the six months ended June 30, 2010:

 

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

**(Dollarsin Thousands)**

 
| ** **                                       | ** ** | **Six Months Ended June 30,** | ** ** |
|--------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                       | ** ** | **2010**                                          | ** ** | **200****9** | ** ** |
| ** **                                       | ** ** | **Average  Balance**                              | ** ** | **Interest  Income/  Expense** | ** ** | **Average  Rate/Yield** | ** ** | **Average  Balance** | ** ** | **Interest  Income/  Expense** | ** ** | **Average  Rate/Yield** | ** ** |
| **Assets:**                                      |       |                                              |       |   |   |   |   |   |   |   |   |   |   |
| Earning  assets:                                 |       |                                              |       |   |   |   |   |   |   |   |   |   |   |
| Net  loans (1)                                   |       | $                                                 | 2,363,714  |   | $ | 71,383 |   | 6.04 | % | $ | 2,045,532 |   | $ | 61,428 |   | 6.01 | % |
| Securities of government  sponsored enterprises  |       | 611,920                                           |       | 9,431 |   | 3.08 | % | 274,746 |   | 5,478 |   | 3.99 | % |
| Other investment securities (2)                  |       | 44,606                                            |       | 940 |   | 6.35 | % | 30,786 |   | 658 |   | 5.96 | % |
| Federal funds sold                               |       | 144,851                                           |       | 676 |   | 0.93 | % | 89,631 |   | 1,066 |   | 2.38 | % |
| Total interest-earning assets                    |       | 3,165,091                                         |       | 82,430 |   | 5.21 | % | 2,440,695 |   | 68,630 |   | 5.65 | % |
| Total  non-interest-earning assets               |       | 281,460                                           |       |   |   |   |   | 168,107 |   |   |   |   |   |
| Total  assets                                    |       | $                                                 | 3,446,551  |   |   |   |   |   | $ | 2,608,802 |   |   |   |   |   |
|                                             |       |                                              |       |   |   |   |   |   |   |   |   |   |   |
| **Liabilities and Shareholders’ Equity:**   |       |                                              |       |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing  liabilities:                   |       |                                              |       |   |   |   |   |   |   |   |   |   |   |
| Money  market deposits                           |       | $                                                 | 964,110    |   | $ | 7,565 |   | 1.57 | % | $ | 399,602 |   | $ | 5,106 |   | 2.56 | % |
| Super NOW deposits                               |       | 22,249                                            |       | 55 |   | 0.49 | % | 19,348 |   | 91 |   | 0.94 | % |
| Savings deposits                                 |       | 74,869                                            |       | 1,203 |   | 3.21 | % | 45,890 |   | 837 |   | 3.65 | % |
| Time deposits of $100,000 or  more               |       | 759,933                                           |       | 5,809 |   | 1.53 | % | 964,175 |   | 13,420 |   | 2.78 | % |
| Other time deposits                              |       | 689,396                                           |       | 7,018 |   | 2.04 | % | 203,401 |   | 3,504 |   | 3.45 | % |
| FHLB  advances and other borrowings              |       | 143,377                                           |       | 1,670 |   | 2.33 | % | 324,373 |   | 3,280 |   | 2.02 | % |
| Junior subordinated debenture                    |       | 87,321                                            |       | 1,313 |   | 3.01 | % | 87,321 |   | 1,747 |   | 4.00 | % |
| Total  interest-bearing liabilities              |       | 2,741,255                                         |       | 24,633 |   | 1.80 | % | 2,044,110 |   | 27,985 |   | 2.74 | % |
| Non-interest-bearing  liabilities:               |       |                                              |       |   |   |   |   |   |   |   |   |   |   |
| Non-interest-bearing  deposits                   |       | 402,604                                           |       |   |   |   |   | 284,804 |   |   |   |   |   |
| Other  liabilities                               |       | 48,314                                            |       |   |   |   |   | 19,124 |   |   |   |   |   |
| Total non-interest-bearing  liabilities          |       | 450,918                                           |       |   |   |   |   | 303,928 |   |   |   |   |   |
| Shareholders’  equity                       |       | 274,378                                           |       |   |   |   |   | 260,764 |   |   |   |   |   |
| Total  liabilities and shareholders’ equity |       | $                                                 | 3,446,551  |   |   |   |   |   | $ | 2,608,802 |   |   |   |   |   |
| Net  interest income                             |       |                                              |       | $ | 57,797 |   |   |   |   |   | $ | 40,645 |   |   |   |
| Net  interest spread (3)                         |       |                                              |       |   |   | 3.41 | % |   |   |   |   | 2.91 | % |
| Net  interest margin (4)                         |       |                                              |       |   |   | 3.68 | % |   |   |   |   | 3.36 | % |

 

----

(1)   Net loan fees are included in the calculation ofinterest income. Net loanfees were approximately $1.5 million and $1.1 million for the six months ended June 30, 2010 and 2009,respectively.  Loans are net of theallowance for loan losses, deferred fees, unearned income, and related directcosts, but include loans placed on non-accrual status.

(2)   Represents tax equivalent yields, non-taxequivalent yields for 2010 and 2009 were 4.17% and 4.27%, respectively.

(3)   Represents the average rate earned oninterest-earning assets less the average rate paid on interest-bearingliabilities.

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

 

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

 

**Rate/VolumeAnalysis of Net Interest Income********(Dollars inThousands)**

 
| ** **                                      | ** ** | **Three  Months Ended June 30,********2010 vs.  200****9********Increases  (Decreases) Due to Change In** | ** ** | **Six  Months Ended June 30,********2010 vs.  200****9********Increases  (Decreases) Due to Change In** | ** ** |
|-------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------------------------------------------|------------|
| ** **                                      | ** ** | **Volume**                                                                                                     | ** ** | **Rate**                                                                                                     | ** ** | **Total** | ** ** | **Volume** | ** ** | **Rate** | ** ** | **Total** | ** ** |
| **Interest income:**                            |       |                                                                                                           |       |                                                                                                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net  loans(1)                                   |       | $                                                                                                              | 4,685      |                                                                                                         | $          | 160 |   | $ | 4,845 |   | $ | 9,712 |   | $ | 243 |   | $ | 9,955 |   |
| Securities  of government sponsored enterprises |       | 2,431                                                                                                          |       | (926                                                                                                         | )          | 1,505 |   | 5,475 |   | (1,469 | ) | 4,006 |   |
| Other  Investment securities                    |       | 13                                                                                                             |       | 44                                                                                                           |       | 57 |   | 246 |   | (17 | ) | 229 |   |
| Federal  funds sold                             |       | 126                                                                                                            |       | (609                                                                                                         | )          | (483 | ) | 456 |   | (846 | ) | (390 | ) |
| Total  interest income                          |       | 7,255                                                                                                          |       | (1,331                                                                                                       | )          | 5,924 |   | 15,889 |   | (2,089 | ) | 13,800 |   |
|                                            |       |                                                                                                           |       |                                                                                                         |       |   |   |   |   |   |   |   |   |
| **Interest expense:**                           |       |                                                                                                           |       |                                                                                                         |       |   |   |   |   |   |   |   |   |
| Money  market deposits                          |       | 2,329                                                                                                          |       | (1,561                                                                                                       | )          | 768 |   | 5,027 |   | (2,568 | ) | 2,459 |   |
| Super  NOW deposits                             |       | 6                                                                                                              |       | (26                                                                                                          | )          | (20 | ) | 12 |   | (48 | ) | (36 | ) |
| Savings  deposits                               |       | 226                                                                                                            |       | (53                                                                                                          | )          | 173 |   | 476 |   | (110 | ) | 366 |   |
| Time  deposit of $100,000 or more               |       | (1,389                                                                                                         | )          | (2,600                                                                                                       | )          | (3,989 | ) | (2,433 | ) | (5,178 | ) | (7,611 | ) |
| Other  time deposits                            |       | 2,717                                                                                                          |       | (949                                                                                                         | )          | 1,768 |   | 5,448 |   | (1,934 | ) | 3,514 |   |
| FHLB advances and other borrowings              |       | (980                                                                                                           | )          | 108                                                                                                          |       | (872 | ) | (2,049 | ) | 439 |   | (1,610 | ) |
| Junior subordinated debenture                   |       | —                                                                                                         |       | (162                                                                                                         | )          | (162 | ) | — |   | (434 | ) | (434 | ) |
| Total  interest expense                         |       | 2,909                                                                                                          |       | (5,243                                                                                                       | )          | (2,334 | ) | 6,481 |   | (9,833 | ) | (3,352 | ) |
| Change  in net interest income                  |       | $                                                                                                              | 4,346      |                                                                                                         | $          | 3,912 |   | $ | 8,258 |   | $ | 9,408 |   | $ | 7,744 |   | $ | 17,152 |   |

 

----

(1) Net loan fees have been included in the calculation ofinterest income. Net loanfees were approximately $687,000 and $523,000 for the quarters ended June 30, 2010 and2009, respectively.  Loans are net of theallowance for loan losses, deferred fees, unearned income, and related directcosts, but include loans placed on non-accrual status.

 

**P****rovision for Losses on Loans and Loan Commitments**

 

In anticipation of credit risksinherent in our lending business and ongoing weakness in the local and nationaleconomy, we set aside allowances through charges to earnings.  Such charges were made not only for our outstandingloan portfolio, but also for off-balance sheet items, such as commitments toextend credits or letters of credit.  Thecharges made for our outstanding loan portfolio were credited to allowance forloan losses, whereas charges for off-balance sheet items were credited to the reservefor off-balance sheet items, and are presented as a component of otherliabilities.

 

Althoughwe continue to enhance our loan underwriting standards and maintain proactivecredit follow-up procedures, we experienced a deterioration of credit qualityin our loan portfolio throughout 2009 and 2010 because of the weak economy andthe decline in the real estate market. We recordedaprovision for losses on loans and loan commitmentsof $32.2 million in the second quarter of 2010, as compared with a provision of $12.1 million for the prior year’s same quarter.  The increase in our provision for losses on loans and loan commitments was primarily to keep pace with an increase ofnon-performing loans (see “Financial Condition — Non-performing Assets” belowfor further discussion), in addition to the sale of non-performing anddelinquent loans in the second quarter of 2010 amounting to $48.0 million. A$13.4 million portion of the provision for loan losses was attributable to theaforementioned sale of non-performing and delinquent loans of which $6.1million was a result of increases in the general valuation allowance (“GVA”) dueto losses incurred from the sale, and $7.3 million was due to an increase inspecific valuation allowance (“SVA”). The $32.2 million provision inthe second quarter of 2010 includes charge-offs of $17.2 million. Our procedures for monitoring the adequacy of ourallowance for losseson loans and loan commitments, as well as detailed information concerning theallowance itself, are described in the section entitled “Allowance for Losses on Loans and Loan Commitments” below.

 

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Losseson Mirae loans purchasedfrom the FDIC are partially reimbursable as stated in our loss-sharingagreementswith the FDIC. For the quarter and six months ending, June 30, 2010, theCompany had a FDIC indemnification of $-3.1 million and $2.7 million,respectively, included in our allowance for loan losses calculation.

 

**Non-interest Income**

 

Total non-interest income was $9.9 million in thesecond quarter of 2010, ascompared with $28.6 million in the same quarter a year ago. Non-interest income as a percentage of average assets was 0.28% for thesecond quarter of 2010 and 1.06% for the second quarter of 2009. For the sixmonths ended June 30, 2010 and 2009, non-interest income was $17.7 millionor 0.51% of average assets and $32.3 million or 1.24% of average assets,respectively. The quarter to date and year to date decrease in non-interestincome was primarily due to the $21.7 million gain from the acquisition ofMirae Bank in the second quarter of 2009.

 

The following tables set forth the various componentsof our non-interest income for the periods indicated:

 

**Non-interestIncome (Dollars in Thousands)**

 
| ** **                                    | ** ** | **For  the Three Months Ended June 30,** | ** ** |
|-----------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                    | ** ** | **2010**                                      | ** ** | **2009** | ** ** |
| ** **                                    | ** ** | **(Amount)**                                  | ** ** | **(%)** | ** ** | **(Amount)** | ** ** | **(%)** | ** ** |
| Gain  on sale of securities                   |       | $                                             | 3,658      |   | 37.0 | % | $ | 1,575 |   | 15.5 | % |
| Service  charges on deposit accounts          |       | 3,215                                         |       | 32.6 | % | 3,125 |   | 10.9 | % |
| Gain  on sale of loans                        |       | 1,444                                         |       | 14.6 | % | 307 |   | 1.1 | % |
| Loan-related  servicing fees                  |       | 810                                           |       | 8.2 | % | 780 |   | 2.7 | % |
| Income  from other earning assets             |       | 203                                           |       | 2.1 | % | 197 |   | 0.7 | % |
| Gain  from acquisition of Mirae Bank          |       | —                                        |       | 0.0 | % | 21,679 |   | 75.8 | % |
| Other  income                                 |       | 548                                           |       | 5.5 | % | 927 |   | 3.3 | % |
| Total                                         |       | $                                             | 9,878      |   | 100.0 | % | $ | 28,590 |   | 100.0 | % |
| Average  assets                               |       | $                                             | 3,475,151  |   |   |   | $ | 2,691,465 |   |   |   |
| Non-interest  income as a % of average assets |       |                                          |       | 0.28 | % |   |   | 1.06 | % |

** **
| ** **                                    | ** ** | **For  the Six Months Ended June 30,** | ** ** |
|-----------------------------------------------|------------|---------------------------------------------|------------|
| ** **                                    | ** ** | **2010**                                    | ** ** | **2009** | ** ** |
| ** **                                    | ** ** | **(Amount)**                                | ** ** | **(%)** | ** ** | **(Amount)** | ** ** | **(%)** | ** ** |
| Gain  on sale of securities                   |       | $                                           | 6,142      |   | 34.8 | % | $ | 1,588 |   | 4.9 | % |
| Service  charges on deposit accounts          |       | 6,439                                       |       | 36.4 | % | 6,024 |   | 18.6 | % |
| Gain  (loss) on sale of loans                 |       | 1,480                                       |       | 8.4 | % | (524 | ) | -1.6 | % |
| Loan-related  servicing fees                  |       | 1,849                                       |       | 10.5 | % | 1,744 |   | 5.4 | % |
| Income  from other earning assets             |       | 407                                         |       | 2.3 | % | 392 |   | 1.2 | % |
| Gain  from acquisition of Mirae Bank          |       | —                                      |       | 0.0 | % | 21,679 |   | 67.1 | % |
| Other  income                                 |       | 1,346                                       |       | 7.6 | % | 1,424 |   | 4.4 | % |
| Total                                         |       | $                                           | 17,663     |   | 100.0 | % | $ | 32,327 |   | 100.0 | % |
| Average  assets                               |       | $                                           | 3,446,551  |   |   |   | $ | 2,608,802 |   |   |   |
| Non-interest  income as a % of average assets |       |                                        |       | 0.51 | % |   |   | 1.24 | % |

 

Our largest source of non-interest income in thesecond quarter of 2010 was gain on sale of securities at $3.7 million, whichrepresented approximately 37% of our total non-interest income, compared to$1.6 at the second quarter of 2009.  Inthe first six months of 2010, gain on sale of securities was $6.1 million, or34.8% of total non-interest income, an increase from $1.6 million at the end ofthe first half of 2009. Market value of securities has continued to increase aswe experienced decreased volatility in securities markets, changes in the yieldcurve, and contraction of interest rates spreads on securities owned by theBank.  We were able to realize theappreciation in market values of our securities while at the same timeshortening our overall duration on our investment portfolio.

 

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Our second largest source of non-interest income inthe second quarter of 2010 was service charges on deposit accounts, whichrepresented about 32.6% of our total non-interest income. Service charge incomeincreased to $3.2 million in the second quarter of 2010, as compared with $3.1 millionfor the prior year’s same period. Year to date service charges on deposits accountsincreased to $6.4 million or 36.5% of non-interest income at June 30,2010, from $6.0 million at June 30, 2010. The increase in service chargeincome was primarily due to increased non sufficient fund and analysis chargesas well as an increase in deposits accounts. Management constantly reviews service charge rates to maximize servicecharge income while still maintaining a competitive position.

 

Gain on sale of loans at the end of the second quarterand first half of 2010 was $1.4 million, or 14.6%, of non-interest income and$1.5 million, or 8.4%, of non-interest income, respectively. Both secondquarter and first half gain on sales of loans increased from prior yearbalances of $307,000 and -$524,000, respectively.  Of the total gain on sale of loans for thesecond quarter and first half of 2010, $1.3 million was attributable to gainson sale of SBA loans.

 

Loan related servicing fees accounted for $810,000 or8.2% of total non-interest income for the second quarter of 2010 and $1.8million or 10.5% of non-interest income for the six months ended balances at June 30,2010.  These figures increased slightlyfrom balances for the quarter and six months ending balances at June 30,2009 which were $780,000, and $1.7 million, respectively. This fee incomeconsists of trade-financing fees and servicing fees on SBA loans sold.  With the expansion of our trade-financingactivities and the growth of our servicing loan portfolio, related fee incomehas continued to increase.

 

Income on other earning assetsrepresents dividend income from FHLB stock ownership and increases in the cashsurrender value of bank owned life insurance (“BOLI”).  Income on other earning assets was $203,000,or 2.1% of total non-interest income for the quarter ending June 30, 2010,a $6,000 increase for the same period of the prior year.  Income on other earning assets for the sixmonths ending at June 30, 2010 was $407,000 or 2.3% of total non-interestincome, compared to $392,000 for the six months ending on June 30, 2009.

 

Other non-interest income represents income frommiscellaneous sources such as loan referral fees, SBA loan packaging fees,checkbook sales income, andexcess of insurance proceeds over carrying value of an insured loss.  Forthe second quarter of 2010, this miscellaneous income amounted to$548,000, as compared with $927,000 in the prior year’s sameperiod, and $1.3 million at for the first half of 2010 compared to $1.4 millionfor the first half of 2009.  Othernon-interest expense as a percentage of total non-interest income was 5.5% and3.2% for the quarters ending June 30, 2010 and June 30, 2009,respectively and 7.6% and 4.4% for the six months ending June 30, 2010 andJune 30, 2009.

 

**Non-interest Expense**

 

Total non-interest expense increased to $16.1 million at the second quarterof 2010 from $14.1 million at the same period in 2009. Non-interest expenses as apercentage of average assets decreased to 0.46%, from 0.52% at the secondquarter of 2010 and 2009, respectively. For the first half of 2010 and 2009,non-interest expense increased to $30.8 million from $26.1million. Non-interest expenses as a percentage of average assets decreased to0.89%, from 1.00 % at the first half of 2010 and 2009, respectively. Ourefficiency ratio was 41.24% at the end of the second quarter of 2010, comparedwith 28.40% at the same period a year ago. Year to date efficiency ratio wasincreased from 35.72% at June 30, 2009 to 40.85% at June 30,2010.  The increase in efficiency ratiosfrom 2009 to 2010 was due to the one-time gain attributable to the acquisitionof Mirae Bank in the second quarter of 2009.

 

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The following tables set forth a summary ofnon-interest expenses for the periods indicated:

 

**Non-interestExpenses**

**(Dollarsin Thousands)**

 
| ** **                                     | ** ** | **For  the Three Months Ended June 30,** | ** ** |
|------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                     | ** ** | **2010**                                      | ** ** | **2009** | ** ** |
| ** **                                     | ** ** | **(Amount)**                                  | ** ** | **(%)** | ** ** | **(Amount)** | ** ** | **(%)** | ** ** |
| Salaries  and employee benefits                |       | $                                             | 7,284      |   | 45.2 | % | $ | 5,988 |   | 42.5 | % |
| Occupancy  and equipment                       |       | 1,946                                         |       | 12.1 | % | 1,682 |   | 11.9 | % |
| Deposit  insurance premiums                    |       | 1,113                                         |       | 6.9 | % | 2,178 |   | 15.5 | % |
| Professional  fees                             |       | 1,395                                         |       | 8.6 | % | 575 |   | 4.1 | % |
| Data  processing                               |       | 690                                           |       | 4.3 | % | 845 |   | 6.0 | % |
| Advertising  and promotional                   |       | 358                                           |       | 2.2 | % | 360 |   | 2.6 | % |
| Outsourced  service for customer               |       | 265                                           |       | 1.6 | % | 210 |   | 1.5 | % |
| Office  supplies                               |       | 268                                           |       | 1.7 | % | 173 |   | 1.2 | % |
| Directors’  fees                          |       | 147                                           |       | 0.9 | % | 98 |   | 0.7 | % |
| Communications                                 |       | 119                                           |       | 0.7 | % | 107 |   | 0.8 | % |
| Investor  relation expenses                    |       | 97                                            |       | 0.6 | % | 74 |   | 0.5 | % |
| Amortization  of other intangible assets       |       | 92                                            |       | 0.6 | % | 74 |   | 0.5 | % |
| Other  operating                               |       | 2,358                                         |       | 14.6 | % | 1,712 |   | 12.2 | % |
| Total                                          |       | $                                             | 16,132     |   | 100.0 | % | $ | 14,076 |   | 100.0 | % |
| Average  assets                                |       | $                                             | 3,475,151  |   |   |   | $ | 2,691,465 |   |   |   |
| Non-interest  expense as a % of average assets |       |                                          |       | 0.46 | % |   |   | 0.52 | % |

 
| ** **                                     | ** ** | **For  the Six Months Ended June 30,** | ** ** |
|------------------------------------------------|------------|---------------------------------------------|------------|
| ** **                                     | ** ** | **2010**                                    | ** ** | **2009** | ** ** |
| ** **                                     | ** ** | **(Amount)**                                | ** ** | **(%)** | ** ** | **(Amount)** | ** ** | **(%)** | ** ** |
| Salaries  and employee benefits                |       | $                                           | 14,399     |   | 46.7 | % | $ | 12,195 |   | 46.8 | % |
| Occupancy  and equipment                       |       | 4,127                                       |       | 13.4 | % | 3,358 |   | 12.9 | % |
| Deposit  insurance premiums                    |       | 2,189                                       |       | 7.1 | % | 2,789 |   | 10.7 | % |
| Professional  fees                             |       | 2,387                                       |       | 7.7 | % | 917 |   | 3.5 | % |
| Data  processing                               |       | 1,327                                       |       | 4.3 | % | 1,672 |   | 6.4 | % |
| Advertising  and promotional                   |       | 708                                         |       | 2.3 | % | 593 |   | 2.3 | % |
| Outsourced  service for customer               |       | 525                                         |       | 1.7 | % | 478 |   | 1.8 | % |
| Office  supplies                               |       | 505                                         |       | 1.6 | % | 333 |   | 1.3 | % |
| Directors’  fees                          |       | 275                                         |       | 0.9 | % | 191 |   | 0.7 | % |
| Communications                                 |       | 230                                         |       | 0.7 | % | 210 |   | 0.8 | % |
| Investor  relation expenses                    |       | 201                                         |       | 0.7 | % | 126 |   | 0.5 | % |
| Amortization  of other intangible assets       |       | 184                                         |       | 0.6 | % | 148 |   | 0.6 | % |
| Other  operating                               |       | 3,765                                       |       | 12.2 | % | 3,052 |   | 11.7 | % |
| Total                                          |       | $                                           | 30,822     |   | 100.0 | % | $ | 26,062 |   | 100.0 | % |
| Average  assets                                |       | $                                           | 3,446,551  |   |   |   | $ | 2,608,802 |   |   |   |
| Non-interest  expense as a % of average assets |       |                                        |       | 0.89 | % |   |   | 1.00 | % |

 

Salaries and employee benefits historically representapproximately half of our total non-interest expense and generally increases as our branchnetworks and business volumes expand. These expenses were $7.3 million forthe quarter ending June 30, 2010 compared with $6.0 million forthe prior year’s same period. For the first six months of 2010, salaries andbenefits were $14.4 million compared to $12.2 million in the first six monthsof 2009. The number of full-time equivalent employees decreased from 421 as of June 30,2009 to 416 as of June 30, 2010. The increase in salaries and employee benefitswere largely due to wage increases in addition to increases in medical premiumsand payroll taxes. Our asset growth helped us improve our assets per employeeratio to $8.3 million at June 30, 2010 from $7.5 million at June 30,2009.

 

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Occupancy and equipment expenses represent about 12%of our total non-interest expenses for the quarter ending June 30, 2009and 2010 and 13% for six months ending June 30, 2009 and 2010. Theseexpenses increased to $1.9million in the second quarter of2010 compared with $1.7 million and forthe same period a year ago. On a year to date basis, occupancy expensesincreased from $3.4 million at June 30, 2009 to $4.1 million at June 30,2010.  The increase was primarilyattributable to the additional lease expenses for our business growth in thepast 12 months with the addition of our Forth Worth, Olympic, and Van Nuysbranches, which all opened in 2010.

 

Deposit insurance premium expenses represent TheFinancing Corporation (“FICO”) and FDIC insurance premium assessments. In thesecond quarter of 2010, these expenses totaled $1.1 million or 6.9% of totalnon-interest expense, compared with $2.2 million or 15.5% of total non-interestexpenses for the prior year’s same periods. Deposit insurance premiums for thesix months ending June 30, 2010 were $2.2 million or 7.1% of totalnon-interest expense, compared to $2.8 million, or 10.7%, of total non-interestexpense for the same period last year. In the second quarter of 2009 the FDICimposed a one-time special assessment of $1.5 million which was primarily thereason for the higher assessment expense for the first half of 2009 compared tothe first half of 2010.

 

Professional fees generallyincrease as we grow. Such fees increased to $1.4 million in the second quarterof 2010 and $2.4 million for the first six months of 2010, compared to $575,000and $917,000 for the same period of the prior year, respectively. Theseexpenses represented 8.6% and 7.7% for the second quarter and first half of2010, respectively, and 4.1% and 3.5% for the second quarter and first half of2009.  This increase was primarily due toincreased legal fees resulting from collection of non-performing loans and OREOforeclosures.

 

Data processing expensesdecreased to $690,000 in the second quarter of 2010 from $845,000 for the sameperiod a year ago.  In the first sixmonths of 2010, data process expense accounted for $1.3 million or 4.3% of totalnon-interest expense compared to $1.7 million or 6.4% of total non-interestexpense for the same period in 2009. Total data processing expenses decreasedas fees have gone down slightly since June 30, 2009.

 

Advertising and promotional expenses decreased by $2,000 to $358,000 at thesecond quarter of 2010 compared to the same period in 2009 but increased to$708,000 for the first half of 2010 from $593,000 for the six months ending June 30,2009. These expenses represent marketing activities,such as media advertisements and promotional gifts for customers of newlyopened offices, especially in the new areas such as the east coast market inNew York and New Jersey. The increase in the year to date figure in 2010 wasprimarily attributable to our increased advertising spending to promote a branchaddition in Van Nuys, as well as a new marketing campaign that began in thefirst quarter of 2010.

 

Outsourced service costs forcustomers are payments made to third parties who provide services that weretraditionally paid by the Bank’s customers, such as armored car services orbookkeeping services, and are recouped from analysis fee charges from thosecustomer’s deposit accounts.  Theseexpenses increased slightly to $265,000 in the second quarter of 2010, as compared with $210,000 for the prior year’s sameperiod. The same expenses were $525,000 for the first six months of 2010compared with $478,000 for the first six months of 2009.

 

Other non-interest expenses, such as office supplies,communications, director’s fees, investor relation expenses, amortization ofintangible assets and other operating expenses were $3.1 million for the secondquarter of 2010 compared with $2.2 million for the sameperiods a year ago. For the first six months of 2010, other non-interestexpenses were $5.2 million compared to $4.1 million for the first six months of2009. The increase represents a normal growth in association with the growth ofour business activities and was consistent with our expectations.

 

**Provision for Income Taxes**

 

For the quarter and six monthsended June 30, 2010, we had an income tax benefit of $5.6 million on apretax net loss of $9.2 million, representing an effective tax rate of 60.2%,as compared with a provision for income taxes of $9.6 million on pretax netincome of $23.4 million, representing an effective tax rate of 41.2% for thesame quarter in 2009.  For the first halfof 2010, we recorded an income tax benefit of $4.2 million on a pretax net lossof $4.6 million representing an effective tax rate of 92.3% compared to a taxprovision of $11.3 million on pretax net income of $28.1 million which resultedin an effective tax rate of 40.2% for the same period in 2009.

 

Due to the high degree ofvariability of the estimated annual effective tax rate when considering therange of projected income for the remainder of the year, the Company hasdetermined that the actual year-to-date effective tax rate is the best estimateof the annual effective tax rate.  Theeffective tax rate for the three and six months ending June 30, 2010 werehigher than the tax rate for June 30, 2009 due mostly to large permanentdifferences pertaining to low income tax housing credits, enterprise zone netinterest deductions, and enterprise hiring credit compared to the net lossamounts. The change in tax provision calculation method increased therecognition of tax benefits over a shorter period of time, increasing theoverall effective tax rate for the second quarter and first half of 2010.

 

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**FinancialCondition**

 

**Investment****Portfolio**

 

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

 

*Cash Equivalents and Interest-bearing Deposits in other FinancialInstitutions*

 

Cash and cash equivalents include cash and due frombanks, term and overnight federal funds sold, and securities purchased underagreements to resell, all of which have original maturities of less than 90days. We buy or sell federal funds and maintain deposits in interest-bearingaccounts in other financial institutions to help meet liquidity requirementsand provide temporary holdings until the funds can be otherwise deployed orinvested.

 

*Investment Securities*

 

Management of our investmentsecurities portfolio focuses on providing an adequate level of liquidity andestablishing a balanced interest rate-sensitive position, while earning anadequate level of investment income without taking undue risk.  As of June 30,2010, our investment portfolio was comprised primarily of United Statesgovernment agency securities, which accounted for 91.2% of the entireinvestment portfolio.  Our U.S. government agency securities holdings areall “prime/conforming” mortgage backed securities, or MBSs, and collateralizedmortgage obligations, or CMOs, guaranteed by FNMA, FHLMC, or GNMA. GNMAs areconsidered equivalent to U.S. Treasury securities, as they are backed by thefull faith and credit of the U.S. government. Currently, there are no subprimemortgages in our investment portfolio. Besides the U.S. government agencysecurities, we also have as a percentage to total investments, an 8.4%investment in municipal debt securities and 0.4% investment in corporate debt.Among our investment portfolio that is not comprised of U.S. government securities, 8.1%,or $40.9 million, carry the two highest “Investment Grade” ratings of “Aaa/AAA”or “Aa/AA”, while 0.4%, or $2.2 million, carry an intermediate “InvestmentGrade” rating of at least “Baa1/BBB+” or above, and 0.3%, or $1.4 million, isunrated.  Our investment portfolio does not contain any governmentsponsored enterprises, or GSE preferred securities or any distressed corporatesecurities that required other-than-temporary-impairment charges as of June 30,2010.

 

We classified our investment securitiesas “held-to-maturity” or “available-for-sale” pursuant to ASC 320-10 (SFAS No. 115).Pursuant to the fair value election option of ASC 470-20, we have chosen tocontinue classifying our existing instruments of investment securities as “held-to-maturity”or “available-for-sale” under ASC 320-10. Investment securities that we intendto hold until maturity are classified as held to maturity securities, and allother investment securities are classified as available-for-sale. The carryingvalues of available-for-sale investment securities are adjusted for unrealizedgains and losses as a valuation allowance and any gain or loss is reported onan after-tax basis as a component of other comprehensive income. Credit relateddeclines in the fair value of held-to-maturity and available-for-salesecurities below their cost that are deemed to be other than temporary arereflected in earnings as realized losses, and there was no suchother-than-temporary-impairment in 2009. The fair market values of our held-to-maturityand available-for-sale securities were respectively $0.1 million and $506.4million as of June 30, 2010.

 

The fair value of investments isaccounted for in accordance with ASC 320-10 (SFAS No. 115, *Accountingfor Certain Investments in Debt and Equity Securities)*. The Companycurrently utilizes an independent third party bond accounting service for ourinvestment portfolio accounting.   Thethird party provides market values derived using a proprietary matrix pricingmodel which utilizes several different sources for pricing. The Company usesmarket values received for investment fair values which are updated on amonthly basis. The market values received is tested annually and is validatedusing prices received from another independent third party source. All of theseevaluations are considered as Level 2 in reference to ASC 820. As required under Financial Accounting StandardsBoard (“FASB”) ASC 325, we consider all available information relevant to thecollectability of the security, including information about past events,current conditions, and reasonable and supportable forecasts, and we considerfactors such as remaining payment terms of the security, prepayment speeds, thefinancial condition of the issuer(s), expected defaults, and the value of anyunderlying collateral.

 

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The following table summarizes the amortized cost,market value, net unrealized gain (loss), and distribution of our investmentsecurities as of the dates indicated:

 

**InvestmentSecurities Portfolio**

**(Dollarsin Thousands)**

** **
| ** **                                     | ** ** | **As of June 30, 2010** | ** ** | **As of December 31, 2009** | ** ** |
|------------------------------------------------|------------|------------------------------|------------|----------------------------------|------------|
| ** **                                     | ** ** | **Amortized  Cost**          | ** ** | **Market  Value**                | ** ** | **Net  Unrealized  Gain** | ** ** | **Amortized  Cost** | ** ** | **Market  Value** | ** ** | **Net  Unrealized  Gain  (Loss)** | ** ** |
| Held to Maturity:                              |       |                         |       |                             |       |   |   |   |   |   |   |   |   |
| Collateralized mortgage obligations            |       | $                            | 96         |                             | $          | 102 |   | $ | 6 |   | $ | 109 |   | $ | 109 |   | $ | — |   |
| Total investment securities held to maturity   |       | $                            | 96         |                             | $          | 102 |   | $ | 6 |   | $ | 109 |   | $ | 109 |   | $ | — |   |
|                                           |       |                         |       |                             |       |   |   |   |   |   |   |   |   |
| Available for Sale:                            |       |                         |       |                             |       |   |   |   |   |   |   |   |   |
| Securities of governmentsponsored enterprises  |       | $                            | 174,738    |                             | $          | 175,955 |   | $ | 1,217 |   | $ | 156,879 |   | $ | 155,382 |   | $ | (1,497 | ) |
| Mortgage backed securities                     |       | 41,491                       |       | 43,298                           |       | 1,807 |   | 131,617 |   | 131,711 |   | 94 |   |
| Collateralized mortgage obligations            |       | 239,138                      |       | 242,630                          |       | 3,492 |   | 318,531 |   | 319,554 |   | 1,023 |   |
| Corporate securities                           |       | 2,000                        |       | 2,019                            |       | 19 |   | 2,000 |   | 2,017 |   | 17 |   |
| Municipal securities                           |       | 41,624                       |       | 42,479                           |       | 855 |   | 42,068 |   | 42,654 |   | 586 |   |
| Total investment securities available for sale |       | $                            | 498,991    |                             | $          | 506,381 |   | $ | 7,390 |   | $ | 651,095 |   | $ | 651,318 |   | $ | 223 |   |

 

The following table summarizes the maturity andrepricing schedule of our investment securities at their market values at June 30,2010:

 

**InvestmentMaturities and Repricing Schedule********(Dollarsin Thousands****)**

** **
| ** **                                     | ** ** | **Within One Year** | ** ** | **After One &  Within Five  Years** | ** ** | **After Five &  Within Ten  Years** | ** ** | **After Ten Years** | ** ** | **Total** | ** ** |
|------------------------------------------------|------------|-------------------------------|------------|--------------------------------------------------------|------------|--------------------------------------------------------|------------|-------------------------------|------------|-----------|------------|
| Held to Maturity:                              |       |                          |       |                                                   |       |                                                   |       |                          |       |      |       |
| Collateralized mortgage obligations            |       | $                             | —     |                                                   | $          | 102                                                    |       | $                             | —     |      | $          | — |   | $ | 102 |   |
| Total investment securities held to maturity   |       | $                             | —     |                                                   | $          | 102                                                    |       | $                             | —     |      | $          | — |   | $ | 102 |   |
|                                           |       |                          |       |                                                   |       |                                                   |       |                          |       |      |       |
| Available for Sale:                            |       |                          |       |                                                   |       |                                                   |       |                          |       |      |       |
| Securities of governmentsponsored enterprises  |       | $                             | —     |                                                   | $          | —                                                 |       | $                             | 175,955    |      | $          | — |   | $ | 175,955 |   |
| Mortgage backed securities                     |       | 7,138                         |       | 63                                                     |       | 3,897                                                  |       | 32,200                        |       | 43,298    |       |
| Collateralized mortgage obligations            |       | 6,100                         |       | 236,530                                                |       | —                                                 |       | —                        |       | 242,630   |       |
| Corporate securities                           |       | —                        |       | 2,019                                                  |       | —                                                 |       | —                        |       | 2,019     |       |
| Municipal securities                           |       | —                        |       | 732                                                    |       | 5,863                                                  |       | 35,884                        |       | 42,479    |       |
| Total investment securities available for sale |       | $                             | 13,328     |                                                   | $          | 239,344                                                |       | $                             | 185,715    |      | $          | 68,084 |   | $ | 506,381 |   |

 

Holdingsof investment securities decreased to $506.5 million at June 30, 2010, ascompared with holdings of $651.4 million at December 31,2009.  Totalinvestment securities as a percentage of total assets was 14.74% and 19.0% at June 30, 2010and December 31, 2009, respectively.  Securities with market value of approximately$250.5 million and $220.9 million were pledged to secure public deposits forother purposes required or permitted by law at June 30, 2010 and December 31,2009 respectively.

 

As of June 30, 2010, our investment securities classifiedas held-to-maturity, which are carried at their amortized cost, stayed relativelyunchanged on a dollar basis at $96,000 as compared with $109,000 as of December 31, 2009. Ourinvestment securities classified as available-for-sale, which are stated attheir fair market values, decreased to $506.4million at June 30, 2010 from $651.3million at December 31, 2009.

 

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The following table shows the gross unrealized lossesand fair value of our investments, aggregated by investment category and thelength of time that individual securities have been in a continuous unrealizedloss position, at June 30, 2010 and December 31, 2009:

 

**As of June 30, 2010**

(Dollars in Thousands)

 
| ** **                                      | ** ** | **Less  than 12 months** | ** ** | **12  months or longer** | ** ** | **Total**       | ** ** |
|-------------------------------------------------|------------|--------------------------|------------|--------------------------|------------|-----------------|------------|
| ** **                                      | ** ** | ** **               | ** ** | **Gross**                | ** ** | ** **      | ** ** | **Gross** | ** ** | ** ** | ** ** | **Gross** | ** ** |
| ** **                                      | ** ** | ** **               | ** ** | **Unrealized**           | ** ** | ** **      | ** ** | **Unrealized** | ** ** | ** ** | ** ** | **Unrealized** | ** ** |
| **Description of Securities (AFS)****(1)**      | ** ** | **Fair  Value**          | ** ** | **Losses**               | ** ** | **Fair  Value** | ** ** | **Losses** | ** ** | **Fair  Value** | ** ** | **Losses** | ** ** |
|                                            |       |                     |       |                     |       |            |       |   |   |   |   |   |   |
| Securities  of government sponsored enterprises |       | $                        |       | —                   |       | $               | —     |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   |
| Mortgage-backed  securities                     |       | —                   |       | —                   |       | —          |       | — |   | — |   | — |   |
| Collateralized  mortgage obligations            |       | 2,011                    |       | (15                      | )          | —          |       | — |   | 2,011 |   | (15 | ) |
| Corporate  securities                           |       | —                   |       | —                   |       | —          |       | — |   | — |   | — |   |
| Municipal securities                            |       | 4,175                    |       | (207                     | )          | 7,688           |       | (129 | ) | 11,863 |   | (336 | ) |
|                                            |       | $                        |       | 6,186                    |       | $               | (222       | ) | $ | 7,688 |   | $ | (129 | ) | $ | 13,874 |   | $ | (351 | ) |

 

**As of December 31, 200****9**

(Dollars in Thousands)

 
| ** **                                      | ** ** | **Less  than 12 months** | ** ** | **12  months or longer** | ** ** | **Total**       | ** ** |
|-------------------------------------------------|------------|--------------------------|------------|--------------------------|------------|-----------------|------------|
| ** **                                      | ** ** | ** **               | ** ** | **Gross**                | ** ** | ** **      | ** ** | **Gross** | ** ** | ** ** | ** ** | **Gross** | ** ** |
| ** **                                      | ** ** | ** **               | ** ** | **Unrealized**           | ** ** | ** **      | ** ** | **Unrealized** | ** ** | ** ** | ** ** | **Unrealized** | ** ** |
| **Description of Securities (AFS)****(1)**      | ** ** | **Fair  Value**          | ** ** | **Losses**               | ** ** | **Fair  Value** | ** ** | **Losses** | ** ** | **Fair  Value** | ** ** | **Losses** | ** ** |
|                                            |       |                     |       |                     |       |            |       |   |   |   |   |   |   |
| Securities  of government sponsored enterprises |       | $                        | 110,296    |                     | $          | (1,600          | )          | $ | — |   | $ | — |   | $ | 110,296 |   | $ | (1,600 | ) |
| Mortgage-backed  securities                     |       | 85,313                   |       | (726                     | )          | —          |       | — |   | 85,313 |   | (726 | ) |
| Collateralized  mortgage obligations            |       | 145,622                  |       | (975                     | )          | —          |       | — |   | 145,622 |   | (975 | ) |
| Corporate  securities                           |       | —                   |       | —                   |       | —          |       | — |   | — |   | — |   |
| Municipal securities                            |       | 18,783                   |       | (505                     | )          | —          |       | — |   | 18,783 |   | (505 | ) |
|                                            |       | $                        | 360,014    |                     | $          | (3,806          | )          | $ | — |   | $ | — |   | $ | 360,014 |   | $ | (3,806 | ) |

 

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(1) There were noheld-to-maturity securities with losses as of June 30, 2010 and December 31,2009.

 

As of June 30, 2010, the total unrealized lossesless than 12 months old were $222,000 and total unrealized losses more than 12months old were $129,000 for the same period. The aggregate related fair value of investments with unrealized lossesless than 12 months old was $6.2 million and$7.7 million with unrealized losses more than 12 months old at June 30,2010.  As of December 31, 2009, thetotal unrealized losses less than 12 months old were $3.8 million,and there were no unrealized losses more than 12 months old. The aggregaterelated fair value of investments with unrealized losses less than 12 monthsold was $360.0 million at December 31, 2009.

 

Credit declines in the fairvalue of held-to-maturity and available-for-sale investment securities belowtheir cost that are deemed to be other than temporary are reflected in earningsas realized losses. In accordance with guidance from FASB, ASC 320-10-65-1 andASC 958-320 *Recognition and Presentation ofOther-Than-Temporary Impairments*, the Company evaluates whether anevent or change in circumstances has occurred that may have a significantadverse effect on the fair value of the investment (an “impairment indicator”). In evaluating an other-than-temporary impairment (“OTTI”),the Company utilizes a systematic methodology that includes all documentationof the factors considered.  All availableevidence concerning declines in market values below cost are identified andevaluated in a disciplined manner by management.  The steps taken by the Company in evaluatingOTTI are:

 

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

 

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·                  If the Company does not intend to sell the security(i.e., a decision to sell the security has not been made), it must assesswhether it is more likely than not that it will be required to sell thesecurity before recovery of the amortized cost basis of the security.

 

·                  Even if theCompany does not intend to sell the security, an OTTI has occurred if theCompany does not expect to recover the entire amortized cost basis (i.e., thereis a credit loss). Under this analysis, the Company compares the present valueof the cash flows expected to be collected to the amortized cost basis of thesecurity.

 

·                  The Company believes that impairment exists onsecurities when their fair value is below amortized cost but an impairment losshas not occurred due to the following reasons:

 

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

 

·                  It is highly unlikely that the Company will beforced to sell any of the securities that have an unrealized loss positionbefore recovery. The Company’s Asset/Liability Committee mandated liquidityratios are well above the minimum targets and secondary sources of liquiditysuch as borrowings lines, brokered deposits, and junior subordinated debentureare easily accessible.

 

·                  The Company fully expects to recover the entireamortized cost basis of all the securities that are in an unrealized lossposition. The basis of this conclusion is that the unrealized loss positionswere caused by changes in interest rates and interest rate spreads and not bydefault risk.

 

As of June 30, 2010, thenet unrealized gain in the investment portfolio was $7.4 million compared to$223,000 in net unrealized gains as of December 31, 2009. The increase inunrealized gains can be attributed to recently improved market stability, whichhas led to a decrease in treasuries interest rate spreads, and an increase intreasury rates.

 

**Loan Portfolio**

 

Total loans are the sum of loans receivable and loansheld for sale and reported at their outstanding principal balances net of anyunearned income which is unamortized deferred fees and costs and premiums anddiscounts. Interest on loans isaccrued daily on a simple interest basis. Totalloans net of unearnedincome and allowance for losses on loansdecreased to $2.36 billion at June 30, 2010, as compared with $2.37 billion at December 31,2009. Total loans net of unearned income and allowance for loan losses as apercentage of total assets remained unchanged at 68.8% both as of at June 30,2010 and December 31, 2009.

 

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The following table sets forth the amount of totalloans outstanding and the percentage distributions in each category, as of thedates indicated:

 

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

**(Dollarsin Thousands)**

** **
| ** **                           | ** ** | **Amount Outstanding** | ** ** |
|--------------------------------------|------------|------------------------|------------|
| ** **                           | ** ** | **June 30, 2010** | ** ** | **December 31, 2009** | ** ** |
| Construction                         |       | $                      | 59,376     |   | $ | 48,371 |   |
| Real estate secured                  |       | 2,009,511              |       | 1,979,704 |   |
| Commercial and industrial            |       | 372,727                |       | 387,443 |   |
| Consumer                             |       | 18,415                 |       | 17,234 |   |
| Total loans(1)                       |       | 2,460,029              |       | 2,432,752 |   |
| Unearned Income                      |       | (5,007                 | )          | (5,311 | ) |
| Gross loans, net of unearned income  |       | 2,455,022              |       | 2,427,441 |   |
| Allowance for losses on loans        |       | (91,419                | )          | (62,130 | ) |
| Net loans                            |       | $                      | 2,363,603  |   | $ | 2,365,311 |   |
|                                 |       |                   |       |   |   |
| Percentage breakdown of gross loans: |       |                   |       |   |   |
| Construction                         |       | 2.4                    | %          | 2.0 | % |
| Real estate secured                  |       | 81.7                   | %          | 81.4 | % |
| Commercial and industrial            |       | 15.1                   | %          | 15.9 | % |
| Consumer                             |       | 0.8                    | %          | 0.7 | % |

 

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(1) Includes loans held for sale,which are recorded at the lower of cost or market, of $17.0 million and $36.2million at June 30, 2010 and December 31, 2009, respectively.

 

Real estate secured loansconsist primarily of commercial real estate loans and are extended to financethe purchase and/or improvement of commercial real estate or businessesthereon. The properties may be either user owned or held for investmentpurposes. Our loan policy adheres to the real estate loan guidelines set forthby the FDIC. The policy provides guidelines including, among other things, fairreview of appraisal value, limitation on loan-to-value ratio, and minimum cashflow requirements to service debt. Loans secured by real estate remainedunchanged at $2.0 billion both June 30, 2010 and December 31, 2009. Real estate secured loans as a percentage of totalloans were 81.7% and 81.4% at June 30, 2010and December 31, 2009, respectively. Home mortgage loans represent a smallfraction of our total real estate secured loan portfolio. Total home mortgageloans outstanding were only $48.6million at June 30, 2010 and $41.3 million at December 31, 2009.

 

Commercial and industrial loans include revolvinglines of credit as well as term business loans. Commercial and industrial loansat June 30, 2010 decreased to $372.7million, as comparedwith $387.4 million at December 31, 2009. Commercial andindustrial loans as a percentage of total loans were 15.1% atJune 30, 2010, decreasing from 15.9% at December 31, 2009.

 

Consumer loans have historically represented less than5% of our total loan portfolio. The majority of consumer loans are concentratedin automobile loans, which we provide as a service only to existing customers.Because we believe that consumer loans present a higher risk compared to ourother loan products, especially given current economic conditions, we havereduced our efforts in consumer lending since 2007. Accordingly, as of June 30, 2010,our volume of consumer loans increased by $1.2 million from the prior year end.As of June 30, 2010, the balance of consumer loans was $18.4million, or 0.8% of total loans, as compared to $17.2 million, or 0.7% of total loansas of December 31, 2009.

 

Construction loans represented less than 5% of ourtotal loan portfolio as of June 30, 2010. In response to the current realestate market, which has been experiencing adownward trend since mid-2007, we have applied stricter loan underwritingpolicies when making construction related loans. However, construction loans increased to$59.4 million, or 2.4% of total loans, at the end of the second quarter of 2010, as compared with $48.4million, or 2.0% of total loans at December 31, 2009.

 

Our loan terms vary according to loan type. Commercialterm loans have typical maturities of three to five years and are extended tofinance the purchase of business entities, business equipment, leaseholdimprovements or to provide permanent working capital. We generally limit realestate loan maturities to five to eight years. Lines of credit, in general, areextended on an annual basis to businesses that need temporary working capitaland/or import/export financing. We generally seek diversification in our loanportfolio, and our borrowers are diverse as to industry, location, and theircurrent and target markets.

 

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The following table shows the contractual maturitydistribution and repricing intervals of the outstanding loans in our portfolio,as of June 30, 2010. In addition, the table shows the distribution of suchloans between those with variable or floating interest rates and those withfixed or predetermined interest rates.

 

**LoanMaturities and Repricing Schedule**

**(Dollarsin Thousands)**

 
| ** **                         | ** ** | **June 30, 2010** | ** ** |
|------------------------------------|------------|------------------------|------------|
| ** **                         | ** ** | **Within  One Year**   | ** ** | **After One  But within  Five Years** | ** ** | **After  Five Years** | ** ** | **Total** | ** ** |
| Construction                       |       | $                      | 59,376     |   | $ | — |   | $ | — |   | $ | 59,376 |   |
| Real estate secured                |       | 1,194,746              |       | 795,454 |   | 19,311 |   | 2,009,511 |   |
| Commercial and industrial          |       | 364,137                |       | 8,590 |   | — |   | 372,727 |   |
| Consumer                           |       | 17,115                 |       | 1,300 |   | — |   | 18,415 |   |
| Gross loans                        |       | $                      | 1,635,374  |   | $ | 805,344 |   | $ | 19,311 |   | $ | 2,460,029 |   |
|                               |       |                   |       |   |   |   |   |   |   |   |   |   |   |
| Loans with variable interest rates |       | $                      | 1,316,452  |   | $ | — |   | $ | — |   | $ | 1,316,453 |   |
| Loans with fixed interest rates    |       | $                      | 318,922    |   | $ | 805,344 |   | $ | 19,311 |   | $ | 1,143,576 |   |

 

A majority of the properties that are collateralizedagainst our loans are located in Southern California. The loans generated byour loan production offices, which are located outside of our main geographicalmarket, are generally collateralized by properties in close proximity to thoseoffices.

 

**Non-performing Assets**

 

Non-performing assets, or NPAs,consist of non-performingloans, or NPLs, restructured loans, and other NPAs. NPLs are reported at their outstanding principal balances,net of any portionguaranteed by SBA, and consistof loans on non-accrual status and loans 90 days or more past due and stillaccruing interest. Restructured loans are loans for which the terms ofrepayment have been renegotiated, resulting in a reduction or deferral ofinterest or principal,OtherNPAs consist of properties, mainly other real estate owned (“OREO”), acquiredby foreclosure or similar means that management intends to offer for sale.

 

On June 26, 2009, weacquired substantially all the assets and assumed substantially all theliabilities of Mirae from the FDIC. We also entered into losssharing agreements with the FDIC in connection with the Mirae acquisition. Under the loss sharing agreements, the FDIC willshare in the losses on assets covered under the agreements, which generallyinclude loans acquired from Mirae and foreclosed loan collateral existing at June 26,2009. Withrespect to losses of up to $83.0 million on the covered assets, the FDIC hasagreed to reimburse us for 80 percent of the losses.  On lossesexceeding $83.0 million, the FDIC has agreed to reimburse us for 95 percent ofthe losses.  The loss sharing agreements are subject to our followingservicing procedures and satisfying certain other conditions as specified inthe agreements with the FDIC. The term for the FDIC’s loss sharing onresidential real estate loans is ten years, and the term for loss sharing onnon-residential real estate loans is five years with respect to losses andeight years with respect to loss recoveries.

 

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For the purposes of the tablebelow, loans and OREO covered under the loss sharing agreements with the FDICare referred to as “covered loans” and “covered OREO”, respectively. Coveredloans and covered OREO were recorded at estimated fair value on June 26,2009.

 

The following is a summary oftotal non-performing loans and OREO on the dates indicated:

 

**Non****-****performing Assets andRestructured Loans********(Dollarsin Thousands)**

 
| ** **                                             | ** ** | **June 30, 2010** | ** ** | **December 31, 2009** | ** ** | **June 30, 2009** | ** ** |
|--------------------------------------------------------|------------|------------------------|------------|----------------------------|------------|------------------------|------------|
| **Total Nonaccrual loans:****(1)**                     |       |                   |       |                       |       |                   |       |
| Real  estate secured                                   |       | $                      | 78,432     |                       | $          | 63,572                 |       | $ | 36,611 |   |
| Commercial  and industrial                             |       | 4,650                  |       | 5,805                      |       | 14,887                 |       |
| Consumer                                               |       | 34                     |       | 70                         |       | 205                    |       |
| Total                                                  |       | 83,116                 |       | 69,447                     |       | 51,703                 |       |
| **Loans 90 days or more past due and still accruing:** |       |                   |       |                       |       |                   |       |
| Real  estate secured                                   |       | 1                      |       | 1,317                      |       | 111                    |       |
| Commercial  and industrial                             |       | —                 |       | —                     |       | 1                      |       |
| Consumer                                               |       | —                 |       | 19                         |       | 16                     |       |
| Total                                                  |       | 1                      |       | 1,336                      |       | 128                    |       |
|                                                   |       |                   |       |                       |       |                   |       |
| Total  non-performing loans                            |       | 83,117                 |       | 70,783                     |       | 51,831                 |       |
|                                                   |       |                   |       |                       |       |                   |       |
| Repossessed  vehicles                                  |       | —                 |       | —                     |       | —                 |       |
| Other real  estate owned                               |       | 6,540                  |       | 3,797                      |       | 5,956                  |       |
| Total non-performing assets, net of SBA guarantee      |       | 89,657                 |       | 74,580                     |       | 57,787                 |       |
|                                                   |       |                   |       |                       |       |                   |       |
| Performing troubled debt restructurings                |       | 53,097                 |       | 64,612                     |       | 37,986                 |       |
|                                                   |       |                   |       |                       |       |                   |       |
| Non-performing loans as a percentage of total loans    |       | 3.39                   | %          | 2.92                       | %          | 2.16                   | %          |
|                                                        |            |                        |            |                            |            |                        |            |  |  |  |

 

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(1) During the periods ended June 30, 2010 and December 31,2009, and June 30, 2009 no interest income related to these loans wasincluded in interest income.

 

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The following is a summary ofcovered non-performing loans and OREO on the dates indicated:

 

**Non****-****performing Covered Loans andCovered OREO**

**(Dollarsin Thousands)**

 
| ** **                                                           | ** ** | **June 30, 2010** | ** ** | **December 31, 2009** | ** ** | **June 30, 2009** | ** ** |
|----------------------------------------------------------------------|------------|------------------------|------------|----------------------------|------------|------------------------|------------|
| **Covered Nonaccrual loans:****(1)**                                 |       |                   |       |                       |       |                   |       |
| Real estate secured                                                  |       | $                      | 17,232     |                       | $          | 15,555                 |       | $ | 4,458 |   |
| Commercial and industrial                                            |       | 1,599                  |       | 2,773                      |       | 12,098                 |       |
| Consumer                                                             |       | —                 |       | —                     |       | 115                    |       |
| Total                                                                |       | 18,831                 |       | 18,328                     |       | 16,671                 |       |
| **Loans 90 days or more past due and  still accruing:**              |       |                   |       |                       |       |                   |       |
| Real estate secured                                                  |       | —                 |       | —                     |       | —                 |       |
| Commercial and industrial                                            |       | —                 |       | —                     |       | —                 |       |
| Consumer                                                             |       | —                 |       | —                     |       | —                 |       |
| Total                                                                |       | —                 |       | —                     |       | —                 |       |
| Total non-performing loans                                           |       | 18,831                 |       | 18,328                     |       | 16,671                 |       |
| Repossessed vehicles                                                 |       | —                 |       | —                     |       | —                 |       |
| Other real estate owned                                              |       | 2,194                  |       | 500                        |       | 500                    |       |
| Total covered non-performing assets                                  |       | $                      | 21,025     |                       | $          | 18,828                 |       | $ | 17,171 |   |
|                                                                 |       |                   |       |                       |       |                   |       |
| Covered performing troubled debt restructurings                      |       | 3,006                  |       | 9,175                      |       | 16,641                 |       |
|                                                                 |       |                   |       |                       |       |                   |       |
| Covered non-performing loans as a percentage of  total covered loans |       | 7.99                   | %          | 7.07                       | %          | 5.83                   | %          |

 

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(1) During the periods ended June 30, 2010, December 31,2009, and June 30, 2009 no interest income related to these loans wasincluded in interest income.

 

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The following table providesinformation with respect to the components of our non-performing (non-covered) assets as of the dates indicated (the figures inthe table are net of the portion guaranteed by SBA, with the total amounts adjusted and reconciled for theSBA guarantee portion for the gross non-performing assets):

 

**Non****-****performing****Non-covered****Assets and Restructured Loans********(Dollarsin Thousands)**

 
| ** **                                                                   | ** ** | **June 30, 2010** | ** ** | **December 31, 2009** | ** ** | **June 30, 2009** | ** ** |
|------------------------------------------------------------------------------|------------|-----------------------------|------------|---------------------------------|------------|-----------------------------|------------|
| **Non-covered Nonaccrual loans:****(1)**                                     |       |                        |       |                            |       |                        |       |
| Real  estate secured                                                         |       | $                           | 61,200     |                            | $          | 48,017                      |       | $ | 32,153 |   |
| Commercial  and industrial                                                   |       | 3,051                       |       | 3,032                           |       | 2,789                       |       |
| Consumer                                                                     |       | 34                          |       | 70                              |       | 90                          |       |
| Total                                                                        |       | 64,285                      |       | 51,119                          |       | 35,032                      |       |
| **Loans 90 days or more past due and still accruing:**                       |       |                        |       |                            |       |                        |       |
| Real  estate secured                                                         |       | 1                           |       | 1,317                           |       | 111                         |       |
| Commercial  and industrial                                                   |       | —                      |       | —                          |       | 1                           |       |
| Consumer                                                                     |       | —                      |       | 19                              |       | 16                          |       |
| Total                                                                        |       | 1                           |       | 1,336                           |       | 128                         |       |
|                                                                         |       |                        |       |                            |       |                        |       |
| Total  non-performing loans                                                  |       | 64,286                      |       | 52,455                          |       | 35,160                      |       |
|                                                                         |       |                        |       |                            |       |                        |       |
| Repossessed  vehicles                                                        |       | —                      |       | —                          |       | —                      |       |
| Other real  estate owned                                                     |       | 4,346                       |       | 3,297                           |       | 5,456                       |       |
| Total non-covered non-performing assets, net of SBA  guarantee               |       | 68,632                      |       | 55,752                          |       | 40,616                      |       |
|                                                                         |       |                        |       |                            |       |                        |       |
| Guaranteed portion of non-performing SBA loans                               |       | 12,553                      |       | 13,421                          |       | 9,176                       |       |
| Total gross non-covered non-performing assets                                |       | $                           | 81,185     |                            | $          | 69,173                      |       | $ | 49,792 |   |
|                                                                         |       |                        |       |                            |       |                        |       |
| Non-covered performing troubled debt restructurings                          |       | 50,091                      |       | 55,437                          |       | 21,345                      |       |
|                                                                         |       |                        |       |                            |       |                        |       |
| Non-covered non-performing loans as a percentage of  totalnon-covered  loans |       | 2.90                        | %          | 2.42                            | %          | 1.66                        | %          |

 

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(1) During the periods ended June 30, 2010 and December 31,2009, and June 30, 2009 no interest income related to these loans wasincluded in interest income.

 

Loans are generally placed onnon-accrual status when they become 90 days past due, unless managementbelieves the loan is adequately collateralized and in the process ofcollection. The past due loans may or may not be adequately collateralized, butcollection efforts are continuously pursued. Loans may be restructured bymanagement when a borrower has experienced some changes in financial status,causing an inability to meet the original repayment terms, and where we believethe borrower will eventually overcome those circumstances and repay the loan infull.

 

As a result of the challengingeconomic conditions in the last few years, credit quality has continued todeteriorate in the past year. The general economic conditions in the UnitedStates as well as the local economies in which we do business have experienceda severe downturn in the housing sector and the transition to below-trend GDPgrowth has continued. The downward movement of the macroeconomic environmentaffected our borrowers’ strength and ourtotal NPLs, net of SBA guaranteed portion, increased to $83.1 million, or 3.39%of total loans at the end of the second quarter of 2010, compared to $70.8million, or 2.92% of total loans for the six months ended June 30, 2009. The$12.3 million increase of NPLs from December 31, 2009 to June 30, 2010 was dueto a $13.6 million increase in non-accrual loans, offset by a $1.3 milliondecrease in loans 90 days or more past due and still accruing. Non-performingloans were also decreased in the second quarter of 2010 as a result of loansale transactions in which both non-performing and delinquent loans totaling$48.0 million were sold.

 

Nointerest income related to non-accrual loans was included in net income for thequarter and six months ending June 30, 2010. Additional interest income ofapproximately $602,000 and $2.6 million would have been recorded during thequarter and six months ending June 30, 2010, respectively, if these loanshad been paid in accordance with their original terms and had been outstandingor, if not outstanding throughout the period, since origination.

 

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Management also believes that the reserves providedfor non-performing loans, together with the tangible collateral, were adequateas of June 30, 2010. See “Allowance for Losses on Loans and Loan Commitments”below for further discussion.

 

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

 

Based on the credit risk inherent in our lendingbusiness, we set aside allowances through charges to earnings. Such chargeswere not only made for the outstanding loan portfolio, but also for off-balancesheet loan commitments, such ascommitments to extend credit or letters of credit. Charges made for our outstandingloan portfolio were credited to the allowance for losses on loans, whereas charges related to loan commitments were creditedto the reserve for loancommitments, which is presented as a component of otherliabilities.

 

The allowance for losses on loans and loan commitments aremaintained at levels that are believed to be adequate by management to absorbestimated probable losses on loans inherent in the loan portfolio. The adequacyof our allowance is determined through periodic evaluations of the loanportfolio and other pertinent factors, which are inherently subjective becausethe process calls for various significant estimates and assumptions. Amongother factors, the estimates involve the amounts and timing of expected futurecash flows and fair value of collateral on impaired loans, estimated losses onloans based on historical loss experience, various qualitative factors, anduncertainties in estimating losses and inherent risks in the various creditportfolios, which may be subject to substantial change.

 

Total charge-offs for the three months ending June 30,2010 were $17.2 million compared with $7.5 million for the same period in 2009.Charge-offs for the six months ending June 30, 2010 were $23.0 million, anincrease from $9.9 million in charge-offs for the same period in 2009. For thefirst six months real estate loan charge-offs increased from $848,000 at June 30,2009 to $17.2 million at June 30, 2010 while commercial loan charge-offsdecreased from $8.6 million to $5.6 million during the same period. Charge-offsof consumer loans decreased from $457,000 at June 30, 2009 to $195,000 at June 30,2010.

 

On a quarterly basis, we utilize a classificationmigration model and individual loan review analysis as starting points fordetermining the adequacy of our allowance for losses on loans. Our lossmigration analysis tracks a certain number of quarters of loan losses historyto determine historical losses by classification category for each loan type,except certain loans (automobile, mortgage and credit scored based businessloans), which are analyzed as homogeneous loan pools. These calculated lossfactors are then applied to outstanding loan balances. Based on Company definedutilization rate of exposure for unused off-balance sheet loan commitments,such as letters of credit, we record a reserve for loan commitments.

 

The individual loan review analysis is the other partof the allowance allocation process, applying specific monitoring policies andprocedures in analyzing the existing loan portfolios. Further allowanceassignments are made based on general and specific economic conditions, as wellas performance trends within specific portfolio segments and individualconcentrations of credit.

 

Weincreased our allowancefor losses on loans to $91.4 million at June 30, 2010,representing an increase of 47.1%, or $29.3 million from $62.1 million at December 31, 2009. With the increase of our non-performing loans, wehave increased the ratio of allowance for losses on loans to totalgross loans to 3.72% at June 30, 2010, as compared with the 2.56%at the year end of 2009. Our total general reserve stands at $51.6 million andrepresents 2.1% of total gross loans at the end of June 30, 2010. Although management believes our allowance at June 30,2010 was adequate to absorb losses from any known and inherent risks in theportfolio at that time, no assurance can be given that economic conditionswhich adversely affect our service areas or other variables will not result infurther increased losses in the loan portfolio in the future.

 

Our allowance for losses onoff-balance sheet items increased to $3.5 million at June 30, 2010, ascompared to $2.5 million at December 31, 2009, an increase of $1.0million.

 

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The table below summarizes for the periods indicated,changes in the allowance for losses on loans arising from loans charged-off,recoveries on loans previously charged-off, additions to the allowance andcertain ratios related to the allowance for losses on loans and loancommitments:

 

**Allowancefor Loan Losses and Loan Commitments**

**(Dollarsin Thousands)**

 
| ** **                                                                 | ** ** | **For  the Three Months Ended June 30,** | ** **   | **For  the Six Months Ended June 30,** | ** ** |
|----------------------------------------------------------------------------|------------|-----------------------------------------------|--------------|---------------------------------------------|------------|
| ** **                                                                 | ** ** | **2010**                                      | ** **   | **2009**                                    | ** ** | **2010** | ** ** | **2009** | ** ** |
| **Allowance for loan losses:**                                             |       |                                          |         |                                        |       |   |   |   |   |
| Balances at beginning of period                                            |       | $                                             |  79,576 |                                        | $          |  34,156 |   | $ |  62,130 |   | $ |  29,437 |   |
|                                                                       |       |                                          |         |                                        |       |   |   |   |   |
| **Actual charge-offs:** *                                                  |       |                                          |         |                                        |       |   |   |   |   |
| Real estate secured                                                        |       | 12,864                                        |         | 176                                         |       | 17,237 |   | 848 |   |
| Commercial and industrial                                                  |       | 4,214                                         |         | 6,940                                       |       | 5,554 |   | 8,570 |   |
| Consumer                                                                   |       | 80                                            |         | 356                                         |       | 195 |   | 457 |   |
| Total charge-offs                                                          |       | 17,158                                        |         | 7,472                                       |       | 22,986 |   | 9,875 |   |
|                                                                       |       |                                          |         |                                        |       |   |   |   |   |
| **Recoveries on loans previously charged off:**                            |       |                                          |         |                                        |       |   |   |   |   |
| Real estate secured                                                        |       | 13                                            |         | 1                                           |       | 24 |   | 1 |   |
| Commercial and industrial                                                  |       | 795                                           |         | 237                                         |       | 1,263 |   | 306 |   |
| Consumer                                                                   |       | 64                                            |         | 24                                          |       | 98 |   | 68 |   |
| Total recoveries                                                           |       | 872                                           |         | 262                                         |       | 1,385 |   | 375 |   |
|                                                                       |       |                                          |         |                                        |       |   |   |   |   |
| Net  loan charge-offs                                                      |       | 16,286                                        |         | 7,210                                       |       | 21,601 |   | 9,500 |   |
|                                                                       |       |                                          |         |                                        |       |   |   |   |   |
| FDIC  Indemnification                                                      |       | (3,140                                        | )            | —                                      |       | 2,691 |   | — |   |
| Provision  for losses on loan and loan commitments                         |       | 31,269                                        |         | 11,812                                      |       | 48,199 |   | 18,821 |   |
| Balances  at end of year                                                   |       | $                                             |  91,419 |                                        | $          |  38,758 |   | $ |  91,419 |   | $ |  38,758 |   |
| **Allowance for loan commitments:**                                        |       |                                          |         |                                        |       |   |   |   |   |
| Balances at beginning of period                                            |       | $                                             |  2,585  |                                        | $          |  933 |   | $ |  2,515 |   | $ |  1,243 |   |
| Provision  (credit) for losses on loan commitments                         |       | 931                                           |         | 288                                         |       | 1,001 |   | (22 | ) |
| Balance  at end of period                                                  |       | $                                             |  3,516  |                                        | $          |  1,221 |   | $ |  3,516 |   | $ |  1,221 |   |
|                                                                       |       |                                          |         |                                        |       |   |   |   |   |
| **Ratios**:                                                                |       |                                          |         |                                        |       |   |   |   |   |
| Net loan charge-offs to  average total loans                               |       | 0.69                                          | %            | 0.34                                        | %          | 0.91 | % | 0.46 | % |
| Allowance for loan losses to  total loans at end of period                 |       | 3.72                                          | %            | 1.62                                        | %          | 3.72 | % | 1.62 | % |
| Net loan charge-offs to  allowance for loan losses at end of period        |       | 17.81                                         | %            | 18.60                                       | %          | 23.63 | % | 24.51 | % |
| Net loan charge-offs to  provision for losses on loans andloan commitments |       | 50.58                                         | %            | 59.59                                       | %          | 43.90 | % | 50.53 | % |

 

----

*     Charge-off amount for thethree months ended June 30, 2010 includes net charge-offs of covered loansamounting to $969,000, which represents gross covered loan charge-offs of $3.7million less FDIC receivable portion of $2.7 million and charge-off amount forthe six months ended June 30, 2010 includes net charge-offs of coveredloans amounting to $1.0 million, which represents gross covered loancharge-offs of $7.7 million less FDIC receivable portion of $6.7 million.

 

**Contractual Obligations**

 

The following table represents our aggregatecontractual obligations to make future payments (principal and interest) asof June 30, 2010:

 
| **(Dollars in Thousands)**     | ** ** | **One Year********or Less** | ** **       | **Over One  Year  To Three Years** | ** ** | **Over  Three Years  To Five Years** | ** ** | **Over Five  Years** | ** **   | **Indeterminate  Maturity** | ** ** | **Total**    | ** ** |
|--------------------------------|------------|-----------------------------|------------------|------------------------------------|------------|--------------------------------------|------------|----------------------|--------------|-----------------------------|------------|--------------|------------|
| FHLB advances                  |       | $                           |  50,569     |                               | $          |  70,792                         |       | $                    |  — |                        | $          |  — |       | $ |  — |   | $ |  121,361 |   |
| Junior subordinated debentures |       | 983                         |             | 10,831                             |       | —                               |       | 77,321               |         | —                      |       | 89,135       |       |
| Operating leases               |       | 3,496                       |             | 6,077                              |       | 5,218                                |       | 5,606                |         | —                      |       | 20,397       |       |
| Unrecognized  tax benefit      |       | —                      |             | —                             |       | —                               |       | —               |         | 398                         |       | 398          |       |
| Time deposits                  |       | 1,418,343                   |             | 63,568                             |       | 22                                   |       | 61                   |         | —                      |       | 1,481,994    |       |
| Total                          |       | $                           |  11,473,391 |                               | $          |  151,268                        |       | $                    |  5,240  |                        | $          |  82,988 |       | $ |  398 |   | $ |  1,713,285 |   |

 

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**Off-Balance Sheet Arrangements**

 

During the ordinary course of business, we providevarious forms of credit lines to meet the financing needs of ourcustomers.  These commitments, whichrepresent a credit risk to us, are not shown or stated in any form on ourbalance sheets.

 

As of June 30, 2010 and December 31, 2009, we had commitmentsto extend credit of $270.8 million and $238.2 million, respectively. Obligations under standby letters of credit were $9.3million and $13.0 million at June 30, 2010 and December 31, 2009, respectively, andour obligations under commercial letters of credit were $10.9million and $10.2 million at such dates, respectively. Commitments to fund Low Income Housing Tax Credit investments were $14.2million at the end of the second quarter of 2010 compared to $11.5 million atthe end of the fourth quarter of 2009.

 

In the normal course of business, we are involved invarious legal claims. We have reviewed with counsel all legal claims against usand have taken into consideration the views of counsel as to the outcome of theclaims.  In our opinion, the finaldisposition of all such claims will not have a material adverse effect on ourfinancial position and results of operations.

 

**Deposits and Other Sources of Funds**

 

Deposits are our primary source of funds.  Total deposits increased to $2.90 billion at June 30,2010, compared with $2.83billion at December 31, 2009.

 

Total non-time deposits at June 30, 2010increased to $1.44 billion in the first six months of 2010, from $1.39 billionat December 31, 2009, while time deposits increased to $1.46 billion at June 30,2010 from $1.44 billion at December 31, 2009.

 

The increase in deposits was primarily attributable toour continued marketing campaign aimed at raising core deposits. Other timedeposits or time deposits under $100,000 increased to $712.7 million at June 30,2010 compared to $643.7 million at December 31, 2009.

 

The average rate that we paid on time deposits indenominations of $100,000 or more for the second quarter of 2010decreased to 1.47% from 2.72% in the same period of the prior year. In order tokeep the interest expense down, we plan to closely monitor interest rate trendsand changes, and our time deposit rates, in an effort to maximize our netinterest margin and profitability.  Totalcost of deposits also decreased from 2.35% for the quarter ending June 30,2009 to 1.43% for the quarter ending June 30, 2010.

 

The following table summarizes the distribution ofaverage daily deposits and the average daily rates paid for the quartersindicated:

 

**AverageDeposits**

**(Dollarsin Thousands)**

** **
| ** **                                          | ** ** | **For the  Three Months Ended,** | ** ** |
|-----------------------------------------------------|------------|----------------------------------|------------|
| ** **                                          | ** ** | **June 30,  2010**          | ** ** | **December 31,  2009** | ** ** | **June 30,  2009** | ** ** |
| ** **                                          | ** ** | **Average********Balance**       | ** ** | **Average********Rate** | ** ** | **Average********Balance** | ** ** | **Average********Rate** | ** ** | **Average********Balance** | ** ** | **Average********Rate** | ** ** |
|                                                |       |                             |       |   |   |   |   |   |   |   |   |   |   |
| Demand,  non-interest-bearing                       |       | $                                | 415,761    | ** ** | ** ** |   | $ | 388,549 | ** ** | ** ** |   | $ | 292,778 | ** ** | ** ** | ** ** |
| Money market                                        |       | 972,096                          |       | 1.46 | % | 853,770 |   | 2.18 | % | 436,066 |   | 2.54 | % |
| Super NOW                                           |       | 22,019                           |       | 0.47 | % | 21,971 |   | 0.65 | % | 19,142 |   | 0.95 | % |
| Savings                                             |       | 75,677                           |       | 3.26 | % | 68,373 |   | 3.33 | % | 48,511 |   | 3.66 | % |
| Time deposits in denominations  of $100,000 or more |       | 751,094                          |       | 1.47 | % | 862,805 |   | 1.91 | % | 994,514 |   | 2.72 | % |
| Other time deposits                                 |       | 702,866                          |       | 2.01 | % | 592,336 |   | 2.27 | % | 210,020 |   | 3.35 | % |
| Total deposits                                      |       | $                                | 2,939,513  |   | 1.43 | % | $ | 2,787,804 |   | 1.83 | % | $ | 2,001,031 |   | 2.35 | % |

 

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The scheduled maturities of our time deposits indenominations of $100,000 or greater at June 30, 2010were as follows:

 

**Maturitiesof Time Deposits of $100,000 or More**

**(Dollarsin Thousands)**

 
| Three  months or less                  |   | $       | 391,380 |   |
|----------------------------------------|--------|---------|---------|--------|
| Over  three months through six months  |   | 129,403 |    |
| Over  six months through twelve months |   | 176,483 |    |
| Over  twelve months                    |   | 55,390  |    |
| Total                                  |   | $       | 752,656 |   |

 

A number of clients carry deposit balances of morethan 1% of our total deposits, but the California State Treasury was the onlydepositor that had a deposit balance representing more than 5% of our totaldeposits at June 30, 2010 and December 31, 2009.

 

In addition to our regular customer base, we alsoaccept brokered deposits on a selective basis at reasonable interest rates toaugment deposit growth.  In the first six months of 2010, despite theongoing weakness in the economy and stiff competition for customer depositsamong banks within the markets where we do business, we were able to increasenon-interest bearing demand deposits to $427.8 million at June 30, 2010from $385.2 million at December 31, 2009. We expect that interest rateswill trend upward when the Federal Reserve Board starts increasing the federalfunds rate. To improve our net interest margin as well as to maintainflexibility in our cost of funds, we will constantly monitor our deposit mix tominimize our cost of funds.

 

Although deposits are theprimary source of funds for our lending and investment activities and forgeneral business purposes, we may obtainadvances from the FHLB as an alternative to retail deposit funds.  We have historically utilized borrowings fromthe FHLB in order to take advantage of their flexibility and comparatively lowcost.  Due to the ongoing credit crisisand stiff competition for customer deposits among banks, we have increased FHLBborrowing as an alternative to fund our growing loan portfolio. See “Liquidity Management” below fordetails relating to the FHLB borrowings program.

 

The following table is a summary of FHLB borrowingsfor the quarters indicated:

 
| **(Dollars in Thousands)**                   | ** ** | **June 30,  2010** | ** ** | **December 31,  2009** | ** ** |
|----------------------------------------------|------------|-------------------------|------------|-----------------------------|------------|
|                                         |       |                    |       |                        |       |
| Balance  at quarter end                      |       | $                       | 118,000    |                        | $          | 232,000 |   |
| Average  balance during the quarter          |       | $                       | 118,000    |                        | $          | 237,341 |   |
| Maximum  amount outstanding at any month-end |       | $                       | 118,000    |                        | $          | 242,000 |   |
| Average  interest rate during the quarter    |       | 2.54                    | %          | 3.05                        | %          |
| Average  interest rate at quarter-end        |       | 2.54                    | %          | 2.22                        | %          |

 

**Asset/Liability Management**

 

We seek to ascertain optimum and stable utilization ofavailable assets and liabilities as a vehicle to attain our overall businessplans and objectives.  In this regard, wefocus on measurement and control of liquidity risk, interest rate risk andmarket risk, capital adequacy, operation risk and credit risk.  See further discussion on these risks in the “RiskFactors” section of our Annual Report on Form 10-K for the year ended December 31,2009.  Information concerning interestrate risk management is set forth under “Item 3 - Quantitative and QualitativeDisclosures about Market Risk.”

 

**Liquidity Management**

 

Maintenance of adequate liquidity requires thatsufficient resources be available at all times to meet our cash flowrequirements.  Liquidity in a bankinginstitution is required primarily to provide for deposit withdrawals and thecredit needs of its customers and to take advantage of investment opportunitiesas they arise.  Liquidity managementinvolves our ability to convert assets into cash or cash equivalents withoutincurring significant loss, and to raise cash or maintain funds without incurringexcessive additional cost.  For thispurpose, we maintain a portion of our funds in cash and cash equivalents,deposits in other financial institutions and loans and securities available forsale.  Our liquid assets at June 30,2010 and December 31, 2009 totaledapproximately $882.2 million and $923.4million, respectively.  Our liquiditylevels measured as the percentage of liquid assets to total assets were 25.7%and 26.9% at June 30, 2010 and December 31, 2009, respectively.

 

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Our primary sources of liquidityare derived from our core operating activities of accepting customer deposits.This funding source is augmented by payments of principal and interest onloans, the routine liquidation of securities from the available-for-saleportfolio and securitizations of loans. In addition, government programs, suchas TLGP, may influence deposit behavior. Primary use of funds includewithdrawal of and interest payments on deposits, originations and purchases ofloans, purchases of investment securities, and payment of operating expenses.

 

As a secondary source of liquidity, we accept brokereddeposits, federal funds facilities, repurchase agreement facilities, and obtainadvances from the FHLB to supplement our supply of lendable funds and to meetdeposit withdrawal requirements. Advances from the FHLB are typically secured by our loans, securitiesand stock issued by the FHLB.  Advancesare made pursuant to several different programs.  Each credit program has its own interest rateand range of maturities.  Depending onthe program, limitations on the amount of advances are based either on a fixedpercentage of an institution’s net worth or on the FHLB’s assessment of theinstitution’s creditworthiness. As of June 30, 2010, our borrowingcapacity from the FHLB was about $787.8 million and our outstanding balance was$118.0 million, or approximately 15.0% of our borrowingcapacity**.**

 

**Capital Resources and Capital Adequacy Requirements**

 

Historically, our primary source of capital has beeninternally generated operating income through retained earnings.  In order to ensure adequate levels ofcapital, we conduct ongoing assessments of projected sources and uses ofcapital in conjunction with projected increases in assets and level ofrisks.  We have considered, and we willcontinue to consider, additional sources of capital as the need arises, whetherthrough the issuance of additional equity, debt or hybrid securities. In December of2008, we received a Troubled Assets Relief Program or “TARP”  investment from the U.S. Treasury in the amount of $62.2 million.

 

We are subject to various regulatory capitalrequirements administered by federal banking agencies. Under capital adequacyguidelines and the regulatory framework for prompt corrective action, we mustmeet specific capital guidelines that rely on quantitative measures of ourassets, liabilities and certain off-balance-sheet items as calculated under regulatoryaccounting practices.  Failure to meet minimum capitalrequirements can trigger regulatory actions under the prompt corrective action rules thatcould have a material adverse effect on our financial condition andoperations.  Prompt corrective action mayinclude regulatory enforcement actions that restrict dividend payments, requirethe adoption of remedial measures to increase capital, terminate FDIC depositinsurance, and mandate the appointment of a conservator or receiver in severecases.  In addition, failure to maintaina well-capitalized status may adversely affect the evaluation of regulatoryapplications 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 andprospective clients.  The aforementionedregulatory consequences for failing to maintain adequate ratios of Tier 1 andTier 2 capital could have a material adverse effect on our financial conditionand results of operations.  Our capital amounts and classification are also subject to qualitativejudgments by regulators about components, risk weightings, and otherfactors.  See Part I, Item 1 “Descriptionof Business — Regulation and Supervision — Capital Adequacy Requirements” inour Annual Report on Form 10-K for the year ended December 31, 2009 for additionalinformation regarding regulatory capital requirements.

 

As of June 30, 2010, we were qualified as a “wellcapitalized institution” under the regulatory framework for prompt correctiveaction.  The following table presents theregulatory standards for well-capitalized institutions, compared to capitalratios as of the dates specified for the Company and the Bank:

 

**Wilshire Bancorp, Inc.**

 
| ** **                              | ** ** | **Regulatory********Adequately-  Capitalized** | ** ** | **Regulatory********Well-********Capitalized** | ** ** | **Actual  ratios for the Company as of:** | ** ** |
|-----------------------------------------|------------|------------------------------------------------|------------|------------------------------------------------|------------|-------------------------------------------|------------|
| ** **                              | ** ** | **Standards**                                  | ** ** | **Standards**                                  | ** ** | **June 30,  2010**                   | ** ** | **December 31,  200****9** | ** ** | **June 30,  2009** | ** ** |
|                                    |       |                                           |       |                                           |       |                                      |       |   |   |   |   |
| Total  capital to risk-weighted assets  |       | 8                                              | %          | 10                                             | %          | 15.17                                     | %          | 15.81 | % | 14.75 | % |
| Tier  I capital to risk-weighted assets |       | 4                                              | %          | 6                                              | %          | 13.72                                     | %          | 14.37 | % | 13.26 | % |
| Tier  I capital to average assets       |       | 4                                              | %          | 5                                              | %          | 9.51                                      | %          | 9.77 | % | 12.30 | % |

 

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**Wilshire State Bank**

 
| ** **                              | ** ** | **Regulatory********Adequately-  Capitalized** | ** ** | **Regulatory********Well-********Capitalized** | ** ** | **Actual  ratios for the Bank as of:** | ** ** |
|-----------------------------------------|------------|------------------------------------------------|------------|------------------------------------------------|------------|----------------------------------------|------------|
| ** **                              | ** ** | **Standards**                                  | ** ** | **Standards**                                  | ** ** | **June 30,  2010**                | ** ** | **December 31,  200****9** | ** ** | **June 30,  2009** | ** ** |
|                                    |       |                                           |       |                                           |       |                                   |       |   |   |   |   |
| Total  capital to risk-weighted assets  |       | 8                                              | %          | 10                                             | %          | 14.75                                  | %          | 15.73 | % | 14.46 | % |
| Tier  I capital to risk-weighted assets |       | 4                                              | %          | 6                                              | %          | 13.30                                  | %          | 14.29 | % | 12.97 | % |
| Tier  I capital to average assets       |       | 4                                              | %          | 5                                              | %          | 9.23                                   | %          | 9.71 | % | 12.13 | % |

 

For the purposes of our regulatory capital ratiocomputation, our equity capital includes the $62.2 million Series APreferred Stock issued by the Company to the U.S. Treasury as part of ourparticipation of the TARP Capital Purchase Program. As of June 30, 2010,the Company’s total Tier 1 capital (which includes our equity capital, plusjunior subordinated debentures, less goodwill and intangibles) was $328.7million, as compared with $331.4 million as of December 31, 2009. For theBank level, Tier 1 capital was $318.7 million as of June 30, 2010,compared with $329.3 million as of December 31, 2009.

 

As a result of weakness in the economy theCompany has experienced elevated credit costs which have in turn had an impacton income and overall capital adequacy. Although the Company’s capital levels currently remain at well above theminimum for a “well capitalized” institution, the Board of Directors ofWilshire Bancorp approved the temporary suspension of the Company’s commonstock dividend in the second quarter of 2010. The suspension in common stock dividend is a cautionary step in theevent that credit costs remain elevated in the near future.

 

**Item 3.****                                                          ****Quantitative and QualitativeDisclosures****a****bout MarketRisk**

 

Market risk is the risk of loss from adverse changesin market prices and rates.  Our marketrisk arises primarily from interest rate risk inherent in lending, investingand deposit taking activities.  Ourprofitability is affected by fluctuations in interest rates. A sudden andsubstantial change in interest rates may adversely impact our earnings to theextent that the interest rates borne by assets and liabilities do not change atthe same speed, to the same extent or on the same basis. We evaluate marketrisk pursuant to policies reviewed and approved annually by our Board ofDirectors.  The Company’s Board delegatesresponsibility for market risk management to the Asset/Liability ManagementCommittee, which reports monthly to the Board on activities related to marketrisk management.  As part of themanagement of our market risk, Asset/Liability Management Committee may directchanges in the mix of assets and liabilities. To that end, we actively monitor and manage interest rate riskexposures.

 

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

 

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

 

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

 

The change in net interest income may not alwaysfollow the general expectations of an “asset-sensitive” or a “liability-sensitive”balance sheet during periods of changing interest rates.  This possibility results from interest ratesearned or paid changing by differing increments and at different time intervalsfor each type of interest-sensitive asset and liability.  The interest rate gaps reported in the tablesarise when assets are funded with liabilities having different repricingintervals.  Because these gaps areactively managed and change daily as adjustments are made in interest rateviews and market outlook, positions at the end of any period may not reflectour interest rate sensitivity in subsequent periods.  We attempt to balance longer-term economicviews against prospects for short-term interest rate changes.

 

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Although the interest ratesensitivity gap is a useful measurement and contributes to effective asset andliability management, it is difficult to predict the effect of changinginterest rates based solely on that measure. As a result, the Asset/Liability Management Committee also regularlyuses simulation modeling as a tool to measure the sensitivity of earnings andnet portfolio value, or NPV, to interest rate changes.  The NPV is defined as the net present valueof an institution’s existing assets, liabilities and off-balance sheet instruments.  The simulation model captures all assets,liabilities and off-balance sheet financial instruments and accounts forsignificant 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 onsecurities, balance sheet growth assumptions and changes in rate relationshipsas various rate indices react differently to market rates.

 

Although the simulation measuresthe volatility of net interest income and net portfolio value under immediateincrease or decrease of market interest rate scenarios in 100 basis pointincrements, our main concern is the negative effect of a reasonably-possibleworst scenario.  The Asset/LiabilityManagement Committee policy prescribes that for the worst possible rate-change scenario the possible reduction of net interestincome and NPV should not exceed 20% of the base net interest income and 25% ofthe base NPV, respectively.

 

In general, based upon ourcurrent mix of deposits, loans and investments, decrease in interest rateswould result an increase in our net interest margin and NPV. An increase ininterest rates would be expected to have opposite effect. However, given in therecord low interest rate environment, either an increase or decrease ininterest rates will result in higher net interest margin, while either anincrease or decrease in interest rates will lower NPV as shown in oursimulation measures below.

 

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

 

The following table sets forth the interest ratesensitivity of our interest-earning assets and interest-bearing liabilities asof June 30, 2010 using the interest rate sensitivity gap ratio.  For purposes of the following table, an assetor liability is considered rate-sensitive within a specified period, if it canbe repriced or if it matures within that timeframe. Actual payment patterns maydiffer from contractual payment patterns:

 

**InterestRate Sensitivity Analysis**

**(Dollarsin Thousands)**

 
| ** **                                                              | ** ** | **At  June 30, 2010**              | ** ** |
|-------------------------------------------------------------------------|------------|-----------------------------------------|------------|
| ** **                                                              | ** ** | **Amounts Subject to Repricing Within** | ** ** | ** ** | ** ** |
| ** **                                                              | ** ** | **0-3 months**                          | ** ** | **3-12  months** | ** ** | **1-5 years** | ** ** | **After 5  years** | ** ** | **Total** | ** ** |
| Interest-earning  assets:                                               | ** ** | ** **                              | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Gross  loans                                                            |       | $                                       | 1,411,893  |   | $ | 223,481 |   | $ | 805,344 |   | $ | 19,311 |   | $ | 2,460,029 |   |
| Investment  securities                                                  |       | 5,163                                   |       | 8,075 |   | 239,440 |   | 253,799 |   | 506,477 |   |
| Federal  funds sold and cash equivalents                                |       | 224,005                                 |       | — |   | — |   | — |   | 224,005 |   |
| Interest-earning  deposits                                              |       | —                                  |       | — |   | — |   | — |   | — |   |
| Total                                                                   |       | $                                       | 1,641,061  |   | $ | 231,556 |   | $ | 1,044,784 |   | $ | 273,110 |   | $ | 3,190,511 |   |
|                                                                    |       |                                    |       |   |   |   |   |   |   |   |   |
| Interest-bearing  liabilities:                                          |       |                                    |       |   |   |   |   |   |   |   |   |
| Savings  deposits                                                       |       | $                                       | 77,011     |   | $ | — |   | $ | — |   | $ | — |   | $ | 77,011 |   |
| Time  deposits of $100,000 or more                                      |       | 391,379                                 |       | 305,886 |   | 55,390 |   | — |   | 752,656 |   |
| Other  time deposits                                                    |       | 226,432                                 |       | 479,229 |   | 7,008 |   | 30 |   | 712,699 |   |
| Other  interest-bearing deposits                                        |       | 931,311                                 |       | — |   | — |   | — |   | 931,311 |   |
| FHLB  advances and other borrowings                                     |       | 27,306                                  |       | 48,000 |   | 70,000 |   | — |   | 145,306 |   |
| Junior  Subordinated Debenture                                          |       | 71,857                                  |       | 15,464 |   | — |   | — |   | 87,321 |   |
| Total                                                                   |       | 1,725,296                               |       | 848,579 |   | 132,398 |   | $ | 30 |   | $ | 2,706,304 |   |
|                                                                    |       |                                    |       |   |   |   |   |   |   |   |   |
| Interest  rate sensitivity gap                                          |       | $                                       | (84,235    | ) | $ | (617,023 | ) | $ | 912,386 |   | $ | 273,080 |   | $ | 484,208 |   |
| Cumulative  interest rate sensitivity gap                               |       | $                                       | (84,235    | ) | $ | (701,258 | ) | $ | 211,128 |   | $ | 484,208 |   |   |   |
| Cumulative  interest rate sensitivity gap ratio (based on total assets) |       | -2.45                                   | %          | -20.40 | % | 6.14 | % | 14.09 | % |   |   |

 

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The following table sets forth our estimated netinterest income over a 12-month period and NPV based on the indicated changesin market interest rates as of June 30, 2010.  All assets presented in this table areheld-to-maturity or available-for-sale. At June 30, 2010, we had no trading investment securities:

 
| **Change********(in basis points)** | ** ** | **Net Interest Income********(next  twelve months)********(Dollars in Thousands)** | ** ** | **% Change** | ** ** | **NPV********(Dollars in Thousands)** | ** ** | **% Change** | ** ** |
|-------------------------------------|------------|------------------------------------------------------------------------------------|------------|--------------|------------|---------------------------------------|------------|--------------|------------|
| +200                                |       | $                                                                                  | 122,372    |         | -1.73      | %                                     | $          | 332,342      |       | -5.04 | % |
| +100                                |       | 123,379                                                                            |       | -0.92        | %          | 351,543                               |       | 0.45         | %          |
| 0                                   |       | 124,524                                                                            |       | —       |       | 349,973                               |       | —       |       |
| -100                                |       | 126,999                                                                            |       | 1.99         | %          | 323,086                               |       | -7.68        | %          |
| -200                                |       | 129,271                                                                            |       | 3.81         | %          | 298,966                               |       | -14.57       | %          |
|                                     |            |                                                                                    |            |              |            |                                       |            |              |            |  |  |

 

Our strategies in protectingboth net interest income and economic value of equity from significantmovements in interest rates involve restructuring our investment portfolio andusing FHLB advances.  Although our policyalso permitsus to purchase rate caps and floors and interest rateswaps, we are not currently engaged in any of those types of transactions.

 

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

 

As of June 30, 2010, we carried out anevaluation, under the supervision and with the participation of our management,including our chief executive officer and chief financial officer, regarding theeffectiveness of the design and operation of our “disclosure controls andprocedures,” as defined under Exchange Act Rules 13a-15(e) and15d-15(e).

 

Based on this evaluation, our chief executive officerand chief financial officer concluded that, as of June 30, 2010, suchdisclosure controls and procedures were effective to ensure that informationrequired to be disclosed by us in the reports we file or submit under theExchange Act is recorded, processed, summarized and reported within the timeperiods specified in the rules and forms of the SEC, and accumulated andcommunicated to our management, including our chief executive officer and chieffinancial officer, as appropriate to allow timely decisions regarding requireddisclosure.

 

In designing and evaluating the disclosure controlsand procedures, our management recognized that any controls and procedures, nomatter how well designed and operated, can only provide reasonable assurance inachieving the desired control objectives and in reaching a reasonable level ofassurance our management necessarily was required to apply its judgment inevaluating the cost-benefit relationship of possible controls and procedures.

 

There were no changes in our internal controls overfinancial reporting during the quarter ended June 30, 2010 that materiallyaffected, or are reasonably likely to materially affect, our internal controlsover financial reporting.

 

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**Part II. OTHER INFORMATION**

 

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

 

In the normal course of business, we are involved invarious legal claims. We have reviewed all legal claims against us with counseland have taken into consideration the views of such counsel as to the outcomeof the claims. We do not believe the final disposition of all such claims willhave a material adverse effect on our financial position or results of operations.

 

**Item 1A. Risk Factors**

 

Certainrisks described below update the risk factors in Part 1, Item 1A.Risk Factors in our Annual Report on Form 10-K for the year endedDecember 31, 2009. The risks and uncertainties described below are not theonly ones we face. Additional risks and uncertainties may also impair ourbusiness operations. This report is qualified in its entirety by these riskfactors.

 

*Recentlyenacted regulatory reforms could have a significant impact on our business,financial condition and results of operations.*

 

On July 21, 2010,President Obama signed into law the Dodd-Frank Wall Street Reform andConsumer Protection Act (the “Dodd-Frank Act”). Although certainprovisions of the Dodd-Frank Act will not apply to banking organizationswith less than $10 billion of assets, such as the Company and the Bank, the changesresulting from the legislation will impact our business.  The Dodd-Frank Act will permit us to payinterest on business checking accounts, which could (i) cause the FederalReserve Board to amend its Regulation D establishing reserve requirements for depositoryinstitutions, and (ii) significantly reduce or eliminate the need fordepository institutions to offer sweep account products.  Additionally, effective July 6, 2010,regulatory changes in overdraft and interchange fee restrictions may reduce ournon-interest income. We are currently in the process of evaluating thisregulatory change, but have not fully quantified the full impact.  Compliance with the Dodd-Frank Act’sprovisions may curtail our revenue opportunities, increase our operating costs,requires us to hold higher levels of regulatory capital and/or liquidity orotherwise adversely affect our business or financial results in thefuture.  Our management is activelyreviewing the provisions of the Dodd-Frank Act and assessing its probableimpact on our business, financial condition, and result of operations. However,because many aspects of the Dodd-Frank Act are subject to futurerulemaking, no assurance can be given as to the ultimate effect that theDodd-Frank Act or any of its provisions may have on the Company, the financialservices industry or the nation’s economy.

 

*Increasesin the level of non-performing loans could adversely affect our business,profitability, and financial condition.*

 

Increase in non-performing loans could have an adverseeffect on our earnings as a result of related increases in our provisions forloan losses, charge-offs, and other losses related to non-performing loans. Theincrease in nonperforming loans and resulting decline in earnings could depleteour capital, leaving the Company undercapitalized. As a result of downturns inthe economy in recent years, our non-performing loans have increased from $51.8million at June 30, 2009 and $70.8 million at December 31, 2009 to$83.1 million at June 30, 2010.

 

**Item 2.****          ****Unregistered Sales of EquitySecurities and Use of Proceeds**

 

None.

 

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

 

None.

 

**Item 4.****          ****(Removed & Reserved)**

 

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

 

None.

 

**Item 6.    Exhibits**

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

 

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**SIGNATURES**

 

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

 
|                      | WILSHIRE BANCORP, INC. |
|---------------------------|-----------------------------|
|                      |                        |   |
|                      |                        |   |
| Date: August 9, 2010 | By:                         | /s/  Alex Ko |
|                      |                        | Alex Ko |
|                      |                        | Chief Financial Officer |
|                      |                        | (Principal Financial and  Accounting Officer) |

 

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**Exhibit Index**

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

 

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