**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**




**________________________________________________________**




FORM
      10-Q


**(Mark
      One)**




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




**For
      the quarterly period ended September 30, 2005.**




**OR**




** ̈**
            **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 
      ** ̈**





Indicate
      by check mark whether the registrant is an accelerated filer (as defined in
      Rule
      12b-2 of the Exchange Act).  Yes **x**No 
      ** ̈**




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




The
      number of shares of Common Stock of the registrant outstanding as of October
      31,
      2005 was 28,585,640.







**FORM
      10-Q**




**INDEX**




**WILSHIRE
      BANCORP, INC.**




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







i


**Part
        I.** **FINANCIAL
        INFORMATION**


Item
          1.
          Financial Statements


WILSHIRE
                    BANCORP, INC.
                  CONDENSED
                    CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION**(UNAUDITED)**
  September
                      30, 2005
                
                **December
                    31, 2004****ASSETS**Cash
                    and due from banks
                
                $
                59,397,952
                
                $
                53,903,163Federal
                    funds sold and other cash equivalents
                
                
                100,000,000
                
                
                45,000,000Cash
                    and cash equivalents
                
                
                159,397,952
                
                
                98,903,163Interest-bearing
                    deposits in other financial institutions
                
                
                2,959
                
                
                2,573Securities
                    available for sale - at fair value (amortized cost of $127,591,968
                    and$86,121,349
                    at September 30, 2005 and December 31, 2004, respectively)
                
                
                126,797,896
                
                
                85,712,485Securities
                    held to maturity - at amortized cost (fair value of $24,706,904
                    and$29,161,100
                    at September 30, 2005 and December 31, 2004, respectively)
                
                
                24,881,133
                
                
                29,262,188Interest
                    only strip - at fair value (amortized cost of $1,549,082and
                    $1,550,444 at September 30, 2005 and December 31, 2004,
                    respectively)
                
                
                1,557,307
                
                
                1,494,176Loans
                    held for sale, at the lower of cost or market
                
                
                20,776,780
                
                
                21,144,128Loans
                    receivable, net of allowance for loan losses of $13,550,664 and
                    $11,111,092at
                    September, 30, 2005 and December 31, 2004, respectively
                
                
                1,154,837,849
                
                
                988,468,142Bank
                    premises and equipment, net
                
                
                8,723,940
                
                
                5,479,776Federal
                    Home Loan Bank stock
                
                
                6,111,600
                
                
                4,371,500Accrued
                    interest receivable
                
                
                6,163,549
                
                
                3,867,005Other
                    real estate owned, net
                
                
                156,400
                
                
                —Deferred
                    income taxes - net
                
                
                7,001,694
                
                
                4,839,346Servicing
                    asset
                
                
                4,769,203
                
                
                4,373,974Due
                    from customers on acceptances
                
                
                2,971,382
                
                
                2,041,023Cash
                    surrender value of life insurance
                
                
                14,955,763
                
                
                11,536,476Other
                    assets
                
                
                6,730,124
                
                
                4,145,368TOTAL
                
                $
                1,545,835,531
                
                $
                1,265,641,323**LIABILITIES
                    AND SHAREHOLDERS’ EQUITY**LIABILITIES:DepositsNoninterest-bearing
                
                $
                312,890,363
                
                $
                273,940,106Interest-bearing:Savings
                
                
                25,398,694
                
                
                22,946,077Time
                    deposits of $100,000 or more
                
                
                584,232,530
                
                
                448,526,610Other
                    time deposits
                
                
                123,264,042
                
                
                115,728,483Money
                    markets and NOWs
                
                
                253,678,390
                
                
                237,564,098Total
                    deposits
                
                
                1,299,464,019
                
                
                1,098,705,374Federal
                    Home Loan Bank borrowings
                
                
                61,000,000
                
                
                41,000,000Junior
                    subordinated debentures
                
                
                61,547,000
                
                
                25,464,000Accrued
                    interest payable
                
                
                4,800,227
                
                
                2,891,707Acceptances
                    outstanding
                
                
                2,971,382
                
                
                2,041,023Other
                    liabilities
                
                
                9,254,025
                
                
                7,231,601Total
                    liabilities
                
                
                1,439,036,653
                
                
                1,177,333,705COMMITMENTS
                    AND CONTINGENCIES (Note 7)SHAREHOLDERS’
                    EQUITY:Preferred
                    stock, no par value; authorized, 1,000,000 shares; issued and
                    outstanding,
                    none
                
                
                —
                
                
                —Common
                    stock, no par value; authorized, 80,000,000 shares;issued
                    and outstanding, 28,585,640 and 28,142,470 shares atSeptember
                    30, 2005 and December 31, 2004, respectively
                
                
                41,079,050
                
                
                38,926,430Accumulated
                    other comprehensive loss
                
                
                (455,796
                )
                
                (223,703
                )Retained
                    earnings
                
                
                66,175,624
                
                
                49,604,891Total
                    shareholders’ equity
                
                
                106,798,878
                
                
                88,307,618TOTAL
                
                $
                1,545,835,531
                
                $
                1,265,641,323




The
        accompanying notes are an integral part of these unaudited condensed
        consolidated financial statements.
  1




**WILSHIRE
                    BANCORP, INC.****CONDENSED
                    CONSOLIDATED STATEMENTS OF OPERATIONS****(UNAUDITED)**
  **Three
                    Months Ended**
                  **September
                    30,**
                
                **Nine
                    Months Ended**
                  **September
                    30,****2005**
                
                **2004**
                
                **2005**
                
                **2004****INTEREST
                    INCOME:**Interest
                    and fees on loans
                
                $
                23,426,039
                
                $
                14,836,911
                
                $
                62,435,585
                
                $
                39,448,958Interest
                    on investment securities and deposits in other financial
                    institutions
                
                
                1,332,561
                
                
                821,288
                
                
                3,351,560
                
                
                2,209,160Interest
                    on federal funds sold and other cash equivalents
                
                
                505,406
                
                
                266,944
                
                
                1,476,930
                
                
                525,102Interest
                    on commercial paper
                
                
                14,573
                
                
                —
                
                
                81,707
                
                
                —Total
                    interest income
                
                
                25,278,579
                
                
                15,925,143
                
                
                67,345,782
                
                
                42,183,220**INTEREST
                    EXPENSE:**Deposits
                
                
                7,828,519
                
                
                4,312,714
                
                
                19,474,943
                
                
                11,150,356Interest
                    on other borrowings
                
                
                1,124,039
                
                
                498,933
                
                
                2,936,730
                
                
                1,276,079Total
                    interest expense
                
                
                8,952,558
                
                
                4,811,647
                
                
                22,411,673
                
                
                12,426,435NET
                    INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES
                
                
                16,326,021
                
                
                11,113,496
                
                
                44,934,109
                
                
                29,756,785PROVISION
                    FOR LOSSES ON LOANS AND LOAN COMMITMENTS
                
                
                1,250,000
                
                
                1,450,000
                
                
                2,470,000
                
                
                3,016,711NET
                    INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES
                
                
                15,076,021
                
                
                9,663,496
                
                
                42,464,109
                
                
                26,740,074**NONINTEREST
                    INCOME:**Service
                    charges on deposit accounts
                
                
                1,973,371
                
                
                1,892,169
                
                
                5,507,777
                
                
                5,548,730Gain
                    on sale of loans
                
                
                2,162,483
                
                
                2,730,952
                
                
                5,674,414
                
                
                6,902,066Loan-related
                    servicing income
                
                
                475,211
                
                
                590,129
                
                
                1,605,961
                
                
                1,763,441Loan
                    referral fees
                
                
                —
                
                
                —
                
                
                118,217
                
                
                99,520Loan
                    packaging fees
                
                
                101,971
                
                
                64,317
                
                
                299,737
                
                
                324,361Income
                    from other earning assets
                
                
                223,798
                
                
                175,223
                
                
                636,262
                
                
                476,313Other
                    income
                
                
                188,809
                
                
                494,083
                
                
                836,386
                
                
                1,092,203Total
                    noninterest income
                
                
                5,125,643
                
                
                5,946,873
                
                
                14,678,754
                
                
                16,206,634**NONINTEREST
                    EXPENSES:**Salaries
                    and employee benefits
                
                
                4,924,298
                
                
                3,709,045
                
                
                13,617,124
                
                
                10,385,656Occupancy
                    and equipment
                
                
                893,344
                
                
                711,130
                
                
                2,496,192
                
                
                1,996,194Data
                    processing
                
                
                473,461
                
                
                454,921
                
                
                1,431,679
                
                
                1,228,322Loan
                    referral fees
                
                
                343,860
                
                
                292,997
                
                
                913,048
                
                
                896,621Professional
                    fees
                
                
                78,908
                
                
                332,798
                
                
                633,497
                
                
                752,433Directors’
                    fees
                
                
                130,650
                
                
                123,550
                
                
                368,000
                
                
                332,100Office
                    supplies
                
                
                235,413
                
                
                137,723
                
                
                478,023
                
                
                383,296Advertising
                    and promotional
                
                
                163,763
                
                
                175,972
                
                
                552,317
                
                
                378,697Communications
                
                
                122,987
                
                
                82,000
                
                
                329,599
                
                
                244,551Deposit
                    insurance premiums
                
                
                38,364
                
                
                32,865
                
                
                113,687
                
                
                95,244Outsourced
                    service for customers
                
                
                415,014
                
                
                361,061
                
                
                1,071,714
                
                
                985,625Other
                    operating
                
                
                539,806
                
                
                714,026
                
                
                1,725,361
                
                
                1,594,455Total
                    noninterest expenses
                
                
                8,359,868
                
                
                7,128,088
                
                
                23,730,241
                
                
                19,273,194INCOME
                    BEFORE INCOME TAX PROVISION
                
                
                11,841,796
                
                
                8,482,281
                
                
                33,412,622
                
                
                23,673,514INCOME
                    TAX PROVISION
                
                
                4,662,999
                
                
                3,382,000
                
                
                13,412,195
                
                
                9,405,000NET
                    INCOME
                
                $
                7,178,797
                
                $
                5,100,281
                
                $
                20,000,427
                
                $
                14,268,514EARNINGS
                    PER SHAREBasic
                
                $
                0.25
                
                $
                0.18
                
                $
                0.70
                
                $
                0.52Diluted
                
                $
                0.25
                
                $
                0.18
                
                $
                0.69
                
                $
                0.50




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




2




**WILSHIRE
                    BANCORP, INC.****CONDENSED
                    CONSOLIDATED STATEMENTS OF COMPREHENSIVE
                    INCOME****(UNAUDITED)**
  **Three
                        Months Ended**
                      **September
                        30,**
                    
                    **Nine
                        Months ended**
                      **September
                        30,****2005**
                    
                    **2004**
                    
                    **2005**
                    
                    **2004**Net
                        income
                    
                    $
                    7,178,797
                    
                    $
                    5,100,281
                    
                    $
                    20,000,427
                    
                    $
                    14,268,514Other
                        comprehensive income, net of tax:Unrealized
                        gains (losses) on securities available for sale and interest-only
                        strip:Unrealized
                        holding gains (losses) on securities available for sale arising
                        during
                        period,net
                        of tax benefit of $94,319 for the three months ended September
                        30, 2005
                        andnet
                        of tax expense of $335,648 for the three months ended September
                        30, 2004,net
                        of tax benefit of $161,789 for the nine months ended September
                        30, 2005
                        andnet
                        of tax benefit of $165,562 for the nine months ended September
                        30, 2004
                    
                    
                    (130,250
                    )
                    
                    463,514
                    
                    
                    (223,423
                    )
                    
                    (228,632
                    )Unrealized
                        holding gains (losses) on interest only strips arising during
                        period,net
                        of tax benefit of $26,752 for the three months ended September
                        30, 2005
                        andnet
                        of tax expense of $35,157 for the three months ended September
                        30, 2004,net
                        of tax benefit of $6,278 for the nine months ended September
                        30, 2005
                        andnet
                        of tax benefit of $101,346 for the nine months ended September
                        30, 2004
                    
                    
                    (36,943
                    )
                    
                    34,197
                    
                    
                    (8,669
                    )
                    
                    (57,206
                    )Unrealized
                        holding gains on interest rate SWAP arising during period,net
                        of tax expense of $25,308 for the nine months ended September
                        30,
                        2004
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    37,962Other
                        comprehensive income (loss), net of tax:
                    
                    
                    (167,193
                    )
                    
                    497,711
                    
                    
                    (232,092
                    )
                    
                    (247,876
                    )Comprehensive
                        income
                    
                    $
                    7,011,604
                    
                    $
                    5,597,992
                    
                    $
                    19,768,335
                    
                    $
                    14,020,638
  The accompanying notes are an integral part of these
          unaudited
          condensed consolidated financial statements.
  3




**WILSHIRE
                    BANCORP, INC.****CONDENSED
                    CONSOLIDATED STATEMENTS OF CASH FLOWS****(UNAUDITED)**
  **Nine
                      Months Ended**
                    **September
                      30,****2005**
                  
                  **2004****CASH
                      FLOWS FROM OPERATING ACTIVITIES:**Net
                      income
                  
                  $
                  20,000,427
                  
                  $
                  14,268,514Adjustments
                      to reconcile net income to net cash provided byoperating
                      activities:Amortization
                      and accretion of premiums and discounts
                  
                  
                  (20,432
                  )
                  
                  237,155Depreciation
                      of premises & equipment
                  
                  
                  724,692
                  
                  
                  577,390Provision
                      for losses on loans and loan commitments
                  
                  
                  2,470,000
                  
                  
                  3,016,711Deferred
                      tax provision (benefit)
                  
                  
                  (2,073,725
                  )
                  
                  (352,122
                  )Loss
                      (gain) on disposition of bank premises, equipment and
                      securities
                  
                  
                  902
                  
                  
                  (4,706
                  )Gain
                      on sale of loans
                  
                  
                  (5,674,414
                  )
                  
                  (6,902,066
                  )Origination
                      of loans held for sale
                  
                  
                  (114,028,588
                  )
                  
                  (78,155,201
                  )Proceeds
                      from sale of loans held for sale
                  
                  
                  120,070,351
                  
                  
                  67,387,602Gain
                      on sale of AFS securities
                  
                  
                  —
                  
                  
                  (271,891
                  )Impairment
                      of servicing asset
                  
                  
                  78,731
                  
                  
                  —Loss
                      on sale of other real estate owned
                  
                  
                  8,607
                  
                  
                  3,967Tax
                      benefit from exercise of stock options
                  
                  
                  1,724,074
                  
                  
                  8,841,664Change
                      in cash surrender value of life insurance
                  
                  
                  (419,286
                  )
                  
                  (333,320
                  )Servicing
                      assets capitalization
                  
                  
                  (1,546,218
                  )
                  
                  (1,503,058
                  )Servicing
                      assets amortization
                  
                  
                  1,072,258
                  
                  
                  721,606Decrease
                      (increase) in interest-only strip
                  
                  
                  1,363
                  
                  
                  (767,348
                  )Increase
                      in accrued interest receivable
                  
                  
                  (2,296,544
                  )
                  
                  (886,457
                  )Increase
                      in other assets
                  
                  
                  (2,584,757
                  )
                  
                  (2,764,453
                  )Dividends
                      of FHLB stock
                  
                  
                  (147,800
                  )
                  
                  (80,800
                  )Increase
                      in accrued interest payable
                  
                  
                  1,908,520
                  
                  
                  644,703Increase
                      (decrease) in other liabilities
                  
                  
                  790,061
                  
                  
                  (2,968,434
                  )Net
                      cash provided by operating activities
                  
                  
                  20,058,222
                  
                  
                  709,456**CASH
                      FLOWS FROM INVESTING ACTIVITIES:**Net
                      (increase) decrease in interest-bearing deposits in other financial
                      institutions
                  
                  
                  (386
                  )
                  
                  198,990Purchases
                      of investment securities available for sale
                  
                  
                  (96,873,454
                  )
                  
                  (40,854,028
                  )Purchases
                      of investment securities held to maturity
                  
                  
                  (1,999,000
                  )
                  
                  (8,987,338
                  )Proceeds
                      from matured securities and principal repayment (AFS)
                  
                  
                  55,406,809
                  
                  
                  31,997,686Proceeds
                      from principal repayment, matured or called securities
                      (HTM)
                  
                  
                  6,396,512
                  
                  
                  6,100,000Net
                      increase in loans receivable
                  
                  
                  (169,215,370
                  )
                  
                  (210,359,376
                  )Proceeds
                      from sale of other loans
                  
                  
                  —
                  
                  
                  11,307,787Proceeds
                      from sale of other real estate owned
                  
                  
                  299,593
                  
                  
                  373,233Purchases
                      of premises and equipment
                  
                  
                  (3,969,759
                  )
                  
                  (1,109,647
                  )Proceeds
                      from redemption of FHLB stock
                  
                  
                  54,400
                  
                  
                  —Purchase
                      of FHLB stock
                  
                  
                  (1,646,700
                  )
                  
                  (2,687,900
                  )Purchases
                      of Bank Owned Life Insurance
                  
                  
                  (3,000,000
                  )
                  
                  —Proceeds
                      from disposition of bank equipment
                  
                  
                  —
                  
                  
                  1,036Net
                      cash used in investing activities
                  
                  
                  (214,547,355
                  )
                  
                  (214,019,557
                  )**CASH
                      FLOWS FROM FINANCING ACTIVITIES:**Net
                      increase in deposits
                  
                  
                  200,758,645
                  
                  
                  190,772,455Increase
                      in Federal Home Loan Bank borrowing
                  
                  
                  20,000,000
                  
                  
                  16,000,000Increase
                      in junior subordinated debentures
                  
                  
                  36,083,000
                  
                  
                  —Payment
                      of cash dividend
                  
                  
                  (2,286,269
                  )
                  
                  —Proceeds
                      from exercise of stock options
                  
                  
                  428,546
                  
                  
                  1,764,079Net
                      cash provided by financing activities
                  
                  
                  254,983,922
                  
                  
                  208,536,534NET
                      INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
                  
                  
                  60,494,789
                  
                  
                  (4,773,567
                  )CASH
                      AND CASH EQUIVALENTS, BEGINNING OF PERIOD
                  
                  
                  98,903,163
                  
                  
                  112,486,069CASH
                      AND CASH EQUIVALENTS, END OF PERIOD
                  
                  $
                  159,397,952
                  
                  $
                  107,712,502SUPPLEMENTAL
                      DISCLOSURES OF CASH FLOW INFORMATION:Interest
                      paid
                  
                  $
                  20,503,152
                  
                  $
                  11,781,732Income
                      taxes paid
                  
                  $
                  14,280,178
                  
                  $
                  5,775,000NONCASH
                      INVESTING AND FINANCING ACTIVITIESCash
                      dividend declared, but not paid
                  
                  $
                  1,143,426Transfer
                      of loans to OREO
                  
                  $
                  464,600


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




4




**WILSHIRE
      BANCORP, INC.**




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




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




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




Prior
      to
      the completion of the reorganization, the Bank was subject to the information,
      reporting and proxy statement requirements of the Securities Exchange Act of
      1934, as amended, or the Exchange Act, pursuant to the regulations of its
      primary regulator, the Federal Deposit Insurance Corporation, or FDIC.
      Accordingly, the Bank filed annual and quarterly reports, proxy statements
      and
      other information with the FDIC. Pursuant to Rule 12g-3 of the Exchange Act,
      the
      Company has succeeded to the reporting obligations of the Bank and the reporting
      obligations of the Bank to the FDIC have terminated. Filings by the Company
      under the Exchange Act, like this Form 10-Q, are to be made with the Securities
      and Exchange Commission, or the Commission. Although 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.




Our
      Corporate Headquarters and primary banking facilities are located at 3200
      Wilshire Boulevard, Los Angeles, California 90010. In addition , we
      have  16
      full-service Bank branch offices in Southern California and Texas. We also
      have
      nine loan production offices nationwide utilized primarily for the origination
      of loans under our Small Business Administration (“SBA”) lending
      program.




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




The
      accompanying unaudited condensed consolidated financial statements include
      the
      accounts of the Company (the Bank for periods prior to August 25, 2004) and
      its
      wholly owned subsidiary. The financial statements have been prepared in
      accordance with the Securities and Exchange Commission (“SEC”) rules and
      regulations for interim financial reporting and therefore do not necessarily
      include all information and footnote disclosures normally included in annual
      financial statements prepared in accordance with accounting principles generally
      accepted in the United States of America. The information provided by these
      interim financial statements reflects all adjustments which are, in the opinion
      of management, necessary for a fair presentation of the Company’s financial
      condition as of September 30, 2005 and December 31, 2004, the related statements
      of operations and comprehensive income for the three months and nine months
      ended September 30, 2005 and 2004, and the statements of cash flows for the
      nine
      months ended September 30, 2005 and 2004. 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, 2004. 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, 2004, unless otherwise noted.




**Note
      3.**  **Earnings
      per Share**




Basic
      earnings per share (“EPS”) exclude dilution and are computed by dividing
      earnings available to common shareholders by the weighted-average number of
      common shares outstanding for the period. Diluted EPS reflects the potential
      dilution of securities that could share in the earnings. There was a two-for-one
      stock split of the Company’s common shares for the shareholders of record at the
      close of business on December 3, 2004, which was effective on December 14,
      2004.
      All basic and diluted earnings per share in this report have been retroactively
      restated for the stock split.




5




The
      following is a reconciliation of the numerators and denominators of the basic
      and diluted per share computations for the specified periods **.**




******Three
                months ended September 30, 2005**
            
            ******Three
                months ended September 30, 2004**Income
              (Numerator)
            
            Shares
              (Denominator)
            
            Per
                Share
              Amount
            
            Income
              (Numerator)
            
            Shares
              (Denominator)
            
            Per
                Share
              AmountBasic
                EPS
            
            $
            7,178,797
            
            
            28,580,640
            
            $
            0.25
            
            $
            5,100,281
            
            
            28,045,290
            
            $
            0.18Effect
                of dilution
            
            
            —
            
            
            345,590
            
            
            (0.00
            )
            
            —
            
            
            657,842
            
            
            (0.00
            )Diluted
                EPS
            
            $
            7,178,797
            
            
            28,926,230
            
            $
            0.25
            
            $
            5,100,281
            
            
            28,703,132
            
            $
            0.18**Nine
                months ended September 30,
                2005**
            
            **Nine
                months ended September 30, 2004**Income(Numerator)
            
            
            Shares
              (Denominator)
            
            
            Per
                ShareAmount
            
            
            Income
              (Numerator)
            
            
            Shares
              (Denominator)
            
            
            Per
                ShareAmountBasic
                EPS
            
            $
            20,000,427
            
            
            28,528,499
            
            $
            0.70
            
            $
            14,268,514
            
            
            27,456,010
            
            $
            0.52Effect
                of dilution
            
            
            —
            
            
            377,941
            
            
            (0.01
            )
            
            —
            
            
            982,159
            
            
            (0.02
            )Diluted
                EPS
            
            $
            20,000,427
            
            
            28,906,440
            
            $
            0.69
            
            $
            14,268,514
            
            
            28,438,169
            
            $
            0.50




There
      were 158,450 anti-dilutive stock options excluded from the calculation above
      for
      the three months and nine months ended September 30, 2005 for which the exercise
      price exceeded the average market price of the Company’s common stock during the
      period. No such options were outstanding for the three months and nine months
      ended September 30, 2004.




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




The
      Company’s identifiable intangible assets that are subject to amortization, loan
      servicing rights, were $4,769,203 and $4,064,135 (net of $1,599,212 and
      $1,281,646 accumulated amortization, respectively) as of September 30, 2005
      and
      2004, respectively. Amortization expense for intangible assets subject to
      amortization was $417,725 and $207,404 for the three months ended September
      30,
      2005 and 2004, respectively, and it is estimated that it will be approximately
      $953,840 annually for the next five fiscal years. The Company did not have
      any
      material unidentifiable assets as of September 30, 2005 and 2004.




**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.




6


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




**(Dollars
                in Thousands)**
            
            **Three
                months ended September 30, 2005**
            
            **Three
                months ended September 30, 2004****Business
                Segment**
            
            **Banking**
              **Operations**
            
            **TFD**
            
            **SBA**
            
            **Company**
            
            **Banking****Operations**
            
            **TFD**
            
            **SBA**
            
            **Company**Net
                interest income
            
            $
            11,787
            
            $
            838
            
            $
            3,704
            
            $
            16,326
            
            $
            8,112
            
            $
            517
            
            $
            2,485
            
            $
            11,114Less
                provision for loan losses
            
            
            712
            
            
            3
            
            
            535
            
            
            1,250
            
            
            294
            
            
            841
            
            
            315
            
            
            1,450Non-interest
                income
            
            
            2,358
            
            
            509
            
            
            2,257
            
            
            5,126
            
            
            2,575
            
            
            467
            
            
            2,904
            
            
            5,946Net
                revenue
            
            
            13,433
            
            
            1,341
            
            
            5,428
            
            
            20,202
            
            
            10,393
            
            
            143
            
            
            5,074
            
            
            15,610Non-interest
                expenses
            
            
            6,925
            
            
            196
            
            
            1,240
            
            
            8,360
            
            
            5,944
            
            
            162
            
            
            1,022
            
            
            7,128Income
                before taxes
            
            $
            6,508
            
            $
            1,145
            
            $
            4,188
            
            $
            11,842
            
            $
            4,449
            
            $
            (19
            )
            $
            4,052
            
            $
            8,482Business
                segment assets
            
            $
            1,326,970
            
            $
            53,793
            
            $
            165,073
            
            $
            1,545,836
            
            $
            1,024,979
            
            $
            44,550
            
            $
            142,372
            
            $
            1,211,901**(Dollars
                in Thousands)**
            
            **Nine
                months ended September 30, 2005**
            **Nine
                months ended September 30, 2004****Business
                Segment**
            
            
            **Banking****Operations**
            
            
            **TFD**
            
            
            **SBA**
            
            
            **Company**
            
            
            **Banking****Operations**
            
            
            **TFD**
            
            
            **SBA**
            
            
            **Company**Net
                interest income
            
            $
            32,917
            
            $
            2,230
            
            $
            9,787
            
            $
            44,934
            
            $
            21,625
            
            $
            1,322
            
            $
            6,810
            
            $
            29,757Less
                provision for loan losses
            
            
            2,068
            
            
            (201
            )
            
            603
            
            
            2,470
            
            
            1,878
            
            
            1,234
            
            
            (95
            )
            
            3,017Non-interest
                income
            
            
            7,079
            
            
            1,379
            
            
            6,221
            
            
            14,679
            
            
            7,195
            
            
            1,389
            
            
            7,623
            
            
            16,207Net
                revenue
            
            
            37,928
            
            
            3,810
            
            
            15,405
            
            
            57,143
            
            
            26,942
            
            
            1,477
            
            
            14,528
            
            
            42,947Non-interest
                expenses
            
            
            19,760
            
            
            647
            
            
            3,323
            
            
            23,730
            
            
            16,079
            
            
            516
            
            
            2,678
            
            
            19,273Income
                before taxes
            
            $
            18,168
            
            $
            3,163
            
            $
            12,082
            
            $
            33,413
            
            $
            10,863
            
            $
            961
            
            $
            11,850
            
            $
            23,674Business
                segment assets
            
            $
            1,326,970
            
            $
            53,793
            
            $
            165,073
            
            $
            1,545,836
            
            $
            1,024,979
            
            $
            44,550
            
            $
            142,372
            
            $
            1,211,901




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




During
      1997, the Company established a new stock option plan that provides for the
      issuance of up to 6,499,800 shares of its authorized but unissued common stock
      to managerial employees and directors. In addition, the outstanding stock
      options granted under the Bank’s 1990 stock option plan were transferred to this
      new plan. In connection with the holding company reorganization, the options
      granted under this plan are exercisable into shares of the Company’s common
      stock. Exercise prices may not be less than the fair market value at the date
      of
      grant. As of September 30, 2005, 857,112 shares were outstanding under this
      option plan. Options granted under the stock option plan expire not more than
      10
      years after the date of grant.




For
      the
      third quarter of 2005, options to purchase 30,000 shares in total were granted,
      whereas 4,000 stock options
      were granted in the same period of 2004. The average estimated fair value of
      options granted during 2005 was $1.98. The fair value was estimated on the
      date
      of grant using the Black−Scholes option pricing model under the following
      assumptions−dividend yield of 1.16%, expected volatility of 25.3%, average
      expected life of 2 years and average risk free interest rate of 3.25%. Had
      compensation costs for the Company’s stock option plan been determined based on
      the fair values at the grant dates for awards under the plan consistent with
      the
      fair value method of SFAS No. 123, the Company’s net income and earnings per
      share for the three and nine months ended September 30, 2004 and 2005 would
      have
      been reduced to the pro forma amounts indicated below:




**Three
                months ended**
              **September
                30,**
            
            **Nine
                months ended**
              **September
                30,****2005**
            
            **2004**
            
            **2005**
            
            **2004****Net
                income - as reported**
            
            $
            7,178,797
            
            $
            5,100,281
            
            $
            20,000,427
            
            $
            14,268,514**Deduct:**Total stock-based employee compensation expenses determined under
                fair
                value-based method for all awards - net of related tax
                effects
            
            
            (40,974
            )
            
            (45,653
            )
            
            (106,539
            )
            
            (111,398
            )Pro
                forma net income
            
            $
            7,137,823
            
            $
            5,054,628
            
            $
            19,893,888
            
            $
            14,157,116**Earnings
                per share:**Basic
                - as reported
            
            $
            0.25
            
            $
            0.18
            
            $
            0.70
            
            $
            0.52Basic
                - pro forma
            
            $
            0.25
            
            $
            0.18
            
            $
            0.70
            
            $
            0.52Diluted
                - as reported
            
            $
            0.25
            
            $
            0.18
            
            $
            0.69
            
            $
            0.50Diluted
                - pro forma
            
            $
            0.25
            
            $
            0.18
            
            $
            0.69
            
            $
            0.50






7




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




We
      are a
      party to financial instruments with off-balance sheet risk in the normal course
      of business to meet the financing needs of our customers. These financial
      instruments include commitments to extend credit, standby letters of credit,
      and
      commercial letters of credit. These instruments involve, to varying degrees,
      elements of credit and interest rate risk in excess of the amount recognized
      in
      the statements of financial condition. Our exposure to credit loss in the event
      of nonperformance on commitments to extend credit and standby letters of credit
      is represented by the contractual notional amount of those instruments. We
      use
      the same credit policies in making commitments and conditional obligations
      as we
      do for extending loan facilities to customers. We evaluate each customer’s
      creditworthiness on a case-by-case basis. The amount of collateral obtained,
      if
      deemed necessary upon extension of credit, is based on our credit evaluation
      of
      the counterparty. Collateral held varies but may include accounts receivable,
      inventory, property, plant, and equipment, and income-producing properties.
      Commitments at September 30, 2005 are summarized as follows:




Commitments
                to extend credit
            
            $
            99,403,000Standby
                letters of credit
            
            $
            2,808,000Commercial
                letters of credit
            
            $
            13,010,000





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. We are not currently engaged in such activities.




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




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




In
      December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No.
      123 (revised 2004), *Share-Based
      Payment* (“SFAS
      No. 123R”), which replaces SFAS No. 123, *Accounting
      for Stock-Based Compensation* ,
      and
      supersedes APB Opinion No. 25, *Accounting
      for Stock Issued to Employees* .
      SFAS
      No. 123R requires all share-based payments to employees, including grants of
      employee stock options, to be recognized in the financial statements based
      on
      their fair values. The pro forma disclosures previously permitted under SFAS
      No.
      123 no longer will be an alternative to financial statement recognition. SFAS
      No. 123R is effective as of the beginning of the first fiscal year that begins
      after June 15, 2005. Thus, the Company is required to adopt SFAS No.
      123R
      effective January 1, 2006. In adopting SFAS No. 123R, the Company may apply
      the
“modified prospective application” method, which requires that compensation
      expense be recorded for all unvested stock options and restricted stock at
      the
      beginning of the first quarter of adoption of SFAS No. 123R. Alternatively,
      the
      Company may apply the “modified retrospective application,” which would require
      the recording of compensation expense for all unvested stock options beginning
      with the first period restated. The Company does not expect the adoption of
      SFAS
      No. 123R to result in amounts that are materially different from the current
      pro
      forma disclosures under SFAS No. 123.




On
      June
      7, 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections
      - a replacement of APB Opinion No. 20, Accounting Changes, and SFAS No. 3,
      Reporting Accounting Changes in Interim Financial Statements. Under the
      provisions of SFAS No. 154, voluntary changes in accounting principles are
      applied retrospectively to prior periods’ financial statements unless it would
      be impractical. SFAS No. 154 supersedes APB Opinion No. 20, which required
      that
      most voluntary changes in accounting principles be recognized by including
      in
      the current period’s net income the cumulative effect of the change. SFAS No.
      154 also makes a distinction between “retrospective application” of a change in
      accounting principle and the “restatement” of financial statements to reflect
      the correction of an error. The provisions of SFAS No. 154 are effective for
      accounting changes made in fiscal years beginning after December 15, 2005.
      The
      Company does not expect the adoption SFAS No. 154 to have a material impact
      on
      the consolidated financial statements, results of operations or liquidity of
      the
      Company.




8




**Note** **9.**  **Acquisition
      of Liberty Bank**




On
      August
      1, 2005, we entered into a stock purchase agreement with the shareholders
      of Liberty Bank of New York (“Liberty Bank”) to acquire all of the outstanding
      stock of Liberty Bank for approximately $15.7 million subject to adjustment
      immediately prior to closing.  Liberty Bank had approximately $ 52 million
      in total assets as of September 30, 2005. The agreement contemplates that the
      purchase price will be payable 60% in cash and 40% in
      our
      restricted common stock.




The
      transactions contemplated by the agreement are anticipated to
      close in
      the fourth quarter of 2005 and will be subject to certain conditions, including
      regulatory approvals from the Federal Deposit Insurance Corporation, the Board
      of Governors of the Federal Reserve, and the California Department of Financial
      Institutions. The agreement contemplates that Liberty Bank will
      be
      merged into Wilshire State Bank, our wholly-owned subsidiary.




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




Certain
      reclassifications were made to the prior periods’ presentation to conform to the
      current year’s presentation.




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




This
      discussion presents management’s analysis of our results of operations for the
      three-month and nine-month periods ended September 30, 2005 and 2004, and our
      financial condition as of December 31, 2004 and September 30, 2005. All per
      share amounts and number of shares outstanding in this item have been
      retroactively adjusted and restated to give effect to a two-for-one stock split
      (effected in the form of a 100% stock dividend) in December 2004. 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, 2004, including
      the
      following:




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




·
            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.




9




·
            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.




·
            Our
                profitability is dependent on the profitability of the Bank.




·
            We
                rely 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, 2004 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.




10




**Selected
      Financial Data**




The
      following table presents selected historical financial information (unaudited)
      as of and for the three and nine months ended September 30, 2005 and 2004.
      All
      per share amounts have been retroactively adjusted and restated to give effect
      to a two-for-one stock split (effected in the form of a 100% stock dividend)
      in
      December 2004. 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 operations results of the interim periods are
      not
      necessarily indicative of our future operating results.




**Three
                    months ended**
                  **September
                    30,**
                
                **Nine
                    months ended**
                  **September
                    30,****(Dollars
                    in thousands, except per share data)****2005**
                
                **2004**
                
                **2005**
                
                **2004**Net
                    income
                
                $
                7,179
                
                $
                5,100
                
                $
                20,000
                
                $
                14,269Net
                    income per share, basic
                
                
                0.25
                
                
                0.18
                
                
                0.70
                
                
                0.52Net
                    income per share, diluted
                
                
                0.25
                
                
                0.18
                
                
                0.69
                
                
                0.50Net
                    interest income
                
                
                16,326
                
                
                11,113
                
                
                44,934
                
                
                29,757**Average
                    balances:**Assets
                
                
                1,468,264
                
                
                1,223,991
                
                
                1,391,433
                
                
                1,109,718Cash
                    and cash equivalents
                
                
                119,738
                
                
                130,534
                
                
                126,060
                
                
                110,316Investment
                    securities
                
                
                139,564
                
                
                95,468
                
                
                123,927
                
                
                85,731Net
                    loans
                
                
                1,145,588
                
                
                945,462
                
                
                1,086,350
                
                
                867,439Total
                    deposits
                
                
                1,247,913
                
                
                1,053,405
                
                
                1,182,330
                
                
                955,364Shareholders’
                    equity
                
                
                104,974
                
                
                80,783
                
                
                98,923
                
                
                73,175**Performance
                    Ratios:**Annualized
                    return on average assets
                
                
                1.96
                %
                
                1.67
                %
                
                1.92
                %
                
                1.71
                %Annualized
                    return on average equity
                
                
                27.35
                %
                
                25.25
                %
                
                26.96
                %
                
                26.00
                %Net
                    interest margin
                
                
                4.84
                %
                
                3.97
                %
                
                4.67
                %
                
                3.91
                %Efficiency
                    ratio1
                
                
                38.97
                %
                
                41.78
                %
                
                39.81
                %
                
                41.93
                %**Capital
                    Ratios:**Tier
                    1 capital to adjusted total assets
                
                
                9.71
                %
                
                8.03
                %Tier
                    1 capital to risk-weighted assets
                
                
                11.66
                %
                
                9.84
                %Total
                    capital to risk-weighted assets
                
                
                14.81
                %
                
                12.01
                %
 **Period-end
                      balances as of:**
                  
                  
                  **September
                      30,**
                    **2005**
                  
                  
                  **December
                      31,**
                    **2004**
                  
                  
                  **September
                      30,**
                    **2004**Total
                      assets
                  
                  $
                  1,545,836
                  
                  $
                  1,265,641
                  
                  $
                  1,211,901Investment
                      securities
                  
                  
                  151,679
                  
                  
                  114,975
                  
                  
                  99,807Total
                      loans, net of unearned income
                  
                  
                  1,189,165
                  
                  
                  1,020,723
                  
                  
                  972,829Total
                      deposits
                  
                  
                  1,299,464
                  
                  
                  1,098,705
                  
                  
                  1,047,289Junior
                      subordinated debentures
                  
                  
                  61,547
                  
                  
                  25,464
                  
                  
                  25,464FHLB
                      borrowings
                  
                  
                  61,000
                  
                  
                  41,000
                  
                  
                  45,000Shareholders’
                      equity
                  
                  
                  106,799
                  
                  
                  88,307
                  
                  
                  83,368**Asset
                      Quality Ratios:**Net
                      charge-off (recoveries) to average total loans for the
                      quarter
                  
                  
                  0.01
                  %
                  
                  0.05
                  %
                  
                  0.05
                  %Nonperforming
                      loans to total loans
                  
                  
                  0.33
                  %
                  
                  0.26
                  %
                  
                  0.31
                  %Nonperforming
                      assets to total loans and other real estate owned
                  
                  
                  0.34
                  %
                  
                  0.26
                  %
                  
                  0.31
                  %Allowance
                      for loan losses to total loans
                  
                  
                  1.14
                  %
                  
                  1.09
                  %
                  
                  1.14
                  %Allowance
                      for loan losses to nonperforming loans
                  
                  
                  344
                  %
                  
                  412
                  %
                  
                  370
                  %
  **Executive
          Overview**




**Introduction**




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





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




11




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




At
      September 30, 2005, we had approximately $1.55 billion in assets, $1.19 billion
      in total loans, and $1.30 billion in deposits.




We
      also
      have expanded and diversified our business growth by focusing on the continued
      development of 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 16 branch offices and 9 loan
      production offices. In 2005, we opened three branch offices - two in Southern
      California and the other in Texas (Dallas) - and four loan production offices
      nationwide - one in Colorado, one in Georgia, one in Texas, and the other in
      New
      York. Our expansion in these areas complements our multi-ethnic small business
      focus. We intend to continue our growth strategy in future years through the
      opening of additional branches and loan production offices as our needs and
      resources permit.




The
      Bank
      issued a $10 million Junior Subordinated Debenture in December 2002. In December
      2003, March 2005 and September 2005, we issued additional Junior Subordinated
      Debentures in an amount of $15.5 million, $20.6 million, and $15.5 million,
      respectively, to the Wilshire Statutory Trusts (Wilshire Statutory Trust I,
      Wilshire Statutory Trust II and Wilshire Statutory Trust III), our wholly owned
      subsidiaries, which in turn issued trust preferred securities of $15.0 million,
      $20.0 million and $15.0 million, respectively. We believe that the supplemental
      capital, raised in connection with the issuance of these debentures and trust
      preferred securities, has allowed us to achieve and maintain status as a
      well-capitalized institution and sustained our continued loan
      growth.




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




**Third
      Quarter 2005 Key Performance Indicators**




We
      believe the following were key indicators of our performance during the third
      quarter of 2005:




·
            Our
                total assets grew to $1.55 billion at the end of the third quarter
                of
                2005, an increase of 22.1% from $1.27 billion at the end of
                2004.




·
            Our
                total deposits grew to $1.30 billion at the end of the third quarter
                of
                2005, an increase of 18.3% from $1.10 billion at the end of
                2004.




·
            Our
                total loans grew to $1.19 billion at the end of the third quarter
                of 2005,
                an increase of 16.5% from $1.02 billion at the end of
                2004.




·
            We
                maintained the level of non-performing loans reasonably low although
                our
                ratio of total non-performing loans to total loans slightly increased
                to
                0.33% at the end of the third quarter of 2005 from 0.26% at the end
                of
                2004.




·
            Total
                noninterest income decreased to $5.1 million in the third quarter
                of 2005
                from $5.9 million in the third quarter of 2004. Such decrease was
                primarily attributable to the fact that we had no sales of unguaranteed
                SBA loans in the third quarter of 2005, compared to a gain of $235,110
                on
                such sales in the third quarter of 2004.




·
            Total
                noninterest expense increased from $7.1 million in the third quarter
                of
                2004 to $8.4 million in the third quarter of 2005, reflecting the
                expanded
                personnel and premises associated with our business growth. Due to
                continuing efforts to minimize operating expenses, noninterest expenses
                as
                a percentage of average assets were maintained at low rate of 0.57%
                and
                0.58% in the third quarter of 2005 and 2004, respectively. We believe
                that
                our efforts in cost-cutting and revenue diversification have improved
                our
                operational efficiency, as evidenced by the improvement in our efficiency
                ratio (the ratio of noninterest expense to the sum of net interest
                income
                before provision for loan losses and total noninterest income) from
                41.78%
                in the third quarter of 2004 to 38.97% in the third quarter of
                2005.






12




These
      items, as well as other factors, contributed to the increase in net income
      for
      the third quarter of 2005 to $7.2 million, or $0.25 per diluted common share,
      from $5.1 million, or $0.18 per diluted common share, in the third quarter
      of
      2004.




**2005
      Outlook**




As
      we
      look ahead to the remainder of 2005, we will continue to pursue opportunities
      for growth in our existing markets, as well as opportunities to expand into
      new
      markets through *de
      novo* branching and regional loan production offices. On August 1, 2005 we entered
      into a definitive stock purchase agreement with the shareholders of Liberty
      Bank
      of New York to acquire all of the stock of Liberty Bank for approximately $15.7
      million. The stock purchase is expected to be completed in the fourth quarter
      of
      2005, and will increase our assets by approximately $55 million. See “Item 5.
      Additional Information” for further discussion regarding our acquisition of
      Liberty Bank.




We
      seek
      additional growth
      in our portfolio of unsecured business loans and consumer loans by utilizing
      target marketing efforts in these areas . Further,
      we intend to
      continue our focus on loan and deposit growth and managing our net interest
      margin, while attempting to control expenses and credit losses to achieve our
      net income and other objectives. We will continue to strive to be more efficient
      and focus on controlling the growth of other operating expenses relative to
      the
      growth of our business.




Although
      interest rates decreased in 2003, 2002 and 2001, compressing our interest
      margins, we continued to exhibit growth in net interest income. As interest
      rates increased since June 2004, our yield on earning assets increased. Should
      interest rates increase further, our yield on earning assets will likely
      increase further although we cannot be certain as to the extent of such
      increases, if any. If interest rates continue to increase, we will decide
      whether to increase the interest rates we pay on our deposit
      accounts
      or change our promotional or other interest rates on new deposits in
      certain marketing programs to attempt to achieve a desirable net interest
      margin. Any increases in the rates we charge our customers could have an adverse
      effect on our efforts to attract new customers and grow loans, particularly
      with
      the continuing competition in the commercial and consumer lending industry.
      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. The economic
      indicators suggest that the national economy and the economies in our primary
      market areas are expanding in recent two years.




Finally,
      we completed our reorganization into a holding company structure during the
      third quarter of 2004. We believe operating within a holding company structure,
      among other things:




·
            allows
                us to use the portion of proceeds from the issuance of our trust
                preferred
                securities as Tier 1 capital (within regulatory
                guidelines).




·
            provides
                greater operating flexibility;




·
            facilitates
                the acquisition of related businesses as opportunities
                arise;




·
            improves
                our ability to diversify;




·
            enhances
                our ability to remain competitive in the future with other companies
                in
                the financial services industry that are organized in a holding company
                structure; and




·
            enhances
                our ability to raise capital to support
                growth.




**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.




13




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 2004
      Annual Report on Form 10-K in the “Critical Accounting Policies” section of
“Management’s Discussion and Analysis of financial condition and result of
      operations” and in Note 1 to the Consolidated Financial Statements-“Significant
      Accounting Policies” which are essential to understanding Management’s
      Discussion and Analysis of Results of Operations and Financial Condition. There
      has been no material modification to these policies during the quarter ended
      September 30, 2005.




**Results
      of Operations**




**Net
      Interest Income and Net Interest Margin**




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




Average
      interest-earning assets increased by 20.5% to $1.4 billion in the third quarter
      of 2005, as compared with $1.1 billion in the same quarter of 2004. **** Average
      net loans also increased by 21.2% to $1.1 billion in the third quarter of 2005,
      as compared with $945.5 million in the same quarter of 2004. For the first
      nine
      months of 2005, average interest-earning assets and average net loans also
      increased to $1.3 billion and $1.1 billion, respectively, as compared with
      $1.0
      billion and $864.4 million for the prior year’s same period. The FRB has raised
      the Fed Funds target rate by an aggregate of 200 basis points since September
      2004, giving us additional benefits on yields on our earning assets, most of
      which bear variable interest rates. The average yields on interest-earning
      assets increased to 7.49% for the third quarter of 2005, as compared with 5.69%
      for the prior year’s same period. This increase of interest-earning assets and
      their yields significantly increased our total interest income by 58.7% to
      $25.3
      million for the third quarter of 2005, as compared with $15.9 million for the
      prior year’s same period. For the first nine months of 2005, total interest
      income increased to $67.3 million from $42.2 million for the prior year’s same
      period and average yields on interest-earning assets increased to 7.00% for
      the
      first nine months of 2005, as compared with 5.54% for the prior year’s same
      period.




Our
      average interest-bearing deposit portfolio increased by 19.6% to $947.6 million
      in the third quarter of 2005, as compared with $792.4 million in the same
      quarter of 2004. We increased other borrowings by $52,000,000 over the last
      12
      months (see “Financial Condition-Deposits and Other Sources of Funds” below).
      Therefore, average interest-bearing liabilities also increased by 20.4% to
      $1.0
      billion in the third quarter of 2005, as compared with $870.0 million in the
      same quarter of 2004. For the first nine months of 2005, our average
      interest-bearing deposit portfolio and average interest-bearing liabilities
      increased to $996.8 million and $900.9 million, respectively, as compared with
      $779.0 million and $708.9 million for the prior year’s same period. The FRB’s
      rate increases also increased our average interest rate paid for
      interest-bearing liabilities to 3.42% for the third quarter of 2005 and 3.00%
      for the first nine months of 2005 from 2.21% and 2.13% for the prior year’s same
      periods. Due to the volume increase of interest-bearing liabilities together
      with the interest rate increase, total interest expense increased to $9.0
      million for the third quarter of 2005 and to $22.4 million for the first nine
      months of 2005, as compared with $4.8 million and $12.4 million for the prior
      year’s same periods. Since the end of the third quarter last year, the FRB
      raised its overnight lending rate eight times by an aggregate 200 basis points
      to 3.75% as of September 30, 2005. The Wall Street Journal Prime Rate
      correspondingly increased to 6.75% as of September 30, 2005. We are in an
      asset-sensitive position, meaning that these rate increases positively affected
      our net interest income because more earning assets were immediately repriced
      than interest-bearing deposits. Although we price deposits competitively with
      the goal to continue to fund our growing loan portfolio, our models indicate
      that our margin should expand in a rising interest rate environment.




14




The
      combined result of our growth and the interest rate increases was an increase
      in
      our net interest income. Net interest income increased to $16.3 million in
      the
      third quarter of 2005 and to $44.9 million for the first nine months of 2005
      as
      compared with $11.1 million and $29.8 million for the prior year’s same periods,
      representing an increase of 46.9% and 51.0%, respectively. Due mainly to the
      positive impact of the FRB’s rate increases on our asset-sensitive position, our
      net interest margin increased to 4.84% and 4.67% respectively, for the third
      quarter and the first nine months of 2005, as compared with 3.97% and 3.91%,
      respectively, for the prior year’s same periods. The net interest spread also
      improved to 4.07% and 4.00% for the third quarter and first nine months of
      2005,
      respectively, from 3.47% and 3.41%, respectively, for the prior year’s same
      periods.




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




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




**For
                  the Quarter EndedSeptember 30,****2005**
              
              
              
              
              
              **2004****(****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
              
              $
              1,145,588
              
              $
              23,426
              
              
              8.18
              %
              $
              945,462
              
              $
              14,837
              
              
              6.28
              %Securities
                  of U.S. government agencies
              
              
              133,224
              
              
              1,266
              
              
              3.80
              %
              
              86,245
              
              
              675
              
              
              3.13
              %Other
                  investment securities
              
              
              6,340
              
              
              67
              
              
              4.21
              %
              
              9,223
              
              
              112
              
              
              4.83
              %Commercial
                  paper
              
              
              1,476
              
              
              15
              
              
              3.95
              %
              
              —
              
              
              —
              
              
              0.00
              %Overnight
                  investments
              
              
              56,862
              
              
              453
              
              
              3.19
              %
              
              71,237
              
              
              267
              
              
              1.50
              %Money
                  market preferred securities
              
              
              6,706
              
              
              52
              
              
              3.10
              %
              
              8,313
              
              
              34
              
              
              1.65
              %Interest-earning
                  deposits
              
              
              3
              
              
              —
              
              
              17.12
              %
              
              17
              
              
              —
              
              
              3.74
              %Total
                  interest-earning assets
              
              
              1,350,199
              
              
              25,279
              
              
              7.49
              %
              
              1,120,497
              
              
              15,925
              
              
              5.69
              %Cash
                  and due from banks
              
              
              61,399
              
              
              
              
              
              
              
              
              59,297Other
                  assets
              
              
              56,666
              
              
              
              
              
              
              
              
              44,197Total
                  assets
              
              $
              1,468,264
              
              
              
              
              
              
              
              $
              1,223,991**Liabilities
                  and Shareholders’ Equity:**Interest-bearing
                  liabilities:Money
                  market deposits
              
              $
              230,776
              
              $
              1,700
              
              
              2.95
              %
              $
              222,867
              
              $
              1,084
              
              
              1.95
              %Super
                  NOW deposits
              
              
              21,823
              
              
              50
              
              
              0.92
              %
              
              22,498
              
              
              44
              
              
              0.79
              %Savings
                  deposits
              
              
              22,915
              
              
              42
              
              
              0.72
              %
              
              27,058
              
              
              50
              
              
              0.75
              %Time
                  certificates of deposit in
                denominations
                  of $100,000 or more
              
              
              562,434
              
              
              5,158
              
              
              3.67
              %
              
              398,934
              
              
              2,370
              
              
              2.38
              %Other
                  time deposits
              
              
              109,603
              
              
              879
              
              
              3.21
              %
              
              121,036
              
              
              765
              
              
              2.53
              %Total
                  interest bearing deposits
              
              
              947,551
              
              
              7,829
              
              
              3.30
              %
              
              792,393
              
              
              4,313
              
              
              2.18
              %Other
                  borrowings
              
              
              99,772
              
              
              1,124
              
              
              4.51
              %
              
              77,584
              
              
              499
              
              
              2.57
              %Total
                  interest-bearing liabilities
              
              
              1,047,323
              
              
              8,953
              
              
              3.42
              %
              
              869,977
              
              
              4,812
              
              
              2.21
              %Non-interest
                  bearing deposits
              
              
              300,362
              
              
              
              
              
              
              
              
              261,011Total
                  deposits and other borrowings
              
              
              1,347,685
              
              
              
              
              
              
              
              
              1,130,988Other
                  liabilities
              
              
              15,605
              
              
              
              
              
              
              
              
              12,220Shareholders’
                  equity
              
              
              104,974
              
              
              
              
              
              
              
              
              80,783Total
                  liabilities and shareholders’ equity
              
              $
              1,468,264
              
              
              
              
              
              
              
              $
              1,223,991Net
                  interest income
              
              
              
              
              $
              16,326
              
              
              
              
              
              
              
              $
              11,113Net
                  interest spread2
              
              
              
              
              
              
              
              
              4.07
              %
              
              
              
              
              
              
              
              3.47
              %Net
                  interest margin3
              
              
              
              
              
              
              
              
              4.84
              %
              
              
              
              
              
              
              
              3.97
              %





___________________________





1
      Loan fees have been included in the calculation of interest income. Loan fees
      were approximately $1,393 and $760 for the quarters ended September 30, 2005
      and
      2004, respectively, and approximately $3,577 and $2,131for the nine months
      ended
      September 30, 2005 and 2004, respectively. Net loans are net of the allowance
      for loan losses, deferred fees, unearned income, and related direct costs,
      but
      includes 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.







15





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




**For
                  the Nine Months Ended September 30,****2005**
              
              
              
              
              
              
              
              
              **2004****(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
              
              $
              1,086,350
              
              $
              62,436
              
              
              7.66
              %
              $
              867,439
              
              $
              39,449
              
              
              6.06
              %Securities
                  of U.S. government agencies
              
              
              118,059
              
              
              3,162
              
              
              3.57
              %
              
              72,238
              
              
              1,639
              
              
              3.02
              %Other
                  investment securities
              
              
              5,868
              
              
              188
              
              
              4.28
              %
              
              13,494
              
              
              509
              
              
              5.03
              %Commercial
                  paper
              
              
              3,152
              
              
              82
              
              
              3.46
              %
              
              0
              
              
              0
              
              
              0.00
              %Overnight
                  Investments
              
              
              65,183
              
              
              1,368
              
              
              2.80
              %
              
              56,377
              
              
              525
              
              
              1.24
              %Money
                  market preferred securities
              
              
              5,051
              
              
              109
              
              
              2.88
              %
              
              5,251
              
              
              59
              
              
              1.51
              %Interest-earning
                  deposits
              
              
              3
              
              
              1
              
              
              47.12
              %
              
              88
              
              
              2
              
              
              2.52
              %Total
                  interest-earning assets
              
              
              1,283,666
              
              
              67,346
              
              
              7.00
              %
              
              1,014,887
              
              
              42,183
              
              
              5.54
              %Cash
                  and due from banks
              
              
              57,725
              
              
              
              
              
              
              
              
              53,939Other
                  assets
              
              
              50,042
              
              
              
              
              
              
              
              
              40,892Total
                  assets
              
              $
              1,391,433
              
              
              
              
              
              
              
              $
              1,109,718**Liabilities
                  and Shareholders’ Equity:**Interest-bearing
                  liabilities:Money
                  market deposits
              
              $
              233,910
              
              $
              4,508
              
              
              2.57
              %
              $
              186,711
              
              $
              2,593
              
              
              1.85
              %Super
                  NOW deposits
              
              
              21,477
              
              
              130
              
              
              0.81
              %
              
              21,094
              
              
              121
              
              
              0.77
              %Savings
                  deposits
              
              
              23,345
              
              
              127
              
              
              0.72
              %
              
              27,131
              
              
              151
              
              
              0.74
              %Time
                  certificates of deposit in
                denominations
                  of $100,000 or more
              
              
              512,576
              
              
              12,335
              
              
              3.21
              %
              
              356,424
              
              
              6,051
              
              
              2.26
              %Other
                  time deposits
              
              
              109,546
              
              
              2,375
              
              
              2.89
              %
              
              117,495
              
              
              2,234
              
              
              2.54
              %Total
                  interest bearing deposits
              
              
              900,854
              
              
              19,475
              
              
              2.88
              %
              
              708,855
              
              
              11,150
              
              
              2.10
              %Other
                  borrowings
              
              
              95,914
              
              
              2,937
              
              
              4.08
              %
              
              70,100
              
              
              1,276
              
              
              2.43
              %Total
                  interest-bearing liabilities
              
              
              996,768
              
              
              22,412
              
              
              3.00
              %
              
              778,955
              
              
              12,426
              
              
              2.13
              %Non-interest
                  bearing deposits
              
              
              281,476
              
              
              
              
              
              
              
              
              246,509Total
                  deposits and other borrowings
              
              
              1,278,244
              
              
              
              
              
              
              
              
              1,025,464Other
                  liabilities
              
              
              14,266
              
              
              
              
              
              
              
              
              11,079Shareholders’
                  equity
              
              
              98,923
              
              
              
              
              
              
              
              
              73,175Total
                  liabilities and shareholders’ equity
              
              $
              1,391,433
              
              
              
              
              
              
              
              $
              1,109,718Net
                  interest income
              
              
              
              
              $
              44,934
              
              
              
              
              
              
              
              $
              29,757Net
                  interest spread2
              
              
              
              
              
              
              
              
              4.00
              %
              
              
              
              
              
              
              
              3.41
              %Net
                  interest margin3
              
              
              
              
              
              
              
              
              4.67
              %
              
              
              
              
              
              
              
              3.91
              %




___________________________




1
      Loan fees have been included in the calculation of interest income. Loan fees
      were approximately $1,393 and $760 for the quarters ended September 30, 2005
      and
      2004, respectively, and approximately $3,577 and $2,131 for the nine months
      ended September 30, 2005 and 2004, respectively. Loans are net of the allowance
      for loan losses, deferred fees, unearned income, and related direct costs,
      but
      includes 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.







16





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




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


**(Dollars
      in Thousands)**




**Three
                Months Ended September 30,**
              **2005
                vs. 2004**
              **Increase
                (Decrease) Due to Change In**
            
            **Nine
                Months Ended September 30,**
              **2005
                vs. 2004**
              **Increase
                (Decrease) Due to Change In****Volume**
            
            **Rate**
            
            **Total**
            
            **Volume**
            
            **Rate**
            
            **Total****Interest
                income:**
              Net
                loans1
            
            $
            3,532
            
            
            5,057
            
            $
            8,589
            
            $
            11,240
            
            
            11,747
            
            $
            22,987Securities
                of U.S. government agencies
            
            
            424
            
            
            167
            
            
            591
            
            
            1,185
            
            
            338
            
            
            1,523Other
                investment securities
            
            
            (32
            )
            
            (13
            )
            
            (45
            )
            
            (253
            )
            
            (68
            )
            
            (321
            )Commercial
                paper
            
            
            15
            
            
            0
            
            
            15
            
            
            82
            
            
            0
            
            
            82Overnight
                investments
            
            
            (63
            )
            
            249
            
            
            186
            
            
            93
            
            
            750
            
            
            843Money
                market preferred securities
            
            
            (8
            )
            
            26
            
            
            18
            
            
            (2
            )
            
            52
            
            
            50Interest-earning
                deposits
            
            
            0
            
            
            0
            
            
            0
            
            
            (3
            )
            
            2
            
            
            (1
            )Total
                interest income
            
            
            3,868
            
            
            5,486
            
            
            9,354
            
            
            12,342
            
            
            12,821
            
            
            25,163**Interest
                expense:**Money
                market deposits
            
            $
            40
            
            
            576
            
            $
            616
            
            
            756
            
            
            1,160
            
            $
            1,916Super
                NOW deposits
            
            
            (1
            )
            
            7
            
            
            6
            
            
            2
            
            
            7
            
            
            9Savings
                deposits
            
            
            (8
            )
            
            (1
            )
            
            (9
            )
            
            (21
            )
            
            (4
            )
            
            (25
            )Time
                certificates of deposit indenominations
                of $100,000 or more
            
            
            1,198
            
            
            1,590
            
            
            2,788
            
            
            3,218
            
            
            3,066
            
            
            6,284Other
                time deposits
            
            
            (77
            )
            
            192
            
            
            115
            
            
            (158
            )
            
            299
            
            
            141Other
                borrowings
            
            
            172
            
            
            453
            
            
            625
            
            
            582
            
            
            1,079
            
            
            1,661Total
                interest expense
            
            
            1,324
            
            
            2,817
            
            
            4,141
            
            
            4,379
            
            
            5,607
            
            
            9,986Change
                in net interest income
            
            $
            2,544
            
            $
            2,669
            
            $
            5,213
            
            $
            7,963
            
            $
            7,214
            
            $
            15,177




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




In
      anticipation of credit risk inherent in our lending business, we set aside
      allowances through charges to earnings. Such charges were not only made for
      our
      outstanding loan portfolio, but also for off-balance sheet items, such as
      commitments to extend credit or letters of credit. The 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.




We
      respond to potential loan losses proactively by identifying problem loans in
      a
      timely manner and by taking immediate actions to successfully curb increases
      in
      the level of non-performing assets (see “Financial Condition-Nonperforming
      Assets” below for further discussion) and reduced net charge-offs. **** Despite
      continued loan growth, our low charge-offs and recoveries of the previously
      charged-off loans reduced our provision for loan losses to $1.3 million in
      the
      third quarter of 2005, as compared to the $1.5 million for the prior year’s
      third quarter. The provision for loan losses in the first nine months of 2005
      decreased to $2.5 million, as compared with $3.0 million in the first nine
      months of 2004. The 2004 provision was abnormally high due to the adjustment
      to
      the reserve for off-balance-sheet items caused by the application of the higher
      calculated loss migration ratio to off-balance-sheet items since the first
      quarter of 2004. We provided a $456,000 reserve for the credit risk of
      off-balance sheet items in the first nine months of 2004, as compared with
      $89,000 in the first nine months of 2005. The procedures for monitoring the
      adequacy of the allowance for loan losses, as well as detailed information
      concerning the allowance itself, are described in the section entitled
“Financial Condition-Allowance for Loan Losses” below.




___________________________
  1 Loan
        fees have been included in the calculation of interest income. Loan fees
        were
        approximately $1,393 and $760 for the quarters ended September 30, 2005 and
        2004, respectively, and approximately $3,577 and $2,131 for the nine months
        ended September 30, 2005 and 2004, respectively. Net loans are net of the
        allowance for loan losses, unearned income and related direct
        costs.





17




**Noninterest
      Income**




Total
      noninterest income decreased to $5.1 million in the third quarter of 2005 and
      $14.7 million for the first nine months of 2005, as compared with $5.9 million
      and $16.2 million, respectively, for the prior year’s same periods. Noninterest
      income as a percentage of average assets decreased to 0.35% and 1.05%,
      respectively, for the third quarter and the first nine months of 2005 from
      0.49%
      and 1.46% for the prior year’s same periods. These decreases were primarily due
      to the decrease in gains from loan sales discussed below. We currently earn
      non-interest income from various sources, including an income stream provided
      by
      BOLI in the form of an increase in cash surrender value.




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




**Noninterest
      Income**


**(Dollars
      in thousands)**




**For
                Three Months Ended September 30,**
            
            ******2005**
            
            ******2004****(Amount)**
            
            **(%)**
            
            **(Amount)**
            
            **(%)**Service
                charges on deposit accounts
            
            $
            1,973
            
            
            38.5
            %
            $
            1,892
            
            
            31.8
            %Gain
                on sale of loans
            
            
            2,163
            
            
            42.2
            %
            
            2,731
            
            
            45.9
            %Loan-related
                servicing income
            
            
            475
            
            
            9.2
            %
            
            590
            
            
            9.9
            %Loan
                referral fees
            
            
            —
            
            
            —
            
            
            —
            
            
            —Loan
                packaging fees
            
            
            102
            
            
            2.0
            %
            
            65
            
            
            1.1
            %Income
                from other earning assets
            
            
            224
            
            
            4.4
            %
            
            175
            
            
            3.0
            %Other
                income
            
            
            189
            
            
            3.7
            %
            
            494
            
            
            8.3
            %Total
            
            $
            5,126
            
            
            100.0
            %
            $
            5,947
            
            
            100.0
            %Average
                assets
            
            $
            1,468,264
            
            
            
            
            $
            1,223,991Noninterest
                income as a % of average assets
            
            
            
            
            
            0.35
            %
            
            
            
            
            0.49
            %**For
                Nine Months Ended September 30,**
            
            ******2005**
            ******2004****(Amount)**
            
            
            **(%)**
            
            
            **(Amount**)****
            
            
            **(%)**Service
                charges on deposit accounts
            
            $
            5,508
            
            
            37.5
            %
            $
            5,549
            
            
            34.2
            %Gain
                on sale of loans
            
            
            5,675
            
            
            38.7
            %
            
            6,902
            
            
            42.6
            %Loan-related
                servicing income
            
            
            1,606
            
            
            11.0
            %
            
            1,764
            
            
            10.9
            %Loan
                referral fees
            
            
            118
            
            
            0.8
            %
            
            100
            
            
            0.6
            %Loan
                packaging fees
            
            
            300
            
            
            2.0
            %
            
            324
            
            
            2.0
            %Income
                from other earning assets
            
            
            636
            
            
            4.3
            %
            
            476
            
            
            2.9
            %Other
                income
            
            
            836
            
            
            5.7
            %
            
            1,092
            
            
            6.8
            %Total
            
            $
            14,679
            
            
            100.0
            %
            $
            16,207
            
            
            100.0
            %Average
                assets
            
            $
            1,391,433
            
            
            
            
            $
            1,109,718Noninterest
                income as a % of average assets
            
            
            
            
            
            1.05
            %
            
            
            
            
            1.46
            %




Our
      largest noninterest income source for the third quarter of 2005 was the gain
      on
      sale of loans, representing approximately 42% of our total noninterest income.
      Income in this category includes sales gains on residential mortgage loans
      in
      2005 in addition to sales gains on the guaranteed portion of SBA loans. The
      sales gains on the guaranteed portions of SBA loans, the main source of this
      income, was $5.4 million for the nine-month period ended September 30, 2005,
      as
      compared to $5.5 million in the same period in 2004. Since the inception of
      our
      Home Loan Center in the fourth quarter of 2003, the sales of residential
      mortgage loans have become a stable noninterest income source. Gain on such
      sales was $86,000 and $300,000, respectively, for the three and nine months
      ended September 30, 2005 as compared with $94,000 and $253,000, respectively,
      for the prior year’s same periods. However, the gain on sales of the
      unguaranteed portion of SBA loans is not considered stable. We had no such
      sales
      in 2005, as compared with realized gains of $235,000 and $1.1 million in the
      three and nine months ended September 30, 2004, respectively. The combined
      gain
      on sale of loans was $2.2 million and $2.7 million in the third quarters of
      2005
      and 2004, respectively, and $5.7 million and $6.9 million in the first nine
      months of 2005 and 2004, respectively.




18




Our
      second largest noninterest income source for the third quarter of 2005 was
      service charge income on deposit accounts, generally representing 30% to 40%
      of
      our total noninterest income. This income source increased by $81,000 in the
      third quarter of 2005 as compared with $1.9 million in the prior year’s same
      quarter, but decreased by $41,000 in the first nine months of 2005 from $5.5
      million for the prior year’s same period despite an increase in the number of
      transactional accounts over the past 12 months. Such decrease was due primarily
      to our efforts to comply with the Bank Secrecy Act and protect us from potential
      loss. For such purposes, we imposed more rigid requirements on money service
      business (“MSB”)  accounts
      and more closely monitored their transactions. As a result, the number of MSB
      accounts was reduced and fee income therefrom was also reduced. We continuously
      review service charge rates and the manager’s authority to waive them to
      maximize service charge income while maintaining a competitive
      position.




The
      third
      largest source of noninterest income for the third quarter of 2005 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
      source historically has increased, but it decreased to $475,000 and $1.6
      million, respectively, in the third quarter and the first nine months of 2005
      as
      compared with $590,000 and $1.8 million for the prior year’s same periods. Such
      decrease was mainly caused by the significant reversals of servicing assets
      on
      sold loans which were paid off before their maturities. The servicing fees
      on
      sold SBA loans are credited when we collect the monthly payments on the sold
      loans we are servicing, and are charged by the monthly amortization of servicing
      assets that we capitalize upon sale of the related loan. Such servicing assets
      are also reversed and charged against the fee income account when the sold
      loans
      are paid off before the related servicing assets are fully amortized. For the
      first nine months of 2005, $833,000 of servicing assets were charged back to
      this income account by the early pay-offs as compared to $396,000 for the prior
      year’s same period. Considering our continued expansion of SBA activities (the
      assets increased to $262.5 million at September 30, 2005 from $221.1 million
      a
      year ago), we believe this income source will increase as prepayments on SBA
      loans decline.




Our
      loan
      referral fee income source includes income derived from our referring to other
      financial institutions loans that did not meet our lending requirements for
      various reasons, including size, availability of funds, credit criteria and
      others. Our referral fee income was $0 and $122,000, respectively, in the third
      quarter and the first nine months of 2005 as compared with $0 and $100,000
      for
      the prior year’s same periods. We cannot assure you that this source of revenue
      will increase because loan referrals do not represent our core banking business
      and fee income, and, therefore, is not a stable source of revenue.




Loan
      packaging fee income represents charges to borrowers for loan processing. The
      increased volume of loan production increased income from this source to
      $102,000 in the third quarter of 2005 from $65,000 for the prior year’s same
      quarter. For the first nine-month period, however, such income decreased to
      $300,000 in 2005 as compared with the last year’s $324,000 due mainly to
      heightened competition, which often results in packaging fee
      waivers.




Income
      from other earning assets represents income from earning assets other than
      interest-earning assets, such as dividend income on Federal Home Loan Bank
      (the
“FHLB”) stock ownership and the increase in cash surrender value of Bank Owned
      Life Insurance (the “BOLI”). Such income increased to $224,000 and $636,000,
      respectively, in the third quarter and the first nine months of 2005, as
      compared with $175,000 and $476,000 for the prior year’s same periods. These
      increases were attributable primarily due to our purchasing an additional $3
      million of BOLI in the third quarter of 2005 and increasing our FHLB stock
      ownership over the past 12 months.




Other
      income represents income from miscellaneous sources, such as gain on sale of
      investment securities and the excess of insurance proceeds over the carrying
      value of an insured loss. Other income decreased to $189,000 and $836,000 in
      the
      third quarter and first nine months of 2005, respectively, as compared with
      $494,000 and $1.1 million for the prior year’s same periods. Such decreases were
      due mainly to the non-recurring income recognized in 2004 (a $135,000 settlement
      award on an insurance claim received in 2004 and a net gain of $267,000 on
      sale
      and call of investment securities) offset by the $65,000 recovery in 2005 for
      an
      operation loss expensed in 2004.




19




**Noninterest
      Expense**




Total
      noninterest expense increased to $8.3 million and $23.7 million in the third
      quarter and the first nine months of 2005, respectively, as compared with $7.1
      million and $19.2 million in the prior year’s same periods, representing an
      increase of 17.3% and 23.1%, respectively. These increases can be attributed
      to
      the expanded personnel and premises associated with our business growth,
      including the recent openings of new offices. However, due to continuing efforts
      to minimize operating expenses, noninterest expenses as a percentage of average
      assets decreased to 1.71% in the first nine months of 2005 from 1.74% in the
      same period of 2004. We believe that our efforts in cost-cutting and revenue
      diversification have improved our operational efficiency, as evidenced by the
      decrease in our efficiency ratio (the ratio of noninterest expense to the sum
      of
      net interest income before provision for loan losses and total noninterest
      income) to 39.0% and 39.8% in the third quarter and the first nine months of
      2005, respectively, as compared with 41.8% and 41.9%, respectively, in the
      prior
      year’s same periods.




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




**Noninterest
      Expense**


**(Dollars
      in thousands)**




**For
                the Quarter Ended September 30,**
            
            **2005**
            
            **2004****(Amount)**
            
            **(%)**
            
            **(Amount)**
            
            **(%)**Salaries
                and employee benefits
            
            $
            4,924
            
            
            58.9
            %
            $
            3,709
            
            
            52.0
            %Occupancy
                and equipment
            
            
            893
            
            
            10.7
            %
            
            711
            
            
            10.0
            %Data
                processing
            
            
            474
            
            
            5.6
            %
            
            455
            
            
            6.4
            %Loan
                referral fee
            
            
            344
            
            
            4.1
            %
            
            293
            
            
            4.1
            %Professional
                fees
            
            
            79
            
            
            0.9
            %
            
            333
            
            
            4.7
            %Directors’
                fees
            
            
            131
            
            
            1.6
            %
            
            123
            
            
            1.7
            %Office
                supplies
            
            
            236
            
            
            2.8
            %
            
            138
            
            
            1.9
            %Advertising
            
            
            164
            
            
            2.0
            %
            
            176
            
            
            2.5
            %Communications
            
            
            123
            
            
            1.5
            %
            
            82
            
            
            1.1
            %Deposit
                insurance premium
            
            
            38
            
            
            0.5
            %
            
            33
            
            
            0.5
            %Outsourced
                service for customer
            
            
            415
            
            
            4.9
            %
            
            361
            
            
            5.1
            %Investor
                relations expenses
            
            
            4
            
            
            0.1
            %
            
            164
            
            
            2.3
            %Other
                operating
            
            
            535
            
            
            6.0
            %
            
            550
            
            
            7.7
            %Total
            
            $
            8,360
            
            
            100.0
            %
            $
            7,128
            
            
            100.0
            %Average
                assets
            
            $
            1,468,264
            
            
            
            
            $
            1,223,991Noninterest
                expenses as a % of average assets
            
            
            
            
            
            0.57
            %
            
            
            
            
            0.58
            %**For
                the Nine Months Ended September 30,**
            
            
            **2005**
            
            
            **2004****(Amount)**
            
            
            **(%)**
            
            
            **(Amount**)****
            
            
            **(%)**Salaries
                and employee benefits
            
            $
            13,617
            
            
            57.4
            %
            $
            10,386
            
            
            53.9
            %Occupancy
                and equipment
            
            
            2,496
            
            
            10.5
            %
            
            1,996
            
            
            10.3
            %Data
                processing
            
            
            1,432
            
            
            6.0
            %
            
            1,228
            
            
            6.4
            %Loan
                referral fee
            
            
            913
            
            
            3.8
            %
            
            897
            
            
            4.7
            %Professional
                fees
            
            
            633
            
            
            2.7
            %
            
            752
            
            
            3.9
            %Directors’
                fees
            
            
            368
            
            
            1.6
            %
            
            332
            
            
            1.7
            %Office
                supplies
            
            
            478
            
            
            2.0
            %
            
            383
            
            
            2.0
            %Advertising
            
            
            552
            
            
            2.3
            %
            
            379
            
            
            2.0
            %Communications
            
            
            330
            
            
            1.4
            %
            
            245
            
            
            1.3
            %Deposit
                insurance premium
            
            
            114
            
            
            0.5
            %
            
            95
            
            
            0.5
            %Outsourced
                service for customer
            
            
            1,072
            
            
            4.5
            %
            
            986
            
            
            5.1
            %Investor
                relation expenses
            
            
            233
            
            
            1.0
            %
            
            299
            
            
            1.5
            %Other
                operating
            
            
            1,492
            
            
            6.3
            %
            
            1,295
            
            
            6.7
            %Total
            
            $
            23,730
            
            
            100.0
            %
            $
            19,273
            
            
            100.0
            %Average
                assets
            
            $
            1,391,433
            
            
            
            
            $
            1,109,718Noninterest
                expenses as a % of average assets
            
            
            
            
            
            1.71
            %
            
            
            
            
            1.74
            %




Salaries
      and employee benefits generally represented over 55% of total noninterest
      expenses. For the third quarter and first nine months of 2005, salaries and
      employee benefits totaled $4.9 million and $13.6 million, respectively, as
      compared with $3.7 million and $10.4 million for the prior year’s same periods,
      representing an increase of 32.8% and 31.1%, respectively, from the comparable
      periods. Such increases were the result of our new office openings, and
      significant asset growth in the past 12 months that increased the number of
      full-time equivalent employees to 278 at September 30, 2005 from 235 at
      September 30, 2004. However, our efforts to promote efficient operations
      increased assets per employee to $5.6 million at September 30, 2005 from $5.2
      million at September 30, 2004.




20




Occupancy
      and equipment expenses represented approximately 10% to 11% of total noninterest
      expenses and totaled $893,000 and $2.5 million, respectively, for the third
      quarter and first nine months of 2005, as compared with $711,000 and $2.0
      million for the prior year’s same periods, representing an increase of 25.6% and
      25.1% respectively, from the comparable periods. These increases were
      attributable primarily to the expansion of our branch network, including loan
      production offices.




Data
      processing expenses were $474,000 and $1.4 million, respectively, for the third
      quarter and the first nine months of 2005, as compared with $455,000 and $1.2
      million for the prior year’s same periods, representing an increase of 4.2% and
      16.6% respectively, from the comparable periods. These increases correspond
      to
      the growth of our business.




Loan
      referral fees generally are paid to brokers who refer loans to us. These loans
      are SBA loans in most cases, although we also pay referral fees for qualified
      commercial loans. Due to the growth of SBA loan production, these referral
      fees
      increased to $344,000 and $913,000 in the third quarter and the first nine
      months of 2005, respectively, from $293,000 and $897,000 in the prior year’s
      same periods. Professional fees generally increase as we grow and we expect
      these expenditures will continue to be significant, as we address the enhanced
      SEC and NASDAQ corporate governance requirements. For the third quarter and
      the
      first nine months of 2005, professional fees decreased to $79,000 and $633,000,
      respectively, from $333,000 and $752,000 recorded in the prior year’s same
      periods. These decreases were attributable to the legal and accounting fees
      incurred in 2004 to comply with the enhanced legal and accounting requirements
      of the Sarbanes-Oxley Act (“SOX”), especially the annual certification
      requirements of SOX 404.




Advertising
      expense usually fluctuates depending on the timing of payment. Advertising
      expenses decreased to $164,000 in the third quarter of 2005 from $176,000 in
      the
      prior year’s same quarter, but increased to $552,000 in the first nine months of
      2005, as compared with $379,000 for the prior year’s same period. Such increases
      were attributable to expanded marketing activities, such as media advertisements
      and promotional gifts for customers of newly opened offices, especially for
      the
      Dallas branch and new loan production offices.




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. These expenses 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, these
      expenses increased to $415,000 and $1.1 million in the third quarter and the
      first nine months of 2005, respectively, as compared with $361,000 and $986,000
      for the prior year’s same periods.




Investor
      relations expenses represent costs for providing services to our existing or
      prospective shareholders, such as NASDAQ listing fees, fees for an outside
      investor relations company and various promotional material costs and usually
      fluctuate depending on the timing of payment. These expenses decreased to $4,000
      and $233,000, respectively, in the third quarter and the first nine months
      of
      2005, as compared with $164,000 and $299,000, respectively, in the prior year’s
      same periods. Such decreases were mainly the result of the non-recurring
      expenditures in 2004, including SEC filing fees and printing costs relating
      to
      the holding company reorganization.




Noninterest
      expenses other than the categories specifically addressed above, such as office
      supplies and communication expenses, increased to $1.1 million and $2.8 million
      in the third quarter and the first nine months of 2005, respectively, as
      compared with $989,000 and $2.4 million for the prior year’s same periods,
      representing an increase of 7.5% and 18.4%, respectively, from the prior year’s
      comparable periods. We believe that such increases corresponded to our business
      growth.




Generally,
      noninterest expense has 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 noninterest expense will continue to
      increase as we continue to grow. However, we remain committed to cost-control
      and efficiency, and we expect to keep these increases to a minimum relative
      to
      growth.




**Provision
      for Income Taxes**




For
      the
      quarter ended September 30, 2005, we made a provision for income taxes of $4.6
      million on pretax net income of $11.8 million, representing an effective tax
      rate of 39.4%, as compared with a provision for income taxes of $3.4 million
      on
      pretax net income of $8.5 million, representing an effective tax rate of 39.9%,
      for the same quarter of 2004. For the first nine months of 2005, we made a
      provision for income taxes of $13.4 million on pretax net income of $33.4
      million, representing an effective tax rate of 40.1%, as compared with a
      provision for income taxes of $9.4 million on pretax net income of $23.7
      million, representing an effective tax rate of 39.7%, for the same period of
      2004.




21


The
      effective tax rates in the third quarter and the first nine months of 2005
      were
      reasonably consistent with those for the prior year’s same periods. 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 results from changes in deferred
      tax assets (liabilities) from year to year. Deferred income tax assets and
      liabilities represent the tax effects, based on current tax law, of future
      deductible or taxable amounts attributable to events that have been recognized
      in the financial statements. Because we traditionally recognize substantially
      more expenses in our financial statements than we have been allowed to deduct
      for taxes, we generally have a net deferred tax asset. At September 30, 2005
      and
      December 31, 2004, we had net deferred tax assets of $7.0 million and $4.8
      million, respectively.




We
      believe that we have adequately provided for income tax issues not yet resolved
      with federal, state and foreign tax authorities. In March 2005, we prepaid
      $515,000 to the California Franchise Tax Board for unresolved tax matters in
      order to avoid the new potential penalty imposed by the State of California
      for
      any tax balances owed for years prior to 2003. Such prepayment was made from
      the
      reserve we previously accrued, the balance of which was $532,000 at December
      31,
      2004. Based upon a 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 material adverse effect upon our results of operations or financial
      condition.




**Financial
      Condition**




**Loan
      Portfolio**




Total
      loans net of unearned income increased by $168.4 million, or 16.5%, to $1.19
      billion at September 30, 2005, as compared with $1.02 billion at December 31,
      2004. Total loans net of unearned income as a percentage of total assets as
      of
      September 30, 2005 and December 31, 2004 were 76.9% and 80.6%,
      respectively.




Real
      estate secured loans consist primarily of commercial real estate loans and
      are
      extended to finance the purchase or improvement of commercial real estate or
      businesses thereon. The properties may be either user owned or for investment
      purposes. Our loan policy adheres to the real estate loan guidelines set forth
      by the FDIC in 1993. 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 $973.0 million and $859.0 million as of September 30, 2005 and December
      31, 2004, respectively. The robust California real estate market in the last
      few
      years and our increased involvement in the residential mortgage loan market
      have
      increased our composition of real estate secured loans to 84.2% of total loans
      at the end of last year. However, our continuing effort to diversify our loan
      portfolio lowered the ratio of real estate secured loans over total loans to
      81.8% at September 30, 2005.




Commercial
      and industrial loans include revolving lines of credit, as well as term business
      loans. Commercial and industrial loans at September 30, 2005 increased to $168.9
      million, as compared with $135.9 million at December 31, 2004 due to our
      continuing effort to diversify our loan portfolio. Commercial and industrial
      loans as a percentage of total loans increased to 14.2% at September 30, 2005,
      from 13.3% at December 31, 2004.




Consumer
      loans have historically represented less than 5% of our total loan portfolio.
      The majority of consumer loans are concentrated in automobile loans, which
      we
      formerly provided as a service only to existing customers. However, in 2003,
      we
      initiated an Auto Loan Center to increase our consumer loan portfolio. Consumer
      loans more than doubled from $18.8 million at December 31, 2004 to $39.4 million
      at September 30, 2005. **** We **** anticipate
      further increases in 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 in the Commercial Loan Center and
      appointed a construction loan specialist as its manager. We expect to expand
      our
      construction loans with the specialized capacity under the guidance of the
      Commercial Loan Center.




22




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




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




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




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




******Amount
                Outstanding****(Dollars
                in Thousands)****September
                30, 2005**
            
            **December
                31, 2004**Construction
            
            $
            8,116
            
            $
            6,972Real
                estate secured
            
            
            972,770
            
            
            858,998Commercial
                and industrial
            
            
            168,895
            
            
            135,943Consumer
            
            
            39,384
            
            
            18,810Total
                loans, net of unearned income
            
            $
            1,189,165
            
            $
            1,020,723Participation
                loans sold and serviced by the Company
            
            $
            262,547
            
            $
            235,534Construction
            
            
            0.7
            %
            
            0.7
            %Real
                estate secured
            
            
            81.8
            %
            
            84.2
            %Commercial
                and industrial
            
            
            14.2
            %
            
            13.3
            %Consumer
            
            
            3.3
            %
            
            1.8
            %Total
                loans, net of unearned income
            
            
            100.0
            %
            
            100.0
            %




The
      following table shows the contractual maturity distribution and repricing
      intervals of the outstanding loans in our portfolio, as of September 30, 2005.
      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
      $8.4
      million, and includes unearned income and deferred fees totaling $10.1 million
      at September 30, 2005:




**Loan
      Maturities and Repricing Schedule**




**At
                September 30, 2005,****Within**
              **One
                Year**
            
            **After
                One**
              **But
                Within**
              **Five
                Years**
            
            **After****Five
                Years**
            
            **Total****(Dollars
                in Thousands)**Construction
            
            $
            8,116
            
            $
            0
            
            $
            0
            
            $
            8,116Real
                estate secured
            
            
            893,443
            
            
            33,149
            
            
            42,029
            
            
            968,621Commercial
                and industrial
            
            
            175,000
            
            
            102
            
            
            92
            
            
            175,194Consumer
            
            
            18,449
            
            
            20,529
            
            
            300
            
            
            39,278Total
                loans, net of unearned income
            
            $
            1,095,008
            
            $
            53,780
            
            $
            42,421
            
            $
            1,191,209Loans
                with variable (floating) interest rates
            
            $
            1,067,875
            
            $
            0
            
            $
            0
            
            $
            1,067,875Loans
                with predetermined (fixed) interest rates
            
            $
            27,133
            
            $
            53,780
            
            $
            42,421
            
            $
            123,334






23




**Nonperforming
      Assets**




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




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




Despite
      the significant growth of our loan portfolio, our asset quality sustained a
      controllable level of nonperforming loans. Our nonperforming loans at September
      30, 2005 were $3.9 million, or 0.33% of total loans, an increase from the levels
      at September 30, 2004, which was $3.0 million, or 0.31% of total loans, and
      at
      December 31, 2004 ($2.7 million, or 0.26% of total loans). We acquired two
      OREOs
      during the third quarter of 2005 and recorded them at their net fair market
      value in the total amount of $156,000. We believe that our nonperforming loans
      are well protected with an adequate reserve together with tangible collateral.
      See “Allowance for Loan Losses” below for further discussion. Except as
      disclosed above, as of September 30, 2005, we were not aware of any material
      credit problems of borrowers that would cause us to have serious doubts about
      the ability of a borrower to comply with present loan payment terms. However,
      no
      assurance can be given that credit problems do not exist that may not have
      been
      brought to the attention of management.




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




**Nonperforming
      Assets**


**(Dollars
      in Thousands)**


**Nonaccrual
                loans:**1
            
            **September
                30, 2005**
            
            **December
                31, 2004**
            
            **September
                  30, 2004**Real
                estate secured
            
            $
            2,877
            
            $
            2,242
            
            $
            2,328Commercial
                and industrial
            
            
            614
            
            
            401
            
            
            510Consumer
            
            
            106
            
            
            0
            
            
            0Total
            
            
            3,597
            
            
            2,643
            
            
            2,838**Loans
                90 days or more past due and still accruing****(as
                to principal****or****interest):**Construction
            
            
            —
            
            
            —
            
            
            —Real
                estate secured
            
            
            315
            
            
            0
            
            
            0Commercial
                and industrial
            
            
            9
            
            
            0
            
            
            107Consumer
            
            
            19
            
            
            42
            
            
            49Total
            
            
            343
            
            
            42
            
            
            156**Restructured
                loans:**2Real
                estate secured
            
            
            —
            
            
            —
            
            
            —Commercial
                and industrial
            
            
            —
            
            
            14
            
            
            16Consumer
            
            
            —
            
            
            —
            
            
            —Total
            
            
            —
            
            
            14
            
            
            16Total
                nonperforming loans
            
            
            3,940
            
            
            2,699
            
            
            3,010Other
                real estate owned
            
            
            156
            
            
            —
            
            
            —Total
                nonperforming assets
            
            $
            4,096
            
            $
            2,699
            
            $
            3,010Nonperforming
                loans as a percentage of total loans
            
            
            0.33
            %
            
            0.26
            %
            
            0.31
            %Nonperforming
                assets as a percentage of total loans and
                other real estate owned
            
            
            0.34
            %
            
            0.26
            %
            
            0.31
            %Allowance
                for loan losses as a percentage ofnonperforming
                loans
            
            
            343.91
            %
            
            411.63
            %
            
            369.75
            %




___________________________


1 During
        the nine months ended September 30, 2005, no interest income related to these
        loans was included in net income. Additional interest income of approximately
        $431 would have been recorded during the nine months ended September 30,
        2005,
        if these loans had been paid in accordance with their original terms and
        had
        been outstanding throughout the three months ended September 30, 2005 or,
        if not
        outstanding, throughout the three months ended September 30, 2005, since
        origination.
 2 A
“restructured
        loan” is
        one in which the terms have been renegotiated to provide a reduction or deferral
        of interest or principal because of deterioration in the financial position
        of
        the borrower.




24




**Allowance
      for Loan Losses**




In
      anticipation of credit risk inherent in our lending business, we set aside
      allowances through charges to earnings. Such charges are not only made for
      the
      outstanding loan portfolio, but also for off-balance sheet items, such as
      commitment to extend credit or letters of credit. The charge made for our
      outstanding loan portfolio is credited to allowance for loan losses, whereas
      the
      charge for off-balance sheet items is credited to 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 “Results of Operations - Provision for
      Loan Losses” above.




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




**Allowance
      for Loan Losses**


**(Dollars
      in Thousands)**




**As
                of and for the period of**
            
            **Three
                months ended**
              **September
                30,**
            
            **Nine
                months ended**
              **September
                30,****2005**
            
            **2004**
            
            **2005**
            
            **2004****Balances:**Average
                total loans outstanding during period
            
            $
            1,158,245
            
            $
            956,085
            
            $
            1,098,404
            
            $
            877,361Total
                loans (net of unearned income)
            
            
            1,189,165
            
            
            972,829
            
            
            1,189,165
            
            
            972,829**Allowance
                for loan losses:****Balances
                at beginning of period**
            
            
            12,450
            
            
            10,251
            
            
            11,111
            
            
            9,011**Actual
                charge-offs:**Real
                estate secured
            
            
            86
            
            
            —
            
            
            110
            
            
            —Commercial
                and industrial
            
            
            114
            
            
            613
            
            
            264
            
            
            629Consumer
            
            
            —
            
            
            10
            
            
            52
            
            
            81Total
                charge-offs
            
            
            200
            
            
            623
            
            
            426
            
            
            710**Recoveries
                on loans previously charged off:**Real
                estate secured
            
            
            —
            
            
            —
            
            
            24
            
            
            —Commercial
                and industrial
            
            
            101
            
            
            109
            
            
            426
            
            
            245Consumer
            
            
            9
            
            
            13
            
            
            35
            
            
            24Total
                recoveries
            
            
            110
            
            
            122
            
            
            485
            
            
            269Net
                charge-offs (net recoveries)
            
            
            90
            
            
            501
            
            
            (59
            )
            
            441**Provision
                for loan losses**
            
            
            1250
            
            
            1450
            
            
            2,470
            
            
            3,017**Less:
                provision for off-balance sheet credit losses**
            
            
            59
            
            
            69
            
            
            89
            
            
            456**Balances
                at end of period**
            
            $
            13,551
            
            $
            11,131
            
            $
            13,551
            
            $
            11,131**Ratios:**Net
                charge-offs (net recoveries) to average total loans
            
            
            0.01
            %
            
            0.05
            %
            
            (0.01
            %)
            
            0.05
            %Allowance
                for loan losses to total loans at period-end
            
            
            1.14
            %
            
            1.14
            %
            
            1.14
            %
            
            1.14
            %Net
                charge-offs (net recoveries) to allowance for loan losses
            
            
            0.67
            %
            
            4.51
            %
            
            (0.43
            %)
            
            3.96
            %Net
                charge-offs (net recoveries) to provision for loan losses
            
            
            7.24
            %
            
            34.62
            %
            
            (2.37
            %)
            
            14.62
            %




The
      allowance for loan losses increased by 22.0%, or $2.4 million, to $13.6 million
      at September 30, 2005, as compared with $11.1 million at December 31, 2004,
      which sustained a similar level at September 30, 2004, relative to outstanding
      loans. With our continued emphasis on asset quality control, we lowered the
      level of charge-offs to $200,000 and $426,000, respectively, for the three
      and
      nine-month periods ended September 30, 2005 as compared with $623,000 and
      $710,000 for the prior year’s same periods. As a result of recoveries on loans
      previously charged-off net charge-offs for the third quarter of 2005 were
      lowered to $90,000 as compared with $501,000 for the prior year’s same quarter.
      We had net recoveries of $59,000 for the first nine-month period of 2005, as
      compared with the net charge-offs of $441,000 for the prior year’s same period.




Although
      we believe the allowance, at September 30, 2005, was adequate to absorb losses
      from any known and inherent risks in the portfolio, no assurance can be given
      that economic conditions which may adversely affect our service areas or other
      variables will not result in increased losses in the loan portfolio in the
      future. As of September 30, 2005 and December 31, 2004, our allowance for loan
      losses consisted of amounts allocated to three phases of our methodology for
      assessing loan loss allowances, as follows:




25


**Phase
                  of Methodology**
              
              **As
                  of:**
              
              **As
                  of:****September
                  30, 2005**
              
              **December
                  31, 2004**Specific
                  review of individual loans
              
              $
              1,119,666
              
              $
              541,261Review
                  of pools of loans with similar characteristics
              
              
              10,225,437
              
              
              8,954,465Judgmental
                  estimate based on various subjective factors
              
              
              2,205,561
              
              
              1,615,366Total
                  allowance for loan losses
              
              $
              13,550,664
              
              $
              11,111,092




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




**Distribution
                and Percentage Composition
                of Allowance for Loan Losses****(Dollars
                in thousands)****Balance
                as of**
            
            **September
                30, 2005**
            
            **December
                31, 2004**Applicable
                to:
            
            **Reserve**
              **Amount**
            
            **Total**
              **Loans**
            
            **(%)**
            
            **Reserve**
              **Amount**
            
            **Total**
              **Loans**
            
            **(%)**Construction
                loans
            
            $
            73
            
            $
            8,116
            
            
            0.90
            %
            $
            66
            
            $
            6,972
            
            
            0.95
            %Real
                estate secured
            
            
            8,989
            
            
            974,178
            
            
            0.92
            %
            
            8,081
            
            
            858,998
            
            
            0.94
            %Commercial
                and industrial
            
            
            4,159
            
            
            177,818
            
            
            2.34
            %
            
            2,796
            
            
            135,943
            
            
            2.06
            %Consumer
            
            
            330
            
            
            39,384
            
            
            0.84
            %
            
            168
            
            
            18,810
            
            
            0.89
            %Total
                Allowance
            
            $
            13,551
            
            $
            1,199,496
            
            
            1.13
            %
            $
            11,111
            
            $
            1,020,723
            
            
            1.09
            %





**Contractual
      Obligations**




The
      following table represents our aggregate contractual obligations to make future
      payments as of September 30, 2005:




**(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
            
            $
            41,976
            
            $
            21,684
            
            
            —
            
            
            —
            
            $
            63,660Junior
                subordinated debentures
            
            
            3,814
            
            
            7,081
            
            
            3,708
            
            
            61,547
            
            
            76,150Operating
                leases
            
            
            1,678
            
            
            2,909
            
            
            2,202
            
            
            2,813
            
            
            9,602Time
                deposits
            
            
            709,649
            
            
            15,360
            
            
            3
            
            
            16
            
            
            725,028Total
            
            $
            757,117
            
            $
            47,034
            
            $
            5,913
            
            $
            64,376
            
            $
            874,440





With
      exception of the operating leases, the expected obligations presented above
      include anticipated interest accrual, based on current respective contractual
      terms.




**Off-Balance
      Sheet Arrangements**




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




As
      of
      September 30, 2005 and December 31, 2004, we had commitments to extend credit
      of
      $99.4 million and $69.5 million, respectively. Obligations under standby letters
      of credit were $2.8 million at each of September 30, 2005 and December
      31,
      2004, respectively, and our obligations under commercial letters of credit
      were
      $13.0 million and $9.3 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.




26




**Investment
      Activities**




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




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




We
        sell
        federal funds, purchase securities under agreements to resell and high quality
        money market instruments, and deposit interest bearing accounts in other
        financial institutions to help meet liquidity requirements and
        provide temporary holdings until the funds can be otherwise deployed or
        invested. As of September 30, 2005 and December 31, 2004, we had $100 million
        and $45 million, respectively, in federal funds sold and repurchase agreements,
        and $3,000 at each of September 30, 2005 and December 31, 2004 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 and are able 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. At September 30, 2005 and December 31, 2004, we had $6.0
      million and $10.0 million in money market preferred stock (“MMPS”), which is
      classified as available-for-sale securities. MMPS is a form of equity security
      having characteristics similar to money market instruments and offers attractive
      tax-equivalent yields with a 70% dividend received deduction. MMPS is
      re-auctioned every 49 or 90 days.




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




**Investment
      Securities Portfolio**


**(Dollars
      in Thousands)**


**As
                of September 30, 2005**
            
            **As
                of December 31, 2004****Amortized
                Cost**
            
            **Market
                Value**
            
            **Amortized
                Cost**
            
            **Market
                Value****Held
                to Maturity:**Securities
                of government sponsoredenterprises
            
            $
            21,990
            
            $
            21,830
            
            $
            28,073
            
            $
            27,976Collateralized
                mortgage obligation
            
            
            272
            
            
            261
            
            
            379
            
            
            371Municipal
                securities
            
            
            2,619
            
            
            2,616
            
            
            810
            
            
            814**Available-for-Sale:**Securities
                of government sponsoredenterprises
            
            
            73,856
            
            
            73,399
            
            
            39,945
            
            
            39,732Mortgage
                backed securities
            
            
            25,695
            
            
            25,635
            
            
            27,794
            
            
            27,740Collateralized
                mortgage obligation
            
            
            16,027
            
            
            15,804
            
            
            4,389
            
            
            4,291Corporate
                securities
            
            
            2,991
            
            
            2,939
            
            
            3,994
            
            
            3,950Municipal
                securities
            
            
            3,023
            
            
            3,021
            
            
            —
            
            
            —Money
                market preferred stock
            
            
            6,000
            
            
            6,000
            
            
            10,000
            
            
            10,000Total
                investment securities
            
            $
            152,473
            
            $
            151,505
            
            $
            115,384
            
            $
            114,874




27




The
      following table summarizes the maturity and repricing schedule of our investment
      securities at their carrying values and their weighted average yields (without
      the consideration of tax effects, if any) at September 30, 2005:




**Investment
      Maturities and Repricing Schedule**


**(Dollars
      in Thousands)**




**Within
                One Year**
            
            **After
                One But**
              **Within
                Five Years**
            
            **After
                Five But**
              **Within
                Ten Years**
            
            **After
                Ten Years**
            
            **Total****Amount**
            
            **Yield**
            
            **Amount**
            
            **Yield**
            
            **Amount**
            
            **Yield**
            
            **Amount**
            
            **Yield**
            
            **Amount**
            
            **Yield****Held
                to Maturity:**
              Securities
                of government
              sponsored
                enterprises
            
            $
            3,999
            
            
            2.79
            %
            $
            17,991
            
            
            3.58
            %
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            $
            21,990
            
            
            3.43
            %Collateralized
                mortgage
              obligation
            
            
            —
            
            
            —
            
            
            272
            
            
            3.93
            %
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            272
            
            
            3.93
            %Corporate
                securities
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Municipal
                securities
            
            
            —
            
            
            —
            
            
            2,619
            
            
            4.05
            %
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            2,619
            
            
            4.05
            %**Available-for-sale:**
              Securities
                of government
              sponsored
                enterprises
            
            
            9,940
            
            
            3.41
            %
            
            63,459
            
            
            3.72
            %
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            73,399
            
            
            3.68
            %Mortgage
                backed securities
            
            
            11,991
            
            
            3.87
            %
            
            29,448
            
            
            4.30
            %
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            41,439
            
            
            4.18
            %Corporate
                securities
            
            
            
            
            
            —
            
            
            987
            
            
            4.20
            %
            
            1,952
            
            
            4.46
            %
            
            —
            
            
            —
            
            
            2,939
            
            
            4.37
            %Municipal
                securities
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            3,021
            
            
            3.75
            %
            
            
            
            
            
            
            
            3,021
            
            
            3.75
            %Money
                market preferred stock
            
            
            6,000
            
            
            3.12
            %
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            
            
            
            
            
            
            6,000
            
            
            3.12
            %Total
                investment securities
            
            $
            31,930
            
            
            3.45
            %
            $
            114,776
            
            
            3.86
            %
            $
            4,973
            
            
            4.03
            %
            
            —
            
            
            —
            
            $
            151,679
            
            
            3.78
            %




Our
      investment securities holdings increased by $36.7 million, or 31.9%, to $151.7
      million at September 30, 2005, compared to holdings of $115.0 million
      at
      December 31, 2004. Total investment securities as a percentage of total assets
      were 9.8% and 9.1% at September 30, 2005 and December 31, 2004, respectively.
      As
      of September 30, 2005, investment securities having a carrying value of $117.9
      million were pledged to secure certain deposits.




As
      of
      September 30, 2005, held-to-maturity securities, which are carried at their
      amortized costs, decreased to $24.9 million from $29.3 million at December
      31,
      2004. Available-for-sale securities, which are stated at their fair market
      values, increased to $126.8 million at September 30, 2005 from $85.7 million
      at
      December 31, 2004. 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.




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




**(Dollars
                in thousands)**
            
            **Less
                than 12 months**
            
            **12
                months or longer**
            
            **Total****Description
                of Securities**
            
            **Fair
                Value**
            
            **Gross**
              **Unrealized**
              **Losses**
            
            **Fair
                Value**
            
            **Gross
                Unrealized Losses**
            
            **Fair
                Value**
            
            **Gross
                Unrealized Losses**Securities
                of government
              sponsored
                enterprises
            
            $
            73,381
            
            $
            (470
            )
            $
            12,850
            
            $
            (151
            )
            $
            86,231
            
            $
            (621
            )Collateralized
                mortgage
              obligation
            
            
            9,398
            
            
            (107
            )
            
            3,475
            
            
            (127
            )
            
            12,873
            
            
            (234
            )Mortgage
                backed securities
            
            
            8,848
            
            
            (70
            )
            
            7,091
            
            
            (93
            )
            
            15,939
            
            
            (163
            )Municipal
                securities
            
            
            4,370
            
            
            (22
            )
            
            —
            
            
            —
            
            
            4,370
            
            
            (22
            )Corporate
                securities
            
            
            987
            
            
            (13
            )
            
            1,952
            
            
            (39
            )
            
            2,939
            
            
            (52
            )$
            96,984
            
            $
            (682
            )
            $
            25,368
            
            $
            (410
            )
            $
            122,352
            
            $
            (1,092
            )




28




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. As of September 30, 2005, we also had the ability and intent to
      hold
      the securities classified as available-for-sale for a period of time sufficient
      for a recovery of cost. The unrealized losses were largely due to increases
      in
      market interest rates over the yields available at the time the underlying
      securities were purchased. The fair value is expected to recover as the bonds
      approach their maturity date or repricing date or if market yields for such
      investments decline. We do not believe any of the securities are impaired due
      to
      reasons of credit quality. Accordingly, as of September 30, 2005, we believe
      the
      impairments detailed in the table above were temporary, and no impairment loss
      has been realized in our consolidated statements of operations.




**Other
      Earning Assets**




For
      various business purposes, we make investments in earning assets other than
      the
      interest-earning securities discussed above.




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




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




The
      balances of other earning assets as of September 30, 2005 and December 31,
      2004
      were as follows:




**Type**
            
            **Balance**
              **as
                of**
              **September
                30, 2005**
            
            **Balance**
              **as
                of**
              **December
                31, 2004**BOLI
            
            $
            14,956,000
            
            $
            11,536,000LIHTCF
            
            $
            2,163,000
            
            $
            1,784,000Federal
                Home Loan Bank Stock
            
            $
            6,112,000
            
            $
            4,372,000




**Deposits
      and Other Sources of Funds**




*Deposits*




Deposits
      are our primary source of funds. Total deposits at September 30, 2005 and
      December 31, 2004 were $1.30 billion and $1.10 billion, respectively,
      representing an increase of $200.8 million, or 18.3%, over the first nine-month
      period of 2005.




Due
      to
      the heightened competition for core deposits, our time deposit reliance level
      increased. The percentage of average time deposits over the average total
      deposits in the third quarter of 2005 increased to 53.9% from 49.4% for the
      prior year’s same quarter. The average time deposits for the quarter ended
      September 30, 2005 increased by $152.1 million, or 29.2%, to $672.0 million
      from
      $520.0 million a year ago, while the average total deposits increased by $194.5
      million, or 18.5%, to $1.25 billion for the quarter ended September 30, 2005,
      from $1.05 billion for the quarter ended September 30, 2004.




The
      average rate paid on time deposits in denominations of $100,000 or more for
      the
      third quarter and the first nine months of 2005 increased to 3.67% and 3.21%,
      respectively, as compared with 2.38% and 2.26%, respectively, for the same
      periods in the prior year. See “Net Interest Income and Net Interest Margin” for
      further discussion.




29




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




**Average
      Deposits**


**(Dollars
      in Thousands)**


**For
                  the quarters ended:**
              
              
              **September
                  30, 2005**
              
              
              **December
                  31, 2004**
              
              
              **September
                  30, 2004****Average**
                **Balance**
              
              
              **Average**
                **Rate**
              
              
              **Average**
                **Balance**
              
              
              **Average**
                **Rate**
              
              
              **Average**
                **Balance**
              
              
              **Average**
                **Rate**Demand,
                  noninterest-bearing
              
              $
              300,362
              
              
              
              
              $
              268,559
              
              
              
              
              $
              261,011Money
                  market
              
              
              230,776
              
              
              2.95
              %
              
              212,207
              
              
              1.93
              %
              
              222,867
              
              
              1.95
              %Super
                  NOW
              
              
              21,823
              
              
              0.92
              %
              
              22,877
              
              
              0.77
              %
              
              22,498
              
              
              0.79
              %Savings
              
              
              22,915
              
              
              0.72
              %
              
              23,913
              
              
              0.79
              %
              
              27,058
              
              
              0.75
              %Time
                  certificates of deposit in
                denominations
                  of $100,000or more
              
              
              562,434
              
              
              3.67
              %
              
              425,900
              
              
              2.49
              %
              
              398,934
              
              
              2.38
              %Other
                  time deposits
              
              
              109,603
              
              
              3.21
              %
              
              118,296
              
              
              2.54
              %
              
              121,036
              
              
              2.53
              %Total
                  deposits
              
              $
              1,247,913
              
              
              2.51
              %
              $
              1,071,752
              
              
              1.68
              %
              $
              1,053,404
              
              
              1.64
              %




The
      scheduled maturities of our time deposits in denominations of $100,000 or
      greater at September 30, 2005 were as follows:




**Maturities
      of Time Deposits of $100,000 or More, at** **September
      30, 2005**


**(Dollars
      in Thousands)**




Three
                months or less
            
            $
            294,774Over
                three months through nine months
            
            
            196,479Over
                nine months through twelve months
            
            
            90,201Over
                twelve months
            
            
            2,779Total
            
            $
            584,233




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 carried deposit balances of more than 1% of our
      total
      deposits at December 31, 2004, but only two customers, including the California
      State Treasury, had a deposit balance of more than 1% of total deposits at
      September 30, 2005.




In
      order
      to take advantage of historically low funding costs, in the past few years
      we
      also accepted brokered deposits on a selective basis at reasonable interest
      rates to augment deposit growth. Brokered deposits grew to $47.3 million at
      December 31, 2004 from $4.2 million at the end of 2001. However, we have
      controlled their growth and reduced these deposits to $26.6 million at September
      30, 2005 in order to limit our reliance on non-core funding sources. Most of
      the
      brokered deposits will mature within one year. Since brokered deposits are
      generally less stable forms of deposits, we closely monitor growth from this
      non-core funding source.




*FHLB
      Borrowings*




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




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




**For
                the Quarter ended**
            
            **September
                30,**
              **2005**
            
            **December
                31,**
              **2004**Balance
                at quarter-end
            
            $
            61,000,000
            
            $
            41,000,000Average
                balance during the quarter
            
            $
            51,000,000
            
            $
            41,184,783Maximum
                amount outstanding at any month-end
            
            $
            61,000,000
            
            $
            41,000,000Average
                interest rate during the quarter
            
            
            3.21
            %
            
            2.05
            %Average
                interest rate at quarter-end
            
            
            3.29
            %
            
            2.08
            %







30




*Junior
      Subordinated Debentures; Trust Preferred Securities*




The
      Bank
      issued a $10 million Junior Subordinated Debenture in December 2002 and, issued
      additional Junior Subordinated Debentures in December 2003, March 2005, and
      September 2005 in amounts of $15.46 million, $20.62 million and $15.46 million,
      respectively, to the Wilshire Statutory Trusts (Wilshire Statutory Trust I,
      Wilshire Statutory Trust II and Wilshire Statutory Trust III), our wholly owned
      subsidiaries, which in turn issued trust preferred securities of $15 million,
      $20 million and $15 million, respectively.




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 7.06% at
      September 30, 2005, 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, the Company 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, the Company organized its wholly owned subsidiary,
      Wilshire Statutory Trust I, which issued $15 million in trust preferred
      securities. The Company 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 $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. The
      Company 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 6.74% at September 30, 2005, 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. The Company 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, the Company organized its wholly owned subsidiary, Wilshire
      Statutory Trust II, which issued $20 million in trust preferred securities.
      The
      Company then purchased all of the common interest in the Wilshire Statutory
      Trust ($619,000) and issued the 2005 Junior Subordinated Debenture (the “2005
      debenture”) in the amount of $20.6 million to the Wilshire Statutory Trust II
      with terms substantially similar to the 2005 trust preferred securities in
      exchange for the proceeds from the issuance of the Wilshire Statutory Trust
      II’s
      2005 trust preferred securities and common securities. The Company subsequently
      deposited the proceeds from the 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 2005 debenture and related trust preferred securities was
      5.68% at September 30, 2005, which adjusts quarterly to the three-month LIBOR
      plus 1.79%. The 2005 debenture and related trust preferred securities will
      mature on March 17, 2035. The interest on both the 2005 debenture and related
      trust preferred securities are payable quarterly and no scheduled payments
      of
      principal are due prior to maturity. The Company may redeem the 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, the Company organized its wholly owned subsidiary, Wilshire
      Statutory Trust III (“Wilshire Trust”), 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, 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.




31




Payments
      of distributions on the trust preferred securities and payments on redemption
      of
      the trust preferred securities are guaranteed by the Company. 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 September 30, 2005, Wilshire Bancorp counted $35.8 million
      of
      total trust preferred securities as Tier 1 capital, leaving $14.2 million as
      Tier 2 capital.




**Asset/Liability
      Management**




We
      seek
      to ascertain optimum and stable utilization of available assets and liabilities
      as a vehicle to attain our overall business plans and objectives. In this
      regard, we focus on measurement and control of liquidity risk, interest rate
      risk and market risk, capital adequacy, operation risk and credit risk. See
      further discussion on these risks in the “Risk Factors” section of our Annual
      Report on Form 10-K for the year ended December 31, 2004. Information concerning
      interest rate risk management is set forth under “Item 3. Quantitative and
      Qualitative Disclosures about Market Risk.”




**Liquidity
      Management**




Maintenance
      of adequate liquidity requires that sufficient resources be available at all
      times to meet our cash flow requirements. Liquidity in a banking institution
      is
      required primarily to provide for deposit withdrawals and the credit needs
      of
      its customers and to take advantage of investment opportunities as they arise.
      Liquidity management involves our ability to convert assets into cash or cash
      equivalents without incurring significant loss, and to raise cash or maintain
      funds without incurring excessive additional cost. For this purpose, we maintain
      a portion of our funds in cash and cash equivalents, deposits in other financial
      institutions and loans and securities available for sale. Our liquid assets
      at
      September 30, 2005 and December 31, 2004 totaled approximately $307.0 million
      and $205.8 million, respectively. Our liquidity level measured as the percentage
      of liquid assets to total assets was 19.9% and 16.3% at September 30, 2005
      and
      December 31, 2004, 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 70% of borrowing capacity, as such borrowing does
      not
      qualify as core funds. As of September 30, 2005, our borrowing capacity from
      the
      FHLB was about $347.8 million and the outstanding balance was $61 million,
      or
      approximately 17.5% of our borrowing capacity. We also maintain a guideline
      to
      purchase up to $10 million in federal funds with Union Bank of
      California.




32




**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 securities, debt
      or
      otherwise.




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, 2004 for additional information regarding regulatory capital
      requirements.




At
      September 30, 2005, total shareholders’ equity increased to $106.8 million from
      $88.3 million at December 31, 2004, representing an increase of $18.5
      million, primarily from internally generated operating income ($20.0 million),
      increased by stock option exercises ($429,000 proceeds from stock option
      exercises and the $1.7 million in tax benefits therefrom) and decreased by
      the
      cash dividends of $3.4 million, which were declared during the first nine months
      of 2005.




In
      addition, in March and September of 2005, we issued a total of $36.1 million
      in
      Junior Subordinated Debentures to the Wilshire Statutory Trusts, our wholly
      owned subsidiaries, which in turn issued the trust preferred securities of
      the
      total of $35 million and we infused $14 million as additional equity capital
      to
      the Bank in March 2005. As a result, our Tier I capital and Tier 2 capital
      increased further by $20.8 million and $14.2 million, respectively. For the
      Bank
      level, the Tier 1 capital also increased by $14 million with the capital
      infusion. See “Deposits and Other Sources of Funds” for further discussion
      regarding the subordinated debentures and the trust preferred securities.




As
      of
      September 30, 2005, 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.****
              
              
              
              
              
              
              
              **Actual
                  ratios as of:****Regulatory**
                **Well-Capitalized**
                **Standards**
              
              **Regulatory**
                **Adequately-Capitalized**
                **Standards**
              
              **September
                  30,**
                **2005**
              
              **December
                  31,**
                **2004**
              
              **September
                  30,**
                **2004**Total
                  capital to risk-weighted assets
              
              10%
              
              8%
              
              14.81%
              
              11.95%
              
              12.01%Tier
                  I capital to risk-weighted assets
              
              6%
              
              4%
              
              11.66%
              
              9.87%
              
              9.84%Tier
                  I capital to adjusted average assets
              
              5%
              
              4%
              
              9.71%
              
              8.35%
              
              8.03%


**Wilshire
                State Bank**
            
            
            
            
            
            
            
            **Actual
                ratios as of:****Regulatory**
              **Well-Capitalized**
              **Standards**
            
            **Regulatory**
              **Adequately-Capitalized**
              **Standards**
            
            **September
                30,**
              **2005**
            
            **December
                31,**
              **2004**
            
            **September
                30,**
              **2004**Total
                capital to risk-weighted assets
            
            10%
            
            8%
            
            13.24%
            
            11.92%
            
            11.97%Tier
                I capital to risk-weighted assets
            
            6%
            
            4%
            
            11.25%
            
            9.84%
            
            9.80%Tier
                I capital to adjusted average assets
            
            5%
            
            4%
            
            9.36%
            
            8.33%
            
            7.99%




33




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.




We
      normally seek to maintain a balanced position over the period of one year to
      ensure net interest margin stability in times of volatile interest rates. This
      is accomplished by maintaining a similar level of loans and investment
      securities and deposits available to be repriced within one year. At September
      30, 2005, we were asset-sensitive, with a positive cumulative one-year gap
      of
      $167.6 million, or 10.84% of total assets. 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, which was the case in the past three
      years. At September 30, 2005, we intentionally maintained a three-month positive
      gap of $404.6 million, or 26.17% of total assets. This positive gap is
      strategically planned 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.




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 ALCO
      also regularly uses simulation modeling as a tool to measure the sensitivity
      of
      earnings and net portfolio value (“NPV”) to interest rate changes. The NPV is
      defined as the net present value of an institution’s existing assets,
      liabilities and off-balance sheet instruments. The simulation model captures
      all
      assets, liabilities and off-balance sheet financial instruments accounting
      for
      significant variables 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.




34




The
      following table sets forth the interest rate sensitivity of our interest-earning
      assets and interest-bearing liabilities as of September 30, 2005 using the
      interest rate sensitivity gap ratio. For purposes of the following table, an
      asset or liability is considered rate-sensitive within a specified period when
      it can be repriced or matures within its contractual terms. Actual payment
      patterns may differ from contractual payment patterns:




**Interest
      Rate Sensitivity Analysis**


**(Dollars
      in Thousands)**




**At
                September 30, 2005****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
            
            $
            1,081,085
            
            $
            13,923
            
            $
            53,780
            
            $
            42,420
            
            $
            1,191,208Investment
                securities
            
            
            11,845
            
            
            20,085
            
            
            114,776
            
            
            4,973
            
            
            151,679Federal
                funds sold and cash equivalents
            
            
            100,000
            
            
            —
            
            
            —
            
            
            —
            
            
            100,000Interest-earning
                deposits
            
            
            3
            
            
            —
            
            
            —
            
            
            —
            
            
            3Total
            
            $
            1,192,933
            
            $
            34,008
            
            $
            168,556
            
            $
            47,393
            
            $
            1,442,890**Interest-bearing
                liabilities:**Savings
                deposits
            
            
            25,399
            
            
            —
            
            
            —
            
            
            —
            
            
            25,399Time
                deposits of $100,000 or more
            
            
            387,521
            
            
            193,933
            
            
            2,779
            
            
            —
            
            
            584,23Other
                time deposits
            
            
            50,698
            
            
            61,076
            
            
            11,485
            
            
            5
            
            
            123,264Other
                interest-bearing deposits
            
            
            253,678
            
            
            —
            
            
            —
            
            
            —
            
            
            253,678Other
                borrowingsdemand
                deposits
            
            
            25,000
            
            
            16,000
            
            
            20,000
            
            
            —
            
            
            61,000Subordinated
                debentures
            
            
            46,083
            
            
            —
            
            
            —
            
            
            15,464
            
            
            61,547Total
            
            $
            788,379
            
            $
            271,009
            
            $
            34,264
            
            $
            15,469
            
            $
            1,109,121Interest
                rate sensitivity gap
            
            $
            404,553
            
            
            ($
                237,000
            )
            $
            134,292
            
            $
            31,925
            
            $
            333,770Cumulative
                interest rate sensitivity gap
            
            $
            404,553
            
            $
            167,553
            
            $
            301,845
            
            $
            333,770Cumulative
                interest rate sensitivity gap ratio
              (based
                on total assets)
            
            
            26.17
            %
            
            10.84
            %
            
            19.53
            %
            
            21.59
            %




The
      following table sets forth our estimated net interest income over a 12-month
      period and NPV based on the indicated changes in market interest rates as of
      September 30, 2005. All assets presented in this table are held-to-maturity
      or
      available-for-sale. At September 30, 2005, we had no trading securities:




**(Dollars
                in
                Thousands)****Change**
            **Net
                Interest Income****(in
                Basis Points)**
            **(next
                twelve months)**
            **%
                Change**
            **NPV**
            **%
                Change**+200
            87,217
            15.4%
            234,637
            12.7%+100
            80,175
            6.1%
            222,600
            6.9%0
            75,561
            —
            208,181
            —-100
            72,087
            -4.6%
            189,971
            -8.7%-200
            64,715
            -14.4%
            168,548
            -19.0%




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




As
      indicated above, the net interest income increases (decreases) as market
      interest rates rise (fall), since we were positively gapped by $167.6 million
      for a time horizon of one year, as of September 30, 2005. This is also due
      to
      the fact that a substantial portion of the interest earning assets reprice
      immediately after the rate change, that interest-bearing liabilities reprice
      slower than interest-earning assets and that interest-bearing liabilities do
      not
      reprice to the same degree as interest earning assets, given a stated change
      in
      the interest rate. The NPV increases (decreases) as the interest income
      increases (decreases) since the change in the cash flows has a greater impact
      on
      the change in the NPV than does the change in the discount rate.




1Excludes
          the gross amount of non-accrual loans of approximately $8.4 million at
          September
          30, 2005.




35




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




Our
      strategies in protecting both net interest income and economic value of equity
      from significant movements in interest rates involve restructuring our
      investment portfolio and using FHLB advances. We also permit the purchase of
      rate caps and floors, and engage in interest rate swaps, although we have not
      yet engaged in either of these activities, other than an interest rate swap
      agreement arranged in September 2003 on the notional amount of $3.0 million
      and
      subsequently terminated without any gain or loss by mutual agreement between
      us
      and a brokerage company in January 2004.




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




As
      of
      September 30, 2005, we carried out an evaluation, under the supervision and
      with
      the participation of our management, including our chief executive officer
      and
      chief financial officer, of the effectiveness of the design and operation of
      our
“disclosure controls and procedures,” as such term is defined under Exchange Act
      Rules 13a-15(e) and 15d-15(e).




Based
      on
      this evaluation, our chief executive officer and chief financial officer
      concluded that, as of September 30, 2005, such disclosure controls and
      procedures were effective to ensure that information required to be disclosed
      by
      us in the reports we file or submit under the Exchange Act is recorded,
      processed, summarized and reported within the time periods specified in the
      rules and forms of the Securities and Exchange Commission, and accumulated
      and
      communicated to our management, including our chief executive officer and chief
      financial officer, as appropriate to allow timely decisions regarding required
      disclosure.




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




There
      were no changes in our internal controls over financial reporting during the
      quarter ended September 30, 2005 that materially affected, or are
      reasonably likely to materially affect, our internal controls over financial
      reporting.




36






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




**Item
        1. L** **egal
        Proceedings**




None.




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




In
      September 2005, the Company organized its wholly owned subsidiary, Wilshire
      Statutory Trust III, which issued $15 million in trust preferred securities.
      The
      Company then purchased all of the common interest in the Wilshire Statutory
      Trust ($464,000) and issued the September 2005 Junior Subordinated Debenture
      (the “September 2005 debenture”) in the amount of $15.5 million to the Wilshire
      Statutory Trust III with terms substantially similar to the September 2005
      trust
      preferred securities in exchange for the proceeds from the issuance of the
      Wilshire Statutory Trust III’s 2005 trust preferred securities and common
      securities. The Company subsequently deposited the proceeds from the 2005
      debenture in a depository account at the Bank. The rate of interest on the
      September 2005 debenture and related trust preferred securities was
      fixed
      at a 6.07% annual interest rate until September 15, 2010, thereafter converting
      to a floating rate of three-month LIBOR plus 1.40%, resetting
      quarterly .
      The
      September 2005 debenture and related trust preferred securities will mature
      on
      March 17, 2035. The interest on both the 2005 debenture and related trust
      preferred securities are payable quarterly and no scheduled payments of
      principal are due prior to maturity. The Company may redeem the September 2005
      debenture (and in turn the trust preferred securities) in whole or in part
      prior
      to maturity on or after September 15, 2010. The issuance of the trust preferred
      securities and the September 2005 debenture was made in private placement in
      reliance upon the exemption from compliance with the registration requirements
      of the Securities Act contained in Section 4(2) of the Securities Act
      and
      applicable state securities law exemptions.




**Item
        3.** **Defaults** **upon
        Senior Securities**




None.




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




None.




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




On
      August
      1, 2005, we entered into a stock purchase agreement with the shareholders
      of Liberty Bank of New York (“Liberty Bank”) to acquire all of the outstanding
      stock of Liberty Bank for approximately $15.7 million subject to adjustment
      immediately prior to closing.  The agreement contemplates that the purchase
      price will be payable 60% in cash and 40% in our restricted
      common stock .
      However, prior to closing, at our option, we may modify the form of
      consideration so that a higher percentage (up to 100%) of the purchase price
      may
      be paid in cash. The value of the shares of our common stock, if any, comprising
      the purchase price will be based on the average
      closing sales prices of our common stock as reported by the NASDAQ National
      Market System for the 20 consecutive trading days ending on the last business
      day prior to the closing date.




The
      definitive purchase price will be increased or decreased to the extent the
      shareholders’ equity of Liberty Bank immediately prior to closing is greater or
      less than $8,800,000, respectively. In addition, the purchase price will be
      decreased to the extent any increase in the allowance of loan and lease losses
      on the books of Liberty Bank is deemed appropriate by the Superintendent of
      Banks of the State of New York Banking Department or the FDIC, but in no event
      will such adjustment be less than the amount required to increase the allowance
      to $600,000.




The
      transactions contemplated by the agreement are anticipated to
      close in
      the fourth quarter of 2005 and will be subject to certain conditions, including
      regulatory approvals from the Federal Deposit Insurance Corporation, the Board
      of Governors of the Federal Reserve, and the California Department of Financial
      Institutions. The agreement contemplates that Liberty Bank will
      be
      merged into Wilshire State Bank, our wholly-owned subsidiary.




37




The
      shares to be issued pursuant to the agreement will be issued
      as
      restricted securities under an exemption pursuant to Section 4(2)
      under the Securities Act of 1933.




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


**Exhibit
        Table**


**Reference
                  Number**
              
              **Item**3.1
              
              Articles
                  of Incorporation, as amended and restated 13.2
              
              Bylaws,
                  as amended and restated 24.1
              
              Specimen
                  of Common Stock Certificate 34.2
              
              Indenture
                  of Subordinated Debentures 44.3
              
              Indenture
                  by and between Wilshire Bancorp, Inc. and U.S. Bank National Association
                  dated as of December 17, 2003511
              
              Statement
                  Regarding Computation of Net Earnings per Share631.1
              
              Certification
                  of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
                  Act of 200231.2
              
              Certification
                  of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
                  Act of 200232
              
              Certifications
                  of Chief Executive Officer and Chief Financial Officer Pursuant
                  to 18
                  U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002




__________________________________




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


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


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


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


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


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






38


**SIGNATURES**




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




WILSHIRE
              BANCORP, INC.Date: November
              9, 2005
            By:
            /s/
              Brian E. ChoBrian
              E. ChoExecutive
                Vice President and Chief Financial Officer
              (Principal
                Financial and Accounting Officer)






39







**INDEX
                  TO EXHIBITS****Exhibit
                  Table**
  **Reference
                    Number**
                
                **Item**3.1
                
                Articles
                    of Incorporation, as amended and restated 13.2
                
                Bylaws,
                    as amended and restated 24.1
                
                Specimen
                    of Common Stock Certificate 34.2
                
                Indenture
                    of Subordinated Debentures 44.3
                
                Indenture
                    by and between Wilshire Bancorp, Inc. and U.S. Bank National
                    Association
                    dated as of December 17, 2003511
                
                Statement
                    Regarding Computation of Net Earnings per Share631.1
                
                Certification
                    of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
                    Act of 200231.2
                
                Certification
                    of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
                    Act of 200232
                
                Certifications
                    of Chief Executive Officer and Chief Financial Officer Pursuant
                    to 18
                    U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
                    Sarbanes-Oxley Act of 2002


__________________________________





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


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


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


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


5.
              Incorporated
                  herein by reference to Exhibit 4.3 in the Registration Statement
                  on Form
                  S-4 filed with the Securities and Exchange Commission on April
                  1,
                  2004.
 6.
              The
                  information required by this Exhibit is incorporated by reference
                  from
                  Note [3] of the Company’s Financial Statements included
                  herein





40