Table of Contents

 

 

 

**UNITED STATES**

**SECURITIES AND EXCHANGECOMMISSION**

**Washington, D.C. 20549**

 

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**FORM 10-Q**

** **

**(Mark One)**

 
| **x**      | **Quarterly  report pursuant to Section 13 or 15(d) of the Securities Exchange  Act of 1934** |
|------------|---------------------------------------------------------------------------------------------------------|
| ** ** | ** **                                                                                              |
| ** ** | **For the quarterly period ended****March 31****, 200****9****.**                                  |

 

**OR**

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

 

**Commission File Number 000-50923**

 

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**WILSHIREBANCORP, INC.**

(Exact name of registrant asspecified 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’stelephone number, including area code

 

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

 

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

 

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Indicateby check mark whether the registrant (1) has filed all reports required tobe filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days.  Yes x    No o

 

Indicateby check mark whether the registrant has submitted electronically and posted onits corporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 ofthis chapter) during the preceding 12 months (or for such shorter period thatthe registrant was required to submit and post such files).   Yes o    No o

 

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

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

 

Indicate by check mark whether the registrant is ashell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o   No   x

 

The number of shares of Common Stock of the registrantoutstanding as of April 30,2009 was 29,413,757.

 

 

** **

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**Tableof Contents**

** **

**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** | **12** |
| ** **                               | ** **                                                                                      | ** ** |
| **Item 3.**                              | **Quantitative  and Qualitative Disclosures about  Market Risk**                                | **34** |
| ** **                               | ** **                                                                                      | ** ** |
| **Item 4.**                              | **Controls  and Procedures**                                                                    | **36** |
| ** **                               | ** **                                                                                      | ** ** |
| **Part II. OTHER INFORMATION** | **38**                                                                                          |
| ** **                               | ** **                                                                                      | ** ** |
| **Item 1.**                              | **Legal  Proceedings**                                                                          | **38** |
| ** **                               | ** **                                                                                      | ** ** |
| **Item 1A.**                             | **Risk Factors**                                                                                | **38** |
| ** **                               | ** **                                                                                      | ** ** |
| **Item 2.**                              | **Unregistered  Sales of Equity Securities and Use of Proceeds**                                | **38** |
| ** **                               | ** **                                                                                      | ** ** |
| **Item 3.**                              | **Defaults  Upon Senior Securities**                                                            | **38** |
| ** **                               | ** **                                                                                      | ** ** |
| **Item 4.**                              | **Submission  of Matters to a Vote of Security Holders**                                        | **38** |
| ** **                               | ** **                                                                                      | ** ** |
| **Item 5.**                              | **Other  Information**                                                                          | **38** |
| ** **                               | ** **                                                                                      | ** ** |
| **SIGNATURES**                           | **40**                                                                                          |

 

i

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Table of Contents

 

**Part I.  FINANCIALINFORMATION**

 

**Item 1.                    Financial Statements**

 

**WILSHIRE BANCORP, INC.**

**CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (DOLLARS INTHOUSANDS) (UNAUDITED)**

 
| ** **                                                                                                                                                                                        | ** ** | **March 31, 2009** | ** ** | **December 31, 2008** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------|------------|---------------------------------|------------|
| **ASSETS**                                                                                                                                                                                        | ** ** | ** **                   | ** ** | ** **                      | ** ** |
| Cash and due  from banks                                                                                                                                                                          |       | $                            | 61,268     |                            | $          | 67,540 |   |
| Federal  funds sold and other cash equivalents                                                                                                                                                    |       | 85,001                       |       | 30,001                          |       |
| Cash and  cash equivalents                                                                                                                                                                        |       | 146,269                      |       | 97,541                          |       |
|                                                                                                                                                                                              |       |                         |       |                            |       |
| Investment  securities available for sale, at fair value (amortized cost of $315,541 and  $227,430 at March 31, 2009 and December 31, 2008, respectively)                               |       | 320,055                      |       | 229,136                         |       |
| Investment  securities held to maturity, at amortized cost (fair value of $133 and $135  at March 31, 2009 and December 31, 2008, respectively)                                         |       | 133                          |       | 139                             |       |
| Loans  receivable, net of allowance for loan losses of $34,156 and $29,437 at  March 31, 2009 and December 31, 2008, respectively)                                                      |       | 2,019,667                    |       | 2,003,665                       |       |
| Loans held  for sale—at the lower of cost or market                                                                                                                                          |       | 20,178                       |       | 18,427                          |       |
| Federal Home  Loan Bank stock, at cost                                                                                                                                                            |       | 17,537                       |       | 17,537                          |       |
| Other real  estate owned                                                                                                                                                                          |       | 6,282                        |       | 2,663                           |       |
| Due from  customers on acceptances                                                                                                                                                                |       | 312                          |       | 2,213                           |       |
| Cash  surrender value of bank owned life insurance                                                                                                                                                |       | 17,559                       |       | 17,395                          |       |
| Investment  in affordable housing partnerships                                                                                                                                                    |       | 11,214                       |       | 9,019                           |       |
| Bank  premises and equipment                                                                                                                                                                      |       | 11,475                       |       | 11,265                          |       |
| Accrued  interest receivable                                                                                                                                                                      |       | 10,122                       |       | 9,975                           |       |
| Deferred  income taxes                                                                                                                                                                            |       | 11,815                       |       | 12,051                          |       |
| Servicing  assets                                                                                                                                                                                 |       | 4,790                        |       | 4,838                           |       |
| Goodwill                                                                                                                                                                                          |       | 6,675                        |       | 6,675                           |       |
| Other assets                                                                                                                                                                                      |       | 7,199                        |       | 7,472                           |       |
| TOTAL                                                                                                                                                                                             |       | $                            | 2,611,282  |                            | $          | 2,450,011 |   |
|                                                                                                                                                                                              |       |                         |       |                            |       |
| **LIABILITIES  AND SHAREHOLDERS’ EQUITY**                                                                                                                                                    |       |                         |       |                            |       |
| LIABILITIES:                                                                                                                                                                                      |       |                         |       |                            |       |
| Deposits:                                                                                                                                                                                         |       |                         |       |                            |       |
| Noninterest  bearing                                                                                                                                                                              |       | $                            | 298,044    |                            | $          | 277,542 |   |
| Interest  bearing:                                                                                                                                                                                |       |                         |       |                            |       |
| Savings                                                                                                                                                                                           |       | 44,118                       |       | 44,452                          |       |
| Money market  checking and NOW accounts                                                                                                                                                           |       | 396,461                      |       | 384,190                         |       |
| Time  deposits of $100,000 or more                                                                                                                                                                |       | 969,001                      |       | 902,804                         |       |
| Other time  deposits                                                                                                                                                                              |       | 197,823                      |       | 203,613                         |       |
| Total  deposits                                                                                                                                                                                   |       | 1,905,447                    |       | 1,812,601                       |       |
|                                                                                                                                                                                              |       |                         |       |                            |       |
| Federal Home  Loan Bank advances and other borrowings                                                                                                                                             |       | 340,000                      |       | 274,000                         |       |
| Junior  subordinated debentures                                                                                                                                                                   |       | 87,321                       |       | 87,321                          |       |
| Accrued  interest payable                                                                                                                                                                         |       | 7,330                        |       | 6,957                           |       |
| Acceptances  outstanding                                                                                                                                                                          |       | 312                          |       | 2,213                           |       |
| Other  liabilities                                                                                                                                                                                |       | 13,166                       |       | 11,859                          |       |
| Total  liabilities                                                                                                                                                                                |       | 2,353,576                    |       | 2,194,951                       |       |
|                                                                                                                                                                                              |       |                         |       |                            |       |
| SHAREHOLDERS’  EQUITY:                                                                                                                                                                       |       |                         |       |                            |       |
| Preferred  stock, $1,000 par value—authorized, 5,000,000 shares; issued and outstanding,  62,158 shares and 62,158 shares at March 31, 2009 and December 31,  2008, respectively   |       | 59,562                       |       | 59,443                          |       |
| Common  stock, no par value—authorized, 80,000,000 shares; issued and outstanding,  29,413,757 shares and 29,413,757 shares at March 31, 2009 and  December 31, 2008, respectively |       | 54,238                       |       | 54,038                          |       |
| Accumulated  other comprehensive income, net of tax                                                                                                                                               |       | 2,898                        |       | 1,239                           |       |
| Retained  earnings                                                                                                                                                                                |       | 141,008                      |       | 140,340                         |       |
| Total  shareholders’ equity                                                                                                                                                                  |       | 257,706                      |       | 255,060                         |       |
|                                                                                                                                                                                              |       |                         |       |                            |       |
| TOTAL                                                                                                                                                                                             |       | $                            | 2,611,282  |                            | $          | 2,450,011 |   |

 

See accompanying notes to consolidatedfinancial statements.

 

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**WILSHIRE BANCORP, INC.**

**CONSOLIDATED STATEMENTS OF OPERATIONS**

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

 
| ** **                                                                       | ** ** | **Three Months Ended March 31,** | ** ** |
|----------------------------------------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                                                                       | ** ** | **2009**                                             | ** ** | **2008** | ** ** |
| ** **                                                                       | ** ** | ** **                                           | ** ** | ** ** | ** ** |
| INTEREST INCOME:                                                                 |       |                                                 |       |   |   |
| Interest and fees on loans                                                       |       | $                                                    | 30,193     |   | $ | 35,318 |   |
| Interest on investment securities                                                |       | 2,942                                                |       | 2,584 |   |
| Interest on federal funds sold                                                   |       | 289                                                  |       | 80 |   |
| Total interest income                                                            |       | 33,424                                               |       | 37,982 |   |
|                                                                             |       |                                                 |       |   |   |
| INTEREST EXPENSE:                                                                |       |                                                 |       |   |   |
| Interest on deposits                                                             |       | 11,181                                               |       | 14,738 |   |
| Interest on FHLB advances and other  borrowings                                  |       | 1,658                                                |       | 2,043 |   |
| Interest on junior subordinated debentures                                       |       | 921                                                  |       | 1,457 |   |
| Total interest expense                                                           |       | 13,760                                               |       | 18,238 |   |
|                                                                             |       |                                                 |       |   |   |
| NET INTEREST INCOME BEFORE PROVISION FOR LOSSES  ON LOANS AND LOAN COMMITMENTS   |       | 19,664                                               |       | 19,744 |   |
|                                                                             |       |                                                 |       |   |   |
| PROVISION FOR LOSSES ON LOANS AND LOAN  COMMITMENTS                              |       | 6,700                                                |       | 1,400 |   |
|                                                                             |       |                                                 |       |   |   |
| NET INTEREST INCOME AFTER PROVISION FOR LOSSES  ON LOANS AND LOAN COMMITMENTS    |       | 12,964                                               |       | 18,344 |   |
|                                                                             |       |                                                 |       |   |   |
| NON-INTEREST INCOME:                                                             |       |                                                 |       |   |   |
| Service charges on deposit accounts                                              |       | 2,899                                                |       | 2,748 |   |
| (Loss) Gain on sale of loans                                                     |       | (831                                                 | )          | 864 |   |
| Loan-related servicing fees                                                      |       | 964                                                  |       | 675 |   |
| Other income                                                                     |       | 705                                                  |       | 867 |   |
| Total noninterest income                                                         |       | 3,737                                                |       | 5,154 |   |
|                                                                             |       |                                                 |       |   |   |
| NON-INTEREST EXPENSES:                                                           |       |                                                 |       |   |   |
| Salaries and employee benefits                                                   |       | 6,207                                                |       | 6,976 |   |
| Occupancy and equipment                                                          |       | 1,676                                                |       | 1,425 |   |
| Data processing                                                                  |       | 827                                                  |       | 764 |   |
| Professional fees                                                                |       | 342                                                  |       | 500 |   |
| Other operating                                                                  |       | 2,935                                                |       | 2,559 |   |
| Total noninterest expenses                                                       |       | 11,987                                               |       | 12,224 |   |
|                                                                             |       |                                                 |       |   |   |
| INCOME BEFORE INCOME TAXES                                                       |       | 4,714                                                |       | 11,274 |   |
| INCOME TAXES                                                                     |       | 1,655                                                |       | 4,224 |   |
| NET INCOME                                                                       |       | $                                                    | 3,059      |   | $ | 7,050 |   |
|                                                                             |       |                                                 |       |   |   |
| Preferred stock cash dividend accrued and  accretion of preferred stock discount |       | 920                                                  |       | — |   |
|                                                                             |       |                                                 |       |   |   |
| NET INCOME AVAILABLE TO COMMON SHAREHOLDERS                                      |       | $                                                    | 2,139      |   | $ | 7,050 |   |
|                                                                             |       |                                                 |       |   |   |
| PER COMMON SHARE INFORMATION                                                     |       |                                                 |       |   |   |
| Basic                                                                            |       | $                                                    | 0.07       |   | $ | 0.24 |   |
| Diluted                                                                          |       | $                                                    | 0.07       |   | $ | 0.24 |   |
| WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING:                                      |       |                                                 |       |   |   |
| Basic                                                                            |       | 29,413,757                                           |       | 29,276,871 |   |
| Diluted                                                                          |       | 29,422,290                                           |       | 29,341,080 |   |

 

See accompanying notes to consolidatedfinancial statements.

 

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**WILSHIRE BANCORP, INC.**

**CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY**

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

 
| ** **                                                                | ** ** | **Preferred Stock** | ** ** | **Common Stock** | ** ** | **Accumulated** | ** ** |
|---------------------------------------------------------------------------|------------|--------------------------|------------|-----------------------|------------|-----------------|------------|
| ** **                                                                | ** ** | ** **               | ** ** | ** **            | ** ** | ** **      | ** ** | ** ** | ** ** | **Other** | ** ** | ** ** | ** ** | **Total** | ** ** |
| ** **                                                                | ** ** | **Shares**               | ** ** | ** **            | ** ** | **Shares**      | ** ** | ** ** | ** ** | **Comprehensive** | ** ** | **Retained** | ** ** | **Shareholders’** | ** ** |
| ** **                                                                | ** ** | **Outstanding**          | ** ** | **Amount**            | ** ** | **Outstanding** | ** ** | **Amount** | ** ** | **Income** | ** ** | **Earnings** | ** ** | **Equity** | ** ** |
|                                                                      |       |                     |       |                  |       |            |       |   |   |   |   |   |   |   |   |
| BALANCE-January 1, 2008                                                   |       | —                   |       | $                     | —     |            | 29,253,311 |   | $ | 49,633 |   | $ | 375 |   | $ | 121,778 |   | $ | 171,786 |   |
| Stock options exercised                                                   |       |                     |       |                  |       | 137,866         |       | 391 |   |   |   |   |   | 391 |   |
| Cash dividend declared or accrued                                         |       |                     |       |                  |       |            |       |   |   |   |   |   |   |   |   |
| Common stock                                                              |       |                     |       |                  |       |            |       |   |   |   |   | (1,469 | ) | (1,469 | ) |
| Stock compensation expense                                                |       |                     |       |                  |       |            |       | 56 |   |   |   |   |   | 56 |   |
| Tax benefit from stock options exercised                                  |       |                     |       |                  |       |            |       | 57 |   |   |   |   |   | 57 |   |
| Cumulative impact of change in accounting for  bank owned life insurance  |       |                     |       |                  |       |            |       |   |   |   |   | (1,876 | ) | (1,876 | ) |
| Comprehensive income:                                                     |       |                     |       |                  |       |            |       |   |   |   |   |   |   |   |   |
| Net income                                                                |       |                     |       |                  |       |            |       |   |   |   |   | 7,050 |   | 7,050 |   |
| Other comprehensive income:                                               |       |                     |       |                  |       |            |       |   |   |   |   |   |   |   |   |
| Change in unrealized gain on interest-only  strips, net of taxes          |       |                     |       |                  |       |            |       |   |   | 14 |   |   |   | 14 |   |
| Change in unrealized gain on securities  available for sale, net of taxes |       |                     |       |                  |       |            |       |   |   | 1,527 |   |   |   | 1,527 |   |
| Comprehensive income                                                      |       |                     |       |                  |       |            |       |   |   |   |   |   |   |   | 8,591 |   |
| BALANCE-March 31, 2008                                                    |       | —                   |       | $                     | —     |            | 29,391,177 |   | $ | 50,137 |   | $ | 1,916 |   | $ | 125,483 |   | $ | 177,536 |   |
|                                                                      |       |                     |       |                  |       |            |       |   |   |   |   |   |   |   |   |
| BALANCE-January 1, 2009                                                   |       | 62,158                   |       | $                     | 59,443     |            | 29,413,757 |   | $ | 54,038 |   | $ | 1,239 |   | $ | 140,340 |   | $ | 255,060 |   |
| Cash dividend declared or accrued                                         |       |                     |       |                  |       |            |       |   |   |   |   | ** ** |   |   |   |
| Common stock                                                              |       |                     |       |                  |       |            |       |   |   |   |   | (1,471 | ) | (1,471 | ) |
| Preferred stock                                                           |       |                     |       |                  |       |            |       |   |   |   |   | (777 | ) | (777 | ) |
| Stock compensation expense                                                |       |                     |       |                  |       |            |       | 200 |   |   |   |   |   | 200 |   |
| Accretion of preferred stock discount                                     |       |                     |       | 119                   |       |            |       |   |   |   |   | (143 | ) | (24 | ) |
| Comprehensive income:                                                     |       |                     |       |                  |       |            |       |   |   |   |   |   |   |   |   |
| Net income                                                                |       |                     |       |                  |       |            |       |   |   |   |   | 3,059 |   | 3,059 |   |
| Other comprehensive income:                                               |       |                     |       |                  |       |            |       |   |   |   |   |   |   |   |   |
| Change in unrealized gain on interest-only  strips, net of taxes          |       |                     |       |                  |       |            |       |   |   | 31 |   |   |   | 31 |   |
| Change in unrealized gain on securities  available for sale, net of taxes |       |                     |       |                  |       |            |       |   |   | 1,628 |   |   |   | 1,628 |   |
| Comprehensive income                                                      |       |                     |       |                  |       |            |       |   |   |   |   |   |   | 4,718 |   |
| BALANCE-March 31, 2009                                                    |       | 62,158                   |       | $                     | 59,562     |            | 29,413,757 |   | $ | 54,238 |   | $ | 2,898 |   | $ | 141,008 |   | $ | 257,706 |   |

 

See accompanying notes to consolidatedfinancial statements.

 

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**WILSHIRE BANCORP, INC.**

**CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)**

**(DOLLARS IN THOUSANDS)**

 
| ** **                                                                         | ** ** | **Three Months Ended March 31,** | ** ** |
|------------------------------------------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                                                                         | ** ** | **2009**                                             | ** ** | **2008** | ** ** |
| CASH FLOWS  FROM OPERATING ACTIVITIES:                                             |       |                                                 |       |   |   |
| Net income                                                                         |       | $                                                    | 3,059      |   | $ | 7,050 |   |
| Adjustments to reconcile net income to net  cash provided by operating activities: |       |                                                 |       |   |   |
| Amortization of investment securities                                              |       | 823                                                  |       | 271 |   |
| Depreciation of bank premises &  equipment                                |       | 487                                                  |       | 441 |   |
| Amortization of investments in affordable  housing partnerships                    |       | 288                                                  |       | 174 |   |
| Provision for losses on loans and loan  commitments                                |       | 6,700                                                |       | 1,400 |   |
| Provision for other real estate owned  losses                                      |       | 204                                                  |       | — |   |
| Deferred tax (benefit) expense                                                     |       | (966                                                 | )          | 929 |   |
| Loss on disposition of bank premises and  equipment                                |       | 11                                                   |       | 1 |   |
| Loss (gain) on sale of loans                                                       |       | 831                                                  |       | (864 | ) |
| Origination of loans held for sale                                                 |       | (3,422                                               | )          | (23,083 | ) |
| Proceeds from sale of loans held for sale                                          |       | 1,671                                                |       | 21,547 |   |
| Gain on sale or call of available for sale  investment securities                  |       | (13                                                  | )          | (3 | ) |
| Decrease in fair value of serving rights                                           |       | 49                                                   |       | 332 |   |
| Loss on sale of other real estate owned                                            |       | 247                                                  |       | — |   |
| Share-based compensation expense                                                   |       | 200                                                  |       | 56 |   |
| Change in cash surrender value of life  insurance                                  |       | (165                                                 | )          | (139 | ) |
| Servicing assets capitalized                                                       |       | —                                               |       | (304 | ) |
| (Increase) decrease in accrued interest  receivable                                |       | (147                                                 | )          | 230 |   |
| Decrease in other assets                                                           |       | 14                                                   |       | 1,612 |   |
| Dividends of Federal Home Loan Bank stock                                          |       | —                                               |       | (118 | ) |
| Tax benefit from exercise of stock options                                         |       | —                                               |       | (57 | ) |
| Increase (decrease) in accrued interest  payable                                   |       | 374                                                  |       | (102 | ) |
| Increase in other liabilities                                                      |       | 1,382                                                |       | 2,887 |   |
| Net cash provided by operating activities                                          |       | 11,627                                               |       | 12,260 |   |
| ** **                                                                         | ** ** | ** **                                           | ** ** | ** ** | ** ** |
| CASH FLOWS  FROM INVESTING ACTIVITIES:                                             |       |                                                 |       |   |   |
| Proceeds from principal repayment, matured  or called securities held to maturity  |       | 5                                                    |       | 7,007 |   |
| Purchase of investment securities available  for sale                              |       | (130,591                                             | )          | (46,165 | ) |
| Proceeds from sale, principal repayment,  matured or                               |       |                                                 |       |   |   |
| called investment securities available for  sale                                   |       | 41,671                                               |       | 54,281 |   |
| Net increase in loans receivable                                                   |       | (30,030                                              | )          | (73,068 | ) |
| Proceeds from sale of other loans                                                  |       | 1,168                                                |       | — |   |
| Proceeds from sale of other real estate  owned                                     |       | 949                                                  |       | — |   |
| Purchases of investments in affordable  housing partnerships                       |       | (2,484                                               | )          | (470 | ) |
| Purchases of Bank premises and equipment                                           |       | (418                                                 | )          | (160 | ) |
| Purchases of Federal Home Loan Bank stock                                          |       | —                                               |       | (2,467 | ) |
| Proceeds from disposition of Bank equipment                                        |       | —                                               |       | 1 |   |
| Net cash used in investing activities                                              |       | (119,730                                             | )          | (61,041 | ) |
|                                                                                    |            |                                                      |            |  |  |  |  |

 

See accompanying notes toconsolidated financial statements.

 
|   |   |   |   | (Continued) |   |
|--------|--------|--------|--------|-------------|--------|

 

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**WILSHIRE BANCORP, INC.**

**CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)**

**(DOLLARS IN THOUSANDS)**

 
| ** **                                               | ** ** | **Three Months Ended March 31,** | ** ** |
|----------------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                                               | ** ** | **2009**                                             | ** ** | **2008** | ** ** |
| CASH FLOWS  FROM FINANCING ACTIVITIES:                   |       |                                                 |       |   |   |
| Proceeds from exercise of stock options                  |       | $                                                    | —     |   | $ | 391 |   |
| Payment of cash dividend on common stock                 |       | (1,471                                               | )          | (1,463 | ) |
| Payment of cash dividend on preferred stock              |       | (544                                                 | )          | — |   |
| Increase in Federal Home Loan Bank advances              |       | 66,000                                               |       | 90,000 |   |
| Tax benefit from exercise of stock options               |       | —                                               |       | 57 |   |
| Net increase (decrease) in deposits                      |       | 92,846                                               |       | (35,484 | ) |
| Net cash provided by financing activities                |       | 156,831                                              |       | 53,501 |   |
|                                                     |       |                                                 |       |   |   |
| NET INCREASE  IN CASH AND CASH EQUIVALENTS               |       | 48,728                                               |       | 4,720 |   |
|                                                     |       |                                                 |       |   |   |
| CASH AND  CASH EQUIVALENTS—Beginning of period      |       | 97,541                                               |       | 92,509 |   |
| CASH AND  CASH EQUIVALENTS—End of period            |       | $                                                    | 146,269    |   | $ | 97,229 |   |
|                                                     |       |                                                 |       |   |   |
| SUPPLEMENTAL  DISCLOSURES OF CASH FLOW INFORMATION:      |       |                                                 |       |   |   |
| Interest paid                                            |       | $                                                    | 13,387     |   | $ | 18,339 |   |
| Income taxes paid                                        |       | $                                                    | 149        |   | $ | 37 |   |
|                                                     |       |                                                 |       |   |   |
| SUPPLEMENTAL  SCHEDULE OF NONCASH INVESTING ACTIVITIES:  |       |                                                 |       |   |   |
| Transfer of loans to other real estate  owned            |       | $                                                    | 5,019      |   | $ | — |   |
| Other assets transferred to Bank premises  and equipment |       | $                                                    | 290        |   | $ | 150 |   |
|                                                     |       |                                                 |       |   |   |
| SUPPLEMENTAL  SCHEDULE OF NONCASH FINANCING ACTIVITIES:  |       |                                                 |       |   |   |
| Common stock cash dividend declared, but  not paid       |       | $                                                    | 1,471      |   | $ | 1,469 |   |
| Preferred stock cash dividend declared, but  not paid    |       | $                                                    | 388        |   | $ | — |   |

 

See accompanying notes toconsolidated financial statements.

 
|   |   |   |   | (Concluded) |   |
|--------|--------|--------|--------|-------------|--------|

 

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**WILSHIRE BANCORP, INC.**

** **

**Notes to ConsolidatedFinancial Statements**

** **

**Note 1.   Businessof Wilshire Bancorp, Inc.**

** **

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

 

Our corporate headquarters and primary bankingfacilities are located at 3200 Wilshire Boulevard, Los Angeles, California90010.  In addition, we have 21 full-serviceBank branch offices in Southern California, Texas, New York and NewJersey.  We also have 5 loanproduction offices utilized primarily for the origination of loans under ourSmall Business Administration (“SBA”) lending program in Colorado, Georgia,Texas, and Virginia.

 

**Note 2.   Basisof Presentation**

** **

Theconsolidated financial statements have been prepared in accordance with theSecurities and Exchange Commission (“SEC”) rules and regulations forinterim financial reporting and therefore do not necessarily include allinformation and footnote disclosures normally included in annual financialstatements prepared in accordance with accounting principles generally acceptedin the United States of America (“GAAP”).  The informationprovided by these interim financial statements reflects all adjustments whichare, in the opinion of management, necessary for a fair presentation of theCompany’s consolidated statements of financialcondition as of March 31, 2009and December 31, 2008, therelated statements of operations and shareholders’ equity for the three monthsended March 31, 2009 and 2008, and the statements of cash flows for threemonths ended March 31, 2009 and 2008. Operating results for interim periodsare not necessarily indicative of operating results for an entire fiscal year.

 

Theunaudited financial statements should be read in conjunction with the auditedfinancial statements and notes thereto included in the Company’s Annual Reporton Form 10-K for the year ended December 31, 2008. The accounting policies used in the preparation of these interimfinancial statements were consistent with those used in the preparation of thefinancial statements for the year ended December 31, 2008.

 

**Note 3.   FairValue Measurement for Financial and Non-Financial Assets and Liabilities**

** **

We record at fair value various financial andnon-financial instruments for financial reporting, and loan or goodwillimpairment purposes. Pursuant to Statement of Financial Accounting Standard(“SFAS”) No. 157, *Fair Value Measurements*, and Financial Accounting StandardsBoard (“FASB”) Statement of Positions (“FSP”)  SFAS No.157-3, *Determiningthe Fair Value of a Financial Asset When the Market for That Asset Is NotActive,*FASB provides a definition of fair value, establishes a framework formeasuring fair value, and requires expanded disclosures about fair valuemeasurements. The standard applies when GAAP requires or allows assets or liabilities tobe measured at fair value, and therefore, does not expand the use of fair valuein any new circumstance, and SFAS No. 157 amends,  but does not supersede SFAS No. 107, *Disclosure about Fair Value of Financial Instruments.* SFAS No. 157defines fair value as the price that would be received to sell an asset or paidto transfer a liability in an arm’s length transaction between marketparticipants in the markets where we conduct business. SFAS No. 157clarifies that fair value should be based on the assumptions marketparticipants would use when pricing an asset or liability and establishes afair value hierarchy that prioritizes the information used to develop thoseassumptions. The fair value hierarchy gives the highest priority to quotedprices available in active markets and the lowest priority to data lackingtransparency. FSP SFAS No. 157-3 further clarifies the application of SFASNo. 157 in a market that is not active and provides an example toillustrate key considerations in determining the fair value of afinancial asset when the market for the financial asset is not active.

 

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In February 2008,the FASB issued FSP SFAS No.157-2, which delays the effective date of SFAS No. 157,for nonfinancial assets and nonfinancial liabilities, except for items that arerecognized or disclosed at fair value in the financial statements on arecurring basis. The delay is intended to allow the FASB and constituentsadditional time to consider the effect of various implementation issues thathave arisen, or that may arise, from the application of SFAS No. 157. ThisFSP applies to various nonfinancial assets and liabilities, including goodwilland nonfinancial long-lived assets, and it defers the effective date of SFAS No. 157to such nonfinancial assets and liabilities to fiscal years beginning after November 15,2008, and interim periods within those fiscal years for items within the scopeof this FSP. We adopted FSP SFAS No. 157-2 on January 1, 2009, andthe adoption of this FSP did not have a material impact on our consolidatedfinancial statements.

 

Thefair value inputs of the instruments are classified and disclosed in one of thefollowing categories pursuant to SFAS No. 157:

 

Level 1 – Unadjustedquoted prices in active markets for identical assets or liabilities thatthe reporting entity has the ability to access at the measurement date. Thequoted price shall not be adjusted for the position size.

 

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

 

Level 3 – Pricing inputsare unobservable inputs for the asset or liability. Unobservable inputsshall be used to measure fair value to the extent that observable inputs arenot available, thereby allowing for situations in which there is little, ifany, market activity for the asset or liability at the measurement date. Theinputs into the determination of fair value require significant managementjudgment or estimation.

 

In certain cases, the inputs used to measurefair value may fall into different levels of the fair value hierarchy. In suchcases, an investment’s level within the fair value hierarchy is based on thelowest level of input that is significant to the fair value measurement. Ourassessment of the significance of a particular input to the fair valuemeasurement in its entirety requires judgment and considers factors specific tothe investment.

 

We used the following methods and assumptions in estimating our fair valuedisclosure for financial instruments. Financial assets and liabilities recordedat fair value on a recurring basis are listed as follows:

 

Investment securities available for sale — Investment in available-for-salesecurities are recorded at fair value pursuant to SFAS No. 115, *Accounting for Certain Investments in Debt and Equity Securities*.Fair value measurement is based upon quoted prices for similar assets, ifavailable. If quoted prices are not available, fair values are measured usingmatrix pricing models, or other model-based valuation techniques requiringobservable inputs other than quoted prices such as yield curves, prepaymentspeeds, and default rates. The investment securities available for sale includefederal agency securities, mortgage-backed securities, collateralized mortgageobligations, municipal bonds and corporate debt securities. Our existinginvestment securities available-for-sale holdings as of March 31, 2009 aremeasured using matrix pricing models in lieu of direct price quotes andrecorded based on Level 2 measurement inputs.

 

Servicing assetsand interest-only (“I/O”) strips — Small BusinessAdministration (“SBA”) loan servicing assets and interest-only strips representthe value associated with servicing SBA loans sold. The value is determinedthrough a discounted cash flow analysis which uses interest rates, prepaymentspeeds and delinquency rate assumptions as inputs. All of these assumptionsrequire a significant degree of management judgment. Adjustments are only madewhen the discounted cash flows are less than the carrying value. We classifySBA loan servicing assets and I/O strips as recurring with Level 3 measurementinputs.

 

Impaired loans— A loan is considered to be impaired when it is probable that all of theprincipal and interest due under the original underwriting terms of the loanmay not be collected. Impairment is measured based on the fair value of the underlyingcollateral. The fair value is determined through appraisals and other matrixpricing models, which require a significant degree of management judgment. Wemeasure impairment on all nonaccrual loans and trouble debt restructured loans,except automobile loans, for which we have established specific reserves aspart of the specific allocated allowance component of the allowance for losseson loans. We record impaired loans as recurring with Level 3 measurementinputs.

 

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Servicingliabilities —SBA loan servicing liabilities represent thevalue associated with servicing SBA loans sold. The value is determined througha discounted cash flow analysis which uses interest rates, prepayment speedsand delinquency rate assumptions as inputs. All of these assumptions require asignificant degree of management judgment. Adjustments are only made when thediscounted cash flows are less than the carrying value. We classify SBA loanservicing liabilities as recurring with Level 3 measurement inputs.

 

The table below summarizes the valuation of ourfinancial assets and liabilities by the above SFAS No. 157 fair valuehierarchy levels as of March 31, 2009:

 

**Assets Measured at FairValue**

**(dollars in thousands**)

 
| ** **                               | ** ** | **As of March 31, 2009** | ** ** |
|------------------------------------------|------------|----------------------------------------------|------------|
| ** **                               | ** ** | ** **                                   | ** ** | **Fair Value Measurements Using:** | ** ** |
| ** **                               | ** ** | **Total Fair  Value**                   | ** ** | **Quoted Prices in   Active Markets   (Level 1)** | ** ** | **Significant Other   Observable Inputs   (Level 2)** | ** ** | **Significant   Unobservable Inputs   (Level 3)** | ** ** |
| Investment securities available for sale |       | $                                            | 320,055    |   | $ | — |   | $ | 320,055 |   | $ | — |   |
|                                     |       |                                         |       |   |   |   |   |   |   |
| Servicing assets                         |       | 4,790                                        |       | — |   | — |   | 4,790 |   |
|                                     |       |                                         |       |   |   |   |   |   |   |
| I/O strips                               |       | 661                                          |       | — |   | — |   | 661 |   |
|                                     |       |                                         |       |   |   |   |   |   |   |
| Impaired loans                           |       | 56,170                                       |       | — |   | — |   | 56,170 |   |
|                                     |       |                                         |       |   |   |   |   |   |   |
| Servicing liabilities                    |       | (333                                         | )          | — |   | — |   | (333 | ) |
|                                          |            |                                              |            |  |  |  |  |  |  |  |  |  |  |

 

Financial instrumentsmeasured at fair value on a recurring basis, which were part of the assetbalances that were deemed to have Level 3 fair value inputs when determiningvaluation, are identified in the table below by asset category with a summaryof changes in fair value for the three months ended March 31, 2009:

 
| **(dollars in thousands)** | ** ** | **At December  31, 2008** | ** ** | **Realized  Losses in   Net Income** | ** ** | **Unrealized   Gains in Other  Comprehensive  Income** | ** ** | **Net   Purchases   Sales and   Settlements** | ** ** | **Transfers   In/out of  Level 3** | ** ** | **At March   31, 2009** | ** ** | **Net   Cumulative  Unrealized  Gains** | ** ** |
|--------------------------------------|------------|-------------------------------------|------------|-----------------------------------------------------|------------|-----------------------------------------------------------------------|------------|-------------------------------------------------------------------|------------|---------------------------------------------------|------------|----------------------------------------|------------|----------------------------------------------|------------|
| Servicing assets                     |       | $                                   | 4,838      |                                                | $          | (48                                                                   | )          | $                                                                 | —     |                                              | $          | —                                 |       | $                                            | —     |   | $ | 4,790 |   | $ | — |   |
|                                 |       |                                |       |                                                |       |                                                                  |       |                                                              |       |                                              |       |                                   |       |                                         |       |
| I/O strips                           |       | 632                                 |       | (25                                                 | )          | 54                                                                    |       | —                                                            |       | —                                            |       | 661                                    |       | (280                                         | )          |
|                                 |       |                                |       |                                                |       |                                                                  |       |                                                              |       |                                              |       |                                   |       |                                         |       |
| Impaired loans                       |       | 27,955                              |       | (4,849                                              | )          | —                                                                |       | 33,064                                                            |       | —                                            |       | 56,170                                 |       | —                                       |       |
|                                 |       |                                |       |                                                |       |                                                                  |       |                                                              |       |                                              |       |                                   |       |                                         |       |
| Servicing liabilities                |       | (328                                | )          | (5                                                  | )          | —                                                                |       | —                                                            |       | —                                            |       | (333                                   | )          | —                                       |       |
|                                      |            |                                     |            |                                                     |            |                                                                       |            |                                                                   |            |                                                   |            |                                        |            |                                              |            |  |  |  |  |  |  |  |

 

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**Note 4.   Shareholder’sEquity**

** **

***Earnings per Share***

** **

Basicearnings per share (“EPS”) excludes dilution and is computed by dividing income available to common shareholdersby the weighted-average number of common shares outstanding for theperiod.  Diluted EPS reflects thepotential dilution that could occur if securities or other contracts to issuecommon stock were exercised or converted into common stock or resulted in theissuance of common stock that would then share in the earnings of the entity. The following tableprovides the basic and diluted EPS computations for the periods indicatedbelow:

 
| ** **                                                                      | ** ** | **For the Quarter Ended**** ****March 31,**              | ** ** |
|---------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------|------------|
| ** **                                                                      | ** ** | **(dollars in thousands, except   per share data)** | ** ** |
| **(dollars in thousands, except per share data)** | ** ** | **2009**                                                                          | ** ** | **2008** | ** ** |
| Numerator:                                                                      |       |                                                                              |       |   |   |
| Net income available to common stockholders                                     |       | $                                                                                 | 2,139      |   | $ | 7,050 |   |
| Denominator:                                                                    |       |                                                                              |       |   |   |
| Denominator for basic earnings per share:                                       |       |                                                                              |       |   |   |
| Weighted-average shares                                                         |       | 29,413,757                                                                        |       | 29,276,871 |   |
| Effect of dilutive stock option                                                 |       | 8,533                                                                             |       | 64,209 |   |
| Denominator for diluted earnings  per share:                                    |       |                                                                              |       |   |   |
| Dilutive weighted-average shares  outstanding                                   |       | 29,422,290                                                                        |       | 29,341,080 |   |
| Basic earnings per share                                                        |       | $                                                                                 | 0.07       |   | $ | 0.24 |   |
| Diluted earnings per share                                                      |       | $                                                                                 | 0.07       |   | $ | 0.24 |   |

* *

**Note**5.   Business Segment Information

 

Thefollowing disclosure about segments of the Company is made in accordance withthe requirements of SFAS No. 131, *Disclosuresabout Segments of an Enterprise and Related Information*.  The Company segregates its operations intothree primary segments:  bankingoperations, Small Business Administration (“SBA”) lending services and tradefinance services (“TFS”).  The Companydetermines the operating results of each segment based on an internal managementsystem that allocates certain expenses to each segment.

 

*BankingOperations -*The Company raises funds from deposits andborrowings for loans and investments, and provides lending products, includingcommercial, consumer and real estate loans to its customers.

 

*SmallBusiness Administration Lending Services -* The SBA departmentmainly provides customers with access to the U.S. SBA guaranteed lendingprogram.

 

*TradeFinance Services -* The trade finance department allows theCompany’s import/export customers to handle their internationaltransactions.  Trade finance productsinclude, among others, the issuance and collection of letters of credit,international collection, and import/export financing.

 

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Thefollowing are the results of operations of the Company’s segments for theperiods indicated below:

 
| ** **                                    | ** ** | **Three Months Ended March 31, 200****9** | ** ** | **Three Months Ended March 31, 2008** | ** ** |
|-----------------------------------------------|------------|--------------------------------------------------------------------|------------|----------------------------------------------------------------|------------|
| **(dollars in thousands)**          | ** ** | **Banking **                                                  | ** ** | ** **                                                     | ** ** | ** ** | ** ** | ** ** | ** ** | **Banking ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Business Segment**                     | ** ** | **Operations**                                                     | ** ** | **SBA**                                                        | ** ** | **TFS** | ** ** | **Total** | ** ** | **Operations** | ** ** | **SBA** | ** ** | **TFS** | ** ** | **Total** | ** ** |
| Net interest  income                          |       | $                                                                  | 17,060     |                                                           | $          | 2,163 |   | $ | 441 |   | $ | 19,664 |   | $ | 15,901 |   | $ | 3,223 |   | $ | 620 |   | $ | 19,744 |   |
| Less provision  (recapture) for credit losses |       | 4,007                                                              |       | 1,864                                                          |       | 829 |   | 6,700 |   | (1,014 | ) | 1,992 |   | 422 |   | 1,400 |   |
| Non-interest  income                          |       | 2,774                                                              |       | 679                                                            |       | 284 |   | 3,737 |   | 3,528 |   | 1,351 |   | 275 |   | 5,154 |   |
| Net revenue                                   |       | 15,827                                                             |       | 978                                                            |       | (104 | ) | 16,701 |   | 20,443 |   | 2,582 |   | 473 |   | 23,498 |   |
| Non-interest  expenses                        |       | 11,278                                                             |       | 437                                                            |       | 272 |   | 11,987 |   | 10,896 |   | 1,068 |   | 260 |   | 12,224 |   |
| Incomebefore taxes                            |       | $                                                                  | 4,549      |                                                           | $          | 541 |   | $ | (376 | ) | $ | 4,714 |   | $ | 9,547 |   | $ | 1,514 |   | $ | 213 |   | $ | 11,274 |   |
| Business segment  assets                      |       | $                                                                  | 2,403,788  |                                                           | $          | 155,385 |   | $ | 52,109 |   | $ | 2,611,282 |   | $ | 2,063,297 |   | $ | 154,751 |   | $ | 42,387 |   | $ | 2,260,435 |   |

 

**Note 6.   Commitments and Contingencies**

 

We area party to financial instruments with off-balance sheet risk in the normalcourse of business to meet the financing needs of our customers.  These financial instruments includecommitments to extend credit, standby letters of credit, and commercial lettersof credit.  These instruments involve, tovarying degrees, elements of credit and interest rate risk in excess of theamount recognized in the consolidatedstatements of financial condition. Our exposure to credit loss in the event of nonperformance oncommitments to extend credit and standby letters of credit is represented bythe contractual notional amount of those instruments.  We use the same credit policies in makingcommitments and conditional obligations as we do for extending loan facilitiesto customers.  We evaluate eachcustomer’s creditworthiness on a case-by-case basis.  The amount of collateral obtained, if deemednecessary upon extension of credit, is based on our credit evaluation of thecounterparty.  Collateral held varies butmay include accounts receivable,inventory, property, plant, andequipment and income-producing properties. Commitments at March 31,2009 are summarized as follows:

 
| **(dollars in thousands)** | ** ** | ** ** | ** ** |
|--------------------------------------|------------|------------|------------|
| Commitments  to extend credit        |       | $          | 146,381    |   |
| Standby letters of credit            |       | 12,751     |       |
| Commercial letters of credit         |       | 7,827      |       |
|                                      |            |            |            |  |

 

In thenormal course of business, we are involved in various legal claims.  We have reviewed all legal claims against uswith counsel and have taken into consideration the views of such counsel as tothe outcome of the claims.  We do notbelieve the final disposition of all such claims will have a material adverseeffect on our financial position or results of operations.

 

**Note 7.   Recent Accounting Pronouncements**

 

In December 2008, the FASB issued FSP SFASNo.132R-1, *Employer’s Disclosures about Postretirement BenefitPlan Asset*, which amends SFAS No. 132R, *Employer’s Disclosures about Pensions and Other PostretirementBenefits*, to provide guidance on employers’ disclosures about planassets of a defined benefit pension or other postretirement plan. Theobjectives of the disclosures are to provide users of financial statements withan understanding of the plan investment policies and strategies regardinginvestment allocation, major categories of plan assets, use of fair valuationinputs and techniques, effect of fair value measurements using significantunobservable inputs (i.e., level 3 inputs), and significant concentrations ofrisk within plan assets. FSP SFAS No. 132R-1 is effective for financialstatements issued for fiscal years beginning after December 15, 2009, withearly adoption permitted. This FSP does not require comparative disclosures forearlier periods. We are in the process of evaluating the impact that theadoption of FSP SFAS No. 132R-1 will have on our consolidated financialstatements.

 

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In April 2009, the FASB issued FSP SFASNo.141R-1, *Accounting for Assets Acquired and LiabilitiesAssumed in a Business Combination That Arise from Contingencies*,which amends and clarifies FASB Statement No. 141 (revised 2007), *Business Combinations*, to addressapplication issues on initial recognition and measurement, subsequentmeasurement and accounting, and disclosure of assets and liabilities arisingfrom contingencies in a business combination. This FSP is effective for assetsor liabilities arising from contingencies in business combinations for whichthe acquisition date is on or after the beginning of the first annual reportingperiod beginning on or after December 15, 2008. The adoption of FSP SFAS No. 141R-1did not have a material impact on our consolidated financial statements.

 

In April 2009, the FASB issued FSP SFAS No.157-4,*Determining Fair Value When the Volume and Level ofActivity for the Asset or Liability Have Significantly Decreased and IdentifyingTransactions That Are Not Orderly*, to provide additional guidancefor estimating fair value in accordance with SFAS No. 157, *Fair Value Measurements*,  when the volume and level of activity for theasset or liability have significantly decreased. As some constituents indicatedthat SFAS No. 157 and FSP SFAS No. 157-3, *Determining the Fair Value of a Financial Asset When the Market forThat Asset Is Not Active*, do not provide sufficient guidance on howto determine whether a market for a financial asset that historically wasactive is no longer active and whether a transaction is not orderly. Therefore,this FSP includes guidance on identifying circumstances that indicate atransaction is not orderly. FSP SFAS No. 157-4 is effective for interimand annual reporting periods ending after June 15, 2009. If a reportingentity elects to adopt early either FSP SFAS No. 115-2 and SFAS No. 124-2or FSP SFAS No. 107-1 and Accounting Principles Board (“APB”) 28-1, thereporting entity also is required to adopt early this FSP. This FSP does notrequire disclosures for earlier periods presented for comparative purposes atinitial adoption. In periods after initial adoption, this FSP requirescomparative disclosures only for periods ending after initial adoption. We willadopt FSP SFAS No. 157-4 in the second quarter of 2009 and are in theprocess of evaluating the impact that the adoption will have on ourconsolidated financial statements.

 

In April 2009, the FASB issued FSP SFAS No.115-2and SFAS No. 124-2, *Recognition andPresentation of Other-Than-Temporary Impairments*, which amends theother-than-temporary impairment (“OTTI”) guidance in the U.S. GAAP for debtsecurities to make the guidance more operational and to improve thepresentation and disclosure of OTTI on debt and equity securities in thefinancial statements. This FSP does not amend existing recognition andmeasurement guidance related to OTTI of equity securities. This FSP alsorequires increased and more timely disclosures sought by investors regarding expectedcash flows, credit losses, and an aging of securities with unrealized losses.FSP SFAS No. 115-2 and SFAS No. 124-2 is effective for interim andannual reporting periods ending after June 15, 2009. If a reporting entityelects to adopt early either FSP SFAS No. 157-4 or FSP SFAS No. 107-1and APB 28-1, the reporting entity also is required to adopt early this FSP.This FSP does not require disclosures for earlier periods presented forcomparative purposes at initial adoption. In periods after initial adoption,this FSP requires comparative disclosures only for periods ending after initialadoption. We will adopt FSP SFAS No. 115-2 and SFAS No. 124-2 in thesecond quarter of 2009 and are in the process of evaluating the impact that theadoption will have on our consolidated financial statements.

 

In April 2009, the FASB issued FSP SFAS No. 107-1and APB 28-1, *Interim Disclosures about FairValue of Financial Instruments*, amends SFAS No. 107, *Disclosure about Fair Value of Financial Instruments*,to require disclosures about fair value of financial instruments for interimreporting periods of publicly traded companies as well as in annual financialstatements.  This FSP also amends APBOpinion No. 28, *Interim FinancialReporting*, to require those disclosures in summarized financialinformation at interim reporting periods. FSP SFAS No. 107-1 and APB 28-1is effective for interim and annual reporting periods ending after June 15,2009. If a reporting entity elects to adopt early either FSP SFAS No. 157-4or FSP SFAS No. 115-2 and SFAS No. 124-2, the reporting entity alsois required to adopt early this FSP. This FSP does not require disclosures forearlier periods presented for comparative purposes at initial adoption. Inperiods after initial adoption, this FSP requires comparative disclosures onlyfor periods ending after initial adoption. We will adopt FSP SFAS No. 107-1and APB 28-1 in the second quarter of 2009 and are in the process of evaluatingthe impact that the adoption will have on our consolidated financialstatements.

 

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

 

Thisdiscussionpresentsmanagement’sanalysisofourresultsofoperationsforthethreemonthsendedMarch31,2009and2008,financialconditionasofMarch31,2009andDecember31,2008,andincludesthestatisticaldisclosuresrequiredbytheSecuritiesandExchangeCommissionGuide3(“StatisticalDisclosurebyBankHoldingCompanies”).ThediscussionshouldbereadinconjunctionwithourfinancialstatementsandthenotesrelatedtheretowhichappearelsewhereinthisQuarterlyReportonForm10-Q.

 

Statementscontained in this report that are not purely historical are forward-lookingstatements within the meaning of Section 21E of the Securities ExchangeAct of 1934, as amended, including our expectations, intentions, beliefs, orstrategies regarding the future.  Anystatements in this document about expectations, beliefs, plans, objectives,assumptions or future events or performance are not historical facts and areforward-looking statements. These statements are often, but not always, made throughthe use of words or phrases such as “may,” “should,” “could,” “predict,”“potential,” “believe,” “expect,” “anticipate,” “seek,” “estimate,” “intend,”“plan,” “projection,” and “outlook,” and similar expressions.  Accordingly, these statements involveestimates, assumptions and uncertainties, which could cause actual results todiffer materially from those expressed in them. Any forward-looking statements are qualified in their entirety byreference to the factors discussed throughout this document.  All forward-looking statements concerningeconomic conditions, rates of growth, rates of income or values as may beincluded in this document are based on information available to us on the datesnoted, and we assume no obligation to update any such forward-lookingstatements.  It is important to note thatour actual results may differ materially from those in such forward-lookingstatements due to fluctuations in interest rates, inflation, governmentregulations, economic conditions, customer disintermediation and competitiveproduct and pricing pressures in the geographic and business areas in which weconduct operations, including our plans, objectives, expectations andintentions and other factors discussed under the section entitled “RiskFactors,” in our Annual Report on Form 10-K for the year ended December 31,2008, including thefollowing:

 

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

 

·                  Increases in ourallowance for loan losses could materially affect our earnings adversely.

 

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

 

·                  Liquidity riskcould impair our ability to fund operations, meet our obligations as theybecome due and jeopardize our financial condition.

 

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

 

·                  Wilshire Bancorp relies heavily on the payment of dividendsfrom the Bank.

 

·                  The holders ofrecently issued debentures and Series A Preferred Stock have rights thatare senior to those of our common shareholders.

 

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

 

·                  Recent negativedevelopments in the financial industry and U.S. and global credit markets mayaffect our operations and results.

 

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

 

·                  Our operationsmay require us to raise additional capital in the future, but that capital maynot be available or may not be on terms acceptable to us when it is needed.

 

·                  The short-termand long-term impact of the new Basel II capital standards and the forthcomingnew capital rules to be proposed for non-Basel II U.S. banks is uncertain.

 

·                  Maintaining orincreasing our market share depends on market acceptance and regulatoryapproval of new products and services.

 

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

 

·                  If we fail toretain our key employees, our growth and profitability could be adverselyaffected.

 

·                  We may be unableto manage future growth.

 

·                  Our expenseswill increase as a result of increases in FDIC insurance premiums.

 

·                  We could beliable for breaches of security in our online banking services.  Fear of security breaches could limit thegrowth of our online services.

 

·                  Our directorsand executive officers beneficially own a significant portion of ouroutstanding common stock.

 

·                  The market forour common stock is limited, and potentially subject to volatile changes inprice.

 

·                  We mayexperience goodwill impairment.

 

·                  We facesubstantial competition in our primary market area.

 

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

 

·                  We are subjectto significant government regulation and legislation that increase the cost ofdoing business and inhibits our ability to compete.

 

·                  As participantsin the United States Department of the Treasury’s Capital Purchase Program, weare subject to additional regulations and legislation that may not beapplicable to other financial institution competitors.

 

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

 

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

 

·                  Shares of ourpreferred stock previously issued and preferred stock issued in the futurecould have dilutive and other effects.

 

Thesefactors and the risk factors referred to in our Annual Report on Form 10-Kfor the year ended December 31, 2008 could cause actual results oroutcomes to differ materially from those expressed in any forward-lookingstatements made by us, and you should not place undue reliance on any suchforward-looking statements.  Anyforward-looking statement speaks only as of the date on which it is made and wedo not undertake any obligation to update any forward-looking statement orstatements to reflect events or circumstances after the date on which suchstatement is made or to reflect the occurrence of unanticipated events.  New factors emerge from time to time, and itis not possible for us to predict which will arise.  In addition, we cannot assess the impact ofeach factor on our business or the extent to which any factor, or combinationof factors, may cause actual results to differ materially from those containedin any forward-looking statements.

 

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**Selected Financial Data**

** **

The following table presents selected historicalfinancial information for the three months ended March 31, 2009, December 31, 2008 and March 31, 2008.  In theopinion of our management, the information presented reflects all adjustmentsconsidered necessary for a fair presentation of the results of suchperiods.  The operating results for theinterim periods are not necessarily indicative of our future operating results.

 

**ExecutiveOverview**

 
|                                                                            |   | **As of and for the Three Months Ended** | ** ** |                         |       |
|---------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------|------------|------------------------------|------------|
| **(dollars in thousands, except per share data)** |   | **March 31, 2009**                                                |       | **March 31, 2008** | ** ** | ** ** | ** ** |
| Net income for  common shareholders                                             |   | $                                                                           | 2,139      |                         | $          | 7,050 |   |   |   |
| Net income per  common share, basic                                             |   | 0.07                                                                        |       | 0.24                         |       |   |   |
| Net income per  common share, diluted                                           |   | 0.07                                                                        |       | 0.24                         |       |   |   |
| Net interest  income before provision for losses on loans and loan commitments  |   | 19,664                                                                      |       | 19,744                       |       |   |   |
|                                                                            |   |                                                                        |       |                         |       |   |   |
| **Average  balances:**                                                          |   |                                                                        |       |                         |       |   |   |
| Assets                                                                          |   | 2,525,225                                                                   |       | 2,211,860                    |       |   |   |
| Cash and cash  equivalents                                                      |   | 105,417                                                                     |       | 76,202                       |       |   |   |
| Investments  securities                                                         |   | 286,553                                                                     |       | 222,525                      |       |   |   |
| Net loans                                                                       |   | 2,030,595                                                                   |       | 1,828,889                    |       |   |   |
| Total deposits                                                                  |   | 1,832,479                                                                   |       | 1,704,820                    |       |   |   |
| Common  shareholders’ equity                                               |   | 199,582                                                                     |       | 175,332                      |       |   |   |
| **Performance  Ratios:**                                                        |   |                                                                        |       |                         |       |   |   |
| Annualized  return on average assets                                            |   | 0.48                                                                        | %          | 1.28                         | %          |   |   |
| Annualized  return on average total equity                                      |   | 4.72                                                                        | %          | 16.08                        | %          |   |   |
| Annualized  return on average common equity                                     |   | 4.29                                                                        | %          | 16.08                        | %          |   |   |
| Net interest  margin                                                            |   | 3.33                                                                        | %          | 3.83                         | %          |   |   |
| Efficiency ratio                                                                |   | 51.22                                                                       | %          | 49.10                        | %          |   |   |
| **Capital  Ratios:**                                                            |   |                                                                        |       |                         |       |   |   |
| Tier 1 capital  to average total assets                                         |   | 12.79                                                                       | %          | 10.24                        | %          |   |   |
| Tier 1 capital  to total risk-weighted assets                                   |   | 15.15                                                                       | %          | 11.75                        | %          |   |   |
| Total capital to  total risk-weighted assets                                    |   | 16.69                                                                       | %          | 14.37                        | %          |   |   |
|                                                                                 |        |                                                                             |            |                              |            |  |  |  |  |

 
| ** **                                                        | ** ** | **March 31, 200****9** | ** ** | **December 31, 2008** | ** ** | **March 31, 200****8** | ** ** |
|-------------------------------------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|----------------------------------|------------|
| **Period-end  balances as of:**                                   |       |                             |       |                            |       |                             |       |
| Total assets                                                      |       | $                                | 2,611,282  |                            | $          | 2,450,011                        |       | $ | 2,260,435 |   |
| Investment  securities                                            |       | 320,188                          |       | 229,275                         |       | 218,882                          |       |
| Total loans, net  of unearned income                              |       | 2,074,001                        |       | 2,051,528                       |       | 1,883,500                        |       |
| Total deposits                                                    |       | 1,905,447                        |       | 1,812,601                       |       | 1,727,587                        |       |
| Junior subordinated debentures                                    |       | 87,321                           |       | 87,321                          |       | 87,321                           |       |
| FHLB advances  and other borrowings                               |       | 340,000                          |       | 274,000                         |       | 240,000                          |       |
| Total common  shareholders’ equity                           |       | 198,144                          |       | 195,617                         |       | 177,536                          |       |
| **Asset  Quality Ratios:**                                        |       |                             |       |                            |       |                             |       |
| Net charge-offs to average total loans for the  quarter           |       | 0.11                             | %          | 0.12                            | %          | 0.06                             | %          |
| Non-performing  loans to total loans                              |       | 1.43                             | %          | 0.76                            | %          | 0.64                             | %          |
| Non-performing  assets to total loans and other real estate owned |       | 1.73                             | %          | 0.89                            | %          | 0.72                             | %          |
| Allowance for  losses on loans to total loans                     |       | 1.65                             | %          | 1.43                            | %          | 1.17                             | %          |
| Allowance for  losses on loans to non-performing loans            |       | 114.84                           | %          | 189.27                          | %          | 184.35                           | %          |
|                                                                   |            |                                  |            |                                 |            |                                  |            |  |  |  |

 

Weoperate community banks doing a general commercial banking business, with ourprimary market encompassing the multi-ethnic population of the Los Angelesmetropolitan area.  Our full-serviceoffices are located primarily in areas where a majority of the businesses areowned by diversified ethnic groups.

 

Wehave also expanded and diversified our business with the focus on our commercialand consumer lending divisions.  Over thepast several years, our network of branches and loan production offices hasbeen expanded geographically.  Wecurrently maintain 21 full-servicebranch banking offices in Southern California, Texas, New Jersey, and New York,and 5 separate loan production offices in Aurora,Colorado (the Denver area); Atlanta, Georgia; Dallas, Texas; Houston, Texas;and Annandale, Virginia.

 

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**Critical Accounting Policies**

** **

Thediscussion and analysis of our financial condition and results of operations isbased upon our financial statements, which have been prepared in accordance withGAAP.  The preparation of these financialstatements requires management to make estimates and judgments that affect thereported amounts of assets and liabilities, revenues and expenses, and relateddisclosures of contingent assets and liabilities at the date of our financialstatements.  Actual results may differfrom these estimates under different assumptions or conditions.

 

Variouselements of our accounting policies, by their nature, are inherently subject toestimation techniques, valuation assumptions and other subjective assessments.We have particularly identified several accounting policies that, due tojudgments, estimates and assumptions inherent in those policies are critical toan understanding of our consolidated financial statements. These policiesrelate to the classification and valuation of investment securities, themethodologies that determine our allowance for losses on loans, the treatmentof non-accrual loans, the valuation of retained interests and servicing assetsrelated to the sales of SBAloans, and the accounting for income tax provisions and the uncertainty inincome taxes. In each area, we have identified the variables most important inthe estimation process. We believe that we have used the best informationavailable to make the estimatesnecessary to value the related assets and liabilities. Actual performance thatdiffers from our estimates and future changes in the key variables could changefuture valuation and could have an impact on our net income.

 

Oursignificant accounting policies are described in greater detail in our 2008 Annual Report on Form 10-K in the“Critical Accounting Policies” section of “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in Note 1 tothe Consolidated Financial Statements (“Summary of Significant AccountingPolicies”) of this report, which are essential to understanding Management’sDiscussion and Analysis of Results of Operations and Financial Condition. Therehas been no material modification to these policies during the quarter ended March 31,2009.

 

**Results of Operations**

** **

**Net Interest Income andNet Interest Margin**

** **

Ourprimary source of revenue is net interest income, which is the differencebetween interest and fees derived from earning assets and interest paid onliabilities obtained to fund those assets. Our net interest income is affected by changes in the level and mix ofinterest-earning assets and interest-bearing liabilities, referred to as volumechanges.  Our net interest income is alsoaffected by changes in the yields earned on assets and rates paid onliabilities, referred to as rate changes. Interest rates charged on our loans are affected principally by thedemand for such loans, the supply of money available for lending purposes andother competitive factors.  Those factorsare, in turn, affected by general economic conditions and other factors beyondour control, such as federal economic policies, the general supply of money inthe economy, legislative tax policies, governmental budgetary matters and theactions of the Federal Reserve Board (“FRB”).

 

Ouraverage interest-earning assets increased to $2.36 billion in the first quarter of 2009, as compared with $2.06 billion in the same quarter of 2008, and average net loans increased to $2.03 billion in the first quarter of 2009, as compared with $1.83 billion in the same quarter of 2008. Average interest-bearing depositsslightly increased to $1.56billion in the first quarter of 2009,as compared with $1.40 billion inthe same quarter of 2008. Average FHLBadvances and other borrowings have significantly increased to $327.3 million inthe first quarter of 2009 from $217.6 million in the same quarter oflast year (see “Financial Condition-Deposits and Other Sources of Funds” below),while the average balance on our junior subordinated debentures stayedunchanged at $87.3 million for the first quarter of 2009 and 2008. As a result,average interest bearing liabilities increased to $1.97 billion in the firstquarter of 2009, as compared with $1.71 billion in the first quarter of 2008.

 

The federal funds rate reductions of 25 and 175 basispoints in second quarter and fourth quarter of 2008, respectively, haveresulted in a decrease inour earning-asset yields as well as our cost of funds. The average yields onour interest-earning assets decreased to 5.67% for the first quarter of 2009 from 7.38% for the first quarterof the prior year. Consistent with thedecrease in average yields on interest-earning assets, the cost of funds foraverage yields on interest-earning liabilities also decreased to 2.79% for thefirst quarter of 2009 from 4.27% for the prior year’s same quarter.Consequently, our net interest spread and net interest margin decreased to2.88% and 3.35%, respectively, for the first quarter of 2009, as compared with3.11% and 3.84% for the first quarter of the prior year.

 

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Our earning-asset yields have decreased in line with our cost of funds. Interest incomedecreased to $33.4 million for the first quarter of 2009, as compared with$38.0 million for the prior year’s same period, while interest expensedecreased to $13.8 million for the first quarter of 2009, as compared with$18.2 million for the quarter a year ago. As a result, net interest incomestayed unchanged at $19.7 million for the first quarter in 2009 and 2008.

 

The following table sets forth, for the periodsindicated, our average balances of assets, liabilities and shareholders’equity, in addition to the major components of net interest income and netinterest margin:

 

**Distribution, Yield and Rate Analysis of NetInterest Income**

**(dollars in thousands)**

 
| ** **                                                         | ** ** | **For the Quarter Ended March 31,** | ** ** |
|--------------------------------------------------------------------|------------|--------------------------------------------------------------|------------|
| ** **                                                         | ** ** | **200****9**                                                 | ** ** | **2008** | ** ** |
| ** **                                                         | ** ** | **Average  Balance**                                         | ** ** | **Interest   Income/  Expense** | ** ** | **Annualized   Average   Rate/Yield** | ** ** | **Average   Balance** | ** ** | **Interest   Income/  Expense** | ** ** | **Annualized   Average   Rate/Yield** | ** ** |
| **Assets:**                                                        |       |                                                         |       |   |   |   |   |   |   |   |   |   |   |
| Interest-earning  assets:                                          |       |                                                         |       |   |   |   |   |   |   |   |   |   |   |
| Net loans(1)                                                       |       | $                                                            | 2,030,595  |   | $ | 30,193 |   | 5.95 | % | $ | 1,828,889 |   | $ | 35,318 |   | 7.72 | % |
| Investment  securities government sponsored agencies               |       | 261,629                                                      |       | 2,668 |   | 4.08 | % | 204,313 |   | 2,378 |   | 4.66 | % |
| Other investment  securities(2)                                    |       | 24,924                                                       |       | 274 |   | 5.97 | % | 18,211 |   | 206 |   | 5.45 | % |
| Interest on federal fund sold                                      |       | 45,639                                                       |       | 289 |   | 2.53 | % | 9,851 |   | 80 |   | 3.27 | % |
| Total  interest-earning assets                                     |       | 2,362,787                                                    |       | 33,424 |   | 5.67 | % | 2,061,264 |   | 37,982 |   | 7.38 | % |
| Cash and due  from banks                                           |       | 59,778                                                       |       |   |   |   |   | 66,351 |   |   |   |   |   |
| Other assets                                                       |       | 102,660                                                      |       |   |   |   |   | 84,245 |   |   |   |   |   |
| Total assets                                                       |       | $                                                            | 2,525,225  |   |   |   |   |   | $ | 2,211,860 |   |   |   |   |   |
|                                                               |       |                                                         |       |   |   |   |   |   |   |   |   |   |   |
| **Liabilities  and Shareholders’ Equity:**                    |       |                                                         |       |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing  liabilities:                                     |       |                                                         |       |   |   |   |   |   |   |   |   |   |   |
| Money market  deposits                                             |       | $                                                            | 362,733    |   | 2,331 |   | 2.57 | % | $ | 396,595 |   | $ | 3,725 |   | 3.76 | % |
| Super NOW  deposits                                                |       | 19,557                                                       |       | 46 |   | 0.94 | % | 22,520 |   | 79 |   | 1.41 | % |
| Savings deposits                                                   |       | 43,241                                                       |       | 393 |   | 3.63 | % | 32,617 |   | 249 |   | 3.05 | % |
| Time  certificates of deposit in denominations of $100,000 or more |       | 933,494                                                      |       | 6,668 |   | 2.86 | % | 788,630 |   | 8,799 |   | 4.46 | % |
| Other time  deposits                                               |       | 196,714                                                      |       | 1,743 |   | 3.54 | % | 163,993 |   | 1,886 |   | 4.60 | % |
| FHLB advances and other borrowings                                 |       | 327,344                                                      |       | 1,658 |   | 2.03 | % | 217,593 |   | 2,043 |   | 3.76 | % |
| Junior subordinated debenture                                      |       | 87,321                                                       |       | 921 |   | 4.22 | % | 87,321 |   | 1,457 |   | 6.68 | % |
| Total interest-bearing  liabilities                                |       | 1,970,404                                                    |       | 13,760 |   | 2.79 | % | 1,709,269 |   | 18,238 |   | 4.27 | % |
| Non-interest-bearing deposits                                      |       | 276,740                                                      |       |   |   |   |   | 300,465 |   |   |   |   |   |
| Total deposits and other borrowings                                |       | 2,247,144                                                    |       |   |   |   |   | 2,009,734 |   |   |   |   |   |
| Other  liabilities                                                 |       | 19,006                                                       |       |   |   |   |   | 26,794 |   |   |   |   |   |
| Shareholders’  equity                                         |       | 259,075                                                      |       |   |   |   |   | 175,332 |   |   |   |   |   |
| Total  liabilities and shareholders’ equity                   |       | $                                                            | 2,525,225  |   |   |   |   |   | $ | 2,211,860 |   |   |   |   |   |
| Net interest  income                                               |       |                                                         |       | $ | 19,664 |   |   |   |   |   | $ | 19,744 |   |   |   |
| Net interest  spread(3)                                            |       |                                                         |       |   |   | 2.88 | % |   |   |   |   | 3.11 | % |
| Net interest  margin(4)                                            |       |                                                         |       |   |   | 3.35 | % |   |   |   |   | 3.84 | % |

 

----

(1) Net loan fees have beenincluded in the calculation of interest income. Loan fees were approximately $569,000 and $1,282,000 for the quarters ended March 31, 2009and 2008, respectively. Loans are net of the allowancefor losses on loans, deferred fees, unearned income and related direct costs,but include those loans placed on non-accrualstatus.

(2) Interest income on a tax equivalentbasis for tax-advantaged income of $97,000 and $42,000 for the three monthsended March 31, 2009 and 2008, respectively, were not included in thecomputation of yields.

(3) Represents the average rate earned on interest-earning assets less theaverage rate paid on interest-bearing liabilities.

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

 

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Thefollowing table sets forth, for the periods indicated, the dollar amount ofchanges in interest earned and paid for interest-earning assets andinterest-bearing liabilities, respectively, and the amount of change attributable to changes inaverage daily balances (volume) or changes in average daily interest rates(rate).  All yields were calculatedwithout the consideration of tax effects, if any, and the variancesattributable to both the volume and rate changes have been allocated to volumeand rate changes in proportion to the relationship of the absolute dollaramount of the changes in each:

 

**Rate/Volume Analysis of Net InterestIncome********(dollars in thousands)**

 
| ** **                                                         | ** ** | **Three Months Ended ****March ****3****1****,   200****9**** vs. 200****8** | ** **  |
|--------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------|-------------|
| ** **                                                         | ** ** | ** Increase (Decrease) Due to Change In**                                         | ** **  |
| ** **                                                         | ** ** | **Volume**                                                                                                      | ** **  | **Rate** | ** ** | **Total** | ** ** |
| **Interest income: **                                    | ** ** | $                                                                                                               |  3,605 |   | $ |  (8,730 | ) | $ |  (5,125 | ) |
| Net loans(1)                                                  | ** ** | ** **                                                                                                      | ** **  | ** ** | ** ** | ** ** | ** ** |
| Investment  securities of government sponsored enterprises         |       | 611                                                                                                             |        | (321 | ) | 290 |   |
| Other investment  securities                                       |       | 73                                                                                                              |        | (5 | ) | 68 |   |
| Interest on federal fund sold                                      |       | 230                                                                                                             |        | (21 | ) | 209 |   |
| Total interest  income                                             |       | 4,519                                                                                                           |        | (9,077 | ) | (4,558 | ) |
|                                                               |       |                                                                                                            |        |   |   |   |   |
| **Interest  expense:**                                             |       |                                                                                                            |        |   |   |   |   |
| Money market  deposits                                             |       | (298                                                                                                            | )           | (1,096 | ) | (1,394 | ) |
| Super NOW  deposits                                                |       | (9                                                                                                              | )           | (24 | ) | (33 | ) |
| Savings deposits                                                   |       | 91                                                                                                              |        | 53 |   | 144 |   |
| Time  certificates of deposit in denominations of $100,000 or more |       | 1,420                                                                                                           |        | (3,551 | ) | (2,131 | ) |
| Other time  deposits                                               |       | 336                                                                                                             |        | (479 | ) | (143 | ) |
| FHLB advances  and other borrowings                                |       | 782                                                                                                             |        | (1,167 | ) | (385 | ) |
| Junior  subordinated debenture                                     |       | —                                                                                                          |        | (536 | ) | (536 | ) |
| Total interest  expense                                            |       | 2,322                                                                                                           |        | (6,800 | ) | (4,478 | ) |
|                                                               |       |                                                                                                            |        |   |   |   |   |
| Change in net  interest income                                     |       | $                                                                                                               | 2,197       |   | $ | (2,277 | ) | $ | (80 | ) |

 

----

(1)  Net loan fees have been included in the calculationof interest income. Loan fees were approximately $569,000 and $1,282,000 for the quarters ended March 31, 2009and 2008, respectively. Loans are net of the allowancefor losses on loans, deferred fees, unearned income and related direct costs,but include those loans placed on non-accrualstatus.

 

**P**rovision for Losses on Loans and LoanCommitments

** **

Given the credit risk inherent in our lending business, we set asideallowances through charges to earnings. Such charges are madenot only for our outstanding loan portfolio, but also for off-balance sheetitems, such as commitments to extend credit or letters of credit.  The charges made for our outstanding loan portfolioare credited to allowance for losses on loans, whereas charges for off-balancesheet items are credited to reserve for off-balance sheet items, which is presented as a component of otherliabilities.

 

Although we continue to enhance our loan underwritingstandards and maintain proactive credit follow-up procedures, we experienced adeterioration of credit in our loan portfolio because of the weak economy, thedecline in the real estate market, and the unprecedented nationwide increase inloan defaults and foreclosures. We recordeda provision for losses on loans and loan commitments of $6.7 million in the first quarter of 2009, as compared with a provision of $1.4 million for the prior year’s same quarter.  The increase in theprovision for losses on loans and loancommitments was primarily to keep pace with the continued growth of ourloan portfolio and an increase of non-performing loans (see “FinancialCondition - Nonperforming Assets” below for further discussion). The $6.7 million and $1.4 million in the firstquarter of 2009 and 2008 were net of recoveries of $309,000 and $112,000 to thereserves for loan commitments, respectively. The procedures formonitoring the adequacy of the allowance for losses on loans and loancommitments, as well as detailed information concerning the allowanceitself, are described in the section entitled “Allowance for Losses on Loans and Loan Commitments”below.

 

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**Non-interest Income**

 

Totalnon-interest income decreased to $3.7 million in the first quarter of 2009, as compared with $5.2 million in the samequarter a year ago. Non-interest income as a percentage of average assetswas 0.15% and 0.23% in the first quarter of 2009 and 2008, respectively. Suchdecrease was primarily caused by the reduction in our loan sales activities.

 

Thefollowing table sets forth the various components of our non-interest incomefor the periods indicated:

 

**Non-interest Income**

**(dollars in thousands)**

 
| ** **                                    | ** ** | **For Three Months Ended ****March ****3****1****,** | ** ** |
|-----------------------------------------------|------------|-------------------------------------------------------------------------------|------------|
| ** **                                    | ** ** | **200****9**                                                                  | ** ** | **200****8** | ** ** |
| Service charges  on deposit accounts          |       | $                                                                             | 2,899      |   | 77.5 | % | $ | 2,748 |   | 53.3 | % |
| Loan-related  servicing fees                  |       | 964                                                                           |       | 25.8 | % | 675 |   | 13.1 | % |
| Gain on sale of  loans                        |       | (831                                                                          | )          | (22.2 | )% | 864 |   | 16.8 | % |
| Income from  other earning assets             |       | 195                                                                           |       | 5.2 | % | 319 |   | 6.2 | % |
| Other income                                  |       | 510                                                                           |       | 13.7 | % | 548 |   | 10.6 | % |
| Total                                         |       | $                                                                             | 3,737      |   | 100.0 | % | $ | 5,154 |   | 100.0 | % |
| Average assets                                |       | $                                                                             | 2,525,225  |   |   |   | $ | 2,211,860 |   |   |   |
| Non-interest  income as a % of average assets |       |                                                                          |       | 0.15 | % |   |   | 0.23 | % |

 

Ourlargest source of non-interest income in the first quarter of 2009 was service charge income on depositaccounts, which represented about 78% ofour total non-interest income. Service charge income increased to $2.9 millionin the first quarter of 2009, as compared with $2.7 million for the prior year’ssame period. The increase in service charge income was primarily due to ourincrease of over 20% in the service charge rates we apply to our customers’deposit accounts. We constantly review service charge rates to maximize servicecharge income while maintaining a competitive position.

 

 The second largest source of non-interestincome was loan-related servicing fees, which represented approximately 26% ofour total non-interest income.  This feeincome consists of trade-financing fees and servicing fees on SBA loanssold.  With the expansion of ourtrade-financing activities and the growth of our servicing loan portfolio, thisfee income has generally increased. In the first quarter of 2009,it increased to $964,000,as compared with $675,000 for the prioryear’s same period.  Such increasewas primarily attributable to $91,000 valuation increase of servicing rights,and $129,000 higher income related to a smaller disposal of servicing assetsand I/O strips of $15,000. The servicing fee income on sold loans is creditedwhen we collect the monthly payments on the sold loans we are servicing andcharged by the monthly amortization of servicing rights and I/O strips that weoriginally capitalized upon sale of the related loans. Such servicing rightsand I/O strips are also charged against the loan service fee income accountwhen the sold loans are paid off.

 

Werecorded a net loss on the sale of loans of $831,000 in the first quarter of2009, as compared with $864,000 gain in the same quarter a year ago.  We sell the guaranteed portion of SBA loansin government securities in the secondary markets and retain servicing rights.  Due to the weakened economy and ongoingfinancial crisis, we had no SBA loan sales in the first quarter of 2009, ascompared with $864,000 gain primarily from the sale of SBA loans in the firstquarter a year ago. Besides SBA loans, we also sell commercial and residentialloans. For the first quarter of 2009, the commercial and residential loan saleswere $1.2 million and $1.7 million, respectively, which resulted in a net lossof $831,000 (representing a $832,000 loss from a commercial loan sale, net of a$1,000 gain from residential loan sales).

 

Incomefrom other earning assets represents income from earning assets other thaninterest-earning assets, such as dividend income from FHLB stock ownership andthe increase in the cash surrender value of BOLI.  For the first quarter of 2009, the balance decreased to $195,000, as compared with $319,000 in the prioryear’s same period. The $124,000decrease was primarily attributable to a temporary cessation of FHLB dividendpayments. Our FHLB dividend income was $138,000 during the first quarter of2008.

 

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Othernon-interest income represents income from miscellaneous sources, such as loanreferral fees, SBA loan packaging fees, checkbook sales income, gain on sales of investment securities, excessof insurance proceeds over carrying value of an insured loss, and aregenerally stable period over period.  Forthe first quarter of 2009, this miscellaneousincome amounted to $510,000, ascompared with $547,000 in theprior year’s same period.

 

**Non-interest Expense**

** **

Inline with noninterest income, total noninterest expense decreased to $12.0 million in the first quarter of2009, from $12.2 million in thesame period of 2008. The decrease was due to our continued effort to minimizeoperating expenses as a method addressing the ongoing financial difficulties inour economy.  Non-interest expenses as apercentage of average assets were maintained at low levels of 0.47% and 0.55% inthe first quarter of 2009 and 2008, respectively. Our efficiency ratio was51.2% in the first quarter of 2009, as compared with 49.1% in the same period ayear ago. The higher efficiency ratio was primarily due to a lower total incomein the first quarter of 2009 because of the $831,000 net loss on loan sales(see “Non-interest Income” above for detail).

 

Thefollowing table sets forth a summary of non-interest expenses for the periodsindicated:

 

**Non-interest Expense**s(dollars in thousands)

 
| ** **                                                      | ** ** | **For the Quarter Ended ****March ****3****1****,** | ** ** |
|-----------------------------------------------------------------|------------|------------------------------------------------------------------------------|------------|
| ** **                                                      | ** ** | **2009**                                                                     | ** ** | **2008** | ** ** |
| Salaries and  employee benefits                                 |       | $                                                                            | 6,207      |   | 51.8 | % | $ | 6,976 |   | 57.1 | % |
| Occupancy and  equipment                                        |       | 1,676                                                                        |       | 14.0 | % | 1,425 |   | 11.7 | % |
| Data processing                                                 |       | 827                                                                          |       | 6.9 | % | 764 |   | 6.2 | % |
| Deposit  insurance premium                                      |       | 611                                                                          |       | 5.1 | % | 330 |   | 2.7 | % |
| Professional  fees                                              |       | 342                                                                          |       | 2.9 | % | 500 |   | 4.1 | % |
| Outsourced  service for customer                                |       | 268                                                                          |       | 2.2 | % | 449 |   | 3.7 | % |
| Advertising                                                     |       | 233                                                                          |       | 1.9 | % | 177 |   | 1.5 | % |
| Office supplies                                                 |       | 161                                                                          |       | 1.3 | % | 217 |   | 1.8 | % |
| Communications                                                  |       | 103                                                                          |       | 0.9 | % | 123 |   | 1.0 | % |
| Directors’ fees                                            |       | 93                                                                           |       | 0.8 | % | 96 |   | 0.8 | % |
| Investor  relation expenses                                     |       | 52                                                                           |       | 0.4 | % | 79 |   | 0.6 | % |
| Amortization of  investments in affordable housing partnerships |       | 288                                                                          |       | 2.4 | % | 174 |   | 1.4 | % |
| Amortization of other intangible assets                         |       | 74                                                                           |       | 0.6 | % | 74 |   | 0.6 | % |
| Other operating                                                 |       | 1,052                                                                        |       | 8.8 | % | 840 |   | 6.8 | % |
| Total                                                           |       | $                                                                            | 11,987     |   | 100.0 | % | $ | 12,224 |   | 100.0 | % |
| Average assets                                                  |       | $                                                                            | 2,525,225  |   |   |   | $ | 2,211,860 |   |   |   |
| Non-interest  expenses as a % of average assets                 |       |                                                                         |       | 0.47 | % |   |   | 0.55 | % |

 

Salariesand employee benefits historically represent more than half of totalnon-interest expense and generally increase as our branch network and businessvolume expand. However, due to our dedicated efforts to streamline our workforce in the second half of 2008, these expenses decreased to $6.2 million in the first quarter of2009, as compared with $7.0 million forthe prior year’s same period.  Thedecrease was the result of overall compensation reduction. Although additionalstaffing was necessitated by our new office opening in Flushing, New York,during March 2009, we have successfully controlled and maintained thetotal number of employee headcount through effective allocation of our humanresources. The number of full-time equivalent employees was reduced to 347 asof March 31, 2009, as compared with 352 as of March 31, 2008. In addition, our asset growth helpedus improve our assets per employee ratio to $7.5 million at March 31, 2009from $6.4 million at March 31, 2008.

 

Occupancyand equipment expenses represent about 14% of our total noninterest expenses.These expenses increased to $1.7 million in the first quarter of 2009, as compared with $1.4million for the same period a yearago.  The increase was primarily attributable to the additionallease expenses for our business growth in the past 12 months and our newFlushing branch office which opened in March 2009.

 

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Data processing expenses increased to $827,000 in thefirst quarter of 2009, from $764,000 in the first quarter of 2008. The increasein data processing in the past 12 months corresponded to the growth of ourbusiness.

 

Deposit insurance premium expenses represent TheFinancing Corporation (“FICO”) and FDIC insurance premium assessments. In thefirst quarter of 2009, these expenses totaled $611,000, as compared with$330,000 for the prior year’s same periods. Recent bank failures coupled withdeteriorating economic conditions have significantly reduced the FDIC’s depositinsurance fund reserves.  As a result,the FDIC has significantly increased its deposit assessment premiums forfederally insured financial institutions. There have also been increases in FDIC assessments resulting from itsTemporary Liquidity Guaranty Program (“TLGP”), which temporarily increases thedeposit coverage amount for depositors until the end of 2009.

 

Professional fees generally increase as we grow.However, these expenses decreased to $342,000, as compared with $500,000 for the prior year’s sameperiod. The $158,000 decrease between the current quarter and the same quartera year ago was mainly attributable to a $66,000 decrease in legal fees and a$92,000 decrease in fees related to consulting, accounting and auditingservices.

 

Outsourced service costs for customers are paymentsmade to third parties who provide services that were traditionally paid by theBank’s customers, such as armored car services or bookkeeping services, and arerecouped from their deposit balances maintained with us. Due mainly to theincrease in service activities and the increase in depositors demanding suchservices, our outsourced service costs generally rise in proportion with ourbusiness growth. Nonetheless, as a result of our cost control measures, theseexpenses decreased to $268,000 in the first quarter of 2009, as compared with $449,000 for the prior year’s same period.

 

Advertising and promotional expenses increased to $233,000 in the first quarter of 2009 from $177,000 in the sameperiod a year ago, representing1.9% and 1.5% of total noninterest expenses for the two periods, respectively.These expenses represent marketing activities, such as media advertisements andpromotional gifts for customers of newly opened offices, especially in the newareas such as the east coast market in New York and New Jersey. The expenses increased in the current quarter primarilyattributable to our increased advertising spending to promote our latest branchaddition in Flushing, New York in March 2009.

 

Othernon-interest expenses, such as office supplies, communications, director’sfees, and other miscellaneous expenses, were $1.8 million in first quarter2009, as compared with $1.6 million in the same quarter a year ago. Theincrease represents a normal growth in association with the growth of ourbusiness activities and was consistent with our expectations.

 

**Provision for IncomeTaxes**

** **

Forthe quarter ended March 31, 2009, we made a provision for income taxes of$1.7 million onpretax net income of $4.7 million,representing an effective tax rate of 35.1%,as compared with a provision for income taxes of $4.2 million on pretax net income of $11.3 million, representing an effective tax rate of 37.5% for thesame quarter in 2008.

 

Oureffective tax rates in the first quarter of 2009 were lower than those for the prioryear’s same period, due mainly toadditional investments in low income housing partnership funds.  Our lower effective tax rates compared tostatutory rates were mainly due to state tax benefits derived from doingbusiness in an enterprise zone, our ownership of BOLI and low income housingtax credit funds.

 

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**Financial Condition**

** **

**Investment**Portfolio

** **

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

 

*Cash Equivalents andInterest-bearing Deposits in other Financial Institutions*

* *

We buyor sell federal funds and high quality money market instruments, and maintain deposits ininterest-bearing accounts in other financial institutions to help meetliquidity requirements and provide temporary holdings until the funds can be otherwise deployed or invested.

 

*Investment Securities*

* *

Management of our investment securities portfoliofocuses on providing an adequate level of liquidity and establishing a balancedinterest rate-sensitive position, while earning an adequate level of investmentincome without taking undue risk.  As of March 31,2009, our investment portfolio is primarily comprised of United Statesgovernment agency securities, which account for 89% of the entire investmentportfolio.  Our U.S. government agencysecurities holdings are all “prime/conforming” mortgage backed securities, orMBS, and collateralized mortgage obligations, or CMOs, guaranteed by FNMA,FHLMC, or GNMA. GNMAs are considered equivalent to U.S. Treasury securities, asthey are backed by the full faith and credit of the U.S. government. Currently,there are no subprime mortgages in our investment portfolio. Besides the U.S.government agency securities, we also have 9% investment in municipal debtsecurities and 2% investment in corporate debt. Among this 11% of ourinvestment portfolio that was not comprised of U.S. government securities, 74%carry the top two highest “Investment Grade” rating of “Aaa/AAA” or “Aa/AA”,while the remaining 26%, or $9.4 million, carry an intermediate “InvestmentGrade” rating of at least “Baa1/BBB+” or above. Our investment portfolio doesnot contain any government sponsored enterprises, or GSE, preferred securitiesor any distressed corporate securities that requiredother-than-temporary-impairment charges as of March 31, 2009. Weclassified our investment securities as “held-to-maturity” or“available-for-sale” pursuant to SFAS No. 115.  Investment securities that we intend to holduntil maturity are classified as held to maturity securities, and all otherinvestment securities are classified as available-for-sale. The carrying valuesof available-for-sale investment securities are adjusted for unrealized gainsand losses as a valuation allowance and any gain or loss is reported on anafter-tax basis as a component of other comprehensive income. Declines in thefair value of held-to-maturity and available-for-sale investment securitiesbelow their cost that are deemed to be other than temporary are reflected inearnings as realized losses, and there were no such other-than-temporary-impairmentin the first quarter of 2009. The fair market values of our held-to-maturityand available-for-sale investment securities were respectively $0.1 million and$320.1 million as of March 31, 2009. We measured and disclosed the fair value of available-for-saleinvestment securities pursuant to SFAS No. 157 and FSP SFAS No. 157-3(see Note 3).

 

Prices from third party pricing services are oftenunavailable for investment securities that are rarely traded or are traded onlyin privately negotiated transactions. As a result, certain investmentsecurities are priced via independent broker quotations which utilize inputsthat may be difficult to corroborate with observable market based data.Additionally, the majority of these independent broker quotations arenon-binding. Therefore, we will individually examine those investmentsecurities for the appropriate valuation methodology based on combination ofmarket approach reflecting current broker prices and a discounted cash flowapproach.  As required under FinancialAccounting Standards Board (“FASB”) Emerging Issues Task Force (“EITF”) 99-20, *Recognition of Interest Income and Impairment onPurchased and Retained Beneficial Interest in Securitized Financial Assets*,and EITF 99-20-1, *Amendments to theImpairment Guidance of EITF Issue No. 99-20*, we consider allavailable information relevant to the collectability of the security, includinginformation about past events, current conditions, and reasonable andsupportable forecasts, and we consider factors such as remaining payment termsof the security, prepayment speeds, the financial condition of the issuer(s),expected defaults, and the value of any underlying collateral.

 

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Thefollowing table summarizes the book value, market value and distribution of ourinvestment securities as of the dates indicated:

 

**InvestmentSecurities Portfolio**

**(dollarsin thousands)**

** **

 
| ** **                                               | ** ** | **As of March 31, 2009** | ** ** | **As of December 31, 2008** | ** ** |
|----------------------------------------------------------|------------|----------------------------------------------|------------|-------------------------------------------------|------------|
| ** **                                               | ** ** | **Amortized   Cost**                    | ** ** | **Market   Value**                         | ** ** | **Unrealized   Gain (Loss)** | ** ** | **Amortized   Cost** | ** ** | **Market   Value** | ** ** | **Unrealized   Gain (Loss)** | ** ** |
| Held to Maturity:                                        |       |                                         |       |                                            |       |   |   |   |   |   |   |   |   |
| Collateralized mortgageobligation.                       |       | $                                            | 133        |                                            | $          | 133 |   | $ | — |   | $ | 139 |   | $ | 135 |   | $ | (4 | ) |
| Total investmentsecurities held to maturity              |       | $                                            | 133        |                                            | $          | 133 |   | $ | — |   | $ | 139 |   | $ | 135 |   | $ | (4 | ) |
|                                                     |       |                                         |       |                                            |       |   |   |   |   |   |   |   |   |
| Available for Sale:                                      |       |                                         |       |                                            |       |   |   |   |   |   |   |   |   |
| Investment securities ofgovernment sponsored enterprises |       | $                                            | 2,967      |                                            | $          | 3,089 |   | $ | 122 |   | $ | 25,952 |   | $ | 26,187 |   | $ | 235 |   |
| Mortgage backedsecurities                                |       | 185,206                                      |       | 188,804                                         |       | 3,598 |   | 124,549 |   | 125,513 |   | 964 |   |
| Collateralized mortgageobligation                        |       | 91,644                                       |       | 93,001                                          |       | 1,357 |   | 62,557 |   | 63,303 |   | 746 |   |
| Corporate securities                                     |       | 7,040                                        |       | 6,950                                           |       | (90 | ) | 7,048 |   | 6,953 |   | (95 | ) |
| Municipal securities                                     |       | 28,684                                       |       | 28,211                                          |       | (473 | ) | 7,323 |   | 7,180 |   | (143 | ) |
| Total investmentsecurities available for sale            |       | $                                            | 315,541    |                                            | $          | 320,055 |   | $ | 4,514 |   | $ | 227,429 |   | $ | 229,136 |   | $ | 1,707 |   |

 

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Thefollowing table summarizes the maturity and repricing schedule of ourinvestment securities at their carrying values at March 31, 2009:

 

**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** | ** ** |
|------------------------------------------------------------|------------|---------------------------------|------------|----------------------------------------------------------------------|------------|----------------------------------------------------------------------|------------|---------------------------------|------------|-----------|------------|
| **Held to Maturity:**                                      |       |                            |       |                                                                 |       |                                                                 |       |                            |       |      |       |
| Mortgage backed securities                                 |       | $                               | —     |                                                                 | $          | 133                                                                  |       | $                               | —     |      | $          | — |   | $ | 133 |   |
| ** **                                                 |       |                            |       |                                                                 |       |                                                                 |       |                            |       |      |       |
| **Available-for-sale:******                                |       |                            |       |                                                                 |       |                                                                 |       |                            |       |      |       |
| Investment securities  of Government sponsored enterprises |       | 2,050                           |       | 1,039                                                                |       | —                                                               |       | —                          |       | 3,089     |       |
| Mortgage backed securities                                 |       | 8,961                           |       | 891                                                                  |       | 496                                                                  |       | 178,456                         |       | 188,804   |       |
| Collateralized mortgage obligation                         |       | 58,218                          |       | 34,783                                                               |       | —                                                               |       | —                          |       | 93,001    |       |
| Corporate securities                                       |       | —                          |       | 6,950                                                                |       | —                                                               |       | —                          |       | 6,950     |       |
| Municipal securities                                       |       | —                          |       | —                                                               |       | 4,703                                                                |       | 23,508                          |       | 28,211    |       |
| Total investment securities                                |       | $                               | 69,229     |                                                                 | $          | 43,796                                                               |       | $                               | 5,199      |      | $          | 201,964 |   | $ | 320,188 |   |

 

Ourinvestment securities holdings substantially increased to $320.2 million at March 31, 2009, compared to holdings of $229.3 million at December 31, 2008. Total investment securities as a percentage of total assets were 12.3% and 9.4% at March 31, 2009 and December 31, 2008, respectively.  As of March 31, 2009, investment securities with a carryingvalue of $299.2 million werepledged to secure certain deposits.

 

As of March 31,2009, our investmentsecurities held-to-maturity, which are carried at their amortized costs, stayedfairly unchanged at $133,000, as compared with $139,000 as of December 31,2008. Our investment securities available-for-sale, which are stated at theirfair market values, increased to $320.1million at March 31, 2009from $229.2 million at December 31,2008.

 

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Thefollowing table shows our investments’ gross unrealized losses and fair value,aggregated by investment category and length of time that individual securitieshave been in a continuous unrealized loss position, at March 31, 2009 and December 31, 2008:

 
| **As of  March 31, 2009**               | ** ** | ** **                             | ** ** |
|-----------------------------------------|------------|----------------------------------------|------------|
| **(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** | ** ** |
|                                    |       |                                   |       |   |   |   |   |   |   |   |   |   |   |
| Collateralized mortgage obligation      |       | $                                      | 8,337      |   | $ | (5 | ) | $ | 133 |   | $ | — |   | $ | 8,470 |   | $ | (5 | ) |
| Mortgage backed securities              |       | 2,047                                  |       | (19 | ) | 2,569 |   | (31 | ) | 4,616 |   | (50 | ) |
| Corporate securities                    |       | —                                 |       | — |   | 1,816 |   | (184 | ) | 1,816 |   | (184 | ) |
| Municipal securities                    |       | 15,150                                 |       | (896 | ) | — |   | — |   | 15,150 |   | (896 | ) |
|                                    |       | $                                      | 25,534     |   | $ | (920 | ) | $ | 4,518 |   | $ | (215 | ) | $ | 30,052 |   | $ | (1,135 | ) |
|                                         |            |                                        |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 
| **As of ****December 31****, 200****8** | ** ** | ** **                             | ** ** |
|-------------------------------------------------------------|------------|----------------------------------------|------------|
| **(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** | ** ** |
| ** **                                                  | ** ** | ** **                             | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Collateralized mortgage obligation                          |       | $                                      | 2,642      |   | $ | (65 | ) | $ | 1,591 |   | $ | (17 | ) | $ | 4,233 |   | $ | (82 | ) |
| Mortgage backed securities                                  |       | 12,287                                 |       | (300 | ) | 536 |   | (3 | ) | 12,823 |   | (303 | ) |
| Corporate securities                                        |       | 5,000                                  |       | (49 | ) | 1,953 |   | (47 | ) | 6,953 |   | (96 | ) |
| Municipal securities                                        |       | 5,712                                  |       | (157 | ) | — |   | — |   | 5,712 |   | (157 | ) |
|                                                        |       | $                                      | 25,641     |   | $ | (571 | ) | $ | 4,080 |   | $ | (67 | ) | $ | 29,721 |   | $ | (638 | ) |

 

As of March 31,2009, the totalunrealized losses less than 12 months old were $920,000, and total unrealized losses more than 12 months old were $215,000. The aggregate related fair value of investments with unrealized lossesless than 12 months old was $25.5 millionat March 31, 2009, and thosewith unrealized losses more than 12 months old were $4.5 million.  As of December 31, 2008, the total unrealized losses less than12 months old were $571,000 andtotal unrealized losses more than 12 months old were $67,000.  The aggregate relatedfair value of investments with unrealized losses less than 12 months old was $25.6 million at December 31, 2008,and those with unrealized losses more than 12 months old were $4.1 million.

 

Declinesin the fair value of held-to-maturity and available-for-sale investmentsecurities below their cost that are deemed to be other than temporary arereflected in earnings as realized losses. In estimating other-than-temporary impairment losses, we consider, amongother things, (i) the length of time and the extent to which the fairvalue has been less than cost, (ii) the financial condition and near-termprospects of the issuer, and (iii) our intent and ability to retain ourinvestment in the issuer for a period of time sufficient to allow for anyanticipated recovery in fair value.

 

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We performed a detailed evaluation of the investment portfolio toassess individual positions that have market values that have declined belowcost.  In determining whether there isother-than-temporary impairment, we carefully considered:

 

·      Whether or not all contractual cash flowsdue on a security will be collected; and

·      Our positive intent and ability to holdthe debt security until recovery in fair value or maturity.

 

A number of factors are considered in the analysis, including but notlimited to:

 

·      Issuer’s credit rating;

·      Likelihood of the issuer’s default orbankruptcy;

·      Collateral underlying the security;

·      Industry in which the issuer operates;

·      Nature of the investment;

·      Severity and duration of the decline infair value; and

·      Analysis of the average life and effectivematurity of the security.

 

 We do not believe that anyindividual unrealized loss as of March 31, 2009 represented another-than-temporary impairment.  Theunrealized losses on our GSE bonds, GSE CMOs, and GSE MBS were attributable toboth changes in interest rates (U.S. Treasury curve) and a repricing of risk(spreads widening against risk-fee rate) in the market. We do not own anynon-agency MBS or CMO. All GSE bonds, GSE CMO, and GSE MBS securities arebacked by U.S. Government Sponsored and Federal Agencies and are thereforerated “Aaa/AAA.”  We have no exposure tothe “Subprime Market” in the form of Asset Backed Securities, or ABS, andCollateralized Debt Obligations, or CDOs, that had previously been rated“Aaa/AAA” but have since been downgraded to below investment grade.  We have the intent and ability to hold oursecurities that were in an unrealized loss position at March 31, 2009until the market value recovers or until the securities mature.

 

Municipal bonds and corporate bonds are evaluated by reviewing thecredit-worthiness of the issuer and general market conditions.  The unrealized losses on our investment inmunicipal and corporate investment securities were primarily attributable toboth changes in interest rates and a repricing of risk in the market.  We have the intent and ability to hold oursecurities that were an unrealized loss position at March 31, 2009 untilthe market value recovers or until the securities mature.

 

**Loan Portfolio**

** **

Totalloans are the sum of loans receivable and loans held for sale and reported attheir outstanding principal balances net of any unearned income which isunamortized deferred fees and costs and premiums and discounts.  Interest on loans is accrued daily on a simple interest basis. Totalloans net of unearned loans and allowancefor losses on loans increased to $2.07 billion at March 31, 2009, as compared with $2.05 billionat December 31, 2008.  Total loansnet of unearned income as a percentage of total assets as of March 31, 2009 and December 31,2008 were 79.4% and 83.7%, respectively.

 

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Thefollowing table sets forth the amount of total loans outstanding and thepercentage distributions in each category, as of the dates indicated:

 

**Distribution of Loansand Percentage Composition of Loan Portfolio**

**(dollars in thousands)**

 
| ** **                           | ** ** | **Amount Outstanding**       | ** ** |
|--------------------------------------|------------|------------------------------|------------|
| ** **                           | ** ** | **March 31, 2009** | ** ** | **December 31, 2008** | ** ** |
| Construction                         |       | $                            | 42,075     |   | $ | 43,180 |   |
| Real estate secured                  |       | 1,639,578                    |       | 1,599,627 |   |
| Commercial and industrial            |       | 377,211                      |       | 389,217 |   |
| Consumer                             |       | 18,854                       |       | 23,669 |   |
| Total loans(1)                       |       | 2,077,718                    |       | 2,055,693 |   |
| Unearned Income                      |       | (3,717                       | )          | (4,164 | ) |
| Gross loans, net of unearned  income |       | 2,074,001                    |       | 2,051,529 |   |
| Allowance for losses on loans        |       | (34,156                      | )          | (29,437 | ) |
| Net loans                            |       | $                            | 2,039,845  |   | $ | 2,022,092 |   |
|                                 |       |                         |       |   |   |
| Percentage breakdown of gross loans: |       |                         |       |   |   |
| Construction                         |       | 2.0                          | %          | 2.1 | % |
| Real estate secured                  |       | 78.9                         | %          | 77.8 | % |
| Commercial and industrial            |       | 18.2                         | %          | 18.9 | % |
| Consumer                             |       | 0.9                          | %          | 1.2 | % |
| Total loans                          |       | 100.0                        | %          | 100.0 | % |

 

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(1) Includes loans held for sale, at the lower of cost or market, of $20.0million and $18.0 million at March 31, 2009 and December 31, 2008,respectively

 

Real estate secured loans consist primarily ofcommercial real estate loans and are extended to finance the purchase and/or improvementof commercial real estate or businesses thereon.  The properties may be either user owned orheld for investment purposes. Our loan policy adheres to the real estate loanguidelines set forth by the FDIC.  Thepolicy provides guidelines including, among other things, fair review ofappraisal value, limitation on loan-to-value ratio, and minimum cash flowrequirements to service debt. Loans secured by real estate totaled $1.64 billion and $1.60 billion as of March 31, 2009 and December 31, 2008,respectively.  The real estate securedloans as a percentage of total loans were 78.9% and 77.8% at March 31, 2009 and December 31, 2008, respectively.  Home mortgage loans represent a smallfraction of our total real estate secured loan portfolio. Total home mortgageloans outstanding were only $42.9 million at March 31, 2009 and $42.4million at December 31, 2008.

 

Commercialand industrial loans include revolving lines of credit as well as term businessloans.  Commercial and industrial loansat March 31,2009 decreased to $377.2 million, as compared with $389.2 million at December 31, 2008. Commercial and industrial loans as a percentage of total loans were 18.2% at March 31, 2009,decreasing from 18.9% at December 31,2008.

 

Consumerloans have historically represented less than 5% of our total loanportfolio.  The majority of consumerloans are concentrated in automobile loans, which we provide as a service onlyto existing customers. As consumer loans present a higher risk potentialcompared to our other loan products, especially given current economicconditions, we have reduced our effort in consumer lending since 2007.Accordingly, as of March 31,2009, our volume of consumer loans was down by $4.8 million from the prior year end. As of March 31, 2009, the balance of consumer loans was $18.9 million, or 0.9% of total loans, as compared to $23.7 million, or 1.2% of totalloans as of December 31, 2008. Consumer loans as a percentage of total loans have historically been minimal.

 

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Constructionloans represented less than 5% of our total loan portfolio as of March 31,2009. In response to the current real estate market, which has been on adownward trend since mid-2007, we have applied stricter loan underwritingpolicies when making loans in this category. As a result, construction loans decreased to $42.1 million, or 2.0%of total loans, at the end of the first quarter of 2009, as compared with $43.2 million, or 2.1% of total loans at the end of 2008.

 

Ourloan terms vary according to loan type. Commercial term loans have typicalmaturities of three to five years and are extended to finance the purchase ofbusiness entities, business equipment, leasehold improvements or to providepermanent working capital.  We generallylimit real estate loan maturities to five to eight years.  Lines of credit, in general, are extended onan annual basis to businesses that need temporary working capital and/orimport/export financing.  We generallyseek diversification in our loan portfolio, and our borrowers are diverse as toindustry, location, and their current and target markets.

 

Thefollowing table shows the contractual maturity distribution and repricingintervals of the outstanding loans in our portfolio, as of March 31, 2009. In addition, the table shows the distribution of such loans betweenthose with variable or floating interest rates and those with fixed or predeterminedinterest rates.

 

**Loan Maturities and Repricing Schedule**

**(dollars in thousands)**

** **
| ** **                                       | ** ** | **At March 31, 2009** | ** ** |
|--------------------------------------------------|------------|--------------------------------------|------------|
| ** **                                       | ** ** | **Within  One Year**            | ** ** | **After One  But Within  Five Years** | ** ** | **After  Five Years** | ** ** | **Total** | ** ** |
| Construction                                     |       | $                                    | 42,075     |   | $ | — |   | $ | — |   | $ | 42,075 |   |
| Real estate secured                              |       | 817,899                              |       | 727,190 |   | 94,536 |   | 1,639,625 |   |
| Commercial and industrial                        |       | 363,847                              |       | 12,748 |   | 305 |   | 376,900 |   |
| Consumer                                         |       | 14,693                               |       | 4,425 |   | — |   | 19,118 |   |
| Total loans, net of non-accrual loans            |       | $                                    | 1,238,514  |   | $ | 744,363 |   | $ | 94,841 |   | $ | 2,077,718 |   |
| Loans with variable (floating) interest  rates   |       | $                                    | 1,009,624  |   | $ | 18,358 |   | $ | — |   | $ | 1,027,982 |   |
| Loans with predetermined (fixed) interest  rates |       | $                                    | 228,890    |   | $ | 726,005 |   | $ | 94,841 |   | $ | 1,049,736 |   |

 

Amajority of the properties that we have taken as collateral are located in SouthernCalifornia.  The loans generated by ourloan production offices, which are located outside of our main geographicalmarket, are generally collateralized by properties in close proximity to thoseoffices.

 

**Non-performing Assets**

** **

Non-performing assets, or NPAs, consist of non-performing loans, or NPLs, restructuredloans, and other NPAs.  NPLs are reported at their outstandingprincipal balances, net of any portionguaranteed by SBA, and consist of loans on non-accrual status and loans90 days or more past due and still accruing interest. Restructured loans areloans of which the terms of repayment have been renegotiated, resulting in areduction or deferral of interest or principal, Other NPAs consist of properties, mainly other real estate owned(OREO), acquired by foreclosure or similar means that management intends tooffer for sale.

 

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Thefollowing table provides information with respect to the components of ournon-performing assets as of the dates indicated (the figures in the table arenet of the portion guaranteed by SBA, with the total amounts adjusted and reconciled for the SBAguarantee portion for the gross nonperforming assets):

 

**Non**-performingAssets and Restructured Loans(dollars in thousands)

** **
| ** **                                                            | ** ** | **March 31, ****200****9** | ** ** | **December 31, ****200****8** | ** ** | **March 31, ****200****8** | ** ** |
|-----------------------------------------------------------------------|------------|--------------------------------------|------------|-----------------------------------------|------------|--------------------------------------|------------|
| **Nonaccrual loans:****(1)**                                          |       |                                 |       |                                    |       |                                 |       |
| Real estate secured                                                   |       | $                                    | 23,185     |                                    | $          | 9,334                                |       | $ | 8,061 |   |
| Commercial and industrial                                             |       | 5,774                                |       | 5,874                                   |       | 2,914                                |       |
| Consumer                                                              |       | 307                                  |       | 131                                     |       | 250                                  |       |
| Total                                                                 |       | 29,266                               |       | 15,339                                  |       | 11,225                               |       |
| **Loans 90 days or more past due and still  accruing:**               |       |                                 |       |                                    |       |                                 |       |
| Real estate secured                                                   |       | 240                                  |       | —                                  |       | 503                                  |       |
| Commercial and industrial                                             |       | 235                                  |       | 213                                     |       | 56                                   |       |
| Consumer                                                              |       | —                               |       | —                                  |       | 189                                  |       |
| Total                                                                 |       | 475                                  |       | 213                                     |       | 748                                  |       |
| Total nonperforming loans                                             |       | 29,741                               |       | 15,552                                  |       | 11,973                               |       |
| Troubled  debt restructurings (2)                                     |       | —                               |       | —                                  |       | 1,393                                |       |
| Repossessed vehicles                                                  |       | —                               |       | —                                  |       | 21                                   |       |
| Other real estate owned                                               |       | 6,282                                |       | 2,663                                   |       | 133                                  |       |
| Total nonperforming assets, net of SBA guarantee                      |       | 36,023                               |       | 18,215                                  |       | 13,520                               |       |
|                                                                  |       |                                 |       |                                    |       |                                 |       |
| Guaranteed portion of  nonperforming SBA loans                        |       | 8,387                                |       | 7,158                                   |       | 6,906                                |       |
| Total gross nonperforming assets                                      |       | $                                    | 44,410     |                                    | $          | 25,373                               |       | $ | 20,426 |   |
|                                                                  |       |                                 |       |                                    |       |                                 |       |
| Restructured loans (3)                                                |       | $                                    | 7,962      |                                    | $          | 2,161                                |       | $ | — |   |
|                                                                  |       |                                 |       |                                    |       |                                 |       |
| Nonperforming loans as a percentage of  total loans                   |       | 1.43                                 | %          | 0.76                                    | %          | 0.64                                 | %          |
| Allowance for losses on loans as  a percentage ofnonperforming  loans |       | 114.84                               | %          | 189.27                                  | %          | 184.35                               | %          |

 

----

(1) During thethree months ended March 31, 2009, no interest income related to these loans was included in interest income.

 

(2) The$1,393,000 troubled debt restructurings as of March 31, 2008 representedloans of which terms were renegotiated to provide a reduction or deferral ofinterest or principal because of deterioration in the financial position of the borrower.

 

(3) The$7,962,000 and $2,161,000 restructured loans as of March 31, 2009 and December 31,2008, respectively, represent loans that were renegotiated to provide atemporary reduction or deferral of interest or principal because ofdeterioration in the financial positionof the borrower. These loans were still in accrual status.

 

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

 

Despite the fact that our loan portfolio continued togrow, our emphasis on asset quality control enabled us to maintain a relativelylow level of NPLs as of March 31, 2009. However, the general economiccondition of the United States as well as the local economies in which we dobusiness have experienced a severe downturn in the housing sector and thetransition to below-trend GDP growth has continued. The downward movement ofthe macro economic environment affected our borrowers’ strength and ourNPLs, net of SBA guaranteed portion, increased to $29.7 million, or 1.43% ofthe total loans at the end of the first quarter of 2009, as compared with $15.6million, or 0.76% of the total loans, at the end of 2008. The $14.2 millionincrease of NPLs was comprised of a $13.9 million net increase in non-accrualloans, and a $0.3 million net increase in delinquent loans.

 

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Managementalso believes that the reserve provided for non-performing loans, together withthe tangible collateral, were adequate as of March 31, 2009.  See “Allowance for Losses on Loans and Loan Commitments” below for furtherdiscussion.

 

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

** **

Basedon the credit risk inherent in our lending business, we set aside allowancesthrough charges to earnings.  Suchcharges were not only made for the outstanding loan portfolio, but also foroff-balance sheet loancommitments, such as commitmentsto extend credit or letters of credit.  Charges made for our outstanding loan portfolio were credited to the allowancefor losses on loans, whereas charges related to loan commitments were credited to the reserve for loancommitments, which is presented as a component of other liabilities.

 

Theallowance for losses on loans and loan commitments are maintained at levels that are believed to beadequate by management to absorb estimated probable losses on loans inherent inthe loan portfolio. The adequacy of our allowance is determined throughperiodic evaluations of the loan portfolio and other pertinent factors, whichare inherently subjective because the process calls for various significantestimates and assumptions. Among other factors, the estimates involve theamounts and timing of expected future cash flows and fair value of collateralon impaired loans, estimated losses on loans based on historical lossexperience, various qualitative factors, and uncertainties in estimating lossesand inherent risks in the various credit portfolios, which may be subject tosubstantial change.

 

On aquarterly basis, we utilize a classification migration model and individualloan review analysis as starting points for determining the adequacy of ourallowance for losses on loans. Our loss migration analysis tracks a certainnumber of quarters of loan losses history to determine historical losses byclassification category for each loan type, except certain loans (automobile,mortgage and credit scored based business loans), which are analyzed as homogeneousloan pools. These calculated loss factors are then applied to outstanding loanbalances.  Based on Company definedutilization rate of exposure for unused off-balance sheet loan commitments,such as letters of credit, we record a reserve for loan commitments.

 

Theindividual loan review analysis is the other part of the allowance allocationprocess, applying specific monitoring policies and procedures in analyzing theexisting loan portfolios. Further allowance assignments are made based ongeneral and specific economic conditions, as well as performance trends withinspecific portfolio segments and individual concentrations of credit.

 

We increased our allowance for losses on loansto $34.2 million at March 31, 2009, representing anincrease of 16.03%, or $4.7million from $29.4 million at December 31, 2008. With the increase of our non-performing loans, we have increased theratio of allowance for losses on loans to total loans at 1.65%, as compared with 1.43% retained at the year end of 2008. Managementbelieves that the current ratio of 1.65%is adequate for our loan portfolio.

 

Our allowance for losses on loan commitments decreasedto $0.9 million at March 31, 2009, as compared to $1.2 million at December 31,2008.

 

Thebeginning balances of allowance for losses on loans and loan commitments forthe first quarter of 2009 and fourth quarter of 2008 were $29.4 million and$26.0 million, respectively. During the first quarter of 2009, the provisionfor losses on loans and loan commitments were $6.7 million, increased from $5.9million in the fourth quarter of 2008, while actual charge-offs were lowered inthe first quarter of 2009 at $2.4 million from $2.6 million in the previousquarter. As a result, the total allowance for losses on loans and loan commitmentsincreased $4.4 million to $35.1 million as of March 31, 2009, as comparedwith $30.7 million as of December 31, 2008.

 

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Thetable below summarizes for the end of the periods indicated, the balance ofallowance for losses on loans and its percent of such loan balance for eachtype of loan:

 
| ** **                  | ** ** | **Distribution and Percentage Composition of Allowance for Losses on Loans** | ** ** |
|-----------------------------|------------|---------------------------------------------------------------------------------------------------------------------------|------------|
| ** **                  | ** ** | **(dollars in thousands)**                                                                                      | ** ** |
| ** **                  | ** ** | **March 31, 200****9**                                                                                          | ** ** | **December 31, 200****8** | ** ** |
| **Balance as of** | ** ** | **Reserve  Amount**                                                                                                       | ** ** | **Total  Loans** | ** ** | **(%)** | ** ** | **Reserve  Amount** | ** ** | **Total  Loans** | ** ** | **(%)** | ** ** |
| Applicable to:         |       |                                                                                                                      |       |   |   |   |   |   |   |   |   |   |   |
| Construction loans          |       | $                                                                                                                         | 215        |   | $ | 42,075 |   | 0.51 | % | $ | 190 |   | $ | 43,180 |   | 0.44 | % |
| Real estate secured         |       | 14,303                                                                                                                    |       | 1,639,578 |   | 0.87 | % | 11,628 |   | 1,599,627 |   | 0.73 | % |
| Commercial and industrial   |       | 19,171                                                                                                                    |       | 377,211 |   | 5.10 | % | 17,209 |   | 389,217 |   | 4.44 | % |
| Consumer                    |       | 467                                                                                                                       |       | 18,854 |   | 2.48 | % | 410 |   | 23,669 |   | 1.73 | % |
| Total allowance             |       | $                                                                                                                         | 34,156     |   | $ | 2,077,718 |   | 1.65 | % | $ | 29,437 |   | $ | 2,055,693 |   | 1.43 | % |

 

Thetable below summarizes for the periods indicated, loan balances at the end ofeach period, the daily averages during the period, changes in the allowance forlosses on loans arising from loans charged off, recoveries on loans previouslycharged off, additions to the allowance and certain ratios related to theallowance for losses on loans and loan commitments:

 

**Allowance for Losses on Loans and LoanCommitments********(dollarsin thousands)**

 
| ** **                                                                  | ** ** | **Three Months  Ended  March 31, 200****9** | ** ** | **Year ended  December 31, 200****8** | ** ** | **Three Months  Ended  March 31, 200****8** | ** ** |
|-----------------------------------------------------------------------------|------------|------------------------------------------------------------|------------|------------------------------------------------------|------------|------------------------------------------------------------|------------|
| Allowance for losses on loans:                                              |       |                                                       |       |                                                 |       |                                                       |       |
| **Balances at beginning of period**                                         |       | $                                                          | 29,437     |                                                 | $          | 21,579                                                     |       | $ | 21,579 |   |
| Actual charge-offs:                                                         |       |                                                       |       |                                                 |       |                                                       |       |
| Real estate secured                                                         |       | 672                                                        |       | 1,070                                                |       | 3                                                          |       |
| Commercial and industrial                                                   |       | 1,629                                                      |       | 5,174                                                |       | 826                                                        |       |
| Consumer                                                                    |       | 102                                                        |       | 903                                                  |       | 310                                                        |       |
| Total charge-offs                                                           |       | 2,403                                                      |       | 7,147                                                |       | 1,139                                                      |       |
| **Recoveries on loans previously charged off:**                             |       |                                                       |       |                                                 |       |                                                       |       |
| Real estate secured                                                         |       | —                                                     |       | —                                               |       | 1                                                          |       |
| Commercial and industrial                                                   |       | 70                                                         |       | 1,927                                                |       | 92                                                         |       |
| Consumer                                                                    |       | 43                                                         |       | 213                                                  |       | 27                                                         |       |
| Total recoveries                                                            |       | 113                                                        |       | 2,140                                                |       | 120                                                        |       |
| Net loan charge-offs                                                        |       | 2,290                                                      |       | 5,007                                                |       | 1,019                                                      |       |
| **Provision for losses on loans**                                           |       | 6,700                                                      |       | 12,110                                               |       | 1,400                                                      |       |
| Add: credit for losses on loan commitments                                  |       | (309                                                       | )          | (755                                                 | )          | (112                                                       | )          |
| **Balances at end of period**                                               |       | $                                                          | 34,156     |                                                 | $          | 29,437                                                     |       | $ | 22,072 |   |
|                                                                        |       |                                                       |       |                                                 |       |                                                       |       |
| Allowance for losses on loan commitments:                                   |       |                                                       |       |                                                 |       |                                                       |       |
| **Balances at beginning of period**                                         |       | $                                                          | 1,243      |                                                 | $          | 1,998                                                      |       | $ | 1,998 |   |
| Credit for losses on loan commitments                                       |       | (309                                                       | )          | (755                                                 | )          | (112                                                       | )          |
| **Balances at end of period**                                               |       | $                                                          | 934        |                                                 | $          | 1,243                                                      |       | $ | 1,886 |   |
|                                                                        |       |                                                       |       |                                                 |       |                                                       |       |
| **Ratios:**                                                                 |       |                                                       |       |                                                 |       |                                                       |       |
| Net loan charge-offs to average total loans                                 |       | 0.11                                                       | %          | 0.26                                                 | %          | 0.06                                                       | %          |
| Allowance for losses on loans to total  loans at period-end                 |       | 1.65                                                       | %          | 1.43                                                 | %          | 1.17                                                       | %          |
| Net loan charge-offs to allowance for  losses on loans at period-end        |       | 6.70                                                       | %          | 17.01                                                | %          | 4.62                                                       | %          |
| Net loan charge-offs to provision for  losses on loans and loan commitments |       | 34.18                                                      | %          | 41.35                                                | %          | 72.79                                                      | %          |

 

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Contractual Obligations

### ** **

Thefollowing table represents our aggregate contractual obligations to make futurepayments (principal andinterest) as of March 31, 2009:

 
| **(****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                              |       | $                               | 235,231    |                                                  | $          | 113,963                                                 |       | $                         | —     |      | $          | — |   | $ | 349,194 |   |
| Junior subordinated debentures               |       | 2,773                           |       | 3,791                                                 |       | 11,252                                                  |       | 77,321                    |       | 95,137    |       |
| Operating leases                             |       | 3,049                           |       | 4,115                                                 |       | 2,882                                                   |       | 2,832                     |       | 12,878    |       |
| Time deposits                                |       | 1,174,660                       |       | 11,304                                                |       | —                                                  |       | —                    |       | 1,185,964 |       |
| Total                                        |       | $                               | 1,415,713  |                                                  | $          | 133,173                                                 |       | $                         | 14,134     |      | $          | 80,153 |   | $ | 1,643,173 |   |

 

**Off-Balance Sheet Arrangements**

 

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

 

As of March 31,2009 and December 31,2008, we had commitments to extendcredit of $146.4 million and $153.4 million, respectively.  Obligations under standby letters of creditwere $12.8 million and $12.7 million at March 31, 2009 and December 31, 2008, respectively, and our obligationsunder commercial letters of credit were $7.8 million and $15.1million at such dates, respectively.

 

In thenormal course of business, we are involved in various legal claims. We havereviewed all legal claims against us with counsel and have taken intoconsideration the views of counsel as to the outcome of the claims.  In our opinion, the final disposition of allsuch claims will not have a material adverse effect on our financial positionand results of operations.

 

**Deposits and OtherSources of Funds**

** **

*Deposits*

* *

Depositsare our primary source of funds.  Totaldeposits increased to $1.91 billion at March 31, 2009, as compared with $1.81 billion at December 31,2008.

 

Totalnon-time deposits at March 31, 2009 increased to $738.6 million over thelast three months from $706.2 million at December 31, 2008, while timedeposits increased to $1.17 billion at March 31, 2009 from $1.11 billionat December 31, 2008.

 

Theincrease in time deposits was largely due to the success of our marketingcampaign. We took advantage of the low interest rate environment to reduce theinterest rates on our time deposits. The average rate that we paid on timedeposits in denominations of $100,000 or more for the first quarter of 2009 decreased to 2.86%, from 4.46% in the same periods of the prior year. However, in order tokeep the interest expense down, we plan to closely monitor interest rate trendsand changes as well as our time deposit rates to maximize our net interestmargin and profitability.

 

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Thefollowing table summarizes the distribution of average daily deposits and theaverage daily rates paid for the quarters indicated:

 

**AverageDeposits**

**(dollarsin thousands)**

 
| ** **                                                         | ** ** | **March ****3****1****, 200****9** | ** ** | **December 31, 200****8** | ** ** |
|--------------------------------------------------------------------|------------|----------------------------------------------|------------|-------------------------------------|------------|
| **For the quarters ended:**                         | ** ** | **Average  Balance**                         | ** ** | **Average  Rate**                   | ** ** | **Average  Balance** | ** ** | **Average  Rate** | ** ** |
|                                                               |       |                                         |       |                                |       |   |   |   |   |
| Demand, non-interest-bearing                                       |       | $                                            | 276,740    |                                |       | ** ** | $ | 281,622 | ** ** | ** ** | ** ** |
| Money market                                                       |       | 362,733                                      |       | 2.57                                | %          | 380,275 |   | 3.06 | % |
| Super NOW                                                          |       | 19,557                                       |       | 0.94                                | %          | 18,989 |   | 1.23 | % |
| Savings                                                            |       | 43,241                                       |       | 3.63                                | %          | 43,029 |   | 3.63 | % |
| Time certificates of deposit in  denominations of $100,000 or more |       | 933,494                                      |       | 2.86                                | %          | 834,971 |   | 3.17 | % |
| Other time deposits                                                |       | 196,714                                      |       | 3.54                                | %          | 211,351 |   | 3.54 | % |
| Total deposits                                                     |       | $                                            | 1,832,479  |                                | 2.44       | % | $ | 1,770,237 |   | 2.68 | % |

** **

Thescheduled maturities of our time deposits in denominations of $100,000 orgreater at March 31, 2009 were as follows:

 

**Maturities of Time Deposits of $100,000 or More,at**March 31,2009

**(dollars in thousands)**

 
| Three months or less                  |   | $       | 545,330 |   |
|---------------------------------------|--------|---------|---------|--------|
| Over three months through six months  |   | 278,159 |    |
| Over six months through twelve months |   | 139,065 |    |
| Over twelve months                    |   | 6,447   |    |
| Total                                 |   | $       | 969,001 |   |

 

Anumber of clients carry deposit balances of more than 1% of our total deposits,but the California State Treasury was the only depositor that had a depositbalance representing more than 5% of our total deposits at March 31, 2009 and December 31, 2008.

 

Inaddition to our regular customer base, we also accept brokered deposits on aselective basis at reasonable interest rates to augment deposit growth.  In thefirst three months of 2009, in spite of the ongoing financial crisis and stiffcompetition for customer deposits among banks within the markets where we dobusiness, we were able to increase non-interest bearing demand deposits to$298.0 million at March 31, 2009 from $277.5 million at December 31,2008, At the same time, we decreased broker deposits to $106.3 million at March 31, 2009 from $147.9 million at December 31,2008.  Most of the $106.3 millionbrokered deposits will mature within one year. In addition, because of the current low interest rate environment, ourtime deposits of $100,000 or more also increased to $969.0 million at March 31,2009 from $902.8 million at December 31, 2008.  We expect that interest rates will trendupward when the Federal Reserve Board starts increasing the federal funds rate.To improve our net interest margin as well as to maintain flexibility in ourcost of funds, we will constantly monitor our deposit mix to minimize risk offund cost.

 

*FHLBBorrowings*

* *

Although deposits are the primary source of fundsfor our lending and investment activities and for general businesspurposes, we may obtain advances from the FHLB as an alternative to retaildeposit funds.  We have historicallyutilized borrowings from the FHLB in order to take advantage of theirflexibility and comparatively low cost. Due to the ongoing credit crisis and stiff competition for customerdeposits among banks, we have increased FHLB borrowing as an alternative tofund our growing loan portfolio. See “LiquidityManagement” below for details relating to the FHLB borrowings program.

 

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The followingtable is a summary of FHLB borrowings for the quarters indicated:

 
| **(dollars in thousands)**         | ** ** | **March 31****, 2009** | ** ** | **December 31, ****2008** | ** ** |
|----------------------------------------------|------------|----------------------------------|------------|-------------------------------------|------------|
| Balance at quarter-end             |       | $                                | 340,000    |                                | $          | 260,000 |   |
| Average balance  during the quarter          |       | $                                | 325,300    |                                | $          | 338,739 |   |
| Maximum amount  outstanding at any month-end |       | $                                | 340,000    |                                | $          | 370,000 |   |
| Average interest  rate during the quarter    |       | 1.95                             | %          | 2.73                                | %          |
| Average interest  rate at quarter-end        |       | 1.94                             | %          | 3.16                                | %          |

** **

**Asset/Liability Management**

** **

Weseek to ascertain optimum and stable utilization of available assets andliabilities as a vehicle to attain our overall business plans andobjectives.  In this regard, we focus onmeasurement 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 “RiskFactors” section of our Annual Report on Form 10-K for the year ended December 31,2008.  Information concerning interestrate risk management is set forth under “Item 3 - Quantitative and QualitativeDisclosures about Market Risk.”

 

**Liquidity Management**

** **

Maintenanceof adequate liquidity requires that sufficient resources be available at alltimes to meet our cash flow requirements. Liquidity in a banking institution is required primarily to provide fordeposit withdrawals and the credit needs of its customers and to take advantageof investment opportunities as they arise. Liquidity management involves our ability to convert assets into cash orcash equivalents without incurring significant loss, and to raise cash ormaintain funds without incurring excessive additional cost.  For this purpose, we maintain a portion of ourfunds in cash and cash equivalents, deposits in other financial institutionsand loans and securities available for sale. Our liquid assets at March 31, 2009 and December 31, 2008 totaled approximately $486.5 million and $345.1 million, respectively.  Our liquidity levels measured as the percentageof liquid assets to total assets were 18.6%and 14.1% at March 31, 2009 and December 31, 2008, respectively.

 

Our primary sources of liquidity are derived from ourcore operating activities of accepting customer deposits. This funding sourceis augmented by payments of principal and interest on loans, the routineliquidation of securities from the available-for-sale portfolio andsecuritizations of loans. In addition, government programs, such as TLGP, mayinfluence deposit behavior. Primary use of funds include withdrawal of andinterest payments on deposits, originations and purchases of loans, purchasesof investment securities, and payment of operating expenses.

 

As asecondary source of liquidity, we accept broker deposits, federal funds facilities,repurchase agreement facilities, and obtain advances from the FHLB tosupplement our supply of lendable funds and to meet deposit withdrawalrequirements.  Advances from the FHLB aretypically secured by our loans and stock issued by the FHLB.  Advances are made pursuant to severaldifferent programs.  Each credit programhas its own interest rate and range of maturities.  Depending on the program, limitations on theamount of advances are based either on a fixed percentage of an institution’snet worth or on the FHLB’s assessment of the institution’s creditworthiness. Asof March 31, 2009,our borrowing capacity from the FHLB was about $687.6 million and the outstanding balance was $340.0 million, or approximately 49.4% of our borrowing capacity.

 

**Capital Resources andCapital Adequacy Requirements**

** **

Historically,our primary source of capital has been internally generated operating incomethrough retained earnings.  In order toensure adequate levels of capital, we conduct ongoing assessments of projectedsources and uses of capital in conjunction with projected increases in assetsand level of risks.  We have considered,and we will continue to consider, additional sources of capital as the needarises, whether through the issuance of additional equity, debt or hybridsecurities. In December of 2008, we received a TroubledAsset Relief Program (“TARP”) investmentfrom the U.S. Treasury in the amount of$62.2 million.

 

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We aresubject to various regulatory capital requirements administered by federalbanking agencies. Under capital adequacy guidelines and the regulatoryframework for prompt corrective action, we must meet specific capitalguidelines that rely on quantitative measures of our assets, liabilities andcertain off-balance-sheet items as calculated under regulatory accountingpractices.  Failure to meet minimumcapital requirements can trigger regulatory actions under the prompt correctiveaction rules that could have a material adverse effect on our financialcondition and operations.  Promptcorrective action may include regulatory enforcement actions that restrictdividend payments, require the adoption of remedial measures to increasecapital, terminate FDIC deposit insurance, and mandate the appointment of aconservator or receiver in severe cases. In addition, failure to maintain a well-capitalized status may adverselyaffect the evaluation of regulatory applications for specific transactions andactivities, including acquisitions, continuation and expansion of existingactivities, and commencement of new activities, and could adversely affect ourbusiness relationships with our existing and prospective clients.  The aforementioned regulatory consequencesfor failing to maintain adequate ratios of Tier 1 and Tier 2 capital could havea material adverse effect on our financial condition and results of operations.  Our capital amounts and classificationare also subject to qualitative judgments by regulators about components, riskweightings, and other factors.  See Part I,Item 1 “Description of Business — Regulation and Supervision — Capital AdequacyRequirements” in our Annual Report on Form 10-K for the year ended December 31,2008 for additional informationregarding regulatory capital requirements.

 

As of March 31,2009, we were qualified as a “well capitalized institution” under theregulatory framework for prompt corrective action.  The following table presents the regulatorystandards for well-capitalized institutions, compared to capital ratios as ofthe dates specified for the Company and the Bank:

 

**Wilshire Bancorp, Inc.**

 
| ** **                              | ** ** | **Regulatory  Adequately-  Capitalized** | ** ** | **Regulatory  Well-  Capitalized** | ** ** | **Actual ratios for the Company as of:** | ** ** |
|-----------------------------------------|------------|------------------------------------------|------------|------------------------------------|------------|------------------------------------------------------------------------|------------|
| ** **                              | ** ** | **Standards**                            | ** ** | **Standards**                      | ** ** | **March 31****, 2009**                                       | ** ** | **December 31, 2008** | ** ** | **March 31****, 2008** | ** ** |
| Total capital to  risk-weighted assets  |       | 8                                        | %          | 10                                 | %          | 16.69                                                                  | %          | 17.09 | % | 14.37 | % |
| Tier I capital  to risk-weighted assets |       | 4                                        | %          | 6                                  | %          | 15.15                                                                  | %          | 15.36 | % | 11.75 | % |
| Tier I capital  to average assets       |       | 4                                        | %          | 5                                  | %          | 12.79                                                                  | %          | 13.25 | % | 10.24 | % |

 

**Wilshire State Bank**

 
| ** **                              | ** ** | **Regulatory  Adequately-  Capitalized** | ** ** | **Regulatory  Well-  Capitalized** | ** ** | **Actual ratios for the Bank as of:** | ** ** |
|-----------------------------------------|------------|------------------------------------------|------------|------------------------------------|------------|---------------------------------------------------------------------|------------|
| ** **                              | ** ** | **Standards**                            | ** ** | **Standards**                      | ** ** | **March 31****, 2009**                                    | ** ** | **December 31, 2008** | ** ** | **March 31****, 2008** | ** ** |
| Total capital to  risk-weighted assets  |       | 8                                        | %          | 10                                 | %          | 16.21                                                               | %          | 13.59 | % | 13.50 | % |
| Tier I capital  to risk-weighted assets |       | 4                                        | %          | 6                                  | %          | 14.67                                                               | %          | 11.86 | % | 11.73 | % |
| Tier I capital  to average assets       |       | 4                                        | %          | 5                                  | %          | 12.39                                                               | %          | 10.24 | % | 10.24 | % |

 

Forthe purposes of our regulatory capital ratio computation, our equity capitalincludes the $62.2 million Series A Preferred Stock issued by the Companyto the U. S. Treasury as part of our participation of the CPP. As of March 31,2009, the Company’s total Tier 1 capital (which includes our equity capital,plus junior subordinated debentures, less goodwill and intangibles) was $321.4million, as compared with $320.4 million as of December 31, 2008. For theBank level, Tier 1 capital was $311.1 million as of March 31, 2009, as comparedwith $247.3 million as of December 31, 2008.

 

## **Item 3.**                                                           Quantitativeand Qualitative Disclosures aboutMarket Risk

## ** **

Marketrisk is the risk of loss from adverse changes in market prices and rates.  Our market risk arises primarily frominterest rate risk inherent in lending, investing and deposit takingactivities.  Our profitability isaffected by fluctuations in interest rates. A sudden and substantial change ininterest rates may adversely impact our earnings to the extent that theinterest rates borne by assets and liabilities do not change at the same speed,to the same extent or on the same basis. We evaluate market risk pursuant topolicies reviewed and approved annually by our Board of Directors.  The Board delegates responsibility for marketrisk management to the Asset & Liability Management (“ALM”) Committee,which reports monthly to the Board on activities related to market riskmanagement.  As part of the management ofour market risk, ALM committee may direct changes in the mix of assets andliabilities.  To that end, we activelymonitor and manage interest rate risk exposures.

 

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Interestrate risk management involves development, analysis, implementation andmonitoring of earnings to provide stable earnings and capital levels duringperiods of changing interest rates.  Inthe management of interest rate risk, we utilize monthly gap analysis andquarterly simulation modeling to determine the sensitivity of net interestincome and economic value sensitivity of the balance sheet.  These techniques are complementary and areused together to provide a more accurate measurement of interest rate risk.

 

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

 

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

 

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

 

Although the interest rate sensitivity gap is a usefulmeasurement and contributes to effective asset and liability management, it isdifficult to predict the effect of changing interest rates based solely on thatmeasure.  As a result, the ALM committeealso regularly uses simulation modeling as a tool to measure the sensitivity ofearnings and net portfolio value, or NPV, to interest rate changes.  The NPV is defined as the net present valueof an institution’s existing assets, liabilities and off-balance sheetinstruments.  The simulation modelcaptures all assets, liabilities and off-balance sheet financial instrumentsand accounts for significant variables that are believed to be affected byinterest rates.  These include prepaymentspeeds on loans, cash flows of loans and deposits, principal amortization, calloptions on securities, balance sheet growth assumptions and changes in raterelationships as various rate indices react differently to market rates.

 

Although the simulation measures the volatility of netinterest income and net portfolio value under immediate increase or decrease ofmarket interest rate scenarios in 100 basis point increments, our main concernis the negative effect of a reasonably-possible worst scenario.  The ALM committee policy prescribes that forthe worst possible rate-changescenario the possible reduction of net interest income and NPV should notexceed 20% of the base net interest income and 25% of the base NPV,respectively.

 

In general, based upon our current mix of deposits,loans and investments, decrease in interest rates would result an increase inour net interest margin and NPV. An increase in interest rates would beexpected to have opposite effect. However, given in the record low interestrate environment, either an increase or decrease in interest rates will resultin higher net interest margin, while either an increase or decrease in interestrates will lower NPV as shown in our simulation measures below.

 

Management believes that the assumptions used toevaluate the vulnerability of our operations to changes in interest ratesapproximate actual experience and considers them reasonable; however, theinterest rate sensitivity of our assets and liabilities and the estimatedeffects of changes in interest rates on our net interest income and NPV couldvary substantially if different assumptions were used or actual experiencediffers from the historical experience on which they are based.

 

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Thefollowing table sets forth the interest rate sensitivity of ourinterest-earning assets and interest-bearing liabilities as of March 31,2009 using the interest rate sensitivity gap ratio.  For purposes of the following table, an assetor liability is considered rate-sensitive within a specified period when it canbe repriced or matures within its contractual terms.  Actual payment patterns may differ fromcontractual payment patterns:

 

**Interest Rate Sensitivity Analysis**(dollars in thousands)

 
| ** **                                                                                  | ** ** | **At March 31, 2009**                        | ** ** |
|---------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------|------------|
| ** **                                                                                  | ** ** | **Amounts Subject to Repricing Within** | ** ** |
| ** **                                                                                  | ** ** | **0-3 months**                                         | ** ** | **3-12 months** | ** ** | **Over 1 to 5 years** | ** ** | **After 5 years** | ** ** | **Total** | ** ** |
| **Interest-earning  assets:**                                                               |       |                                                        |       |   |   |   |   |   |   |   |   |
| Gross loans(1)                                                                              |       | $                                                           | 1,055,360  |   | $ | 147,906 |   | $ | 741,957 |   | $ | 94,842 |   | $ | 2,040,065 |   |
| Investment  securities                                                                      |       | 15,927                                                      |       | 53,302 |   | 43,796 |   | 207,163 |   | 320,188 |   |
| Federal funds  sold and cash equivalents                                                    |       | 85,001                                                      |       | — |   | — |   | — |   | 85,001 |   |
| Interest-earning  deposits                                                                  |       | —                                                      |       | — |   | — |   | — |   | — |   |
| Total                                                                                       |       | $                                                           | 1,156,288  |   | $ | 201,208 |   | $ | 785,753 |   | $ | 302,005 |   | $ | 2,445,254 |   |
|                                                                                        |       |                                                        |       |   |   |   |   |   |   |   |   |
| **Interest-bearing  liabilities:**                                                          |       |                                                        |       |   |   |   |   |   |   |   |   |
| Savings deposits                                                                            |       | $                                                           | 44,118     |   | $ | — |   | $ | — |   | $ | — |   | $ | 44,118 |   |
| Time deposits of  $100,000 or more                                                          |       | 545,331                                                     |       | 417,223 |   | 6,447 |   | — |   | 969,001 |   |
| Other time  deposits                                                                        |       | 84,143                                                      |       | 109,122 |   | 4,558 |   | — |   | 197,823 |   |
| Other  interest-bearing deposits                                                            |       | 396,461                                                     |       | — |   | — |   | — |   | 396,461 |   |
| FHLB borrowings                                                                             |       | 140,000                                                     |       | 130,000 |   | 70,000 |   | — |   | 340,000 |   |
| Junior  Subordinated Debentures                                                             |       | 71,857                                                      |       | — |   | 15,464 |   | — |   | 87,321 |   |
| Total                                                                                       |       | $                                                           | 1,281,910  |   | $ | 656,345 |   | $ | 96,469 |   | $ | — |   | $ | 2,034,724 |   |
|                                                                                        |       |                                                        |       |   |   |   |   |   |   |   |   |
| Interest rate  sensitivity gap                                                              |       | $                                                           | (125,622   | ) | $ | (455,137 | ) | $ | 689,284 |   | $ | 302,005 |   | $ | 410,530 |   |
| Cumulative  interest rate sensitivity gap                                                   |       | (125,622                                                    | )          | (580,759 | ) | 108,525 |   | 410,530 |   |   |   |
| Cumulative  interest rate sensitivity gap ratio (based on average interest-earning  assets) |       | -5.22                                                       | %          | -24.13 | % | 4.51 | % | 17.06 | % |   |   |
|                                                                                             |            |                                                             |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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(1) Excludes the gross amount ofnon-accrual loans of approximately $37.7million at March 31, 2009.

 

Thefollowing table sets forth our estimated net interest income over a 12-monthperiod and NPV based on the indicated changes in market interest rates as of March 31,2009.  All assets presented in this tableare held-to-maturity or available-for-sale. At March 31, 2009, we had no trading investment securities:

 
| ** **                                    | ** ** | **Net Interest Income**                                      | ** ** | ** **            | ** ** | ** **                                  | ** ** | ** **            | ** ** |
|-----------------------------------------------|------------|------------------------------------------------------------------------|------------|-----------------------|------------|---------------------------------------------|------------|-----------------------|------------|
| **Change********(in basis points)** | ** ** | **(next twelve months)****(dollars in thousands)** | ** ** | **%**** Change** | ** ** | **NPV****(dollars in thousands)** | ** ** | **%**** Change** | ** ** |
| +200                                          |       | $                                                                      | 93,410     |                  | 0.6        | %                                           | $          | 280,468               |       | -3.9 | % |
| +100                                          |       | 93,532                                                                 |       | 0.7                   | %          | 290,189                                     |       | -0.6                  | %          |
| 0                                             |       | 92,852                                                                 |       | —                |       | 291,941                                     |       | —                |       |
| -100                                          |       | 98,561                                                                 |       | 6.1                   | %          | 283,901                                     |       | -2.8                  | %          |
| -200                                          |       | 104,567                                                                |       | 12.6                  | %          | 274,354                                     |       | -6.0                  | %          |
|                                               |            |                                                                        |            |                       |            |                                             |            |                       |            |  |  |

 

Our strategies in protecting both net interest incomeand economic value of equity from significant movements in interest ratesinvolve restructuring our investment portfolio and using FHLB advances.  Although our policy also permits us to purchase rate caps and floors and interest rate swaps, we arenot currently engaged in any of those types of transactions.

 

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

 

As of March 31,2009, we carried out an evaluation, under the supervision and with theparticipation of our management, including our chief executive officer andchief financial officer, regardingthe effectiveness of the design and operation of our “disclosurecontrols and procedures,” as defined under Exchange Act Rules 13a-15(e) and15d-15(e).

 

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Basedon this evaluation, our chief executive officer and chief financial officerconcluded that, as of March 31, 2009, such disclosure controls andprocedures were effective to ensure that information required to be disclosedby 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 andforms of the SEC, and accumulated and communicated to our management, includingour chief executive officer and chief financial officer, as appropriate toallow timely decisions regarding required disclosure.

 

Indesigning and evaluating the disclosure controls and procedures, our managementrecognized that any controls and procedures, no matter how well designed andoperated, can only provide reasonable assurance in achieving the desired controlobjectives and in reaching a reasonable level of assurance our managementnecessarily was required to apply its judgment in evaluating the cost-benefitrelationship of possible controls and procedures.

 

Therewere no changes in our internal controls over financial reporting during thequarter ended March 31, 2009 that materially affected, or are reasonablylikely to materially affect, our internal controls over financial reporting.

 

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# **Part II.   OTHERINFORMATION**

# ** **

## **Item 1.**                           LegalProceedings

## ** **

In thenormal course of business, we are involved in various legal claims. We havereviewed all legal claims against us with counsel and have taken intoconsideration the views of such counsel as to the outcome of the claims. We donot believe the final disposition of all such claims will have a materialadverse effect on our financial position or results of operations.

 

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

## ** **

Thereare no material changes to our risk factors as presented in the Company’s 2008 Form 10-Kunder the heading “Item 1A. Risk Factors.”

 

## **Item 2.**                           UnregisteredSales of Equity Securities and Use of Proceeds

## ** **

None.

 

## **Item 3.**                           DefaultsUpon Senior Securities

## ** **

None.

 

## **Item 4.**                           Submissionof Matters to a Vote of Security Holders

## ** **

None.

 

## **Item 5.**                           OtherInformation

## ** **

None.

 

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EXHIBITS

 

**Exhibit Table**

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

** **

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** **

**SIGNATURES**

** **

Pursuant to therequirement of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned, thereuntoduly authorized.

 
|                   | WILSHIRE BANCORP, INC. |
|------------------------|------------------------|
|                   |                   |
|                   |                   |
| Date: May 8, 2009 | By:                    | /s/ Alex Ko |
|                   |                   | Alex Ko |
|                   |                   | Chief Financial Officer |
|                   |                   | (Principal Financial  and Accounting Officer) |

 

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