**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**









**FORM
      10-Q**


**(Mark
      One)**




x
            **Quarterly
                report pursuant to Section 13 or 15(d) of the Securities Exchange
                Act of
                1934**




**For
      the quarterly period ended September 30, 2006.**


**OR**




o
            **Transition
                report pursuant to Section 13 or 15(d) of the Securities Exchange
                Act of
                1934**




**For
      the transition period from
    ______________   
to   ______________**




**Commission
      File Number 000-50923**







**WILSHIRE
      BANCORP, INC.**


(Exact
      name of registrant as specified in its charter)




**California**
            **20-0711133**State
                or other jurisdiction of incorporation or organization
            I.R.S.
                Employer Identification Number**3200
                Wilshire Blvd.****Los
                Angeles, California**
            **90010**Address
                of principal executive offices
            Zip
                Code**(213)
                387-3200**Registrant’s
                telephone number, including area
                code




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




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





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




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


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




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




The
      number of shares of Common Stock of the registrant outstanding as of October
      31,
      2006 was 29,170,350.





**FORM
      10-Q**


**INDEX**


**WILSHIRE
      BANCORP, INC.**









Part
                I.
            FINANCIAL
                INFORMATION
            
            1Item
                1.
            Financial
                Statements
            
            1Item
                2.
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            
            12Item
                3.
            Quantitative
                and Qualitative Disclosures About Market Risk
            
            38Item
                4.
            Controls
                and Procedures
            
            39Part
                II.
            OTHER
                INFORMATION
            
            41Item
                1.
            Legal
                Proceedings
            
            41Item
                2.
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            
            41Item
                3.
            Defaults
                Upon Senior Securities
            
            41Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            
            41Item
                5.
            Other
                Information
            
            41Item
                6.
            Exhibits
            
            42SIGNATURES
            
            
            43







i




**Part
        I.** **** **FINANCIAL
        INFORMATION**
  Item
        1. **Financial
        Statements**




**WILSHIRE
      BANCORP, INC.**


**CONDENSED
      CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION**


**(UNAUDITED)**




**September
                  30, 2006**
              
              **December
                  31, 2005****ASSETS**Cash
                  and due from banks
              
              $
              70,831,563
              
              $
              68,205,078Federal
                  funds sold and other cash equivalents
              
              
              65,003,153
              
              
              126,002,978Cash
                  and cash equivalents
              
              
              135,834,716
              
              
              194,208,056Interest-bearing
                  deposits in other financial institutions
              
              
              500,000
              
              
              500,000Securities
                  available for sale - at fair value (amortized cost of $183,622,667
                  and$140,428,100
                  at September 30, 2006 and December 31, 2005, respectively)
              
              
              182,418,409
              
              
              138,650,270Securities
                  held to maturity - at amortized cost (fair value of $20,381,525
                  and$22,510,961
                  at September 30, 2006 and December 31, 2005, respectively)
              
              
              20,630,371
              
              
              22,860,200Interest
                  only strip - at fair value (amortized cost of $1,395,899and
                  $1,493,344 at September 30, 2006 and December 31, 2005,
                  respectively)
              
              
              1,261,761
              
              
              1,501,866Loans
                  held for sale, at the lower of cost or market
              
              
              3,427,905
              
              
              21,796,677Loans
                  receivable, net of allowance for loan losses of $18,417,199 and
                  $13,999,302at
                  September 30, 2006 and December 31, 2005, respectively
              
              
              1,488,037,607
              
              
              1,226,763,867Bank
                  premises and equipment, net
              
              
              10,217,269
              
              
              8,955,872Federal
                  Home Loan Bank stock, at cost
              
              
              7,438,300
              
              
              6,181,700Accrued
                  interest receivable
              
              
              9,994,223
              
              
              6,891,670Other
                  real estate owned - net
              
              
              241,500
              
              
              294,400Deferred
                  income taxes - net
              
              
              10,032,655
              
              
              8,114,343Servicing
                  asset
              
              
              5,237,036
              
              
              4,682,848Due
                  from customers on acceptances
              
              
              3,012,849
              
              
              3,220,846Cash
                  surrender value of life insurance
              
              
              15,536,151
              
              
              15,098,770Goodwill
              
              
              6,674,772
              
              
              -Core
                  deposit intangible
              
              
              1,575,901
              
              
              -Favorable
                  lease intangible
              
              
              383,541
              
              
              -Other
                  assets
              
              
              7,457,582
              
              
              6,552,033TOTAL
              
              $
              1,909,912,548
              
              $
              1,666,273,418**LIABILITIES
                  AND SHAREHOLDERS’ EQUITY**LIABILITIES:Deposits
                  :Noninterest-bearing
              
              $
              315,445,469
              
              $
              292,170,888Interest-bearing:Savings
              
              
              28,537,500
              
              
              19,585,805Time
                  deposits of $100,000 or more
              
              
              766,950,848
              
              
              630,662,463Other
                  time deposits
              
              
              160,954,197
              
              
              142,944,546Money
                  markets accounts and other
              
              
              389,563,386
              
              
              324,101,535Total
                  deposits
              
              
              1,661,451,400
              
              
              1,409,465,237Federal
                  Home Loan Bank borrowings
              
              
              20,000,000
              
              
              61,000,000Junior
                  subordinated debentures
              
              
              61,547,000
              
              
              61,547,000Accrued
                  interest payable
              
              
              11,585,084
              
              
              6,898,196Acceptances
                  outstanding
              
              
              3,012,849
              
              
              3,220,846Other
                  liabilities
              
              
              10,562,754
              
              
              11,038,271Total
                  liabilities
              
              
              1,768,159,087
              
              
              1,553,169,550COMMITMENTS
                  AND CONTINGENCIES (Note 7)**SHAREHOLDERS’
                  EQUITY:**Preferred
                  stock, no par value; authorized, 1,000,000 shares; issued and outstanding,
                  none
              
              
              -
              
              
              -Common
                  stock, no par value; authorized, 80,000,000 shares;Issued
                  and outstanding, 29,166,050 and 28,630,600 shares atSeptember
                  30, 2006 and December 31, 2005, respectively
              
              
              48,881,546
              
              
              41,340,448Accumulated
                  other comprehensive loss
              
              
              (622,767
              )
              
              (1,026,202
              )Retained
                  earnings
              
              
              93,494,682
              
              
              72,789,622Total
                  shareholders’ equity
              
              
              141,753,461
              
              
              113,103,868TOTAL
              
              $
              1,909,912,548
              
              $
              1,666,273,418





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




1





**WILSHIRE
      STATE BANK**


**CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS**


**(UNAUDITED)**







**Three
                  Months Ended September 30,**
              
              **Nine
                  Months Ended September 30,****2006**
              
              **2005**
              
              **2006**
              
              **2005****INTEREST
                  INCOME:**Interest
                  and fees on loans
              
              $
              33,995,238
              
              $
              23,426,039
              
              $
              93,270,573
              
              $
              62,435,585Interest
                  on investment securities and deposits in other financial
                  institutions
              
              
              2,361,562
              
              
              1,332,561
              
              
              6,375,372
              
              
              3,351,560Interest
                  on federal funds sold and other cash equivalents
              
              
              1,107,452
              
              
              505,406
              
              
              3,496,369
              
              
              1,476,930Interest
                  on commercial paper
              
              
              -
              
              
              14,573
              
              
              -
              
              
              81,707Total
                  interest income
              
              
              37,464,252
              
              
              25,278,579
              
              
              103,142,314
              
              
              67,345,782**INTEREST
                  EXPENSE:**Deposits
              
              
              15,845,581
              
              
              7,828,519
              
              
              41,743,221
              
              
              19,474,943Interest
                  on other borrowings
              
              
              1,515,500
              
              
              1,124,039
              
              
              4,579,447
              
              
              2,936,730Total
                  interest expense
              
              
              17,361,081
              
              
              8,952,558
              
              
              46,322,668
              
              
              22,411,673NET
                  INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES
              
              
              20,103,171
              
              
              16,326,021
              
              
              56,819,646
              
              
              44,934,109PROVISION
                  FOR LOSSES ON LOANS AND LOAN COMMITMENTS
              
              
              2,800,000
              
              
              1,250,000
              
              
              5,060,000
              
              
              2,470,000NET
                  INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES
              
              
              17,303,171
              
              
              15,076,021
              
              
              51,759,646
              
              
              42,464,109**NONINTEREST
                  INCOME:**Service
                  charges on deposit accounts
              
              
              2,544,642
              
              
              1,973,371
              
              
              7,140,893
              
              
              5,507,777Gain
                  on sale of loans
              
              
              3,454,753
              
              
              2,162,483
              
              
              8,859,768
              
              
              5,674,414Loan-related
                  servicing income
              
              
              538,349
              
              
              475,211
              
              
              1,431,185
              
              
              1,605,961Loan
                  referral fee income
              
              
              22,470
              
              
              -
              
              
              70,117
              
              
              118,217SBA
                  Loan packaging fee
              
              
              111,943
              
              
              101,971
              
              
              346,177
              
              
              299,737Income
                  from other earning assets
              
              
              267,946
              
              
              223,798
              
              
              764,583
              
              
              636,262Other
                  income
              
              
              367,639
              
              
              188,809
              
              
              1,039,471
              
              
              836,386Total
                  noninterest income
              
              
              7,307,742
              
              
              5,125,643
              
              
              19,652,194
              
              
              14,678,754**NONINTEREST
                  EXPENSES:**Salaries
                  and employee benefits
              
              
              6,326,931
              
              
              4,924,298
              
              
              17,547,717
              
              
              13,617,124Occupancy
                  and equipment
              
              
              1,257,473
              
              
              893,344
              
              
              3,225,312
              
              
              2,496,192Data
                  processing
              
              
              674,870
              
              
              473,461
              
              
              1,829,751
              
              
              1,431,679Loan
                  referral fees
              
              
              326,935
              
              
              343,860
              
              
              1,269,861
              
              
              913,048Professional
                  fees
              
              
              343,328
              
              
              78,908
              
              
              835,481
              
              
              633,497Directors’
                  fees
              
              
              147,900
              
              
              130,650
              
              
              394,368
              
              
              368,000Office
                  supplies
              
              
              171,440
              
              
              235,413
              
              
              482,129
              
              
              478,023Other
                  real estate owned
              
              
              650
              
              
              -
              
              
              12,740
              
              
              -Advertising
                  and promotional
              
              
              400,972
              
              
              163,763
              
              
              958,830
              
              
              552,317Communications
              
              
              107,002
              
              
              122,987
              
              
              339,754
              
              
              329,599Deposit
                  insurance premiums
              
              
              47,874
              
              
              38,364
              
              
              137,740
              
              
              113,687Outsourced
                  service for customers
              
              
              301,177
              
              
              415,014
              
              
              932,272
              
              
              1,071,714Amortization
                  of core deposit intangible
              
              
              43,416
              
              
              -
              
              
              64,159
              
              
              -Amortization
                  of favorable lease intangible
              
              
              31,309
              
              
              -
              
              
              45,943
              
              
              -Other
                  operating
              
              
              353,498
              
              
              539,806
              
              
              1,939,621
              
              
              1,725,361Total
                  noninterest expenses
              
              
              10,534,775
              
              
              8,359,868
              
              
              30,015,678
              
              
              23,730,241INCOME
                  BEFORE INCOME TAX PROVISION
              
              
              14,076,138
              
              
              11,841,796
              
              
              41,396,162
              
              
              33,412,622INCOME
                  TAX PROVISION
              
              
              5,257,761
              
              
              4,662,999
              
              
              16,339,793
              
              
              13,412,195NET
                  INCOME
              
              $
              8,818,377
              
              $
              7,178,797
              
              $
              25,056,369
              
              $
              20,000,427EARNINGS
                  PER SHAREBasic
              
              $
              0.30
              
              $
              0.25
              
              $
              0.87
              
              $
              0.70Diluted
              
              $
              0.30
              
              $
              0.25
              
              $
              0.86
              
              $
              0.69







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





2





**WILSHIRE
      STATE BANK**


**CONDENSED
      CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME**


**(UNAUDITED)**




**Three
                  Months Ended September 30,**
              
              **Nine
                  Months Ended September 30,****2006**
              
              **2005**
              
              **2006**
              
              **2005**Net
                  income
              
              $
              8,818,377
              
              $
              7,178,797
              
              $
              25,056,369
              
              $
              20,000,427Other
                  comprehensive income, net of tax:Unrealized
                  gains (losses) on securities available for sale and interest-only
                  strip:Unrealized
                      holding gains (losses) on securities available for sale arising
                      during
                      period, net of tax expense of $840,245 for the three months
                      ended
                      September 30, 2006 and net of tax benefit of $94,319 for the
                      three months
                      ended September 30,2005 net of tax expense of $240,901 for
                      the nine months
                      ended September 30,2006 and net of tax benefit of $161,789
                      for the nine
                      months ended September 30, 2005
              
              
              1,160,339
              
              
              (130,250
              )
              
              332,673
              
              
              (223,423
              )Unrealized
                  holding gains (losses) on interest only strips arising during period,
                  net
                  of tax expense of $54,822 for the three months ended September
                  30, 2006
                  and net of tax benefit of $26,752 for the three months ended September
                  30,
                  2005, net of tax expense of $51,241 for the nine months ended September
                  30, 2006 and net of tax benefit of $6,278 for the nine months ended
                  September 30, 2005
              
              
              75,706
              
              
              (36,943
              )
              
              70,762
              
              
              (8,669
              )Other
                  comprehensive income (loss), net of tax:
              
              
              1,236,045
              
              
              (167,193
              )
              
              403,435
              
              
              (232,092
              )Comprehensive
                  income
              
              $
              10,054,422
              
              $
              7,011,604
              
              $
              25,459,804
              
              $
              19,768,335




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




3





**WILSHIRE
      BANCORP, INC.**


**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**


**(UNAUDITED)**




**Nine
                  Months Ended September 30,****2006**
              
              **2005****CASH
                  FLOWS FROM OPERATING ACTIVITIES:**Net
                  income
              
              $
              25,056,369
              
              $
              20,000,427Adjustments
                  to reconcile net income to net cash provided byoperating
                  activities, net of acquisition:Amortization
                  and accretion of premiums and discounts
              
              
              (25,417
              )
              
              (20,432
              )Depreciation
                  of premises & equipment
              
              
              964,901
              
              
              724,692Amortization
                  of core deposit intangible
              
              
              64,159
              
              
              -Amortization
                  of lease intangible
              
              
              45,943
              
              
              -Provision
                  for losses on loans and loan commitments
              
              
              5,060,000
              
              
              2,470,000Deferred
                  tax benefit
              
              
              (1,672,984
              )
              
              (2,073,725
              )Loss
                  on disposition of bank premises, equipment and securities
              
              
              9,766
              
              
              902Gain
                  on sale of loans
              
              
              (8,859,768
              )
              
              (5,674,414
              )Origination
                  of loans held for sale
              
              
              (135,128,236
              )
              
              (114,028,588
              )Proceeds
                  from sale of loans held for sale
              
              
              161,111,088
              
              
              120,070,351Recovery
                  of valuation allowance of Servicing Asset
              
              
              (172,462
              )
              
              78,731Impairment
                  of I/O Strip
              
              
              88,020
              
              
              -Loss
                  on sale of other real estate owned
              
              
              (9,326
              )
              
              8,607Tax
                  benefit from exercise of stock option
              
              
              -
              
              
              1,724,074Stock
                  based compensation cost
              
              
              345,424
              
              
              -Change
                  in cash surrender value of life insurance
              
              
              (437,381
              )
              
              (419,286
              )Servicing
                  assets capitalization
              
              
              (1,835,065
              )
              
              (1,546,218
              )Servicing
                  assets amortization
              
              
              1,453,338
              
              
              1,072,258Decrease
                  in interest-only strip
              
              
              274,192
              
              
              1,363Increase
                  in accrued interest receivable
              
              
              (2,820,784
              )
              
              (2,296,544
              )Increase
                  in other assets
              
              
              (827,177
              )
              
              (2,584,757
              )Dividends
                  of FHLB Stock
              
              
              (241,300
              )
              
              (147,800
              )Increase
                  in accrued interest payable
              
              
              4,630,914
              
              
              1,908,520Decrease
                  in other liabilities
              
              
              (1,791,276
              )
              
              790,061Net
                  cash provided by operating activities
              
              
              45,282,938
              
              
              20,058,222**CASH
                  FLOWS FROM INVESTING ACTIVITIES:**Net
                  (increase) decrease in interest-bearing deposits in other financial
                  institutions
              
              
              -
              
              
              (386
              )Purchases
                  of investment securities available for sale
              
              
              (48,934,543
              )
              
              (96,873,454
              )Purchases
                  of investment securities held to maturity
              
              
              -
              
              
              (1,999,000
              )Proceeds
                  from matured securities and principal repayment (AFS)
              
              
              20,868,151
              
              
              55,406,809Proceeds
                  from principal repayment, matured or called securities
                  (HTM)
              
              
              2,236,771
              
              
              6,396,512Net
                  increase in loans receivable
              
              
              (249,571,090
              )
              
              (169,215,370
              )Proceeds
                  from sale of other loans
              
              
              10,490,470Proceeds
                  from sale of other real estate owned
              
              
              108,145
              
              
              299,593Purchases
                  of premises and equipment
              
              
              (1,455,526
              )
              
              (3,969,759
              )Proceeds
                  from redemption of FHLB stock
              
              
              -
              
              
              54,400Purchases
                  of FHLB stock
              
              
              (1,015,300
              )
              
              (1,646,700
              )Purchases
                  of Bank Owned Life Insurance
              
              
              -
              
              
              (3,000,000
              )Proceeds
                  from disposition of bank equipment
              
              
              250
              
              
              -Acquisition
                  of Liberty Bank, net of cash and cash equivalents acquired
              
              
              5,906,249
              
              
              -Net
                  cash used in investing activities
              
              
              (261,366,423
              )
              
              (214,547,355
              )**CASH
                  FLOWS FROM FINANCING ACTIVITIES:**Net
                  increase in deposits
              
              
              201,489,295
              
              
              200,758,645Increase
                  in Federal Home Loan Bank borrowing
              
              
              (41,000,000
              )
              
              20,000,000Payment
                  of cash dividend
              
              
              (4,038,231
              )
              
              (2,286,269
              )Increase
                  in junior subordinated debentures
              
              
              -
              
              
              36,083,000Tax
                  benefit from exercise of stock options
              
              
              899,249
              
              
              -Proceeds
                  from exercise of stock options
              
              
              359,832
              
              
              428,546Net
                  cash provided by financing activities
              
              
              157,710,145
              
              
              254,983,922NET
                  INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
              
              
              (58,373,340
              )
              
              60,494,789CASH
                  AND CASH EQUIVALENTS, BEGINNING OF PERIOD
              
              
              194,208,056
              
              
              98,903,163CASH
                  AND CASH EQUIVALENTS, END OF PERIOD
              
              $
              135,834,716
              
              $
              159,397,952SUPPLEMENTAL
                  DISCLOSURES OF CASH FLOW INFORMATION:Interest
                  paid
              
              $
              41,635,781
              
              $
              20,503,152Income
                  taxes paid
              
              $
              17,202,211
              
              $
              14,280,178NONCASH
                  INVESTING AND FINANCING ACTIVITIESCash
                  dividend declared, but has not been paid
              
              $
              1,458,303
              
              $
              1,143,426Transfer
                  of loans to OREO
              
              
              -
              
              $
              464,600





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


4


**WILSHIRE
      BANCORP, INC.**




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




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




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




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




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




The
      financial statements have been prepared in accordance with the Securities and
      Exchange Commission (“SEC”) rules and regulations for interim financial
      reporting and therefore do not necessarily include all information and footnote
      disclosures normally included in annual financial statements prepared in
      accordance with accounting principles generally accepted in the United States
      of
      America. The information provided by these interim financial statements reflects
      all adjustments which are, in the opinion of management, necessary for a fair
      presentation of the Company’s financial condition as of September 30, 2006 and
      December 31, 2005, the related statements of operations and comprehensive income
      for the three months and nine months ended September 30, 2006 and 2005, and
      the
      statements of cash flows for the nine months ended September 30, 2006 and 2005.
      Such adjustments are of a normal recurring nature unless otherwise disclosed
      in
      the Form 10-Q. Operating results for interim periods are not necessarily
      indicative of operating results for an entire fiscal year.




The
      unaudited financial statements should be read in conjunction with the audited
      financial statements and notes thereto included in the Company’s Annual Report
      on Form 10-K for the year ended December 31, 2005. The accounting policies
      used
      in the preparation of these interim financial statements were consistent with
      those used in the preparation of the financial statements for the year ended
      December 31, 2005, unless otherwise noted.




**Note
      3.**  **Earnings
      per Share** **and Stock Based Compensation**




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




5


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




**Three
                Months Ended**
              **September
                30**
            
            **Nine
                Months Ended**
              **September
                30****2006**
            
            **2005**
            
            **2006**
            
            **2005**Numerator:
              Net
                income - numerator for basic earningsper
                share and diluted earnings per share-income
                available to common stockholders
            
            $
            8,818,377
            
            $
            7,178,797
            
            $
            25,056,369
            
            $
            20,000,427Denominator:
              Denominator
                for basic earnings per share:
              Weighted-average
                shares
            
            
            29,137,027
            
            
            28,580,640
            
            
            28,922,416
            
            
            28,528,499Effect
                of dilutive securities:
              Stock
                option dilution
            
            
            321,565
            
            
            345,590
            
            
            351,045
            
            
            377,941Denominator
                for diluted earnings per share:
              Adjusted
                weighted-average shares
              And
                assumed conversions
            
            
            29,458,592
            
            
            28,926,230
            
            
            29,273,461
            
            
            28,906,440Basic
                earnings per share
            
            $
            0.30
            
            $
            0.25
            
            $
            0.87
            
            $
            0.70Diluted
                earnings per share
            
            $
            0.30
            
            $
            0.25
            
            $
            0.86
            
            $
            0.69




On
      January 1, 2006, the Company adopted Statement of Financial Accounting Standards
      (“SFAS”) 123R, *Share-Based
      Payment* ,
      using
      the modified prospective method. Accordingly, prior-period amounts have not
      been
      restated. Had the Company determined compensation cost based on the fair value
      at the grant date for stock options exercisable under SFAS No. 123R prior to
      January 1, 2006, the Company’s results of operations and earnings per share
      would have been adjusted to the pro forma amounts for the periods indicated
      below:









**Three
                Months Ended September 30**
            
            **Nine
                Months Ended September 30****2005**
            
            **2005****Net
                income - as reported**
            
            $
            7,178,797
            
            $
            20,000,427**Add:**
              Stock-based
                compensation expense included in
              the
                reported net income, net of tax
            
            
            -
            
            
            -**Deduct:**
              Total
                stock-based compensation expense,
              determined
                using fair value method, net of tax
            
            
            (40,974
            )
            
            (106,539
            )Pro
                forma net income
            
            $
            7,137,823
            
            $
            19,893,888**Earnings
                per share:**Basic
                - as reported
            
            $
            0.25
            
            $
            0.70Basic
                - pro forma
            
            $
            0.25
            
            $
            0.70Diluted
                - as reported
            
            $
            0.25
            
            $
            0.69Diluted
                - pro forma
            
            $
            0.25
            
            $
            0.69




The
      adoption of SFAS 123R resulted in incremental stock-based compensation expense
      of $195,475 and $345,424 for the three months and nine months ended September
      30, 2006, respectively, and accordingly decreased the periodic income before
      income taxes by the respective amounts and their effect on basic or diluted
      earnings per share was negligible. For the three months ended September, 2006
      there was no cash provided by financing activities due to excess tax benefits
      from stock-based payment arrangements. But for the nine months ended September
      30, 2006 cash
      provided by financing activities  increased
      by $899,249.




The
      Company has issued stock options to employees under stock-based compensation
      plans. Stock options are issued at the current market price on the date of
      grant. The vesting period and contractual term are determined at the time of
      grant, but the contractual term may not exceed 10 years from the date of grant.
      The grant date fair value of each option award is estimated on the date of
      grant
      using the Black-Scholes option valuation model that uses the assumptions noted
      below. The expected life (estimated period of time outstanding) of options
      was
      estimated using the simple method in accordance with SFAS 123R. The expected
      volatility was based on historical volatility for a period equal to the stock
      option’s expected life. The risk-free rate is based on the U.S. Treasury yield
      curve in effect at the time of grant.




6




A
      summary
      of activity for the Company’s stock options as of and for the nine months ended
      September 30, 2006 is presented below:





**Weighted**
            
            **Weighted****Average**
            
            **Average**
            
            **Aggregate****Exercise**
            
            **Remaining**
            
            **Intrinsic********Shares**
            
            **Price**
            
            **Contractual
                term**
            
            **Value****(in
                years)**Outstanding
                at January 1, 2006
            
            
            810,952
            
            $
            5.26Granted
            
            
            187,000
            
            
            18.80Exercised
            
            
            (207,340
            )
            
            1.74Forfeited
            
            
            (17,950
            )
            
            14.60Outstanding
                at September 30, 2006
            
            
            772,662
            
            $
            9.27
            
            
            5.01
            
            
            7,567,879Options
                exercisable at September 30, 2006
            
            
            497,702
            
            
            
            
            
            4.28
            
            
            7,013,520Weighted
                average fair value of options granted
              during
                the period
            
            $
            5.26







For
      the
      third quarter of 2006 and 2005, options to purchase 112,000 and 30,000 shares
      were granted, respectively. The weighted average fair value of options granted
      for the third quarter of 2006 and 2005 was $5.36 and $1.98, respectively. For
      the first nine-month periods of 2006 and 2005, 187,000 and 258,600 shares were
      granted, respectively. The weighted average fair value of options granted for
      the nine months ended September, 2006 and 2005 was $5.26 and $1.97,
      respectively. The
      fair
      value of each option grant is estimated on the date of grant using the
      Black-Scholes option-pricing model with the following assumptions:




**Three
                  Months Ended**
              
              **Nine
                  Months Ended****September
                  30,**
              
              **September
                  30,****2006**
              
              **2005**
              
              **2006**
              
              **2005**Expected
                  life1
              
              
              3.5
                  years
              
              
              2
                  years
              
              
              3.5
                  years
              
              
              2
                  yearsExpected
                  volatility2
              
              
              32.61
              %
              
              25.3
              %
              
              32.89
              %
              
              24.53
              %Expected
                  dividend yield
              
              
              1.04
              %
              
              1.16
              %
              
              1.06
              %
              
              1.16
              %Risk-free
                  interest rate3
              
              
              4.70
              %
              
              3.25
              %
              
              4.70
              %
              
              2.82
              %




The
      following table summarizes information about stock options outstanding as of
      September 30, 2006:




**Options
                Outstanding**
            
            **Options
                Exercisable****Weighted****Weighted**
            
            **Average**
            
            
            
            **Weighted****Number
                of**
            
            **Average**
            
            **Remaining**
            
            **Number
                of**
            
            **Average****Outstanding**
            
            **Exercise**
            
            **Contractual**
            
            **Exercisable**
            
            **Exercise****Range
                of Exercise Prices**
            
            **Options**
            
            **Price**
            
            **Life**
            
            **Options**
            
            **Price**$0.50
                to $0.99
            
            
            170,596
            
            $
            0.62
            
            
            0.53
                years
            
            
            170,596
            
            $
            0.62$1.00
                to $1.99
            
            
            61,120
            
            
            1.39
            
            
            4.22
                years
            
            
            61,120
            
            
            1.39$2.00
                to $2.99
            
            
            101,046
            
            
            2.57
            
            
            5.65
                years
            
            
            101,046
            
            
            2.57$3.00
                to $4.99
            
            
            52,000
            
            
            4.53
            
            
            6.84
                years
            
            
            52,000
            
            
            4.53$13.00
                to $14.99
            
            
            69,000
            
            
            13.79
            
            
            8.55
                years
            
            
            27,600
            
            
            13.83$15.00
                to $16.99
            
            
            131,900
            
            
            15.21
            
            
            8.45
                years
            
            
            57,940
            
            
            15.22$17.00
                to $19.99
            
            
            187,000
            
            
            18.80
            
            
            4.76
                years
            
            
            27,400
            
            
            18.85$0.50
                to $19.99
            
            
            772,662
            
            $
            9.27
            
            
            5.01
                years
            
            
            497,702
            
            $
            4.95







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


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


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


7





During
      the three and nine months ended September 30, 2006 and 2005, activities related
      to stock options are presented as follows:




**Three
                  Months Ended**
              
              **Nine
                  Months Ended****September
                  30,**
              
              **September
                  30,****2006**
              
              **2005**
              
              **2006**
              
              **2005**Total
                  intrinsic value of options exercised
              
              $
              686,304
              
              $
              -
              
              $
              3,287,642
              
              $
              6,115,604Total
                  fair value of options vested
              
              $
              158,914
              
              $
              43,288
              
              $
              300,496
              
              $
              201,337




As
      of
      September 30, 2006, total unrecognized compensation cost related to stock
      options amounted to $725,000. This cost is expected to be recognized over a
      weighted average period of 1.76 years.




A
      summary
      of the status and changes of the Company’s nonvested shares related to the
      Company’s stock plans as of and during the nine months ended September 30, 2006
      is presented below:




**Shares**
            
            **Weighted
                Average**
              **Grant
                date**
              **Fair
                value**Nonvested
                at January 1, 2006
            
            
            235,000
            
            $
            1.19Granted
            
            
            187,000
            
            
            5.26Vested
            
            
            (129,790
            )
            
            2.32Forfeited
                on unvested shares
            
            
            (17,250
            )
            
            2.20Nonvested
                at September 30, 2006
            
            
            274,960
            
            $
            3.98




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




Prior
      to
      the acquisition of Liberty Bank of New York in May 2006, the Company did not
      have any material intangible assets other than loan servicing rights. The loan
      servicing rights are subject to amortization and were $5,237,036 and $4,682,848
      (net of $1,755,811 and $1,599,212 accumulated amortization, respectively) as
      of
      September 30, 2006 and 2005, respectively. Amortization expenses for servicing
      rights were $467,000 and $418,000 for the three months ended September 30,
      2006
      and 2005, respectively, and $1,453,000 and $1,072,000 for the nine months ended
      September 30, 2006 and 2005, respectively. In connection with the acquisition
      of
      Liberty Bank of New York, the Company recorded core deposit intangibles and
      favorable lease intangibles. As of September 30, 2006, those intangible assets
      were $1,576,000 and $384,000, respectively, net of $64,000 and $46,000
      accumulated amortizations, respectively. Amortization expenses for those
      intangible assets were $43,000 and $31,000 for the three months ended September
      30, 2006 and $64,000 and $46,000 for the nine months ended September 30, 2006,
      respectively. We estimate the combined amortization expenses to be approximately
      $966,000 annually for the next five fiscal years. The acquisition also caused
      the Company to record goodwill valued at approximately $6.7 million, which
      is
      subject to annual impairment testing. The Company has selected December 31
      as
      the annual testing date and there was no amortization that indicated impairment
      at September 30, 2006.




**Note
      5.**  **Business Segment Information**




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




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




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




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




8






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




**(Dollars
                in Thousands)**
            
            **Three
                Months Ended September 30, 2006**
            
            **Three
                Months Ended September 30, 2005****Business
                Segment**
            
            **Banking**
              **Operations**
            
            **TFS**
            
            **SBA**
            
            **Total**
            
            **Banking****Operations**
            
            **TFS**
            
            **SBA**
            
            **Total**Net
                interest income
            
            $
            16,260
            
            $
            716
            
            $
            3,127
            
            $
            20,103
            
            $
            11,787
            
            $
            838
            
            $
            3,704
            
            $
            16,326Less
                provision for loan losses
            
            
            1,582
            
            
            1,111
            
            
            107
            
            
            2,800
            
            
            712
            
            
            3
            
            
            535
            
            
            1,250Other
                operating income
            
            
            3,205
            
            
            368
            
            
            3,735
            
            
            7,308
            
            
            2,360
            
            
            509
            
            
            2,257
            
            
            5,126Net
                revenue
            
            
            17,883
            
            
            (27
            )
            
            6,755
            
            
            24,611
            
            
            13,432
            
            
            1,344
            
            
            5,426
            
            
            20,202Other
                operating expenses
            
            
            9,316
            
            
            240
            
            
            979
            
            
            10,535
            
            
            6,924
            
            
            196
            
            
            1,240
            
            
            8,360Income
                before taxes
            
            $
            8,567
            
            $
            (267
            )
            $
            5,776
            
            $
            14,076
            
            $
            6,508
            
            $
            1,148
            
            $
            4,186
            
            $
            11,842Business
                segment assets
            
            $
            1,709,789
            
            $
            52,270
            
            $
            147,854
            
            $
            1,909,913
            
            $
            1,326,970
            
            $
            53,793
            
            $
            165,073
            
            $
            1,545,836





**(Dollars
                in Thousands)**
            
            **Nine
                Months Ended September 30, 2006**
            
            **Nine
                Months Ended September 30, 2005****Business
                Segment**
            
            **Banking****Operations**
            
            **TFS**
            
            **SBA**
            
            **Total**
            
            **Banking****Operations**
            
            **TFS**
            
            **SBA**
            
            **Total**Net
                interest income
            
            $
            46,566
            
            $
            2,213
            
            $
            8,041
            
            $
            56,820
            
            $
            32,917
            
            $
            2,230
            
            $
            9,787
            
            $
            44,934Less
                provision for loan losses
            
            
            2,805
            
            
            1,345
            
            
            910
            
            
            5,060
            
            
            2,068
            
            
            (201
            )
            
            603
            
            
            2,470Other
                operating income
            
            
            8,933
            
            
            1,190
            
            
            9,529
            
            
            19,652
            
            
            7,079
            
            
            1,379
            
            
            6,221
            
            
            14,679Net
                revenue
            
            
            52,694
            
            
            2,058
            
            
            16,660
            
            
            71,412
            
            
            37,928
            
            
            3,810
            
            
            15,405
            
            
            57,143Other
                operating expenses
            
            
            25,255
            
            
            729
            
            
            4,032
            
            
            30,016
            
            
            19,760
            
            
            647
            
            
            3,323
            
            
            23,730Income
                before taxes
            
            $
            27,439
            
            $
            1,329
            
            $
            12,628
            
            $
            41,396
            
            $
            18,168
            
            $
            3,163
            
            $
            12,082
            
            $
            33,413Business
                segment assets
            
            $
            1,709,789
            
            $
            52,270
            
            $
            147,854
            
            $
            1,909,913
            
            $
            1,326,970
            
            $
            53,793
            
            $
            165,073
            
            $
            1,545,836




**Note
      6.**  **Stock
      Option Plan**




During
      1997, the Bank established a new stock option plan that provides for the
      issuance of up to 6,499,800 shares of its authorized but unissued common stock
      to managerial employees and directors. In connection with the holding company
      reorganization, the options granted under this plan are exercisable into shares
      of the Company’s common stock. Exercise prices may not be less than the fair
      market value at the date of grant. As of September 30, 2006, 772,662 shares
      were
      outstanding under this option plan. The outstanding stock options granted under
      the Company’s 1990 plan were transferred to this plan. Options granted before
      2005 under the stock option plan expire not more than 10 years after the date
      of
      grant, but options granted after 2005 expire not more than 5 years after the
      date of grant.




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




We
      are a
      party to financial instruments with off-balance sheet risk in the normal course
      of business to meet the financing needs of our customers. These financial
      instruments include commitments to extend credit, standby letters of credit,
      and
      commercial letters of credit. These instruments involve, to varying degrees,
      elements of credit and interest rate risk in excess of the amount recognized
      in
      the statements of financial condition. Our exposure to credit loss in the event
      of nonperformance on commitments to extend credit and standby letters of credit
      is represented by the contractual notional amount of those instruments. We
      use
      the same credit policies in making commitments and conditional obligations
      as we
      do for extending loan facilities to customers. We evaluate each customer’s
      creditworthiness on a case-by-case basis. The amount of collateral obtained,
      if
      deemed necessary upon extension of credit, is based on our credit evaluation
      of
      the counterparty. Collateral held varies but may include accounts receivable,
      inventory, property, plant, and equipment and income-producing properties.
      Commitments at September 30, 2006 are summarized as follows:




Commitments
                to extend credit
            
            $
            136,323,368Standby
                letters of credit
            
            $
            4,215,761Commercial
                letters of credit
            
            $
            14,908,902




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




9




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




**Note
      8.**  **Recent
      Accounting Pronouncements**




In
      February 2006, the FASB issued SFAS No. 155, *Accounting
      for Certain Hybrid Financial Instruments* ,
      which
      amends SFAS No. 133, *Accounting
      for Derivative Instruments and Hedging Activities* ,
      and
      SFAS No. 140, *Accounting
      for Transfers and Servicing of Financial Assets and Extinguishments of
      Liabilities* .
      This
      statement also resolves issues addressed in Statement 133 Implementation Issue
      No. D1, *Application
      of Statement 133 to Beneficial Interests in Securitized Financial Assets.* SFAS
      No.
      155 eliminates the exemption from applying SFAS No. 133 to interests in
      securitized financial assets so that similar instruments are accounted for
      similarly regardless of the form of the instruments. SFAS No. 155 also allows
      a
      preparer to elect fair value measurement at acquisition, at issuance, or when
      a
      previously recognized financial instrument is subject to a remeasurement (new
      basis) event, on an instrument-by-instrument basis, in a case in which a
      derivative would otherwise have to be bifurcated. SFAS No. 155 is effective
      for
      all financial instruments acquired or issued after the beginning of an entity’s
      first fiscal year that begins after September 15, 2006. We do not expect the
      adoption SFAS No. 155 to have a material impact on the consolidated financial
      statements or results of our operations.




In
      March
      2006, the FASB issued SFAS No. 156, *Accounting
      for Servicing of Financial Assets,* which
      amends the guidance in SFAS No. 140. SFAS No. 156 requires that an entity
      separately recognize a servicing asset or a servicing liability when it
      undertakes an obligation to service a financial asset under a servicing contract
      in certain situations. Such servicing assets or servicing liabilities are
      required to be measured initially at fair value, if practicable. SFAS No. 156
      also allows an entity to measure its servicing assets and servicing liabilities
      subsequently using either the amortization method, which existed under SFAS
      No.
      140, or the fair value measurement method. SFAS No. 156 will be effective for
      the Company in the fiscal year beginning January 1, 2007. The Company is in
      the
      process of evaluating the impact that adoption of this statement will have
      on
      its results of operations or financial condition.




In
      June
      2006, the FASB issued interpretation No. 48, *Accounting
      for Uncertainty in income taxes (FIN 48)* which
      supplements SFAS No. 109 by defining the confidence level that a tax position
      must meet in order to be recognized in the financial statements. The
      interpretation requires that the tax effects of a position be recognized only
      if
      it is “ more-likely-than-not” to be sustained based solely on its technical
      merits as of the reporting date. The more-likely-than-not threshold represents
      a
      positive assertion by management that a company is entitled to the economic
      benefits of a tax position. If a tax position is not considered
      more-likely-than-not to be sustained based solely on its technical merits,
      no
      benefits of the position are to be recognized. Moreover, the
      more-likely-than-not threshold must continue to be met in each reporting period
      to support continued recognition of a benefit. At adoption, companies must
      adjust their financial statements to reflect only those tax positions that
      are
      more-likely-than-not to be sustained as of the adoption date. Any necessary
      adjustment would be recorded directly to retained earnings in the period of
      adoption and reported as a change in accounting principle. This interpretation
      is effective as of the beginning of the first fiscal year beginning after
      December 15, 2006. Management is assessing the potential impact on our financial
      condition or results of operations.




In
      September 2006, the FASB issued SFAS No. 157, *Fair
      Value Measurements* ,
      which
      defines fair value, establishes a framework for measuring fair value in
      generally accepted accounting principles (GAAP), and expands disclosures about
      fair value measurements. This statement is effective for financial statements
      issued for fiscal years beginning after November 15, 2007, and interim periods
      with those fiscal years. The transition adjustment, measured as the difference
      between the carrying amounts and the fair values of those financial instruments
      at the date this Statements is initially applied, should be recognized as a
      cumulative-effect adjustment to the opening balance of retained earnings for
      the
      fiscal year in which this Statement is initially applied. The Company is in
      the
      process of evaluating the impact that adoption of this statement will have
      on
      its results or financial condition.




In
      September 2006, the FASB issued SFAS No. 158, *Employers’
      Accounting for Defined Benefit Pension* and
      Other Postretirement Plans, which requires an employer to recognize the
      overfunded or underfunded status of a defined benefit postretirement plan as
      an
      asset or liability in its statement of financial position and to recognize
      changes in that funded status in the year in which the change occur through
      comprehensive income of the business entity. An employer with publicly traded
      equity securities is required to initially recognize the funded status of a
      defined benefit postretirement plan and to provide the required disclosures
      as
      of the end of the fiscal year ending after December 15, 2006. Management is
      assessing the potential impact on our financial condition or results of
      operations.




10




In
      September 2006 the SEC issued Staff Accounting Bulletin (SAB) No. 108, *Quantifying
      Financial Misstatements* ,
      which
      expresses the Staff’s views regarding the process of quantifying financial
      statement misstatements. Registrants are required to quantify the impact of
      correcting all misstatements, including both the carryover and reversing effects
      of prior year misstatements, on the current year financial statements. The
      techniques most commonly used in practice to accumulate and quantify
      misstatements are generally referred to as the “rollover” (current year income
      statement perspective) and “iron curtain” (year-end balance perspective)
      approaches. The financial statements would require adjustment when either
      approach results in quantifying a misstatement that is material, after
      considering all relevant quantitative and qualitative factors. Management does
      not expect this guidance to have a material effect on our financial condition
      and results of operations.




**Note** **9.**  **Business
      Combination**




On
      May
      19, 2006, the Company completed its acquisition of Liberty Bank of New York
      (“Liberty”), a commercial bank with about $66 million in assets and two branches
      in New York City, which was then immediately merged into Wilshire State Bank.
      The Company paid $8,592,407 in cash and issued an aggregate of 328,110 shares
      of
      its common stock to the former shareholders of Liberty in connection with the
      Company’s acquisition of all the outstanding capital stock of Liberty. The
      Company’s common stock was valued pursuant to the Stock Purchase Agreement at
      $18.0933 per share, the average of the daily closing prices of the Company’s
      common stock as reported on the Nasdaq National Market for the 20 consecutive
      trading days ending on the last business day prior to the closing. The aggregate
      purchase price of this business combination was $15,154,000, which included
      $625,000 of capitalized direct costs associated with this business combination
      in addition to the payment to the former Liberty shareholders of $14,529,000.
      The purchase price, as well as the fair values of assets and liabilities
      recorded, may change as certain estimates are finalized.




Certain
      restructuring costs, mainly consulting fees paid to third parties and severance
      payments to certain Liberty employees specified in the stock purchase agreement,
      were recognized as liabilities assumed in the business combination. Accordingly,
      they have been considered part of the purchase price of Liberty and recorded
      as
      an increase in the balance of goodwill. Such payments totaled $625,000 and
      consisted of $332,000 of legal and accounting consulting fees, $253,000 for
      severance payments, and $40,000 for miscellaneous items.




As
      of May
      19, 2006, the fair value of the Liberty’s net assets acquired was as
      follows:




**Assets:**
            
            (dollars
                in thousands)Cash
                and due from banks
            
            $
            2,423Federal
                funds sold and other cash equivalents
            
            
            12,700Cash
                and cash equivalents
            
            
            15,123Securities
                available for sale
            
            
            15,110Loans
                receivable
            
            
            25,657Bank
                premises and equipment, net
            
            
            631Accrued
                interest receivable
            
            
            282Deferred
                income taxes
            
            
            538Other
                assets
            
            
            274Favorable
                lease intangible
            
            
            429Core
                deposit intangible
            
            
            1,640Goodwill
            
            
            6,675Total
                assets
            
            $
            66,359**Liabilities:**Deposits:Noninterest-bearing
            
            $
            22,217Interest-bearingSavings
            
            
            2,445Time
                deposits of $100,000 or more
            
            
            12,116Other
                time deposits
            
            
            5,191Interest
                bearing demand deposit
            
            
            8,528Total
                deposits
            
            
            50,497Accrued
                interest payable
            
            
            56Other
                liabilities
            
            
            420Unfavorable
                lease intangible
            
            
            232Total
                liabilities
            
            
            51,205Total
                consideration paid
            
            $
            15,154




The
      core-deposit intangibles are the sum of intangibles on different types of core
      deposits. The intangible for each type of core deposit is being amortized over
      its respective estimated useful life, which ranges from 94 to 126 months. The
      favorable lease intangible is being amortized for the remaining lease term
      of 41
      months. None of the goodwill balance is expected to be deductible for income
      tax
      purposes.




11






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




This
      discussion presents management’s analysis of our results of operations and
      financial condition as of and for the three and nine months ended September
      30,
      2006 and 2005, respectively, and includes the statistical disclosures required
      by the Securities and Exchange Commission Guide 3 (“Statistical Disclosure by
      Bank Holding Companies”). The discussion should be read in conjunction with our
      financial statements and the notes related thereto which appear elsewhere in
      this Quarterly Report on Form 10-Q.




Statements
      contained in this report that are not purely historical are forward-looking
      statements within the meaning of Section 21E of the Securities Exchange Act
      of
      1934, as amended, including our expectations, intentions, beliefs, or strategies
      regarding the future. Any
      statements in this document about expectations, beliefs, plans, objectives,
      assumptions or future events or performance are not historical facts and are
      forward-looking statements. These statements are often, but not always, made
      through the use of words or phrases such as “may,” “should,” “could,” “predict,”
“potential,” “believe,” “expect,” “anticipate,” “seek,” “estimate,” “intend,”
“plan,” “projection,” and “outlook,” and similar expressions. Accordingly, these
      statements involve estimates, assumptions and uncertainties, which could cause
      actual results to differ materially from those expressed in them. Any
      forward-looking statements are qualified in their entirety by reference to
      the
      factors discussed throughout this document. All
      forward-looking statements concerning economic conditions, rates of growth,
      rates of income or values as may be included in this document are based on
      information available to us on the dates noted, and we assume no obligation
      to
      update any such forward-looking statements. It is important to note that our
      actual results may differ materially from those in such forward-looking
      statements due to fluctuations in interest rates, inflation, government
      regulations, economic conditions, customer disintermediation and competitive
      product and pricing pressures in the geographic and business areas in which
      we
      conduct operations, including our plans, objectives, expectations and intentions
      and other factors discussed under the section entitled “Risk Factors,” in our
      Annual Report on Form 10-K for the year ended December 31, 2005, including
      the
      following:




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




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




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




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




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




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




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




·
            We
                may be unable to manage future
                growth.




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






12




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




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




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




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




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




·
            We
                face substantial competition in our primary market
                area.




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




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




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




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




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




These
      factors and the risk factors referred to in our Annual Report on Form 10-K
      for
      the year ended December 31, 2005 could cause actual results or outcomes to
      differ materially from those expressed in any forward-looking statements made
      by
      us, and you should not place undue reliance on any such forward-looking
      statements. Any forward-looking statement speaks only as of the date on which
      it
      is made and we do not undertake any obligation to update any forward-looking
      statement or statements to reflect events or circumstances after the date on
      which such statement is made or to reflect the occurrence of unanticipated
      events. New factors emerge from time to time, and it is not possible for us
      to
      predict which will arise. In addition, we cannot assess the impact of each
      factor on our business or the extent to which any factor, or combination of
      factors, may cause actual results to differ materially from those contained
      in
      any forward-looking statements.






13




**Selected
      Financial Data**




The
      following table presents selected historical financial information (unaudited)
      as of and for the three and nine months ended September 30, 2006 and 2005.
      In
      the opinion of our management, the information presented reflects all
      adjustments considered necessary for a fair presentation of the results of
      such
      periods. The operating results for the interim periods are not necessarily
      indicative of our future operating results.




******Three
                Months Ended September 30,**
            
            ******Nine
                Months Ended September 30,****(Dollars
                in thousands, except per share data)****2006**
            
            **2005**
            
            **2006**
            
            **2005**Net
                income
            
            $
            8,818
            
            $
            7,179
            
            $
            25,056
            
            $
            20,000Net
                income per share, basic
            
            
            0.30
            
            
            0.25
            
            
            0.87
            
            
            0.70Net
                income per share, diluted
            
            
            0.30
            
            
            0.25
            
            
            0.86
            
            
            0.69Net
                interest income
            
            
            20,103
            
            
            16,326
            
            
            56,820
            
            
            44,934**Average
                balances:**Assets
            
            
            1,893,185
            
            
            1,468,264
            
            
            1,790,659
            
            
            1,391,433Cash
                and cash equivalents
            
            
            146,381
            
            
            119,738
            
            
            157,854
            
            
            126,060Investment
                debt securities
            
            
            207,553
            
            
            139,564
            
            
            193,576
            
            
            123,927Net
                loans
            
            
            1,460,959
            
            
            1,145,588
            
            
            1,369,249
            
            
            1,086,350Total
                deposits
            
            
            1,633,097
            
            
            1,247,913
            
            
            1,530,630
            
            
            1,182,330Shareholders’
                equity
            
            
            138,454
            
            
            104,974
            
            
            128,346
            
            
            98,923**Performance
                Ratios:**Annualized
                return on average assets
            
            
            1.86
            %
            
            1.96
            %
            
            1.87
            %
            
            1.92
            %Annualized
                return on average equity
            
            
            25.48
            %
            
            27.35
            %
            
            26.03
            %
            
            26.96
            %Net
                interest margin
            
            
            4.59
            %
            
            4.84
            %
            
            4.57
            %
            
            4.67
            %Efficiency
                ratio1
            
            
            38.43
            %
            
            38.97
            %
            
            39.25
            %
            
            39.81
            %**Capital
                Ratios:**Tier
                1 capital to adjusted total assets
            
            
            9.59
            %
            
            9.71
            %Tier
                1 capital to risk-weighted assets
            
            
            11.60
            %
            
            11.66
            %Total
                capital to risk-weighted assets
            
            
            13.66
            %
            
            14.81
            %







**Period-end
                balances as of:**
            
            **September
                30, 2006**
            
            **December
                31,**
              **2005**
            
            **September
                30, 2005**Total
                assets
            
            $
            1,909,913
            
            $
            1,666,273
            
            $
            1,545,836Investment
                securities
            
            
            203,049
            
            
            161,510
            
            
            151,679Total
                loans, net of unearned income
            
            
            1,509,883
            
            
            1,262,560
            
            
            1,189,165Total
                deposits
            
            
            1,661,451
            
            
            1,409,465
            
            
            1,299,464Junior
                subordinated debentures
            
            
            61,547
            
            
            61,547
            
            
            61,547FHLB
                borrowings
            
            
            20,000
            
            
            61,000
            
            
            61,000Shareholders’
                equity
            
            
            141,753
            
            
            113,104
            
            
            106,799**Asset
                Quality Ratios:**Net
                charge-off (recoveries) to average total loans for the
                quarter
            
            
            0.05
            %
            
            0.03
            %
            
            0.01
            %Nonperforming
                loans to total loans
            
            
            0.47
            %
            
            0.20
            %
            
            0.33
            %Nonperforming
                assets to total loans and other real estate owned
            
            
            0.49
            %
            
            0.22
            %
            
            0.34
            %Allowance
                for loan losses to total loans
            
            
            1.22
            %
            
            1.11
            %
            
            1.14
            %Allowance
                for loan losses to nonperforming loans
            
            
            259
            %
            
            567
            %
            
            344
            %




**Executive
      Overview**




**Introduction**




Wilshire
      Bancorp, Inc. (the “Company,” “we,” “us,” or “our,” hereafter) succeeded to the
      business and operations of Wilshire State Bank (the “Bank”) upon consummation of
      the reorganization of the Bank into a holding company structure, effective
      as of
      August 25, 2004. Prior to the completion of the reorganization, the Bank was
      subject to the information, reporting and proxy statement requirements of the
      Exchange Act, pursuant to the regulations of its primary regulator, the Federal
      Deposit Insurance Corporation, or FDIC. Accordingly, the Bank filed annual
      and
      quarterly reports, proxy statements and other information with the FDIC.
      Pursuant to Rule 12g-3 of the Exchange Act, the Company has succeeded to the
      reporting obligations of the Bank and the reporting obligations of the Bank
      to
      the FDIC have terminated. Filings by the Company under the Exchange Act, like
      this Form 10-Q, are to be made with the SEC.




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







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




14






At
      September 30, 2006, we had approximately $1.91 billion in assets, $1.51 billion
      in total loans, and $1.66 billion in deposits. We have also expanded and
      diversified our business by focusing on the continued development of our
      commercial and consumer lending divisions.




As
      of May
      19, 2006, we completed the acquisition of Liberty Bank of New York (“Liberty”)
      and its merger into Wilshire State Bank. With this acquisition, we added $66
      million in total assets and two branches in New York City. We paid $14.5 million
      for this acquisition, which consisted of $8.6 million in cash and $5.9 million
      in our common stock (328,110 shares). We also incurred merger-related costs
      of
      $625,000 which we recognized as additional consideration in connection with
      this
      business combination.




Over
      the
      past several years, our network of branches and loan production offices has
      been
      expanded geographically. We currently maintain 19 branch offices and seven
      loan
      production offices. Our expansion in these areas complements our multi-ethnic
      small business focus. We intend to continue our growth strategy in future years
      through the opening of additional branches and loan production offices as our
      needs and resources permit.




In
      December 2002, the Bank issued $10 million of the 2002 Junior Subordinated
      Debentures. Subsequently, the Company, as a wholly-owned subsidiary in 2003
      and
      as a parent company of the Bank in 2005, issued a total of $51,547,000 of Junior
      Subordinated Debentures in connection with $50,000,000 of trust preferred
      securities issued by statutory trusts wholly-owned by the Company. We believe
      that the supplemental capital raised in connection with the issuance of these
      debentures allowed us to achieve and maintain status as a well-capitalized
      institution and sustained our continued loan growth.




As
      evidenced by our past several years of operations, we have experienced
      significant balance sheet growth. We have implemented a strategy of building
      our
      core banking foundation by focusing on commercial loans and business transaction
      accounts. Our management believes that this strategy has created recurring
      revenue streams, diversified our product portfolio and enhanced shareholder
      value.




**Third** **Quarter 2006 Key Performance Indicators**




We
      believe the following were key indicators of our performance during the third
      quarter of 2006:




·
            Our
                total assets grew to $1.91 billion at the end of the third quarter
                of
                2006, an increase of 14.62% from $1.67 billion at the end of
                2005.




·
            Our
                total deposits grew to $1.66 billion at the end of the third quarter
                of
                2006, an increase of 17.88% from $1.41 billion at the end of
                2005.




·
            Our
                total loans grew to $1.51 billion at the end of the third quarter
                of 2006,
                an increase of 19.59% from $1.26 billion at the end of 2005.




·
            Our
                ratio of total non-performing loans to total loans was 0.47%, increased
                from 0.20% at the end of 2005 and 0.33% a year ago.




·
            Net
                interest income before provision for loan loss for the third quarter
                of
                2006 increased by $3.8 million (23.1%) to $20.1 million, as compared
                with
                $16.3 million in the third quarter of
                2005.




·
            The
                net interest margin decreased to 4.59% in the third quarter of 2006,
                as
                compared with 4.84% in the third quarter of 2005.




·
            Total
                noninterest income increased to $7.5 million in the third quarter
                of 2006,
                an increase of 45.94% from $5.1 million in the third quarter of 2005.




·
            Total
                noninterest expense increased from $8.4 million in the third quarter
                of
                2005 to $10.7 million in the third quarter of 2006, reflecting the
                expanded personnel and premises associated with our business growth,
                especially the market expansion into New York City.




·
            Efficiency
                ratio for the third quarter of 2006 improved to 38.8% as compared
                with
                39.0% in the year earlier.




These
      items, as well as other factors, contributed to the increase in net income
      for
      the third quarter of 2006 to $8.8 million, or $0.30 per diluted common share,
      as
      compared with $7.2 million, or $0.25 per diluted common share, in the third
      quarter of 2005.




15




**200** **6
      Outlook**




As
      we
      look ahead to the remainder of 2006, the economies and real estate markets
      in
      our primary market areas will continue to be significant determinants of the
      quality of our assets in future periods and, thus, our results of operations,
      liquidity and financial condition. Current economic indicators suggest that
      the
      national economy and the economies in our primary market areas are still
      expanding.




We
      will
      continue to pursue opportunities for growth in our existing markets, as well
      as
      opportunities to expand into new markets through *de
      novo* branching and regional loan production offices. With our acquisition of Liberty
      in the second quarter of 2006, we added two branches in the New York
      metropolitan area and expanded our business into the East Coast market of the
      United States. Since May 19, 2006, our portfolio of loans in New York has grown
      by 77%, from $26 million to $46 million at the end of the third quarter of
      2006.
      Deposit growth has exceeded our expectations as well, doubling to $100 million
      at the end of September 2006.




W e
      will
      continue our focus on loan and deposit growth, while streamlining our operations
      so that our expenses grow more slowly than the overall growth of our business.
      Furthermore, we expect that our portfolio of unsecured business loans and
      consumer loans will continue to grow as a result of target-marketing efforts
      in
      these specific areas.




Our
      focus
      on net interest margin management will continue. We have generally been in
      an
      asset-sensitive position, meaning that more interest earning assets immediately
      re-price than interest-bearing liabilities. Although the interest repricing
      gap
      in our models indicate that our margin generally decreases in a declining
      interest-rate environment, we do not anticipate a major drop, if any, in our
      net
      interest margin because our rate-sensitivity position between assets and
      liabilities for the one-year timeframe is currently about neutral. We also
      believe that our continued marketing strategy for core deposits, complemented
      by
      our New York market expansion, will benefit our net interest margin going
      forward.




For
      the
      remainder of 2006, management will focus on the implementation of Wilshire’s
      marketing strategy into the newly acquired New York branches in addition to
      the
      above challenges and opportunities and other factors affecting the business
      results of the third quarter of 2006, as discussed in “Management’s Discussion
      and Analysis of Financial Condition and Results of Operations.”




**Critical
      Accounting Policies**




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




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




Our
      significant accounting policies are described in greater detail in our 2005
      Annual Report on Form 10-K in the “Critical Accounting Policies” section of
“Management’s Discussion and Analysis of Financial Condition and Result of
      Operations” and in Note 1 to the Consolidated Financial Statements-“Significant
      Accounting Policies” which are essential to understanding Management’s
      Discussion and Analysis of Results of Operations and Financial Condition. There
      has been no material modification to these policies during the quarter ended
      September 30, 2006.




16




**Results
      of Operations**




**Net
      Interest Income and Net Interest Margin**




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




Average
      net loans increased by 27.5% to $1.46 billion in the third quarter of 2006,
      as
      compared with $1.15 billion in the same quarter of 2005 and average
      interest-earning assets increased by 29.7% to $1.75 billion in the third quarter
      of 2006, as compared with $1.35 billion in the same quarter of 2005. **** Our
      average interest-bearing deposits also increased by 38.3% to $1.31 billion
      in
      the third quarter of 2006, as compared with $947.6 million in the same quarter
      of 2005. Although other borrowings decreased over the last 12 months (see
“Financial Condition-Deposits and Other Sources of Funds” below), average
      interest-bearing liabilities increased by 34.3% to $1.41 billion in the third
      quarter of 2006, as compared with $1.05 billion in the same quarter of 2005.




The
      strong competition for customer deposits in our local market in the latter
      part
      of 2005 caused our cost of funds to increase more than the increase of our
      earning-asset yields. Our cost of funds increased by 1.52% (to 4.94% for the
      third quarter of 2006 from 3.42% for the prior year’s same quarter), more than
      the 1.07% increase in the earning-asset yields over the same time period.




The
      combined results of our growth and the interest rate increases were an increase
      in our net interest income. Net interest income increased by $3.8 million,
      or
      23.14%, to $20.1 million in the third quarter of 2006 as compared with $16.3
      million for the prior year’s same quarter. Although deposit rates typically
      adjust upwards slower than rates on our interest-earning assets, now that
      interest rates have leveled off, our cost of funds has continued to rise. As
      a
      result, our net interest margin and spread were under some pressure and
      decreased to 4.59% and 3.62%, respectively, in the third quarter of 2006, as
      compared with 4.84% and 4.07%, respectively, for the prior year’s same quarter.




For
      the
      first nine months of 2006, average interest-earning assets and average net
      loans
      increased to $1.8 billion and $1.4 billion, respectively, as compared with
      $1.4
      billion and $1.1 billion for the prior year’s same period. For the first nine
      months of 2006, average interest-bearing liabilities and the average
      interest-bearing deposit portfolio also increased to $1.4 billion and $1.3
      billion, respectively, as compared with $996.8 million and $900.8 million for
      the prior year’s same period. The average yields on interest-earning assets
      increased by 1.29% to 8.29% for the first nine months of 2006 from 7.00% for
      the
      prior year’s same period, while our cost of funds increased by 1.46% to 4.46%
      for the first nine months of 2006 from 3.00% for the prior year’s same period.
      The combined results of our growth and the interest rate increases were an
      increase in our net interest income. Net interest income increased by $11.9
      million, or 26.45%, to $56.8 million in the first nine months of 2006 as
      compared with $44.9 million for the prior year’s same period. With the increase
      in the cost of funds higher than the increase of earning-asset yields over
      the
      past nine months, our net interest margin and spread was under some pressure
      and
      decreased to 4.57% and 3.65%, respectively, in the first nine months of 2006,
      as
      compared with 4.67% and 4.00%, respectively, for the prior year’s same period.




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




17




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




**For
                  the Quarter Ended September 30,****2006**
              
              **2005****(****Dollars
                  in Thousands)****Average
                  Balance**
              
              **Interest
                  Income/ Expense**
              
              **Annualized
                  Average Rate/Yield**
              
              **Average
                  Balance**
              
              **Interest
                  Income/ Expense**
              
              **Annualized
                  Average**
                **Rate/Yield****Assets**:
                Interest-earning
                  assets:Net
                  loans1
              
              $
              1,460,959
              
              $
              33,995
              
              
              9.31
              %
              $
              1,145,588
              
              $
              23,426
              
              
              8.18
              %Securities
                  of U.S. government agencies
              
              
              184,688
              
              
              2,086
              
              
              4.52
              %
              
              133,224
              
              
              1,214
              
              
              3.64
              %Other
                  investment securities
              
              
              22,865
              
              
              271
              
              
              4.73
              %
              
              6,340
              
              
              67
              
              
              4.21
              %Commercial
                  paper
              
              
              -
              
              
              -
              
              
              -
              
              
              1,476
              
              
              15
              
              
              3.95
              %Overnight
                  investments
              
              
              81,626
              
              
              1,107
              
              
              5.43
              %
              
              56,865
              
              
              505
              
              
              3.55
              %Money
                  market preferred securities
              
              
              -
              
              
              -
              
              
              -
              
              
              6,706
              
              
              52
              
              
              3.10
              %Interest-earning
                  deposits
              
              
              500
              
              
              5
              
              
              4.29
              %
              
              -
              
              
              -
              
              
              -Total
                  interest-earning assets
              
              
              1,750,638
              
              
              37,464
              
              
              8.56
              %
              
              1,350,199
              
              
              25,279
              
              
              7.49
              %Cash
                  and due from banks
              
              
              64,755
              
              
              
              
              
              
              
              
              61,399Other
                  assets
              
              
              77,792
              
              
              
              
              
              
              
              
              56,666Total
                  assets
              
              $
              1,893,185
              
              
              
              
              
              
              
              $
              1,468,264**Liabilities
                  and Shareholders’ Equity:**Interest-bearing
                  liabilities:Money
                  market deposits
              
              $
              375,030
              
              $
              4,078
              
              
              4.35
              %
              $
              230,776
              
              $
              1,700
              
              
              2.95
              %Super
                  NOW deposits
              
              
              20,550
              
              
              65
              
              
              1.26
              %
              
              21,823
              
              
              50
              
              
              0.92
              %Savings
                  deposits
              
              
              25,856
              
              
              95
              
              
              1.47
              %
              
              22,915
              
              
              42
              
              
              0.72
              %Time
                  certificates of deposit indenominations
                  of $100,000 or more
              
              
              726,287
              
              
              9,652
              
              
              5.32
              %
              
              562,434
              
              
              5,158
              
              
              3.67
              %Other
                  time deposits
              
              
              162,464
              
              
              1,955
              
              
              4.81
              %
              
              109,603
              
              
              879
              
              
              3.21
              %Total
                  interest bearing deposits
              
              
              1,310,187
              
              
              15,845
              
              
              4.84
              %
              
              947,551
              
              
              7,829
              
              
              3.30
              %Other
                  borrowings
              
              
              96,824
              
              
              1,516
              
              
              6.26
              %
              
              99,772
              
              
              1,124
              
              
              4.51
              %Total
                  interest-bearing liabilities
              
              
              1,407,011
              
              
              17,361
              
              
              4.94
              %
              
              1,047,323
              
              
              8,953
              
              
              3.42
              %Non-interest
                  bearing deposits
              
              
              322,911
              
              
              
              
              
              3.88
              %
              
              300,362Other
                  liabilities
              
              
              24,809
              
              
              
              
              
              
              
              
              15,605Shareholders’
                  equity
              
              
              138,454
              
              
              
              
              
              
              
              
              104,974Total
                  liabilities and shareholders’ equity
              
              $
              1,893,185
              
              
              
              
              
              
              
              $
              1,468,264Net
                  interest income
              
              
              
              
              $
              20,103
              
              
              
              
              
              
              
              $
              16,326Net
                  interest spread2
              
              
              
              
              
              
              
              
              3.62
              %
              
              
              
              
              
              
              
              4.07
              %Net
                  interest margin3
              
              
              
              
              
              
              
              
              4.59
              %
              
              
              
              
              
              
              
              4.84
              %







1 Net loan
        fees have been included in the calculation of interest income. Loan fees
        were
        approximately $1,561,000 and $1,393,000 for the quarters ended September
        30,
        2006 and 2005, respectively, and approximately $4,663,000 and $3,557,000
        for the
        nine months ended September 30, 2006 and 2005, respectively. Net loans are
        net
        of the allowance for loan losses, deferred fees, unearned income and related
        direct costs, but include those loans placed on non-accrual
        status.


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


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




18


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




**For
                  the Nine Months Ended September 30,****2006**
              
              **2005****(Dollars
                  in Thousands)****Average
                  Balance**
              
              **Interest
                  Income/ Expense**
              
              **Annualized
                  Average Rate/Yield**
              
              **Average
                  Balance**
              
              **Interest
                  Income/ Expense**
              
              **Annualized
                  Average Rate/Yield****Assets**:
                Interest-earning
                  assets:Net
                  loans1
              
              $
              1,369,249
              
              $
              93,271
              
              
              9.08
              %
              $
              1,086,350
              
              $
              62,436
              
              
              7.66
              %Securities
                  of U.S. government agencies
              
              
              173,633
              
              
              5,653
              
              
              4.34
              %
              
              118,059
              
              
              3,054
              
              
              3.45
              %Other
                  investment securities
              
              
              19,942
              
              
              706
              
              
              4.72
              %
              
              5,868
              
              
              188
              
              
              4.28
              %Commercial
                  paper
              
              
              -
              
              
              -
              
              
              -
              
              
              3,152
              
              
              82
              
              
              3.46
              %Overnight
                  investments
              
              
              95,250
              
              
              3,496
              
              
              4.89
              %
              
              65,186
              
              
              1,477
              
              
              3.02
              %Money
                  market preferred securities
              
              
              -
              
              
              -
              
              
              -
              
              
              5,051
              
              
              109
              
              
              2.88
              %Interest-earning
                  deposits
              
              
              500
              
              
              16
              
              
              4.25
              %
              
              -
              
              
              1
              
              
              -Total
                  interest-earning assets
              
              
              1,658,574
              
              
              103,142
              
              
              8.29
              %
              
              1,283,666
              
              
              67,346
              
              
              7.00
              %Cash
                  and due from banks
              
              
              62,605
              
              
              
              
              
              
              
              
              57,725Other
                  assets
              
              
              69,480
              
              
              
              
              
              
              
              
              50,042Total
                  assets
              
              $
              1,790,659
              
              
              
              
              
              
              
              $
              1,391,433**Liabilities
                  and Shareholders’ Equity:**Interest-bearing
                  liabilities:Money
                  market deposits
              
              
              346,755
              
              
              10,808
              
              
              4.16
              %
              
              233,910
              
              
              4,508
              
              
              2.57
              %Super
                  NOW deposits
              
              
              21,235
              
              
              188
              
              
              1.18
              %
              
              21,477
              
              
              130
              
              
              0.81
              %Savings
                  deposits
              
              
              23,773
              
              
              211
              
              
              1.19
              %
              
              23,345
              
              
              127
              
              
              0.72
              %Time
                  certificates of deposit indenominations
                  of $100,000 or more
              
              
              678,061
              
              
              25,399
              
              
              4.99
              %
              
              512,576
              
              
              12,335
              
              
              3.21
              %Other
                  time deposits
              
              
              153,336
              
              
              5,137
              
              
              4.47
              %
              
              109,546
              
              
              2,375
              
              
              2.89
              %Total
                  interest bearing deposits
              
              
              1,223,160
              
              
              41,743
              
              
              4.55
              %
              
              900,854
              
              
              19,475
              
              
              2.88
              %Other
                  borrowings
              
              
              107,937
              
              
              4,579
              
              
              5.66
              %
              
              95,914
              
              
              2,937
              
              
              4.08
              %Total
                  interest-bearing liabilities
              
              
              1,331,097
              
              
              46,322
              
              
              4.64
              %
              
              996,768
              
              
              22,412
              
              
              3.00
              %Non-interest
                  bearing deposits
              
              
              307,470
              
              
              
              
              
              3.64
              %
              
              281,476Other
                  liabilities
              
              
              23,746
              
              
              
              
              
              
              
              
              14,266Shareholders’
                  equity
              
              
              128,346
              
              
              
              
              
              
              
              
              98,923Total
                  liabilities and shareholders’ equity
              
              $
              1,790,659
              
              
              
              
              
              
              
              $
              1,391,433Net
                  interest income
              
              
              
              
              $
              56,820
              
              
              
              
              
              
              
              $
              44,934Net
                  interest spread2
              
              
              
              
              
              
              
              
              3.65
              %
              
              
              
              
              
              
              
              4.00
              %Net
                  interest margin3
              
              
              
              
              
              
              
              
              4.57
              %
              
              
              
              
              
              
              
              4.67
              %








1 Net loan
      fees have been included in the calculation of interest income. Loan fees were
      approximately $1,561,000 and $1,393,000 for the quarters ended September 30,
      2006 and 2005, respectively, and approximately $4,663,000 and $3,557,000 for
      the
      nine months ended September 30, 2006 and 2005, respectively. Net loans are
      net
      of the allowance for loan losses, deferred fees, unearned income and related
      direct costs, but include those loans placed on non-accrual status.


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


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




19







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




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




**(Dollars
      in Thousands)**




**Three
                Months Ended September 30,**
              **2006
                vs. 2005**
              **Increase
                (Decrease) Due to Change In**
            
            **Nine
                Months Ended September 30,**
              **2006
                vs. 2005**
              **Increase
                (Decrease) Due to Change In**Volume
            
            Rate
            
            Total
            
            Volume
            
            Rate
            
            Total**Interest
                income:**
              Net
                loans1
            
            $
            7,041
            
            
            3,528
            
            $
            10,569
            
            $
            18,019
            
            $
            12,816
            
            $
            30,835Securities
                of U.S. government agencies
            
            
            537
            
            
            335
            
            
            872
            
            
            1,677
            
            
            922
            
            
            2,599Other
                investment securities
            
            
            195
            
            
            9
            
            
            204
            
            
            496
            
            
            22
            
            
            518Commercial
                paper
            
            
            (15
            )
            
            -
            
            
            (15
            )
            
            (82
            )
            
            -
            
            
            (82
            )Overnight
                Investments
            
            
            272
            
            
            330
            
            
            602
            
            
            862
            
            
            1,157
            
            
            2,019Money
                market preferred securities
            
            
            (52
            )
            
            -
            
            
            (52
            )
            
            (109
            )
            
            -
            
            
            (109
            )Interest-earning
                deposits
            
            
            5
            
            
            -
            
            
            5
            
            
            16
            
            
            -
            
            
            16Total
                interest income
            
            
            7,983
            
            
            4,202
            
            
            12,185
            
            
            20,879
            
            
            14,917
            
            
            35,796**Interest
                expense:**Money
                market deposits
            
            
            1,350
            
            
            1,028
            
            
            2,378
            
            
            2,764
            
            
            3,536
            
            
            6,300Super
                NOW deposits
            
            
            (3
            )
            
            18
            
            
            15
            
            
            (1
            )
            
            59
            
            
            58Savings
                deposits
            
            
            6
            
            
            47
            
            
            53
            
            
            2
            
            
            82
            
            
            84Time
                certificates of deposit in
              denominations
                of $100,000 or more
            
            
            1,768
            
            
            2,726
            
            
            4,494
            
            
            4,796
            
            
            8,268
            
            
            13,064Other
                time deposits
            
            
            528
            
            
            548
            
            
            1,076
            
            
            1,168
            
            
            1,594
            
            
            2,762Other
                borrowings
            
            
            (34
            )
            
            426
            
            
            392
            
            
            403
            
            
            1,239
            
            
            1,642Total
                interest expense
            
            
            3,615
            
            
            4,793
            
            
            8,408
            
            
            9,132
            
            
            14,778
            
            
            23,910Change
                in net interest income
            
            $
            4,368
            
            $
            (591
            )
            $
            3,777
            
            $
            11,747
            
            $
            139
            
            $
            11,886







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




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




Although
      our proactive approaches in asset quality control, identifying problem loans
      in
      a timely manner and taking immediate actions on them, has helped us to maintain
      non-performing assets and net charge-offs at a relatively low level, our
      provision for loan losses generally increases as our loan portfolio grows.




The
      provision for loan losses increased to $2.80 million in the third quarter of
      2006 from $1.25 million for the prior year’s same quarter to keep pace with the
      continued growth in our loan portfolio and an increase of non-performing loans
      (see “Nonperforming Assets” below for further discussion). The provision for
      loan losses in the first nine months of 2006 was $5.06 million, as compared
      with
      $2.47 million in the prior year’s same period. The procedures for monitoring the
      adequacy of the allowance for loan losses, as well as detailed information
      concerning the allowance itself, are described in the section entitled
“Financial Condition-Allowance for Loan Losses” below .





1  Net
      loan
      fees have been included in the calculation of interest income. Loan fees were
      approximately $1,561,000 and $1,393,000 for the quarters ended September 30,
      2006 and 2005, respectively, and approximately $4,663,000 and $3,557,000 for
      the
      nine months ended September 30, 2006 and 2005, respectively. Net loans are
      net
      of the allowance for loan losses, unearned income and related direct
      costs.


20




**Noninterest
      Income**




Total
      noninterest income increased by 45.9% to $7.5 million in the third quarter
      of
      2006 as compared with $5.1 million for the prior year’s same quarter, due mainly
      to the overall increase of various income sources. Noninterest income as a
      percentage of average assets also increased to 0.40% for the third quarter
      of
      2006 from 0.35% for the prior year’s same period. For the first nine months of
      2006, total noninterest income increased by 35.1% to $19.8 million or 1.11%
      of
      average assets, as compared with $14.7 million or 1.05% of average assets in
      the
      same period of 2005. We currently earn non-interest income from various sources,
      including an income stream provided by bank-owned life insurance, or BOLI,
      in
      the form of an increase in cash surrender value.




The
      following table sets forth the various components of our noninterest income
      for
      the periods indicated:




**Noninterest
      Income**


**(Dollars
      in thousands)**




**For
                Three Months Ended September 30,**
            
            ******2006**
            
            ******2005****(Amount)**
            
            **(%)**
            
            **(Amount)**
            
            **(%)**Service
                charges on deposit accounts
            
            $
            2,545
            
            
            34.8
            %
            $
            1,973
            
            
            38.5
            %Gain
                on sale of loans
            
            
            3,455
            
            
            47.3
            %
            
            2,163
            
            
            42.2
            %Loan-related
                servicing income
            
            
            538
            
            
            7.4
            %
            
            475
            
            
            9.2
            %Loan
                referral fee income
            
            
            22
            
            
            0.3
            %
            
            -
            
            
            -SBA
                Loan packaging fee
            
            
            112
            
            
            1.5
            %
            
            102
            
            
            2.0
            %Income
                from other earning assets
            
            
            268
            
            
            3.7
            %
            
            224
            
            
            4.4
            %Other
                income
            
            
            368
            
            
            5.0
            %
            
            189
            
            
            3.7
            %Total
            
            $
            7,308
            
            
            100.0
            %
            $
            5,126
            
            
            100.0
            %Average
                assets
            
            $
            1,893,185
            
            
            
            
            $
            1,468,264Noninterest
                income as a % of average assets
            
            
            
            
            
            0.40
            %
            
            
            
            
            0.35
            %





**For
                Nine Months Ended September 30,**
            
            ******2006**
            
            ******2005****(Amount)**
            
            **(%)**
            
            **(Amount)**
            
            **(%)**Service
                charges on deposit accounts
            
            $
            7,141
            
            
            36.3
            %
            $
            5,508
            
            
            37.5
            %Gain
                on sale of loans
            
            
            8,860
            
            
            45.1
            %
            
            5,675
            
            
            38.7
            %Loan-related
                servicing income
            
            
            1,431
            
            
            7.3
            %
            
            1,606
            
            
            11.0
            %Loan
                referral fee income
            
            
            70
            
            
            0.4
            %
            
            118
            
            
            0.8
            %SBA
                Loan packaging fee
            
            
            346
            
            
            1.8
            %
            
            300
            
            
            2.0
            %Income
                from other earning assets
            
            
            765
            
            
            3.9
            %
            
            636
            
            
            4.3
            %Other
                income
            
            
            1,039
            
            
            5.2
            %
            
            836
            
            
            5.7
            %Total
            
            $
            19,652
            
            
            100.0
            %
            $
            14,679
            
            
            100.0
            %Average
                assets
            
            $
            1,790,659
            
            
            
            
            $
            1,391,433Noninterest
                income as a % of average assets
            
            
            
            
            
            1.11
            %
            
            
            
            
            1.05
            %







Our
      largest source of noninterest income for the third quarter of 2006 was the
      gain
      on the sale of loans, representing over 40% of our total noninterest income.
      It
      increased to $3.5 million and $8.9 million for the three months and nine months
      ended September 30, 2006 from $2.2 million and $5.7 million, respectively,
      for
      the prior year’s same periods. This non-interest income is derived primarily
      from the sale of the guaranteed portion of SBA loans. We sell the guaranteed
      portion of SBA loans in government securities secondary markets and retain
      servicing rights. For the first nine-month period, SBA loan production levels
      were $130.9 million in 2006, up from $104.8 million in 2005. The gain on sale
      of
      the guaranteed portions of SBA loans accordingly increased to $2.1 million
      and
      $7.4 million for the three months and nine months ended September 30, 2006
      as
      compared with $2.1 million and $5.4 million, respectively, for the prior year’s
      same periods. We also sell the unguaranteed portion of SBA loans, but the
      resulting gains are not considered a stable income source since this
      unguaranteed portion is sold mainly for credit risk management purposes. We
      recognized a $1.2 million gain on sale of the unguaranteed portion of SBA loans
      in the third quarter of 2006, whereas we had no such gains in the same period
      of
      2005. We also recognize noninterest income from the sale of residential mortgage
      loans. Since the inception of our Home Loan Center in the fourth quarter of
      2003, the sales of residential mortgage loans have become a stable noninterest
      income source, but gain on such sales decreased to $40,321 and $184,613,
      respectively, for the three months and nine months ended September 30, 2006
      as
      compared with $86,000 and $300,000, respectively, for the prior year’s same
      periods due to the slowdown of the residential mortgage market.




Our
      second largest noninterest income source was service charge income on deposit
      accounts, generally representing about 35% of our total noninterest income.
      This
      income source increased by 28.9% to $2.5 million in the third quarter of 2006
      and by 29.7% to $7.1 million in the first nine months of 2006 as compared with
      $2.0 million and $5.5 million, respectively, for the prior year’s same periods.
      Such increases were mainly caused by an increase in the number of transactional
      accounts over the past twelve months. We constantly review service charge rates
      to maximize service charge income while maintaining a competitive position.




21




The
      third
      largest source of noninterest income was loan-related servicing income. This
      fee
      income consists of trade-financing fees and servicing fees on SBA loans sold.
      With the expansion of our trade financing activities and the growth of our
      servicing loan portfolio, this fee income has generally increased. This fee
      income increased to $538,000 in the third quarter of 2006 as compared with
      $475,000 in the prior year’s same quarter, but this fee income decreased to $1.4
      million in the first nine months of 2006, as compared with $1.6 million for
      the
      prior year’s same period. Such decrease was mainly caused by the significant
      reversals of servicing rights on sold SBA loans which were paid off before
      their
      maturities. The servicing fee income on sold loans is credited when we collect
      the monthly payments on the sold loans we are servicing, and charged by the
      monthly amortization of servicing rights that we capitalize upon sale of the
      related loans. Such servicing rights are also reversed and charged against
      the
      fee income account when the sold loans are paid off before the related servicing
      rights are fully amortized. For the first nine months of 2006, $1.1 million
      of
      servicing assets were charged back to this income account by the early pay-offs
      as compared to $833,000 for the prior year’s same period. Considering our
      continued expansion of SBA activities (the servicing loan portfolio increased
      to
      $321.0 million at September 30, 2006 from $262.5 million a year ago), management
      believes that this income should continue to increase as prepayments on SBA
      loans slow down. However, there can be no assurance that this will be the case.




Our
      loan
      referral fee income source includes income derived from our referring to other
      financial institutions loans that did not meet our lending requirements for
      various reasons, including size, availability of funds, credit criteria and
      others. There was $22,000 of referral fee income in the third quarter of 2006,
      while there was no such income in the prior year’s same quarter. For the nine
      months ended September 30, 2006, the referral fee income was $70,000, as
      compared with $118,000 for the prior year’s same period. We cannot assure you
      that this source of revenue will increase because loan referrals do not
      represent our core banking business and fee income therefrom is not a stable
      source of revenue.




SBA
      loan
      packaging fee income represents charges to borrowers for SBA loan processing.
      This fee income generally grows as our level of SBA loan production increases.
      This fee income slightly increased to $112,000 and $346,000, respectively,
      in
      the third quarter and the first nine-month period of 2006, as compared with
      $102,000 and $300,000, respectively, for the prior year’s same periods.




Income
      from other earning assets represents income from earning assets other than
      interest-earning assets, such as dividend income from Federal Home Loan Bank
      (the “FHLB”) stock ownership and the increase in cash surrender value of BOLI.
      This income increased to $268,000 and $765,000, respectively, in the third
      quarter and the first nine-month period of 2006 as compared with $224,000 and
      $636,000, respectively, for the prior year’s same periods. These increases were
      primarily attributable to an additional purchase of $3 million in BOLI in the
      third quarter of 2005 and the increased acquisition of FHLB stock during the
      past twelve months.




Other
      income represents income from miscellaneous sources, such as check book sales
      income and recoveries of operating losses, and generally increases as our
      business activities grow. Other income increased to $368,000 and $1.0 million,
      respectively, in the third quarter and the first nine-month period of 2006
      as
      compared with $189,000 and $836,000 for the prior year’s same periods.




**Noninterest
      Expense**




Total
      noninterest expense increased to $10.7 million and $30.2 million for the three
      months and nine months ended September 30, 2006, respectively, as compared
      with
      $8.4 million and $23.7 million in the prior year’s same periods, representing an
      increase of 28.1% and 27.2%, respectively. These increases can be attributed
      to
      the expanded personnel and premises associated with our business growth and
      marketing activities in newly expanded markets and the increase was especially
      significant after the second quarter of 2006 because of expenses we incurred
      for
      the New York market expansion. However, due to continuing efforts to minimize
      operating expenses, noninterest expenses as a percentage of average assets
      decreased to 1.69% for the first nine month of 2006 from 1.71% in the same
      period of 2005. We believe that our efforts in cost-cutting and revenue
      diversification have improved our operational efficiency. We managed to maintain
      our efficiency ratio (the ratio of noninterest expense to the sum of net
      interest income before provision for loan losses and total noninterest income)
      at a relatively low level. Our efficiency ratio was stable at 38.8% and 39.4%
      for the three months and nine months ended September 30, 2006 as compared with
      39.0% and 39.8%, respectively, in the prior year’s same periods.




22




The
      following table sets forth a summary of noninterest expenses for the periods
      indicated:




**Noninterest
      Expenses**


**(Dollars
      in thousands)**




**For
                the Quarter Ended September 30,**
            
            **2006**
            
            **2005****(Amount)**
            
            **(%)**
            
            **(Amount)**
            
            **(%)**Salaries
                and employee benefits
            
            $
            6,327
            
            
            60.1
            %
            $
            4,924
            
            
            58.9
            %Occupancy
                and equipment
            
            
            1,257
            
            
            11.9
            %
            
            893
            
            
            10.7
            %Data
                processing
            
            
            675
            
            
            6.4
            %
            
            474
            
            
            5.6
            %Loan
                referral fee
            
            
            327
            
            
            3.1
            %
            
            344
            
            
            4.1
            %Professional
                fees
            
            
            343
            
            
            3.3
            %
            
            79
            
            
            0.9
            %Directors’
                fees
            
            
            148
            
            
            1.4
            %
            
            131
            
            
            1.6
            %Office
                supplies
            
            
            171
            
            
            1.6
            %
            
            236
            
            
            2.8
            %Other
                real estate owned
            
            
            1
            
            
            0.0
            %
            
            -
            
            
            -Advertising
            
            
            401
            
            
            3.8
            %
            
            164
            
            
            2.0
            %Communications
            
            
            107
            
            
            1.0
            %
            
            123
            
            
            1.5
            %Deposit
                insurance premium
            
            
            48
            
            
            0.4
            %
            
            38
            
            
            0.5
            %Outsourced
                service for customers
            
            
            301
            
            
            2.9
            %
            
            415
            
            
            4.9
            %Amortization
                of intangible
            
            
            75
            
            
            0.7
            %
            
            -
            
            
            -Investor
                relation expenses
            
            
            60
            
            
            0.6
            %
            
            4
            
            
            0.1
            %Other
                operating
            
            
            293
            
            
            2.8
            %
            
            535
            
            
            6.0
            %Total
            
            $
            10,535
            
            
            100.0
            %
            $
            8,360
            
            
            100.0
            %Average
                assets
            
            $
            1,893,185
            
            
            
            
            $
            1,468,264Noninterest
                expenses as a % of average assets
            
            
            
            
            
            0.56
            %
            
            
            
            
            0.57
            %





**For
                the Nine months Ended September 30,**
            
            **2006**
            
            **2005****(Amount)**
            
            **(%)**
            
            **(Amount)**
            
            **(%)**Salaries
                and employee benefits
            
            $
            17,548
            
            
            58.5
            %
            $
            13,617
            
            
            57.4
            %Occupancy
                and equipment
            
            
            3,225
            
            
            10.7
            %
            
            2,496
            
            
            10.5
            %Data
                processing
            
            
            1,830
            
            
            6.1
            %
            
            1,432
            
            
            6.0
            %Loan
                referral fee
            
            
            1,270
            
            
            4.2
            %
            
            913
            
            
            3.8
            %Professional
                fees
            
            
            835
            
            
            2.8
            %
            
            633
            
            
            2.7
            %Directors’
                fees
            
            
            394
            
            
            1.3
            %
            
            368
            
            
            1.6
            %Office
                supplies
            
            
            482
            
            
            1.6
            %
            
            478
            
            
            2.0
            %Other
                real estate owned
            
            
            13
            
            
            0.0
            %
            
            -
            
            
            -Advertising
                and promotional expenses
            
            
            959
            
            
            3.2
            %
            
            552
            
            
            2.3
            %Communications
            
            
            340
            
            
            1.1
            %
            
            330
            
            
            1.4
            %Deposit
                insurance premium
            
            
            138
            
            
            0.5
            %
            
            114
            
            
            0.5
            %Outsourced
                service for customers
            
            
            932
            
            
            3.1
            %
            
            1,072
            
            
            4.5
            %Amortization
                of intangible
            
            
            110
            
            
            0.4
            %
            
            -
            
            
            -Investor
                relation expenses
            
            
            170
            
            
            0.6
            %
            
            233
            
            
            1.0
            %Other
                operating
            
            
            1,769
            
            
            5.9
            %
            
            1,492
            
            
            6.3
            %Total
            
            $
            30,016
            
            
            100.0
            %
            $
            23,730
            
            
            100.0
            %Average
                assets
            
            $
            1,790,659
            
            
            
            
            $
            1,391,433Noninterest
                expenses as a % of average assets
            
            
            
            
            
            1.68
            %
            
            
            
            
            1.71
            %







Salaries
      and employee benefits usually represent more than half of our total noninterest
      expenses. For the three months and nine months ended September 30, 2006,
      salaries and employee benefits totaled $6.3 million and $17.5 million,
      respectively, as compared with $4.9 million and $13.6 million for the prior
      year’s same periods, representing an increase of 28.5% and 28.9%, respectively,
      from the comparable periods. Such increases were the result of our new office
      openings, especially for the two New York branches, and significant asset growth
      in the past 12 months that increased the number of full-time equivalent
      employees to 326 in September 2006 from 278 a year ago. However, our efforts
      to
      promote efficient operations increased assets per employee to $5.9 million
      at
      September 30, 2006 from $5.6 million at September 30, 2005.




Occupancy
      and equipment expenses represent approximately 10% of total non-interest
      expenses. These expenses increased by 29.2% to $3.2 million for the nine months
      ended September 30, 2006 as compared with $2.5 million for the prior year’s same
      period, due to the expansion of our office network. Such expenses for the third
      quarter of 2006 were $1.2 million, representing an increase (40.8%) from
      $893,000 in the prior year’s same quarter, due mainly to the lease expenses for
      our two New York branches.




Data
      processing expenses represent approximately 6% of total non-interest expenses.
      These expenses for the nine months ended September 30, 2006 increased by 27.8%
      to $1.8 million as compared with $1.4 million for the prior year’s same period,
      due to the general growth of our business. Such expenses increased by 42.5%
      to
      $675,000 in the third quarter of 2006 as compared with $474,000 in the prior
      year’s same quarter, due mainly to additional expenses incurred in servicing our
      two New York branches.




23






Loan
      referral fees are paid to brokers who refer loans to us, which are mostly SBA
      loans. Although we also pay referral fees for some qualified commercial loans,
      referral fee expenses generally correspond to our SBA loan production level.
      Our
      SBA loans production for the first nine month period of 2006 increased to $130.9
      million as compared to $104.8 million in the prior year’s same period and
      referral fees accordingly increased to $1.3 million from $913,000. Since our
      SBA
      loan production in the third quarter was $36 million which was lower than the
      $49 million a year ago, loan referral fee expenses in the third quarter of
      2006
      accordingly decreased to $327,000 from $344,000 in the prior year’s same
      quarter.




Professional
      fees for the nine month period of 2006 increased by 31.9% to $835,000 as
      compared with $633,000 in the prior year’s same period. Professional fees
      generally increased as we addressed the enhanced SEC regulations and Nasdaq
      corporate governance requirements as well as the regulations in various states
      where our business is expanding. We expect that expenditures in this area will
      continue to be significant. We recognize these expenses by the monthly accruals
      determined by our annual cost estimates on various projects, such as the annual
      audit engagement and SEC related legal services. These expenses in a specific
      quarter may fluctuate to reflect our adjustments necessary for the changes
      of
      such annual cost estimates. Professional fees were $343,000 and $79,000,
      respectively, in the third quarter of 2006 and 2005.




Advertising
      and promotional expenses  significantly
      increased to $401,000 and $959,000 for the three months and nine months ended
      September 30, 2006, respectively, as compared with $164,000 and $552,000 for
      the
      prior year’s same periods. These increases can be attributed to expanded
      marketing activities, such as media advertisements and promotional gifts for
      customers of newly opened offices, especially for the newly acquired New York
      branches.




Outsourced
      service costs for customers are payments made to third parties who provide
      services that were traditionally provided by banks to their customers, such
      as
      armored car services or bookkeeping services, and are recouped from the earnings
      credits earned by the respective depositors on their balances maintained with
      us. Due to the reduction of such services, these expenses slightly decreased
      to
      $301,000 and $932,000 for the three months and nine months ended September
      30,
      2006, respectively, as compared with $415,000 and $1.1 million for the prior
      year’s same periods.




Investor
      relations expenses represent costs for providing services to our existing or
      prospective shareholders, such as Nasdaq listing fees, fees for an outside
      investor relations company and various promotional material costs. For the
      first
      nine months of 2006, such expenses decreased to $170,000 from $233,000 in the
      same period of 2005, due mainly to the additional Nasdaq listing fees for
      additional shares issued in connection with the December 2004 stock split
      expensed in early 2005. We recognize these expenses by the monthly accruals
      on
      the basis of our annual cost estimates on various projects, such as the annual
      Nasdaq listing fees and investor relations. These expenses in a specific quarter
      may fluctuate to reflect our adjustments necessary for the changes of such
      annual cost estimates. These expenses were $60,000 and $4,000, respectively,
      in
      the third quarter of 2006 and 2005.




Noninterest
      expenses other than the categories specifically addressed above, such as office
      supplies and communication expenses generally increase as our business
      activities grow. These expenses decreased to $767,000 in the third quarter
      of
      2006 from $1.1 million in the prior year’s same quarter. Such decrease was
      attributable to the recovery ($406,000) of impairment valuation allowance of
      servicing assets which offsets the general increases in these areas. An
      impairment valuation allowance is recorded when the fair value is below the
      carrying amount. A recovery of the impairment allowance is recorded when its
      fair value exceeds the carrying amount. However, a reversal may not exceed
      the
      original valuation allowance recorded. For the first nine month period of 2006
      and 2005, these expenses were $3.1 million and $2.8 million, respectively.




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




**Provision
      for Income Taxes**




For
      the
      quarter ended September 30, 2006, we made a provision for income taxes of $5.3
      million on pretax net income of $14.1 million, representing an effective tax
      rate of 37.4%, as compared with a provision for income taxes of $4.7 million
      on
      pretax net income of $11.8 million, representing an effective tax rate of 39.4%,
      for the same quarter of 2005. For the first nine months of 2006, we made a
      provision for income taxes of $16.3 million on pretax net income of $41.4
      million, representing an effective tax rate of 39.5%, as compared with a
      provision for income taxes of $13.4 million on pretax net income of $33.4
      million, representing an effective tax rate of 40.1%, for the same period of
      2005.




24






The
      effective tax rates for the three months and nine months ended September 30,
      2006 were slightly lower than those for the prior year’s same periods, due
      mainly to the effect of the 2005 tax liability true-up. We filed our 2005 income
      tax returns in the third quarter of 2006 and the actual income tax liability
      on
      the 2005 return decreased by approximately $400,000 from the provision we
      recognized in 2005. Our effective tax rates are generally one to two percentage
      points lower than statutory rates due to state tax benefits derived from doing
      business in an Enterprise Zone and our ownership of BOLI and Low Income Housing
      Tax Credit Funds (see “Financial Condition -- Other Earning Assets” for further
      discussion). Generally, income tax expense is the sum of two components: current
      tax expense and deferred tax expense (benefit). Current tax expense is
      calculated by applying the current tax rate to taxable income. Deferred tax
      expense accounts for the change in deferred tax assets (liabilities) from year
      to year. Deferred income tax assets and liabilities represent the tax effects,
      based on current tax law, of future deductible or taxable amounts attributable
      to events that have been recognized in the financial statements. Because we
      traditionally recognize substantially more expenses in our financial statements
      than we have been allowed to deduct for taxes, we generally have a net deferred
      tax asset. At September 30, 2006 and December 31, 2005, we had net deferred
      tax
      assets of $9.5 million and $8.1 million, respectively.




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




**Financial
      Condition**




**Loan
      Portfolio**




Total
      loans, net of unearned income, increased by $247.3 million, or 14.6%, to $1.51
      billion at September 30, 2006, as compared with $1.26 billion at December 31,
      2005. Total loans, net of unearned income, as a percentage of total assets
      as of
      September 30, 2006 and December 31, 2005 were 79.1% and 75.8%,
      respectively.




Real
      estate secured loans consist primarily of commercial real estate loans and
      are
      extended to finance the purchase or improvement of commercial real estate or
      businesses thereon. The properties may be either user owned or for investment
      purposes. Our loan policy adheres to the real estate loan guidelines set forth
      by the FDIC. The policy provides guidelines including, among other things,
      fair
      review of appraisal value, limitation on loan-to-value ratio and minimum cash
      flow requirements to service debt. Loans secured by real estate equaled $1.16
      billion and $1.01 billion as of September 30, 2006 and December 31, 2005,
      respectively. The real estate secured loans as a percentage of total loans
      were
      76.7% and 80.1% at September 30, 2006 and December 31, 2005, respectively.
      The
      composition of real estate secured loans has increased due mainly to the robust
      California real estate market in the past few years, but lowered somewhat in
      2006 due mainly to our marketing strategy targeted for the relationship-based
      accounts, such as unsecured business and commercial loans. Since 2003, we have
      been actively involved in residential mortgage lending. We offer traditional
      and
      non-traditional mortgage products such as option ARM (Adjustable Rate Mortgage)
      and interest only programs. However, we predominantly sell our non-traditional
      loans to secondary markets and retain a fraction of conventional mortgages
      on
      our books. Our mortgage loan portfolio outstanding was $43.3 million at December
      31, 2005 and $42.3 million at September 30, 2006. We have deemed its effect
      on
      our credit risk profile to be immaterial. Non-traditional mortgage loans
      retained at the same periods were $8.0 million and $9.0 million respectively,
      including some pending transfers to secondary markets.




Commercial
      and industrial loans include revolving lines of credit, as well as term business
      loans. Commercial and industrial loans at September 30, 2006 increased to $260.1
      million, as compared with $190.8 million at December 31, 2005. Commercial and
      industrial loans as a percentage of total loans also increased to 17.2% at
      September 30, 2006, from 15.1% at December 31, 2005. Such increase was mainly
      caused by our marketing strategy targeted for the relationship-based accounts,
      such as unsecured business and commercial loans.




Consumer
      loans have historically represented less than 5% of our total loan portfolio.
      The majority of consumer loans are concentrated in automobile loans, which
      we
      formerly provided as a service only to existing customers. However, in 2003,
      we
      initiated a business plan to increase our consumer loan portfolio, and
      introduced an Auto Loan Center. Consumer loans continue to increase since we
      initiated the program. The outstanding portfolio was $42.9 million at December
      31, 2005 and $52.3 million at September 30, 2006. **** Management
      anticipates further increases in consumer loans going forward, although no
      assurance can be given that this increase will occur.




25






Construction
      loans generally have represented 5% or less of our total loan portfolio and
      are
      extended as a temporary financing vehicle only. In
      the
      third quarter of 2004, we formed a construction loan department by appointing
      a
      construction loan specialist as its manager under the guidance of the Commercial
      Loan Center. We expect to expand our construction lending activities with this
      specialized capacity.




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




The
      majority of the properties taken as collateral are located in Southern
      California. The loans generated by our loan production offices, which are
      located outside of our main geographical market, are generally collateralized
      by
      property in close proximity to those offices. We employ strict guidelines
      regarding the use of collateral located in less familiar market areas. Since
      a
      major real estate recession during the first part of the 1990s, property values
      in Southern California, where most of our loan collateral is located, have
      generally increased. However, no assurance can be given that this trend will
      continue or that property values will not significantly decrease.




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




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






**Amount
                Outstanding**
              **(Dollars
                in Thousands)****September
                30, 2006**
            
            **December
                31, 2005**Construction
            
            $
            39,519
            
            $
            17,366Real
                estate secured
            
            
            1,157,965
            
            
            1,011,513Commercial
                and industrial
            
            
            260,102
            
            
            190,796Consumer
            
            
            52,297
            
            
            42,885Total
                loans, excluding unearned income
            
            $
            1,509,883
            
            $
            1,262,560Participation
                loans sold and serviced by the Company
            
            $
            329,195
            
            $
            273,876Construction
            
            
            2.6
            %
            
            1.4
            %Real
                estate secured
            
            
            76.7
            %
            
            80.1
            %Commercial
                and industrial
            
            
            17.2
            %
            
            15.1
            %Consumer
            
            
            3.5
            %
            
            3.4
            %Total
                loans, excluding unearned income
            
            
            100.0
            %
            
            100.0
            %







The
      following table shows the contractual maturity distribution and repricing
      intervals of the outstanding loans in our portfolio as of September 30, 2006.
      In
      addition, the table shows the distribution of such loans between those with
      variable or floating interest rates and those with fixed or predetermined
      interest rates. The table excludes the gross amount of non-accrual loans of
      $7.8
      million and includes unearned income and deferred fees totaling $10.7 million
      at
      September 30, 2006:




26




**Loan
      Maturities and Repricing Schedule**




**At
                September 30, 2006****Within**
              **One
                Year**
            
            **After
                One**
              **But
                Within**
              **Five
                Years**
            
            **After**
              **Five
                Years**
            
            **Total****(Dollars
                in Thousands)**Construction
            
            $
            36,157
            
            $
            0
            
            $
            0
            
            $
            36,157Real
                estate secured
            
            
            914,559
            
            
            199,087
            
            
            44,590
            
            
            1,158,236Commercial
                and industrial
            
            
            258,006
            
            
            5,299
            
            
            3,330
            
            
            266,635Consumer
            
            
            23,846
            
            
            27,603
            
            
            268
            
            
            51,717Total
                loans, net of unearned income
            
            $
            1,232,568
            
            $
            231,989
            
            $
            48,188
            
            $
            1,512,745Loans
                with variable (floating) interest rates
            
            $
            1,163,015
            
            $
            29,333
            
            $
            720
            
            $
            1,193,068Loans
                with predetermined (fixed) interest rates
            
            $
            66,765
            
            $
            202,657
            
            $
            47,468
            
            
            316,890




**Nonperforming
      Assets**




Nonperforming
      assets consist of loans on non-accrual status, loans 90 days or more past due
      and still accruing interest, loans restructured, where the terms of repayment
      have been renegotiated resulting in a reduction or deferral of interest or
      principal, and other real estate owned (“OREO”).




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




Despite
      the significant growth of our loan portfolio, our continued emphasis on asset
      quality control enabled us to maintain a relatively low level of nonperforming
      loans prior to 2006. However, the general economic condition of the United
      States as well as the local economies in which we do business has seen
      a slowdown as the housing sector has cooled in the third quarter of 2006 and
      the
      transition to below-trend GDP growth has started. This transition of the economy
      affected our borrowers’ strength and our nonperforming loans increased to $7.1
      million at September 30, 2006, as compared with $2.5 million and $3.9 million
      at
      December 31, 2005 and September 30, 2005, respectively. The nonperforming loans
      as a percentage of total loans also increased to 0.47% at September 30, 2006,
      as
      compared with 0.20% and 0.33% at December 31, 2005 and September 30, 2005,
      respectively. Although nonperforming loans have increased in 2006, they remain
      manageable and we do not anticipate any significant losses because a majority
      of
      the increase was caused by two borrowers who recently experienced business
      deterioration. Such nonperforming loans were adequately protected with the
      underlying collaterals and reserves we provided as of September 30, 2006. We
      acquired three OREOs in 2005, totaling $294,000 at the end of 2005, and we
      subsequently sold one of them at a small profit. As of September 30, 2006,
      we
      possessed a residential property and a commercial property as OREO and their
      combined book value was $242,000.




We
      believe that our reserve for nonperforming loans, together with tangible
      collateral, was adequate as of September 30, 2006. See “Allowance for Loan
      Losses” below for further discussion. Except as disclosed above, as of September
      30, 2006, we were not aware of any material credit problems of borrowers that
      would cause us to have serious doubts about the ability of a borrower to comply
      with present loan payment terms. However, no assurance can be given that credit
      problems do not exist that may not have been brought to the attention of
      management.




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




27







**Nonperforming
      Assets**


**(Dollars
      in Thousands)**


**September
                30, 2006**
            
            **December
                31,**
              **2005**
            
            **September
                30, 2005****Nonaccrual
                loans:****1**Real
                estate secured
            
            $
            3,122
            
            $
            1,171
            
            $
            2,877Commercial
                and industrial
            
            
            2,058
            
            
            341
            
            
            614Consumer
            
            
            580
            
            
            292
            
            
            106Total
            
            
            5,760
            
            
            1,804
            
            
            3,597**Loans
                90 days or more past due (as to principal****or****interest) and still****accruing:**Construction
            
            
            -
            
            
            -
            
            
            -Real
                estate secured
            
            
            761
            
            
            553
            
            
            315Commercial
                and industrial
            
            
            520
            
            
            111
            
            
            9Consumer
            
            
            56
            
            
            -
            
            
            19Total
            
            
            1,337
            
            
            664
            
            
            343**Restructured
                loans:****2**Real
                estate secured
            
            
            -
            
            
            -
            
            
            -Commercial
                and industrial
            
            
            -
            
            
            -
            
            
            -Consumer
            
            
            -
            
            
            -
            
            
            -Total
            
            
            -
            
            
            -
            
            
            -Total
                nonperforming loans
            
            
            7,097
            
            
            2,469
            
            
            3,940Other
                real estate owned
            
            
            242
            
            
            294
            
            
            156Total
                nonperforming assets
            
            $
            7,339
            
            $
            2,763
            
            $
            4,096Nonperforming
                loans as a % of total loans
            
            
            0.47
            %
            
            0.20
            %
            
            0.33
            %Nonperforming
                assets as a % of total loans and OREO
            
            
            0.49
            %
            
            0.22
            %
            
            0.34
            %Allowance
                for loan losses as a % of nonperforming loans
            
            
            259.51
            %
            
            567.15
            %
            
            343.91
            %




**Allowance
      for Loan Losses**




In
      anticipation of credit risk inherent in our lending business, we set aside
      allowances through charges to earnings. Such charges were not only made for
      the
      outstanding loan portfolio, but also for off-balance sheet items, such as
      commitments to extend credit or letters of credit. Charges made for our
      outstanding loan portfolio were credited to the allowance for loan losses,
      whereas charges for off-balance sheet items were credited to the reserve for
      off-balance sheet items, which is presented as a component of other liabilities.
      The rapid growth of our loan portfolio has required more reserves for possible
      loan losses. The provision for loan losses is discussed in the section entitled
      “Results of Operations - Provision for Loan Losses”, above.




With
      the
      economic transition addressed in “Nonperforming Assets” above, the net
      charge-offs in 2006 increased to $707,000 and $892,000, respectively, in the
      third quarter and the first nine month period of 2006, respectively, as compared
      to net charge-offs of $90,000 and net recoveries of $59,000, in the third
      quarter and first nine-month period of 2005, respectively. In order to keep
      pace
      with the increase of charge-offs and nonperforming loans, as well as the growth
      of our loan portfolio, we increased our allowance for loan losses by $4.4
      million, or 31.6%, to $18.4 million at September 30, 2006 as compared with
      $14.0
      million at December 31, 2005. Our allowance for loan losses was $13.6 million
      at
      September 30, 2005. Although we believe the allowance at September 30, 2006
      is
      adequate to absorb losses from any known and inherent risks in the portfolio,
      no
      assurance can be given that economic conditions which may adversely affect
      our
      service areas or other variables will not result in increased losses in the
      loan
      portfolio in the future.




_______________________


1 During
          the three months ended September 30, 2006, no interest income related to
          these
          loans was included in net income. Additional interest income of approximately
          $346,000 would have been recorded during the three months ended September
          30,
          2006, if these loans had been paid in accordance with their original terms
          and
          had been outstanding throughout the three months ended September 30, 2006
          or, if
          not outstanding throughout the three months ended September 30, 2006, since
          origination..
 2 A
“restructured loan” is one the terms of which were renegotiated to provide a
          reduction or deferral of interest or principal because of deterioration
          in the
          financial position of the borrower.


28




As
      of
      September 30, 2006 and December 31, 2005, our allowance for loan losses
      consisted of amounts allocated to three phases of our methodology for assessing
      loan loss allowances, as follows:









**Phase
                of Methodology**
            
            **As
                of:**
            
            **As
                of:****September
                30, 2006**
            
            **December
                31, 2005**Specific
                review of individual loans
            
            $
            1,279,213
            
            $
            392,380Review
                of pools of loans with similar characteristics
            
            
            14,018,357
            
            
            11,345,551Judgmental
                estimate based on various subjective factors
            
            
            3,119,629
            
            
            2,261,371Total
                allowance for loan losses
            
            $
            18,417,199
            
            $
            13,999,302





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


**Distribution
                and Percentage Composition of Allowance for Loan
                Losses**
              **(Dollars
                in thousands)****Balance
                as of**
            
            **September
                30, 2006**
            
            **December
                31, 2005**Applicable
                to:
            
            **Reserve**
              **Amount**
            
            **Total**
              **Loans**
            
            **(%)**
            
            **Reserve**
              **Amount**
            
            **Total**
              **Loans**
            
            **(%)**Construction
                loans
            
            $
            249
            
            $
            36,158
            
            
            0.69
            %
            $
            152
            
            $
            15,322Real
                estate secured
            
            
            9,156
            
            
            1,162,640
            
            
            0.79
            %
            
            9,751
            
            
            1,015,055
            
            
            0.96
            %Commercial
                and industrial
            
            
            8,034
            
            
            269,563
            
            
            2.98
            %
            
            3,742
            
            
            199,581
            
            
            1.87
            %Consumer
            
            
            978
            
            
            52,297
            
            
            1.87
            %
            
            354
            
            
            42,885
            
            
            0.83
            %Total
                Allowance
            
            $
            18,417
            
            $
            1,520,658
            
            
            1.21
            %
            $
            13,999
            
            $
            1,272,843
            
            
            1.10
            %







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




**Allowance
      for Loan Losses**


**(Dollars
      in Thousands)**




**As
                  of and for the period of**
              
              **Three
                  Months Ended September 30,**
              
              **Nine
                  Months Ended September 30,****2006**
              
              **2005**
              
              **2006**
              
              **2005****Balances:**Average
                  total loans outstanding during period
              
              $
              1,477,773
              
              $
              1,158,245
              
              $
              1,384,858
              
              $
              1,098,404Total
                  loans (net of unearned income)
              
              
              1,509,883
              
              
              1,189,165
              
              $
              1,509,883
              
              
              1,189,165**Allowance
                  for loan losses:****Balances
                  at beginning of period**
              
              
              16,358
              
              
              12,450
              
              
              13,999
              
              
              11,111**Actual
                  charge-offs:**Real
                  estate secured
              
              
              131
              
              
              86
              
              
              138
              
              
              110Commercial
                  and industrial
              
              
              321
              
              
              114
              
              
              669
              
              
              264Consumer
              
              
              263
              
              
              -
              
              
              382
              
              
              52Total
                  charge-offs
              
              
              715
              
              
              200
              
              
              1,189
              
              
              426**Recoveries
                  on loans previously charged off:**Real
                  estate secured
              
              
              -
              
              
              -
              
              
              145
              
              
              24Commercial
                  and industrial
              
              
              8
              
              
              101
              
              
              146
              
              
              426Consumer
              
              
              1
              
              
              9
              
              
              5
              
              
              35Total
                  recoveries
              
              
              9
              
              
              110
              
              
              297
              
              
              485Net
                  charge-offs (net recoveries)
              
              
              706
              
              
              90
              
              
              892
              
              
              (59
              )**Allowance
                  for loan losses acquired in acquisition**
              
              
              -
              
              
              -
              
              
              601
              
              
              -**Provision
                  for loan losses**
              
              
              2,800
              
              
              1250
              
              
              5,060
              
              
              2,470**Less:
                  provision for off-balance sheet credit losses**
              
              
              35
              
              
              59
              
              
              351
              
              
              89**Balances
                  at end of period**
              
              $
              18,417
              
              $
              13,551
              
              $
              18,417
              
              $
              13,551**Ratios:**Net
                  charge-offs (net recoveries) to average total loans
              
              
              0.05
              %
              
              0.01
              %
              
              0.06
              %
              
              (0.01
              %)Allowance
                  for loan losses to total loans at period-end
              
              
              1.22
              %
              
              1.14
              %
              
              1.22
              %
              
              1.14
              %Net
                  charge-offs (net recoveries) to allowance for loan losses
              
              
              3.84
              %
              
              0.67
              %
              
              4.85
              %
              
              (0.43
              %)Net
                  charge-offs (net recoveries) to provision for loan losses
              
              
              25.24
              %
              
              7.24
              %
              
              17.64
              %
              
              (2.37
              %)


29




**Contractual
      Obligations**




The
      following table represents our aggregate contractual obligations to make future
      payments (principal and interest) as of September 30, 2006:




**(Dollars
                in thousands)**
            
            **One
                Year****or Less**
            
            **Over
                One Year****To
                Three Years**
            
            **Over
                Three Years****To
                Five Years**
            
            **Over
                Five****Years**
            
            **Total**FHLB
                borrowings
            
            $
            -
            
            $
            20,950
            
            $
            -
            
            $
            -
            
            $
            20,950Junior
                subordinateddebentures
            
            
            4,491
            
            
            6,487
            
            
            1,788
            
            
            61,547
            
            
            74,313Operating
                leases
            
            
            2,562
            
            
            4,544
            
            
            2,299
            
            
            2,447
            
            
            11,852Time
                deposits
            
            
            952,039
            
            
            7,031
            
            
            7
            
            
            13
            
            
            959,090Total
            
            $
            959,092
            
            $
            39,012
            
            $
            4,094
            
            $
            64,007
            
            $
            1,066,205




**Off-Balance
      Sheet Arrangements**




During
      the ordinary course of business, we provide various forms of credit lines to
      meet the financing needs of our customers. These commitments, which represent
      a
      credit risk to us, are not represented in any form on our balance
      sheets. **** As
      of
      September 30, 2006 and December 31, 2005, we had commitments to extend credit
      of
      $136.3 million and $104.3 million, respectively. Obligations under standby
      letters of credit were $4.2 million and $2.5 million at September 30, 2006
      and
      December 31, 2005, respectively, and our obligations under commercial letters
      of
      credit were $14.9 million and $11.4 million at such dates, respectively. The
      effect on our revenues, expenses, cash flows and liquidity from the unused
      portion of the commitments to provide credit cannot be reasonably predicted
      because there is no guarantee that the lines of credit will be used.




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




**Investment
      Activities**




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




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




We
      sell
      federal funds, purchase securities under agreements to resell and high quality
      money market instruments, and deposit interest bearing accounts in other
      financial institutions to help meet liquidity requirements and provide temporary
      holdings until the funds can be otherwise deployed or invested. As of September
      30, 2006 and December 31, 2005, we had $65 million and $126 million,
      respectively, in federal funds sold and repurchase agreements, and $500,000
      at
      each of September 30, 2006 and December 31, 2005 in interest-bearing deposits
      in
      other financial institutions.




*Investment
      Securities*




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




30




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




**Investment
      Securities Portfolio**


**(Dollars
      in Thousands)**




**As
                of September 30, 2006**
            
            **As
                of December 31, 2005****Amortized**
              **Cost**
            
            **Market
                Value**
            
            **Amortized**
              **Cost**
            
            **Market
                Value**Held
                to Maturity:Securities
                of government sponsored enterprises
            
            $
            17,999
            
            $
            17,779
            
            $
            19,993
            
            $
            19,684Collateralized
                mortgage obligation.
            
            
            206
            
            
            189
            
            
            248
            
            
            229Municipal
                securities
            
            
            2,425
            
            
            2,414
            
            
            2,619
            
            
            2,598Available
                for Sale:Securities
                of government sponsored enterprises
            
            
            108,762
            
            
            108,235
            
            
            77,882
            
            
            76,981Mortgage
                backed securities
            
            
            22,885
            
            
            22,709
            
            
            23,451
            
            
            23,158Collateralized
                mortgage obligation
            
            
            30,799
            
            
            30,427
            
            
            26,302
            
            
            25,870Corporate
                securities
            
            
            13,452
            
            
            13,334
            
            
            8,132
            
            
            8,047Municipal
                securities
            
            
            7,725
            
            
            7,713
            
            
            4,661
            
            
            4,594Total
                investment securities
            
            $
            204,253
            
            $
            202,800
            
            $
            163,288
            
            $
            161,161







The
      following table summarizes the maturity and repricing schedule of our investment
      securities at their carrying values and their weighted average yields (without
      the consideration of tax effects, if any) at September 30, 2006:




**Investment
      Maturities and Repricing Schedule**


**(Dollars
      in Thousands)**




**Within
                One Year**
            
            **After
                One But**
              **Within
                Five Years**
            
            **After
                Five But**
              **Within
                Ten Years**
            
            **After
                Ten Years**
            
            **Total****Amount**
            
            **Yield**
            
            **Amount**
            
            **Yield**
            
            **Amount**
            
            **Yield**
            
            **Amount**
            
            **Yield**
            
            **Amount**
            
            **Yield****Held
                to Maturity:**
              Securities
                of governmentsponsored
                enterprises
            
            $
            3,999
            
            
            3.70
            %
            $
            12,000
            
            
            4.10
            %
            
            2,000
            
            
            3.97
            %
            
            -
            
            
            -
            
            $
            17,999
            
            
            4.00
            %Mortgage
                backed securities
            
            
            -
            
            
            -
            
            
            206
            
            
            3.97
            %
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            206
            
            
            3.97
            %Municipal
                securities
            
            
            2,000
            
            
            4.03
            %
            
            425
            
            
            4.12
            %
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            2,425
            
            
            4.05
            %**Available-for-sale:**
              Securities
                of governmentsponsored
                enterprises
            
            
            44,774
            
            
            4.20
            %
            
            61,506
            
            
            4.68
            %
            
            1,955
            
            
            4.17
            %
            
            -
            
            
            -
            
            
            108,235
            
            
            4.47
            %Mortgage
                backed securities
            
            
            12,632
            
            
            4.50
            %
            
            7,750
            
            
            4.51
            %
            
            -
            
            
            -
            
            
            2,328
            
            
            5.94
            %
            
            22,710
            
            
            4.65
            %Collateralized
                mortgageobligation
            
            
            -
            
            
            -
            
            
            30,427
            
            
            5.06
            %
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            30,427
            
            
            5.06
            %Corporate
                securities
            
            
            6,328
            
            
            4.97
            %
            
            5,081
            
            
            5.58
            %
            
            1,925
            
            
            4.46
            %
            
            -
            
            
            -
            
            
            13,334
            
            
            5.13
            %Municipal
                securities
            
            
            -
            
            
            -
            
            
            397
            
            
            3.66
            %
            
            2,257
            
            
            3.72
            %
            
            5,059
            
            
            4.06
            %
            
            7,713
            
            
            3.94
            %Total
                investment securities
            
            $
            69,733
            
            
            4.29
            %
            $
            117,792
            
            
            4.74
            %
            $
            8,137
            
            
            4.07
            %
            
            7,387
            
            
            4.66
            %
            $
            203,049
            
            
            4.56
            %




Our
      investment securities holdings increased by $41.5 million, or 25.7%, to $203.0
      million at September 30, 2006, compared to holdings of $161.5 million at
      December 31, 2005. Total investment securities as a percentage of total assets
      were 10.6% and 9.8% at September 30, 2006 and December 31, 2005, respectively.
      As of September 30, 2006, investment securities having a carrying value of
      $157.2 million were pledged to secure certain deposits.




As
      of
      September 30, 2006, held-to-maturity securities, which are carried at their
      amortized costs, decreased to $20.6 million from $22.9 million at December
      31,
      2005. Available-for-sale securities, which are stated at their fair market
      values, increased to $182.4 million at September 30, 2006 from $138.7 million
      at
      December 31, 2005. These increases reflect a strategy of improving our liquidity
      level using available-for-sale securities, in addition to immediately available
      funds, the majority of which are maintained in the form of overnight
      investments.




31






The
      following table shows our investments’ gross unrealized losses and fair value,
      aggregated by investment category and length of time that individual securities
      have been in a continuous unrealized loss position, at September 30, 2006 and
      December 31, 2005:




**As
                of September 30, 2006**
            
            
            
            
            
            **(Dollars
                in thousands)****Less
                than 12 months**
            
            **12
                months or longer**
            
            **Total****Description
                of Securities**
            
            **Fair
                Value**
            
            **Gross**
              **Unrealized**
              **Losses**
            
            **Fair
                Value**
            
            **Gross
                Unrealized Losses**
            
            **Fair
                Value**
            
            **Gross
                Unrealized Losses**Securities
                of governmentsponsored
                enterprises
            
            $
            27,885
            
            $
            (101
            )
            $
            75,256
            
            $
            (706
            )
            $
            103,141
            
            $
            (807
            )Collateralized
                mortgageobligations
            
            
            15,504
            
            
            (121
            )
            
            10,213
            
            
            (292
            )
            
            25,717
            
            
            (412
            )Mortgage
                backed securities
            
            
            2,249
            
            
            (12
            )
            
            10,703
            
            
            (243
            )
            
            12,952
            
            
            (255
            )Corporate
                securities
            
            
            5,082
            
            
            (36
            )
            
            2,915
            
            
            (82
            )
            
            7,997
            
            
            (118
            )Municipal
                securities
            
            
            1,609
            
            
            (29
            )
            
            4,153
            
            
            (43
            )
            
            5,762
            
            
            (73
            )$
            52,329
            
            $
            (299
            )
            $
            103,240
            
            $
            (1,366
            )
            $
            155,569
            
            $
            (1,665
            )







**As
                of December 31, 2005**
            
            
            
            
            
            
            
            
            
            **(Dollars
                in thousands)****Less
                than 12 months**
            
            **12
                months or longer**
            
            **Total****Description
                of Securities**
            
            **Fair
                Value**
            
            **Gross**
              **Unrealized**
              **Losses**
            
            **Fair
                Value**
            
            **Gross
                Unrealized Losses**
            
            **Fair
                Value**
            
            **Gross
                Unrealized Losses**Securities
                of governmentsponsored
                enterprises
            
            $
            52,380
            
            $
            (513
            )
            $
            41,285
            
            $
            (697
            )
            $
            93,665
            
            $
            (1,210
            )Collateralized
                mortgageobligations
            
            
            14,971
            
            
            (280
            )
            
            3,167
            
            
            (171
            )
            
            18,138
            
            
            (451
            )Mortgage-backed
                securities
            
            
            8,632
            
            
            (136
            )
            
            8,075
            
            
            (185
            )
            
            16,707
            
            
            (321
            )Corporate
                securities
            
            
            982
            
            
            (17
            )
            
            1,926
            
            
            (68
            )
            
            2,908
            
            
            (85
            )Municipal
                securities
            
            
            5,553
            
            
            (89
            )
            
            -
            
            
            -
            
            
            5,553
            
            
            (89
            )$
            82,518
            
            $
            (1,035
            )
            $
            54,453
            
            $
            (1,121
            )
            $
            136,971
            
            $
            (2,156
            )




As
      of
      September 30, 2006, the total unrealized losses less than 12 months old were
      $299,000, and total unrealized losses more than 12 months old were $1.37
      million. The aggregate related fair value of investments with unrealized losses
      less than 12 months old was $52.3 million at September 30, 2006, and those
      with
      unrealized losses more than 12 months old were $103.2 million. As of December
      31, 2005, the total unrealized losses less than 12 months old were $1.0 million
      and total unrealized losses more than 12 months old were $1.1 million. The
      aggregate related fair value of investments with unrealized losses less than
      12
      months old was $82.5 million at December 31, 2005, and those with unrealized
      losses more than 12 months old were $54.5 million.




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




We
      have
      the ability and intent to hold the securities classified as held-to-maturity
      until they mature, at which time we expect to receive full value for the
      securities. Furthermore, as of September 30, 2006, we also had the ability
      and
      intent to hold the securities classified as available-for-sale for a period
      of
      time sufficient for a recovery of cost. The unrealized losses were largely
      due
      to increases in market interest rates over the yields available at the time
      the
      underlying securities were purchased. The fair value is expected to recover
      as
      the bonds approach their maturity date or repricing date or if market yields
      for
      such investments decline. We do not believe any of the securities are impaired
      due to reasons of credit quality. Accordingly, as of September 30, 2006, we
      believe the impairments detailed in the table above were temporary, and no
      impairment loss has been realized in our consolidated statements of
      operations.




32




**Other
      Earning Assets**




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




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




In
      2003,
      we invested in two low-income housing tax credit funds (“LIHTCF”) to promote our
      participation in CRA activities. We committed to invest, over two to three
      years, a total of $3.0 million to two different LIHTCF - $1.0 million in Apollo
      California Tax Credit Fund XXII, LP, and $2.0 million in Hudson Housing Los
      Angeles Revitalization Fund, LP. We anticipate receiving the return following
      a
      two-to three-year period in the form of tax credits and tax deductions over
      15
      years.




In
      2006,
      we committed to invest an additional $1 million, $2 million, and $3 million,
      respectively, in WNC Institutional Tax Credit Fund XXI to promote our CRA
      activities in the Dallas, Texas assessment area, WNC Institutional Tax Credit
      Fund X New York Series 7 to promote our CRA activities in the New York, New
      York
      assessment area, and WNC Institutional Tax Credit Fund X California Series
      6 to
      promote our CRA activities in the Los Angeles, California assessment
      area.




The
      balances of other earning assets as of September 30, 2006 and December 31,
      2005
      were as follows:




**Type**
            
            **Balance
                as of**
              **September
                30, 2006**
            
            **Balance
                as of**
              **December
                31, 2005**BOLI
            
            $
            15,536,151
            
            $
            15,099,000LIHTCF
            
            $
            3,750,688
            
            $
            2,350,000Federal
                Home Loan Bank Stock
            
            $
            7,438,300
            
            $
            6,182,000


**Deposits
      and Other Sources of Funds**




*Deposits*




Deposits
      are our primary source of funds. Total deposits at September 30, 2006 and
      December 31, 2005 were $1.67 billion and $1.41 billion, respectively,
      representing an increase of $255.7 million, or 18.13%, over the first nine-month
      period of 2006.




In
      2005,
      our niche market depositors’ preference in time deposits bearing relatively high
      interest rates decreased the level of deposits in transactional accounts and
      we
      increased our reliance on time deposits to fund our loan growth. Despite our
      efforts in controlling the growth of expensive time deposits, the percentage
      of
      the average time deposits over the average total deposits in the third quarter
      of 2006 was 54.4%, slightly increased from 53.9% for the prior year’s same
      quarter. We believe that our regional diversification into the Texas and New
      York markets together with our efforts building up the core-deposit foundation
      will reduce our level of time deposit reliance going forward.




The
      average rate paid on time deposits in denominations of $100,000 or more for
      the
      third quarter and the first nine months of 2006 increased to 5.32% and 4.99%,
      respectively, as compared with 3.67% and 3.21%, respectively, for the same
      periods in the prior year. See “Net Interest Income and Net Interest Margin” for
      further discussion.




33


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




**Average
      Deposits**


**(Dollars
      in Thousands)**




**For
                the quarters ended:****September
                30, 2006**
            
            **December
                31, 2005**
            
            **September
                30, 2005****Average**
              **Balance**
            
            **Average**
              **Rate**
            
            **Average****Balance**
            
            **Average**
              **Rate**
            
            **Average****Balance**
            
            **Average**
              **Rate**Demand,
                noninterest-bearing
            
            $
            322,910
            
            
            
            
            $
            286,966
            
            
            
            
            $
            300,362Money
                market
            
            
            375,030
            
            
            4.35
            %
            
            247,313
            
            
            2.93
            %
            
            230,776
            
            
            2.95
            %Super
                NOW
            
            
            20,550
            
            
            1.26
            %
            
            21,446
            
            
            0.87
            %
            
            21,823
            
            
            0.92
            %Savings
            
            
            25,856
            
            
            1.47
            %
            
            22,878
            
            
            0.73
            %
            
            22,915
            
            
            0.72
            %Time
                certificates of deposit indenominations
                of $100,000 ormore
            
            
            726,287
            
            
            5.32
            %
            
            532,207
            
            
            3.49
            %
            
            562,434
            
            
            3.67
            %Other
                time deposits
            
            
            162,464
            
            
            4.81
            %
            
            116,698
            
            
            3.20
            %
            
            109,603
            
            
            3.21
            %Total
                deposits
            
            $
            1,633,097
            
            
            3.88
            %
            $
            1,227,508
            
            
            2.44
            %
            $
            1,247,913
            
            
            2.51
            %




The
      scheduled maturities of our time deposits in denominations of $100,000 or
      greater at September 30, 2006 were as follows:




**Maturities
      of Time Deposits of $100,000 or More, at September 30, 200** **6**


**(Dollars
      in Thousands)**


Three
                months or less
            
            $
            378,540Over
                three months through six months
            
            
            205,382Over
                six months through twelve months
            
            
            180,301Over
                twelve months
            
            
            2,728Total
            
            $
            766,951




Because
      our client base is comprised primarily of commercial and industrial accounts,
      individual account balances are generally higher than those of consumer-oriented
      banks. A number of clients carry deposit balances of more than 1% of our total
      deposits, but the California State Treasury was the only depositor which had
      a
      deposit balance of more than 5% of total deposits at September 30, 2006 and
      December 31, 2005.




We
      accept
      brokered deposits on a selective basis at reasonable interest rates to augment
      deposit growth. We have reduced these deposits to $5.5 million at September
      30,
      2006 from $23 million at December 31, 2005 in order to limit our reliance on
      non-core funding sources. Most of the brokered deposits will mature within
      one
      year. Since brokered deposits are generally less stable forms of deposits,
      we
      closely monitor growth from this non-core funding source.




*FHLB
      Borrowings*




Although
      deposits are the primary source of funds for our lending and investment
      activities and for general business purposes, we may obtain advances from the
      FHLB as an alternative to retail deposit funds. See “Liquidity Management” below
      for details relating to the FHLB borrowings program.




The
      following table is a summary of our FHLB borrowings for the quarters
      indicated:




**For
                the Quarter ended**(Dollars
                in Thousands)
            
            **September
                30, 2006**
            
            **December
                31, 2005**Balance
                at quarter-end
            
            $
            20,000
            
            $
            61,000Average
                balance during the quarter
            
            $
            35,163
            
            $
            56,151Maximum
                amount outstanding at any month-end
            
            $
            45,000
            
            $
            61,000Average
                interest rate during the quarter
            
            
            4.01
            %
            
            3.13
            %Average
                interest rate at quarter-end
            
            
            3.68
            %
            
            3.51
            %




*Junior
      Subordinated Debentures; Trust Preferred Securities*




In
      December 2002, the Bank issued $10 million of the 2002 Junior Subordinated
      Debentures. Subsequently, the Company, as a wholly owned subsidiary in 2003
      and
      as a parent company of the Bank in 2005, issued a total of $51,547,000 of Junior
      Subordinated Debentures in connection with a $50,000,000 trust preferred
      securities issuance by statutory trusts wholly owned by the Company.




34






2002
      Bank Level Junior Subordinated Debenture .
      In
      December 2002, the Bank issued a $10 million Junior Subordinated Debenture
      (the
“2002 debenture”). The interest rate payable on the 2002 debenture was 8.47% at
      September 30, 2006, which rate adjusts quarterly to the three-month LIBOR plus
      3.10%. The 2002 debenture will mature on December 26, 2012. Interest on the
      2002
      debenture is payable quarterly and no scheduled payments of principal are due
      prior to maturity. The Bank may redeem the 2002 debenture in whole or in part
      prior to maturity on or after December 26, 2007.




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




2003
      Junior Subordinated Debenture; Trust Preferred Securities
      Issuance .
      In
      December 2003, Wilshire Bancorp was formed as a wholly-owned subsidiary of
      the
      Bank, in order to raise additional capital funds through the issuance of trust
      preferred securities. Prior to the completion of the August 2004 bank holding
      company reorganization, Wilshire Bancorp organized its wholly owned subsidiary,
      Wilshire Statutory Trust I, which issued $15 million in trust preferred
      securities. Wilshire Bancorp then purchased all of the common interest in the
      Wilshire Statutory Trust I ($464,000) and issued the 2003 Junior Subordinated
      Debenture (the “2003 debenture”) in the amount of approximately $15.5 million to
      the Wilshire Statutory Trust I with terms substantially similar to the 2003
      trust preferred securities in exchange for the proceeds from the issuance of
      the
      Wilshire Statutory Trust I’s 2003 trust preferred securities and common
      securities. Wilshire Bancorp subsequently deposited the proceeds from the 2003
      debenture in a depository account at the Bank and infused $14.5 million as
      additional equity capital to the Bank immediately following the holding company
      reorganization. The rate of interest on the 2003 debenture and related trust
      preferred securities was 8.24% at September 30, 2006, which adjusts quarterly
      to
      the three-month LIBOR plus 2.85%. The 2003 debenture and related trust preferred
      securities will mature on December 17, 2033. The interest on both the 2003
      debenture and related trust preferred securities is payable quarterly and no
      scheduled payments of principal are due prior to maturity. Wilshire Bancorp
      may
      redeem the 2003 debenture (and in turn the trust preferred securities) in whole
      or in part prior to maturity on or after December 17, 2008.




March
      2005 Junior Subordinated Debenture; Trust Preferred Securities
      Issuance .
      In
      March 2005, Wilshire Bancorp organized its wholly owned subsidiary, Wilshire
      Statutory Trust II, which issued $20 million in trust preferred securities.
      Wilshire Bancorp then purchased all of the common interest in the Wilshire
      Statutory Trust II ($619,000) and issued the 2005 Junior Subordinated Debenture
      (the “March 2005 debenture”) in the amount of $20.6 million to the Wilshire
      Statutory Trust II with terms substantially similar to the March 2005 trust
      preferred securities in exchange for the proceeds from the issuance of the
      Wilshire Statutory Trust II’s March 2005 trust preferred securities and common
      securities. Wilshire Bancorp subsequently deposited the proceeds from the March
      2005 debenture in a depository account at the Bank and infused $14 million
      as
      additional equity capital to the Bank. The rate of interest on the March 2005
      debenture and related trust preferred securities was 7.18% at September 30,
      2006, which adjusts quarterly to the three-month LIBOR plus 1.79%. The March
      2005 debenture and related trust preferred securities will mature on March
      17,
      2035. The interest on both the March 2005 debenture and related trust preferred
      securities are payable quarterly and no scheduled payments of principal are
      due
      prior to maturity. Wilshire Bancorp may redeem the March 2005 debenture (and
      in
      turn the trust preferred securities) in whole or in part prior to maturity
      on or
      after March 17, 2010.




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




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




35




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




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




Under
      the
      final rule, as of September 30, 2006, Wilshire Bancorp would have been able
      to
      count $47.5 million of total trust preferred securities as Tier 1 capital,
      leaving $2.5 million as Tier 2 capital.




**Asset/Liability
      Management**




We
      seek
      to ascertain optimum and stable utilization of available assets and liabilities
      as a vehicle to attain our overall business plans and objectives. In this
      regard, we focus on measurement and control of liquidity risk, interest rate
      risk and market risk, capital adequacy, operation risk and credit risk. See
      further discussion on these risks in the “Risk Factors” section of our Annual
      Report on Form 10-K for the year ended December 31, 2005. Information concerning
      interest rate risk management is set forth under “Item 3. Quantitative and
      Qualitative Disclosures about Market Risk.”




**Liquidity
      Management**




Maintenance
      of adequate liquidity requires that sufficient resources be available at all
      times to meet our cash flow requirements. Liquidity in a banking institution
      is
      required primarily to provide for deposit withdrawals and the credit needs
      of
      its customers and to take advantage of investment opportunities as they arise.
      Liquidity management involves our ability to convert assets into cash or cash
      equivalents without incurring significant loss, and to raise cash or maintain
      funds without incurring excessive additional cost. For this purpose, we maintain
      a portion of our funds in cash and cash equivalents, deposits in other financial
      institutions and loans and securities available for sale. Our liquid assets
      at
      September 30, 2006 and December 31, 2005 totaled approximately $322.2 million
      and $355.2 million, respectively. Our liquidity level measured as the percentage
      of liquid assets to total assets was 16.9% and 21.3% at September 30, 2006
      and
      December 31, 2005, respectively.




As
      a
      secondary source of liquidity, we rely on advances from the FHLB to supplement
      our supply of lendable funds and to meet deposit withdrawal requirements.
      Advances from the FHLB are typically secured by our mortgage loans and stock
      issued by the FHLB. Advances are made pursuant to several different programs.
      Each credit program has its own interest rate and range of maturities. Depending
      on the program, limitations on the amount of advances are based either on a
      fixed percentage of an institution’s net worth or on the FHLB’s assessment of
      the institution’s creditworthiness. While this fund provides flexibility and low
      cost, we limit our use to 50% of borrowing capacity, as such borrowing does
      not
      qualify as core funds. As of September 30, 2006, our borrowing capacity from
      the
      FHLB was about $419.6 million and the outstanding balance was $20 million,
      or
      approximately 4.77% of our borrowing capacity. As of September 30, 2006, we
      also
      maintained a guideline to purchase up to $25 million and $10 million in federal
      funds with Bank of the West and Union Bank of California,
      respectively.




36


**Capital
      Resources and Capital Adequacy Requirements**




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




We
      are
      subject to various regulatory capital requirements administered by federal
      banking agencies. Under capital adequacy guidelines and the regulatory framework
      for prompt corrective action, we must meet specific capital guidelines that
      rely
      on quantitative measures of our assets, liabilities and certain
      off-balance-sheet items as calculated under regulatory accounting practices. Failure
      to meet minimum capital requirements can trigger regulatory actions under
      the
      prompt corrective action rules that
      could have a material adverse effect on our financial condition and
      operations. Prompt
      corrective action may include regulatory enforcement actions that restrict
      dividend payments, require the adoption of remedial measures to increase
      capital, terminate FDIC deposit insurance, and mandate the appointment of a
      conservator or receiver in severe cases. In addition, failure to maintain a
      well-capitalized status may adversely affect the evaluation of regulatory
      applications for specific transactions and activities, including acquisitions,
      continuation and expansion of existing activities, and commencement of new
      activities, and could adversely affect our business relationships with our
      existing and prospective clients. The aforementioned regulatory consequences
      for
      failing to maintain adequate ratios of Tier 1 and Tier 2 capital could have
      a
      material adverse effect on our financial condition and results of
      operations. Our
      capital amounts and classification are also subject to qualitative judgments
      by
      regulators about components, risk weightings, and other factors. See Part I,
      Item 1 “Description of Business -- Regulation and Supervision -- Capital
      Adequacy Requirements” in our Annual Report on Form 10-K for the year ended
      December 31, 2005 for additional information regarding regulatory capital
      requirements.




At
      September 30, 2006, total shareholders’ equity increased by $28.7 million, after
      declaring cash dividends of $4.4 million, to $141.8 million from $113.1 million
      at December 31, 2005. Such additional capital was primarily derived from
      internally generated operating income ($25.1 million) and the additional shares
      issued in connection with the Liberty Bank acquisition ($5.9 million). Our
      equity also increased by the share-based compensation and other comprehensive
      income.




As
      of
      September 30, 2006, we were qualified as a “well capitalized institution” under
      the regulatory framework for prompt corrective action. The following table
      presents the regulatory standards for well-capitalized institutions, compared
      to
      capital ratios as of the dates specified for the Company and the
      Bank:





**Actual
                ratios for the Company as of:****Wilshire
                Bancorp, Inc.**
            
            **Regulatory**
              **Well-**
              **Capitalized****Standards**
            
            **Regulatory**
              **Adequately-Capitalized****Standards**
            
            **September
                30, 2006**
            
            **December
                31, 2005**
            
            **September
                30, 2005**Total
                capital to risk-weighted assets
            
            
            10
            %
            
            8
            %
            
            13.66
            %
            
            14.41
            %
            
            14.81
            %Tier
                I capital to risk-weighted assets
            
            
            6
            %
            
            4
            %
            
            11.60
            %
            
            11.60
            %
            
            11.66
            %Tier
                I capital to adjusted average assets
            
            
            5
            %
            
            4
            %
            
            9.59
            %
            
            9.39
            %
            
            9.71
            %




**Actual
                ratios for the Bank as of:****Wilshire
                State Bank**
            
            **Regulatory**
              **Well-**
              **Capitalized****Standards**
            
            **Regulatory**
              **Adequately-Capitalized****Standards**
            
            **September
                30, 2006**
            
            **December
                31, 2005**
            
            **September
                30, 2005**Total
                capital to risk-weighted assets
            
            
            10
            %
            
            8
            %
            
            13.33
            %
            
            13.05
            %
            
            13.24
            %Tier
                I capital to risk-weighted assets
            
            
            6
            %
            
            4
            %
            
            11.44
            %
            
            11.15
            %
            
            11.25
            %Tier
                I capital to adjusted average assets
            
            
            5
            %
            
            4
            %
            
            9.46
            %
            
            9.04
            %
            
            9.36
            %




For
      the
      regulatory capital ratio computation purpose, we considered the Junior
      Subordinated Debentures of $61.5 million, which consists of $51.5 million issued
      by the Company in connection with the issuance of $50 million trust preferred
      securities and $10 million issued by the Bank. As of December 31, 2005, Wilshire
      Bancorp accounted for $38.0 million of such securities as Tier 1 capital,
      leaving $12.0 million, as Tier 2 capital. As of September 30, 2006, the portion
      qualified for Tier 1 capital increased to $47.5 million, reducing the portion
      for Tier 2 capital to $2.5 million. For the Bank level, only the $10 million
      debenture issued by the Bank in 2002 is treated as Tier 2 capital. See “Deposits
      and Other Sources of Funds” for further discussion regarding the capital
      treatment of subordinated debentures and the trust preferred securities.




37




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




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




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




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




The
      significant balance of noninterest bearing deposits puts us in an overall
      asset-sensitive position and we strategically plan a significant three-month
      positive gap to meet any unanticipated funding needs by maintaining a large
      portion of funds obtained from non-interest bearing deposits in overnight
      investments and other cash equivalents. In general, based upon our mix of
      deposits, loans and investments, increases in interest rates would be expected
      to increase our net interest margin. Decreases in interest rates would be
      expected to have the opposite effect. However, we usually seek to maintain
      a
      balanced position over the period of one year to ensure net interest margin
      stability in times of volatile interest rates. This is accomplished by
      maintaining a similar level of loans and investment securities and deposits
      available to be repriced within one year. At September 30, 2006, our position
      appeared balanced for a one-year timeframe with a negligible liability-sensitive
      cumulative gap (minus 0.98 % of average interest-earning assets). We do not
      anticipate a major change in our net interest margin as we expect such repricing
      gap to be eliminated within a year.




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




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




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




As
      our
      simulation measures indicate below, the net interest income increases
      (decreases) as market interest rates rise (fall), since we were in an overall
      asset-sensitive position with a 20.4% positive gap for the three-month
      timeframe. The NPV increases (decreases) as interest income increases
      (decreases) since the change in cash flows has a greater impact on the change
      in
      the NPV than does the change in the discount rate. However the extent of such
      changes was within the tolerance level prescribed by our ALM policy due partly
      to the near-balanced cumulative gap for the one-year timeframe.




38




The
      following table sets forth the interest rate sensitivity of our interest-earning
      assets and interest-bearing liabilities as of September 30, 2006 using the
      interest rate sensitivity gap ratio. For purposes of the following table, an
      asset or liability is considered rate-sensitive within a specified period when
      it can be repriced or matures within its contractual terms. Actual payment
      patterns may differ from contractual payment patterns:




**Interest
      Rate Sensitivity Analysis**


**(Dollars
      in Thousands)**




**At
                September 30, 2006****Amounts
                Subject to Repricing Within****Interest-earning
                assets:**
            
            **0-3
                months**
            
            **3-12
                months**
            
            **Over
                1 to 5 years**
            
            **After
                5 years**
            
            **Total**Gross
                loans1
            
            $
            1,169,654
            
            $
            62,914
            
            $
            231,989
            
            $
            48,188
            
            $
            1,512,745Investment
                securities
            
            
            30,863
            
            
            38,870
            
            
            117,792
            
            
            15,524
            
            
            203,049Federal
                funds sold and cash equivalentsagreement
                to resell
            
            
            65,003
            
            
            -
            
            
            -
            
            
            -
            
            
            65,003Interest-earning
                deposits
            
            
            500
            
            
            -
            
            
            -
            
            
            -
            
            
            500Total
            
            $
            1,266,020
            
            $
            101,784
            
            $
            349,781
            
            $
            63,712
            
            $
            1,781,297**Interest-bearing
                liabilities:**Savings
                deposits
            
            
            28,538
            
            
            -
            
            
            -
            
            
            -
            
            
            28,538Time
                deposits of $100,000 or more
            
            
            381,113
            
            
            383,110
            
            
            2,728
            
            
            -
            
            
            766,951Other
                time deposits
            
            
            59,681
            
            
            97,088
            
            
            4,178
            
            
            11
            
            
            160,958Other
                interest-bearing deposits
            
            
            389,563
            
            
            -
            
            
            -
            
            
            -
            
            
            389,563Other
                borrowingsdemand
                deposits
            
            
            -
            
            
            -
            
            
            20,000
            
            
            -
            
            
            20,000Subordinated
                debentures
            
            
            46,083
            
            
            -
            
            
            15,464
            
            
            -
            
            
            61,547Total
            
            $
            904,978
            
            $
            480,198
            
            $
            42,370
            
            $
            11
            
            $
            1,427,557Interest
                rate sensitivity gap
            
            $
            361,041
            
            
            ($
                378,414
            )
            $
            307,412
            
            $
            63,701
            
            $
            353,740Cumulative
                interest rate sensitivity gap
            
            $
            361,041
            
            
            ($
                17,373
            )
            $
            290,039
            
            $
            353,740Cumulative
                interest rate sensitivity gap ratio (based on average interest-earning
                assets)
            
            
            20,38
            %
            
            (0.98
            %)
            
            16.37
            %
            
            19.96
            %




The
      following table sets forth our estimated net interest income over a 12-month
      period and NPV based on the indicated changes in market interest rates as of
      September 30, 2006. All assets presented in this table are held-to-maturity
      or
      available-for-sale. At September 30, 2006, we had no trading securities:




**(Dollars
                in Thousands)**




**Change**
            
            **Net
                Interest Income****(in
                Basis Points)**
            
            **(next
                twelve months)**
            
            **%
                Change**
            
            **NPV**
            
            **%
                Change**+200
            
            
            115,446
            
            
            16.0
            %
            
            292,475
            
            
            8.0
            %+100
            
            
            107,076
            
            
            7.6
            %
            
            283,174
            
            
            4.5
            %0
            
            
            99,549
            
            
            -
            
            
            270,867
            
            
            --100
            
            
            96,839
            
            
            -2.7
            %
            
            253,266
            
            
            -6.5
            %-200
            
            
            89,026
            
            
            -10.6
            %
            
            232,091
            
            
            -14.3
            %




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




Our
      strategies in protecting both net interest income and economic value of equity
      from significant movements in interest rates involve restructuring our
      investment portfolio and using FHLB advances. We also permit the purchase of
      rate caps and floors, and engage in interest rate swaps, although we are not
      currently engaged in any of these activities.




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




As
      of
      September 30, 2006, we carried out an evaluation, under the supervision and
      with
      the participation of our management, including our chief executive officer
      and
      chief financial officer, of the effectiveness of the design and operation of
      our
“disclosure controls and procedures,” as such term is defined under Exchange Act
      Rules 13a-15(e) and 15d-15(e).







1Excludes the gross amount of non-accrual loans of approximately $7.3
        million at September 30, 2006.
  39


Based
      on
      this evaluation, our chief executive officer and chief financial officer
      concluded that, as of September 30, 2006, such disclosure controls and
      procedures were effective to ensure that information required to be disclosed
      by
      us in the reports we file or submit under the Exchange Act is recorded,
      processed, summarized and reported within the time periods specified in the
      rules and forms of the Securities and Exchange Commission, and accumulated
      and
      communicated to our management, including our chief executive officer and chief
      financial officer, as appropriate to allow timely decisions regarding required
      disclosure.




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




There
      were no changes in our internal controls over financial reporting during the
      quarter ended September 30, 2006 that materially affected, or are reasonably
      likely to materially affect, our internal controls over financial
      reporting.


40




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




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




From
      time
      to time, we are a party to claims and legal proceedings arising in the ordinary
      course of business. Our management evaluates our exposure to these claims and
      proceedings individually and in the aggregate and provides for potential losses
      on such litigation if the amount of the loss is estimable and the loss is
      probable.




We
      believe that there are no material litigation matters at the current time.
      Although the results of such litigation matters and claims cannot be predicted
      with certainty, we believe that the final outcome of such claims and proceedings
      will not have a material adverse impact on our financial position, liquidity,
      or
      results of operations.




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




None.


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


None.




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




None.




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




Not
      applicable.


41




**Item
                6.**
            **Exhibits******




**Exhibit
                Table****Reference
                Number**
            
            **Item**3.1
            
            Articles
                of Incorporation, as amended and restated13.2
            
            Bylaws,
                as amended and restated24.1
            
            Specimen
                of Common Stock Certificate34.2
            
            Indenture
                of Subordinated Debentures44.3
            
            Indenture
                by and between Wilshire Bancorp, Inc. and U.S. Bank National Association
                dated as of December 17, 2003511
            
            Statement
                Regarding Computation of Net Earnings per Share631.1
            
            Certification
                of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act of 200231.2
            
            Certification
                of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act of 200232
            
            Certifications
                of Chief Executive Officer and Chief Financial Officer Pursuant to
                18
                U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002





1.
            Incorporated
                herein by reference to Exhibit 3.1 in the Registration Statement
                on Form
                S-4 filed with the Securities and Exchange Commission on June 15,
                2004.


2.
            Incorporated
                herein by reference to Exhibit 3.2 in the Registration Statement
                on Form
                S-4 filed with the Securities and Exchange Commission on June 15,
                2004.


3.
            Incorporated
                herein by reference to Exhibit 4.1 in the Registration Statement
                on Form
                S-4 filed with the Securities and Exchange Commission on April 1,
                2004.


4.
            Incorporated
                herein by reference to Exhibit 4.2 in the Registration Statement
                on Form
                S-4 filed with the Securities and Exchange Commission on April 1,
                2004.


5.
            Incorporated
                herein by reference to Exhibit 4.3 in the Registration Statement
                on Form
                S-4 filed with the Securities and Exchange Commission on April 1,
                2004.


6.
            The
                information required by this Exhibit isincorporatedby
                reference from Note 3 of the Company’s Financial Statements included
                herein.




42


**SIGNATURES**




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


WILSHIRE
                BANCORP, INC.Date:
              November
              9,2006
            By:
            /s/
              Brian E. ChoBrian
                E. Cho
              Executive
                Vice President and Chief Financial Officer
              (Principal
                Financial and Accounting Officer)




43