WILSHIRE BANCORP INC - 10-K Annual Report

WILSHIRE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THREE YEARS ENDED DECEMBER 31, 2004

1.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Wilshire Bancorp, Inc. (the “Company”) succeeded to the business and operations of Wilshire State Bank, a California state-chartered commercial bank (the “Bank”), upon consummation of the reorganization of the Bank into a holding company structure, effective as of August 25, 2004. Wilshire State Bank was incorporated under the laws of the State of California on May 20, 1980 and commenced operations on December 30, 1980. The Company was incorporated in December 2003 as a wholly owned subsidiary of the Bank for the purpose of facilitating the issuance of trust preferred securities for the Bank and eventually serving as the holding company of the Bank. The Bank’s shareholders approved a reorganization into a holding company structure at a meeting held on August 25, 2004. As a result of the reorganization, shareholders of the Bank are now shareholders of the Company and the Bank is a direct subsidiary of the Company. The Bank’s primary source of revenue is from providing financing for business working capital, commercial real estate, and trade activities, and its investment portfolio. The accounting and reporting policies of the Bank are in accordance with accounting principles generally accepted in the United States of America and conform to general practices in the banking industry.

The Company organized its wholly owned subsidiary, Wilshire Statutory Trust, which issued $15 million in trust preferred securities in December 2003. The Company then purchased all of the common interest in the Wilshire Statutory Trust and issued junior subordinated debentures to the Wilshire Statutory Trust having terms substantially similar to the trust preferred securities in exchange for the proceeds from the Wilshire Statutory Trust’s trust preferred securities (the “2003 Junior Subordinated Debentures”). In accordance with Financial Accounting Standards Board Interpretation 46 (revised December 2003), the Trust is not be reported on a consolidated basis; instead the junior subordinated debentures to the Trust of $15,464,000 and the investment in the Trust common stock of $464,000 are reported separately as debt and other assets, respectively.

Principles of Consolidation—The financial statements include the accounts of the Company and its subsidiary, Wilshire State Bank. Inter-company transactions and accounts have been eliminated in consolidation. As noted above in accordance with FIN No. 46, the Company is not including Wilshire Statutory Trust on a consolidated basis.

Cash and Cash Equivalents—Cash and cash equivalents include cash and due from banks, term and overnight federal funds sold and money market preferred stock, all of which have original maturities of less than 90 days.

Interest-Bearing Deposits in Other Financial Institutions—Interest-bearing deposits in other financial institutions mature within three years and are carried at cost.

Investment Securities—Investments are classified into three categories and accounted for as follows:

(i)

Securities that the Company has the positive intent and ability to hold to maturity are classified as “held to maturity” and reported at amortized cost;

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(ii)

Securities that are bought and held principally for the purpose of selling them in the near future are classified as “trading securities” and reported at fair value. Unrealized gains and losses are recognized in earnings; and

(iii)

Securities not classified as held to maturity or trading securities are classified as “available for sale” and reported at fair value. Unrealized gains and losses are reported, net of taxes, as a separate component of accumulated other comprehensive income (loss) in shareholders’ equity.

Accreted discounts and amortized premiums on investment securities are included in interest income by a method that approximates the effective yield, and unrealized and realized gains or losses related to holding or selling securities are calculated using the specific-identification method. Declines in the fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses. The Company did not record any other-than-temporary impairment on investment securities in 2004, 2003 and 2002.

In 2004, the Company recognized a other-than-temporary charge of $79,442 on its interest-only (“I/O”) strip related to SBA loans sold, which are discussed below. The I/O strips are accounted for like available-for-sale securities; impairment charges reduce the cost basis of the I/O strips and reduce earnings. The Company did not record any other-than-temporary impairment in 2003 and 2002.

Loans—Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off generally are reported at their outstanding unpaid principal balances adjusted for charge-offs, the allowance for loan losses and any deferred fees or costs on originated loans.

Interest on loans is credited to income as earned and is accrued only if deemed collectible. Accrual of interest is discontinued when a loan is over 90 days delinquent unless management believes the loan is adequately collateralized and in the process of collection. Generally, payments received on nonaccrual loans are recorded as principal reductions. Interest income is recognized after all principal has been repaid or an improvement in the condition of the loan has occurred that would warrant resumption of interest accruals.

Nonrefundable fees, net of incremental costs, associated with the origination or acquisition of loans are deferred and recognized as an adjustment of the loan yield over the life of the loan using the effective yield method. Other loan fees and charges, representing service costs for the prepayment of loans, for delinquent payments, or for miscellaneous loan services, are recorded as income when collected.

Certain Small Business Administration (“SBA”) loans that may be sold prior to maturity have been designated as held for sale at origination and are recorded at the lower of cost or market value, determined on an aggregate basis. A valuation allowance is established if the market value of such loans is lower than their cost, and operations are charged or credited for valuation adjustments. A portion of the premium on sale of SBA loans is recognized as other noninterest income at the time of the sale. The remaining portion of the premium, presented as unearned income in Note 3, is deferred and amortized over the remaining life of the loan as an adjustment to yield. Upon sales of such loans, the Company receives a fee for servicing the loans. A servicing asset is recorded based on the present value of the contractually specified servicing fee, net of servicing cost, over the estimated life of the loan, using a discount rate of 1.5% above the main note rate, with an average discount rate of 7.5% and a range of constant prepayment rates from 14% to 17% in 2004. During 2003, the discount rate was also 1.5% above the main note rate, with an average discount rate of 7.3% and a range of constant prepayment rates from 14% to 17%. During 2002, the discount rate was also 1.5% above the main note rate, with an average discount rate of 8.2% and a range of constant prepayment rates from 14% to 17%. The servicing asset is amortized in proportion to and over the period of estimated servicing income. The Company has capitalized $2,091,883, $1,750,426 and $895,472 of servicing assets and amortized $1,000,592, $629,560 and $533,010 during the years ended December 31, 2004, 2003 and 2002, respectively. Management periodically evaluates the servicing asset for impairment. Impairment, if it occurs, is recognized in a valuation allowance in the period of impairment. For purposes of measuring impairment, the servicing assets are stratified by collateral type. The expected yearly amortization of existing servicing assets for each of the years ending 2005 to 2009 is $605,459.

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An I/O strip is recorded based on the present value of the excess of future interest income over the contractually specified servicing fee, calculated using the same assumptions as noted above. I/O strips are accounted for at their estimated fair value, with unrealized gains or losses recorded as an adjustment in accumulated other comprehensive income in shareholders’ equity. I/O strips are also monitored for impairments.

Allowance for Loan Losses— Accounting for allowance for loan losses involves significant judgment and assumptions by management and is based on historical data and management’s view of the current economic environment. At least on a quarterly basis, our management reviews the methodology and adequacy of allowance for loan losses and reports its assessment to the Board of Directors for its review and approval.

We base our allowance for loan losses on an estimation of probable losses inherent in our loan portfolio. Our methodology for assessing loan loss allowances is intended to reduce the differences between estimated and actual losses and involves a detailed analysis of our loan portfolio in three phases:

· the specific review of individual loans in accordance with Statement of Financial Accounting Standards (SFAS) 114, Accounting by Creditors for Impairment of a Loan,

· the segmenting and reviewing of loan pools with similar characteristics in accordance with SFAS No. 5, Accounting for Contingencies, and

· our judgmental estimate based on various subjective factors.

The first phase of our allowance analysis involves the specific review of individual loans to identify and measure impairment. We evaluate each loan by use of a risk-rating system, except for homogeneous loans, such as automobile loans and home mortgages. Specific risk-rated loans are deemed impaired with respect to all amounts, including principal and interest, which will likely not be collected in accordance with the contractual terms of the related loan agreement. Impairment for commercial and real estate loans is measured either based on the present value of the loan’s expected future cash flows or, if collection on the loan is collateral dependent, the estimated fair value of the collateral, less selling and holding costs.

The second phase involves segmenting the remainder of the risk-rated loan portfolio into groups or pools of loans, together with loans with similar characteristics, for evaluation in accordance with SFAS No. 5. We perform loss migration analysis and calculate the loss migration ratio for each loan pool based on its historical net losses and benchmark it against the levels of other peer banks.

In the third phase, we consider relevant internal and external factors that may affect the collectibility of a loan portfolio and each group of loan pools. As a general rule, the factors detailed below will be considered to have no impact (neutral) to our loss migration analysis. However, if there exists information to warrant adjustment to the loss migration ratios, the changes will be made in accordance with the established parameters and supported by narrative and/or statistical analysis. We use a credit risk matrix to determine the impact to the loss migration analysis. The credit risk matrix provides seven possible scenarios for each of the identified factors detailed below. The matrix allows for three positive/decrease (major, moderate, and minor), three negative/increase (major, moderate, and minor), and one neutral credit risk scenario within each factor for each loan pool. These possible scenarios enable management to adjust the loss migration ratio as much as 50% in either direction (positive or negative) for each loan pool. These adjustments are applied to the general allocation for each loan pool if warranted.

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Bank Premises and Equipment—Bank premises and equipment are stated at cost less accumulated depreciation and amortization. Depreciation on building, furniture, fixtures and equipment is computed on the straight-line method over the estimated useful lives of the related assets, which range from 3 to 30 years. Leasehold improvements are capitalized and amortized on the straight-line method over the term of the lease or the estimated useful lives of the improvements, whichever is shorter.

Other Real Estate Owned—Other real estate owned, which represents real estate acquired through foreclosure in satisfaction of commercial and real estate loans, is stated at fair value less estimated selling costs of the real estate. Loan balances in excess of the fair value of the real estate acquired at the date of acquisition are charged to the allowance for loan losses.

Any subsequent operating expenses or income, reduction in estimated fair values, and gains or losses on disposition of such properties are charged or credited to current operations.

Impairment of Long-Lived Assets—The Company reviews its long-lived assets for impairment annually or when events or circumstances indicate that the carrying amount of these assets may not be recoverable. An asset is considered impaired when the expected undiscounted cash flows over the remaining useful life are less than the net book value. When impairment is indicated for an asset, the amount of impairment loss is the excess of the net book value over its fair value.

Income Taxes—Deferred income taxes are provided for using an asset and liability approach. Deferred income tax assets and liabilities represent the tax effects, based on current tax law, of future deductible or taxable amounts attributable to events that have been recognized in the financial statements.

Stock-Based Compensation—As amended by Statement of Financial Accounting Standards (“SFAS”) No. 148, Accounting for Stock-Based Compensation—Transition and Disclosure, SFAS No. 123, Accounting for Stock-Based Compensation, encourages all entities to adopt a fair value based method of accounting for employee stock compensation plans, whereby compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. However, it also allows an entity to continue to measure compensation cost for those plans using the intrinsic value based method of accounting prescribed by Accounting Principles Board Opinion (“APB”) No. 25, Accounting for Stock Issued to Employees, whereby compensation cost is the excess, if any, of the quoted market price of the stock at the grant date (or other measurement date) over the amount an employee must pay to acquire the stock. Stock options issued under the Company’s stock option plan have no intrinsic value at the grant date, and under APB No. 25 no compensation cost is recognized for them. The Company has elected to continue with the accounting methodology in APB No. 25 and, as a result, has provided pro forma disclosures of net income and earnings per share and other disclosures as if the fair value based method of accounting had been applied. The pro forma disclosures include the effects of all awards granted on or after January 1, 1995.

The estimated fair value of options granted during 2004, 2003 and 2002 was $3.97, $1.19 and $0.71 per share, respectively.

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Had compensation cost for the Company’s stock option plan been determined based on the fair values at the grant dates for awards under the plan consistent with the fair value method of SFAS No. 123, the Company’s net income and earnings per share would have been reduced to the pro forma amounts indicated below for the years ended December 31:

	2004			2003			2002

Net income—as reported	$	19,458,308		$	12,816,732		$	8,593,112
Add: Stock-based employee compensation
expense included in reported net income—net
of related tax effect
Deduct: Total stock-based employee
expense determined under fair value based
compensation method for all awards—net of
related tax effect		(122,306	)		(134,347	)		(143,805	)

Pro forma net income	$	19,336,002		$	12,682,385		$	8,449,307

Earnings per share:
Basic—as reported	$	0.70		$	0.50		$	0.34
Basic—pro forma	$	0.70		$	0.49		$	0.33

Diluted—as reported	$	0.68		$	0.44		$	0.32
Diluted—pro forma	$	0.68		$	0.44		$	0.31

The fair values of options granted under the Company’s fixed stock option plan during 2004, 2003 and 2002 were estimated on the date of grant using the Black-Scholes option-pricing model, with the following assumptions used: no cash dividend yield, expected volatility of 19% for 2004, 22% for 2003 and 22% for 2002; expected life of two to five years for 2004, 2003 and 2002; and risk-free interest rate of 3.45%, 3.23% and 2.73% for 2004, 2003 and 2002, respectively.

Earnings per Share—Basic earnings per share (“EPS”) exclude dilution and are computed by dividing earnings available to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution of securities that could share in the earnings. There was a two-for-one stock split of the Company’s common shares for the shareholders of record at the close of business on July 31, 2002, November 30, 2003 and December 3, 2004 which were effective on August 15, 2002, December 17, 2003 and December 14, 2004, respectively. There was a 10% stock dividend, which was paid in May 2003 for shareholders of record at the close of business on April 30, 2003. All basic and diluted earnings per share in this report have been retroactively restated for each stock split and stock dividend.

Use of Estimates in the Preparation of Financial Statements—The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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 estimates.

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Recent Accounting Pronouncements—In January 2003, the Financial Accounting Standard Board (“FASB”) issued Interpretation No. 46 — Consolidation of Variable Interest Entities (“FIN 46”). In December 2003, the FASB revised FIN 46 and codified certain FASB Staff Positions previously issued for FIN 46 (“FIN 46R). The objective of FIN 46 as originally issued, and as revised by FIN 46R, was to improve financial reporting by companies involved with variable interest entities. Prior to the effectiveness of FIN 46, a company generally included another entity in its consolidated financial statements only if it controlled the entity through voting interests. FIN 46 changed that standard by requiring a variable interest entity to be consolidated by a company if that company was subject to a majority of the risk of loss from the variable interest entity’s activities or entitled to receive a majority of the entity’s residual returns or both. The consolidation requirements of FIN 46 applied immediately to variable interest entities created after January 31, 2003. The consolidation requirements applied to older entities in the first fiscal year or interim period beginning after June 15, 2003. The provisions of FIN 46R were required to be adopted prior to the first reporting period that ended after March 15, 2004. Our adoption of FIN 46 and FIN 46R did not have a significant impact on the financial position, results of operations or cash flows of the Company.

In December 2003, the Accounting Standards Executive Committee of the AICPA issued Statement of Position No. 03-3 (“SOP 03-3”), Accounting for Certain Loans or Debt Securities Acquired in a Transfer. SOP 03-3 addresses the accounting for differences between the contractual cash flows and the cash flows expected to be collected from purchased loans or debt securities if those differences are attributable, in part, to credit quality. SOP 03-3 requires purchased loans and debt securities to be recorded initially at fair value based on the present value of the cash flows expected to be collected with no carryover of any valuation allowance previously recognized by the seller. Interest income should be recognized based on the effective yield from the cash flows expected to be collected. To the extent that the purchased loans or debt securities experience subsequent deterioration in credit quality, a valuation allowance would be established for any additional cash flows that are not expected to be received. However, if more cash flows subsequently are expected to be received than originally estimated, the effective yield would be adjusted on a prospective basis. SOP 03-3 will be effective for loans and debt securities acquired after December 31, 2004. The Company anticipates that the implementation of SOP 03-3 is not expected to have a significant effect on the consolidated financial statements.

In March 2004, the Emerging Issues Task Force (EITF) reached consensus on the guidance provided in EITF Issue No. 03-1, The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments (EITF 03-1) as applicable to debt and equity securities that are within the scope of SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities and equity securities that are accounted for using the cost method specified in Accounting Policy Board Opinion No. 18, The Equity Method of Accounting for Investments in Common Stock. An investment is impaired if the fair value of the investment is less than its cost. EITF 03-1 outlines that an impairment would be considered other-than-temporary unless: (a) the investor has the ability and intent to hold an investment for a reasonable period of time sufficient for the recovery of the fair value up to (or beyond) the cost of the investment, and (b) evidence indicating that the cost of the investment is recoverable within a reasonable period of time outweighs evidence to the contrary. Although not presumptive, a pattern of selling investments prior to the forecasted recovery of fair value may call into question the investor’s intent. In addition, the severity and duration of the impairment should also be considered in determining whether the impairment is other-than-temporary.

In September 2004 the FASB staff issued a proposed Board-directed FASB Staff Position, FSP EITF Issue 03-1-a, Implementation Guidance for the Application of Paragraph 16 of EITF Issue No. 03-1. The proposed FSP would provide implementation guidance with respect to debt securities that are impaired solely due to interest rates and/or sector spreads and analyzed for other-than-temporary impairment under paragraph 16 of Issue 03-1. The Board also issued FSP EITF Issue 03-1-b, which delays the effective date for the measurement and recognition guidance contained in paragraphs 10-20 of EITF 03-1. The delay does not suspend the requirement to recognize other-than-temporary impairments as required by existing authoritative literature. Adoption of this standard may cause the Company to recognize impairment losses in the Consolidated Statements of Operations, which would not have been recognized under the current guidance or to recognize such losses in earlier periods, especially those due to increases in interest rates. Since fluctuations in the fair value for available-for-sale securities are already recorded in Accumulated Other Comprehensive Income, adoption of this standard is not expected to have a significant impact on shareholders’ equity.

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In December 2004, the FASB issued SFAS No.153 - Exchanges of Nonmonetary Assets, which eliminates the exception from fair value measurement for nonmonetary exchanges of similar productive assets in paragraph 21(b) of APB Opinion No. 29, Accounting for Nonmonetary Transactions, and replaces it with an exception for exchanges that do not have commercial substance. This statement specifies that a nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. The provisions of this statement shall be effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. This statement is not expected to have a significant effect on the consolidated financial statements.

In December 2004, the FASB issued SFAS 123R, which revises SFAS 123 and supersedes APB 25. Accounting and reporting under SFAS 123R is generally similar to the SFAS 123 approach except that SFAS 123R requires all share-based payments to employees, including grants of stock options and stock appreciation rights, to be recognized in the income statement based on their fair values. The provisions of SFAS 123R are effective for the first interim period of the Company beginning on July 1, 2005. The Company is currently evaluating both the timing and method of adopting the new standard.

Reclassifications—Certain reclassifications were made to the prior years’ presentation to conform to the current year’s presentation.

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2.	INVESTMENT SECURITIES

The following is a summary of the investment securities at December 31:

			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair
2004	Cost		Gain		Loss		Value

Available for sale:
Securities of government
sponsored enterprises	$	39,944,815	$	15,565	$	228,251	$	39,732,129
Corporate Securities		3,993,503		15,270		59,429		3,949,344
CMOs & MBS		32,183,031		109,150		261,169		32,031,012
Money Market Preferred Stock		10,000,000		—		—		10,000,000

Total	$	86,121,349	$	139,985	$	548,849	$	85,712,485

Held to maturity:
Securities of government
sponsored enterprises	$	28,072,958	$	7,606	$	104,458	$	27,976,106
CMOs & MBS		379,230		—		8,040		371,190
Municipal Bond		810,000		3,804		—		813,804

Total	$	29,262,188	$	11,410	$	112,498	$	29,161,100

				Gross		Gross		Estimated
		Amortized		Unrealized		Unrealized		Fair
2003		Cost		Gain		Loss		Value
Available for sale:
Securities of government
sponsored enterprises	$	29,317,232	$	44,733	$	3,626	$	29,358,339
Corporate Securities		12,362,407		422,956		19,688		12,765,675
CMOs & MBS		15,021,529		41,612		191,854		14,871,287
Money Market Preferred Stock		8,000,000		—		—		8,000,000

Total	$	64,701,168	$	509,301	$	215,168	$	64,995,301

Held to maturity:
Securities of government
sponsored enterprises	$	19,083,533	$	73,789	$	155,589	$	19,001,733
Corporate Securities		2,594,377		29,073		—		2,623,450
CMOs & MBS		694,386		—		2,360		692,026
Municipal Bond		1,055,000		18,984		—		1,073,984

Total	$	23,427,296	$	121,846	$	157,949	$	23,391,193

Accrued interest and dividends receivable on investment securities totaled $525,464 and $695,558 at December 31, 2004 and 2003, respectively.

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The following tables show our investments’ gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31:

2004											(Dollars in thousands)
	Less than 12 months					12 months or longer					Total
			Gross					Gross					Gross
			Unrealized					Unrealized					Unrealized
DESCRIPTION OF SECURITIES	Fair Value		Losses			Fair Value		Losses			Fair Value		Losses

Securities of government sponsored enterprises	$	50,789	$	(267	)	$	3,934	$	(66	)	$	54,723	$	(333	)
Collateralized mortgage obligations		1,915		(29	)		2,747		(77	)		4,662		(106	)
Mortgage-backed securities		11,970		(123	)		2,949		(40	)		14,919		(163	)
Corporate securities		1,926		(59	)		—		—			1,926		(59	)
	$	66,600	$	(478	)	$	9,630	$	(183	)	$	76,230	$	(661	)

2003										(Dollars in thousands)
	Less than 12 months					12 months or longer				Total
			Gross					Gross				Gross
			Unrealized					Unrealized				Unrealized
DESCRIPTION OF SECURITIES	Fair Value		Losses			Fair Value		Losses		Fair Value		Losses

Securities of government sponsored enterprises	$	20,906	$	(159	)		—		—	$	20,906	$	(159	)
Collateralized mortgage obligations		4,297		(83	)		—		—		4,297		(83	)
Mortgage-backed securities		7,447		(111	)		—		—		7,447		(111	)
Corporate securities		990		(20	)		—		—		990		(20	)
	$	33,640	$	(373	)		—		—	$	33,640	$	(373	)

The unrealized loss positions of our government sponsored enterprises bonds, collateralized mortgage obligations, and mortgage-backed securities are a function of the volatility of interest rates during 2004, in that they are all rated AAA by Standard & Poors (“S&P”), redeem at maturity or when called at par, and have the implicit guaranty of the United States Treasury.

Because the decline in market value is attributable to changes in interest rates and not to credit quality, and because the Company has the ability and intent to hold these investments until a recovery of fair value, which may be at maturity, we do not consider these investments to be other-than-temporarily impaired at December 31, 2004 and 2003.

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The amortized cost and estimated fair value of investment securities at December 31, 2004, by contractual maturity, are shown below.

	Amortized		Estimated
	Cost		Fair Value

Available for sale:
Due in one year or less	$	10,000,000	$	10,000,000
Due after one year through five years		36,968,473		36,774,803
Due after five years through ten years		5,960,609		5,892,920
Due after ten years		33,192,267		33,044,762

Total	$	86,121,349	$	85,712,485

Held to maturity:
Due in one year or less	$	1,000,000	$	1,005,490
Due after one year through five years		19,787,416		19,765,244
Due after five years through ten years		8,095,542		8,019,176
Due after ten years		379,230		371,190

Total	$	29,262,188	$	29,161,100

Securities with amortized cost of approximately $86,582,606 and $62,401,000 were pledged to secure public deposits and for other purposes as required or permitted by law at December 31, 2004 and 2003, respectively. For the year ended December 31, 2004 and 2003, proceeds from sale of securities available for sale amounted to $18,568,500 and 13,785,488, respectively. Gross realized gains from the sales and maturities of securities available for sale amounted to $284,411 and $143,294 and gross losses from the sales of securities available for sale amounted to $12,520 and $139,601 for the years ended December 31, 2004 and 2003, respectively. There were no sales of securities during 2002.

At December 31, 2004, 2003, and 2002 we also had $10 million, $8 million, and $0, respectively, in money market preferred stock (“MMPS”), which is classified as available-for-sale securities. MMPS is a form of equity security having characteristics similar to money market investments such as commercial paper and offers attractive tax-equivalent yields with a 70% dividend received deduction. MMPS is re-auctioned every 49 or 90 days.

3.	LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES

Loans receivable consist of the following at December 31:

	2004			2003

Commercial loans	$	137,363,148		$	130,055,273
Real estate loans		852,595,552			601,362,964
Installment loans		18,810,397			14,968,687

		1,008,769,097			746,386,924
Allowance for loan losses		(11,111,092	)		(9,011,071	)
Deferred loan fees		(1,761,154	)		(1,633,486	)
Unearned income		(7,428,709	)		(5,849,681	)

Loans receivable—net	$	988,468,142		$	729,892,686

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At December 31, 2004, 2003 and 2002, the Company serviced loans sold to unaffiliated parties in the amounts of $235,534,249, $180,558,338 and $126,345,997 respectively.

Management believes that as of December 31, 2004 and 2003, the allowance for loan losses is adequate to provide for losses inherent in the loan portfolio; however, the allowance is an estimate that is inherently uncertain and depends on the outcome of future events. Management’s estimates are based on previous loan loss experience; volume, growth and composition of the loan portfolio; the value of collateral; and current economic conditions.

The Company evaluates credit risks associated with the commitments to extend credit and letters of credit at the same time it evaluates credit risk associated with the loan portfolio. However, the allowances necessary for the commitments are reported separately in other liabilities in the accompanying statement of financial condition and not part of the allowance for loan losses as presented above.

The activity in the allowance for loan losses was as follows for the years ended December 31:

	2004			2003			2002
Balance—beginning of year	$	9,011,071		$	6,342,595		$	5,559,071
Provision for loan losses		3,008,015			2,770,000			3,169,891
Loans charged off		(1,368,717	)		(951,618	)		(2,827,912	)
Recoveries of charge-offs		460,723			850,094			441,545
Balance—end of year	$	11,111,092		$	9,011,071		$	6,342,595

The activity in the liability for losses on loan commitments was as follows for the years ended December 31:

	2004		2003		2002
Balance—beginning of year	$	82,931	$	70,412	$	—
Provision for losses on loan commitments		558,696		12,519		70,412
Balance—end of year	$	641,627	$	82,931	$	70,412

At December 31, 2004 and 2003, the Company had considered $2,656,818 and $3,628,554 of its loans as impaired with specific reserves of $541,261 and $603,095, respectively. The average recorded investment in impaired loans during the years ended December 31, 2004 and 2003 was $3,240,532 and $3,418,360, respectively. Interest income of $5,828, $2,422 and $137,234 was recognized on a cash basis on impaired loans during the years ended December 31, 2004, 2003 and 2002, respectively.

At December 31, 2004, the Company had loans on non-accrual status of $2,642,813 compared to $3,628,554 at December 31, 2003.

At December 31, 2004, the Company’s loans-to-one-borrower limit was $17.8 million based upon the 15% of unimpaired capital and surplus measurement. At December 31, 2004, the Company’s largest relationship consisted of one borrower with outstanding commitments of $9 million, which consisted of three loans, two of which are secured by commercial real estate and the other by cash. All of these loans were performing in accordance with their terms.

F-18

Many of our customers are locally based Korean-Americans who also conduct business in South Korea. Although we conduct most of our business with locally-based customers and rely on domestically located assets to collateralize our loans and credit arrangements, we have historically had some exposure to the economy of South Korea in connection with certain of our loans and credit transactions with Korean banks.

Substantially all of the Company’s business is located in California, with a particular concentration in Southern California. Approximately 90% of the Company’s loan portfolio was concentrated in Southern California at December 31, 2004. As a result, the Company’s financial condition and operating results are subject to changes in economic conditions in that region. In the early to mid-1990s, California experienced a significant and prolonged downturn in its economy, which adversely affected financial institutions, including the Company. Although the general economy in California has recovered from that prolonged recession, the Company is subject to changes in economic conditions in that region. We can provide no assurance that conditions in the California economy will not deteriorate in the future and that such deterioration will not adversely affect the Company.

The following is an analysis of all loans to officers and directors of the Company and its affiliates as of December 31. All such loans were made under terms that are consistent with the Company’s normal lending policies.

	2004			2003

Outstanding balance—beginning of year	$	12,400,980		$	7,262,174
Credit granted, including renewals		1,118,764			8,699,140
Repayments		(1,923,707	)		(3,560,334	)

Outstanding balance—end of year	$	11,596,037		$	12,400,980

Income from these loans totaled approximately $617,235, $526,000 and $279,000 for the years ended December 31, 2004, 2003 and 2002, respectively, and is reflected in the accompanying statements of operations.

4.	BANK PREMISES AND EQUIPMENT

The following is a summary of the major components of Bank premises and equipment as of December 31:

	2004			2003

Land	$	867,731		$	867,731
Building		1,168,485			1,168,485
Furniture and equipment		4,219,184			3,909,935
Leasehold improvements		3,784,671			3,043,630

		10,040,071			8,989,781
Accumulated depreciation and amortization		(4,560,295	)		(4,187,292	)

	$	5,479,776		$	4,802,489

F-19

Depreciation expense was $790,186, $654,472 and $637,023 for the years ended December 31, 2004, 2003 and 2002, respectively.

5.	OTHER REAL ESTATE OWNED

As of December 31, 2003 and 2002, other real estate owned consisted of single residential property and a parcel of undeveloped land.

Activity in the allowance for the other real estate owned losses is as follows:

	2004		2003		2002

Balance—beginning of year	$	—	$	—	$	150,500
Provision charged to operations						80,000
Charge-offs						(230,500	)

Balance—end of year	$	—	$	—	$	—

6.	DEPOSITS

Time deposits by maturity dates are as follows at December 31:

	2004		2003

Less than three months	$	307,360,905	$	204,206,774
After three to six months		118,077,134		103,040,844
After six months to twelve months		118,417,468		102,271,703
After twelve months		20,399,586		11,719,628

Total	$	564,255,093	$	421,238,949

The scheduled maturities of time deposits as of December 31, 2004 are as follows:

2005	$	543,855,507
2006		14,446,238
2007		5,790,675
2008		99,000
2009 and thereafter		63,673

	$	564,255,093

F-20

A summary of interest expense on deposits is as follows for the years ended December 31:

	2004		2003		2002

Savings	$	198,022	$	168,012	$	135,833
Time deposits of $100,000 or more		8,697,283		5,850,354		5,055,320
Other time deposits		2,984,659		3,300,442		2,314,393
Other		3,783,263		1,931,512		1,375,456

Total	$	15,663,227	$	11,250,320	$	8,881,002

Other interest-bearing deposits consist of money market deposits and super NOW deposits.

In addition to credit risks, because the Company’s customer base is largely Korean-American, the Company’s deposit base could significantly decrease as a result of deterioration in the Korean economy. During downturns in the Korean economy, some of the Company’s customers may need funds for their local businesses, or may temporarily withdraw deposits in order to transfer funds and benefit from gains on foreign exchange and interest rates and/or to help their relatives in South Korea during downturns in the Korean economy. A significant decrease in the Company’s deposits could also have a material adverse effect on the financial condition and results of operations of the Company.

7.	COMMITMENTS AND CONTINGENCIES

The Company leases premises and equipment under noncancelable operating leases. Future minimum rental commitments under these leases are as follows at December 31, 2004:

Year	Amount

2005	$	1,411,697
2006		1,106,282
2007		1,048,393
2008		732,033
2009		600,845
Thereafter		221,925
	$	5,121,175

Rental expense recorded under such leases amounted to approximately $1,426,000 (2004), $1,137,000 (2003) and $1,004,000 (2002).

In the normal course of business, the Company is involved in various legal claims. Management has reviewed all legal claims against the Company with outside legal counsel and has taken into consideration the views of such counsel as to the outcome of the claims. In management’s opinion, the final disposition of all such claims will not have a material adverse effect on the financial position and results of operations of the Company.

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 and standby letters of credit. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the statements of financial condition. The Company’s exposure to credit loss in the event of nonperformance by the other party to commitments to extend credit and standby letters of credit is represented by the contractual notional amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for extending loan facilities to customers. The Company evaluates each customer’s creditworthiness 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 counterparty.

F-21

Collateral held varies but may include accounts receivable, inventory, property, plant and equipment and income-producing properties. The Company had commitments to extend credit of approximately $69,488,000 and $42,574,000 and obligations under standby letters of credit and commercial letters of credit of approximately $12,135,000 and $9,632,000 at December 31, 2004 and 2003, respectively.

8.	FHLB BORROWINGS AND JUNIOR SUBORDINATED DEBENTURES

At December 31, 2004, the Company had approved financing with the FHLB for a maximum advance of up to 25% of total assets ($302,858,000 as of December 31, 2004) based on qualifying collateral. The Company’s borrowing capacity under the FHLB standard credit program was about $293 million, with $41 million outstanding as of December 31, 2004.

As of December 31, 2004, the Company has seven advances from the FHLB. These are for $5,000,000, $10,000,000, $5,000,000, $5,000,000, $6,000,000, $5,000,000 and $5,000,000 and mature in January 2005, April 2005, July 2005, August 2005, March 2006, June 2006 and August 2006, respectively, with interest rates of 1.98%, 2.03%, 1.94%, 2.20%, 1.98%, 1.78% and 2.69%, respectively. As of December 31, 2003, the Company had five borrowings with the FHLB. These were for $5,000,000, $5,000,000, $10,000,000, $4,000,000 and $5,000,000 and mature in July 2004, August 2004, September 2004, October 2004 and June 2006, respectively, with interest rates of 1.11%, 1.10%, 1.09%, 1.20% and 1.78%, respectively.

The following table summarizes information relating to the Company’s FHLB advances for the periods or dates indicated.

	Year Ended December 31,
	2004			2003			2002
	(Dollars in thousands)

Average balance during the year	$	43,760		$	17,189		$	6,151
Average interest rate during the year		1.56	%		1.34	%		1.82	%
Maximum month-end balance during the year	$	55,000		$	30,000		$	10,000
Loan collateralizing the agreements at year-end	$	801,785		$	184,323		$	145,814

F-22

The Company’s floating rate long-term debt of $10,000,000 and $15,464,000 at December 31, 2004 represents junior subordinated debentures issued to a trust in which the Company is the sole stockholder, and matures in 2012 and 2033, respectively. The floating rate is based on the three-month London Interbank Offered Rate (“LIBOR”) plus 3.10% and 2.85%, respectively. At December 31, 2004, the interest rate on floating rate long-term debt was 5.65% and 5.35%, respectively. The debt is callable at par by the Company after the initial five-year term.

9.	SHAREHOLDERS’ EQUITY

During 1997, the Company established a stock option plan that provides for the issuance of up to 6,499,800 shares of the Company’s authorized but unissued common stock to managerial employees and directors. The number of securities remaining available for future issuance under the stock option plan as of December 31, 2004 is 1,049,280. Exercise prices may not be less than the fair market value at the date of grant. As of December 31, 2004, 1,108,272 shares are outstanding under this option plan. Options granted under the stock option plans expire not more than 10 years after the date of grant.

Activity in the stock option plans, which has been retroactively adjusted for all stock splits, is as follows for the years ended December 31:

	2004					2003					2002
				Weighted-					Weighted-					Weighted-
				Average					Average					Average
				Exercise					Exercise					Exercise
	Shares			Price		Shares			Price		Shares			Price

Outstanding—beginning of year		3,358,094		$	0.98		3,333,904		$	1.06		3,525,088		$	0.88
Effect on options, due to stock
dividend							333,390			0.97
Forfeited		(14,080	)		1.69		(52,800	)		1.83		(41,600	)		1.73
Exercised		(2,239,742	)		0.81		(308,400	)		1.25		(469,584	)		0.86
Granted		4,000			15.98		52,000			4.53		320,000			2.83
Outstanding—end of year		1,108,272			1.37		3,358,094			0.98		3,333,904			1.06

Options exercisable at year-end		934,672			1.01		2,923,054			0.80		2,751,504			0.86
Weighted-average fair value of
options granted during the year	$	3.97				$	1.19				$	0.71

F-23

Information pertaining to options outstanding at December 31, 2004 is as follows:

	Options Outstanding						Options Exercisable
			Weighted-
			Average		Weighted-				Weighted-
			Remaining		Average				Average
	Number		Contractual		Exercise		Number		Exercise
Range of Exercise Prices	Outstanding		Life		Price		Exercisable		Price

$0.62-$0.88		639,526		2.16	$	0.63		639,526	$	0.63
$1.39-$1.65		206,240		6.00		1.40		202,720		1.40
$2.57-$4.53		258,506		7.63		2.96		91,626		2.67
$15.98		4,000		9.65		15.98		800		15.98

Outstanding at end of year		1,108,272		4.18		1.37		934,672		1.01

F-24

10.

INCOME TAXES

A summary of income tax expense (benefit) for 2004, 2003 and 2002 follows:

	Current		Deferred			Total

2004:
Federal	$	9,453,894	$	443,377		$	9,897,271
State		2,839,784		286,878			3,126,662

	$	12,293,678	$	730,255		$	13,023,933

2003:
Federal	$	7,565,594	$	(976,311	)	$	6,589,283
State		2,185,669		(279,476	)		1,906,193

	$	9,751,263	$	(1,255,787	)	$	8,495,476

2002:
Federal	$	5,360,649	$	(802,649	)	$	4,558,000
State		1,585,461		(412,461	)		1,173,000

	$	6,946,110	$	(1,215,110	)	$	5,731,000

The following is a summary of the income taxes payable (receivable) at December 31:

	2004			2003

Current income taxes:
Federal	$	(8,041	)	$	1,923,443
State		258,309			1,263,876

Total income taxes payable	$	250,268		$	3,187,319

F-25

The cumulative temporary differences, as tax effected, are as follows as of December 31, 2004 and 2003:

2004	Federal			State			Total

Deferred tax assets:
Statutory bad debt deduction less than
financial statement provision	$	3,722,654		$	1,269,150		$	4,991,804
Tax depreciation less than financial
statement depreciation		29,757			117,420			147,177
Mark to market loans held-for-sale		530,283			164,236			694,519

Total deferred tax assets		4,282,694			1,550,806			5,833,500

Deferred tax liabilities:
Prepaid expenses		220,494			68,291			288,785
Deferred loan origination costs		670,283			207,596			877,879
Unrealized loss on securities available-for-sale		(180,056	)		(43,250	)		(223,306	)
State tax deferred and other		52,414			(1,618	)		50,796

Total deferred tax liabilities		763,135			231,019			994,154

Net deferred tax assets	$	3,519,559		$	1,319,787		$	4,839,346

2003	Federal			State		Total

Deferred tax assets:
Statutory bad debt deduction less than
financial statement provision	$	2,634,526		$	1,019,285	$	3,653,811
Tax depreciation less than financial
statement depreciation		229,990			83,598		313,588
Mark to market		341,344			105,720		447,064

Total deferred tax assets		3,205,860			1,208,603		4,414,463

Deferred tax liabilities:
Prepaid expenses		207,585			64,292		271,877
Deferred loan origination costs		496,209			153,683		649,892
Unrealized loss on securities available for sale		78,402			9,706		88,108
State tax deferred and other		(394,060	)		968		(393,092	)

Total deferred tax liabilities		388,136			228,649		616,785

Net deferred tax assets	$	2,817,724		$	979,954	$	3,797,678

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, the projected future taxable income, and tax-planning strategies in making this assessment. A valuation allowance against deferred tax assets at the balance-sheet date is not considered necessary, because it is more likely than not the deferred tax asset will be fully realized.

F-26

A reconciliation of the difference between the federal statutory income tax rate and the effective tax rate is shown in the following table for the three years ended December 31:

	2004			2003			2002

Statutory tax rate		35	%		35	%		35	%
State taxes—net of Los Angeles Revitalization Zone and federal
tax benefits		6			6			5
Other—net		(1	)		(1	)		—

		40	%		40	%		40	%

The Company believes it has adequately provided for income tax issues not yet resolved with federal, state and foreign tax authorities. At December 31, 2004, $532,000 was accrued for unresolved tax matters. Based upon a consideration of all relevant facts and circumstances, the Company does not believe the ultimate resolution of tax issues for all open tax periods will have a materially adverse effect upon its results of operations or financial condition.

11.

RETIREMENT PLAN

In 1996, the Company established a 401(k) savings plan, which is open to all eligible employees who are 21 years old or over and have completed six months of service. The plan provides for the Company’s matching contribution up to 6% of participants’ compensation during the plan year. Vesting in employer contributions is 25% after two years of service and 25% per year thereafter. Total employer contributions to the plan amounted to approximately $119,000 (2004), $105,000 (2003) and $93,000 (2002).

12.

REGULATORY MATTERS

The Company is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory—and possibly additional discretionary—actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company must meet specific capital guidelines that involve quantitative measures of the Company’s assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The Company’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Company to maintain minimum ratios (set forth in the table below) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined) and Tier I capital (as defined) to average assets (as defined). Management believes that, as of December 31, 2004 and 2003, the Company meets all capital adequacy requirements to which it is subject.

F-27

Before our bank holding company reorganization, our 2003 debenture was treated as Tier 2 capital for Bank regulatory capital purposes. The bank holding company reorganization allows us to take advantage of the current Federal Reserve Board rules regarding the capital treatment of junior subordinated debentures and related trust preferred securities which provide that a bank holding company may count a portion of the proceeds of a trust preferred securities issuance as Tier 1 capital in an amount up to 25% of its total Tier 1 capital. Under the current Federal Reserve Board capital guidelines, as of December 31, 2004, the Company is able to include all of the proceeds from the issuance of the trust preferred securities as Tier 1 capital.

The Company is periodically examined by the Federal Deposit Insurance Corporation (“FDIC”) and the Department of Financial Institutions of the State of California. As of the most recent notification from the FDIC, the Company is categorized as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Company must maintain minimum total risk-based, Tier I risk-based and Tier I leverage ratios as set forth in the table.

The Company’s actual capital amounts and ratios are presented in the table.


		Actual					For Capital Adequacy Purposes						To Be Categorized As Well Capitalized under Prompt Corrective Action Provisions
		Amount		Ratio			Amount			Ratio			Amount			Ratio
	(In thousands)					(In thousands)						(In thousands)

As of December 31, 2004:
Total capital (to risk-
weighted assets)		$	125,011		11.95	%	$	83,662	>		8.0	%	$	104,577	>		10.0	%
Tier I capital (to risk-
weighted assets)		$	103,258		9.87	%	$	41,831	>		4.0	%	$	62,746	>		6.0	%
Tier I capital
(to average assets)		$	103,258		8.35	%	$	49,439	>		4.0	%	$	61,798	>		5.0	%

As of December 31, 2003:
Total capital (to risk-
weighted assets)		$	93,096		11.59	%	$	64,260	>		8.0	%	$	80,324	>		10.0	%
Tier I capital (to risk-
weighted assets)		$	58,538		7.29	%	$	32,120	>		4.0	%	$	48,179	>		6.0	%
Tier I capital
(to average assets)		$	58,538		6.36	%	$	36,816	>		4.0	%	$	46,020	>		5.0	%

As a holding company whose only significant asset is the common stock of the Bank, the Company's ability to pay dividends on its common stock and to conduct business activities directly or in non-banking subsidiaries depends significantly on the receipt of dividends or other distributions from the Bank. The Bank’s ability to pay any cash dividends will depend not only upon our earnings during a specified period, but also on our meeting certain capital requirements. The FDIA and FDIC regulations restrict the payment of dividends when a bank is undercapitalized, when a bank has failed to pay insurance assessments, or when there are safety and soundness concerns regarding a bank.

The payment of dividends by the Bank may also be affected by other regulatory requirements and policies, such as maintenance of adequate capital. If, in the opinion of the regulatory authority, a depository institution under its jurisdiction is engaged in, or is about to engage in, an unsafe or unsound practice (that, depending on the financial condition of the depository institution, could include the payment of dividends), such authority may require, after notice and hearing, that such depository institution cease and desist from such practice. The Federal Reserve Board has issued a policy statement that provides that insured banks and bank holding companies should generally pay dividends only out of operating earnings for the current and preceding two years. In addition, all insured depository institutions are subject to the capital-based limitations required by the Federal Deposit Insurance Corporation Improvement Act of 1991. In addition to the regulation of dividends and other capital distributions, there are various statutory and regulatory limitations on the extent to which the Bank can finance or otherwise transfer funds to the Company or any of its non-banking subsidiaries, whether in the form of loans, extensions of credit, investments or asset purchases. The Federal Reserve Act and Regulation may further restrict these transactions in the interest of safety and soundness.

13.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair value of financial instruments has been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is required to interpret market data in order to develop estimates of fair value.

F-28

Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts at December 31:

	2004				2003
	Carrying		Estimated		Carrying		Estimated
	Amount		Fair Value		Amount		Fair Value

Assets:
Cash and cash equivalents	$	98,903,163	$	98,903,163	$	112,486,069	$	112,486,069
Interest-bearing deposits in other
financial institutions		2,573		2,573		201,496		201,496
Investment securities available for sale		85,712,485		85,712,485		64,995,301		64,995,301
Investment securities held to maturity		29,262,188		29,161,100		23,427,296		23,391,193
Interest-only strip		1,494,176		1,494,176		847,306		847,306
Loans receivable—net		988,468,142		984,569,550		729,892,686		726,778,834
Loans held for sale		21,144,128		22,865,260		18,101,665		19,549,799
FHLB stock		4,371,500		4,371,500		1,509,500		1,509,500
Accrued interest receivable		3,867,005		3,867,005		2,685,200		2,685,200
Servicing asset		4,373,974		4,556,088		3,282,683		4,135,096

Liabilities:
Noninterest-bearing deposits	$	274,207,744	$	274,207,744	$	238,018,220	$	238,018,220
Interest-bearing deposits		824,765,268		823,640,024		618,497,957		617,870,322
Subordinated Debentures		25,464,000		25,459,190		25,464,000		25,464,000
FHLB borrowings		41,000,000		40,670,670		29,000,000		29,021,431
Accrued interest payable		2,891,707		2,891,707		2,103,244		2,103,244

The methods and assumptions used to estimate the fair value of each class of financial statements for which it is practicable to estimate that value are explained below:

Cash and Cash Equivalents—The carrying amounts approximate fair value due to the short-term nature of these investments.

Interest-Bearing Deposits in Other Financial Institutions—The carrying amounts approximate fair value due to the short-term nature of these investments.

Investment Securities—The fair value of investment securities is generally obtained from market bids from similar or identical securities, or obtained from independent securities brokers or dealers.

Interest-Only Strip—The fair value of the I/O strip is calculated by the Company’s management based on the present value of the excess of total servicing fees over the contractually specified servicing fee for the estimated life of loans that were sold, discounted at a market interest rate.

Loans—Fair values are estimated for portfolios of loans with similar financial characteristics, primarily fixed and adjustable rate interest terms. The fair values of fixed rate mortgage loans are based on discounted cash flows utilizing applicable risk-adjusted spreads relative to the current pricing of similar fixed rate loans, as well as anticipated repayment schedules. The fair value of adjustable rate commercial loans is based on the estimated discounted cash flows utilizing the discount rates that approximate the pricing of loans collateralized by similar commercial properties. The estimated fair value is net of allowance for loan losses. The carrying amount of accrued interest receivable approximates its fair value.

F-29

The fair value of nonperforming loans at December 31, 2004 and 2003 was not estimated because it is not practicable to reasonably assess the credit adjustment that would be applied in the marketplace for such loans.

FHLB Stock—The carrying amounts approximate fair value, as the stock may be sold back to the FHLB at the carrying value.

Servicing Asset—The fair value of the servicing asset is based on the present value of the contractually specified servicing fee, net of servicing cost, for the estimated life of the loans the Company sold, based upon approximate prepayment speed, discounted by the effective interest rate.

Deposits—The fair values of nonmaturity deposits are equal to the carrying values of such deposits. Nonmaturity deposits include noninterest-bearing demand deposits, savings accounts, super NOW accounts, and money market demand accounts. Discounted cash flows have been used to value term deposits, such as CDs. The discount rate used is based on interest rates currently being offered by the Company on comparable deposits as to amount and term. The carrying amount of accrued interest payable approximates its fair value.

Subordinated Debentures and FHLB Borrowings—The fair value of debt at December 31, 2004 is based on discounted cash flows. The discount rate used is based on the current market rate.

Loan Commitments and Standby Letters of Credit—The fair value of loan commitments and standby letters of credit is based upon the difference between the current value of similar loans and the price at which the Company has committed to make the loans. The fair value of loan commitments and standby letters of credit is not material at December 31, 2004 and 2003.

The fair value estimates presented herein are based on pertinent information available to management at December 31, 2004 and 2003. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since that date, and therefore, current estimates of fair value may differ significantly from the amounts presented herein.

F-30

14.

EARNINGS PER SHARE

The following is a reconciliation of the numerators and denominators of the basic and diluted per share computations at December 31, 2004, 2003 and 2002:

	Income		Shares		Per Share
2004	(Numerator)		(Denominator)		Amount

Basic EPS—income available to
common shareholders	$	19,458,308		27,623,766	$	0.70

Effect of dilutive securities—options				892,116		(0.02	)

Diluted EPS—income available to
common shareholders	$	19,458,308		28,515,882	$	0.68

2003

Basic EPS—income available to
common shareholders	$	12,816,732		25,781,222	$	0.50

Effect of dilutive securities—options				3,191,986		(0.06	)

Diluted EPS—income available to
common shareholders	$	12,816,732		28,973,208	$	0.44

2002

Basic EPS—income available to
common shareholders	$	8,593,112		25,319,514	$	0.34

Effect of dilutive securities—options				1,739,336		(0.02	)

Diluted EPS—income available to
common shareholders	$	8,593,112		27,058,850	$	0.32

There were no anti-dilutive shares as of December 31, 2004, 2003 and 2002.

F-31

15.

QUARTERLY FINANCIAL DATA (UNAUDITED)

Summarized quarterly financial data follows:

	Three Months Ended
	March 31		June 30		September 30		December 31		Total
2004	(In thousands, except per share amounts)

Net interest income	$	9,105	$	9,538	$	11,113	$	12,579	$	42,335
Provision for loan losses		897		670		1,450		550		3,567
Net income		4,345		4,823		5,100		5,190		19,458
Basic earnings per common share		0.16		0.18		0.18		0.18		0.70
Diluted earnings per common share		0.15		0.17		0.18		0.18		0.68

2003

Net interest income	$	6,293	$	6,757	$	7,748	$	8,184	$	28,982
Provision for loan losses		453		343		755		1,232		2,783
Net income		2,757		3,251		3,331		3,478		12,817
Basic earnings per common share		0.11		0.13		0.13		0.13		0.50
Diluted earnings per common share		0.10		0.11		0.11		0.12		0.44

16.

BUSINESS SEGMENT INFORMATION

The following disclosure about segments of the Company is made in accordance with the requirements of SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information. The Company segregates its operations into three primary segments: Banking Operations, Trade Finance Services (“TFS”), and Small Business Administration Lending Services. The Company determines the operating results of each segment based on an internal management system that allocates certain expenses to each segment.

Banking Operations—The Company provides lending products, including commercial installment and real estate loans, to its customers.

Trade Finance Services—The Trade Finance department allows the Company’s import/export customers to handle their international transactions. Trade finance products include, among others, the issuance and collection of letters of credit, international collection and import/export financing.

Small Business Administration Lending Services—The SBA department mainly provides customers of the Company access to the U.S. SBA-guaranteed lending program.

F-32

The following are the results of operations of the Company’s segments for the year-ended December 31:

	Business Segment
	Banking
	Operations		TFS		SBA		Company
2004	(In thousands)

Net interest income	$	31,029	$	1,965	$	9,341	$	42,335
Less provision for loan losses		2,180		1,327		60		3,567
Other operating income		9,233		1,808		9,956		20,997

Net revenue		38,082		2,446		19,237		59,765
Other operating expenses		22,685		762		3,836		27,283

Income before taxes	$	15,397	$	1,684	$	15,401	$	32,482

Business segment assets	$	835,553	$	44,316	$	150,044	$	1,029,913
Non-business segment assets								235,728

Total assets							$	1,265,641

	Business Segment
	Banking
	Operations		TFS			SBA		Company
2003	(In thousands)

Net interest income	$	20,698	$	1,242		$	7,042	$	28,982
Less provision for loan losses		1,812		(175	)		1,146		2,783
Other operating income		7,684		1,545			7,869		17,098

Net revenue		26,570		2,962			13,765		43,297
Other operating expenses		18,408		758			2,819		21,985

Income before taxes	$	8,162	$	2,204		$	10,946	$	21,312

Business segment assets	$	609,116	$	29,808		$	125,565	$	764,489
Non-business segment assets									218,775

Total assets								$	983,264

F-33

	Business Segment
	Banking
	Operations		TFS		SBA		Company
2002	(In thousands)

Net interest income	$	16,803	$	1,194	$	5,780	$	23,777
Less provision for loan losses		2,240		549		451		3,240
Other operating income		6,163		1,262		3,950		11,375

Net revenue		20,726		1,907		9,279		31,912
Other operating expenses		14,740		745		2,103		17,588

Income before taxes	$	5,986	$	1,162	$	7,176	$	14,324

Business segment assets	$	403,097	$	25,030	$	101,581	$	529,708
Non-business segment assets								163,102

Total assets							$	692,810

17.

CONDENSED FINANCIAL STATEMENTS OF PARENT COMPANY

The following presents the unconsolidated financial statements of only the parent company, Wilshire Bancorp, Inc., as of December 31:


(In thousands)	2004				2004
STATEMENTS OF FINANCIAL CONDITION			STATEMENTS OF OPERATIONS

Assets:			Interest expense		$	228
Cash and cash equivalents	$	356	Net interest expense			228
Investment in subsidiaries		103,447	Other operating expense
Total assets	$	103,803	Equity in net earnings
				of subsidiaries		6,209
Liabilities:			Earnings before income
Other borrowings	$	15,464	tax provision			5,981
Accounts payable and other liabilities		31	Income tax benefit
Total liabilities		15,495	Net Income		$	5,981
Stockholders' Equity		88,308
Total liabilities and
stockholders' equity	$	103,803

Notes to Consolidated Financial Statements (continued)

F-34


	2004

STATEMENTS OF CASH FLOWS
Cash flows from operating activities:
Net income	$	5,981
Adjustments to reconcile net earnings to net cash used in operating activities:
Amortization
Decrease in accounts payable and other liabilities		(111	)
Equity in net earnings of subsidiaries		(6,209	)
Net cash used in operating activities	$	(339	)

Cash flows from Investing activities:
Payments for investments in and advances to subsidiaries		(14,500	)
Net cash used by investing activities		(14,500	)

Cash flows from financing activities:
Proceeds from the issuance of trust preferred securities		15,141
Proceeds from exercise of stock options		54
Payments of cash and cash equivalents
Net cash provided by financing activities		15,195
Net increase in cash and cash equivalents		356
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year	$	356

******

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

		Page
PART I		3
Item 1.	Business	3
Item 2.	Properties	30
Item 3.	Legal Proceedings	31
Item 4.	Submission of Matters to a Vote of Security Holders	31
PART II		31
Item 5.	Market for Registrant's Common Equity and Related Stockholder Matters	31
Item 6.	Selected Financial Data	34
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	66
Item 8.	Financial Statements and Supplementary Data	68
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	68
Item 9A.	Controls and Procedures	68
Item 9B.	Other Information	71
PART III		71
Item 10.	Directors and Executive Officers of Registrant	71
Item 11.	Executive Compensation	71
Item 12.	Security Ownership of Certain Beneficial Owners and Management	71
Item 13.	Certain Relationships and Related Transactions	71
Item 14.	Principal Accounting Fees and Services	71
PART IV		72
Item 15.	Exhibits, Financial Statement Schedules and Reports on Form 8-K	72
SIGNATURES		74

	Closing Sale Price ¹
	High		Low
Year Ended December 31, 2004
First Quarter	$	14.56	$	8.63
Second Quarter	$	14.25	$	10.98
Third Quarter	$	17.00	$	11.87
Fourth Quarter	$	17.35	$	13.54
Year Ended December 31, 2003
First Quarter	$	3.65	$	2.73
Second Quarter	$	4.31	$	3.54
Third Quarter	$	5.88	$	3.86
Fourth Quarter	$	9.71	$	5.89

Declaration Date	Payable Date	Record Date	Type
July 19, 2002	August 15, 2002	July 31, 2002	Two-for-one stock split
April 10, 2003	May 15, 2003	April 30, 2003	10% stock dividend
November 20, 2003	December 17, 2003	November 30, 2003	Two-for-one stock split
November 22, 2004	December 14, 2004	December 3, 2004	Two-for-one stock split

Plan Category	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights ¹	Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights ¹	Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding securities reflected in Column A ¹

Equity compensation plans approved by security holders	941,167	$4.05	882,720

(213) 387-3200
Registrant’s telephone number, including area code

	Group A	Group B	Group C
Well Capitalized	0	3	17
Adequately Capitalized	3	10	24
Undercapitalized	10	24	27

	As of and For the Years Ended December 31,
	2004			2003			2002			2001			2000
	(Dollars in Thousands)
Summary Statement of Operations Data:
Interest income	$	59,798		$	40,926		$	32,785		$	32,770		$	32,057
Interest expense		17,463			11,944			9,008			13,144			12,079
Net interest income before provision for loan losses		42,335			28,982			23,777			19,626			19,978
Provision for losses on loans and loan commitments		3,567			2,783			3,240			3,935			3,010
Noninterest income		20,997			17,099			11,375			9,167			6,792
Noninterest expenses		27,283			21,986			17,588			15,461			14,938
Income before income taxes		32,482			21,312			14,324			9,397			8,823
Income tax provision		13,024			8,495			5,731			3,215			3,653
Net income		19,458			12,817			8,593			6,182			5,169
Per Share Data:¹
Net income
Basic	$	0.70		$	0.50		$	0.34		$	0.25		$	0.22
Diluted	$	0.68		$	0.44		$	0.32		$	0.23		$	0.20
Book value	$	3.14		$	2.27		$	1.78		$	1.45		$	1.21
Weighted average common shares outstanding
Basic		27,623,766			25,781,222			25,319,514			24,727,896			23,988,862
Diluted		28,515,881			28,973,208			27,058,850			27,086,704			25,742,198
Period end shares outstanding		28,142,470			25,902,728			25,594,615			25,078,072			24,083,320
Summary Statement of Financial Condition Data (Period End):
Total loans, net of unearned income	$	1,020,723		$	757,006		$	524,541		$	371,536		$	272,268
Allowance for loan losses		11,111			9,011			6,343			5,559			4,968
Other real estate owned		—			377			—			26			41
Total assets		1,265,641			983,264			692,810			490,014			423,985
Total deposits		1,098,973			856,516			618,855			448,607			388,162
Federal Home Loan Bank Advances		41,000			29,000			10,000
Junior Subordinated Debentures		25,464			25,464			10,000
Total stockholders’ equity		88,307			58,741			45,392			36,192			29,134
Performance ratios:
Return on average equity²		25.42	%		24.56	%		20.97	%		18.77	%		19.57	%
Return on average assets³		1.70	%		1.58	%		1.49	%		1.37	%		1.45	%
Average equity over average assets		6.71	%		6.43	%		7.10	%		7.28	%		7.43	%
Net interest margin⁴		4.05	%		3.89	%		4.48	%		4.75	%		6.20	%
Efficiency ratio⁵		43.08	%		47.71	%		50.03	%		53.70	%		55.80	%
Net loans to total deposits at period end		91.87	%		87.33	%		83.73	%		81.58	%		68.86	%
Dividend payout ratio		—			—			—			—			—
Capital ratios:
Average stockholders’ equity to average total assets		6.69	%		6.43	%		7.09	%		7.28	%		7.43	%
Tier 1 capital to adjusted total assets		8.35	%		6.36	%		7.00	%		7.70	%		7.22	%
Tier 1 capital to total risk-weighted assets		9.87	%		7.29	%		8.40	%		9.25	%		9.89	%
Total capital to total risk-weighted assets		11.95	%		11.60	%		11.45	%		10.50	%		11.15	%
Asset quality ratios:
Nonperforming loans to total loans⁶^.		0.26	%		0.50	%		0.66	%		0.96	%		0.90	%
Nonperforming assets to total loans and other real estate owned⁷		0.26	%		0.54	%		0.66	%		0.96	%		0.92	%
Net charge-offs (recoveries) to average total loans		0.10	%		0.02	%		0.54	%		1.06	%		0.60	%
Allowance for loan losses to total loans at period end		1.09	%		1.19	%		1.21	%		1.50	%		1.82	%
Allowance for loan losses to nonperforming loans		411.63	%		240.45	%		182.96	%		156.28	%		202.20	%

	For the Years Ended December 31,
	2004							2003							2002
	Average Balance		Interest Income/ Expense		Average Rate/Yield				Average Balance	Interest Income/ Expense		Average Rate/Yield			Average Balance		Interest Income/ Expense		Average Rate/Yield
	(Dollars in Thousands)
Assets:
Earning assets:
Net loans¹	$	895,380	$	55,943		6.25	%	$	621,949	$	37,892		6.09	%	$	439,481	$	30,185		6.87	%
Securities of government sponsored enterprises		77,251		2,377		3.08	%		56,664		1,600		2.82	%		35,957		1,363		3.79	%
Other investment securities.		11,305		566		5.00	%		14,705		783		5.33	%		7,538		375		4.97	%
Federal funds sold		55,760		805		1.44	%		47,993		596		1.24	%		46,408		790		1.70	%
Money Market Preferred Stocks		6,259		105		1.68	%		2,274		27		1.18	%		—		—		—
Interest-earning deposits		67		2		2.69	%		1,022		28		2.74	%		1,920		72		3.75	%
Total interest-earning assets		1,046,022		59,798		5.72	%		744,607		40,926		5.50	%		531,304		32,785		6.17	%
Total noninterest-earning assets		95,408							67,116							46,393
Total assets	$	1,141,430						$	811,723						$	577,697
Liabilities and Shareholders’ Equity:
Interest-bearing liabilities:
Money market deposits	$	193,120	$	3,618		1.87	%	$	107,062	$	1,787		1.67	%	$	68,404	$	1,209		1.77	%
Super NOW deposits		21,542		165		0.77	%		17,494		145		0.83	%		16,243		166		1.02	%
Savings deposits		26,322		198		0.75	%		22,754		168		0.74	%		18,540		136		0.73	%
Time certificates of deposit in denominations of $100,000 or more		373,888		8,698		2.33	%		233,763		5,850		2.50	%		184,802		5,055		2.74	%
Other time deposits		117,697		2,984		2.54	%		140,243		3,300		2.35	%		76,460		2,315		3.03	%
Other borrowings		69,353		1,800		2.59	%		27,807		694		2.49	%		6,137		127		2.07	%
Total interest-bearing liabilities		801,922		17,463		2.18	%		549,123		11,944		2.18	%		370,586		9,008		2.43	%
Noninterest-bearing liabilities:
Noninterest-bearing deposits		252,021							201,360							161,271
Other liabilities		10,925							9,060							4,853
Total noninterest-bearing liabilities		262,946							210,420							166,124
Shareholders’ equity		76,562							52,180							40,987
Total liabilities and shareholders’ equity	$	1,141,430						$	811,723						$	577,697
Net interest income			$	42,335						$	28,982						$	23,777
Net interest spread²						3.54	%						3.32	%						3.74	%
Net interest margin³						4.05	%						3.89	%						4.48	%

	For the Year Ended December 31, 2004 vs. 2003									For the Year Ended December 31, 2003 vs. 2002
	Increases (Decreases) Due to Change In									Increases (Decreases) Due to Change In

	Volume			Rate			Total			Volume			Rate			Total
Interest income:
Net loans¹	$	17,060		$	991		$	18,051		$	11,420			($3,713	)	$	7,707
Securities of government sponsored enterprises		623			155			778			646			(409	)		237
Other Investment securities		(172	)		(46	)		(218	)		380			28			408
Federal funds sold		104			105			209			26			(220	)		(194	)
Money Market Preferred Stocks		63			15			78			27			—			27
Interest-earning deposits		(26	)		—			(26	)		(28	)		(16	)		(44	)

Total interest income		17,652			1,220			18,872			12,471			(4,330	)		8,141

Interest expense:
Money market deposits	$	1,589		$	243		$	1,832		$	649			($71	)	$	578
Super NOW deposits		32			(11	)		21			12			(33	)		(21	)
Savings deposits		27			3			30			31			1			32
Time certificates of deposit in denominations of $100,000 or more		3,286			(439	)		2,847			1,253			(458	)		795
Other time deposits		(558	)		242			(316	)		1,591			(606	)		985
Other borrowings		1,076			29			1,105			536			31			567

Total interest expense		5,452			67			5,519			4,072			(1,136	)		2,936

Change in net interest income	$	12,200		$	1,153		$	13,353		$	8,399			($3,194	)	$	5,205

	Amount Outstanding as of December 31,
	(Dollars in Thousands)
	2004			2003			2002			2001			2000
Construction	$	6,972		$	7,845		$	13,777		$	12,625		$	2,836
Real estate secured		858,998			607,561			400,446			255,801			148,040
Commercial and industrial		135,943			126,631			97,998			89,500			115,215
Consumer		18,810			14,969			12,320			13,610			6,177
Total loans, net of unearned income	$	1,020,723		$	757,006		$	524,541		$	371,536		$	272,268
Participation loans sold and serviced by the Company	$	235,534		$	180,558		$	126,346		$	109,489		$	102,741
Construction		0.70	%		1.00	%		2.60	%		3.40	%		1.00	%
Real estate secured		84.20	%		80.30	%		76.30	%		68.90	%		54.40	%
Commercial and industrial		13.30	%		16.70	%		18.70	%		24.10	%		42.30	%
Consumer		1.80	%		2.00	%		2.40	%		3.60	%		2.30	%
Total loans, net of unearned income		100.00	%		100.00	%		100.00	%		100.00	%		100.00	%

	At December 31, 2004,
	Within One Year		After One But Within Five Years		After Five Years		Total
	(Dollars in Thousands)
Construction	$	6,972	$	—	$	—	$	6,972
Real estate secured		791,749		19,651		44,635		856,035
Commercial and industrial		141,327		157		93		141,577
Consumer		5,735		13,037		7		13,779
Total loans, net of unearned income	$	945,783	$	32,845	$	44,735	$	1,023,363
Loans with variable (floating) interest rates	$	927,000	$	—	$	—	$	927,000
Loans with predetermined (fixed) interest rates	$	18,784	$	32,845	$	44,734	$	96,363

	At December 31,
	2004			2003			2002			2001			2000
	(Dollars in Thousands)
Nonaccrual loans:¹
Real estate secured	$	2,242		$	3,086		$	2,074		$	1,219		$	314
Commercial and industrial		401			543			479			2,141			732
Consumer		—			—			—			24			2
Total	$	2,643		$	3,629		$	2,553		$	3,384		$	1,048
Loans 90 days or more past due and still accruing (as to principal or interest):
Construction	$	—		$	—		$	875		$	—		$	—
Real estate secured		—			—			—			—			81
Commercial and industrial		—			29			—			131			1,326
Consumer		42			67			7			—			2
Total		42			96			882			131			1,409
Restructured loans:^2,3
Real estate secured	$	—		$	—		$	—		$	—		$	—
Commercial and industrial		14			23			32			42			—
Consumer		—			—			—			—			—
Total		14			23			32			42			0
Total nonperforming loans		2,699			3,748			3,467			3,557			2,457
Other real estate owned		—			377			—			26			41
Total nonperforming assets	$	2,699		$	4,125		$	3,467		$	3,583		$	2,498

Nonperforming loans as a percentage of total loans		0.26	%		0.50	%		0.66	%		0.96	%		0.90	%
Nonperforming assets as a percentage of total loans and other real estate owned
		0.26	%		0.54	%		0.66	%		0.96	%		0.92	%
Allowance for loan losses as a percentage of nonperforming loans		411.63	%		240.45	%		182.95	%		156.28	%		202.20	%

Phase of Methodology	As of December 31,
	2004		2003
Specific review of individual loans	$	541,261	$	288,399
Review of pools of loans with similar characteristics	$	8,954,465	$	7,442,313
Judgmental estimate based on various subjective factors	$	1,615,366	$	1,280,359

	Amount Outstanding as of December 31,
	(Dollars in Thousands)
Applicable to:	2004			2003			2002			2001			2000
Construction	$	66		$	80		$	140		$	130		$	28
Real estate secured		8,081			6,991			4,583			2,364			1,660
Commercial and industrial		2,796			1,852			1,597			3,031			3,095
Consumer		168			88			23			34			185
Total Allowance	$	11,111		$	9,011		$	6,343		$	5,559		$	4,968
Construction		0.59	%		0.89	%		2.21	%		2.34	%		0.56	%
Real estate secured		72.73	%		77.58	%		72.25	%		42.53	%		33.41	%
Commercial and industrial		25.17	%		20.55	%		25.18	%		54.52	%		62.30	%
Consumer		1.51	%		0.98	%		0.36	%		0.61	%		3.73	%
Total Allowance		100.00	%		100.00	%		100.00	%		100.00	%		100.00	%

	One Year or Less		Over One Year To Three Years		Over Three Years To Five Years		Over Five Years		Total
FHLB borrowings	$	25,536	$	16,141	$	—	$	—	$	41,677
Junior subordinated debenture		1,387		2,764		783		25,464		30,398
Operating leases		1,350		1,357		480		78		3,265
Time deposits		552,276		20,823		120		78		573,297
Total	$	580,549	$	41,085	$	1,383	$	25,620	$	648,637

	As of December 31, 2004				As of December 31, 2003				As of December 31, 2002

	Amortized Cost		Market Value		Amortized Cost		Market Value		Amortized Cost		Market Value
Held to Maturity:
Securities of government sponsored enterprises	$	28,073	$	27,976	$	19,084	$	19,002	$	20,462	$	20,632
Collateralized mortgage obligation		379		371		694		692		—		—
Municipal securities		810		814		1,055		1,074				—
Corporate securities		—		—		2,594		2,623		4,612		4,746

Available-for-Sale:
Securities of government sponsored enterprises		39,945		39,732		29,318		29,359		24,170		24,248
Mortgage backed securities		32,183		32,031		15,022		14,871		3,785		3,872
Corporate securities		3,994		3,950		12,362		12,766		6,731		6,594
Money market preferred stock		10,000		10,000		8,000		8,000		—		—

Total investment securities	$	115,384	$	114,874	$	88,129	$	88,387	$	59,760	$	60,092

	Within One Year					After One But Within Five Years					After Five But Within Ten Years					After Ten years							Total
	Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield
Held to Maturity:
Securities of government sponsored enterprises	$	1,000		4.25	%	$	18,977		2.95	%	$	8,096		3.19	%		—		—		$	28,073		3.07	%
Collateralized mortgage obligation.		—		—			379		3.79	%		—		—			—		—			379		3.79	%
Municipal securities		—		—			810		4.12	%		—		—			—		—			810		4.12	%

Available-for-sale:
Securities of government sponsored enterprises		—		—			35,765		3.24	%		3,967		4.43	%		—		—			39,732		3.36	%
Mortgage backed securities		11,041		3.33	%		20,990		3.59	%		—		—			—		—			32,031		3.50	%
Corporate securities		—		—			1,010		4.20	%		1,926		4.89	%		1,014		6.70	%		3,950		5.18	%
Money Market Preferred Stock		10,000		2.07	%		—		—			—		—			—		—			10,000		2.07	%

Total investment securities	$	22,041		2.80	%	$	77,931		3.29	%	$	13,989		3.78	%	$	1,014		6.70	%	$	114,975		3.28	%

Type	Balance as of December 31, 2004		Balance as of December 31, 2003
BOLI	$	11,536,000	$	11,100,000
LIHTCF	$	1,784,000	$	1,227,000
Federal Home Loan Bank Stock	$	4,372,000	$	1,510,000

Three months or less	$	262,532
Over three months through six months		92,730
Over six months through twelve months		85,193
Over twelve months		8,072
Total	$	448,527

	2004			2003
Balance at year-end	$	41,000,000		$	29,000,000
Average balance during the year	$	43,759,563		$	17,189,041
Maximum amount outstanding at any month-end	$	55,000,000		$	30,000,000
Average interest rate during the year		1.56	%		1.34	%
Average interest rate at year-end		2.08	%		1.23	%

Wilshire Bancorp, Inc.	Regulatory Well- Capitalized Standards	Regulatory Adequately-Capitalized Standards	Actual ratios for the Company as of:
	Regulatory Well- Capitalized Standards	Regulatory Adequately-Capitalized Standards	December 31, 2004	December 31, 2003	December 31, 2002
Total capital to risk-weighted assets	10%	8%	11.95%	11.59%	11.45%
Tier I capital to risk-weighted assets	6%	4%	9.87%	7.29%	8.40%
Tier I capital to adjusted average assets	5%	4%	8.35%	6.36%	7.00%

Wilshire State Bank	Regulatory Well- Capitalized Standards	Regulatory Adequately-Capitalized Standards	Actual ratios for the Company as of:
	Regulatory Well- Capitalized Standards	Regulatory Adequately-Capitalized Standards	December 31, 2004	December 31, 2003	December 31, 2002
Total capital to risk-weighted assets	10%	8%	11.92%	11.59%	11.45%
Tier I capital to risk-weighted assets	6%	4%	9.84%	7.29%	8.40%
Tier I capital to adjusted average assets	5%	4%	8.33%	6.36%	7.00%

	At December 31, 2004
	Amounts Subject to Repricing Within
	0-3 months			3-12 months			1-5 years			After 5 years			Total
Interest-earning assets:	(Dollars in Thousands)
Gross loans¹	$	938,025		$	7,759		$	32,845		$	44,734		$	1,023,363
Investment securities		10,151			11,891			77,930			15,002			114,974
Federal funds sold and cash equivalents		45,000			—			—			—			45,000
Interest-earning deposits		3			—			—			—			3
Total	$	993,179		$	19,650		$	110,775		$	59,736		$	1,183,340

Interest-bearing liabilities:
Savings deposits		22,946			—			—			—			22,946
Time deposits of $100,000 or more		262,532			177,923			8,072			—			448,527
Other time deposits		44,828			58,572			12,280			48			115,728
Other interest-bearing deposits		237,564			—			—			—			237,564
Other borrowings		50,464			—			16,000			—			66,464
Total	$	618,334		$	236,495		$	36,352		$	48		$	891,229

Interest rate sensitivity gap	$	374,845			($216,845	)	$	74,423		$	59,688		$	292,111
Cumulative interest rate sensitivity gap	$	374,845		$	158,000		$	232,423		$	292,111
Cumulative interest rate sensitivity gap ratio (based on total assets)		29.62	%		12.48	%		18.36	%		23.08	%

(Dollars in Thousands)
Change (in Basis Points)	Net Interest Income (next twelve months)	% Change	NPV	% Change
+200	$ 73,016	17.4%	$ 187,426	15.6%
+100	$ 67,426	8.4%	$ 175,708	8.4%
0	$ 62,181	—	$ 162,095	—
-100	$ 57,740	-7.1%	$ 145,320	-10.3%
-200	$ 50,134	-19.4%	$ 126,063	-22.2%

		Page
Report of Independent Registered Public Accounting Firm		F-1

Consolidated Financial Statements:

Consolidated Statements of Financial Condition		F-2

Consolidated Statement of Operations		F-3

Consolidated Statements of Changes in Shareholders’ Equity		F-4

Consolidated Statements of Cash Flows		F-6

Notes to Consolidated Financial Statements		F-8

Exhibit Table
Reference Number	Item

3.1	Articles of Incorporation, as amended ¹
3.2	Bylaws, as amended¹
4.1	Specimen of Common Stock Certificate¹
4.2	Indenture of Subordinated Debentures ²
4.3	Indenture by and between Wilshire Bancorp, Inc. and U.S. Bank National Association dated as of December 17, 2003 ³
10.1	Lease dated September 1, 1996 between the Company and Wilmont, Inc. (Main Office - 1^st floor) ¹
10.2	Lease dated May 1, 1990 between the Company and Western Properties Co., Ltd. (Western Branch) ¹
10.3	Lease dated February 3, 1997 between the Company and Benlin Properties (Downtown Branch) ¹
10.4	Sublease dated June 20, 1997 between the Company and Property Development Assoc. (Cerritos Branch) ¹
10.5	1997 Stock Option Plan of Wilshire Bancorp, Inc. ¹

10.7	Lease dated October 26, 1998 between the Company and Union Square Limited Partnership. (Seattle Business Lending Office) ⁴
10.8	Lease dated March 18, 1999 between the Company and BGK Texas Property Management, Inc. (Dallas Business Lending Office)⁵
10.9	Lease dated February 4, 2000 between the Company and Wilmont, Inc. (Commercial Loan Center and Corporate headquarter - 14^th floor) ⁶
10.10	Lease dated July 18, 2000 between the Company and 183 Townsend Corporation (San Jose Business Lending Office) ⁶
10.11	Lease dated September 1, 2000 between the Company and Joseph Hanasab (Gardena Office) ⁶
10.12	Lease dated January 8, 2001 between the Company and UNT Atia Co. II, a California general partnership (Rowland Heights Office) ⁶
10.13	Sublease dated January 26, 2001 between the Company and California Federal Bank, a federal savings bank (Valley Office) ⁶
10.14	Employment Agreement for Soo Bong Min, Chief Executive Officer and President ³
10.15	Sublease dated March 13, 2002 between the Company and Assi Food International, Inc (Garden Grove Office) ⁷
10.16	Lease dated October 3, 2002 between the Company and Terok Management, Inc. (Mid-Wilshire Office) ⁷
10.17	Survivor income plan and exhibit thereto (Split dollar agreement) ⁸
10.18	Stock Purchase Agreement by and between Wilshire Bancorp, Inc. and Texas Bank dated January 29, 2004 ³
11	Statement Regarding Computation of Net Earnings per Share ⁹
21	Subsidiaries of the Registrant
23.1	Consent of Independent Registered Public Accounting Firm
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


Date: March 16, 2005	WILSHIRE BANCORP, INC., a California corporation

	By:	/s/ Brian E. Cho
		Brian E. Cho
		Chief Financial Officer

Signature	Title	Date

/s/ Steven Koh	Chairman and Director	March 16, 2005
Steven Koh

/s/ Soo Bong Min	President, Chief Executive Officer and Director	March 16, 2005
Soo Bong Min

/s/ Larry D. Greenfield, M.D.	Director	March 16, 2005
Larry D. Greenfield, M.D.

/s/ Kyu-Hyun Kim	Director	March 16, 2005
Kyu-Hyun Kim

/s/ Mel Elliot	Director	March 16, 2005
Mel Elliot

/s/ Richard Y. Lim	Director	March 16, 2005
Richard Y. Lim

/s/ Fred F. Mautner	Director	March 16, 2005
Fred F. Mautner

/s/ Young H. Pak	Director	March 16, 2005
Young H. Pak

/s/ Donald Byun	Director	March 16, 2005
Donald Byun

/s/ Harry Siafaris	Director	March 16, 2005
Harry Siafaris

/s/ Forrest I. Stichman	Director	March 16, 2005
Forrest I. Stichman

/s/ Gapsu Kim	Director	March 16, 2005
Gapsu Kim

/s/ Brian E. Cho	Chief Financial Officer and Corporate Secretary	March 16, 2005
Brian E. Cho

WILSHIRE BANCORP, INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 2004 AND 2003

ASSETS	2004			2003

Cash and due from banks	$	53,903,163		$	62,486,069
Federal funds sold and other cash equivalents		45,000,000			50,000,000
Cash and cash equivalents		98,903,163			112,486,069
Interest-bearing deposits in other financial institutions		2,573			201,496
Securities available for sale, at fair value (amortized cost of $86,121,349 and $64,701,168
at December 31, 2004 and 2003, respectively)		85,712,485			64,995,301
Securities held to maturity, at amortized cost (fair value of $29,161,100 and $23,391,193
at December 31, 2004 and 2003, respectively)		29,262,188			23,427,296
Interest-only strip, at fair value (amortized cost of $1,550,444 and $725,410
at December 31, 2004 and 2003, respectively)		1,494,176			847,306
Loans held for sale—at the lower of cost or market		21,144,128			18,101,665
Loans receivable, net of allowance for loan losses of $11,111,092 and $9,011,071
at December 31, 2004 and 2003, respectively		988,468,142			729,892,686
Bank premises and equipment—net		5,479,776			4,802,489
Federal Home Loan Bank stock, at cost		4,371,500			1,509,500
Accrued interest receivable		3,867,005			2,685,200
Other real estate owned—net		—			377,200
Deferred income taxes—net		4,839,346			3,797,678
Servicing asset		4,373,974			3,282,683
Due from customers on acceptances		2,041,023			2,750,315
Cash surrender value of life insurance		11,536,476			11,101,704
Other assets		4,145,368			3,004,974
TOTAL	$	1,265,641,323		$	983,263,562

LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES:
Deposits:
Noninterest bearing	$	274,207,744		$	238,018,220
Interest bearing:
Savings		22,946,077			26,467,729
Time deposits of $100,000 or more		448,526,610			307,710,163
Other time deposits		115,728,483			113,528,786
Other		237,564,098			170,791,279
Total deposits		1,098,973,012			856,516,177
Federal Home Loan Bank borrowings		41,000,000			29,000,000
Junior subordinated debentures		25,464,000			25,464,000
Accrued interest payable		2,891,707			2,103,244
Acceptances outstanding		2,041,023			2,750,315
Other liabilities		6,963,963			8,688,485
Total liabilities		1,177,333,705			924,522,221

COMMITMENTS AND CONTINGENCIES (Note 7)

SHAREHOLDERS’ EQUITY:
Preferred stock, no par value—authorized, 1,000,000 shares; issued and outstanding, none
Common stock, no par value—authorized, 80,000,000 shares; issued and outstanding,
28,142,470 shares and 25,902,728 shares at December 31, 2004 and 2003,
respectively		38,926,430			28,391,427
Accumulated other comprehensive (loss) income		(223,703	)		203,331
Retained earnings		49,604,891			30,146,583
Total shareholders’ equity		88,307,618			58,741,341
TOTAL	$	1,265,641,323		$	983,263,562

See accompanying notes to consolidated financial statements.

WILSHIRE BANCORP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
THREE YEARS ENDED DECEMBER 31, 2004

	2004		2003		2002
INTEREST INCOME:
Interest and fees on loans	$	55,943,023	$	37,891,746	$	30,185,494
Interest on investment securities and deposits in
other financial institutions		3,050,123		2,438,044		1,809,484
Interest on federal funds sold and other cash equivalents		804,802		596,194		790,085
Total interest income		59,797,948		40,925,984		32,785,063

INTEREST EXPENSE:
Deposits		15,663,227		11,250,320		8,881,002
Interest on other borrowings		1,799,329		693,574		126,951
Total interest expense		17,462,556		11,943,894		9,007,953

NET INTEREST INCOME BEFORE PROVISION FOR
LOAN LOSSES		42,335,392		28,982,090		23,777,110

PROVISION FOR LOSSES ON LOANS AND LOAN
COMMITMENTS		3,566,711		2,782,519		3,240,303

NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES		38,768,681		26,199,571		20,536,807

NONINTEREST INCOME:
Service charges on deposit accounts		7,378,636		6,788,720		5,639,571
Gain on sale of loans		8,831,677		6,235,550		2,492,204
Loan-related servicing income		2,372,577		1,889,730		1,651,481
Loan referral fee income		112,520		476,977		582,922
Loan packaging fee		375,835		450,243		347,941
Income from other earning assets		639,151		498,640		11,700
Other income		1,286,515		758,731		649,121
Total noninterest income		20,996,911		17,098,591		11,374,940

NONINTEREST EXPENSES:
Salaries and employee benefits		14,581,480		12,182,709		10,047,014
Occupancy and equipment		2,730,432		2,159,229		1,929,165
Other real estate owned		—		81		92,382
Data processing		1,643,822		1,568,968		1,409,467
Professional fees		1,429,831		841,267		559,234
Directors’ fees		460,110		422,450		365,050
Loan referral fee		1,202,020		959,170		623,084
Office supplies		573,344		523,036		300,283
Communications		337,999		380,342		251,625
Advertising		652,126		302,620		327,679
Deposit insurance premiums		132,462		188,722		79,463
Outsourced service for customer		1,301,680		945,843		717,804
Other operating		2,238,045		1,511,517		885,385
Total noninterest expenses		27,283,351		21,985,954		17,587,635

INCOME BEFORE INCOME TAXES		32,482,241		21,312,208		14,324,112

INCOME TAX PROVISION		13,023,933		8,495,476		5,731,000

NET INCOME	$	19,458,308	$	12,816,732	$	8,593,112
EARNINGS PER SHARE:
Basic	$	0.70	$	0.50	$	0.34
Diluted	$	0.68	$	0.44	$	0.32

See accompanying notes to consolidated financial statements.

WILSHIRE BANCORP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
THREE YEARS ENDED DECEMBER 31, 2004
								Accumulated
								Other			Total
	Common Stock				Retained			Comprehensive			Shareholders’
	Shares		Amount		Earnings			Income (Loss)			Equity

BALANCE—January 1, 2002		22,798,248	$	18,555,777	$	17,525,776		$	110,302		$	36,191,855

Stock options exercised		469,584		405,497								405,497
Tax benefit from stock options exercised				236,979								236,979
Comprehensive income:
Net income						8,593,112						8,593,112
Other comprehensive income:
Change in unrealized gain on
interest-only strip									(5,696	)		(5,696	)
Change in unrealized gain on
securities available for sale									(29,933	)		(29,933	)
Comprehensive income												8,557,483

BALANCE—December 31, 2002		23,267,832		19,198,253		26,118,888			74,673			45,391,814

Stock options exercised		308,400		385,469								385,469
Stock dividend		2,326,496		8,787,960		(8,789,037	)					(1,077	)
Tax benefit from stock options exercised				19,745								19,745
Comprehensive income:
Net income						12,816,732						12,816,732
Other comprehensive income:
Change in unrealized gain on
interest-only strip									12,641			12,641
Change in unrealized gain on
securities available for sale									153,979			153,979
Change in unrealized gain on
interest swap									(37,962	)		(37,962	)
Comprehensive income												12,945,390

BALANCE—December 31, 2003		25,902,728		28,391,427		30,146,583			203,331			58,741,341

Stock options exercised		2,239,742		1,814,639								1,814,639
Tax benefit from stock options exercised				8,720,364								8,720,364
Comprehensive income:
Net income						19,458,308						19,458,308
Other comprehensive income:
Change in unrealized gain (loss) on
interest-only strip									(57,259	)		(57,259	)
Change in unrealized gain (loss) on
securities available for sale									(407,737	)		(407,737	)
Change in unrealized gain on
interest swap									37,962			37,962
Comprehensive income												19,031,274

BALANCE—December 31, 2004		28,142,470	$	38,926,430	$	49,604,891		$	(223,703	)	$	88,307,618

												(Continued)

WILSHIRE BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE YEARS ENDED DECEMBER 31, 2004

	2004			2003			2002

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	19,458,308		$	12,816,732		$	8,593,112
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization and accretion of investment securities		261,223			587,653			402,724
Depreciation of premises & equipment		790,186			654,472			637,023
Provision for losses on loans and loan commitments		3,566,711			2,782,519			3,320,303
Deferred tax provision (benefit)		730,255			(1,255,787	)		(1,215,110	)
Loss (gain) on disposition of bank premises,
equipment and securities		5,537			(12,041	)		1,129
Gain on sale of loans		(8,831,677	)		(6,235,550	)		(2,492,204	)
Origination of loans held for sale		(93,001,291	)		(72,964,235	)		(52,297,694	)
Proceeds from sale of loans held for sale		97,655,386			79,887,488			39,347,924
Gain on sale of AFS securities		(271,891	)		(29,654	)		—
Impairment of interest-only strip		79,442			—			—
Loss on sale of other real estate owned		3,967			—			10,802
Change in cash surrender value of Life Insurance		(434,772	)		(415,459	)		16,822
Servicing assets capitalized		(2,091,883	)		(1,750,426	)		(895,472	)
Servicing assets amortization		1,000,592			629,560			533,010
(Increase) decrease in interest-only strip		(904,476	)		(646,764	)		64,342
Increase in accrued interest receivable		(1,181,805	)		(533,772	)		(487,640	)
Increase in other assets		(1,140,393	)		(1,962,603	)		(218,169	)
Dividends of FHLB stock		(120,300	)		(28,200	)
Tax benefit from exercise of stock options		8,720,364			19,745			236,979
Increase (decrease) in accrued interest payable		788,463			587,791			(390,044	)
(Decrease) increase in other liabilities		(3,601,017	)		3,697,694			2,269,554

Net cash provided by (used in)
operating activities		21,480,929			15,829,163			(2,562,609	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease in interest-bearing
deposits in other financial institutions		198,923			1,483,159			1,084,545
Purchase of securities held to maturity		(13,987,338	)		(19,131,250	)		(14,510,278	)
Proceeds from principal repayment, matured or
called securities held to maturity		8,149,510			20,606,794			11,120,912
Purchase of securities available for sale		(105,033,528	)		(89,910,755	)		(32,326,359	)
Proceeds from sale of securities (AFS)		18,568,500			13,785,488
Proceeds from matured securities (AFS)		65,058,451			45,693,243			12,778,494
Net increase in loans receivable		(271,756,138	)		(238,612,284	)		(141,087,688	)
Proceeds from sale of other loans		11,307,787			4,968,808
Proceeds from sale of real estate owned		373,233			—			1,002,733
Purchases of premises and equipment		(1,478,321	)		(2,550,990	)		(511,613	)
Purchase of FHLB stock		(2,741,700	)		(978,000	)		(393,300	)
Purchase of Bank Owned Life Insurance		—			(10,500,000	)
Proceeds from disposition of bank equipment		5,312			29,931

Net cash used in investing activities		(291,335,309	)		(275,115,856	)		(162,842,554	)