**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 June 30, 2007.**




**OR**




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




**For
      the transition period from ____________ to
      ____________**




**Commission
      File Number 000-50923**







**WILSHIRE
      BANCORP, INC.**


(Exact
      name of registrant as specified in its charter)


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


Securities
      registered pursuant to Section 12(b) of the Act: **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 July 31,
      2007 was 29,371,696.









**FORM
      10-Q**




**INDEX**




**WILSHIRE
      BANCORP, INC.**




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







i




**FINANCIAL
      INFORMATION**


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


**WILSHIRE
                  BANCORP, INC.****CONSOLIDATED
                  STATEMENTS OF FINANCIAL CONDITION****(UNAUDITED)**
  **June
                  30, 2007**
              
              **December
                  31, 2006****ASSETS**Cash
                  and due from banks
              
              $
              70,949,354
              
              $
              75,243,346Federal
                  funds sold and other cash equivalents
              
              
              25,003,498
              
              
              130,003,268Cash
                  and cash equivalents
              
              
              95,952,852
              
              
              205,246,614Securities
                  available for sale, at fair value (amortized cost of $196,576,670
                  and
                  $168,662,357at
                  June 30, 2007 and December 31, 2006, respectively)
              
              
              195,102,867
              
              
              167,837,734Securities
                  held to maturity, at amortized cost (fair value of $11,432,699
                  and
                  $14,445,714at
                  June 30, 2007 and December 31, 2006, respectively)
              
              
              11,603,336
              
              
              14,620,870Interest-only
                  strips, at fair value (amortized cost of $865,452 and $1,008,064at
                  June 30, 2007 and December 31, 2006, respectively)
              
              
              904,698
              
              
              1,130,006Loans
                  held for sale—at the lower of cost or market
              
              
              13,806,930
              
              
              5,496,421Loans
                  receivable, net of allowance for loan losses of $19,377,856 and
                  $18,654,082at
                  June 30, 2007 and December 31, 2006, respectively
              
              
              1,639,858,935
              
              
              1,536,388,815Bank
                  premises and equipment—net
              
              
              10,204,715
              
              
              10,464,600Federal
                  Home Loan Bank stock, at cost
              
              
              8,475,800
              
              
              7,541,700Accrued
                  interest receivable
              
              
              10,096,512
              
              
              10,049,265Other
                  real estate owned—net
              
              
              -
              
              
              138,000Deferred
                  income taxes—net
              
              
              9,296,891
              
              
              9,722,008Servicing
                  assets
              
              
              5,093,383
              
              
              5,080,466Due
                  from customers on acceptances
              
              
              4,237,932
              
              
              2,385,134Cash
                  surrender value of life insurance
              
              
              15,931,305
              
              
              15,635,773Goodwill
              
              
              6,674,772
              
              
              6,674,772Core
                  deposit intangible
              
              
              1,445,653
              
              
              1,532,485Favorable
                  lease intangible
              
              
              290,633
              
              
              352,231Other
                  assets
              
              
              10,538,517
              
              
              8,186,927TOTAL
              
              $
              2,039,515,731
              
              $
              2,008,483,821**LIABILITIES
                  AND SHAREHOLDERS’ EQUITY**LIABILITIES:Deposits:Noninterest
                  bearing
              
              $
              327,399,787
              
              $
              319,310,552Interest
                  bearing:Savings
              
              
              29,519,873
              
              
              29,019,943Time
                  deposits of $100,000 or more
              
              
              792,031,136
              
              
              812,105,950Other
                  time deposits
              
              
              148,848,741
              
              
              160,933,032Money
                  market accounts and other
              
              
              468,125,274
              
              
              430,603,175Total
                  deposits
              
              
              1,765,924,811
              
              
              1,751,972,652Federal
                  Home Loan Bank borrowings
              
              
              20,000,000
              
              
              20,000,000Junior
                  subordinated debentures
              
              
              61,547,000
              
              
              61,547,000Accrued
                  interest payable
              
              
              12,520,844
              
              
              12,006,124Acceptances
                  outstanding
              
              
              4,237,932
              
              
              2,385,134Other
                  liabilities
              
              
              12,698,641
              
              
              10,937,886Total
                  liabilities
              
              
              1,876,929,228
              
              
              1,858,848,796COMMITMENTS
                  AND CONTINGENCIES (Note 6)SHAREHOLDERS’
                  EQUITY:Preferred
                  stock, no par value—authorized, 5,000,000 shares; issued and outstanding,
                  noneCommon
                  stock, no par value—authorized, 80,000,000 shares; issued and
                  outstanding,29,371,696
                  shares and 29,197,420 shares at at June 30, 2007 and December 31,
                  2006,
                  respectively
              
              $
              50,732,993
              
              $
              49,122,536Accumulated
                  other comprehensive loss, net of tax benefit
              
              
              (710,732
              )
              
              (407,612
              )Retained
                  earnings
              
              
              112,564,242
              
              
              100,920,101Total
                  shareholders’ equity
              
              
              162,586,503
              
              
              149,635,025TOTAL
              
              $
              2,039,515,731
              
              $
              2,008,483,821




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




1




**WILSHIRE
                  BANCORP, INC.****CONSOLIDATED
                  STATEMENTS OF OPERATIONS****(UNAUDITED)**
  **Three
                  Months Ended June 30,**
              
              **Six
                  Months Ended June 30,****2007**
              
              **2006**
              
              **2007**
              
              **2006**INTEREST
                  INCOME:Interest
                  and fees on loans
              
              $
              36,583,855
              
              $
              31,625,453
              
              $
              70,485,325
              
              $
              59,275,335Interest
                  on investment securities and deposits inother
                  financial institutions
              
              
              2,341,925
              
              
              2,238,038
              
              
              4,580,432
              
              
              4,013,810Interest
                  on federal funds sold and other cash equivalents
              
              
              578,119
              
              
              773,415
              
              
              2,087,266
              
              
              2,388,917Total
                  interest income
              
              
              39,503,899
              
              
              34,636,906
              
              
              77,153,023
              
              
              65,678,062INTEREST
                  EXPENSE:Deposits
              
              
              17,242,926
              
              
              13,644,758
              
              
              34,605,420
              
              
              25,897,641Interest
                  on other borrowings
              
              
              1,345,172
              
              
              1,554,370
              
              
              2,659,030
              
              
              3,063,947Total
                  interest expense
              
              
              18,588,098
              
              
              15,199,128
              
              
              37,264,450
              
              
              28,961,588NET
                  INTEREST INCOME BEFORE PROVISION FORLOAN
                  LOSSES AND LOAN COMMITMENTS
              
              
              20,915,801
              
              
              19,437,778
              
              
              39,888,573
              
              
              36,716,474PROVISION
                  FOR LOSSES ON LOANS ANDLOAN
                  COMMITMENTS
              
              
              4,500,000
              
              
              1,200,000
              
              
              6,130,000
              
              
              2,260,000NET
                  INTEREST INCOME AFTER PROVISION FORLOAN
                  LOSSES AND LOAN COMMITMENTS
              
              
              16,415,801
              
              
              18,237,778
              
              
              33,758,573
              
              
              34,456,474NONINTEREST
                  INCOME:Service
                  charges on deposit accounts
              
              
              2,504,461
              
              
              2,441,093
              
              
              4,791,516
              
              
              4,596,250Gain
                  on sale of loans
              
              
              2,334,401
              
              
              3,055,165
              
              
              4,143,753
              
              
              5,405,015Loan-related
                  servicing fees
              
              
              420,063
              
              
              363,755
              
              
              690,957
              
              
              892,836Loan
                  referral fees
              
              
              -
              
              
              -
              
              
              -
              
              
              47,647Loan
                  packaging fees
              
              
              15,096
              
              
              119,986
              
              
              35,550
              
              
              234,234Income
                  from other earning assets
              
              
              275,157
              
              
              256,761
              
              
              552,258
              
              
              496,637Other
                  income
              
              
              762,058
              
              
              343,666
              
              
              1,307,541
              
              
              671,834Total
                  noninterest income
              
              
              6,311,236
              
              
              6,580,426
              
              
              11,521,575
              
              
              12,344,453NONINTEREST
                  EXPENSES:Salaries
                  and employee benefits
              
              
              5,702,502
              
              
              5,964,781
              
              
              11,400,336
              
              
              11,220,786Occupancy
                  and equipment
              
              
              1,299,830
              
              
              1,072,116
              
              
              2,569,997
              
              
              1,967,839Data
                  processing
              
              
              744,827
              
              
              650,081
              
              
              1,509,842
              
              
              1,154,880Loan
                  referral fees
              
              
              430,043
              
              
              600,627
              
              
              850,096
              
              
              942,926Outsourced
                  service for customers
              
              
              447,368
              
              
              290,306
              
              
              823,360
              
              
              631,095Advertising
                  and promotional
              
              
              251,403
              
              
              375,941
              
              
              397,775
              
              
              557,858Professional
                  fees
              
              
              264,004
              
              
              249,650
              
              
              578,825
              
              
              492,154Office
                  supplies
              
              
              146,558
              
              
              199,776
              
              
              320,209
              
              
              310,689Directors’
                  fees
              
              
              133,650
              
              
              125,118
              
              
              273,550
              
              
              246,468Communications
              
              
              119,767
              
              
              127,631
              
              
              234,407
              
              
              232,752Investor
                  relations
              
              
              103,304
              
              
              65,432
              
              
              184,054
              
              
              110,443Deposit
                  insurance premiums
              
              
              322,311
              
              
              47,198
              
              
              372,240
              
              
              89,867Amortization
                  of core deposit intangible
              
              
              43,416
              
              
              20,743
              
              
              86,832
              
              
              20,743Amortization
                  of favorable lease intangible
              
              
              30,969
              
              
              14,634
              
              
              61,598
              
              
              14,634Other
                  real estate owned
              
              
              -
              
              
              12,090
              
              
              -
              
              
              12,090Other
                  operating
              
              
              565,929
              
              
              801,061
              
              
              1,445,449
              
              
              1,475,679Total
                  noninterest expenses
              
              
              10,605,881
              
              
              10,617,185
              
              
              21,108,570
              
              
              19,480,903INCOME
                  BEFORE INCOME TAX PROVISION
              
              
              12,121,156
              
              
              14,201,019
              
              
              24,171,578
              
              
              27,320,024INCOME
                  TAX PROVISION
              
              
              4,775,225
              
              
              5,785,741
              
              
              9,508,441
              
              
              11,082,032NET
                  INCOME
              
              $
              7,345,931
              
              $
              8,415,278
              
              $
              14,663,137
              
              $
              16,237,992EARNINGS
                  PER SHARE:Basic
              
              $
              0.25
              
              $
              0.29
              
              $
              0.50
              
              $
              0.56Diluted
              
              $
              0.25
              
              $
              0.29
              
              $
              0.50
              
              $
              0.56


The
        accompanying notes are an integral part of these unaudited condensed
        consolidated financial statements.
  2
  **WILSHIRE
                  BANCORP, INC.**
                **CONSOLIDATED
                  STATEMENTS OF SHAREHOLDERS’ EQUITY**
                **(UNAUDITED)**
 **Accumulated****Other**
                
                
                
                **Total****Common
                    Stock**
                
                **Comprehensive**
                
                **Retained**
                
                **Shareholders’****Shares**
                
                **Amount**
                
                **Income
                    (Loss)**
                
                **Earnings**
                
                **Equity**BALANCE—January
                    01, 2006
                
                
                28,630,600
                
                $
                41,340,448
                
                $
                (1,026,202
                )
                $
                72,789,622
                
                $
                113,103,868Stock
                    options exercised
                
                
                489,770
                
                
                178,830
                
                
                
                
                
                
                
                
                178,830Cash
                    dividend declared
                
                
                
                
                
                
                
                
                
                
                
                (2,893,007
                )
                
                (2,893,007
                )Stock
                    compensation expense
                
                
                
                
                
                149,949
                
                
                
                
                
                
                
                
                149,949Tax
                    benefit from stock options exercised
                
                
                
                
                
                899,249
                
                
                
                
                
                
                
                
                899,249Shares
                    issued for acquisition of Liberty Bank of New York
                
                
                328,110
                
                
                5,936,593
                
                
                
                
                
                
                
                
                5,936,593Comprehensive
                    income:Net
                    income
                
                
                
                
                
                
                
                
                
                
                
                16,237,992
                
                
                16,237,992Other
                    comprehensive income:Change
                    in unrealized loss on interest-only strips, net of tax
                    benefit
                
                
                
                
                
                
                
                
                (4,943
                )
                
                
                
                
                (4,943
                )Change
                    in unrealized loss on securities available for sale, net on
                    benefit
                
                
                
                
                
                
                
                
                (827,666
                )
                
                
                
                
                (827,666
                )Comprehensive
                    income
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                15,405,383BALANCE—June
                    30, 2006
                
                
                29,448,480
                
                $
                48,505,069
                
                $
                (1,858,811
                )
                $
                86,134,607
                
                $
                132,780,865
  **Accumulated****Other**
                  
                  
                  
                  **Total****Common
                      Stock**
                  
                  **Comprehensive**
                  
                  **Retained**
                  
                  **Shareholders’****Shares**
                  
                  **Amount**
                  
                  **Income
                      (Loss)**
                  
                  **Earnings**
                  
                  **Equity**BALANCE—January
                      01, 2007
                  
                  
                  29,197,420
                  
                  $
                  49,122,536
                  
                  $
                  (407,612
                  )
                  $
                  100,920,101
                  
                  $
                  149,635,025Stock
                      options exercised
                  
                  
                  174,276
                  
                  
                  115,186
                  
                  
                  
                  
                  
                  
                  
                  
                  115,186Cash
                      dividend declared
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (2,937,030
                  )
                  
                  (2,937,030
                  )Stock
                      compensation expense
                  
                  
                  
                  
                  
                  208,823
                  
                  
                  
                  
                  
                  
                  
                  
                  208,823Tax
                      benefit from stock options exercised
                  
                  
                  
                  
                  
                  1,286,448
                  
                  
                  
                  
                  
                  
                  
                  
                  1,286,448Cumulative
                      impact of change in accounting for uncertainties in income
                      taxes (FIN 48 -
                      see Note 7)
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (161,583
                  )
                  
                  (161,583
                  )Cumulative
                      impact of change in accounting for fair valuation method adoption
                      (SFAS
                      156 - see Note 7)
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  79,617
                  
                  
                  79,617Comprehensive
                      income:Net
                      income
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  14,663,137
                  
                  
                  14,663,137Other
                      comprehensive income:Change
                      in unrealized loss on interest-only strips, net of taxes
                  
                  
                  
                  
                  
                  
                  
                  
                  73,407
                  
                  
                  
                  
                  
                  73,407Change
                      in unrealized loss on securities available for sale, net of
                      tax
                      benefit
                  
                  
                  
                  
                  
                  
                  
                  
                  (376,527
                  )
                  
                  
                  
                  
                  (376,527
                  )Comprehensive
                      income
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  14,360,017BALANCE—June
                      30, 2007
                  
                  
                  29,371,696
                  
                  $
                  50,732,993
                  
                  $
                  (710,732
                  )
                  $
                  112,564,242
                  
                  $
                  162,586,503
 **Six
                          Months Ended June 30,****2007**
                      
                      **2006**DISCLOSURE
                          OF RECLASSIFICATION AMOUNTSWITHIN
                          ACCUMULATED OTHER COMPREHENSIVE LOSS:Net
                          unrealized losses on securities available for sale arising
                          during
                          period
                      
                      $
                      (649,180
                      )
                      $
                      (1,427,010
                      )Less
                          income tax benefit
                      
                      
                      (272,653
                      )
                      
                      (599,344
                      )Net
                          unrealized losses on securities available for sale
                      
                      $
                      (376,527
                      )
                      $
                      (827,666
                      )Net
                          unrealized gains (losses) on interest-only strips arising
                          during
                          period
                      
                      $
                      126,664
                      
                      $
                      (96,542
                      )Less
                          reclassification adjustment for impairment
                      
                      
                      -
                      
                      
                      (88,020
                      )Less
                          income tax expense (benefit)
                      
                      
                      53,257
                      
                      
                      (3,579
                      )Net
                          unrealized gains (losses) on interest-only strips
                      
                      $
                      73,407
                      
                      $
                      (4,943
                      )
 The
            accompanying notes are an integral part of these unaudited condensed
            consolidated financial statements.


3


**WILSHIRE
                  BANCORP, INC.****CONSOLIDATED
                  STATEMENTS OF CASH FLOWS****(UNAUDITED)**
  **Six
                  Months Ended June 30,****2007**
              
              **2006**CASH
                  FLOWS FROM OPERATING ACTIVITIES:Net
                  income
              
              $
              14,663,137
              
              $
              16,237,992Adjustments
                  to reconcile net income to net cashprovided
                  by operating activities:Accretion
                  and amortization of investment securities
              
              
              (86,039
              )
              
              3,601Depreciation
                  of premises & equipment
              
              
              793,198
              
              
              591,427Amortization
                  of core deposit intangible
              
              
              86,832
              
              
              20,743Amortization
                  of favorable lease intangible
              
              
              61,598
              
              
              14,634Provision
                  for losses on loans and loan commitments
              
              
              6,130,000
              
              
              2,260,000Deferred
                  tax (benefit) provision
              
              
              644,512
              
              
              (77,521
              )Loss
                  on disposition of bank premises and equipment
              
              
              9,268
              
              
              9,766Net
                  gain on sale of loans
              
              
              (4,143,753
              )
              
              (5,405,015
              )Origination
                  of loans held for sale
              
              
              (85,672,373
              )
              
              (104,115,057
              )Proceeds
                  from sale of loans held for sale
              
              
              80,905,226
              
              
              114,370,069Impairment
                  of servicing asset
              
              
              -
              
              
              233,226Increase
                  in servicing asset per fair valuation
              
              
              (322,937
              )
              
              -Increase
                  in servicing liability per fair valuation
              
              
              28,493
              
              
              -Impairment
                  on interest-only strips
              
              
              -
              
              
              88,020Gain
                  on sale of other real estate owned
              
              
              (125,109
              )
              
              (9,445
              )Loss
                  on sale of repossessed vehicles
              
              
              26,156
              
              
              -Tax
                  benefit from exercise of stock options
              
              
              (1,286,448
              )
              
              (899,249
              )Stock-based
                  compensation cost
              
              
              208,823
              
              
              149,949Change
                  in cash surrender value of life insurance
              
              
              (295,532
              )
              
              (297,756
              )Servicing
                  assets capitalized
              
              
              (909,698
              )
              
              (1,324,687
              )Servicing
                  assets amortization
              
              
              1,357,097
              
              
              986,177Decrease
                  in interest-only strips
              
              
              351,973
              
              
              136,442Decrease
                  in accrued interest receivable
              
              
              (47,247
              )
              
              (1,554,547
              )Increase
                  in other assets
              
              
              (2,552,704
              )
              
              (2,506,170
              )Dividends
                  of Federal Home Loan Bank stock
              
              
              (201,800
              )
              
              (149,100
              )Increase
                  in accrued interest payable
              
              
              514,720
              
              
              3,604,190Increase(decrease)
                  in other liabilities
              
              
              1,836,500
              
              
              (813,080
              )Net
                  cash provided by operating activities
              
              
              11,973,893
              
              
              21,554,609CASH
                  FLOWS FROM INVESTING ACTIVITIES:Purchase
                  of securities available for sale
              
              
              (62,977,090
              )
              
              (41,387,838
              )Proceeds
                  from principal repayment, matured orcalled
                  securities held to maturity
              
              
              3,017,496
              
              
              2,030,825Proceeds
                  from matured securities available for sale
              
              
              35,148,854
              
              
              5,439,704Net
                  increase in loans receivable
              
              
              (114,076,430
              )
              
              (150,353,685
              )Proceeds
                  from sale of loans
              
              
              5,384,851
              
              
              -Proceeds
                  from sale of repossessed vehicles
              
              
              73,286
              
              
              -Proceeds
                  from sale of other real estate owned
              
              
              871,282
              
              
              108,264Purchases
                  of Bank premises and equipment
              
              
              (403,081
              )
              
              (814,506
              )Purchase
                  of Federal Home Loan Bank stock
              
              
              (732,300
              )
              
              (1,015,300
              )Proceeds
                  from disposition of bank equipment
              
              
              -
              
              
              250Acquisition
                  of Liberty Bank, net of cash and cash equivalents acquired
              
              
              -
              
              
              5,840,113Net
                  cash used in investing activities
              
              
              (133,693,132
              )
              
              (180,152,173
              )
 The
          accompanying notes are an integral part of these condensed consolidated
          financial statements.


(continued)




4


**WILSHIRE
                  BANCORP, INC.****CONSOLIDATED
                  STATEMENTS OF CASH FLOWS****(UNAUDITED)**
  **Six
                  Months Ended June 30,****2007**
              
              **2006**CASH
                  FLOWS FROM FINANCING ACTIVITIES:Proceeds
                  from exercise of stock options
              
              $
              115,186
              
              $
              178,831Payment
                  of cash dividend
              
              
              (2,928,316
              )
              
              (2,582,212
              )Decrease
                  in Federal Home Loan Bank borrowings
              
              
              -
              
              
              (16,000,000
              )Tax
                  benefit from exercise of stock options
              
              
              1,286,448
              
              
              899,249Net
                  increase in deposits
              
              
              13,952,159
              
              
              130,481,601Net
                  cash provided by financing activities
              
              
              12,425,477
              
              
              112,977,469NET
                  INCREASE (DECREASE) IN CASH ANDCASH
                  EQUIVALENTS
              
              
              (109,293,762
              )
              
              (45,620,095
              )CASH
                  AND CASH EQUIVALENTS—Beginning of period
              
              
              205,246,614
              
              
              194,208,056CASH
                  AND CASH EQUIVALENTS—End of period
              
              $
              95,952,852
              
              $
              148,587,961SUPPLEMENTAL
                  DISCLOSURES OF CASHFLOW
                  INFORMATION:Interest
                  paid
              
              $
              36,749,730
              
              $
              25,301,424Income
                  taxes paid
              
              $
              8,501,162
              
              $
              12,858,010SUPPLEMENTAL
                  SCHEDULE OF NONCASHOPERATING
                  ACTIVITIES:Other
                  assets transferred to Bank premisesand
                  equipment
              
              $
              139,500
              
              $
              -Transfer
                  of loans to other real estate owned
              
              
              646,000
              
              
              -SUPPLEMENTAL
                  SCHEDULE OF NONCASHFINANCING
                  ACTIVITIES:Cash
                  dividend declared, but not paid
              
              $
              1,468,585
              
              $
              1,456,019


The
        accompanying notes are an integral part of these condensed consolidated
        financial statements.
  5


**WILSHIRE
      BANCORP, INC.**




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




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




Wilshire
      Bancorp, Inc. (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. The
      Bank
      was incorporated under the laws of the State of California on May 20, 1980
      and
      commenced operations on December 30, 1980. The Company was incorporated in
      December 2003 as a wholly-owned subsidiary of the Bank for the purpose of
      facilitating the issuance of trust preferred securities for the Bank and
      eventually serving as the holding company of the Bank. The Bank’s shareholders
      approved a reorganization into a holding company structure at a meeting held
      on
      August 25, 2004. As a result of the reorganization, shareholders of the Bank
      are
      now shareholders of the Company, and the Bank is a direct wholly-owned
      subsidiary of the Company.




Our
      corporate headquarters and primary banking facilities are located at 3200
      Wilshire Boulevard, Los Angeles, California 90010. In addition , we
      have  19
      full-service Bank branch offices in Southern California, Texas, New York, and
      New Jersey. We also have 7 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 (“GAAP”). The information provided by these interim financial statements
      reflects all adjustments which are, in the opinion of management, necessary
      for
      a fair presentation of the Company’s consolidated statements of financial
      condition as of June 30, 2007 and December 31, 2006, the related statements
      of
      operations and shareholders’ equity for the three months and six months ended
      June 30, 2007 and 2006, and the consolidated statements of cash flows for the
      six months ended June 30, 2007 and 2006. Such adjustments are of a normal
      recurring nature unless otherwise disclosed in the Form 10-Q. Operating results
      for interim periods are not necessarily indicative of operating results for
      an
      entire fiscal year.




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




**Note
      3.**  **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 entity.




6


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




**Three
                months ended**
              **June
                30,**
            
            **Six
                months ended**
              **June
                30,****2007**
            
            **2006**
            
            **2007**
            
            **2006**Numerator:Net
                income - numerator for basic earningsper
                share and diluted earnings per share-income
                available to common stockholders
            
            $
            7,345,931
            
            $
            8,415,278
            
            $
            14,663,137
            
            $
            16,237,992Denominator:Denominator
                for basic earnings per share:Weighted-average
                shares
            
            
            29,370,096
            
            
            28,911,555
            
            
            29,358,335
            
            
            28,813,332Effect
                of dilutive securities:Stock
                option dilution
            
            
            291,950
            
            
            366,624
            
            
            283,024
            
            
            380,689Denominator
                for diluted earnings per share:Adjusted
                weighted-average sharesAnd
                assumed conversions
            
            
            29,662,046
            
            
            29,278,179
            
            
            29,641,359
            
            
            29,194,021Basic
                earnings per share
            
            $
            0.25
            
            $
            0.29
            
            $
            0.50
            
            $
            0.56Diluted
                earnings per share
            
            $
            0.25
            
            $
            0.29
            
            $
            0.50
            
            $
            0.56




During
      1997, the Bank established the 1997 stock option plan (“1997 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. The outstanding
      stock options granted under the Company’s 1990 plan were transferred to the 1997
      Plan. In connection with the holding company reorganization, the options granted
      under the 1997 Plan are exercisable into shares of the Company’s common stock.
      Exercise prices may not be less than the fair market value at the date of grant.
      This 1997 Plan completed its ten-year term and expired in May 2007, leaving
      549,216 previously granted and outstanding shares as of June 30, 2007. Options
      granted through 2005 under this stock option plan expire not more than 10 years
      after the date of grant, but options granted after 2005 expire not more than
      5
      years after the date of grant.




On
      January 1, 2006, the company adopted the statement of financial accounting
      standards (“SFAS”) No. 123R, using prospective method. The adoption of SFAS No.
      123R resulted in incremental stock-based compensation expense of $91,000 and
      $87,000 for the three months ended June 30, 2007 and 2006, respectively. For
      the
      first half of 2007 and 2006, the incremental stock-based compensation expense
      was $209,000 and $150,000, respectively, and accordingly decreased the periodic
      income before income taxes by the respective amounts and their effects on basic
      or diluted earnings per share was negligible. For the six months ended June
      30,
      2007 and 2006, cash provided by operating activities decreased by $1,286,000
      and
      $900,000, respectively, and cash provided by financing activities increased
      by
      identical amounts related to excess tax benefits from stock-based payment
      arrangements.




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




For
      the
      first half of 2007, there were no stock options granted, but 60,000 and 75,000
      options were granted during the second quarter and the first half of 2006,
      respectively. The weighted average fair value of options granted for the second
      quarter and the first half of 2006 was $5.23 and $5.12, 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:




7




**Three
                Months Ended**
            
            **Six
                Months Ended****June
                30,**
            
            **June
                30,****2007**
            
            **2006**
            
            **2007**
            
            **2006**Expected
                life1
            
            
            -
            
            
            3.5
                years
            
            
            -
            
            
            3.5
                yearsExpected
                volatility2
            
            
            -
            
            
            33.3
            %
            
            -
            
            
            33.3
            %Expected
                dividend yield
            
            
            -
            
            
            1.08
            %
            
            -
            
            
            1.10
            %Risk-free
                interest rate3
            
            
            -
            
            
            4.81
            %
            
            -
            
            
            4.71
            %




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




**Shares**
            
            **Weighted**
              **Average**
              **Exercise**
              **Price**
            
            **Weighted**
              **Average**
              **Remaining**
              **Contractual
                term**
              **(in
                years)**
            
            **Aggregate**
              **Intrinsic**
              **Value**Outstanding
                at January 1, 2007
            
            
            737,892
            
            $
            9.48Granted
            
            
            -
            
            
            -Exercised
            
            
            (174,276
            )
            
            0.66Forfeited
            
            
            (14,400
            )
            
            14.94Outstanding
                at June 30, 2007
            
            
            549,216
            
            $
            12.13
            
            
            5.54
            
            $
            1,713,149Options
                exercisable at June 30, 2007
            
            
            344,776
            
            $
            9.00
            
            
            5.65
            
            $
            1,713,149





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




**Options
                Outstanding**
            
            **Options
                Exercisable****Weighted****Weighted**
            
            **Average**
            
            
            
            **Weighted****Number
                of**
            
            **Average**
            
            **Remaining**
            
            **Number
                of**
            
            **Average****Outstanding**
            
            **Exercise**
            
            **Contractual**
            
            **Exercisable**
            
            **Exercise****Range
                of Exercise Prices**
            
            **Options**
            
            **Price**
            
            **Life**
            
            **Options**
            
            **Price**$1.00
                to $1.99
            
            
            40,000
            
            $
            1.39
            
            
            3.47
                years
            
            
            40,000
            
            $
            1.39$2.00
                to $2.99
            
            
            91,966
            
            
            2.57
            
            
            4.90
                years
            
            
            91,966
            
            
            2.57$3.00
                to $4.99
            
            
            52,000
            
            
            4.53
            
            
            6.09
                years
            
            
            52,000
            
            
            4.53$13.00
                to $14.99
            
            
            56,000
            
            
            13.72
            
            
            7.78
                years
            
            
            34,400
            
            
            13.72$15.00
                to $16.99
            
            
            124,250
            
            
            15.21
            
            
            7.71
                years
            
            
            74,010
            
            
            15.22$17.00
                to $19.99
            
            
            185,000
            
            
            18.80
            
            
            4.01
                years
            
            
            52,400
            
            
            18.64$1.00
                to $19.99
            
            
            549,216
            
            
            12.13
            
            
            5.54
                years
            
            
            344,776
            
            
            9.00




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




**Three
                Months Ended**
            
            **Six
                Months Ended****June
                30,**
            
            **June
                30,****2007**
            
            **2006**
            
            **2007**
            
            **2006**Total
                intrinsic value of options exercised
            
            $
            28,649
            
            $
            833,425
            
            $
            3,100,522
            
            $
            2,601,338Total
                fair value of options vested
            
            $
            125,393
            
            $
            61,891
            
            $
            197,444
            
            $
            141,360Weighted
                average fair value of optionsgranted
                during the period
            
            $
            -
            
            $
            5.23
            
            $
            -
            
            $
            5.12




As
      of
      June 30, 2007, total unrecognized compensation cost related to stock options
      amounted to $390,000, which is expected to be recognized over a weighted average
      period of 1.41 years.







1
                The
                    expected life (estimated period of time outstanding) of stock
                    options
                    granted was estimated using the historical exercise behavior
                    of
                    employees.
 2
                The
                    expected volatility was based on historical volatility for a
                    period equal
                    to the stock option’s expected
                    life.
 3
                The
                    risk-free rate is based on the U.S. Treasury yield curve in effect
                    at the
                    time of grant.




8




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




******Shares**
            
            **Weighted
                Average**
              **Grant
                date**
              **Fair
                value**Nonvested
                at January 1, 2007
            
            
            274,360
            
            $
            3.99Granted
            
            
            -
            
            
            -Vested
            
            
            (56,720
            )
            
            3.48Forfeited
                on unvested shares
            
            
            (13,200
            )
            
            2.61Nonvested
                at June 30, 2007
            
            
            204,440
            
            $
            4.21




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




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




Prior
      to
      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 $5,093,000 and $4,788,000
      (net of $1,945,000 and $1,704,000 accumulated amortization, respectively) as
      of
      June 30, 2007 and 2006, respectively. Amortization expenses for servicing rights
      were $662,000 and $572,000 for the three months ended June 30, 2007 and 2006,
      respectively, and $1,357,000 and $986,000 for the six months ended June 30,
      2007
      and 2006, respectively. In connection with the acquisition of Liberty Bank
      of
      New York, the Company recorded core deposit intangibles and favorable lease
      intangibles. As of June 30, 2007, those intangible assets were $1,446,000 and
      $291,000, respectively, net of $194,000 and $139,000 accumulated amortizations,
      respectively. Amortization expenses for those intangible assets were $74,000
      and
      $35,000 for the three months ended June 30, 2007 and 2006, and $148,000 and
      $35,000 for the six months ended June 30, 2007 and 2006, respectively. We
      estimate the combined amortization expenses, excluding the effect of unexpected
      reversal of servicing rights, to be approximately $1.3 million annually for
      the
      next five fiscal years.




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




**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.




9


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


**(Dollars
                  in Thousands)**
              **Three
                  Months Ended June 30, 2007**
              
              
              **Three
                  Months Ended June 30, 2006****Business
                  Segment**
              
              **Banking**
                **Operations**
              
              **TFS**
              
              
              **SBA**
              
              
              **Total**
              
              
              **BankingOperations**
              
              
              **TFS**
              
              
              **SBA**
              
              
              **Total**Net
                  interest income
              
              $
              15,652
              
              $
              750
              
              $
              4,514
              
              $
              20,916
              
              $
              13,766
              
              $
              1,107
              
              $
              4,565
              
              $
              19,438Less
                  provision for loan losses
              
              
              2,579
              
              
              1,670
              
              
              251
              
              
              4,500
              
              
              870
              
              
              109
              
              
              221
              
              
              1,200Other
                  operating income
              
              
              3,477
              
              
              369
              
              
              2,465
              
              
              6,311
              
              
              3,030
              
              
              425
              
              
              3,125
              
              
              6,580Net
                  revenue
              
              
              16,550
              
              
              (551
              )
              
              6,728
              
              
              22,727
              
              
              15,926
              
              
              1,423
              
              
              7,469
              
              
              24,818Other
                  operating expenses
              
              
              9,163
              
              
              237
              
              
              1,206
              
              
              10,606
              
              
              8,867
              
              
              257
              
              
              1,493
              
              
              10,617Income
                  before taxes
              
              $
              7,387
              
              $
              (788
              )
              $
              5,522
              
              $
              12,121
              
              $
              7,059
              
              $
              1,166
              
              $
              5,976
              
              $
              14,201Business
                  segment assets
              
              $
              1,829,901
              
              $
              51,084
              
              $
              158,531
              
              $
              2,039,516
              
              $
              1,644,008
              
              $
              50,829
              
              $
              158,977
              
              $
              1,853,814
 **(Dollars
                  in Thousands)**
              **Six
                  Months Ended June 30, 2007**
              
              
              **Six
                  Months Ended June 30, 2006****Business
                  Segment**
              
              
              **Banking****Operations**
              
              
              **TFS**
              
              
              **SBA**
              
              
              **Total**
              
              
              **Banking****Operations**
              
              
              **TFS**
              
              
              **SBA**
              
              
              **T
                  otal**Net
                  interest income
              
              $
              29,764
              
              $
              1,702
              
              $
              8,423
              
              $
              39,889
              
              $
              26,253
              
              $
              2,087
              
              $
              8,376
              
              $
              36,716Less
                  provision for loan losses
              
              
              4,129
              
              
              1,586
              
              
              415
              
              
              6,130
              
              
              1,223
              
              
              234
              
              
              803
              
              
              2,260Other
                  operating income
              
              
              6,518
              
              
              712
              
              
              4,292
              
              
              11,522
              
              
              5,728
              
              
              822
              
              
              5,794
              
              
              12,344Net
                  revenue
              
              
              32,153
              
              
              828
              
              
              12,300
              
              
              45,281
              
              
              30,758
              
              
              2,675
              
              
              13,367
              
              
              46,800Other
                  operating expenses
              
              
              18,305
              
              
              473
              
              
              2,331
              
              
              21,109
              
              
              15,876
              
              
              489
              
              
              3,115
              
              
              19,480Income
                  before taxes
              
              $
              13,848
              
              $
              355
              
              $
              9,969
              
              $
              24,172
              
              $
              14,882
              
              $
              2,186
              
              $
              10,252
              
              $
              27,320Business
                  segment assets
              
              $
              1,829,901
              
              $
              51,084
              
              $
              158,531
              
              $
              2,039,516
              
              $
              1,644,008
              
              $
              50,829
              
              $
              158,977
              
              $
              1,853,814




**Note** **6.**  **Commitments
      and Contingencies**




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




Commitments
                to extend credit
            
            $
            255,048,341Standby
                letters of credit
            
            $
            9,635,259Commercial
                letters of credit
            
            $
            13,898,705




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




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




10




**Note** **7.**  **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 December 31, 2006 for the
      Company. The Company adopted SFAS No. 155 on January 1, 2007, and this adoption
      has not had a material impact on the consolidated financial statements or
      results of 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 is effective for the
      Company in the fiscal year beginning January 1, 2007. On January 1, 2007, we
      adopted SFAS No. 156. Upon this adoption, the Company selected a fair value
      measurement method to subsequently measure its servicing assets and liabilities
      and recognized the net increase in their fair value of $80,000, net of tax
      effects, as an adjustment to the beginning balance of retained
      earnings.




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




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




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 changes 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. We adopted SFAS No. 158 effective on December
      31, 2006, and the adoption of SFAS No. 158 did not have a material impact on
      the
      consolidated financial statements or results of operations.




11




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




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




**Note** **8.**  **Reclassifications**




Certain
      reclassifications, principally related to components of tax benefit from
      exercise of stock option in cash flows, were made to the prior periods’
presentation to conform to the current year’s presentation.




**Note
      9** **.**  **Subsequent
      events**




On
      September 1, 2006, Wilshire State Bank entered into an agreement providing
      for
      the purchase and assumption of the branch in Fort Lee, New Jersey, of Royal
      Bank
      America in exchange for our branch in Flushing, New York. On July 6, 2007,
      we
      completed the acquisition of our New Jersey branch in Fort Lee.




On
      July
      25, 2007, the Company adopted the 2007 stock repurchase program which permits
      the repurchase of up to $10 million worth of shares of the Company’s common
      stock from time to time until July 31, 2008.




**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 six-month periods ended June
      30,
      2007 and 2006, respectively, and includes the statistical disclosures required
      by the Securities and Exchange Commission Guide 3 (“Statistical Disclosure by
      Bank Holding Companies”). The discussion should be read in conjunction with our
      financial statements and the notes related thereto which appear elsewhere in
      this Quarterly Report on Form 10-Q.




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




12




·
            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.




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




13


**Selected
      Financial Data**




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




******Three
                months ended June 30,**
            
            ******Six
                months ended June 30,****(Dollars
                in thousands, except per share data)****2007**
            
            **2006**
            
            **2007**
            
            **2006**Net
                income
            
            $
            7,346
            
            $
            8,415
            
            $
            14,663
            
            $
            16,238Net
                income per share, basic
            
            
            0.25
            
            
            0.29
            
            
            0.50
            
            
            0.56Net
                income per share, diluted
            
            
            0.25
            
            
            0.29
            
            
            0.50
            
            
            0.56Net
                interest income
            
            
            20,916
            
            
            19,438
            
            
            39,889
            
            
            36,716**Average
                balances:**Assets
            
            
            1,996,898
            
            
            1,774,172
            
            
            1,994,399
            
            
            1,738,821Cash
                and cash equivalents
            
            
            106,708
            
            
            124,464
            
            
            141,122
            
            
            163,686Investment
                debt securities
            
            
            188,184
            
            
            202,125
            
            
            187,378
            
            
            186,471Net
                loans
            
            
            1,621,006
            
            
            1,377,679
            
            
            1,586,403
            
            
            1,322,633Total
                deposits
            
            
            1,724,088
            
            
            1,512,128
            
            
            1,727,604
            
            
            1,478,548Shareholders’
                equity
            
            
            161,855
            
            
            127,895
            
            
            158,496
            
            
            123,208**Performance
                Ratios:**Annualized
                return on average assets
            
            
            1.47
            %
            
            1.90
            %
            
            1.47
            %
            
            1.87
            %Annualized
                return on average equity
            
            
            18.15
            %
            
            26.32
            %
            
            18.50
            %
            
            26.36
            %Net
                interest margin
            
            
            4.52
            %
            
            4.74
            %
            
            4.31
            %
            
            4.56
            %Efficiency
                ratio1
            
            
            38.95
            %
            
            40.81
            %
            
            41.06
            %
            
            39.71
            %**Capital
                Ratios:**Tier
                1 capital to adjusted total assets
            
            
            10.28
            %
            
            9.63
            %Tier
                1 capital to risk-weighted assets
            
            
            12.36
            %
            
            11.35
            %Total
                capital to risk-weighted assets
            
            
            14.22
            %
            
            13.53
            %




**June
                30, 2007**
            
            **December
                31, 2006**
            
            **June
                30, 2006****Period-end
                balances as of:**Total
                assets
            
            $
            2,039,516
            
            $
            2,008,484
            
            $
            1,853,814Investment
                securities
            
            
            206,706
            
            
            182,459
            
            
            209,107Total
                loans, net of unearned income
            
            
            1,673,044
            
            
            1,560,539
            
            
            1,434,136Total
                deposits
            
            
            1,765,925
            
            
            1,751,973
            
            
            1,590,444Junior
                subordinated debentures
            
            
            61,547
            
            
            61,547
            
            
            61,547FHLB
                borrowings
            
            
            20,000
            
            
            20,000
            
            
            45,000Shareholders’
                equity
            
            
            162,587
            
            
            149,635
            
            
            132,781**Asset
                Quality Ratios:**Net
                charge-off (recoveries) to average total loans for the
                quarter
            
            
            0.11
            %
            
            0.06
            %
            
            0.01
            %Non-performing
                loans to total loans
            
            
            0.50
            %
            
            0.44
            %
            
            0.32
            %Non-performing
                assets to total loans and other real estate owned
            
            
            0.51
            %
            
            0.45
            %
            
            0.34
            %Allowance
                for loan losses to total loans
            
            
            1.16
            %
            
            1.20
            %
            
            1.14
            %Allowance
                for loan losses to non-performing loans
            
            
            230.33
            %
            
            272.38
            %
            
            351.53
            %




**Executive
      Overview**




**Introduction**




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




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




14




At
      June
      30, 2007, we had approximately $2.04 billion in assets, $1.67 billion in total
      loans, and $1.77 billion in deposits.




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




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 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, although our recent strategy to focus on
      loan
      credit quality and to increase non-time deposits, which was implemented in
      the
      fourth quarter of 2006, resulted in more moderate balance sheet growth during
      2007. Our management believes that this strategy will continue to improve our
      cost of funds, decrease non-performing loans and assets, and enhance shareholder
      value.




**Second
      Quarter 200** **7
      Key Performance Indicators**




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




·
            Under
                our new strategy which moderated the growth of our balance sheet,
                time
                deposits continued to decline in the second quarter of 2007 while
                non-time
                deposits grew 4.2% in the same
                quarter.




·
            Our
                total loans grew in a more controlled way by 7.2% to $1.67 billion
                at the
                end of the second quarter of 2007, as compared with $1.56 billion
                at the
                end of 2006.




·
            On
                a sequential-quarter basis, our net interest margin improved to 4.52%
                from
                4.10% in the preceding quarter, although our margin is still currently
                lower than 4.74% in the same quarter a year ago.




·
            Our
                non-performing assets, net of the portion guaranteed by the U.S.
                government, significantly decreased to $8.5 million at the end of
                the
                second quarter of 2007 from $20.4 million three months ago, but is
                still
                higher than $7.1 million at the end of 2006. Our credit quality remains
                at
                a manageable level with $11.7 million in total delinquent loans,
                net of
                the portion guaranteed by the U.S. government, which represent 0.7%
                of
                total loans at the end of the second quarter of
                2007.




·
            Total
                non-interest income decreased by 4.1% to $6.3 million in the second
                quarter of 2007, as compared with $6.6 million in the second quarter
                of
                2006, mainly due to the reduction of loan sale
                gains.




·
            We
                have kept our operating expenses in line throughout our New York/New
                Jersey expansion and our efficiency ratio improved to 38.95% in the
                second
                quarter of 2007 as compared with 40.81% in the prior year’s same quarter.




Primarily
      due to a substantial rise in our provision for loan losses caused by the
      increased loan charge-offs and the changes in overall business environments,
      our
      net income decreased to $7.3 million or $0.25 per diluted common share for
      the
      second quarter of 2007, from $8.4 million or $0.29 per diluted common share
      in
      the second quarter of 2006. For the first half of 2007, our net income decreased
      to $14.7 million or $0.50 per diluted common share, from $16.2 million or $0.56
      per diluted common share in the prior year’s same period.




15




**200** **7
      Outlook**




As
      we
      look ahead to the remainder of 2007, the economies and real estate markets
      in
      our primary market areas will continue to be significant determinants of the
      quality of our assets in future periods and thus our results of operations,
      liquidity and financial condition. We anticipate that the national economy
      is
      headed for a soft landing in 2007 and that this will generally affect asset
      quality negatively. Responding proactively to this anticipated business
      environment, we shifted our focus from growth to asset quality management.
      We
      have already enhanced our loan underwriting standards to be more stringent
      and
      made it more difficult to allow exceptions from our loan policy. We anticipate
      these changes will result in moderate loan growth, but at the same time improve
      loan quality going forward.




Our
      focus
      on net interest margin management will continue. It
      is our
      expectation that the strategic change toward more moderate loan growth will
      make
      our funding needs subside and our reliance on high-cost deposits to decline.
      As
      a result, our net interest margin should improve. We
      also
      believe that these strategic changes and our expansion into the
      East
      Coast market of the United States, together
      with our core deposit campaign that already brought some positive results in
      the
      first half of 2007, will benefit our net interest margin going forward.




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




We
      recently opened a new branch in Fort Lee, New Jersey, which will allow us to
      offer greater convenience to both new and existing customers in the
      East
      Coast market of the United States . We
      believe that this New Jersey branch, together with the existing New York
      branches, will be a critical part of our expansion strategy, especially in
      the
      East Coast market due to its high level of small business activity and diverse
      population. We will continue to pursue opportunities for growth through *de
      novo* branching and regional loan production offices.




In
      addition, we will continue to focus on streamlining our operations so that
      our
      expenses grow more slowly than the overall growth of our business. Unfortunately,
      our credit correction process and our expansion resulted in similar profit
      levels in the second quarter compared to the first quarter, despite our overall
      improvements . Although
      our profit recovery was slightly delayed, we fully expect to be back on track
      later this year as our correction processes and our modified growth strategy
      both continue to materialize.




**Critical
      Accounting Policies**




The
      discussion and analysis of our financial condition and results of operations
      is
      based upon our financial statements, which have been prepared in accordance
      with
      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 2006
      Annual Report on Form 10-K in the “Critical Accounting Policies” section of
“Management’s Discussion and Analysis of Financial Condition and Result of
      Operations” and in Note 1 to the Consolidated Financial Statements-“Significant
      Accounting Policies” which are essential to understanding Management’s
      Discussion and Analysis of Results of Operations and Financial Condition. There
      has been no material modification to these policies during the quarter ended
      June 30, 2007.




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 (FRB).




Average
      interest-earning assets increased by 12.8% to $1.85 billion in the second
      quarter of 2007, as compared with $1.64 billion in the same quarter of 2006
      and
      average net loans increased by 17.7% to $1.6 billion in the second quarter
      of
      2007, as compared with $1.4 billion in the same quarter of 2006. Our average
      interest-bearing deposits also increased by 17.2% to $1.4 billion in the second
      quarter of 2007, as compared with $1.2 billion in the same quarter of 2006.
      We
      reduced other borrowings over the last 12 months (see “Financial
      Condition-Deposits and Other Sources of Funds” below) as the advances from
      Federal Home Loan Bank, or FHLB, have matured.




The
      strong competition for customer deposits in our local market caused our cost
      of
      funds to increase more than the increase of our earning-asset yields. The
      average yields on our interest-earning assets increased to 8.53% for the second
      quarter of 2007 from 8.44% for the second quarter of the prior year. In the
      same
      time periods, the strong competition for deposits in our local markets
      accelerated to a greater extent of our average cost on interest-bearing
      liabilities to 4.99% for the second quarter of 2007 from 4.63% for the prior
      year’s same quarter. As a result, interest income grew 14.1% to $39.5 million
      for the second quarter of 2007, as compared with $34.6 million for the prior
      year’s same period, outpaced by a 22.3% increase in interest expense. Interest
      expense increased to $18.6 million for the second quarter of 2007, as compared
      with $15.2 million for the prior year’s same period.




The
      combined result of our business growth and the interest rate increase was an
      increase in our net interest income. Net interest income increased by $1.5
      million (7.6%) to $20.9 million in the second quarter of 2007 from $19.4 million
      in the same quarter of the prior year. Due to the fact that upward adjustments
      in our deposit rates typically lag rate adjustments on our interest-earning
      assets, our cost of funds has continued to rise since interest rates leveled
      off. As a result, our net interest margin and spread were under some pressure
      and decreased to 4.52% and 3.55%, respectively, in the second quarter of 2007,
      as compared with 4.74% and 3.80%, respectively, for the prior year’s same
      quarter.




For
      the
      first six months of 2007, average interest-earning assets and average net loans
      increased to $1.85 billion and $1.59 billion, respectively, as compared with
      $1.61 billion and $1.32 billion for the prior year’s same period. For the first
      six months of 2007, average interest-bearing liabilities and the average
      interest-bearing deposit portfolio also increased to $1.5 billion and $1.4
      billion, respectively, as compared with $1.3 billion and $1.2 billion for the
      prior year’s same period. The average yields on interest-earning assets
      increased by 0.18% to 8.33% for the first six months of 2007 from 8.15% for
      the
      prior year’s same period, while our cost of funds increased by 0.50% to 4.98%
      for the first six months of 2007 from 4.48% for the prior year’s same period.
      The combined results of our business growth and the interest rate increases
      were
      an increase in our net interest income. Net interest income increased by $3.2
      million, or 8.64%, to $39.9 million in the first six months of 2007 as compared
      with $36.7 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
      six
      months, our net interest margin and spread were under some pressure and
      decreased to 4.31% and 3.35%, respectively, in the first six months of 2007,
      as
      compared with 4.56% and 3.67%, respectively, for the prior year’s same period.




In
      2007,
      our continuing deposit campaign for transactional accounts brought some positive
      results and lowered the ratio of time deposits over total deposits to 53.3%
      at
      the end of the second quarter from 55.5% at the end of 2006. As a result, our
      cost of interest-bearing liabilities decreased slightly to 4.99% in the second
      quarter of 2007, from 5.03% at the end of 2006 a fter
      rising in each quarter of 2006. Management
      believes that our expansion into the
      East
      Coast market of the United States will
      help
      improve our fund costs further and eventually our margins.




17




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




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


**For
                  the Quarter Ended June 30,****2007**
              
              **2006****(****Dollars
                  in Thousands)****Average****Balance**
              
              **Interest
                  Income/****Expense**
              
              **Annualized
                  Average****Rate/Yield**
              
              **Average****Balance**
              
              **Interest
                  Income/****Expense**
              
              **Annualized
                  Average**
                **Rate/Yield****Assets**:
                Interest-earning
                  assets:Net
                  loans1
              
              $
              1,621,006
              
              $
              36,584
              
              
              9.03
              %
              $
              1,377,679
              
              $
              31,626
              
              
              9.18
              %Securities
                  of U.S. government agencies
              
              
              162,663
              
              
              2,034
              
              
              5.00
              %
              
              181,570
              
              
              1,985
              
              
              4.37
              %Other
                  investment securities
              
              
              25,521
              
              
              308
              
              
              4.83
              %
              
              20,555
              
              
              248
              
              
              4.82
              %Commercial
                  paper
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Overnight
                  investments
              
              
              42,225
              
              
              578
              
              
              5.48
              %
              
              61,746
              
              
              773
              
              
              5.01
              %Money
                  market preferred securities
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Interest-earning
                  deposits
              
              
              -
              
              
              -
              
              
              -
              
              
              500
              
              
              5
              
              
              4.26
              %Total
                  interest-earning assets
              
              
              1,851,415
              
              
              39,504
              
              
              8.53
              %
              
              1,642,050
              
              
              34,637
              
              
              8.44
              %Cash
                  and due from banks
              
              
              64,483
              
              
              
              
              
              
              
              
              62,718Other
                  assets
              
              
              81,000
              
              
              
              
              
              
              
              
              69,404Total
                  assets
              
              $
              1,996,898
              
              
              
              
              
              
              
              $
              1,774,172**Liabilities
                  and Shareholders’ Equity:**Interest-bearing
                  liabilities:Money
                  market deposits
              
              $
              421,205
              
              $
              4,722
              
              
              4.48
              %
              $
              348,733
              
              $
              3,616
              
              
              4.15
              %Super
                  NOW deposits
              
              
              22,119
              
              
              66
              
              
              1.20
              %
              
              21,448
              
              
              64
              
              
              1.19
              %Savings
                  deposits
              
              
              29,039
              
              
              165
              
              
              2.28
              %
              
              23,755
              
              
              68
              
              
              1.14
              %Time
                  certificates of deposit indenominations
                  of $100,000 or more
              
              
              783,100
              
              
              10,391
              
              
              5.31
              %
              
              657,744
              
              
              8,263
              
              
              5.03
              %Other
                  time deposits
              
              
              152,789
              
              
              1,899
              
              
              4.97
              %
              
              149,922
              
              
              1,634
              
              
              4.36
              %Total
                  interest-bearing deposits
              
              
              1,408,252
              
              
              17,243
              
              
              4.90
              %
              
              1,201,602
              
              
              13,645
              
              
              4.54
              %Other
                  borrowings
              
              
              83,087
              
              
              1,345
              
              
              6.48
              %
              
              110,174
              
              
              1,554
              
              
              5.64
              %Total
                  interest-bearing liabilities
              
              
              1,491,339
              
              
              18,588
              
              
              4.99
              %
              
              1,311,776
              
              
              15,199
              
              
              4.63
              %Non-interest-bearing
                  deposits
              
              
              315,837
              
              
              
              
              
              4.00
              %
              
              310,525
              
              
              
              
              
              3.61
              %Total
                  deposits and other borrowings
              
              
              1,807,176
              
              
              
              
              
              
              
              
              1,622,301Other
                  liabilities
              
              
              27,867
              
              
              
              
              
              
              
              
              23,976Shareholders’
                  equity
              
              
              161,855
              
              
              
              
              
              
              
              
              127,895Total
                  liabilities and shareholders’ equity
              
              $
              1,996,898
              
              
              
              
              
              
              
              $
              1,774,172Net
                  interest income
              
              
              
              
              $
              20,916
              
              
              
              
              
              
              
              $
              19,438Net
                  interest spread2
              
              
              
              
              
              
              
              
              3.55
              %
              
              
              
              
              
              
              
              3.80
              %Net
                  interest margin3
              
              
              
              
              
              
              
              
              4.52
              %
              
              
              
              
              
              
              
              4.74
              %







1
                Net
                    loan fees have been included in the calculation of interest income.
                    Loan
                    fees were approximately $1,925,000 and $1,723,000 for the quarters
                    ended
                    June 30, 2007 and 2006, respectively, and approximately $3,524,000
                    and
                    $3,101,000 for the six months ended June 30, 2007 and 2006, respectively.
                    Net loans are net of the allowance for loan losses, deferred
                    fees,
                    unearned income and related direct costs, but include those loans
                    placed
                    on non-accrual status.


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


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




18


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


**For
                  the Six Months Ended June 30,****2007**
              
              **2006****(Dollars
                  in Thousands)****Average****Balance**
              
              **Interest
                  Income/****Expense**
              
              **Annualized
                  Average****Rate/Yield**
              
              **Average****Balance**
              
              **Interest
                  Income/****Expense**
              
              **Annualized
                  Average****Rate/Yield****Assets**:
                Interest-earning
                  assets:Net
                  loans1
              
              $
              1,586,403
              
              $
              70,485
              
              
              8.89
              %
              $
              1,322,633
              
              $
              59,275
              
              
              8.96
              %Securities
                  of U.S. government agencies
              
              
              161,868
              
              
              3,967
              
              
              4.90
              %
              
              168,014
              
              
              3,568
              
              
              4.25
              %Other
                  investment securities
              
              
              25,510
              
              
              614
              
              
              4.81
              %
              
              18,457
              
              
              435
              
              
              4.72
              %Commercial
                  paper
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Overnight
                  investments
              
              
              77,638
              
              
              2,087
              
              
              5.38
              %
              
              102,175
              
              
              2,389
              
              
              4.68
              %Money
                  market preferred securities
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Interest-earning
                  deposits
              
              
              -
              
              
              -
              
              
              -
              
              
              500
              
              
              11
              
              
              4.22
              %Total
                  interest-earning assets
              
              
              1,851,419
              
              
              77,153
              
              
              8.33
              %
              
              1,611,779
              
              
              65,678
              
              
              8.15
              %Cash
                  and due from banks
              
              
              63,484
              
              
              
              
              
              
              
              
              61,511Other
                  assets
              
              
              79,496
              
              
              
              
              
              
              
              
              65,531Total
                  assets
              
              $
              1,994,399
              
              
              
              
              
              
              
              $
              1,738,821**Liabilities
                  and Shareholders’ Equity:**Interest-bearing
                  liabilities:Money
                  market deposits
              
              $
              413,608
              
              $
              9,320
              
              
              4.51
              %
              $
              332,383
              
              $
              6,730
              
              
              4.05
              %Super
                  NOW deposits
              
              
              21,541
              
              
              125
              
              
              1.16
              %
              
              21,583
              
              
              124
              
              
              1.15
              %Savings
                  deposits
              
              
              29,154
              
              
              306
              
              
              2.10
              %
              
              22,715
              
              
              116
              
              
              1.02
              %Time
                  certificates of deposit indenominations
                  of $100,000 or more
              
              
              794,060
              
              
              21,008
              
              
              5.29
              %
              
              653,548
              
              
              15,746
              
              
              4.82
              %Other
                  time deposits
              
              
              155,596
              
              
              3,846
              
              
              4.94
              %
              
              148,705
              
              
              3,182
              
              
              4.28
              %Total
                  interest-bearing deposits
              
              
              1,413,959
              
              
              34,605
              
              
              4.89
              %
              
              1,178,934
              
              
              25,898
              
              
              4.39
              %Other
                  borrowings
              
              
              82,330
              
              
              2,659
              
              
              6.46
              %
              
              113,586
              
              
              3,064
              
              
              5.39
              %Total
                  interest-bearing liabilities
              
              
              1,496,289
              
              
              37,264
              
              
              4.98
              %
              
              1,292,520
              
              
              28,962
              
              
              4.48
              %Non-interest-bearing
                  deposits
              
              
              313,645
              
              
              
              
              
              4.01
              %
              
              299,613
              
              
              
              
              
              3.50
              %Total
                  deposits and other borrowings
              
              
              1,809,934
              
              
              
              
              
              
              
              
              1,592,133Other
                  liabilities
              
              
              25,969
              
              
              
              
              
              
              
              
              23,480Shareholders’
                  equity
              
              
              158,496
              
              
              
              
              
              
              
              
              123,208Total
                  liabilities and shareholders’ equity
              
              $
              1,994,399
              
              
              
              
              
              
              
              $
              1,738,821Net
                  interest income
              
              
              
              
              $
              39,889
              
              
              
              
              
              
              
              $
              36,716Net
                  interest spread2
              
              
              
              
              
              
              
              
              3.35
              %
              
              
              
              
              
              
              
              3.67
              %Net
                  interest margin3
              
              
              
              
              
              
              
              
              4.31
              %
              
              
              
              
              
              
              
              4.56
              %







1
            Netloan
                fees have been included in the calculation of interest income. Loan
                fees
                were approximately $1,925,000 and $1,723,000 for the quarters ended
                June
                30, 2007 and 2006, respectively, and approximately $3,524,000 and
                $3,101,000 for the six months ended June 30, 2007 and 2006, respectively.
                Net loans are net of the allowance for loan losses, deferred fees,
                unearned income, and related direct costs, but include those loans
                placed
                on non-accrual status.


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


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




19




The
      following table sets forth, for the periods indicated, the dollar amount of
      changes in interest earned and paid for interest-earning assets and
      interest-bearing liabilities 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 June 30,**
                **2007
                  vs. 2006**
                **Increase
                  (Decrease) Due to Change In**
              
              **Six
                  Months Ended June 30,**
                **2007
                  vs. 2006**
                **Increase
                  (Decrease) Due to Change In**Volume
              
              Rate
              
              Total
              
              Volume
              
              Rate
              
              Total**Interest
                  income:**Net
                  loans1
              
              $
              5,500
              
              $
              (542
              )
              $
              4,958
              
              $
              11,724
              
              $
              (514
              )
              $
              11,210Securities
                  of U.S. government agencies
              
              
              (219
              )
              
              268
              
              
              49
              
              
              (134
              )
              
              533
              
              
              399Other
                  investment securities
              
              
              60
              
              
              -
              
              
              60
              
              
              170
              
              
              9
              
              
              179Overnight
                  Investments
              
              
              (262
              )
              
              67
              
              
              (195
              )
              
              (627
              )
              
              325
              
              
              (302
              )Interest-earning
                  deposits
              
              
              (5
              )
              
              -
              
              
              (5
              )
              
              (11
              )
              
              -
              
              
              (11
              )Total
                  interest income
              
              
              5,074
              
              
              (207
              )
              
              4,867
              
              
              11,122
              
              
              353
              
              
              11,475**Interest
                  expense:**Money
                  market deposits
              
              $
              795
              
              $
              311
              
              $
              1,106
              
              $
              1,771
              
              $
              819
              
              $
              2,590Super
                  NOW deposits
              
              
              2
              
              
              -
              
              
              2
              
              
              -
              
              
              1
              
              
              1Savings
                  deposits
              
              
              18
              
              
              79
              
              
              97
              
              
              40
              
              
              150
              
              
              190Time
                  certificates of deposit indenominations
                  of $100,000 or more
              
              
              1,643
              
              
              485
              
              
              2,128
              
              
              3,613
              
              
              1,649
              
              
              5,262Other
                  time deposits
              
              
              32
              
              
              233
              
              
              265
              
              
              153
              
              
              511
              
              
              664Other
                  borrowings
              
              
              (417
              )
              
              208
              
              
              (209
              )
              
              (940
              )
              
              535
              
              
              (405
              )Total
                  interest expense
              
              
              2,073
              
              
              1,316
              
              
              3,389
              
              
              4,637
              
              
              3,665
              
              
              8,302Change
                  in net interest income
              
              $
              3,001
              
              $
              (1,523
              )
              $
              1,478
              
              $
              6,485
              
              $
              (3,312
              )
              $
              3,173
 **P** **rovision
            for Loan Losses**




Due
      to
      the credit risk inherent in our lending business, we set aside allowances
      through charges to earnings. Such charges were not made 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 are presented as a component of other liabilities.




Our
      stringent loan underwriting standard and proactive credit follow-up procedures
      have helped us successfully curb an increase of the provision for loan losses
      despite our rapid loan growth. **** However,
      the provision for loan losses increased to $4.5 million in the second quarter
      of
      2007 as compared with $1.2 million for the prior year’s same quarter. The
      provision for loan losses in the first half of 2007 was $6.1 million, as
      compared to $2.3 million in the first half of 2006. Such increase was made
      to
      keep pace with an increase of non-performing loans and charge-off’s (see
“Financial Condition - Non-performing Assets” and “Allowance for Loan Losses”
below for further discussion) in addition to the growth of our loan portfolio.
      Included in such provision was $579,000 and $205,000 provision to the reserve
      for off-balance-sheet items in the second quarter of 2007 and 2006,
      respectively, and $954,000 and $316,000 provision to the reserve for
      off-balance-sheet items for the first half of 2007 and 2006, respectively.
      The
      procedures for monitoring the adequacy of the allowance for loan losses, as
      well
      as detailed information concerning the allowance itself, are described in the
      section entitled “Allowance for Loan Losses” below.







1
              Net
                  loan fees have been included in the calculation of interest income.
                  Loan
                  fees were approximately $1,925,000 and $1,723,000 for the quarters
                  ended
                  June 30, 2007 and 2006, respectively, and approximately $3,524,000
                  and
                  $3,101,000 for the six months ended June 30, 2007 and 2006, respectively.
                  Net loans are net of the allowance for loan losses, unearned income
                  and
                  related direct costs.


20




**Non-interest
      Income**




Total
      non-interest income decreased by 4.1% to $6.3 million in the second quarter
      of
      2007 as compared with $6.6 million for the prior year’s same quarter, due mainly
      to the decrease of gain on sale of loans. Non-interest income as a percentage
      of
      average assets slightly decreased to 0.32% for the second quarter of 2007 from
      0.37% for the prior year’s same period. For the first six months of 2007, total
      non-interest income decreased by 6.7% to $11.5 million as compared with $12.3
      million in the same period of 2006, and such six-month non-interest income
      of
      2007 and 2006 represent 0.58% and 0.71% of average assets, respectively. We
      currently earn non-interest income from various sources, including an income
      stream provided by bank-owned life insurance (BOLI) in the form of an increase
      in cash surrender value.




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




**Non-interest
      Income**


**(Dollars
      in thousands)**




******2007**
            
            ******2006****For
                Three Months Ended June 30,**
            
            **(Amount)**
            
            **(%)**
            
            **(Amount)**
            
            **(%)**Service
                charges on deposit accounts
            
            $
            2,504
            
            
            39.7
            %
            $
            2,441
            
            
            37.1
            %Gain
                on sale of loans
            
            
            2,334
            
            
            37.0
            %
            
            3,055
            
            
            46.5
            %Loan-related
                servicing income
            
            
            420
            
            
            6.7
            %
            
            364
            
            
            5.5
            %Loan
                referral fee income
            
            
            -
            
            
            -
            
            
            -
            
            
            -SBA
                Loan packaging fee
            
            
            15
            
            
            0.2
            %
            
            120
            
            
            1.8
            %Income
                from other earning assets
            
            
            275
            
            
            4.4
            %
            
            257
            
            
            3.9
            %Other
                income
            
            
            763
            
            
            12.0
            %
            
            343
            
            
            5.2
            %Total
            
            $
            6,311
            
            
            100.0
            %
            $
            6,580
            
            
            100.0
            %Average
                assets
            
            $
            1,996,898
            
            
            
            
            $
            1,774,172Non-interest
                income as a % of average assets
            
            
            
            
            
            0.32
            %
            
            
            
            
            0.37
            %




******2007**
            
            ******2006****For
                Six Months Ended June 30,**
            
            **(Amount)**
            
            **(%)**
            
            **(Amount)**
            
            **(%)**Service
                charges on deposit accounts
            
            $
            4,792
            
            
            41.6
            %
            $
            4,596
            
            
            37.2
            %Gain
                on sale of loans
            
            
            4,144
            
            
            36.0
            %
            
            5,405
            
            
            43.8
            %Loan-related
                servicing income
            
            
            691
            
            
            6.0
            %
            
            893
            
            
            7.2
            %Loan
                referral fee income
            
            
            -
            
            
            -
            
            
            48
            
            
            0.4
            %SBA
                Loan packaging fee
            
            
            36
            
            
            0.3
            %
            
            234
            
            
            1.9
            %Income
                from other earning assets
            
            
            552
            
            
            4.8
            %
            
            496
            
            
            4.0
            %Other
                income
            
            
            1,307
            
            
            11.3
            %
            
            672
            
            
            5.5
            %Total
            
            $
            11,522
            
            
            100.0
            %
            $
            12,344
            
            
            100.0
            %Average
                assets
            
            $
            1,994,399
            
            
            
            
            $
            1,738,821Non-interest
                income as a % of average assets
            
            
            
            
            
            0.58
            %
            
            
            
            
            0.71
            %




Our
      largest source of non-interest income for the second quarter of 2007 was the
      service charge income on deposit accounts, representing approximately 40% of
      our
      total non-interest income. This income source increased to $2.5 million in
      the
      second quarter of 2007 and $4.8 million in the first half of 2007, as compared
      with $2.4 million and $4.6 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 12 months. We constantly review service
      charge rates and the managers’ authority to waive them to maximize service
      charge income while maintaining a competitive position.




Our
      second largest non-interest income for the second quarter of 2007 was the gain
      on the sale of loans, representing around 37% of our total non-interest income,
      which decreased to $2.3 million and $4.1 million in the second quarter and
      the
      first half of 2007 from $3.1 million and $5.4 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. Although our expanded SBA marketing network increased our SBA loan
      production levels in 2007, the production of available-for-sale loans guaranteed
      under the SBA 7(a) program decreased to $42.2 million and $81.0 million,
      respectively, for the second quarter and the first half of 2007, as compared
      with $54.1 million and $93.7 million, respectively, for the prior year’s same
      periods, due to the industry trend favoring the SBA 504 program loans. Such
      reduction of 7(a) guarantee loan production, coupled with the lowered sales
      premium on SBA loans, decreased the gain on sale of the guaranteed portions
      of
      SBA loans to $1.7 million and $3.4 million in the second quarter and the first
      half of 2007, as compared with $3.0 million and $5.3 million, respectively,
      for
      the prior year’s same periods. We also recognize gains from the sale of
      residential mortgage loans. Since the inception of our Home Loan Center in
      2003,
      the sale of residential mortgage loans has become a stable non-interest income
      source, but gain on such sales decreased to $51,000 and $111,000, respectively,
      for the second quarter and the first half of 2007, as compared with $91,000
      and
      $144,000, respectively, for the prior year’s same periods due to the slow-down
      of the residential mortgage market. Mainly for credit risk management purposes,
      we sometimes sell the unguaranteed portion of SBA loans, but the resulting
      gains
      are not considered a stable source of non-interest income. These gains were
      $601,000 in the second quarter of 2007; there were no such sales in the first
      quarter of 2007 or in the first half of 2006.




21




The
      third
      largest source of non-interest income was loan-related servicing income. This
      fee income consists of trade-financing fees and servicing fees on SBA loans
      sold. With the expansion of our trade-financing activities and the growth of
      our
      servicing loan portfolio, this fee income has generally increased. In the second
      quarter of 2007, it increased to $420,000 as compared with $364,000 for the
      second quarter of 2006. For the first half of 2007, however, it decreased to
      $691,000 from $893,000 for the prior year’s same periods. Such decrease was
      mainly caused by the significant reversals of servicing rights on sold SBA
      loans
      which were paid off before their maturities in the first quarter of 2007. The
      servicing fee income on sold loans is credited when we collect the monthly
      payments on the sold loans we are servicing and charged by the monthly
      amortization of servicing rights that we capitalize upon sale of the related
      loans. Such servicing rights are also 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 half of 2007, $1.1 million of
      servicing assets were charged back to this income account by the early pay-offs
      as compared to $758,000 for the prior year’s same period. Considering our
      continued expansion of SBA activities (the servicing portfolio increased to
      $333.1 million at June 30, 2007 from $308.9 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 referrals to other
      financial institutions for loans that did not meet our lending requirements
      for
      various reasons including size, availability of funds, credit criteria and
      others. There was no referral fee income in the second quarter of 2007 and
      2006.
      For the first six-month period, such income was none in 2007, but $48,000 in
      2006. 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.




Income
      from other earning assets represents income from earning assets other than
      interest-earning assets, such as dividend income on FHLB stock ownership and
      increases in cash surrender value of BOLI. For the second quarter and the first
      six-months of 2007, it increased to $275,000 and $552,000, respectively, as
      compared with $257,000 and $496,000, respectively, for the prior year’s same
      periods. These increases were primarily attributable to the increased
      acquisition of FHLB stock as required by the new Capital Plan of the Federal
      Home Loan Bank of San Francisco that went into effect on April 1, 2004.




Non-interest
      income, other than the categories specifically addressed above, represents
      income from miscellaneous sources, such as SBA loan packaging fees and checkbook
      sales income, and generally increases as our business activities grow. For
      the
      second quarter and the first six-months of 2007, this miscellaneous income
      increased to $778,000 and $1.3 million, respectively, as compared with $463,000
      and $906,000, respectively, for the prior year’s same periods, due mainly to the
      appreciation of intangible assets. We recognized $294,000 as other income for
      the net increase of fair value on servicing assets/liabilities in accordance
      with SFAS No. 156, which became effective on January 1, 2007.




**Non-interest
      Expense**




Total
      non-interest expense was $10.6 million in both the second quarter of 2007 and
      2006, and increased by 8.4% to $21.1 million in the first half of 2007 from
      $19.5 million in the prior year’s same period. Our continuing efforts to
      minimize our operating expenses, however, have decreased the ratio of
      non-interest expense as a percentage of average assets to 0.53% and 1.06% for
      the second quarter and the first six-months of 2007 as compared with 0.60%
      and
      1.12%, respectively, for the prior year’s same periods. We believe that our
      efforts in cost-cutting and revenue diversification have improved our
      operational efficiency. We maintained our efficiency ratio (the ratio of
      non-interest expense to the sum of net interest income before provision for
      loan
      losses and total non-interest income) at relatively low levels of 38.95% and
      41.06% in the second quarter and the first half of 2007, respectively, as
      compared with 40.8% and 39.7%, respectively, in the prior year’s same
      periods.




22




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




**Non-interest
      Expense**


**(Dollars
      in thousands)**




**2007**
            
            **2006****For
                the Quarter Ended June 30,**
            
            **(Amount)**
            
            **(%)**
            
            **(Amount)**
            
            **(%)**Salaries
                and employee benefits
            
            $
            5,703
            
            
            53.7
            %
            $
            5,965
            
            
            56.2
            %Occupancy
                and equipment
            
            
            1,300
            
            
            12.3
            %
            
            1,072
            
            
            10.1
            %Data
                processing
            
            
            745
            
            
            7.0
            %
            
            650
            
            
            6.1
            %Loan
                referral fee
            
            
            430
            
            
            4.1
            %
            
            601
            
            
            5.7
            %Professional
                fees
            
            
            264
            
            
            2.5
            %
            
            250
            
            
            2.4
            %Directors’
                fees
            
            
            134
            
            
            1.3
            %
            
            125
            
            
            1.2
            %Office
                supplies
            
            
            147
            
            
            1.4
            %
            
            200
            
            
            1.9
            %Other
                real estate owned
            
            
            -
            
            
            -
            
            
            12
            
            
            0.1
            %Advertising
            
            
            251
            
            
            2.4
            %
            
            376
            
            
            3.5
            %Communications
            
            
            120
            
            
            1.1
            %
            
            128
            
            
            1.2
            %Deposit
                insurance premium
            
            
            322
            
            
            3.0
            %
            
            47
            
            
            0.4
            %Outsourced
                service for customer
            
            
            447
            
            
            4.2
            %
            
            290
            
            
            2.7
            %Amortization
                of intangibles
            
            
            74
            
            
            0.7
            %
            
            35
            
            
            0.3
            %Investor
                relation expenses
            
            
            103
            
            
            1.0
            %
            
            65
            
            
            0.6
            %Other
                operating
            
            
            566
            
            
            5.3
            %
            
            801
            
            
            7.6
            %Total
            
            $
            10,606
            
            
            100.0
            %
            $
            10,617
            
            
            100.0
            %Average
                assets
            
            $
            1,996,898
            
            
            
            
            $
            1,774,172Non-interest
                expenses as a % of average assets
            
            
            
            
            
            0.53
            %
            
            
            
            
            0.60
            %




**2007**
            
            **2006****For
                the Six Months Ended June 30,**
            
            **(Amount)**
            
            **(%)**
            
            **(Amount)**
            
            **(%)**Salaries
                and employee benefits
            
            $
            11,400
            
            
            54.0
            %
            $
            11,221
            
            
            57.6
            %Occupancy
                and equipment
            
            
            2,570
            
            
            12.2
            %
            
            1,968
            
            
            10.1
            %Data
                processing
            
            
            1,509
            
            
            7.2
            %
            
            1,155
            
            
            5.9
            %Loan
                referral fee
            
            
            850
            
            
            4.0
            %
            
            943
            
            
            4.8
            %Professional
                fees
            
            
            579
            
            
            2.7
            %
            
            492
            
            
            2.5
            %Directors’
                fees
            
            
            274
            
            
            1.3
            %
            
            246
            
            
            1.3
            %Office
                supplies
            
            
            320
            
            
            1.5
            %
            
            311
            
            
            1.6
            %Other
                real estate owned
            
            
            -
            
            
            -
            
            
            12
            
            
            0.1
            %Advertising
                and promotional expenses
            
            
            398
            
            
            1.9
            %
            
            558
            
            
            2.9
            %Communications
            
            
            234
            
            
            1.1
            %
            
            233
            
            
            1.2
            %Deposit
                insurance premium
            
            
            372
            
            
            1.8
            %
            
            90
            
            
            0.5
            %Outsourced
                service for customer
            
            
            823
            
            
            3.9
            %
            
            631
            
            
            3.2
            %Amortization
                of intangibles
            
            
            148
            
            
            0.7
            %
            
            35
            
            
            0.1
            %Investor
                relation expenses
            
            
            184
            
            
            0.9
            %
            
            110
            
            
            0.6
            %Other
                operating
            
            
            1,445
            
            
            6.8
            %
            
            1,476
            
            
            7.6
            %Total
            
            $
            21,109
            
            
            100.0
            %
            $
            19,481
            
            
            100.0
            %Average
                assets
            
            $
            1,994,399
            
            
            
            
            $
            1,738,862Non-interest
                expenses as a % of average assets
            
            
            
            
            
            1.06
            %
            
            
            
            
            1.12
            %




Salaries
      and employee benefits usually represent more than half of our total non-interest
      expense. Reflecting the depression of profitability, our profit sharing accruals
      for the summer bonus program decreased to $800,000 in the first half of 2007,
      as
      compared with $1.5 million for the prior year’s same period. Salaries and
      employee benefits, excluding the profit sharing accruals, increased to $5.5
      million and $10.6 million, respectively, for the second quarter and first half
      of 2007, as compared with $5.1 million and $9.7 million for the prior year’s
      same periods, respectively. Such increases were the result of our new office
      openings, including the New York branches, and significant asset growth in
      the
      past 12 months that increased the number of full-time equivalent employees
      to
      352 as of June 30, 2007 from 331 as of June 30, 2006. However, our efforts
      to
      promote efficient operations increased assets per employee to $5.8 million
      at
      June 30, 2007 from $5.6 million at June 30, 2006.




Primarily
      due to our geographic expansion and growth of our business, occupancy and
      equipment expenses as a percentage of total non-interest expenses increased
      to
      approximately 12% in the first half of 2007 from approximately 10% in the prior
      year’s same period. Such expenses totaled $1.3 million and $2.6 million,
      respectively, for the second quarter and first half of 2007, as compared with
      $1.1 million and $2.0 million for the prior year’s same periods,




23




Data
      processing expenses increased to $745,000 and $1.5 million, respectively, for
      the second quarter and the first half of 2007, as compared with $650,000 and
      $1.2 million for the prior year’s same periods. These increases correspond to
      the overall growth of our business.




Loan
      referral fees are paid to brokers who refer loans to us, mostly SBA loans.
      Although we also pay referral fees for some qualified commercial loans, referral
      fee expenses generally correspond to our SBA loan production level since most
      SBA loans are referred by brokers. Due to the decrease of SBA loan referrals,
      these referral fees decreased to $430,000 and $850,000 in the second quarter
      and
      first half of 2007, respectively, from $601,000 and $943,000 in the prior year’s
      same periods.




Professional
      fees generally increase as we grow. Professional fees increased to $264,000
      and
      $579,000, respectively, in the second quarter and first half of 2007 as compared
      with $250,000 and $492,000, respectively, for the prior year’s same periods. We
      expect these expenditures will continue to be significant as we address the
      enhanced SEC and NASDAQ corporate governance requirements and the local
      regulation of the states into which we recently commenced business operations.




Advertising
      and promotional expenses  decreased
      somewhat to $251,000 and $398,000 in the second quarter and the first half
      of
      2007, respectively, as compared with $376,000 and $558,000 for the prior year’s
      same periods. These decreases can be attributed to the reduction of initial
      marketing activities incurred upon the initiation of our New York area
      operations in the first half of 2006.




Outsourced
      service costs for customers are payments made to third parties who provide
      services that were traditionally provided by banks to their customers, such
      as
      armored car services or bookkeeping services, and are recouped from the earnings
      credits earned by the respective depositors on their balances maintained with
      us. Due mainly to the increase in service activities and the increase in
      depositors demanding such services, such as escrow accounts and brokerage
      accounts, these expenses increased to $447,000 and $823,000 in the second
      quarter and the first half of 2007, respectively, as compared with $290,000
      and
      $631,000, respectively, for the prior year’s same periods.




Investor
      relations expenses represent costs for providing services to our existing and
      prospective shareholders, such as Nasdaq listing fees, fees for an outside
      investor relations company and various promotional material costs. Mainly due
      to
      our expanded activities, these expenses increased to $103,000 and $184,000,
      respectively, in the second quarter and the first half of 2007, as compared
      with
      $65,000 and $110,000, respectively, for the prior year’s same
      periods.




Non-interest
      expenses other than the categories specifically addressed above, such as office
      supplies and FDIC assessments, generally increase as our overall business grows.
      These miscellaneous expenses increased to $1.4 million and $2.8 million,
      respectively, in the second quarter and the first half of 2007, as compared
      with
      $1.3 million and $2.4 million, respectively, for the prior year’s same periods.
      The increase for the six-month comparison was due mainly to losses on the
      disposition of non-performing assets recognized in the first quarter of 2007
      and
      more amortization expenses of intangibles acquired in the second quarter of
      2006
      upon the acquisition of Liberty Bank of New York.




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




**Provision
      for Income Taxes**




For
      the
      quarter ended June 30, 2007, we made a provision for income taxes of $4.8
      million on pretax net income of $12.1 million, representing an effective tax
      rate of 39.4%, as compared with a provision for income taxes of $5.8 million
      on
      pretax net income of $14.2 million, representing an effective tax rate of 40.7%,
      for the same quarter of 2006. For the first half of 2007, we made a provision
      for income taxes of $9.5 million on pretax net income of $24.2 million,
      representing an effective tax rate of 39.3%, as compared with a provision for
      income taxes of $11.1 million on pretax net income of $27.3 million,
      representing an effective tax rate of 40.6%, for the same period of
      2006.




24




The
      effective tax rates in the second quarter and the first half of 2007 were
      reasonably lower than those for the prior year’s same periods, due mainly to our
      increased state tax apportionment into states whose tax rates were lower than
      that of California. Our effective tax rates were one to two percentage points
      lower than statutory rates due to state tax benefits derived from doing business
      in an Enterprise Zone and our ownership of BOLI and Low Income Housing Tax
      Credit Funds (see “Financial Condition -- Other Earning Assets” for further
      discussion). Generally, income tax expense is the sum of two components: current
      tax expense and deferred tax expense (benefit). Current tax expense is
      calculated by applying the current tax rate to taxable income. Deferred tax
      expense accounts for the change in deferred tax assets (liabilities) from year
      to year. Deferred income tax assets and liabilities represent the tax effects,
      based on current tax law, of future deductible or taxable amounts attributable
      to events that have been recognized in the financial statements. Because we
      traditionally recognize substantially more expenses in our financial statements
      than we have been allowed to deduct for taxes, we generally have a net deferred
      tax asset. At June 30, 2007 and December 31, 2006, we had net deferred tax
      assets of $9.3 million and $9.7 million, respectively.




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




**Financial
      Condition**




**Loan
      Portfolio**




Total
      loans are the sum of loans receivable and loans held for sale reported at their
      outstanding principal balances, net of any unearned income which is unamortized
      deferred fees, costs, premiums, and discounts. Total loans net of unearned
      income increased by $112.5 million, or 7.2%, to $1.67 billion at June 30, 2007,
      as compared with $1.56 billion at December 31, 2006. Total loans net of unearned
      income as a percentage of total assets as of June 30, 2007 and December 31,
      2006
      were 82.0% and 77.7%, respectively.




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




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


**Amount
                  Outstanding**
                **(Dollars
                  in Thousands)****June
                  30, 2007**
              
              **December
                  31, 2006**Construction
              
              $
              50,786
              
              $
              46,285Real
                  estate secured
              
              
              1,272,405
              
              
              1,183,030Commercial
                  and industrial
              
              
              306,732
              
              
              278,165Consumer
              
              
              43,121
              
              
              53,059Total
                  loans
              
              $
              1,673,044
              
              $
              1,560,539Participation
                  loans sold and serviced by the Company
              
              $
              333,100
              
              $
              336,652Construction
              
              
              3.0
              %
              
              3.0
              %Real
                  estate secured
              
              
              76.1
              %
              
              75.8
              %Commercial
                  and industrial
              
              
              18.3
              %
              
              17.8
              %Consumer
              
              
              2.6
              %
              
              3.4
              %Total
                  loans
              
              
              100.0
              %
              
              100.0
              %




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 $1.27
      billion and $1.18 billion as of June 30, 2007 and December 31, 2006,
      respectively. The real estate secured loans as a percentage of total loans
      were
      76.1% and 75.8% at June 30, 2007 and December 31, 2006, respectively. Since
      2003, we have been actively involved in residential mortgage lending. We offer
      a
      wide selection of residential mortgage programs, including non-traditional
      mortgages such as interest only and payment option adjustable rate mortgages.
      Most of our salable loans are transferred to the secondary market while we
      retain a portion on our books as portfolio loans. Our total home mortgage loan
      portfolio outstanding was $40.6 million at December 31, 2006 and $39.3 million
      at June 30, 2007, and we have deemed its effect on our credit risk profile
      to be
      immaterial. The residential mortgage loans with unconventional terms such as
      interest-only mortgage and option adjustable rate mortgage at June 30, 2007
      were
      $6.2 million and $1.1 million, respectively, inclusive of loans held temporarily
      for sale or refinancing, as compared with $4.6 million and $1.1 million,
      respectively, at December 31, 2006.




25




Commercial
      and industrial loans include revolving lines of credit as well as term business
      loans. Commercial and industrial loans at June 30, 2007 increased to $306.7
      million, as compared with $278.2 million at December 31, 2006. Commercial and
      industrial loans as a percentage of total loans also increased to 18.3% at
      June
      30, 2007, from 17.8% at December 31, 2006. Such increase was mainly caused
      by
      our marketing strategy to target relationship-based accounts, such as unsecured
      business and commercial loans.




Consumer
      loans have historically represented less than 5% of our total loan portfolio.
      The majority of consumer loans are concentrated in automobile loans, which
      we
      formerly provided as a service only to existing customers. With our target
      marketing since 2003, consumer loans continued to increase to $53.1 million
      at
      December 31, 2006, but we subsequently slowed down the auto loan financing
      for
      credit risk management purposes. As a result, this portfolio decreased to $43.1
      million at June 30, 2007. **** Management
      anticipates further increases in other types of consumer loans going forward,
      although no assurance can be given that this increase will occur.




Construction
      loans generally have represented 5% or less of our total loan portfolio and
      are
      extended as a temporary financing vehicle only. In the third quarter of 2004,
      we
      formed a construction loan department by appointing a construction loan
      specialist as its manager. Since then, construction loans increased to $46.3
      million at the end of 2006, and increased to $50.8 million at the end of the
      second quarter of 2007, representing 3.0% of total loans. We expect to expand
      our construction lending activities with this specialized capacity.




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




The
      following table shows the contractual maturity distribution and repricing
      intervals of the outstanding loans in our portfolio, as of June 30, 2007. In
      addition, the table shows the distribution of such loans between those with
      variable or floating interest rates and those with fixed or predetermined
      interest rates. The table excludes the gross amount of non-accrual loans of
      $16.1 million, and includes unearned income and deferred fees totaling $7.6
      million at June 30, 2007:




**Loan
      Maturities and Repricing Schedule**




**At
                June 30, 2007,****Within**
              **One
                Year**
            
            **After
                One**
              **But
                Within**
              **Five
                Years**
            
            **After**
              **Five
                Years**
            
            **Total****(Dollars
                in Thousands)**Construction
            
            $
            50,787
            
            $
            -
            
            $
            -
            
            $
            50,787Real
                estate secured
            
            
            883,145
            
            
            345,362
            
            
            33,898
            
            
            1,262,405Commercial
                and industrial
            
            
            294,475
            
            
            9,813
            
            
            3,944
            
            
            308,232Consumer
            
            
            25,299
            
            
            17,795
            
            
            -
            
            
            43,094Total
                loans, net of non-accrual loans
            
            $
            1,253,706
            
            $
            372,970
            
            $
            37,842
            
            $
            1,664,518Loans
                with variable (floating) interest rates
            
            $
            1,182,184
            
            $
            27,559
            
            $
            1,900
            
            $
            1,211,643Loans
                with predetermined (fixed) interest rates
            
            $
            71,522
            
            $
            345,411
            
            $
            35,942
            
            $
            452,875






26




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




**Non-performing
      Assets**




Non-performing
      assets, or NPAs, 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 non-performing assets, or other
      NPAs.




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. Other NPAs consist of properties, mainly other real estate owned (OREO)
      and repossessed vehicles, acquired by foreclosure or similar means that
      management intends to offer for sale.




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




**Non-performing
      Assets**


**(Dollars
      in Thousands)**




**June
                30, 2007**
            
            **December
                31, 2006**
            
            **June
                30, 2006****Nonaccrual
                loans:****1**Real
                estate secured
            
            $
            6,320
            
            $
            2,530
            
            $
            1,143Commercial
                and industrial
            
            
            789
            
            
            2,342
            
            
            1,717Consumer
            
            
            227
            
            
            930
            
            
            892Total
            
            
            7,336
            
            
            5,802
            
            
            3,752**Loans
                90 days or more past due (as to principal****or****interest) and still****accruing:**Construction
            
            
            -
            
            
            -
            
            
            -Real
                estate secured
            
            
            743
            
            
            209
            
            
            240Commercial
                and industrial
            
            
            334
            
            
            838
            
            
            614Consumer
            
            
            -
            
            
            -
            
            
            47Total
            
            
            1,077
            
            
            1,047
            
            
            901**Restructured
                loans:****2**Real
                estate secured
            
            
            -
            
            
            -
            
            
            -Commercial
                and industrial
            
            
            -
            
            
            -
            
            
            -Consumer
            
            
            -
            
            
            -
            
            
            -Total
            
            
            -
            
            
            
            
            
            -Total
                non-performing loans
            
            
            8,413
            
            
            6,849
            
            
            4,653Repossessed
                vehicles
            
            
            73
            
            
            95
            
            
            -Other
                real estate owned (“OREO”)
            
            
            -
            
            
            138
            
            
            242Total
                non-performing assets (“NPAs”)
            
            $
            8,486
            
            $
            7,082
            
            $
            4,895Non-performing
                loans as a % of total loans
            
            
            0.50
            %
            
            0.44
            %
            
            0.32
            %NPAs
                as a % of total loans and OREO
            
            
            0.51
            %
            
            0.45
            %
            
            0.34
            %Allowance
                for loan losses as a % of non-performing loans
            
            
            230.33
            %
            
            272.38
            %
            
            351.53
            %


1
        During
        the six months ended June 30, 2007, no interest income related to these loans
        was included in net income. Additional interest income of approximately $1.1
        million would have been recorded during the six months ended June 30, 2007,
        if
        these loans had been paid in accordance with their original terms and had
        been
        outstanding throughout the six months ended June 30, 2007 or, if not outstanding
        throughout the six months ended June 30, 2007, since origination.
 2
        A
“restructured loan” is defined as a loan in which the terms were renegotiated to
        provide a reduction or deferral of interest or principal because of
        deterioration in the financial position of the borrower.




27




Our
      continued emphasis on asset quality control enabled us to maintain a relatively
      low level of non-performing loans prior to 2007. However, the general economic
      condition of the United States as well as the local economies in which
      we do business has shown a slowdown as the housing sector cooled in 2006 and
      the
      transition to below-trend GDP growth began. This transition of the economy
      affected our borrowers’ strength and four large loans placed in non-accrual
      status in the aggregate amount of $13.1 million increased our non-performing
      loans to $20.3 million, or 1.25% of loans as of March 31, 2007. Most of them
      were paid-off or brought current as planned during the second quarter of 2007.
      As a result, non-performing loans decreased to $8.5 million or 0.50% of gross
      loans at the end of June 2007, which is higher than $6.9 million or 0.44% at
      December 31, 2006 and $4.7 million or 0.32% at June 30, 2006.




At
      June
      30, 2007, we had $73,000 worth of repossessed vehicles amounting to in other
      NPAs, while we had $233,000 in Other NPAs at the end of 2006, which consisted
      of
      one OREO which was sold at a small loss in January 2007 and a few repossessed
      vehicles. At June 30, 2006, we had two OREO in other NPAs, in an amount of
      $242,000, which were subsequently sold without significant losses. Together
      with
      other NPAs, the ratio of NPAs as a percentage of total loans and other NPAs
      increased to 0.51% at June 30, 2007, as compared with 0.45% at December 31,
      2006
      and 0.34% at June 30, 2006.




Management
      believes that the increase of non-performing loans does not reflect a trend
      nor
      the overall quality of our loan portfolio considering total delinquent loans
      over 30 days, net of the portion guaranteed by the U.S. government, were
      insignificant as of June 30, 2007 at $11.7 million or 0.7% of total loans.
      Management also believes that the reserve provided for non-performing loans,
      together with the tangible collateral, were adequate as of June 30, 2007. See
      “Allowance for Loan Losses” below for further discussion. Except as disclosed
      above, as of June 30, 2007, management was not aware of any material credit
      problems of borrowers that would cause it to have serious doubts about the
      ability of a borrower to comply with the present loan payment terms. However,
      no
      assurance can be given that credit problems may exist that may not have been
      brought to the attention of management.




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




In
      anticipation of credit risk inherent in our lending business, we set aside
      allowances through charges to earnings. Such charges were not only made for
      the
      outstanding loan portfolio, but also for off-balance sheet items, such as
      commitments to extend credit or letters of credit. Charges made for our
      outstanding loan portfolio were credited to the allowance for loan losses,
      whereas charges for off-balance sheet items were credited to the reserve for
      off-balance sheet items, which is presented as a component of other liabilities.
      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 “Non-performing Assets” above, the net
      charge-offs in the second quarter and first half of 2007 increased to $1.8
      million and $4.5 million, respectively, compared to $107,000 and $186,000,
      respectively, in the same periods of 2006. The net charge-offs in 2007 included
      $1.1 million consumer loan charge-offs, the majority of which were written-off
      in the first quarter of 2007 for automobile loans, including automobile
      inventory financing, extended in connection with two used car dealers who closed
      down their businesses in 2006. These net charge-offs represent 0.11% and 0.28%
      of average total loans in the second quarter and first half of 2007,
      respectively.




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




**As
                of:**
            
            **As
                of:****Phase
                of Methodology**
            
            **June
                30, 2007**
            
            **December
                31, 2006**Specific
                review of individual loans
            
            $
            876,972
            
            $
            1,779,560Review
                of pools of loans with similar characteristics
            
            
            14,512,800
            
            
            13,424,657Judgmental
                estimate based on various subjective factors
            
            
            3,988,084
            
            
            3,449,865Total
                allowance for loan losses
            
            $
            19,377,856
            
            $
            18,654,082




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




28




**Distribution
                and Percentage Composition of Allowance for Loan
                Losses****(Dollars
                in thousands)****Balance
                as of**
            
            **June
                30, 2007**
            
            **December
                31, 2006**Applicable
                to:
            
            **Reserve**
              **Amount**
            
            **Total**
              **Loans**
            
            **(%)**
            
            **Reserve**
              **Amount**
            
            **Total**
              **Loans**
            
            **(%)**Construction
                loans
            
            $
            220
            
            $
            50,787
            
            
            0.43
            %
            $
            352
            
            $
            46,285
            
            
            0.76
            %Real
                estate secured
            
            
            11,475
            
            
            1,272,405
            
            
            0.90
            %
            
            9,933
            
            
            1,183,030
            
            
            0.84
            %Commercial
                and industrial
            
            
            6,958
            
            
            306,732
            
            
            2.27
            %
            
            7,164
            
            
            278,165
            
            
            2.58
            %Consumer
            
            
            725
            
            
            43,121
            
            
            1.68
            %
            
            1,205
            
            
            53,059
            
            
            2.27
            %Total
                Allowance
            
            $
            19,378
            
            $
            1,673,045
            
            
            1.16
            %
            $
            18,654
            
            $
            1,560,539
            
            
            1.20
            %




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




**Allowance
      for Loan Losses**


**(Dollars
      in Thousands)**


**Three
                  months ended June 30,**
              
              **Six
                  months ended June 30,****As
                  of and for the period of**
              
              **2007**
              
              **2006**
              
              **2007**
              
              **2006****Balances:**Average
                  total loans outstanding during period
              
              $
              1,639,030
              
              $
              1,393,340
              
              $
              1,604,276
              
              $
              1,337,631Total
                  loans (net of unearned income)
              
              $
              1,673,044
              
              $
              1,434,136
              
              $
              1,673,044
              
              $
              1,434,136**Allowance
                  for loan losses:****Balances
                  at beginning of period**
              
              $
              17,214
              
              $
              14,870
              
              $
              18,654
              
              $
              13,999**Actual
                  charge-offs:**Real
                  estate secured
              
              
              -
              
              
              8
              
              
              163
              
              
              8Commercial
                  and industrial
              
              
              1,597
              
              
              238
              
              
              3,253
              
              
              348Consumer
              
              
              191
              
              
              48
              
              
              1,118
              
              
              118Total
                  charge-offs
              
              
              1,788
              
              
              294
              
              
              4,534
              
              
              474**Recoveries
                  on loans previously charged off:**Real
                  estate secured
              
              
              -
              
              
              145
              
              
              -
              
              
              145Commercial
                  and industrial
              
              
              6
              
              
              40
              
              
              16
              
              
              138Consumer
              
              
              25
              
              
              1
              
              
              66
              
              
              5Total
                  recoveries
              
              
              31
              
              
              186
              
              
              82
              
              
              288Net
                  charge-offs (recoveries)
              
              
              1,757
              
              
              108
              
              
              4,452
              
              
              186**Allowance
                  for loan losses acquired in LBNY acquisition**
              
              
              -
              
              
              601
              
              
              -
              
              
              601**Provision
                  for loan losses**
              
              
              4,500
              
              
              1,200
              
              
              6,130
              
              
              2,260**Less:
                  Provision for losses in off-balance sheet items**
              
              
              579
              
              
              205
              
              
              954
              
              
              316**Balances
                  at end of period**
              
              $
              19,378
              
              $
              16,358
              
              $
              19,378
              
              $
              16,358**Ratios:**Net
                  loan charge-offs to average total loans
              
              
              0.11
              %
              
              0.01
              %
              
              0.28
              %
              
              0.01
              %Allowance
                  for loan losses to total loans at period-end
              
              
              1.16
              %
              
              1.14
              %
              
              1.16
              %
              
              1.14
              %Net
                  loan charge-offs to allowance for loan losses
              
              
              9.07
              %
              
              0.65
              %
              
              22.98
              %
              
              1.13
              %Net
                  loan charge-offs to provision for loan losses
              
              
              39.05
              %
              
              8.90
              %
              
              72.63
              %
              
              8.21
              %




**Contractual
      Obligations**




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




29




**(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
            
            $
            20,399
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            20,399Junior
                subordinated debentures
            
            
            4,030
            
            
            4,892
            
            
            190
            
            
            61,547
            
            
            70,659Operating
                leases
            
            
            2,880
            
            
            4,962
            
            
            2,441
            
            
            2,675
            
            
            12,958Time
                deposits
            
            
            966,177
            
            
            4,362
            
            
            1
            
            
            32
            
            
            970,572Total
            
            $
            993,486
            
            $
            14,216
            
            $
            2,632
            
            $
            64,254
            
            $
            1,074,588




**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
      June 30, 2007 and December 31, 2006, we had commitments to extend credit of
      $255.0 million and $141.2 million, respectively. Obligations under standby
      letters of credit were $9.6 million and $9.5 million at June 30, 2007 and
      December 31, 2006, respectively, and our obligations under commercial letters
      of
      credit were $13.9 million and $14.8 million at such dates, respectively. The
      effect on our revenues, expenses, cash flows and liquidity from the unused
      portion of the commitments to provide credit cannot be reasonably predicted
      because there is no guarantee that the lines of credit will be used.




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




**Investment
      Activities**




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




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




We
      sell
      federal funds, purchase securities under agreements to resell and high quality
      money market instruments, and deposit interest-bearing accounts in other
      financial institutions to help meet liquidity requirements and provide temporary
      holdings until the funds can be otherwise deployed or invested. As of June
      30,
      2007 and December 31, 2006, we had $25 million and $130 million, respectively,
      in federal funds sold and repurchase agreements, and in interest-bearing
      deposits in other financial institutions.




*Investment
      Securities*




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




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




30




**Investment
      Securities Portfolio**


**(Dollars
      in Thousands)**




**As
                of June 30, 2007**
            
            **As
                of December 31, 2006****Amortized**
              **Cost**
            
            **Market
                Value**
            
            **Amortized**
              **Cost**
            
            **Market
                Value**Held
                to Maturity:Securities
                of government sponsored enterprises
            
            $
            11,000
            
            $
            10,852
            
            $
            14,000
            
            $
            13,845Collateralized
                mortgage obligation.
            
            
            178
            
            
            162
            
            
            196
            
            
            181Municipal
                securities
            
            
            425
            
            
            419
            
            
            425
            
            
            419Available
                for Sale:Securities
                of government sponsored enterprises
            
            
            118,867
            
            
            118,443
            
            
            87,809
            
            
            87,511Mortgage
                backed securities
            
            
            17,744
            
            
            17,687
            
            
            21,033
            
            
            20,917Collateralized
                mortgage obligation
            
            
            34,840
            
            
            34,215
            
            
            38,650
            
            
            38,260Corporate
                securities
            
            
            17,401
            
            
            17,203
            
            
            13,445
            
            
            13,387Municipal
                securities
            
            
            7,725
            
            
            7,555
            
            
            7,725
            
            
            7,763Total
                investment securities
            
            $
            208,180
            
            $
            206,536
            
            $
            183,283
            
            $
            182,283




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




**Investment
      Maturities and Repricing Schedule**




**(Dollars
      in Thousands)**




**Within
                One Year**
            
            **After
                One But**
              **Within
                Five Years**
            
            **After
                Five But**
              **Within
                Ten Years**
            
            **After
                Ten Years**
            
            **Total****Amount**
            
            **Yield**
            
            **Amount**
            
            **Yield**
            
            **Amount**
            
            **Yield**
            
            **Amount**
            
            **Yield**
            
            **Amount**
            
            **Yield****Held
                to Maturity:**Securities
                of governmentsponsored
                enterprises
            
            $
            -
            
            
            -
            
            $
            9,000
            
            
            4.12
            %
            $
            2,000
            
            
            3.93
            %
            $
            -
            
            
            -
            
            $
            11,000
            
            
            4.08
            %Mortgage
                backed securities
            
            
            -
            
            
            -
            
            
            178
            
            
            3.98
            %
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            178
            
            
            3.98
            %Municipal
                securities
            
            
            -
            
            
            -
            
            
            425
            
            
            4.12
            %
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            425
            
            
            4.12
            %**Available-for-sale:**Securities
                of governmentsponsored
                enterprises
            
            
            23,960
            
            
            4.92
            %
            
            94,483
            
            
            5.28
            %
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            118,443
            
            
            5.21
            %Mortgage
                backed securities
            
            
            9,336
            
            
            4.90
            %
            
            6,369
            
            
            4.45
            %
            
            240
            
            
            5.64
            %
            
            1,742
            
            
            5.87
            %
            
            17,687
            
            
            4.84
            %Collateralized
                mortgageobligation
            
            
            -
            
            
            -
            
            
            34,215
            
            
            5.12
            %
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            34,215
            
            
            5.12
            %Corporate
                securities
            
            
            5,337
            
            
            5.38
            %
            
            9,952
            
            
            5.48
            %
            
            1,914
            
            
            4.46
            %
            
            -
            
            
            -
            
            
            17,203
            
            
            5.34
            %Municipal
                securities
            
            
            398
            
            
            3.66
            %
            
            -
            
            
            -
            
            
            2,216
            
            
            3.72
            %
            
            4,941
            
            
            4.06
            %
            
            7,555
            
            
            3.75
            %Total
                investment securities
            
            $
            39,031
            
            
            4.96
            %
            $
            154,622
            
            
            5.15
            %
            $
            6,370
            
            
            4.08
            %
            $
            6,683
            
            
            4.53
            %
            $
            206,706
            
            
            5.06
            %




Our
      investment securities holdings increased by $24.2 million, or 13.3%, to $206.7
      million at June 30, 2007, compared to holdings of $182.5 million at December
      31,
      2006. Total investment securities as a percentage of total assets were 10.1%
      and
      9.1% at June 30, 2007 and December 31, 2006, respectively. As of June 30, 2007,
      investment securities having a carrying value of $182.2 million were pledged
      to
      secure certain deposits.




As
      of
      June 30, 2007, held-to-maturity securities, which are carried at their amortized
      costs, decreased to $11.6 million from $14.6 million at December 31, 2006.
      Available-for-sale securities, which are stated at their fair market values,
      increased to $195.1 million at June 30, 2007 from $167.8 million at December
      31,
      2006. 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 June 30, 2007 and
      December 31, 2006:




**As
                of June 30, 2007**
            
            **(Dollars
                in thousands)****Less
                than 12 months**
            
            **12
                months or longer**
            
            **Total**Description
                of Securities
            
            **Fair
                Value**
            
            **Gross
                Unrealized Losses**
            
            **Fair
                Value**
            
            **Gross
                Unrealized Losses**
            
            **Fair
                Value**
            
            **Gross
                Unrealized Losses**Securities
                of governmentsponsored
                enterprises
            
            $
            80,706
            
            $
            (184
            )
            $
            46,590
            
            $
            (403
            )
            $
            127,296
            
            $
            (587
            )Collateralized
                mortgageobligation
            
            
            12,971
            
            
            (121
            )
            
            21,406
            
            
            (520
            )
            
            34,377
            
            
            (641
            )Mortgage
                backed securities
            
            
            1,707
            
            
            (13
            )
            
            8,068
            
            
            (86
            )
            
            9,775
            
            
            (99
            )Corporate
                securities
            
            
            9,952
            
            
            (114
            )
            
            1,913
            
            
            (85
            )
            
            11,865
            
            
            (199
            )Municipal
                securities
            
            
            4,271
            
            
            (44
            )
            
            3,703
            
            
            (132
            )
            
            7,974
            
            
            (176
            )$
            109,607
            
            $
            (476
            )
            $
            81,680
            
            $
            (1,226
            )
            $
            191,287
            
            $
            (1,702
            )







**As
                of December 31, 2006**
            
            **(Dollars
                in thousands)****Less
                than 12 months**
            
            **12
                months or longer**
            
            **Total**Description
                of Securities
            
            **Fair
                Value**
            
            **Gross
                Unrealized Losses**
            
            **Fair
                Value**
            
            **Gross
                Unrealized Losses**
            
            **Fair
                Value**
            
            **Gross
                Unrealized Losses**Securities
                of governmentsponsored
                enterprises
            
            $
            17,972
            
            $
            (24
            )
            $
            64,484
            
            $
            (497
            )
            $
            82,456
            
            $
            (521
            )Collateralized
                mortgageobligation
            
            
            12,066
            
            
            (31
            )
            
            17,455
            
            
            (383
            )
            
            29,521
            
            
            (414
            )Mortgage
                backed securities
            
            
            1,740
            
            
            (5
            )
            
            10,834
            
            
            (204
            )
            
            12,574
            
            
            (209
            )Corporate
                securities
            
            
            -
            
            
            -
            
            
            2,929
            
            
            (68
            )
            
            2,929
            
            
            (68
            )Municipal
                securities
            
            
            -
            
            
            -
            
            
            3,802
            
            
            (34
            )
            
            3,802
            
            
            (34
            )$
            31,778
            
            $
            (60
            )
            $
            99,504
            
            $
            (1,186
            )
            $
            131,282
            
            $
            (1,246
            )




As
      of
      June 30, 2007, the total unrealized losses less than 12 months old were
      $476,000, and total unrealized losses more than 12 months old were $1.2 million.
      The aggregate related fair value of investments with unrealized losses less
      than
      12 months old was $109.6 million at June 30, 2007, and those with unrealized
      losses more than 12 months old were $81.7 million. As of December 31, 2006,
      the
      total unrealized losses less than 12 months old were $60,000 and total
      unrealized losses more than 12 months old were $1.2 million. The aggregate
      related fair value of investments with unrealized losses less than 12 months
      old
      was $31.8 million at December 31, 2006, and those with unrealized losses more
      than 12 months old were $99.5 million.




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




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




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 FHLB stock and the cash
      surrender value on the BOLI.




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




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




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




**Type**
            
            Balance
                as of
              June
                30, 2007
            
            Balance
                as of
              December
                31, 2006BOLI
            
            $
            15,931,000
            
            $
            15,636,000LIHTCF
            
            
            4,779,000
            
            
            4,206,000Federal
                Home Loan Bank Stock
            
            
            8,476,000
            
            
            7,542,000




**Deposits
      and Other Sources of Funds**




*Deposits*




Deposits
      are our primary source of funds. Total deposits at June 30, 2007 and December
      31, 2006 were $1.77 billion and $1.75 billion, respectively.




Since
      2006, our niche market depositor’s preference in time deposits bearing
      relatively high interest rates decreased the level of deposits in transactional
      accounts. Therefore, our reliance on time deposits to fund our lending continued
      to increase in 2006. In the fourth quarter of 2006, we implemented a new
      strategy to moderate balance sheet growth and initiated a deposit campaign
      to
      increase non-time deposits and improve our funding cost. This campaign increased
      our non-time deposits by $46.1 million in the first six months of 2007 while
      decreasing time deposits by $32.2 million in the same period. Our average cost
      of interest-bearing liabilities was slightly lowered to 4.99% in the second
      quarter of 2007 from 5.03% in the last quarter of 2006 after rising in each
      quarter of 2006. We believe that our regional diversification into the Texas
      and
      New York/New Jersey markets will also help reduce our time deposit reliance
      level going forward.




The
      average rate paid on time deposits in denominations of $100,000 or more for
      the
      second quarter and the first half of 2007 increased to 5.31% and 5.29%,
      respectively, as compared with 5.03% and 4.82%, 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:**
            
            **June
                30, 2007**
            
            **December
                31, 2006**
            
            **June
                30, 2006****Average****Balance**
            
            **Average****Rate**
            
            **Average****Balance**
            
            **Average****Rate**
            
            **Average****Balance**
            
            **Average****Rate**Demand,
                non-interest-bearing
            
            $
            315,837
            
            
            
            
            $
            317,630
            
            
            
            
            $
            310,525Money
                market
            
            
            421,205
            
            
            4.48
            %
            
            385,823
            
            
            4.50
            %
            
            348,733
            
            
            4.15
            %Super
                NOW
            
            
            22,119
            
            
            1.20
            %
            
            19,719
            
            
            1.16
            %
            
            21,448
            
            
            1.19
            %Savings
            
            
            29,038
            
            
            2.28
            %
            
            29,007
            
            
            1.66
            %
            
            23,755
            
            
            1.14
            %Time
                certificates of deposit in
              denominations
                of $100,000 or more
            
            
            783,100
            
            
            5.31
            %
            
            791,800
            
            
            5.40
            %
            
            657,744
            
            
            5.03
            %Other
                time deposits
            
            
            152,789
            
            
            4.97
            %
            
            162,876
            
            
            4.90
            %
            
            149,922
            
            
            4.36
            %Total
                deposits
            
            $
            1,724,088
            
            
            4.00
            %
            $
            1,706,855
            
            
            4.03
            %
            $
            1,512,127
            
            
            4.54
            %


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




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


**(Dollars
      in Thousands)**




Three
                months or less
            
            $
            446,428Over
                three months through six months
            
            
            194,410Over
                six months through twelve months
            
            
            149,604Over
                twelve months
            
            
            1,589Total
            
            $
            792,031




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 June 30, 2007 and December
      31, 2006.




We
      accept
      brokered deposits on a selective basis at reasonable interest rates to augment
      deposit growth. We have reduced these deposits to $2.3 million at June 30,
      2007
      from $6.3 million at December 31, 2006 in order to limit our reliance on
      non-core funding sources. Most of the brokered deposits will mature within
      one
      year. Since brokered deposits are generally less stable forms of deposits,
      we
      closely monitor growth from this non-core funding source.




*FHLB
      Borrowings*




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




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




For
                the quarter ended
            
            **June
                30, 2007**
            
            **December
                31, 2006**Balance
                at quarter-end
            
            $
            20,000
            
            $
            20,000Average
                balance during the quarter
            
            $
            20,000
            
            $
            20,000Maximum
                amount outstanding at any month-end
            
            $
            20,000
            
            $
            20,000Average
                interest rate during the quarter
            
            
            3.68
            %
            
            3.68
            %Average
                interest rate at quarter-end
            
            
            3.68
            %
            
            3.68
            %


*Junior
      Subordinated Debentures; Trust Preferred Securities*




In
      December 2002, the Bank issued $10 million of the 2002 Junior Subordinated
      Debentures. Subsequently, the Company, as a wholly owned subsidiary in 2003
      and
      as a parent company of the Bank in 2005, 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 8.46% at
      June 30, 2007, which rate adjusts quarterly to the three-month LIBOR plus 3.10%.
      The 2002 debenture will mature on December 26, 2012. Interest on the 2002
      debenture is payable quarterly and no scheduled payments of principal are due
      prior to maturity. The Bank may redeem the 2002 debenture in whole or in part
      prior to maturity on or after December 26, 2007.




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




2003
      Junior Subordinated Debenture; Trust Preferred Securities
      Issuance .
      In
      December 2003, Wilshire Bancorp was formed as a wholly-owned subsidiary of
      the
      Bank, in order to raise additional capital funds through the issuance of trust
      preferred securities. Prior to the completion of the August 2004 bank holding
      company reorganization, Wilshire Bancorp organized its wholly owned subsidiary,
      Wilshire Statutory Trust I, which issued $15 million in trust preferred
      securities. Wilshire Bancorp then purchased all of the common interest in the
      Wilshire Statutory Trust I ($464,000) and issued the 2003 Junior Subordinated
      Debenture (the “2003 debenture”) in the amount of approximately $15.5 million to
      the Wilshire Statutory Trust I with terms substantially similar to the 2003
      trust preferred securities in exchange for the proceeds from the issuance of
      the
      Wilshire Statutory Trust I’s 2003 trust preferred securities and common
      securities. Wilshire Bancorp subsequently deposited the proceeds from the 2003
      debenture in a depository account at the Bank and infused $14.5 million as
      additional equity capital to the Bank immediately following the holding company
      reorganization. The rate of interest on the 2003 debenture and related trust
      preferred securities was 8.21% at June 30, 2007, which adjusts quarterly to
      the
      three-month LIBOR plus 2.85%. The 2003 debenture and related trust preferred
      securities will mature on December 17, 2033. The interest on both the 2003
      debenture and related trust preferred securities is payable quarterly and no
      scheduled payments of principal are due prior to maturity. Wilshire Bancorp
      may
      redeem the 2003 debenture (and in turn the trust preferred securities) in whole
      or in part prior to maturity on or after December 17, 2008.




March
      2005 Junior Subordinated Debenture; Trust Preferred Securities
      Issuance .
      In
      March 2005, Wilshire Bancorp organized its wholly owned subsidiary, Wilshire
      Statutory Trust II, which issued $20 million in trust preferred securities.
      Wilshire Bancorp then purchased all of the common interest in the Wilshire
      Statutory Trust II ($619,000) and issued the 2005 Junior Subordinated Debenture
      (the “March 2005 debenture”) in the amount of $20.6 million to the Wilshire
      Statutory Trust II with terms substantially similar to the March 2005 trust
      preferred securities in exchange for the proceeds from the issuance of the
      Wilshire Statutory Trust II’s March 2005 trust preferred securities and common
      securities. Wilshire Bancorp subsequently deposited the proceeds from the March
      2005 debenture in a depository account at the Bank and infused $14 million
      as
      additional equity capital to the Bank. The rate of interest on the March 2005
      debenture and related trust preferred securities was 7.15% at June 30, 2007,
      which adjusts quarterly to the three-month LIBOR plus 1.79%. The March 2005
      debenture and related trust preferred securities will mature on March 17, 2035.
      The interest on both the March 2005 debenture and related trust preferred
      securities are payable quarterly and no scheduled payments of principal are
      due
      prior to maturity. Wilshire Bancorp may redeem the March 2005 debenture (and
      in
      turn the trust preferred securities) in whole or in part prior to maturity
      on or
      after March 17, 2010.




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.




35




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.




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 June 30, 2007, Wilshire Bancorp counted the full amount ($50.0
      million) of trust preferred securities as Tier 1 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, 2006. Information concerning
      interest rate risk management is set forth under “Item 3. Quantitative and
      Qualitative Disclosures about Market Risk.”




**Liquidity
      Management**




Maintenance
      of adequate liquidity requires that sufficient resources be available at all
      times to meet our cash flow requirements. Liquidity in a banking institution
      is
      required primarily to provide for deposit withdrawals and the credit needs
      of
      its customers and to take advantage of investment opportunities as they arise.
      Liquidity management involves our ability to convert assets into cash or cash
      equivalents without incurring significant loss, and to raise cash or maintain
      funds without incurring excessive additional cost. For this purpose, we maintain
      a portion of our funds in cash and cash equivalents, deposits in other financial
      institutions and loans and securities available for sale. Our liquid assets
      at
      June 30, 2007 and December 31, 2006 totaled approximately $304.9 million and
      $378.6 million, respectively. Our liquidity level measured as the percentage
      of
      liquid assets to total assets was 14.9% and 18.8% at June 30, 2007 and December
      31, 2006, respectively.




As
      a
      secondary source of liquidity, we rely on advances from the FHLB to supplement
      our supply of lendable funds and to meet deposit withdrawal requirements.
      Advances from the FHLB are typically secured by our mortgage loans and stock
      issued by the FHLB. Advances are made pursuant to several different programs.
      Each credit program has its own interest rate and range of maturities. Depending
      on the program, limitations on the amount of advances are based either on a
      fixed percentage of an institution’s net worth or on the FHLB’s assessment of
      the institution’s creditworthiness. While this fund provides flexibility and low
      cost, we limit our use to 50% of borrowing capacity, as such borrowing does
      not
      qualify as core funds. As of June 30, 2007, our borrowing capacity from the
      FHLB
      was about $441.9 million and the outstanding balance was $20 million, or
      approximately 4.53% of our borrowing capacity. As of June 30, 2007, we also
      maintained a guideline to purchase up to $25 million and $10 million in federal
      funds with Bank of the West and Union Bank of California,
      respectively.




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, 2006 for additional information regarding regulatory capital
      requirements.




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




**Wilshire
                  Bancorp, Inc.**
              
              **Regulatory**
                **Well-**
              
              **Regulatory**
                **Adequately-**
              
              **Actual
                  ratios for the Company as of:****Capitalized****Standards**
              
              **Capitalized****Standards**
              
              **June
                  30,**
                **2007**
              
              **December
                  31,**
                **2006**
              
              **June
                  30,**
                **2006**Total
                  capital to risk-weighted assets
              
              
              10
              %
              
              8
              %
              
              14.22
              %
              
              13.63
              %
              
              13.53
              %Tier
                  I capital to risk-weighted assets
              
              
              6
              %
              
              4
              %
              
              12.36
              %
              
              11.81
              %
              
              11.35
              %Tier
                  I capital to adjusted average assets
              
              
              5
              %
              
              4
              %
              
              10.28
              %
              
              9.79
              %
              
              9.63
              %




**Wilshire
                  State Bank**
              
              **Regulatory**
                **Well-**
              
              **Regulatory**
                **Adequately-**
              
              **Actual
                  ratios for the Bank as of:****Capitalized****Standards**
              
              **Capitalized****Standards**
              
              **June
                  30,**
                **2007**
              
              **December
                  31,**
                **2006**
              
              **June
                  30,**
                **2006**Total
                  capital to risk-weighted assets
              
              
              10
              %
              
              8
              %
              
              14.26
              %
              
              13.51
              %
              
              13.12
              %Tier
                  I capital to risk-weighted assets
              
              
              6
              %
              
              4
              %
              
              12.41
              %
              
              11.68
              %
              
              11.29
              %Tier
                  I capital to adjusted average assets
              
              
              5
              %
              
              4
              %
              
              10.32
              %
              
              9.69
              %
              
              9.59
              %




At
      June
      30, 2007, total shareholders’ equity increased by $13.0 million, after declaring
      cash dividends of $2.9 million, to $162.6 million from $149.6 million at
      December 31, 2006. Such additional capital was primarily derived from
      internally generated operating income ($14.7 million). Our equity also increased
      by the share-based compensation, cumulative effects in change of accounting
      principles, and other comprehensive income.




For
      the
      regulatory capital ratio computation purpose, the Junior Subordinated Debentures
      of $61.5 million, which consists of $10 million issued by the Bank and $51.5
      million issued by the Company in connection with the issuance of $50 million
      trust preferred securities, were taken into consideration. As of June 30, 2007
      and December 31, 2006, Wilshire Bancorp accounted for $50.0 million of such
      securities as Tier 1 capital and $10.0 million as Tier 2 capital. 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 Committee (“ALCO”), which reports monthly to the Board on activities
      related to market risk management. As part of the management of our market
      risk,
      ALCO may direct changes in the mix of assets and liabilities. To that end,
      we
      actively monitor and manage interest rate risk exposures.




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




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




The
      significant balance of non-interest-bearing deposits puts us in an overall
      asset-sensitive position and we strategically plan a significant three-month
      positive gap to meet any unanticipated funding needs by maintaining a large
      portion of funds obtained from non-interest-bearing deposits in overnight
      investments and other cash equivalents. In general, based upon our mix of
      deposits, loans and investments, increases in interest rates would be expected
      to increase our net interest margin. Decreases in interest rates would be
      expected to have the opposite effect. However, we usually seek to maintain
      a
      balanced position over the period of one year to ensure net interest margin
      stability in times of volatile interest rates. This is accomplished by
      maintaining a similar level of interest-earning assets and interest-paying
      liabilities available to be repriced within one year. At June 30, 2007, our
      position appeared balanced for a one-year timeframe with a negligible sensitive
      cumulative gap (minus 9.9% of average interest-earning assets). We do not
      anticipate a major change in our net interest margin as we expect such repricing
      gap, if occurred, to be eliminated within a year.




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




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




Although
      the simulation measures the volatility of net interest income and net portfolio
      value under immediate increase or decrease of market interest rate scenarios
      in
      100 basis point increments, our main concern is the negative effect of a
      reasonably-possible worst scenario. The ALM policy prescribes that for the
      worst
      possible rate-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.




38




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 11.4% positive gap for the three-month timeframe
      and 20.2% cumulative positive gap for a whole portfolios. The NPV increases
      (decreases) as interest income increases (decreases) since the change in cash
      flows has a greater impact on the change in the NPV than does the change in
      the
      discount rate. However the extent of such changes was within the tolerance
      level
      prescribed by our ALM policy due partly to the near-balanced cumulative gap
      for
      the one-year timeframe.




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




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




**Interest
      Rate Sensitivity Analysis**


**(Dollars
      in Thousands)**




**At
                June 30, 2007****Amounts
                Subject to Repricing Within****Interest-earning
                assets:**
            
            **0-3
                months**
            
            **3-12
                months**
            
            **Over
                1 to 5 years**
            
            **After
                5 years**
            
            **Total**Gross
                loans1
            
            $
            1,219,739
            
            $
            33,967
            
            $
            372,970
            
            $
            37,842
            
            $
            1,664,518Investment
                securities
            
            
            17,414
            
            
            21,617
            
            
            154,622
            
            
            13,053
            
            
            206,706Federal
                funds sold and cash equivalents
            
            
            25,003
            
            
            -
            
            
            -
            
            
            -
            
            
            25,003Interest-earning
                deposits
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Total
            
            $
            1,262,156
            
            $
            55,584
            
            $
            527,592
            
            $
            50,895
            
            $
            1,896,227**Interest-bearing
                liabilities:**Savings
                deposits
            
            
            29,520
            
            
            -
            
            
            -
            
            
            -
            
            
            29,520Time
                deposits of $100,000 or more
            
            
            446,535
            
            
            343,907
            
            
            1,589
            
            
            -
            
            
            792,031Other
                time deposits
            
            
            59,281
            
            
            88,069
            
            
            1,469
            
            
            30
            
            
            148,849Other
                interest-bearing deposits
            
            
            468,125
            
            
            -
            
            
            -
            
            
            -
            
            
            468,125Other
                borrowings
            
            
            -
            
            
            20,000
            
            
            -
            
            
            -
            
            
            20,000Subordinated
                debentures
            
            
            46,083
            
            
            -
            
            
            15,464
            
            
            -
            
            
            61,547Total
            
            $
            1,049,544
            
            $
            451,976
            
            $
            18,522
            
            $
            30
            
            $
            1,520,072Interest
                rate sensitivity gap
            
            $
            212,612
            
            
            ($
                396,392
            )
            $
            509,070
            
            $
            50,865
            
            $
            376,155Cumulative
                interest rate sensitivity gap
            
            $
            212,612
            
            
            ($
                183,780
            )
            $
            325,290
            
            $
            376,155Cumulative
                interest rate sensitivity gap ratio (based on average interest-earning
                assets)
            
            
            11.42
            %
            
            -9.87
            %
            
            17.47
            %
            
            20.20
            %




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
      June 30, 2007. All assets presented in this table are held-to-maturity or
      available-for-sale. At June 30, 2007, we had no trading securities:







1
                Excludes
                    the gross amount of non-accrual loans of approximately $16.1
                    million at
                    June 30, 2007.


39




**(Dollars
                in Thousands)****Change**
            
            **Net
                Interest Income****(in
                Basis Points)**
            
            **(next
                twelve months)**
            
            **%
                Change**
            
            **NPV**
            
            **%
                Change**+200
            
            95,867
            
            6.6%
            
            282,678
            
            7.1%+100
            
            93,038
            
            3.4%
            
            274,481
            
            4.0%0
            
            89,941
            
            -
            
            263,874
            
            --100
            
            85,659
            
            -4.8%
            
            247,205
            
            -6.3%-200
            
            80,027
            
            -11.0%
            
            223,367
            
            -15.4%


Our
      strategies in protecting both net interest income and economic value of equity
      from significant movements in interest rates involve restructuring our
      investment portfolio and using FHLB advances. Although our policy also permits
      to purchase rate caps and floors and interest rate swaps, we are not currently
      engaged in any of these types of transactions.




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




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




Based
      on
      this evaluation, our chief executive officer and chief financial officer
      concluded that, as of June 30, 2007, such disclosure controls and procedures
      were effective to ensure that information required to be disclosed by us in
      the
      reports we file or submit under the Exchange Act is recorded, processed,
      summarized and reported within the time periods specified in the rules and
      forms
      of the Securities and Exchange Commission, and accumulated and communicated
      to
      our management, including our chief executive officer and chief financial
      officer, as appropriate to allow timely decisions regarding required disclosure.




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




There
      were no changes in our internal controls over financial reporting during the
      quarter ended June 30, 2007 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**




Not
      applicable.




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




Not
      applicable.




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




None.




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




Not
      applicable.




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




At
      our
      Annual Meeting of Shareholders held May 30, 2007, the following persons were
      elected as our Class III directors to serve three-year terms expiring at the
      2010 Annual Meeting of Shareholders or until their successors are duly elected
      and qualified:




·
            Soo
                Bong Min (25,822,680 votes in favor; 861,007 votes
                withheld)




·
            Larry
                Greenfield, M.D. (24,916,208 votes in favor; 1,767,479 votes
                withheld)




·
            Kyu-Hyun
                Kim (25,658,615 votes in favor; 1,025,072 votes
                withheld)




·
            Young
                Hi Pak (25,815,336 votes in favor; 868,351 votes
                withheld)




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




*Class
      I*




·
            Steven
                Koh




·
            Gapsu
                Kim




·
            Fred
                Mautner




·**
            Donald
                Byun




*Class
      II*




·
            Mel
                Elliot




·
            Richard
                Lim




·
            Harry
                Siafaris




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




Not
      applicable.




41




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




**Exhibit
                Table**




**Reference
                Number**
            
            **Item**11
            
            Statement
                Regarding Computation of Net Earnings per Share131.1
            
            Certification
                of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act of 200231.2
            
            Certification
                of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act of 200232
            
            Certifications
                of Chief Executive Officer and Chief Financial Officer Pursuant to
                18
                U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002







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




42




**SIGNATURES**




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


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






43