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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

FORM 10-Q

          Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

          As of September 30, 2002, there were 7,088,591 outstanding shares of the issuer’s Common Stock with no par value.

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FORM 10-Q

Index

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PART I - FINANCIAL INFORMATION

Item 1:      INTERIM CONSOLIDATED FINANCIAL STATEMENTS

CENTER FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
September 30, 2002 and December 31, 2001

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

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CENTER FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Three and Nine Month Periods Ended September 30, 2002 And 2001 (Unaudited)

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

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CENTER FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
September 30, 2002 and December 31, 2001

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CENTER FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
September 30, 2002 and December 31, 2001

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CENTER FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, 2002 And 2001 (Unaudited)

(Continued)

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CENTER FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, 2002 And 2001 (Unaudited)

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CENTER FINANCIAL CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

1.     THE BUSINESS OF CENTER FINANCIAL CORPORATION

          Center Financial Corporation (“Center Financial”) was incorporated on April 19, 2000 as a California corporation initially under the name of “Center Financial Services” to be a subsidiary of California Center Bank (the “Bank), and was subsequently renamed Center Financial Corporation to become the bank holding company for the Bank.    The new corporate structure will permit Center Financial and the Bank greater flexibility in terms of operations, expansion, and diversification. In June 2002, Center Financial filed a registration statement to register its common stock with the Securities and Exchange Commission (the “SEC”) pursuant to the terms of a Plan of Reorganization and Agreement of Merger dated June 7, 2002.  The Plan of Reorganization and Agreement of Merger provided for the exchange of shares of the Bank for shares of Center Financial on a share-for-share basis (the “Reorganization”).  The registration statement was declared effective in September 2002.   Center Financial also registered its common stock with the SEC pursuant to section 12(g) of the Securities Exchange Act of 1934, as amended. The Reorganization was consummated on October 28, 2002, at which time each issued and outstanding share of the California Center Bank was exchanged on a share-for-share basis for a share of Center Financial, and the Bank became a wholly owned subsidiary of Center Financial.  As of September 30, 2002, Center Financial had not engaged in any business since its incorporation. In the Reorganization, the Bank will continue its operations as presently conducted under its Management, but the Bank will be a wholly owned subsidiary of Center Financial.   Center Financial, the Bank, and the subsidiary of the Bank (CB Capital Trust) discussed below, are collectively referred to herein as the “Company”.  The financial statements for Center Financial presented herein are presented pro forma, on a consolidated basis, assuming the Reorganization had been consummated as of the dates of the respective financial statements.

          The Bank is a California state-chartered and FDIC-insured financial institution, which was incorporated in 1985 and commenced operations in March 1986.  The Bank’s headquarters is located at 3435 Wilshire Boulevard, Suite 700, Los Angeles, California 90010.  The Bank is a community bank providing comprehensive financial services for small to medium sized business owners, mostly in Southern California.  The Bank specializes in commercial loans, which are mostly secured by real property, to multi-ethnic and small business customers.  In addition, the Bank is a Preferred Lender of Small Business Administration (SBA) loans and provides trade finance loans and other international banking products.  The Bank’s primary market is the greater Los Angeles metropolitan area, including Orange, San Bernardino, and San Diego counties, primarily focused in areas with high concentrations of Korean-Americans. The Bank currently has twelve full-service branch offices located in Los Angeles, Orange, San Bernardino, and San Diego counties.  The Bank opened all 12 branches as de novo branches, including the Oxford Branch, which began its operations in September 2002.  The Oxford Branch is situated in the heart of the Korean community in Los Angeles.  The Bank also operates three Loan Production Offices (“LPO’s”) in Phoenix, Seattle, and Denver.

          Additionally, CB Capital Trust, a Maryland real estate investment trust, was formed as a subsidiary of the Bank in August 2002 with the primary business purpose of investing in the Bank’s real-estate related assets, and should ultimately reduce state taxes and increase its earnings.  CB Capital Trust was capitalized in September 2002, whereby the Bank exchanged real estate related assets for 100% of the common stock of the CB Capital Trust.  Additionally, it is anticipated that CB Capital Trust will issue preferred stock to at least 100 employees.  The value of preferred shares issued to each employee will be minimal.

          Center Financial’s principal source of income is currently dividends from the Bank, but Center Financial intends to explore supplemental sources of income in the future.  The expenditures of Center Financial, including the holding company formation related legal and accounting professional fees, SEC Registration, NASDAQ listing fees and the cost of servicing debt, will generally be paid from dividends paid to Center Financial by the Bank.

2.     BASIS OF PRESENTATION

          The consolidated financial statements include the accounts of Center Financial, the Bank, and CB Capital Trust.  Intercompany transactions and accounts have been eliminated in consolidation.

          The interim consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for unaudited financial statements. The information furnished in these interim statements reflects all adjustments which are, in the opinion of Management, necessary for the fair statement of results for the

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periods presented. All adjustments are of a normal and recurring nature. Results for the nine months ended September 30, 2002 are not necessarily indicative of the results which may be expected for any other interim period or for the year as a whole. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted.  The unaudited financial statements should be read in conjunction with the audited financial statements and notes thereto as of and for each of the years in the three-year period ended December 31, 2001 included in Company’s Form S-4 Registration Statement effective September 25, 2002.

          Certain reclassifications have been made to the prior period financial statements to conform to the current period presentation.  

3.     SIGNIFICANT ACCOUNTING POLICIES

          The Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 133, Accounting for Derivative Instruments and Hedging Activities as amended by SFAS No. 137, Accounting for Derivative Instruments and Hedging Activities – Deferral of the Effective Date of SFAS No. 133 and SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities – Amendment of FAS 133 on January 1, 2001. There was no transition adjustment upon adoption by the Company. These statements establish accounting and reporting standards for derivative instruments and for hedging activities.  They require that an entity recognize all derivatives as either assets or liabilities in the balance sheets and measure those instruments at fair value.  If certain conditions are met, a derivative may be specifically designated as a fair value hedge, a cash flow hedge, or a hedge of foreign currency exposure.  The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation. 

          In accordance with these accounting standards, the Company has identified certain variable-rate loans as a source of interest rate risk to be hedged in connection with the Company’s overall asset-liability management process.  As these loans have contractually variable rates, there is a risk of fluctuation in interest income as interest rates rise and fall in future periods.  In response to this identified risk, the Company uses an interest rate swap as a cash flow hedge to hedge the interest rate risk associated with the cash flows of the specifically identified variable-rate loans. To qualify for hedge accounting, the Company must demonstrate that at the inception of the hedge and on an on-going basis that the changes in the fair value of the hedging instrument are expected to be perfectly effective in offsetting related changes in the cash flows of the hedged loans due to the matched terms in both the interest rate swap and the hedged loans.  Accordingly, the accumulated change in the fair value of the cash flow hedge is recorded in a separate component of stockholders’ equity, net of tax, while ineffective portions are recognized in earnings immediately. Revenues or expenses associated with the interest rate swap are accounted for on an accrual basis and are recognized as adjustments to interest income on loans, based on the interest rates currently in effect for the interest rate swap agreement.

4.     RECENT ACCOUNTING PRONOUNCEMENTS

          In June 2001, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 141, Accounting for Business Combinations, effective starting with fiscal years beginning after December 15, 2001.  This standard requires that all business combinations be accounted for by a single method – the purchase method and prohibits the use of the pooling-of-interests method for all business combinations initiated after June 30, 2001. This statement supersedes Accounting Principle Board Opinion (“APB”) Opinion No. 16, Business Combinations, and SFAS No. 38, Accounting for Contingencies of Purchased Enterprises.  This statement reflects the conclusion that virtually all business combinations are acquisitions and, thus, all business combinations should be accounted for in the same way that other asset acquisitions are accounted for – based on the values exchanged. The adoption of SFAS No. 141 did not have a material effect on the Company’s financial position, results of operations, or cash flows.

          In June 2001, the FASB issued SFAS No. 142, Accounting for Goodwill and Other Intangible Assets, effective starting with fiscal years beginning after December 15, 2001.  This standard establishes new accounting standards for goodwill and other intangible assets and continues to require the recognition of goodwill and other intangible assets as an asset but does not permit amortization of goodwill and other intangible assets as previously required by APB Opinion No. 17. The standard also establishes a new method of testing goodwill and other intangible assets for impairment. It requires goodwill and other intangible assets to be separately tested for impairment at a reporting unit level. The amount of goodwill determined to be impaired, if any, would be expensed to current operations. The adoption of SFAS No. 141 did not have a material effect on the Company’s financial position, results of operations, or cash flows.

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          In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets.  This standard supersedes SFAS No. 121, Accounting for the Impairment or Disposal of Long-Lived Assets to Be Disposed Of, but retains the requirements relating to recognition and measurement of an impairment loss and resolves certain implementation issues relating to recognition and measurement of an impairment loss and resolves certain implementation issues relating from SFAS No. 121.  This Statement is effective for fiscal years beginning after December 15, 2001.  The adoption of SFAS No. 144 did not have a material effect on the Company’s financial position, results of operations, or cash flows.

          In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections, which among various topics, eliminated the requirement that all forms of gains or losses on debt extinguishments, such as the liquidation of repurchase agreements, be reported as extraordinary items.  The adoption of SFAS No. 141 did not have a material effect on the Company’s financial position, results of operations, or cash flows.

          The FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities, in July 2002.  The standard requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan.  Examples of costs covered by the standard include lease termination costs and certain employee severance costs that are associated with a restructuring, discontinued operation, plant closing, or other exit or disposal activity.  Previous accounting guidance was provided by Emerging Issues Task Force (EITF) Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).”  SFAS 146 replaces Issue 94-3 and is to be applied prospectively to exit or disposal activities initiated after December 31, 2002. 

          In October 2002, the FASB issued SFAS No. 147, Acquisitions of Certain Financial Institutions, which provides guidance on the accounting for the acquisition of a financial institution.  This statement requires that the excess of the fair value of liabilities assumed over the fair value of tangible and identifiable intangible assets acquired in a business combination represents goodwill that should be accounted for under SFAS No. 142, Goodwill and Other Intangible Assets.  Thus, the specialized accounting guidance in paragraph 5 of SFAS No. 72, Accounting for Certain Acquisitions of Banking or Thrift Institutions, will not apply after September 30, 2002.  If certain criteria in SFAS No. 147 are met, the amount of the unidentifiable intangible asset will be reclassified to goodwill upon adoption of the statement.  Financial institutions meeting conditions outlined in SFAS No. 147 will be required to restate previously issued financial statements.  Additionally, the scope of SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, is amended to include long-term customer-relationship intangible assets such as depositor- and borrower-relationship intangible assets and credit cardholder intangible assets.  This statement is effective for the Company beginning October 1, 2002.  The Company has adopted the new standard as of October 1, 2002 and the adoption of this standard did not have a material impact on the Company’s financial position, results of operations, or cash flows.

5.     OTHER BORROWED FUNDS

          The Company generally borrows funds from the Treasury, Tax, and Loan Investment Program, which is administered by the Federal Reserve Bank.  Borrowings obtained from the Treasury, Tax, and Loan Investment Program mature within a month from the transaction date.  Under the program, the Company receives funds from the U.S. Treasury Department in the form of open-ended notes, up to a total of $2,200,000.  The Company has pledged U.S. government agencies and/or mortgage-backed securities with a total carrying value of $3,475,790 (available-for-sale at fair market value of $2,475,790 and held-to-maturity at amortized cost of $1,000,000) at September 30, 2002 and $3,530,499 (available-for-sale at fair market value of $2,530,499 and held-to-maturity at amortized cost of $1,000,000) at December 31, 2001, as collateral to participate in the program. 

          The borrowed amounts outstanding at September 30, 2002 and December 31, 2001, which includes Treasury Tax and Loan and notes issued to U.S. Treasury, were $2,334,723 and $324,401, respectively.  Interest expense on notes was $16,004 for the nine months ended September 30 2002 and $42,685 for the year ended December 31, 2001, reflecting average interest rates of 1.03% and 3.88%, respectively.

          In addition, the Company regularly uses Federal Home Loan Bank (“FHLB”) advances.  During the third quarter of 2002, the Company borrowed $10,000,000 from the Federal Home Loan Bank of San Francisco with note terms from 2 years to 15 years.  Notes of 10-year and 15-year terms are amortizing over the life of notes.  As of September 30, 2002, the amount of FHLB advances outstanding at September 30, 2002 and December 31, 2001 were $9,960,104 and $0, respectively.  The Company has pledged government agencies and/or mortgage-backed securities with a total carrying value of $11,609,194 (all

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available-for-sale securities at fair market value) at September 30, 2002.  Total interest expense on the notes was $70,769 and $0 for the nine months ended September 30 2002 and 2001.

6.     EARNINGS PER SHARE 

          The actual number of shares outstanding at September 30, 2002, was 7,088,591. Basic earnings per share is calculated on the basis of weighted average number of shares outstanding during the period.  Diluted earnings per share is calculated on the basis of weighted average shares outstanding during the period plus shares issuable upon assumed exercise of outstanding common stock options and warrants.

          The following table sets forth the Company’s earnings per share calculation for the three and nine months ended September 30, 2002 and 2001:

 7.     COMMITMENTS AND CONTINGENCIES

          The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers.  These financial instruments include commitments to extend credit, commercial letters of credit, standby letters of credit, and performance bonds. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets. 

          The Company’s exposure to credit loss is represented by the contractual notional amount of these instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments. 

          Commitments to extend credit are agreements to lend to a customer provided there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since certain of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of the collateral obtained, if deemed necessary by the Company upon extension of credit, is based on Management’s credit evaluation of the borrower.

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          Commercial letters of credit, standby letters of credit, and performance bonds are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in making loans to customers. The Company generally holds collateral supporting those commitments if deemed necessary.

          A summary of the notional amounts of the Company’s financial instruments relating to extension of credit with off-balance-sheet risk at September 30, 2002 and December 31, 2001 follows:

8.     FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

          As of September 30, 2002, the Company had three interest rate swap agreements at a notional amount of $65 million, wherein the Company receives a fixed rate of 5.89% at semi-annual intervals and 6.89% and 6.25% at quarterly intervals, respectively. The Company pays a floating rate at quarterly intervals for all three off-balance sheet interest rate swaps based on the Wall Street Journal published Prime Rate, on notional amounts of $20 million (original notional amount of  $45 million but terminated $25 million in August 2002), $20 million, and $25 million, respectively.  These contracts mature on October 30, 2003, May 10, 2005, and August 15, 2006, respectively.  At September 30, 2002, the Wall Street Journal published Prime Rate was 4.75 percent.  Interest income from loans was increased by $565,435 for the nine months ended September 30, 2002.  At September 30, 2002, the fair value of the interest rate swaps was at a favorable position of $1,031,506 net of tax of $748,487, and is included in accumulated other comprehensive income. At September 30, 2002, the related asset on the interest rate swap of $1,779,993 was included in other assets.

          In August 2001, the Company terminated a $25 million notional amount interest rate swap with a gain of  $201,000, which will be recognized over the remaining term of the interest rate swap agreement until October 2003 as yield adjustment of underlying loans.

          The credit risk associated with the interest rate swap agreements represents the accounting loss that would be recognized at the reporting date if the counterparty failed completely to perform as contracted and any collateral or security proved to be of no value.  To reduce such credit risk, the Company evaluates the counterparty’s credit rating and financial position.  In Management’s opinion, the Company did not have a significant exposure to the individual counterparty before the maturity of the interest rate swap agreements, because the counterparties to the interest rate swap agreements are large banks with strong credit ratings.

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          The following discussion provides information about the results of operations, financial condition, liquidity, and capital resources of the Company. This information is intended to facilitate the understanding and assessment of significant changes and trends related to the financial condition of the Company and its operations. This discussion and analysis should be read in conjunction with the audited financial statements and notes thereto as of and for each of the years in the three-year period ended December 31, 2001 included in the Company’s Form S-4 Registration Statement effective September 25, 2002, and the accompanying interim unaudited consolidated financial statements notes thereto.

SELECTED FINANCIAL DATA

          The following table sets forth-certain selected financial data concerning the Company for the periods indicated: