UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

OR

For the transition period from                                                         to                                                         

UCBH Holdings, Inc.

555 Montgomery Street, San Francisco, California 94111

(415) 315-2800

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

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

APPLICABLE ONLY TO CORPORATE ISSUERS:

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

As of November 5, 2004, the Registrant had 45,500,694 shares of common stock outstanding.

UCBH HOLDINGS, INC.
TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

UCBH HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Dollars in Thousands)

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

Page 1

UCBH HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in Thousands, Except for Per Share Data)

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

Page 2

UCBH HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in Thousands)

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

Page 3

UCBH HOLDINGS, INC.

1. Basis of Presentation and Summary of Significant Accounting and Reporting Policies

     Organization

     UCBH Holdings, Inc. (the “Company” or “UCBH”) is a bank holding company organized under the laws of Delaware that conducts its business through its principal subsidiary, United Commercial Bank (the “Bank” or “UCB”), a California state-chartered commercial bank. The Bank offers a full range of commercial and consumer banking products domestically through its retail branches and other banking offices in California and New York, and internationally through its full-service branch in Hong Kong, which was opened during the second half of 2003 under a license granted by the Hong Kong Monetary Authority. During the first quarter of 2004, the Company’s wholly owned subsidiary UCB Investment Services, Inc. (“UCBIS”) commenced business. UCBIS is a registered broker-dealer with the Securities and Exchange Commission and a member of the National Association of Securities Dealers (“NASD”) and the Securities Investor Protection Corporation (“SIPC”).

     Basis of Presentation and Principles of Consolidation

     The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X, and include all normal recurring adjustments which the Company considers necessary for a fair statement of the financial statements of such periods. Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been omitted pursuant to such rules and regulations. The unaudited consolidated financial statements include the accounts of the Company and most of its wholly owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. The wholly owned subsidiaries not included in the consolidated results are certain special purpose trusts established for the purpose of issuing Guaranteed Preferred Beneficial Interests in the Company’s Junior Subordinated Debentures. These trusts are excluded pursuant to Financial Accounting Standards Board (FASB) Interpretation No. 46R, “Consolidation of Variable Interest Entities” (“FIN 46R”), issued by the FASB in December of 2003, as the Company is not deemed to be the primary beneficiary. The Company also invests in affordable housing and small business corporations, limited liability companies, and limited partnerships as a result of Community Reinvestment Act (“CRA”) requirements. Such investments are generally accounted for under the equity or cost method pursuant to Accounting Principles Board Opinion Number 18, “The Equity Method of Accounting for Investments in Common Stock.” None of these investments meet the requirements of FIN 46R, and therefore, are not consolidated.

     Operating results for the three and nine months ended September 30, 2004, are not necessarily indicative of the results that may be expected for the year ending December 31, 2004.

     Please refer to the audited consolidated financial statements and related notes thereto included in the Company’s Form 10-K for the year ended December 31, 2003, for additional details of the Company’s financial position, as well as for a description of the Company’s significant accounting policies, which have been continued without material change. The details included in the notes have not changed except as a result of normal transactions in the interim period and the events mentioned in the notes below.

     Use of Estimates in Preparation of Financial Statements

     The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimated results.

Page 4

     Reclassification

     Certain prior period amounts have been reclassified to conform to the current period’s presentation.

2. Recent Accounting Pronouncements

     Accounting for Stock-Based Compensation

     In December 2002, the FASB issued Statements of Financial Accounting Standards (SFAS) No. 148, “Accounting for Stock-Based Compensation - Transition and Disclosure,” which provides guidance on alternative methods of transition for an entity that voluntarily changes to the fair value based method of accounting for stock-based employee compensation. It also amends the disclosure provision of that statement to require prominent disclosure about the effects on reported net income of an entity’s accounting policy decisions with respect to stock-based employee compensation. Finally, this statement amends Accounting Principles Board (APB) Opinion No. 28, “Interim Financial Reporting,” to require disclosure about those effects in interim financial information.

     The Company has elected to continue accounting for stock-based compensation in accordance with APB Opinion No. 25, “Accounting for Stock Issued to Employees.” Under APB No. 25, no stock-based employee compensation cost is reflected in the statement of operations, as all options granted have an exercise price equal to the market value of the underlying common stock on the date of grant.

     The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” to stock-based employee compensation.

     If the computed fair values of the stock awards had been amortized to expense over the vesting period of the awards, pro forma amounts would have been as shown in the above table.

Page 5

     These calculations require the use of option pricing models, even though such models were developed to estimate the fair value of freely tradable, fully transferable options without vesting restrictions, which significantly differ from the Company’s stock option awards. These models as required by current accounting pronouncements also require subjective assumptions, including future stock price volatility, dividend yield, and expected time to exercise, which greatly affect the calculated values. The following weighted average assumptions were used in the Black-Scholes option pricing model for options granted during the three and nine months ended September 30, 2004, and 2003:

     Consolidation of Variable Interest Entities

     In January 2003, the FASB issued FASB Interpretation No. 46, (“FIN 46”) “Consolidation of Variable Interest Entities.” This interpretation applies immediately to variable interest entities (“VIE”) in which an enterprise obtains an interest after that date. It applies in the first fiscal year or interim period beginning after June 15, 2003, to any VIE in which an enterprise holds a variable interest that is acquired before February 1, 2003. Previously issued accounting pronouncements require the consolidation of one entity in the financial statements of another if the second entity has a controlling interest in the first. In effect, FIN 46 applies broader criteria than just voting rights in determining whether one entity has a controlling financial interest in another. Specifically, if by design the owners of the entity have not made an equity investment sufficient to absorb its expected losses and the owners lack any one of three essential characteristics of controlling financial interest, the entity is to be consolidated in the financial statements of its primary beneficiary. The three characteristics are: (1) the ability to make decisions about the entity’s activities, (2) the obligation to absorb the expected losses of the entity, and (3) the right to receive the expected residual returns of the entity.

     At December 31, 2003, the Company adopted FIN 46R. The FASB issued Fin 46R to clarify the application of Accounting Research Bulletin No. 51, Consolidated Financial Statements and finalizes this statement for public entities. Under FIN 46R, a VIE is defined as an entity subject to consolidation based on criteria specified in FIN 46R.

     In 1998, 2001 and 2002, the Company created certain special purpose trusts for the purpose of issuing capital securities. Through the third quarter of 2003, these trusts were consolidated into the financial results of the Company. As discussed in Note 1, under FIN 46R, the trusts are no longer consolidated as the trusts are deemed VIEs and the Company is not the primary beneficiary. Consequently, the trusts have been deconsolidated from the financial results of the Company effective December 31, 2003 with consistent presentation for periods presented.

     The impact of this deconsolidation on the Company’s financial condition and operating results was immaterial, resulting primarily in classification changes on the Balance Sheet. A potential outcome arising as a result of FIN 46R is that the Federal Reserve Bank may no longer allow the capital securities issued by the trusts to be included in Tier I capital of the Company. The Federal Reserve has issued proposed rules that these securities will be grandfathered and will continue to be included in the Company’s Tier I capital, subject to certain limited phase-out limitations to be imposed over time. If regulatory requirements required exclusion of these securities from Tier I capital, the Company would remain well capitalized at September 30, 2004. The Bank’s Tier I capital and total risk-based capital would be unaffected as the trusts and their securities have been issued at the holding company level.

Page 6

     Certain Financial Instruments with Characteristics of Both Liabilities and Equities

     In May 2003, the FASB issued SFAS No. 150 “Accounting for Certain Financial Instruments with Characteristics of both Liability and Equity” (“SFAS No. 150”). This statement requires that an issuer classify financial instruments that are within its scope as liabilities. Many of those instruments were classified as equities under previous guidance.

     Most of the guidance in SFAS No. 150 is effective for all financial instruments entered into or modified after May 31, 2003, and otherwise effective at the beginning of the first interim period beginning after June 15, 2003. Certain provisions of SFAS No. 150 as they apply to mandatorily redeemable noncontrolling interests have been deferred. The deferral of these provisions is expected to remain in effect while these noncontrolling interests are addressed in later phases of FASB projects.

     Excluding these deferred provisions, the adoption of the SFAS No. 150 did not have a material impact on our consolidated financial statements.

     Accounting for Certain Loans or Debt Securities Acquired in a Transfer

     In December 2003, the American Institute of Certified Public Accountants (“AICPA”) issued Statement of Position 03-3 (“SOP 03-3”), which addresses accounting for loans or debt securities acquired in a transfer and the resulting differences between contractual cash flows and cash flows expected to be collected. This SOP does not apply to loans originated by the Bank. This SOP limits the yield that may be accreted to the excess of the investor’s estimate of undiscounted expected principal, interest, and other cash flows over the investor’s initial investment in the loan. SOP 03-3 requires that the excess of contractual cash flows over cash flows expected to be collected not be recognized as an adjustment of yield, loss accrual, or valuation allowance. SOP 03-3 also prohibits “carrying over” or creation of valuation allowances in the initial accounting of all loans acquired in a transfer that are within the scope of this SOP. The prohibition of the valuation allowance carryover applies to the purchase of individual loans, pools of loans and loans acquired in a purchase business combination.

     SOP 03-3 is effective for loans acquired in fiscal years beginning after December 15, 2004. For loans acquired in fiscal years beginning on or before December 15, 2004, decreases in cash flows expected to be collected should be applied prospectively. The Company does not anticipate the adoption of SOP 03-3 to have a material impact on the financial condition or operating results of the Company.

     Other-Than-Temporary Impairment and Its Application to Certain Investments

     In March 2004, the FASB approved the consensus reached on the Emerging Issues Task Force (“EITF”) Issue No. 03-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments.” EITF No. 03-1 clarifies the investment impairment methodology for debt and equity securities within the scope of SFAS No. 115, “Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities” and SFAS No. 124, “Accounting for Certain Investments Held by Not-For-Profit Organizations” and for equity securities that are not subject to the scope of SFAS No. 115 and not accounted for under the equity method under Opinion 18 and related interpretations (hereinafter referred to as “cost method investments”).

     Certain disclosure requirements regarding investments accounted for under SFAS No. 115 and SFAS No. 124 are effective for annual financial statements for fiscal years ending after December 31, 2003. These currently effective disclosure requirements have been adopted by the Company and did not have a material impact on the financial condition or operating results of the Company. Additional disclosure requirements regarding cost method investments are effective for annual periods ending after June 15, 2004. The Company does not anticipate the adoption of these disclosure requirements to have a material impact on the financial condition or operating results of the Company.

Page 7

     In September 2004, the FASB issued a final FASB Staff Position (FSP), FSP EITF 03-1-1, delaying the effective date of the measurement and recognition guidance indefinitely. Excluding the deferred guidance, the adoption of EITF No. 03-1 did not have a material impact on the financial condition or operating results of the Company.

3. Cash and Due From Banks

     The following table summarizes the interest-bearing and noninterest-bearing components of Cash and Due From Banks on the dates indicated (dollars in thousands):

     The Bank is required to maintain a percentage of its deposit balances as reserves either in cash or on deposit at the Federal Reserve Bank. At both September 30, 2004 and December 31, 2003, the reserve requirement was $6.8 million.

4. Business Combinations, Goodwill and Intangibles Assets

     In July 2003, the Company completed the acquisition of privately held First Continental Bank (“FCB”), a full-service commercial bank headquartered in Rosemead, California. Pro forma consolidated results of operations follow for the three and nine months ended September 30, 2003 as though FCB had been acquired as of January 1, 2003 (dollars in thousands, except earnings per share):

     In accordance with SFAS No. 141 and No. 142, goodwill resulting from the Company’s acquisitions will not be amortized to expense over a fixed period of time but will be tested for impairment at least annually. During the second quarter of 2004, the Company finalized its purchase accounting with respect to the acquisition and as a result, there was a $2.3 million reduction in goodwill. As of September 30, 2004 and December 31, 2003, the balance of goodwill totaled $85.1 million and $87.4 million, respectively. This quarter, the annual review of goodwill for impairment was performed and no adjustment was necessary. The Company will continue to monitor goodwill for impairment in the future.

     Other than goodwill, the Company has no intangible assets with indefinite lives. Intangible assets with finite lives, consisting primarily of core deposit intangibles and loan servicing assets, are amortized over their estimated period of remaining benefit; such amortization expense was $498,000 and $307,000 for the three months ended September 30, 2004 and 2003, respectively. Amortization expense of $1.8 million and $1.6 million was recorded for the nine months ended September 30, 2004 and 2003, respectively. Core deposit intangible amortization expense was $285,000 and $185,000 for the three months ended September 30, 2004 and 2003, respectively, and $1.0 million and $1.3 million for the nine months ended September 30, 2004 and 2003, respectively. Amortization expense on loan servicing assets was netted against loan servicing fee income and reported as part of commercial banking and other fees; such amortization expense was $213,000 and $122,000 for the three months ended September 30, 2004 and 2003, respectively. Amortization expense on loan servicing assets was $830,000 and $269,000 for the nine months ended September 30, 2004 and 2003, respectively. Intangible assets are analyzed for impairment quarterly and adjusted accordingly. During the nine months ended September 30, 2004, intangible assets were reviewed for impairment and $80,000 of capitalized loan servicing assets was deemed impaired during the second quarter, and the asset was written down accordingly.

Page 8

     The net carrying amount of intangible assets and the associated accumulated amortization are as follows:

     The amortization expense for amortizable intangible assets for the years ending December 31, 2004, 2005, 2006, 2007, 2008 and 2009 is estimated to be $2.5 million, $2.2 million, $1.8 million, $1.5 million, $1.3 million and $1.2 million, respectively.

5. Loans and Allowance for Loan Losses

     The following table shows the composition of the Bank’s loan portfolio by amount of gross loans in each major loan category at the dates indicated:

Page 9

     The following table sets forth information concerning the Bank’s allowance for loan losses for the periods indicated:

     At September 30, 2004, the Company classified $6.4 million of loans as impaired, compared with $5.0 million at December 31, 2003. Of the balance of total impaired loans, $6.0 million and $5.0 million had a related allowance for loan losses of $2.0 million and $2.1 million at September 30, 2004 and December 31, 2003, respectively. All impaired loans, as of September 30, 2004 and December 31, 2003, were included in non-accrual loans. Our average recorded investment in impaired loans for the three and nine months ended September 30, 2004 was $7.9 million and $7.6 million, respectively, and there was no related interest income recognized on these loans during the time within the period that they were impaired.

6. Earnings per Share

     The following are the basic and diluted earnings per share for the periods then ended:

Page 10

7. Comprehensive Income

     SFAS No. 130, “Reporting Comprehensive Income,” establishes presentation and disclosure requirements for comprehensive income. For the Company, comprehensive income consists of net income and the change in unrealized gains and losses on available for sale securities. For the three months ended September 30, 2004, total comprehensive income was $35.5 million, an increase of $26.6 million compared to the three months ended September 30, 2003. Net income for the three months ended September 30, 2004, was $21.8 million, and net unrealized gains on available for sale securities increased by $13.8 million. For the corresponding period of 2003, net income was $16.8 million, and net unrealized gains on available for sale securities decreased by $7.8 million.

     For the nine months ended September 30, 2004 and 2003, total comprehensive income was $60.5 million and $36.7 million, respectively. Net income for the nine months ended September 30, 2004, was $61.9 million, and net unrealized losses on available for sale securities increased by $1.4 million. For the corresponding period of 2003, net income was $46.1 million and net unrealized losses on available for sale securities increased by $9.4 million.

8. Derivative Financial Instruments and Financial Instruments with Off-Balance-Sheet Risk

     The Company is party to derivative financial instruments and financial instruments with off-balance-sheet credit risk in the normal course of business to meet the financing needs of its customers and to reduce its own exposure to fluctuations in foreign currency and interest rates. The Company does not hold or issue financial instruments for trading or speculative purposes.

     The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual or notional amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments. For interest-rate swap and cap transactions, forward commitments to sell loans and foreign exchange contracts, the contract or notional amounts do not represent exposure to credit loss. The Company controls the credit risk of its interest-rate swap and cap agreements, foreign exchange contracts, and forward commitments to sell loans, and foreign exchange contracts through credit approvals, limits, and monitoring procedures. The Company does not require collateral or other security to support interest-rate swap transactions with credit risk.

     The following table sets forth the contractual or notional amounts of derivative financial instruments and financial instruments with off-balance-sheet risk as of September 30, 2004 and December 31, 2003 (dollars in thousands):

Page 11

     Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses. The Company evaluates each customer’s credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the counter party. Collateral held generally includes residential or commercial real estate, accounts receivable, or other assets.

     Letters of credit 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 extending loan facilities to customers. These letters of credit are usually secured by inventories or by deposits held at the Company.

     Foreign exchange contracts are contracts to purchase or sell currencies in the over-the-counter market. Such contracts can be either for immediate or forward delivery. Entering into foreign exchange contract agreements involves the risk of dealing with counter parties and their ability to meet the terms of the contracts. The Bank purchases or sells foreign exchange contracts in order to hedge a balance sheet or off-balance-sheet foreign exchange position. Additionally, the Bank purchases and sells foreign exchange contracts for customers, as long as the foreign exchange risk is hedged with an offsetting position.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

     This report on Form 10-Q may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based upon specific assumptions that may or may not prove correct. Forward-looking statements are also subject to known and unknown risks, uncertainties and other factors relating to the Company’s and the Bank’s operations and business environment, all of which are difficult to predict, and many of which are beyond the control of the Company and the Bank. The factors include, among others:

	•		economic and business conditions in the areas and markets in which the Company and the Bank operate, particularly those affecting commercial loans secured by real estate in California;
	•		deterioration or improvement in the ability of the Bank’s borrowers to pay their debts to the Bank;
	•		market fluctuations such as those affecting interest and foreign exchange rates and the value of securities in which the Bank invests;
	•		competition from other financial institutions, whether banks, investment banks, insurance companies or others;
	•		the ability of the Bank to enter new markets and lines of business, and open new branches successfully;
	•		changes in business strategies;
	•		changes in tax law and governmental regulation of financial institutions;
	•		demographic changes; and
	•		other risks and uncertainties, including those discussed in the documents the Company files with the Securities and Exchange Commission (“SEC”).

Page 12

     The foregoing may cause the actual results and performance of the Company and the Bank to be materially different from the results and performance indicated or suggested by the forward-looking statements.

     Further description of the risks and uncertainties are included in detail in the Company’s most recent Annual Report on Form 10-K for the year ended December 31, 2003, as filed with the SEC.

     The following discussion and analysis is intended to provide details of the results of operations of the Company for the three and nine months ended September 30, 2004 and 2003, and financial condition at September 30, 2004 and at December 31, 2003. The following discussion should be read in conjunction with the information set forth in the Company’s Consolidated Financial Statements and notes thereto and other financial data included in this report.

SUMMARY RESULTS

     UCBH Holdings, Inc. (“we”, “our”, and “Company”), operating through its principal subsidiary, United Commercial Bank (“Bank”), earned $21.8 million for the third quarter of 2004, compared to $16.8 million in the third quarter of 2003, an increase of $5.0 million, or 29.9%. Fully diluted earnings per share for the third quarter of 2004 were $0.46 compared to $0.36 in the third quarter of 2003. For the nine months ended September 30, 2004, we earned $61.9 million, an increase of $15.7 million or 34.1% compared to the same period in 2003. Fully diluted earnings per share for the nine months ended September 30, 2004 and 2003 were $1.30 and $1.02, respectively. As a result of our third quarter performance, we are increasing our earnings guidance to a range of $1.73 to $1.77 for the full year 2004.

     Our revenues for the three months ended September 30, 2004 consist of approximately 84% net interest income, which represents the difference between interest income and interest expense, and 16% noninterest income. Our revenues for the nine months ended September 30, 2004 consist of approximately 87% net interest income and 13% noninterest income. We generate interest income primarily on the loans and securities that we hold in our portfolios. Interest expense results from the interest that we pay customers on their deposits and debt holders on our borrowings. Noninterest income results primarily from commercial banking fees, charges on deposit accounts and gains on sales of multifamily loans, U.S. Small Business Administration (“SBA”) loans and securities.

     As a result of the increased earnings of the organization, our return on average assets (“ROA”) increased to 1.43% and 1.41% for the three months and nine month periods ended September 30, 2004, compared with 1.25% and 1.22%, respectively, for corresponding periods of 2003. Our return on average equity (“ROE”) was 18.97% and 18.65% for the same periods in 2004, compared to 17.96% and 19.02%, respectively, for the corresponding periods in 2003. The decrease in the ROE for the nine months ended September 30, 2004, compared with the same period in 2003 reflected the net effect of the ROE reduction created by the acquisition of First Continental Bank (“FCB”) for 100% stock in 2003, partially offset by our increased earnings in 2004 compared with 2003. We anticipate that our earnings will continue to increase for the rest of the year, which will improve our ROA and ROE as well.

     Our Efficiency Ratio, which represents the ratio of total noninterest expense to the sum of net interest income and noninterest income, increased to 41.50% for the third quarter of 2004, compared to 39.88% for the corresponding period of the prior year. The Efficiency Ratio for the nine months ended September 30, 2004 and 2003 was 41.16% and 41.57%, respectively. The increase in this ratio for the three months ended September 30, 2004 compared with the same period in 2003 was primarily due to higher personnel, professional fees and contracted services, furniture and equipment, and occupancy expenses. The slight improvement in this ratio for the nine months ended September 30, 2004 compared with the same period in 2003 reflected the increase in revenues.

     Compared to the prior periods, our interest income increased by $10.3 million and $26.7 million, or 15.5% and 13.9% for the three and nine months ended September 30, 2004, respectively, primarily as a result of increases in our average interest-earning assets. The average interest-earning assets increased primarily as a result of our loan production. The increase in the nine months ended September 30, 2004 compared to the corresponding period of 2003 also reflected our acquisition of FCB in July 2003. Our average loans outstanding were $4.16 billion and $3.98 billion in the three and nine months ended September 30, 2004, compared with $3.53 billion and $3.26 billion for the same period in 2003.

Page 13

     As a financial institution, we are sensitive to fluctuations in market interest rates. As a result of the decreases in market interest rates during the first nine months of 2004, the yields on our loans and deposits have been decreasing. Since the rate of the decrease on loan yields was not as fast as the rate of the decrease on the cost of our deposits, our net interest margin, calculated on a tax equivalent basis, improved from 3.44% to 3.70% for the first nine months of 2004 when compared with the first nine months of 2003.

     The asset quality of the residential (one to four family) and multifamily loan portfolios was good given low charge-offs and delinquency rates during the three and nine months ended September 30, 2004. This good asset quality resulted in a decrease in the loan loss provision for these portfolios in the three and nine months ended September 30, 2004 compared with the corresponding periods of the prior year. The effect of lower provisions necessary for increased multifamily and residential loans was partially offset by an increased provision resulting from the increase in the commercial real estate and commercial business loan portfolios and increases in criticized loans.

     Our noninterest income increased in the third quarter of 2004 to $9.8 million from $6.5 million in the third quarter of 2003. The increase primarily reflects the gains on sales of multifamily loans and the higher commercial banking fees, partially offset by a decrease in net gains on sales of securities. Noninterest income for the nine months ended September 30, 2004 and 2003 totaled $22.0 million and $16.3 million, respectively.

     Our noninterest expenses increased to $26.0 million and $71.7 million in the three and nine months ended September 30, 2004, from $19.8 million and $57.5 million for the corresponding periods of 2003. The increase for the three months ended September 30, 2004 compared with the three months ended September 30, 2003 was primarily due to higher personnel, professional fees and contracted services, furniture and equipment, and occupancy expenses. The increase for the nine months ended September 30, 2004 compared with the nine months ended September 30, 2003 also reflected our acquisition of FCB in July 2003.

TREND ANALYSIS

     Although we have operated in California since 1974, we operated as a thrift until 1998. In 1998, we changed our charter to that of a commercial bank and began operating as a commercial bank. Presented below are charts reflecting our growth trends since becoming a commercial bank.

     Following are graphs reflecting our total balance sheet, loan and deposit growth since 1998 as of the end of the specified periods:

Total Assets
($Millions)

Page 14

Gross Loans
($Millions)

Total Deposits
($Millions)

Core Deposits
($Millions)

     We have grown our balance sheet at a compounded rate of 20.0% since 1998. In 2002, we acquired the Bank of Canton of California (“BCC”), with assets of $1.45 billion, which accounts for the substantial increase in the assets that year. Similarly, in 2003, we acquired First Continental Bank with assets of $356.7 million. Without these acquisitions, we would have grown our balance sheet at a compounded annualized rate of 12.2% since 1998. In the future, our goal is to grow our balance sheet organically in a range of 14% to 17% per annum.

     Our loan portfolio has grown at a compounded rate of 19.8% since 1998. Without the acquisitions of BCC and FCB, the growth rate would have been 15.8%, compounded annually. Our ongoing goal is to increase our loan portfolio by a range of 15% to 20% annually.

     Our deposits have grown at a compounded rate of 21.6% since 1998. Without the acquisitions of BCC and FCB, the growth rate would have been 13.9%, compounded annually. Our core deposits have grown at a rate of 35.5% since becoming a commercial bank. Without the acquisitions of BCC and FCB, the growth rate would have been 30.8%, compounded annually.

     Through making further incursions in our Asian customer-oriented niche market and by expanding into new market areas, management believes that it will meet the stated growth objectives for 2004.

Page 15

     Following is a table reflecting our asset quality since becoming a commercial bank as of the end of the specified periods:

     We have maintained a good credit quality by adhering to our credit underwriting criteria. Our goal is to maintain nonperforming assets to 25 basis points or less of ending assets. We have achieved this operating performance metric for twenty-two consecutive quarters.

     The chart below presents selected operating metrics of the Company since becoming a commercial bank:

(1)		Efficiency ratio represents total noninterest expense divided by the sum of net interest income and total noninterest income.
(2)		Net interest margin represents net interest income divided by average interest-earning assets and calculated on a tax equivalent basis.

     Our net interest margin improvement results from continuing balance sheet restructuring, as we reduce the concentration in lower yielding loans and increase core deposits. ROA has increased accordingly. When we acquired BCC, we blended our 4.02% margin with their 2.23% margin. BCC had a heavy concentration of low yielding securities and high costing certificates of deposit, which caused compression in the margin. Through restructuring the BCC assets and deposits, we have improved our margin.

Page 16

     Capital

     We have increased our capital since 1998 through the retention of earnings and the issuance of new stock in conjunction with acquisitions. The charts below present our capital level and Tier I and Total risk-based capital ratios since 1998. As of September 30, 2004, the Bank met the “well capitalized” requirements under these guidelines.

Stockholders’ Equity
($Thousands)

Tier I Leverage Ratio
(Bank Level)

Total Risk-Based Ratio
(Bank Level)

Page 17

     We have declared dividends since 1999 and plan to continue dividend payments for the next year. The chart below presents our dividend payments on a per share basis and in total since 1998. The dividends for 2004 have been annualized to be comparable with prior periods.

Dividends Declared Per Share

CORPORATE DEVELOPMENTS

     The Bank continues to expand its branch presence in key target markets during 2004. In August 2004, the Bank opened a new branch in Westminster, California, the Bank’s eighteenth branch in the Southern California region. In June 2004, the Bank opened two new branches, one in Foster City, California and one in Torrance, California. Recently, the Bank signed leases for two additional branches in the New York metropolitan area.

     During the first quarter of 2004, the Company’s wholly owned subsidiary UCB Investment Services, Inc. (“UCBIS”) commenced business. UCBIS is a registered broker-dealer with the Securities and Exchange Commission and a member of the National Association of Securities Dealers (“NASD”) and the Securities Investor Protection Corporation (“SIPC”). UCBIS acts as an introducing broker in the sales of mutual funds, listed and over-the-counter equity securities, and corporate, municipal, and U.S. Government debt. UCBIS also sells fixed and variable annuities and covered options for its customers. UCBIS is registered with the Municipal Securities Rulemaking Board (“MSRB”). UCBIS does not have custody or possession of customer funds or securities. Customer accounts are carried on a fully-disclosed basis at UCBIS’ clearing firm National Financial Services, LLC.

CRITICAL ACCOUNTING ESTIMATES

     A number of critical accounting policies are used in the preparation of the Consolidated Financial Statements, which this discussion accompanies.

     The Use of Estimates. The preparation of the Consolidated Financial Statements in accordance with generally accepted accounting principles in the United States of America (“GAAP”) requires management to make certain estimates and assumptions that affect the amounts of reported assets and liabilities as well as contingent assets and liabilities as of the date of these financial statements. These estimates and assumptions also affect the reported amounts of revenues and expenses during the reporting period(s). The Company has established detailed policies and control procedures that are intended to ensure that valuation methods are well controlled and applied consistently from period to period unless actual results indicate a change in estimate is required.

     Allowance for Loan Losses. The allowance for loan losses covers the commercial and consumer loan portfolios and is intended to adjust the value of the Company’s loan assets for probable credit losses inherent at a balance sheet date in accordance with GAAP. The methodology for calculating the allowance involves significant judgment. First and foremost, it involves early detection of credits that are deteriorating. Second, it involves management’s judgment to derive loss factors.

Page 18

     The Company uses a risk grading system to determine the credit quality of its loans. Loans are reviewed for information affecting the obligor’s ability to fulfill contractual obligations. In assessing the risk grading of a particular loan, the factors considered include:

•

the borrower’s debt capacity and financial flexibility

•

the level of earnings of the borrowers

•

the amount and sources of repayment

•

the level and nature of contingencies, management strength

•

the quality of the collateral, and

•

the industry in which the borrower operates.

     These factors are based on an evaluation of historical information as well as subjective assessment and interpretation. Emphasizing one factor over another or considering additional factors that may be relevant in determining the risk grading of a particular loan, but which are not currently an explicit part of the Company’s methodology, could affect the risk grade assigned to that loan.

     Management also applies judgment to derive loss factors associated with each credit facility. These loss factors are considered by type of obligor and collateral. Whenever possible, the Company uses its own historical loss experience or independent verifiable data to estimate the loss factors. Many factors can affect management’s estimates of a loss factor. The application of different loss factors would change the amount of the allowance for credit losses determined to be appropriate by the Company. Given the process the Company follows in determining the risk grading of its loans, management believes the current risk gradings and loss factors assigned to loans are appropriate.

     Management’s judgment is also applied when considering uncertainties based on current macroeconomic conditions and other factors. For example, judgment as to the economic outlook in California will affect management’s assessment of probable losses based on exposure to that marketplace. Notwithstanding the judgment required in assessing the allowance for loan losses, the Company believes its estimate for the allowance for loan losses is adequate at the balance sheet date. In the second quarter of 2004, we reclassified approximately $3.1 million of the allowance for loan losses to other liabilities. This reclassification represents allocated loss allowances for unfunded loan commitments and off-balance-sheet commitments for letters of credit. Such reclassification is also reflected in the financial statements as of September 30, 2004 and the Company will continue to report the allowance for unfunded loan and off-balance-sheet commitments in other liabilities. As of September 30, 2004, the allocated loss allowance for unfunded loan commitments and off-balance-sheet commitments increased to $3.6 million. For comparison purposes, $2.8 million of the allowance for loan losses associated with unfunded loan commitments and off-balance-sheet commitments as of December 31, 2003 was also reclassified.

     Fair Value of Certain Assets. Certain assets of the Company are recorded at fair value. In some cases, the fair value used is an estimate. Included among these assets are securities that are classified as available for sale, goodwill and other intangible assets, other real estate owned and impaired loans. These estimates may change from period to period as they are affected by changes in interest rates and other market conditions. If the Company were to sell one of these assets and then discover that its estimate of fair value had been too high, losses not anticipated or greater than anticipated could result. Gains not anticipated or greater than anticipated could result if the Company were to sell one of these assets, subsequently discovering that its estimate of fair value had been too low. The Company arrives at estimates of fair value as follows:

     Available for Sale Securities. The fair values of most securities classified as available for sale are based on quoted market prices. If quoted market prices are not available, fair values are extrapolated from the quoted prices of similar instruments.

Page 19

     Goodwill and Other Intangible Assets. The Company establishes goodwill and other intangible assets including core deposit intangibles and capitalized servicing rights by estimating fair value of assets and liabilities acquired using various valuation approaches, such as market value, replacement costs and estimated cash flows for future periods. Additionally, the Company must assess goodwill each year and other intangible assets each quarter for impairment. This assessment involves reviewing or revising estimated cash flows for future periods. If the future cash flows are materially less than the estimates, the Company would be required to take a charge against earnings to write down the asset to the lower fair value.

     Mortgage servicing rights result from the sale of multifamily loans and SBA loans with the servicing rights retained, and the securitization and retention of 1-4 single-family and multifamily loans with the servicing rights retained. The market value for servicing is based upon the coupon rates, maturity, and prepayment rates experienced for the mortgages being serviced. The value of mortgage servicing rights is based upon management’s best estimate of the market value based upon discounted cash flows.

     Income Taxes. The provision for income taxes is based on income reported for financial statement purposes and differs from the amount of taxes currently payable, since certain income and expense items are reported for financial statement purposes in different periods than those for tax reporting purposes.

     The Company accounts for income taxes using the asset and liability approach, the objective of which is to establish deferred tax assets and liabilities for the temporary differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled. A valuation allowance is established for deferred tax assets if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The valuation allowance reduces the deferred tax assets to the amount that is more likely than not to be realized.

     Alternative Methods of Accounting. The accounting and reporting policies of the Company are in accordance with GAAP and conform to practices within the banking industry.

     When the Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation” in 1996, it elected to continue to use the method of accounting for stock options that did not recognize compensation expense at the time options were granted. As required by SFAS No. 123, pro forma amounts of compensation expense and the pro forma effect on net income and earnings per share are disclosed each quarter as if the Company had instead elected to use the accounting method that recognizes compensation expense. The Company adopted SFAS No. 148 “Accounting for Stock-Based Compensation - Transition and Disclosure” during 2003. The pro forma amounts of compensation expense and the pro forma effect on net income and earnings per share are disclosed in Note 2 to the Consolidated Financial Statements using the Black-Scholes model for pricing options. Had the Company elected to adopt the SFAS No. 123 fair value based method of accounting instead of pro forma disclosure, additional compensation expense would have been recognized.

RESULTS OF OPERATIONS

     General. The Company’s primary source of income is net interest income, which is the difference between interest income from interest-earning assets, such as loans and securities, and interest paid on interest-bearing liabilities, such as deposits and other borrowings used to fund those assets. The Company’s net interest income is affected by changes in the volume of interest-earning assets and interest-bearing liabilities as well as by changes in yields earned on interest-earning assets and rates paid on interest-bearing deposits and other borrowed funds. The Company also generates noninterest income, including commercial banking fees, gain on sale of U.S. Small Business Administration (“SBA”) loans, gain on sale of securities, gain on sale of loans and other transactional fees. The Company’s source of noninterest income derives predominantly from commercial banking fees plus any gains on sale of loans and securities. The Company’s noninterest expenses consist primarily of personnel, occupancy, professional fees, and other operating expenses. The Company’s results of operations are affected by its provision for loan losses and may also be significantly affected by other factors including general economic and competitive conditions, changes in market interest rates, governmental policies and the actions of regulatory agencies.

Page 20

Operating Data and Ratios

Following is a table of selected operating metrics for the quarters ended September 30, 2004 and 2003:

     The consolidated net income of the Company during the three months ended September 30, 2004 increased by $5.0 million compared with the corresponding period of the preceding year. The increase in net income was primarily due to an increase in net interest income, which was partially offset by an increase in noninterest expense, during the current period as compared to the corresponding period in the prior year.

     The annualized return on average assets (“ROA”) ratio and the annualized return on average equity (“ROE”) for the three months ended September 30, 2004 improved primarily due to higher net interest income.

     Following is a table of selected operating metrics for the nine-month periods ended September 30, 2004 and 2003:

     The consolidated net income of the Company during the nine months ended September 30, 2004 increased by $15.7 million, or 34.1%, to $61.9 million, compared to $46.1 million for the corresponding period of the preceding year, primarily as a result of the increase in interest-earning assets.

     The ROA for the nine months ended September 30, 2004 improved primarily due to higher net income. The ROE decreased for the nine months ended September 30, 2004 compared to the corresponding period in the prior year due to the Company’s purchase of FCB for 100% stock.

Page 21

     Net Interest Income. Following is a table of selected ratios that reflect the dynamics of the net interest income for the Company for the three-month periods ending September 30, 2004 and 2003:

(1) Calculated on a tax equivalent basis.

     Net interest income before provision for loan losses increased $9.7 million for the three months ended September 30, 2004 compared to the corresponding quarter in the prior year. The increase in net interest income reflects the growth in interest-earning assets, primarily in the Company’s loan portfolio, coupled with a 27 basis point improvement in the net interest margin.

     The average cost of deposits decreased 18 basis points from the three months ended September 30, 2003 to the three months ended September 30, 2004. This savings was partially offset by a 17 basis point decrease in average loan yields from the three-month period ended September 30, 2003 to the comparable period in 2004. The decreases in these areas reflect the decline in the overall market interest rate environment from the prior year. The decrease in loan yields reflects repricing of adjustable-rate loans resulting from reductions in market interest rate indices, and the impact of accelerated prepayments on higher-yielding loans due to the lower market interest rates.

     The average yield on securities increased 49 basis points from the three months ended September 30, 2003 to the three months ended September 30, 2004. Premium as a percentage of the outstanding balance on the securities portfolio declined substantially between September 30, 2003 and September 30, 2004, resulting in less premium amortization in the third quarter of 2004 as compared with the third quarter of 2003. In the second quarter of 2003, the Company began to sell premium securities and replace them with bonds that were discounted or close to par. This restructuring of the securities portfolio was completed in the second quarter of 2004. Additionally, in the third quarter of 2003, amortization of premium increased as a result of accelerated prepayments caused by the sharp decline in the general level of market interest rates.

Page 22

     Following is a table of selected ratios that reflect the dynamics of the net interest income for the Company for the nine-month periods ending September 30, 2004 and 2003:

(1) Calculated on a tax equivalent basis.

     Net interest income before provision for loan losses increased $30.3 million for the nine months ended September 30, 2004 compared to the corresponding period in the prior year. The increase in net interest income reflects the growth in interest-earning assets, primarily in the Company’s loan portfolio, coupled with a 26 basis point improvement in the net interest margin. The average cost of deposits decreased 35 basis points from the nine-month period ended September 30, 2003 to the corresponding period in 2004. This savings was partially offset by a 27 basis point decrease in average loan yields from the nine months ended September 30, 2003 to the corresponding period in 2004. The decrease in loan yields and the deposit cost reflects the decline in the overall market interest rate environment from the prior year. The decrease in loan yields reflects repricing of adjustable-rate loans resulting from reductions in market interest rate indices, as well as the impact of accelerated prepayments on higher-yielding loans due to the lower market interest rates.

     The average yield on securities increased 10 basis points from the nine months ended September 30, 2003 to the nine months ended September 30, 2004. Premium as a percentage of the outstanding balance on the securities portfolio declined substantially between September 30, 2003 and September 30, 2004. In the second quarter of 2003, the Company began to sell premium securities and replace them with bonds that were discounted or close to par. This restructuring of the securities portfolio was completed in the second quarter of 2004. Additionally, in the third quarter of 2003, amortization of premium increased as a result of accelerated prepayments caused by the sharp decline in the general level of market interest rates. The effect of the aforementioned factors was partially offset by the higher average yield on securities in the first quarter of 2003 compared with the same period in 2004, reflecting the decline in market interest rates subsequent to the first quarter of 2003.

     The net interest margin, calculated on a tax equivalent basis, was 3.70% for the nine months ended September 30, 2004, as compared to 3.44% for the corresponding period of 2003. Certain interest-earning assets of the Company qualify for state or federal tax exemptions or credits. The net interest margin, calculated on a tax equivalent basis, considers the tax benefit derived from these assets. The increase in the net interest margin reflects the favorable impact of increasing loan yields while decreasing the cost of deposits.

Page 23

     Following is a table reflecting selected average balances of the Company’s assets and liabilities for the nine-month periods ended September 30, 2004 and 2003:

     The following table presents the composition of the Bank’s average loan portfolio at the dates indicated:

     The following table presents components of the Bank’s average outstanding deposits at the dates indicated:

     The increase of $800.1 million on average earning assets for the nine months ended September 30, 2004 resulted primarily from organic commercial loan growth. Average outstanding loans increased by $720.0 million for the nine months ended September 30, 2004 from the same period last year as a result of the Bank’s continued focus on commercial lending activities. Average commercial loan balances increased $691.7 million for the nine months ended September 30, 2004 as compared to the corresponding period of 2003. This increase is primarily due to the Bank’s continued emphasis on commercial real estate and commercial business loans, and expansion of its Hong Kong branch. Average consumer loans for the nine months ended September 30, 2004 and 2003 remained relatively constant at $380.1 million and $351.8 million. New loan commitments of $1.92 billion for the nine months ended September 30, 2004 were comprised of $1.70 billion in commercial and $221.3 million in consumer commitments. As of September 30, 2004 the loan pipeline approximated $1.38 billion, which was comprised of $1.35 billion for commercial loans and $37.7 million of consumer loans.

     Average securities increased $77.6 million for the nine months ended September 30, 2004. This increase was primarily due to internal securitizations during the year as well as purchases that occurred early. Securities prepayments, which accelerated with the lower market interest rate environment, were substantially replaced with new securities purchases. During the first nine months of 2004, the Company also sold securities with an aggregate principal balance of $600.9 million. Such securities were sold to protect the Company from both accelerating prepayments and from increases in market interest rates. The Company’s restructuring strategy was to replace securities that have high prepayment and extension risk with shorter-dated securities with less prepayment and extension risk.

Page 24

     Average outstanding deposits increased $548.3 million for the nine months ended September 30, 2004 compared to the corresponding period of 2003. This increase is a result of the Company’s ongoing focus on the generation of commercial and consumer demand deposits. Average interest-bearing and average noninterest bearing deposits increased $466.5 million and $81.8 million, respectively, for the nine months ended September 30, 2004 compared to the corresponding period in 2003.

     The following table presents condensed average balance sheet information for the Company, together with interest rates earned and paid on the various sources and uses of funds for each of the periods indicated: