10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2006

Commission file number: 000-50050

Center Financial Corporation

(Exact name of Registrant as specified in its charter)

California	52-2380548
(State of Incorporation)	(IRS Employer Identification No)

3435 Wilshire Boulevard, Suite 700, Los Angeles, California 90010

(Address of principal executive offices)

(213) 251-2222

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

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

x  Yes    ¨  No

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

Large accelerated filer  ¨    Accelerated filer  x    Non-accelerated filer  ¨

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

Yes  ¨    No  x

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

As of March 31, 2006 there were 16,476,768 outstanding shares of the issuer’s Common Stock with no par value.

FORM 10-Q

Index

PART I - FINANCIAL INFORMATION	3
ITEM 1.    INTERIM CONSOLIDATED FINANCIAL STATEMENTS	3
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS	6
ITEM 2:    MANAGEMENT’S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS	16
FORWARD-LOOKING STATEMENTS	16
SUMMARY OF FINANCIAL DATA	19
EARNINGS PERFORMANCE ANALYSIS	19
FINANCIAL CONDITION ANALYSIS	26
LIQUIDITY AND MARKET RISK/INTEREST RISK MANAGEMENT	36
CAPITAL RESOURCES	39
ITEM 3:    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	40
ITEM 4:    CONTROLS AND PROCEDURES	40
PART II - OTHER INFORMATION	41
ITEM 1:    LEGAL PROCEEDINGS	41
ITEM 1A. RISK FACTORS	41
ITEM 2:    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	41
ITEM 3:    DEFAULTS UPON SENIOR SECURITIES	41
ITEM 4:    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	41
ITEM 5:    OTHER INFORMATION	41
ITEM 6:    EXHIBITS	43
SIGNATURES	44

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PART I—FINANCIAL INFORMATION

Item 1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS

CENTER FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

AS OF MARCH 31, 2006 (UNAUDITED) AND DECEMBER 31, 2005

	03/31/2006			12/31/2005
	(Dollars in thousands)
ASSETS:
Cash and due from banks	$	84,808		$	79,822
Federal funds sold		91,690			58,490
Money market funds and interest-bearing deposits in other banks		5,264			5,064
Cash and cash equivalents		181,762			143,376
Securities available for sale, at fair value		204,121			226,023
Securities held to maturity, at amortized cost (fair value of $11,147 as of March 31, 2006 and $11,014 as of December 31, 2005)		11,217			11,052
Federal Home Loan Bank and Pacific Coast Bankers Bank stock, at cost		5,497			5,434
Loans, net of allowance for loan losses of $13,918 as of March 31, 2006 and $13,871 as of December 31, 2005		1,218,864			1,206,408
Loans held for sale, at the lower of cost or market		11,781			12,741
Premises and equipment, net		13,863			14,027
Customers’ liability on acceptances		3,698			4,028
Accrued interest receivable		7,256			6,486
Deferred income taxes, net		10,117			10,205
Investments in affordable housing partnerships		4,353			4,481
Cash surrender value of life insurance		10,897			10,805
Goodwill		1,253			1,253
Intangible assets-net		360			373
Other assets		4,318			4,311
Total	$	1,689,357		$	1,661,003
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities
Deposits:
Noninterest-bearing	$	389,355		$	395,050
Interest-bearing		1,101,727			1,085,506
Total Deposits		1,491,082			1,480,556
Acceptances outstanding		3,698			4,028
Accrued interest payable		11,150			9,084
Other borrowed funds		37,243			28,643
Trust preferred securities		18,557			18,557
Accrued expenses and other liabilities		9,145			7,421
Total liabilities		1,570,875			1,548,289
Commitments and Contingencies
Shareholders’ Equity
Serial preferred stock, no par value; authorized 10,000,000 shares; issued and outstanding, none		—			—
Common stock, no par value; authorized 40,0000,000 shares; issued and outstanding, 16,476,768 as of March 31, 2006 and 16,439,053 as of December 31, 2005		66,066			65,622
Retained earnings		53,379			48,268
Accumulated other comprehensive loss, net of tax		(963	)		(1,176	)
Total shareholders’ equity		118,482			112,714
Total	$	1,689,357		$	1,661,003

See accompanying notes to interim consolidated financial statements.

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CENTER FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

FOR THE THREE MONTHS ENDED MARCH 31, 2006 AND 2005 (UNAUDITED)

	2006		2005
	(Dollars in thousands, except per share data)
Interest and Dividend Income:
Interest and fees on loans	$	25,288	$	17,594
Interest on federal funds sold		823		171
Interest on taxable investment securities		2,186		1,281
Interest on tax-advantaged investment securities		97		71
Dividends on equity stock		66		33
Money market funds and interest-earning deposits		60		23
Total interest and dividend income		28,520		19,173
Interest Expense:
Interest on deposits		11,424		4,821
Interest expense on trust preferred securities		334		266
Interest on borrowed funds		104		254
Total Interest expense		11,862		5,341
Net interest income before provision for loan losses		16,658		13,832
Provision for loan losses		257		650
Net interest income after provision for loan losses		16,401		13,182
Noninterest Income:
Customer service fees		2,130		2,235
Fee income from trade finance transactions		953		902
Wire transfer fees		216		204
Gain on sale of loans		674		673
Net gain on sale of securities available for sale		—		50
Loan service fees		554		440
Other income		480		533
Total noninterest income		5,007		5,037
Noninterest Expense:
Salaries and employee benefits		5,563		4,445
Occupancy		884		715
Furniture, fixtures, and equipment		460		408
Data processing		542		465
Professional service fees		2,060		798
Business promotion and advertising		845		650
Stationary and supplies		159		177
Telecommunications		173		129
Postage and courier service		141		163
Security service		263		175
Loss on termination of interest rate swap		—		306
Loss on interest rate swaps		53		157
Other operating expenses		947		782
Total noninterest expense		12,090		9,370
Income before income tax provision		9,318		8,849
Income tax provision		3,549		3,436
Net income		5,769		5,413
Other comprehensive income—unrealized gain (loss) on available for sale securities, net of income tax (expense) benefit of $(154) and $389		213		(402	)
Comprehensive income	$	5,982	$	5,011
EARNINGS PER SHARE:
Basic	$	0.35	$	0.33
Diluted	$	0.35	$	0.32

See accompanying notes to interim consolidated financial statements.

4

CENTER FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2006 AND 2005 (UNAUDITED)

	03/31/2006			03/31/2005
	(Dollars in thousands)
Cash flows from operating activities:
Net income	$	5,769		$	5,413
Adjustments to reconcile net income to net cash provided by operating activities:
Stock option compensation		173			—
Depreciation and amortization		601			374
Mark to market adjustments on interest rate swaps		36			308
Amortization of premium, net of accretion of discount, on securities available for sale and held to maturity		(186	)		78
Provision for loan losses		257			650
Net loss (gain) on sale of securities available for sale		—			(50	)
Originations of SBA loans held for sale		(14,940	)		(7,919	)
Gain on sale of loans		(632	)		(673	)
Proceeds from sale of loans		16,532			19,353
Deferred tax (benefit) provision		—			956
(Increase) decrease in accrued interest receivable		(770	)		(528	)
Net increase in cash surrender value of life insurance policy		(92	)		(92	)
Decrease (increase) in other assets and servicing assets		270			(391	)
Increase (decrease) in accrued interest payable		2,066			79
Increase in accrued expenses and other liabilities		1,446			50
Net cash provided by operating activities		10,530			17,608
Cash flows from investing activities:
Purchase of securities available for sale		(7,408	)		(41,974	)
Proceeds from principal repayment, matured, or called securities available for sale		29,868			22,928
Proceeds from sale of securities available for sale		—			7,530
Purchase of securities held to maturity		(518	)		—
Proceeds from matured, called or principal repayment on securities held to maturity		348			508
Purchase of Federal Home Loan Bank and other equity stock		(63	)		—
Proceeds (payments) from net swap settlement		(89	)		161
Net increase in loans		(12,742	)		(32,851	)
Proceeds from recoveries of loans previously charged-off		29			19
Purchases of premises and equipment		(309	)		(726	)
Net increase in investments in affordable housing partnerships		—			85
Net cash provided by investing activities		9,116			(44,320	)
Cash flows from financing activities:
Net increase in deposits		10,526			25,116
Net (decrease) increase in other borrowed funds		8,600			24,414
Proceeds from stock options exercised		271			293
Payment of cash dividend		(657	)		(653	)
Net cash provided by financing activities		18,740			49,170
Net increase in cash and cash equivalents		38,386			22,458
Cash and cash equivalents, beginning of the year		143,376			103,142
Cash and cash equivalents, end of the period	$	181,762		$	125,600
Supplemental disclosure of cash flow information:
Interest paid	$	9,796		$	5,262
Income taxes paid	$	1,700		$	2,533
Supplemental schedule of noncash investing, operating, and financing activities:
Cash dividend accrual	$	657		$	654

See accompanying notes to interim consolidated financial statements.

5

CENTER FINANCIAL CORPORATION

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

1. THE BUSINESS OF CENTER FINANCIAL CORPORATION

Center Financial Corporation (“Center Financial”) was incorporated on April 19, 2000 and acquired all of the issued and outstanding shares of Center Bank (the “Bank”) in October 2002. Currently, Center Financial’s direct subsidiaries include the Bank and Center Capital Trust I. Center Financial exists primarily for the purpose of holding the stock of the Bank and of other subsidiaries. Center Financial, the Bank, and the subsidiary of the Bank (“CB Capital Trust”) discussed below, are collectively referred to herein as the “Company.”

The Bank is a California state-chartered and FDIC-insured financial institution, which was incorporated in 1985 and commenced operations in March 1986. The Bank changed its name from California Center Bank to Center Bank in December 2002. The Bank’s headquarters is located at 3435 Wilshire Boulevard, Suite 700, Los Angeles, California 90010. The Bank provides comprehensive financial services for small to medium sized business owners, mostly in Southern California. The Bank specializes in commercial loans, which are mostly secured by real property, to multi-ethnic and small business customers. In addition, the Bank is a Preferred Lender of Small Business Administration (“SBA”) loans and provides trade finance loans and other international banking products. The Bank’s primary market is the greater Los Angeles metropolitan area, including Los Angeles, Orange, San Bernardino, and San Diego counties, primarily focused in areas with high concentrations of Korean-Americans. The Bank currently has 17 full-service branch offices, 15 of which are located in Los Angeles, Orange, San Bernardino, and San Diego counties. The Bank opened all California branches as de novo branches. On April 26, 2004, the Company completed its acquisition of the Korea Exchange Bank (KEB) Chicago branch, the Bank’s first out-of-state branch, with a focus on the Korean-American market in Chicago. The Company assumed $12.9 million in FDIC insured deposits and purchased $8.0 million in loans from the KEB Chicago branch. The Company opened two new branches in Irvine, California and Seattle, Washington in 2005. The Bank also operates nine Loan Production Offices (“LPOs”) in Phoenix, Seattle, Denver, Washington D.C., Las Vegas, Atlanta, Honolulu, Houston and Dallas.

CB Capital Trust, a Maryland real estate investment trust (“REIT”) which is a consolidated subsidiary of the Bank, was formed in August 2002 for the primary business purpose of investing in the Bank’s real-estate related assets, and enhancing and strengthening the Bank’s capital position and earnings primarily through tax advantaged income from such assets. On December 31, 2003, the California Franchise Tax Board issued an opinion listing bank-owned REITs as potentially abusive tax shelters subject to possible penalties, and stating that REIT consent dividends are not deductible for California state income tax purposes. In view of this opinion, it appears that the REIT will not be able to fulfill its original intended purposes, and management is in the process of determining whether or not to utilize the REIT for any other purpose.

In December 2003, the Company formed a wholly owned subsidiary, Center Capital Trust I, a Delaware statutory business trust, for the exclusive purpose of issuing and selling trust preferred securities.

Center Financial’s principal source of income is currently dividends from the Bank. The expenses of Center Financial, including legal and accounting and Nasdaq listing fees, have been and will generally be paid from dividends paid to Center Financial by the Bank.

2. BASIS OF PRESENTATION

The consolidated financial statements include the accounts of Center Financial, the Bank, and CB Capital Trust. Center Capital Trust I is not consolidated as disclosed in Note 7.

The interim consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for unaudited financial statements. The

6

information furnished in these interim statements reflects all adjustments that are, in the opinion of management, necessary for the fair statement of results for the periods presented. All adjustments are of a normal and recurring nature. Results for the three months ended March 31, 2006 are not necessarily indicative of the results that may be expected for any other interim period or for the year as a whole. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted. The unaudited consolidated financial statements should be read in conjunction with the audited financial statements and notes included in Company’s annual report on Form 10-K for the year ended December 31, 2005.

3. SIGNIFICANT ACCOUNTING POLICIES

Accounting policies are fully described in Note 2 in Center Financial’s Annual Report on Form 10-K and there have been no material changes noted.

4. RECENT ACCOUNTING PRONOUNCEMENTS

In December 2004, the Financial Accounting Standards Board (“FASB”) issued Statement No. 123 (revised 2004), “Share-Based Payment” (“SFAS No. 123R”), which requires the cost resulting from stock options be measured at fair value and recognized in earnings. This Statement replaces Statement No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”) and supersedes Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” (“APB No. 25”) which permitted the recognition of compensation expense using the intrinsic value method. SFAS No. 123R was to be effective July 1, 2005. However, on April 15, 2005, the Securities Exchange Commission (“SEC”) issued a press release announcing the amendment of the compliance date for SFAS No. 123R to be no later than the beginning of the first fiscal year beginning after June 15, 2005. The Company adopted SFAS 125R effective January 1, 2006 (see note 5 Share-based compensation).

In March 2005, the SEC issued Staff Accounting Bulletin No. 107 (“SAB No. 107”), “Share-Based Payment”, providing guidance on option valuation methods, the accounting for income tax effects of share-based payment arrangements upon adoption of SFAS No. 123R, and the disclosures in MD&A subsequent to the adoption. We have provided SAB No. 107 required disclosures upon adoption of SFAS No. 123R for the period ended March 31, 2006.

Additionally, during 2005 and 2006 the FASB Staff issued four FASB Staff Positions (FSPs) related to SFAS No. 123R, FSP FAS 123R-1, “Classification and Measurement of Freestanding Financial Instruments Originally Issued in Exchange for Employee Services under FASB Statement No. 123R”, FSP FAS 123R-2, “Practical Accommodation to the Application of Grant Date as Defined in FASB Statement No. 123R”, FSP FAS 123R-3, “Transition Election Related to Accounting for the Tax Effects of Share-Based Payment Awards” and FSP FAS 123R-4 “Classification of Options and Similar Instruments Issued as Employee Compensation That Allow for Cash Settlement upon the Occurrence of a Contingent Event”. Each of these FSPs has been considered and has been incorporated into the adoption of SFAS No. 123R on January 1, 2006.

In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections, that addresses accounting for changes in accounting principles, changes in accounting estimates and changes required by an accounting pronouncement in the instance that the pronouncement does not include specific transition provisions and error correction. SFAS No. 154 requires retrospective application to prior periods’ financial statements of changes in accounting principle and error correction unless impracticable to do so. SFAS No. 154 states an exception to retrospective application when a change in accounting principle, or the method of applying it, may be inseparable from the effect of a change in accounting estimate. When a change in principle is inseparable from a change in estimate, such as depreciation, amortization or depletion, the change to the financial statements is to be presented in a prospective manner. SFAS No. 154 and the required disclosures are effective for accounting changes and error corrections in fiscal years beginning after December 15, 2005.

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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. The severity and duration of the impairment should also be considered in determining whether the impairment is other-than-temporary. Adoption of EITF 03-1 did not have a material impact on the operations or the financial condition of the Company.

In November 2005, the Financial Accounting Standards Board (FASB) issued FASB Staff Position (FSP) 115-1/124-1, The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments. This FSP provides additional guidance on when an investment in a debt or equity security should be considered impaired and when that impairment should be considered other-than-temporary and recognized as a loss in earnings. Specifically, the guidance clarifies that an investor should recognize an impairment loss no later than when the impairment is deemed other-than-temporary, even if a decision to sell has not been made. The FSP also requires certain disclosures about unrealized losses that have not been recognized as other-than-temporary impairments. Companies are required to apply the guidance in this FSP to reporting periods beginning after December 15, 2005. Adoption of this FSP did not have a significant effect on our financial condition or results of operation.

On December 19, 2005, the FASB staff issued FSP SOP 94-6-1, “Terms of Loan Products That May Give Rise to a Concentration of Credit Risk”. This FSP recognizes that certain loan products (e.g., loans subject to significant payment increases, negatively amortizing loans and loans with high loan-to-value ratios) may increase a reporting entity’s exposure to credit risk, that may result in a concentration of credit risk as defined in SFAS No. 107, “Disclosures about Fair Value of Financial Instruments” that requires separate disclosure within the financial statements. The FSP was effective immediately and the disclosures required have been presented.

In February 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments, which amends SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, and SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. This statement also resolves issues addressed in Statement 133 Implementation Issue No. D1, Application of Statement 133 to Beneficial Interests in Securitized Financial Assets. SFAS No. 155 eliminates the exemption from applying SFAS No. 133 to interests in securitized financial assets so that similar instruments are accounted for similarly regardless of the form of the instruments. SFAS No. 155 also allows a preparer to elect fair value measurement at acquisition, at issuance, or when a previously recognized financial instrument is subject to a remeasurement (new basis) event, on an instrument-by-instrument basis, in case in which a derivative would otherwise have to be bifurcated. SFAS No. 155 is effective for all financial instruments acquired or issued after the beginning of an entity’s first fiscal year that begins after September 15, 2006. The Company does not expect the adoption SFAS No. 155 to have a material impact on the consolidated financial statements or results of operations of the Company.

In March 2006, the FASB issued SFAS No. 156, Accounting for Servicing of Financial Assets – an amendment of FASB Statement No. 140. SFAS 156 requires an entity to recognize a servicing asset or liability each time it undertakes an obligation to service a financial asset by entering into a servicing contract if a) a transfer of the servicer’s assets meets the requirements for sale accounting b) a transfer of the servicer’s financial assets to a qualifying special-purpose entity in a guaranteed mortgage securitzation in which the transferor retains

8

all of the resulting securities and c) an acquisition or assumption of an obligation to service a financial asset does not relate to financial assets of the servicer or its consolidated affiliates. Further, the SFAS requires all separately recognized servicing asset and liabilities to be initially measured at fair value, if practicable. SFAS 156 must be adopted as of the first fiscal year that begins after September 15, 2006.

5. STOCK-BASED COMPENSATION

The Company had a Stock Option Plan, adopted by the Bank in 1996, assumed by the Company in connection with the Holding Company reorganization in 2002 and amended as of March 24, 2004, under which options may be granted to key employees and directors of the Company. This plan expired in February 2006 and a new plan has been submitted for shareholder approval at the annual meeting in May 2006. Under the expired stock option plan, option prices could not be less than 100% of the fair market value at the date of grant. Options vest at the rate of 33-1/3% per year for directors (Non-Qualified Stock Option Plan) and generally 20% per year for employees (Incentive Stock Option Plan) and all options not exercised expire ten years after the date of grant.

Effective January 1, 2006 the Company adopted SFAS 123R. Prior to the adoption of SFAS 123R, the Company accounted for stock-based compensation using the intrinsic value method of APB 25. As a result, the Company did not recognize compensation expense in the statement of operations for options granted. As required by SFAS 123, the Company provided certain pro forma disclosures for stock-based compensation as if the fair-value-based approach of SFAS 123 had been applied.

The Company elected to use the modified prospective transition method as permitted by SFAS 123R and therefore have not restated the financial results for prior periods. Under this transition method, the Company will apply the provisions of SFAS 123R to new options granted or cancelled after December 31, 2005. Additionally, the Company will recognize compensation cost for the portion of options for which the requisite service has not been rendered (unvested) that are outstanding as of December 31, 2005, as the remaining service is rendered. The compensation cost the Company records for these options will be based on their grant-date fair value as calculated for the pro forma disclosures required by SFAS 123.

The Company’s pre-tax compensation cost for stock-based employee compensation was $173,000 ($158,000 after tax effects) for the three months ended March 31, 2006.

Prior to the adoption of SFAS 123R, the Company presented all tax benefits resulting from the exercise of stock options as operating cash flows in the consolidated statement of cash flows. SFAS 123R requires that cash flows from the exercise of stock options resulting from tax benefits in excess of recognized cumulative compensation cost (excess tax benefits) be classified as financing cash flows. For the three months ended March 31, 2006 no such tax benefit was recognized.

The following table details the effect on net income had stock-based compensation expense been recorded in the three months ended March 31, 2005 based on the fair-value method under SFAS 123.

	2005
	(Dollars in thousands, except per share data)
Reported net income	$	5,413
Add: Total stock based compensation expense included in reported net income, net of related tax effects		—
Deduct: total stock based compensation expense determined under fair-value method for all awards, net of related tax expense		(119	)
Pro forma net income	$	5,294
Earnings per share
Basic - reported	$	0.33
Basic - pro forma	$	0.32
Diluted - reported	$	0.32
Diluted - pro forma	$	0.32

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The fair value of the stock options granted was estimated on the date of grant using the Black-Scholes option valuation model that uses the assumptions noted in the following table. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant. Beginning in 2006, with the adoption of SFAS 123R the expected life (estimated period of time outstanding) of options granted with a 10-year term was determined using the average of the vesting period and term, an accepted method under SEC’s Staff Accounting Bulletin No. 107, Share-Based Payment. Expected volatility was based on historical volatility for a period equal to the stock option’s expected life, ending on the day of grant, and calculated on a weekly basis.

	For the Three Months Ended
	03/31/2006	03/31/2005
Risk-free interest rate	2.05%-6.21%	2.05%-6.21%
Expected life	3-6.5 years	3-5 years
Expected volatility	30%-34%	30.0%
Expected dividend yield	0.00%-1.05%	0.00%-1.05%
Weighted average fair value	$3.37	$2.49

These assumptions were utilized in the calculation of the compensation expense noted above. This expense is the result of vesting of previously granted stock awards. No stock options were granted for the three months ended March 31, 2006 and 2005.

A summary of the Company’s stock option activity and related information for the three months ended March 31, 2005 and 2006 is set forth in the following table:

		Outstanding Options
	Shares Available For Grant	Number of Shares		Weighted Average Exercise Price
Balance at December 31, 2004	970,975	759,779		$	9.95
Options granted	—	—			—
Options forfeited	12,590	(12,590	)		10.69
Options exercised	—	(57,567	)		5.09
Balance at March 31, 2005	983,565	689,622		$	9.97
Balance at December 31, 2005	936,389	638,804		$	13.38
Options granted	—	—			—
Options forfeited	—	—			—
Options exercised	—	(37,715	)		7.20
Balance at March 31, 2006	936,389	601,089		$	13.76

The options as of March 31, 2006 have been segregated into seven ranges for additional disclosure as follows:

	Options Outstanding				Options Exercisable
	Options Outstanding as of 03/31/2006	Weighted- Average Remaining Contractual Life in Years	Weighted- Average Exercise Price		Options Exercisable as of 03/31/2006	Weighted- Average Remaining Contractual Life in Years	Weighted- Average Exercise Price
Range of Exercise Prices
$2.23 - $4.00	23,152	5.41	$	3.65	15,503	5.13	$	3.49
$4.01 - $4.99	11,989	5.80	$	4.62	4,317	5.44	$	4.39
$5.00 - $5.99	105,688	6.55	$	5.32	75,021	6.50	$	5.24
$6.00 - $7.99	12,960	7.00	$	6.39	3,264	7.00	$	6.23
$8.00 - $14.00	158,800	8.09	$	13.06	60,000	8.05	$	13.02
$14.01 - $20.00	170,000	8.09	$	15.89	12,604	8.24	$	16.02
$20.01 - $25.10	118,500	10.00	$	22.87	—	—	$	—
	601,089	8.02	$	13.76	170,709	7.03	$	8.61

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Aggregate intrinsic value of options outstanding and options exercisable at March 31, 2006 was $6.3 million and $2.7 million, respectively. Aggregate intrinsic value represents the difference between the Company’s closing stock price on the last trading day of the period, which was $24.23 as of March 31, 2006, and the exercise price multiplied by the number of options outstanding. Total intrinsic value of options exercised was $620,000 and $884,000 for the three months ended March 31, 2006 and 2005, respectively.

As of March 31, 2006, the Company had approximately $1.6 million of unrecognized compensation costs related to non-vested options. The Company expects to recognize these costs over a weighted average period of 3.32 years.

6. OTHER BORROWED FUNDS

The Company borrows funds from the Federal Home Loan Bank and the Treasury, Tax, and Loan Investment Program. Other borrowed funds totaled $37.2 million and $28.6 million at March 31, 2006 and December 31, 2005, respectively. Interest expense on other borrowed funds was $104,000 for the three months ended March 31, 2006, compared to $254,000 for the three months ended March 31, 2005, reflecting average interest rates of 4.47% and 2.86%, respectively.

As of March 31, 2006, the Company borrowed $37.0 million from the Federal Home Loan Bank of San Francisco with note terms from 1 year to 15 years. Notes of 10-year and 15-year terms are amortizing at predetermined schedules over the life of notes. The Company has pledged, under a blanket lien (all qualifying commercial and residential loans) as collateral under the borrowing agreement with Federal Home Loan Bank, with a total carrying value of $385.3 million at March 31, 2006. Total interest expense on the notes was $90,000 and $247,000 for the three months ended March 31, 2006 and 2005, respectively, reflecting average interest rates of 4.29% and 2.88% respectively.

Federal Home Loan Bank advances outstanding as of March 31, 2006 mature as follows:

	2006			2007			2012			2017			Total
Borrowings	$	30,000		$	4,000		$	1,379		$	1,657		$	37,036
Weighted interest rate		4.89	%		4.08	%		4.58	%		5.24	%		4.81	%

Borrowings obtained from the Treasury Tax and Loan Investment Program mature within a month from the transaction date. Under the program, the Company receives funds from the U.S. Treasury Department in the form of open-ended notes, up to a total of $2.2 million. The Company has pledged U.S. government agencies and/or mortgage-backed securities with a total carrying value of $3.0 million at March 31, 2006, as collateral to participate in the program. The total borrowed amount under the program, outstanding at March 31, 2006 and December 31, 2005 was $207,000 and $1.1 million, respectively. Interest expense on notes was $7,500 and $6,200 for the three months ended March 31, 2006 and 2005, respectively, reflecting average interest rates of 3.01% and 2.38%, respectively. In addition, the Company had customer deposits for tax payments which amounted to $122,000 and $127,000 at March 31, 2006 and December 31, 2005, respectively.

7. LONG-TERM SUBORDINATED DEBENTURES

Center Capital Trust I is a Delaware business trust formed by the Company for the sole purpose of issuing trust preferred securities fully and unconditionally guaranteed by the Company. During the fourth quarter of 2004, Center Capital Trust I issued 18,000 Capital Trust Preferred Securities (“TP Securities”), with a liquidation value of $1,000 per security, for gross proceeds of $18,000,000. The entire proceeds of the issuance were invested by Center Capital Trust I in $18,000,000 of Junior Long-term Subordinated Debentures (the “Subordinated Debentures”) issued by the Company, with identical maturity, repricing and payment terms as the TP Securities. The Subordinated Debentures represent the sole assets of Center Capital Trust I. The Subordinated Debentures mature on January 7, 2034, bear a current interest rate of 7.00% (based on 3-month LIBOR plus

11

2.85%), with repricing and payments due quarterly in arrears on January 7, April 7, July 7, and October 7 of each year commencing April 7, 2004. The Subordinated Debentures are redeemable by the Company, subject to receipt by the Company of prior approval from the Federal Reserve Bank, on any January 7th, April 7th, July 7th, and October 7th on or after April 7, 2009 at the Redemption Price. Redemption Price means 100% of the principal amount of Subordinated Debentures being redeemed plus accrued and unpaid interest on such Subordinated Debentures to the Redemption Date, or in case of redemption due to the occurrence of a Special Event, to the Special Redemption Date if such Redemption Date is on or after April 7, 2009. The TP Securities are subject to mandatory redemption to the extent of any early redemption of the Subordinated Debentures and upon maturity of the Subordinated Debentures on January 7, 2034.

Holders of the TP Securities are entitled to a cumulative cash distribution on the liquidation amount of $1,000 per security at a current rate per annum of 7.00%. Interest rate defined as per annum rate of interest, resets quarterly, equal to LIBOR immediately preceding each interest payment date (January 7, April 7, July 7, and October 7 of each year) plus 2.85%. The distributions on the TP Securities are treated as interest expense in the consolidated statements of operations. The Company has the option to defer payment of the distributions for a period of up to five years, as long as the Company is not in default on the payment of interest on the Subordinated Debentures. The TP Securities issued in the offering were sold in private transactions pursuant to an exemption from registration under the Securities Act of 1933, as amended. The Company has guaranteed, on a subordinated basis, distributions and other payments due on the TP Securities.

On March 1, 2005, the FRB adopted a final rule that allows the continued inclusion of trust-preferred securities in the Tier I capital of bank holding companies. However, under the final rule, after a five-year transition period, the aggregate amount of trust preferred securities and certain other capital elements would be limited to 25% of Tier I capital elements, net of goodwill. Trust preferred securities currently make up 14.0% of the Company’s Tier I capital.

In accordance with FIN 46 (revised December 2004), Center Capital Trust I is not reported on a consolidated basis. Therefore, the capital securities of $18,000,000 do not appear on the consolidated statement of financial condition. Instead, the long-term subordinated debentures of $18,557,000 payable by Center Financial to the Center Capital Trust I and the investment in the Center Capital Trust I’s common stock of $557,000 (included in other assets) are separately reported.

8. EARNINGS PER SHARE

The actual number of shares outstanding at March 31, 2006, was 16,476,768. Basic earnings per share is calculated on the basis of weighted average number of shares outstanding during the period. Diluted earnings per share reflects additional common shares that would have been outstanding if dilutive potential common shares had been issued. Potential common shares that may be issued by the Company relate solely to outstanding stock options, and are determined using the treasury stock method.

The following table sets forth the Company’s earnings per share calculation for the three months ended March 31, 2006 and 2005:

	For the Three Months Ended March 31,
	2006					2005
	(Dollars in thousands, except earnings per share)
	Net Income		Average Number Of Shares	Per Share Amounts		Net Income		Average Number of Shares	Per Share Amounts
Basic earnings per share	$	5,769	16,451	$	0.35	$	5,413	16,315	$	0.33
Effect of dilutive securities:
Stock options		—	178		—		—	354		(0.01	)
Diluted earnings per share	$	5,769	16,629	$	0.35	$	5,413	16,669	$	0.32

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Options not included in the computation of diluted earnings per share because they would have had an antidilutive effect amounted to 54,500 for the three months ended March 31, 2006.

9. CASH DIVIDENDS

On March 17, 2006, the Board of Directors declared a quarterly cash dividend of 4 cents per share. This cash dividend was paid on April 14, 2006 to shareholders of record as of March 31, 2006.

10. GOODWILL AND INTANGIBLES

In April 2004, the Company purchased the Chicago branch of Korea Exchange Bank and recorded goodwill of $1.3 million and a core deposit intangible of $462,000. The Bank amortizes premiums on acquired deposits using the straight-line method over 5 to 9 years. Accumulated amortization expense for core deposit intangible was $102,000 and $89,000 as of March 31, 2006 and December 31, 2005, respectively. Core deposit intangible, net of amortization, was $360,000 and $373,000 at March 31, 2006 and December 31, 2005, respectively. Estimated amortization expense, for five succeeding fiscal years and thereafter, is as follows:

(Dollars in thousands)

2006	$	40
2007		53
2008		53
2009		53
2010		53
Therafter		108

11. COMMITMENTS AND CONTINGENCIES

Off-Balance-Sheet Risk

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

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

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

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

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A summary of the notional amounts of the Company’s financial instruments relating to extension of credit with off-balance-sheet risk at March 31, 2006 and December 31, 2005 follows:

Outstanding commitments (Dollars in thousands)

	March 31, 2006		December 31, 2005
Loans	$	250,876	$	255,096
Standby letters of credit		12,655		12,797
Performance bonds		263		283
Commercial letters of credit		33,368		24,262

Litigation

From time to time, the Company is a party to claims and legal proceedings arising in the ordinary course of business. With the exception of the potentially adverse outcome in the litigation described in the next three paragraphs, after taking into consideration information furnished by counsel as to the current status of these claims and proceedings, management does not believe that the aggregate potential liability resulting from such proceedings would have a material adverse effect on the Company’s financial condition or results of operations.

On or about March 3, 2003, the Bank was served with a complaint filed by Korea Export Insurance Corporation (“KEIC”) in Orange County, California Superior Court, entitled Korea Export Insurance Corporation v. Korea Data Systems (USA), Inc., et al. KEIC is seeking to recover alleged losses from a number of parties involved in international trade transactions that gave rise to bills of exchange financed by various Korean Banks but not ultimately paid. KEIC is seeking to recover damages of approximately $56 million from the Bank based on a claim that, in its capacity as a presenting bank for these bills of exchange, the Bank acted negligently in presenting and otherwise handling trade documents for collection.

On November 10, 2005, the Orange County Superior Court dismissed all claims of KEIC against the Bank in this action on the grounds that federal courts have exclusive jurisdiction over KEIC’s claims against the Bank. KEIC has appealed the dismissal; and, in addition, has filed a new claim against the Bank in federal court.

The Bank intends to continue to vigorously defend this lawsuit. However, management cannot predict the outcome of this litigation, and it will be expensive and time-consuming to defend. One of the Bank’s insurance companies, BancInsure, has informed the Bank that there is coverage for a portion of defense. While it is possible that the claims may ultimately be determined to be covered by insurance, BancInsure has stated that it reserves its rights to determine whether coverage exists and ultimately may deny coverage. If the outcome of this litigation is adverse to the Bank, and is required to pay significant monetary damages, the Company’s financial condition and results of operations are likely to be materially and adversely affected.

Memorandum of Understanding

On May 10, 2005, Center Bank entered into a memorandum of understanding (the “MOU”) with the FDIC and the California Department of Financial Institutions (the “DFI”). The MOU is an informal administrative agreement primarily concerning the Bank’s compliance with Bank Secrecy Act (“BSA”) regulations. In accordance with the MOU, the Bank agreed to (i) implement a written action plan, policies and procedures, and comprehensive independent compliance testing to ensure compliance with all BSA-related rules and regulations; (ii) correct any apparent BSA violations previously disclosed by the FDIC; (iii) develop the expertise to ensure that generally accepted accounting principles and regulatory reporting guidelines are observed in all of the Bank’s financial transactions and reporting; and (iv) furnish written quarterly progress reports to the FDIC and the DFI detailing the form and manner of any actions taken to secure compliance with the memorandum and the results thereof.

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Management does not believe that the MOU will have a material impact on the Bank’s operating results or financial condition. However, if the DFI and FDIC determine that the Bank’s compliance with the MOU is not satisfactory, the MOU will constrain our business. Management has committed to promptly comply with all of the terms of the MOU, and have taken the measures that are deemed necessary to correct the identified deficiencies.

12. DERIVATIVE FINANCIAL INSTRUMENTS

The following table provides information as of March 31, 2006 on the Company’s outstanding derivatives:

Description	Notional Value		Period	Fixed Receiving Rate		Floating Paying Rate
	(Dollars in thousands)
Interest Rate Swap II	$	25,000	08/02-08/06	6.25	%	WSJ Prime	*

(*) At March 31, 2006, the Wall Street Journal published Prime Rate was 7.75 percent.

As of March 31, 2006 and December 31, 2005, the Company had one interest rate swap agreement with a total notional amount of $25 million. Under the swap agreement, the Company receives a fixed rate and pays a variable rate based on Wall Street Journal published Prime Rate.

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

Losses on interest rate swaps, recorded in noninterest expense, consist of following:

	For the Three Months Ended March 31,
	(Dollars in thousands)
	2006			2005
Net swap settlement payments (receipts)	$	89		$	(151	)
Decrease (increase) in market value		(36	)		308
Net change in market value	$	53		$	157

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Item 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview:

The following is management’s discussion and analysis of the major factors that influenced our consolidated results of operations and financial condition for the three months ended March 31, 2006. This analysis should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2005 and with the unaudited consolidated financial statements and notes as set forth in this report.

FORWARD-LOOKING STATEMENTS

Certain matters discussed under this caption may constitute forward-looking statements under Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. There can be no assurance that the results described or implied in such forward-looking statements will, in fact, be achieved and actual results, performance, and achievements could differ materially because the business of the Company involves inherent risks and uncertainties. Risks and uncertainties include possible future deteriorating economic conditions in the Company’s areas of operation; interest rate risk associated with volatile interest rates and related asset-liability matching risk; liquidity risks; risk of significant non-earning assets, and net credit losses that could occur, particularly in times of weak economic conditions or times of rising interest rates; risks of available-for-sale securities declining significantly in value as interest rates rise or issuers of such securities suffer financial losses; and regulatory risks associated with the variety of current and future regulations to which the Company is subject. All of these risks could have a material adverse impact on the Company’s financial condition, results of operations or prospects, and these risks should be considered in evaluating the Company. For additional information concerning these factors, see “Interest Rate Risk Management” and “Liquidity and Capital Resources” contained in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our Form 10-K for the year ended December 31, 2005.

Critical Accounting Policies

Accounting estimates and assumptions discussed in this section are those that the Company considers to be the most critical to an understanding of the Company’s financial statements because they inherently involve significant judgments and uncertainties. The financial information contained in these statements is, to a significant extent, financial information that is based on approximate measures of the financial effects of transactions and events that have already occurred. These critical accounting policies are those that involve subjective decisions and assessments and have the greatest potential impact on the Company’s results of operations. Management has identified its most critical accounting policies to be those relating to the following: investment securities, loan sales, allowance for loan losses, interest rate swaps and share-based compensation. The following is a summary of these accounting policies. In each area, the Company has identified the variables most important in the estimation process. The Company has used the best information available to make the estimations necessary to value the related assets and liabilities. Actual performance that differs from the Company’s estimates and future changes in the key variables could change future valuations and impact net income.

Investment Securities

Under SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, investment securities generally must be classified as held-to-maturity, available-for-sale or trading. The appropriate classification is based partially on the Bank’s ability to hold the securities to maturity and largely on management’s intentions with respect to either holding or selling the securities. The classification of investment securities is significant since it directly impacts the accounting for unrealized gains and losses on securities. Unrealized gains and losses on trading securities flow directly through earnings during the periods in which they arise, whereas for available-for-sale securities, they are recorded as a separate component of shareholders’ equity

16

(accumulated comprehensive other income or loss) and do not affect earnings until realized. The fair values of the Bank’s investment securities are generally determined by reference to quoted market prices and reliable independent sources. The Bank is obligated to assess, at each reporting date, whether there is an “other-than-temporary” impairment to the Bank’s investment securities. Such impairment must be recognized in current earnings rather than in other comprehensive income. Aside from the Fannie Mae and Freddie Mac preferred stocks that were written down as of December 31, 2004, the Bank did not have any other investment securities that were deemed to be “other-than-temporarily” impaired as of March 31, 2006 and December 31, 2005.

Loan Sales

Certain Small Business Administration (“SBA”) loans that the Bank has the intent to sell prior to maturity are designated as held for sale at origination and recorded at the lower of cost or market value, 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 operating income at the time of the sale. The remaining portion of the premium (relating to the portion of the loan retained) is deferred and amortized over the remaining life of the loan as an adjustment to yield. Servicing assets are recognized when loans are sold with servicing retained. Servicing assets are recorded based on the present value of the contractually specified servicing fee, net of servicing costs, over the estimated life of the loan, using a discount rate based on the related note rate plus 1 to 2%. Servicing assets are amortized in proportion to and over the period of estimated future servicing income. Management periodically evaluates the servicing asset for impairment, which is the carrying amount of the servicing asset in excess of the related fair value. Impairment, if it occurs, is recognized in a write down in the period of impairment.

Allowance for Loan Losses

The Bank’s allowance for loan loss methodologies incorporate a variety of risk considerations, both quantitative and qualitative, in establishing an allowance for loan loss that management believes is appropriate at each reporting date. Quantitative factors include the Bank’s historical loss experience, delinquency and charge-off trends, collateral values, changes in nonperforming loans, and other factors. Quantitative factors also incorporate known information about individual loans, including borrowers’ sensitivity to interest rate movements and borrowers’ sensitivity to quantifiable external factors including commodity and finished good prices as well as acts of nature (earthquakes, floods, fires, etc.) that occur in a particular period. Qualitative factors include the general economic environment in the Bank’s markets and, in particular, the state of certain industries. Size and complexity of individual credits, loan structure, extent and nature of waivers of existing loan policies and pace of portfolio growth are other qualitative factors that are considered in its methodologies. As the Bank adds new products, increases the complexity of the loan portfolio, and expands the geographic coverage, the Bank will enhance the methodologies to keep pace with the size and complexity of the loan portfolio. Changes in any of the above factors could have significant impact to the loan loss calculation. The Bank believes that its methodologies continue to be appropriate given its size and level of complexity. Detailed information concerning the Bank’s loan loss methodology is contained in “Item 2, Management Discussion and Analysis of Financial Condition and Results of Operations—Allowance for Loan Losses.”

Interest Rate Swaps

As a part of its asset and liability management strategy the Bank has included derivative financial instruments, such as interest rate swaps, with the overall goal of minimizing the impact of interest rate fluctuations. In accordance with SFAS No. 133, such interest rate swap agreements are measured at fair value and reported as assets or liabilities on the consolidated statement of financial condition. When such swaps qualify for hedge accounting treatment, the change in the fair value of the swaps is recorded as a component of accumulated other comprehensive income in shareholders’ equity. However, if the swaps do not qualify for hedge accounting treatment, then the change in the fair value of the swaps is recorded as a gain or loss directly to the consolidated statements of operations as a part of non-interest expense. The Company does not use hedge

17

accounting treatment to account for its interest rate swaps. Therefore, the difference between the market and book value of these instruments is included in current earnings. For the three months ended March 31, 2006 a mark to market loss of $53,000 was recognized, compared to a mark to market loss of $157,000 for the three months ended March 31, 2005.

The Company, in compliance with SFAS 133, includes the swap settlement payments in noninterest expense when hedge accounting treatment is not used.

Share-based Compensation

The Company adopted SFAS 123R as of January 1, 2006 as discussed in Note 5 to the consolidated financial statements. SFAS 123R requires the Company to recognize compensation expense for all share-based payments made to employees based on the fair value of the share-based payment on the date of grant. The Company elected to use the modified prospective method for adoption, which requires compensation expense to be recorded for all unvested stock options beginning in the first quarter of adoption. For all unvested options outstanding as of January 1, 2006, the previously measured but unrecognized compensation expense, based on the fair value at the original grant date, is recognized on a straight-line basis in the Consolidated Statements of Operations over the remaining vesting period. For share-based payments granted subsequent to January 1, 2006, compensation expense, based on the fair value on the date of grant, is recognized in the Consolidated Statements of Operations on a straight-line basis over the vesting period. In determining the fair value of stock options, the Company uses the Black-Scholes option-pricing model that employs the following assumptions:

• Expected volatility—based on the weekly historical volatility of our stock price, over the expected life of the option.

• Expected term of the option—based on historical employee stock option exercise behavior, the vesting terms of the respective option and a contractual life of ten years.

• Risk-free rate—based upon the rate on a zero coupon U.S. Treasury bill, for periods within the contractual life of the option, in effect at the time of grant.

• Dividend yield—calculated as the ratio of historical dividends paid per share of common stock to the stock price on the date of grant.

The Company’s stock price volatility and option lives involve management’s best estimates at that time, both of which impact the fair value of the option calculated under the Black-Scholes methodology and, ultimately, the expense that will be recognized over the life of the option.

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SUMMARY OF FINANCIAL DATA

Executive Overview

Consolidated net income for the first quarter of 2006, increased by $356,000 to $5.8 million, or $0.35 per diluted share compared to $5.4 million or $0.32 per diluted share in the first quarter of 2005. The following were significant highlights related to first quarter 2006 results as compared to the corresponding period of 2005:

• Due to strong loan and deposit growth and rising interest rates, the Company’s net interest income before provision for loan losses increased by 20.4% for the quarter ended March 31, 2006 versus 2005.

• Interest margin for the first quarter of 2006 declined to 4.40% compared to 4.57% for the same quarter of 2005. This change in net interest margin was mainly attributable to the recent increase in the federal funds rate by the Federal Reserve Board and changes in the deposit mix over the periods.

• The Company’s efficiency ratio was 55.8% for the first quarter of 2006 compared to 49.7% for the quarter ended March 31, 2005. Negatively impacting the ratio were professional fees primarily associated with BSA compliance upgrades.

• Return on average assets and return on average equity equaled 1.41% and 20.16%, respectively, for the three months ended March 31, 2006, compared to 1.63% and 23.36%, respectively, for the three months ended March 31, 2005.

The Company’s financial condition and liquidity remain strong. The following are important factors in understanding the Company’s financial condition and liquidity:

• Net loans grew $11.5 million or 0.9% to $1.23 billion as of March 31, 2006 as compared to $1.22 billion as of December 31, 2005.

• Total deposits grew $10.5 million or 0.7% to $1.49 billion as March 31, 2006 as compared to $1.48 billion at December 31, 2005.

• Net loans to total deposits grew marginally to 82.5% at March 31, 2005 as compared to 82.3% December 31, 2005.

• While the loan portfolio grew, the ratio of nonaccrual loans to total loans decreased to .29% at March 31, 2006 compared to 0.24% at December 31, 2005. Our ratio of allowance for loan losses to total nonperforming loans decreased to 386% at March 31, 2006, as compared to 471% at December 31, 2005. However, our allowance for losses to total gross loans remained consist at 1.12% at March 31, 2006 and December 31, 2005.

• Under the regulatory framework for prompt corrective action, the Bank continued to be “well-capitalized”.

• The Company declared its quarterly cash dividend of $0.04 per share in March 2006.

• All liquidity measures at March 31, 2006 met or exceeded the same measures at December 31, 2005.

EARNINGS PERFORMANCE ANALYSIS

As previously noted and reflected in our results for the first quarter ended March 31, 2006, the Company recorded net income of $5.8 million as compared to $5.4 million for the same period in 2005. The Company earns income from two primary sources: net interest income, which is the difference between interest income generated from the successful deployment of earning assets and interest expense created by interest-bearing liabilities; and net noninterest income, which is basically fees and charges earned from customer services less the operating costs associated with providing a full range of banking services to customers.

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Net Interest Income and Net Interest Margin

The following table presents the net interest spread, net interest margin, average balances, interest income and expense, and average yields and rates by asset and liability component for the three months ended March 31, 2006 and 2005:

Distribution, Rate and Yield Analysis of Net Income

	Three Months Ended March 31,
	2006						2005
	Average Balance		Interest Income/ Expense		Annualized Average Rate/Yield(1)		Average Balance		Interest Income/ Expense		Annualized Average Rate/Yield(1)
Assets:
Interest-earning assets:
Loan(2)	$	1,227,712	$	25,288	8.35	%	$	1,027,819	$	17,594	6.94	%
Federal funds sold		73,806		823	4.52			27,385		171	2.53
Taxable investment securities
U.S. Treasury		791		9	4.61			2,026		24	4.80
U.S. Governmental agencies debt securities and U.S. Government sponsored enterprise debt securities		113,739		1,083	3.86			63,102		436	2.80
U.S. Governmental agencies and U.S. Government sponsored and enterprise mortgage-backed securities		74,520		812	4.42			68,775		636	3.75
U.S. Governmental agencies and U.S. Government sponsored enterprise mortgage-backed securities		2,724		32	4.76			—		—	0.00
Municipal securities		101		2	8.03			102		2	7.95
Other securities(3)		17,232		248	5.84			16,309		183	4.55
Total taxable investment securities		209,107		2,186	4.24			150,314		1,281	3.46
Tax-advantage investment securities(4):
Municipal securities		7,275		74	6.35			5,097		53	6.49
Other - Government preferred stock		5,404		23	2.38			8,713		18	1.15
Total tax-advantage investment securities		12,679		97	4.17			13,810		71	3.12
Equity stocks		5,444		66	4.92			3,905		33	3.43
Money market funds and interest-earning deposits		5,064		60	4.81			3,579		23	2.61
Total interest-earning assets		1,533,812		28,520	7.54	%		1,226,812		19,173	6.34	%
Noninterest-earning assets:
Cash and due from banks		74,467						66,211
Bank premises and equipment, net		13,975						11,890
Customers’ acceptances outstanding		4,038						6,511
Accrued interest receivables		6,512						4,518
Other assets		29,800						28,714
Total noninterest-earning assets		128,792						117,844
Total assets	$	1,662,604					$	1,344,656

¹ Average rates/yields for these periods have been annualized.

² Loans are net of the allowance for loan losses, deferred fees, and discount on SBA loans retained. Loan fees included in loan income were approximately $554,000 and $440,000, for the three months ended March 31, 2006 and 2005, respectively. Amortized loan fees have been included in the calculation of net interest income. Nonaccrual loans have been included in the table for computation purposes, but the foregone interest of such loans is excluded.

³ Other securities include U.S. government asset-backed securities, corporate trust preferred securities, and corporate debt securities.

⁴ Yields on tax-advantaged income have been computed on a tax equivalent basis. 100% of earnings on municipal obligations and 70% of earnings on the preferred stock are not taxable for federal income tax purposes.

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Distribution, Rate and Yield Analysis of Net Income

	Three Months Ended March 31,
	2006						2005
	Average Balance		Interest Income/ Expense		Annualized Average Rate/Yield(5)		Average Balance		Interest Income/ Expense		Annualized Average Rate/Yield(5)
Liabilities and Shareholders’ Equity:
Interest-bearing liabilities:
Deposits:
Money market and NOW accounts	$	202,960	$	1,360	2.72	%	$	202,816	$	840	1.68	%
Savings		80,670		744	3.74			75,247		599	3.23
Time certificates of deposits in:
Denominations of $100,000 or more		734,453		8,392	4.63			464,211		2,938	2.57
Other time certificates of deposits		100,489		928	3.75			82,079		444	2.19
		1,118,572		11,424	4.14			824,353		4,821	2.37
Other borrowed funds		9,437		104	4.47			36,030		254	2.86
Long-term subordinated debentures		18,557		334	7.30			18,557		266	5.82
Total interest-bearing liabilities		1,146,566	$	11,862	4.20	%		878,940	$	5,341	2.46	%
Noninterest-bearing liabilities:
Demand deposits		379,431						354,608
Total funding liabilities		1,525,997			3.15	%		1,233,548			1.76	%
Other liabilities		20,567						17,123
Total noninterest-bearing liabilities		399,998						371,731
Shareholders’ equity		116,040						93,985
Total liabilities and shareholders’ equity	$	1,662,604					$	1,344,656
Net interest income			$	16,658					$	13,832
Cost of deposits					3.09	%					1.66	%
Net interest spread(6)					3.34	%					3.88	%
Net interest margin(7)					4.40	%					4.57	%

⁵ Average rates/yields for these periods have been annualized.

⁶ Represents the weighted average yield on interest-earning assets less the weighted average cost of interest-bearing liabilities.

⁷ Represents net interest income (before provision for loan losses) as a percentage of average interest-earning assets.

The following table sets forth, for the periods indicated, the dollar amount of changes in interest earned and paid for interest-earning assets and interest-bearing liabilities and the amount of change attributable to

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(i) changes in average daily balances (volume), (ii) changes in interest rates (rate), and (iii) changes in both rate and volume (rate/volume):

	Three Months Ended March 31, 2006 vs. 2005 Increase (Decrease) Due to Change In
	Volume			Rate (8)			Total
Earning assets:
Interest income:
Loans(9)	$	3,722		$	3,972		$	7,694
Federal funds sold		446			206			652
Taxable investment securities		573			332			905
Tax-advantage securities(10)		(5	)		31			26
Equity stocks		24			9			33
Money market funds and interest-earning deposits		13			24			37
Total earning assets		4,773			4,574			9,347
Interest expense:
Deposits and borrowed funds:
Money market and super NOW accounts		1			521			522
Savings deposits		45			99			144
Time Certificates of deposits		2,357			3,580			5,937
Other borrowings		(641	)		491			(150	)
Long-term subordinated debentures		—			68			68
Total interest-bearing liabilities		1,762			4,759			6,521
Net interest income	$	3,011		$	(185	)	$	2,826

⁸ Average rates/yields for these periods have been annualized.

⁹ Loans are net of the allowance for loan losses, deferred fees, and discount on SBA loans retained. Loan fees included in loan income were approximately $554,000 and $440,000, for the three months ended March 31, 2006 and 2005, respectively. Amortized loan fees have been included in the calculation of net interest income. Nonaccrual loans have been included in the table for computation purposes, but the foregone interest of such loans is excluded.

¹⁰ The yield on tax-advantaged income has been computed on a tax equivalent basis. 100% of earnings on municipal obligations and 70% of earnings on the preferred stock are not taxable for federal income tax purposes.

The Company’s net interest income depends on the yields, volumes, and mix of its earning asset components, as well as the rates, volume, and mix associated with its funding sources. The Company’s net interest margin is its taxable-equivalent net interest income expressed as a percentage of its average earning assets.

Total interest and dividend income for the first quarter of 2006 increased 48% to $28.5 million compared with $19.2 million for the same period in 2005, primarily due to growth in earning assets and market rate hikes. Growth in earning assets was mainly driven by an increase in average net loans. Average net loans increased by $199.9 million or 19.4% for the first quarter of 2006 compared to the same period in 2005.

Total interest expense for the first quarter of 2006 increased by 122.1% to $11.8 million compared with $5.3 million for the same quarter in 2005. This increase was primarily due to interest-bearing deposit growth and increase in market rates set by the Federal Reserve Board. Average interest bearing liabilities increased to $1.1 billion during the first quarter of 2006 from $878.9 million in the first quarter of 2005.

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Net interest income before provision for loan losses increased by $2.8 million for the first quarter of 2006 compared to the like quarter in 2005. Of the $2.8 million increase in the net interest income before provision for loan losses, $3.0 million was due to volume changes and ($184,000) was due to rate changes. Helped by market rate hikes and growth in loan volume, the average yield on loans for the first quarter of 2006 increased to 8.35% compared to 6.94% for the like quarter in 2005, an increase of 141 basis points. The average investment portfolios for the first quarter of 2006 and 2005 were $221.8 million and $164.1 million, respectively. The average yields on the investment portfolio as of the first quarter of 2006 and 2005 were 4.17% and 3.34%, respectively.

Interest margin for the first quarter of 2006 eroded to 4.40% compared to 4.57% for the same quarter of 2005. This change in net interest margin was mainly attributable to the recent increase in the federal funds rate by the Federal Reserve Board and changes in the deposit mix over the periods.

Provision for Loan Losses

Credit risk is inherent in the business of making loans. The Company sets aside an allowance for potential loan losses through charges to earnings, which are reflected monthly in the consolidated statement of operations as the provision for loan losses. Specifically, the provision for loan losses represents the amount charged against current period earnings to achieve an allowance for loan losses that in management’s judgment is adequate to absorb losses inherent in the Company’s loan portfolio.

Because of a decrease in the loan portfolio growth rate and improvement of asset quality, the provision for loan losses for the March 31, 2006 quarter decreased to $257,000, as compared to a $650,000 provision for the prior year period. Management believes that the $257,000 loan loss provision was adequate for the first three months of 2006. While management believes that the allowance for loan losses of 1.12% of total loans at March 31, 2006 was adequate, future additions to the allowance will be subject to continuing evaluation of the estimation, inherent and other known risks in the loan portfolio. The procedures for monitoring the adequacy of the allowance, and detailed information on the allowance, are included below in “Allowance for Loan Losses.”

Noninterest Income

The following table sets forth the various components of the Company’s noninterest income for the periods indicated:

Noninterest Income

	Three Months Ended March 31,
	2006				2005
	Amount		Percent of Total		Amount		Percent of Total
	(Dollars in thousands)
Customer service fees	$	2,130	42.90	%	$	2,235	44.37	%
Fee income from trade finance transactions		953	19.19			902	17.91
Wire transfer fees		216	4.35			204	4.05
Gain on sale of loans		674	12.73			673	13.36
Net gain on sale of securities available for sale		—	0.00			50	.99
Other loan related service fees		554	11.16			440	8.74
Other income		480	9.67			533	10.58
Total noninterest income	$	5,007	100.00	%	$	5,037	100.00	%
As a percentage of average earning assets			1.32	%			1.67	%

For the first quarter of 2006, noninterest income remained unchanged at $5.0 million compared to the same quarter in 2005, and decreased from 1.67% to 1.32% of average earning assets for the same periods.

The primary sources of recurring noninterest income continue to be customer service fee charges on deposit accounts and fees from trade finance transactions. Customer service fees decreased by $105,000, or 4.7%, in the

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first quarter of 2006 compared to the same period last year. This decrease was due primarily to management’s decision to close certain customer operating accounts whose activities, while generating service charges, were inconsistent with the Company’s risk management process and requirements. The decision was consistent with the Company’s intention of maintaining full compliance with all of its risk management policies and regulatory requirements.

Fee income from trade finance transactions remained the second largest source of our noninterest income, which increased to $953,000 for the first quarter of 2006, compared to $902,000 in the first quarter of 2005, due to increased levels of international trade activity by the Company’s customers.

The Company recorded a $674,000 and $673,000 gain on sale of SBA and commercial real estate loans for the first quarter of 2006 and 2005, respectively. The Company sold $10.9 million of SBA loans during the first quarter of 2006.

Loan service fees increased by $114,000 or 25.9% to $554,000 for the first quarter of 2006, compared to $440,000 for the same quarter in 2005. This increase was due to additional servicing fee income resulting from a larger servicing portfolio.

Other income decreased by $53,000 or 9.9% to $480,000 in the first quarter of 2006 as compared to $533,000 in the same quarter in 2005, due mainly to discontinuing the Company’s ATM funding program that resulted in decreased income of approximately $64,000.

Noninterest Expense

The following table sets forth the components of noninterest expense for the periods indicated:

Noninterest Expense

	Three Months Ended March 31,
	2006				2005
	Amount		Percent of Total		Amount		Percent of Total
	(Dollars in thousands)
Salaries and benefits	$	5,563	46.01	%	$	4,445	47.44	%
Occupancy		884	7.31			715	7.63
Furniture, fixtures, and equipment		460	3.80			408	4.35
Data processing		542	4.48			465	4.96
Professional service fees		2,060	17.04			798	8.52
Business promotion and advertising		845	6.99			650	6.94
Stationery and supplies		159	1.32			177	1.89
Telecommunications		173	1.43			129	1.38
Postage and courier service		141	1.17			163	1.74
Security service		263	2.18			175	1.87
Loss on termination of interest rate swaps		—	0.00			306	3.27
Loss on interest rate swaps		53	.44			157	1.67
Other operating expenses		947	7.83			782	8.34
Total noninterest expense	$	12,090	100.00	%	$	9,370	100.00	%
As a percentage of average earning assets			3.20	%			3.10	%
Efficiency ratio			55.8	%			49.7	%

For the first quarter of 2006, noninterest expense increased 29.0% to $12.1 million, compared to $9.4 million for the same quarter in 2005. The increase in noninterest expense was attributable to increases in

24

professional service fees, salaries and benefits, business promotion and advertising, occupancy and other operating expenses. Noninterest expense as a percentage of average assets also increased to 3.2% in first quarter of 2006 as compared to 3.1% in same period in 2005.

The Company’s efficiency ratio, defined as the ratio of noninterest expense to the sum of net interest income before provision for loan losses and noninterest income, increase to 55.8% for the first quarter of 2006 compared to 49.66% in the like quarter a year ago. This fluctuation was due to primarily to non-recurring professional service fees experienced in the quarter ended March 31, 2006. The increase was primarily attributable to costs related to resolving issues identified with the Company’s BSA compliance program.

Salaries and benefits increased 25.2% to $5.6 million for the first quarter of 2006 compared to $4.4 million for the same quarter in 2005. This increase was mainly due to expenses associated with the increased personnel to staff the new branches, the increased hiring activity of highly qualified personnel, and normal salary increases.

Our continuing geographical expansion increased occupancy cost by 23.7% to $884,000 in the first quarter of 2006 from $715,000 in same quarter last year. Additionally, this expansion was a major contributor to the increase in furniture, fixture, and equipment expense, which totaled $460,000 for the three months ended March 31, 2006, an increase of 12.7%, or $52,000, as compared to $408,000 in same period of 2005.

Business promotion and advertising expenses increased by 16.2% to $845,000 for the three months ended March 31, 2006 as compared to $650,000 in same period last year. This increase in 2006 was mainly due to the increased promotional activity for the Company’s products, new LPOs and our 20^th anniversary celebration.

During the first quarter of 2005, the Company terminated one of its longer maturity interest rate swaps and recorded a net loss of $306,000. There was no loss recorded for the same period of 2006. During the first quarter of 2006, the Company recorded a loss of $53,000 on interest rate swaps compared to a loss of $157,000 during the first quarter of 2005 to reflect the mark to market of the swaps.

For the quarter ended March 31, 2006, other operating expenses increased 21.1% or $165,000 to $947,000 as compared to $782,000 in the first quarter of 2005. This increase was mainly due to increases in; 1) loan related expenses ($43,000) 2) amortization of affordable housing investments ($40,000) 3) correspondent bank charges ($21,000) 4) directors and officers insurance ($26,000) 5) corporation administration expenses ($20,000) and 6) regulatory assessment ($13,000).

The remaining noninterest expenses include such items as data processing, stationery and supplies, telecommunications, postage, courier service and security service expenses. For the first quarter of 2006, these noninterest expenses slightly increased to $1.3 million compared to $1.1 million for the same quarter in 2005. This increase was mainly attributable to expenses related to data processing ($77,000) and security services ($88,000).

Provision for Income Taxes

Income tax expense is the sum of two components, current tax expense and deferred tax expense. Current tax expense is the result of applying the current tax rate to taxable income. The deferred portion is intended to reflect that income on which taxes are paid differs from financial statement pre-tax income because some items of income and expense are recognized in different years for income tax purposes than in the financial statements.

For the quarter ended March 31, 2006 and 2005, the provisions for income taxes were $3.5 million and $3.4 million representing effective tax rates of 38% and 39%, respectively. The primary reasons for the difference from the federal statutory tax rate of 35% are the inclusion of state taxes and reductions related to tax favored investments in low-income housing, municipal obligations and agency preferred stocks. The Company reduced taxes utilizing the tax credits from investments in the low-income housing projects in the amount of $147,000 for the first three months of 2006 compared to $129,000 for the three months ended in March 31, 2005.

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Deferred income tax assets or liabilities reflect the estimated future tax effects attributable to differences as to when certain items of income or expense are reported in the financial statements versus when they are reported in the tax return. The Company’s deferred tax asset was $10.1 million as of March 31, 2006, and $10.2 million as of December 31, 2005. As of March 31, 2006, the Company’s deferred tax asset was primarily due to book reserves for losses on loans and impairment losses on preferred stock.

FINANCIAL CONDITION ANALYSIS

The major components of the Company’s earning asset base are its interest-earning short-term investments, investment securities portfolio and loan portfolio. The detailed composition and growth characteristics of these three portfolios are significant to any analysis of the financial condition of the Company, and the loan portfolio analysis will be discussed in a later section of this Form 10-Q.

Interest Earning Short-Term Investments

The Company invests its excess available funds from daily operations in overnight Fed Funds and Money Market Funds. Money Market Funds are composed of mostly government funds and high quality short-term commercial paper. The Company can redeem the funds at any time. As of March 31, 2006 and December 31, 2005, the amounts invested in Fed Funds were $91.7 million and $58.5 million, respectively. The average yield earned on these funds was 4.52% for the first three months of 2006 compared to 2.53% for the same period last year. The Company invested $5.3 million and $5.1 million in money market funds and interest bearing deposits in other banks as of March 31, 2006 and December 31, 2005. The average balance and yield on money market funds and interest bearing deposits in other banks were $5.1 million and 4.81% for the first three months of 2006 as compared to $3.6 million and 2.61% for the comparable period of 2005.

Investment Portfolio

The following table summarizes the amortized cost, fair value and distribution of the Company’s investment securities as of the dates indicated:

Investment Portfolio

	As of March 31,				As of December 31,
	2006				2005
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(Dollars in thousands)
Available for Sale:
U.S. Treasury	$	985	$	983	$	498	$	497
U.S. Governmental agencies securities and U.S Government sponsored enterprise securities		106,937		105,752		131,719		130,483
U.S. Governmental agencies and U.S. Government sponsored and enterprise mortgage-backed securities		71,644		70,490		70,959		69,882
U.S Government sponsored enterprise preferred stock		6,750		5,636		4,865		5,173
Corporate trust preferred securities		11,000		11,070		11,000		11,054
Mutual Funds backed by adjustable rate mortgages		4,500		4,397		3,000		2,961
Fixed rate collateralized mortgage obligations		2,657		2,623		2,817		2,800
Corporate debt securities		3,194		3,170		3,194		3,173
Total available for sale	$	207,667	$	204,121	$	228,052	$	226,023
Held to Maturity:
U.S. Government agencies and U.S. Government sponsored enterprise mortgage-backed securities	$	3,778	$	3,681	$	4,130	$	4,053
Municipal securities		7,439		7,466		6,922		6,961
Total held to maturity	$	11,217	$	11,147	$	11,052	$	11,014
Total investment securities	$	218,884	$	215,268	$	239,104	$	237,037

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As of March 31, 2006, investment securities totaled $215.3 million or 12.7% of total assets, compared to $237.1 million or 14.3% of total assets as of December 31, 2005. The decrease in the investment portfolio was due to liquidity being deployed in funding loans.

As of March 31, 2006, available-for-sale securities totaled $204.1 million, compared to $226.0 million as of December 31, 2005. Available-for-sale securities as a percentage of total assets decreased to 12.1% as of March 31, 2006 compared to 13.6% at December 31, 2005. Held-to-maturity securities increased to $11.2 million as of March 31, 2006, compared to $11.1 million as of December 31, 2005. The composition of available-for-sale and held-to-maturity securities was 94.7% and 5.3% as of March 31, 2006, compared to 95.3% and 4.7% as of December 31, 2005, respectively. For the three months ended March 31, 2006, the yield on the average investment portfolio was 4.40%, representing a increase of 106 basis points as compared to 3.34% for the same period of 2005. The Company used the proceeds from the decrease in the investment portfolio to fund loan growth.

The average balance of taxable investment securities increased by 39.1% to $209.1 million for the three months ended March 31, 2006, compared to $150.3 million for the same period of previous year. The annualized average yield increased 78 basis points to 4.24% for the three months ended March 31, 2006, compared to 3.46% for the three months ended March 31, 2005.

The average balance of tax-advantaged securities was $12.7 million and $13.8 million for the three months ended March 31, 2006 and 2005, respectively. The average yield on tax-advantaged securities for the quarter ended March 31, 2006 was 3.10% compared to 2.09% for the same period last year. This increase was mainly due to an increased yield on U.S. Government sponsored enterprise preferred stock. The tax-equivalent yield on these same types of securities for the three months ended March 31, 2006 and 2005 was 4.17% and 3.12%, respectively.

The following table summarizes, as of March 31, 2006, the maturity characteristics of the investment portfolio, by investment category. Expected remaining maturities may differ from remaining contractual maturities because obligors may have the right to prepay certain obligations with or without penalties.

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Investment Maturities and Repricing Schedule

	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
	(Dollars in thousands)
Available for Sale (Fair Value):
U.S. Governmental agencies securities and U.S Government sponsored enterprise securities	$	61,400	3.72	%	$	45,337	4.00	%	$	—	0.00	%	$	—	0.00	%	$	106,737	3.84	%
U.S. Governmental agencies and U.S. Government sponsored and enterprise mortgage-backed securities		—	0.00			1,880	4.86			7,458	4.82			61,152	4.32			70,490	4.39
U.S Government sponsored enterprise preferred stock		—	0.00			—	0.00			—	0.00			11,070	6.37			11,070	6.37
Corporate trust preferred securities		—	0.00			5,636	4.36			—	0.00			—	0.00			5,636	4.36
Mutual Funds backed by adjustable rate mortgages		4,397	3.32			—	0.00			—	0.00			—	0.00			4,397	3.32
Fixed rate collateralized mortgage obligations		—	0.00			—	0.00			—	0.00			2,622	4.70			2,621	4.70
Corporate debt securities		1,000	5.80			2,170	4.7			—	0.00			—	0.00			3,170	5.05
Total available for sale	$	66,797	3.72	%	$	55,023	4.09	%	$	7,458	4.82	%	$	74,844	4.64	%	$	204,121	4.20	%
Held to Maturity (Amortized Cost):
U.S. Government agencies and U.S. Government sponsored enterprise mortgage-backed securities	$	—	0.00	%	$	—	0.00	%	$	—	0.00	%	$	3,778	4.02	%	$	3,778	4.02	%
Municipal securities		380	3.90			2,726	4.23			3,236	3.97			1,097	3.80			7,439	4.04
Total held to maturity	$	380	3.90	%	$	2,726	4.23	%	$	3,236	3.97	%	$	4,875	3.97	%	$	11,217	4.03	%
Total investment securities	$	67,177	3.73	%	$	57,749	4.10	%	$	10,694	4.56	%	$	79,719	4.60	%	$	215,338	4.19	%

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The following table shows the Company’s investments with 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 March 31, 2006.

	As of March 31, 2006
	Less than 12 months					12 months or more					Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
	(Dollars in thousands)
U.S. Governmental and U.S Government sponsored enterprise agencies securities	$	2,983	$	(2	)	$	47,981	$	(1,046	)	$	50,964	$	(1,048	)
U.S. Governmental agencies and U.S. Government sponsored enterprise mortgage-backed securities		27,016		(341	)		46,982		(960	)		73,998		(1,301	)
Municipal securities and corporate debt securities		2,601		(19	)		2,067		(38	)		4,668		(57	)
Total	$	32,600	$	(362	)	$	97,030	$	(2,044	)	$	129,630	$	(2,406	)

As of March 31, 2006, the Company has total fair value of $129.6 million of securities, with unrealized losses of $2.4 million. We believe these unrealized losses are due to a temporary condition, namely fluctuations in interest rates, and do not reflect a deterioration of credit quality of the issuer. The market value of securities that have been in a continuous loss position for 12 months or more totaled $97.0 million, with unrealized losses of $2.0 million.

All individual securities that have been in a continuous unrealized loss position for twelve months or longer at March 31, 2006 had investment grade ratings upon purchase. The issuers of these securities have not, to our knowledge, established any cause for default on these securities and the various rating agencies have reaffirmed these securities’ long-term investment grade status at March 31, 2006. These securities have fluctuated in value since their purchase dates as market interest rates have fluctuated. However, the Company has the ability, and management intends, to hold these securities until their fair values recover to cost.

Loan Portfolio

The following table sets forth the composition of the Company’s loan portfolio as of the dates indicated:

	March 31, 2006				December 31, 2005
	Amount		Percent of Total		Amount		Percent of Total
	(Dollars in thousands)
Real Estate:
Construction	$	11,569	.93	%	$	4,713	.38	%
Commercial(11)		792,341	63.46			776,725	62.80
Commercial(12)		241,331	19.33			243,052	19.65
Trade Finance		80,071	6.41			90,370	7.30
SBA(13)		50,390	4.04			49,070	3.97
Other(14)		250	0.02			1,473	0.12
Consumer		72,566	5.81			71,499	5.78
Total Gross Loans		1,248,518	100.00	%		1,236,902	100.00	%
Less:
Allowance for Losses		13,918				13,871
Deferred Loan Fees		1,547				1,595
Discount on SBA Loans Retained		2,408				2,287
Total Net Loans and Loans Held for Sale	$	1,230,645			$	1,219,149

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¹¹ Real estate commercial loans are loans secured by first deeds of trust on real estate.

¹² Includes advances on trust receipts, clean advances, cash advances, acceptances discounted, and documentary negotiable advances under commitments.

¹³ SBA loans held for sale is stated at the lower of cost or market.

¹⁴ Consists of transactions in process and overdrafts.

The Company experienced moderate loan growth during the first quarter of 2006. Net loans increased $11.5 million, or .9%, to $1.23 billion at March 31, 2006, as compared to $1.2 billion at December 31, 2005. The increase in loans was funded primarily through liquidity created from principal reductions in the investment portfolio and increases in deposits. While management believes that it can continue to leverage the Company’s current infrastructure to achieve similar or greater growth in loans for the remainder of the year, no assurance can be given that such growth will occur. Net loans as of March 31, 2006, represented 72.7% of total assets, compared to 73.4% as of December 31, 2005.

The growth in net loans is comprised primarily of net increases in real estate commercial loans of $15.6 million or 2.0%, real estate construction loans of $6.9 million or 146.8%, offset by a reduction in trade finance loans of 10.3 million or 11.4%.

As of March 31, 2006, commercial real estate remained the largest component of the Company’s total loan portfolio with loans totaling $792.3 million, representing 63.5% of total loans, compared to $776.7 million or 62.8% of total loans at December 31, 2005. The increase in commercial real estate loans resulted from the continuing demand for commercial real estate financing with the Company’s market.

Commercial business loans decreased by $1.7 million during the first three months ended March 31, 2006 to $241.3 million, as compared to $243.1 million at year end 2005, mainly due to increased interest rates and resulting prepayments.

Trade finance loans decreased by $10.3 million or 11.4% to $80.1 million at March 31, 2006 from $90.3 million at December 31, 2005. This decrease in trade finance loans was mainly due to decreased activity in documentary negotiable advances.

The Company sold $10.9 million of SBA loans in the first quarter of 2006, and retained the obligation to service the loans for a servicing fee and to maintain customer relations. As of March 31, 2006, the Company was servicing $151.1 million of sold SBA loans, compared to $149.4 million of sold SBA loans as of December 31, 2005. Despite continuing sales of SBA loans, SBA loans increased to $50.4 million at March 31, 2006, an increase of $1.3 million, or 2.6%, compared to same period of last year.

The Bank has determined it has no material foreign credit risk. As of March 31, 2006, no single industry, business category or foreign country loans represented more than 10% of the loan portfolio.

Nonperforming Assets

Nonperforming assets are comprised of loans on nonaccrual status, loans 90 days or more past due but not on nonaccrual status, loans restructured where the terms of repayment have been renegotiated, resulting in a reduction and/or deferral of interest or principal, and Other Real Estate Owned (“OREO”). Management generally places loans on nonaccrual status when they become 90 days or more past due, unless they are fully secured and in process of collection. Loans may be restructured at the discretion of management when a borrower has experienced some change in financial status causing an inability to meet the original repayment terms, but the Company nonetheless believes the borrower will eventually overcome those circumstances and repay the loan in full. OREO consists of real property acquired through foreclosure or similar means that management intends to offer for sale.

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The following table provides information with respect to the components of the Company’s nonperforming assets as of the dates indicated:

	March 31, 2006			December 31, 2005			March 31, 2005
	(Dollars in thousands)
Nonaccrual loans:
Real estate:
Construction	$	1,562		$	1,632		$	1,726
Commercial		354			—			—
Commercial		1,088			598			426
Consumer		173			113			62
Trade Finance		—			—			532
SBA		429			600			753
Total nonperforming loans		3,606			2,943			3,499
Other real estate owned		—			—			—
Total nonperforming assets	$	3,606		$	2,943		$	3,499
Nonperforming loans as a percent of total loans		0.29	%		0.24	%		0.37	%
Nonperforming assets as a percent of total loans and other real estate owned		0.29	%		0.24	%		0.37	%
Allowance for loan losses to nonperforming loans		385.97	%		471.32	%		336.75	%

Management’s classification of a loan as nonaccrual or restructured is an indication that there is reasonable doubt as to the full collectibility of principal and/or interest on the loan. At this point, the Company stops recognizing income from the interest on the loan and reverses any uncollected interest that had been accrued but unpaid. If the loan deteriorates further due to a borrower’s bankruptcy or similar financial problems, unsuccessful collection efforts or a loss classification (by the Company, regulators or auditors), the remaining balance of the loan is then charged off. These loans may or may not be collateralized, but collection efforts are continuously pursued. Total nonperforming loans were $3.6 million and $2.9 million as of March 31, 2005 and December 31, 2005, respectively. The increase in nonperforming loans was mainly due to an increase in nonperforming commercial real estate loans and commercial loans, offset by a reduction in construction real estate, consumer and SBA loans.

Total nonperforming loans increased by approximately $100,000 to $3.6 million in the first quarter of 2006 from $3.5 million in the first quarter of 2005. This increase was primarily due to a change in mix of nonperforming loans that resulted from an increase in commercial real estate, commercial and consumer loans in the aggregate amount of $1.1 million and reduction of construction loan, trade financed and SBA in the aggregate amount of $1.0 million.

The Company evaluates impairment of loans according to the provisions of SFAS No. 114, Accounting by Creditors for Impairment of a Loan. Under SFAS No. 114, loans are considered impaired when it is probable that the Company will be unable to collect all amounts due as scheduled according to the contractual terms of the loan agreement, including contractual interest and principal payments. Impaired loans are measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate or, alternatively, at the loan’s observable market price or the fair value of the collateral if the loan is collateralized, less costs to sell.

The following table provides information on impaired loans as of:

	March 31, 2006			December 31, 2005
	(Dollars in thousands)
Impaired loans with specific reserves	$	4,395		$	1,632
Impaired loans without specific reserves		4,332			3,872
Total impaired loans		8,727			5,504
Allowance on impaired loans		(110	)		(41	)
Net recorded investment in impaired loans	$	8,617		$	5,463
	Three Months Ended March 31, 2006			Twelve Months Ended December 31, 2005
Average total recorded investment in impaired loans	$	7,924		$	5,532
Interest income recognized in impaired loans on a cash basis	$	215		$	322

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Allowance for Loan Losses

The allowance for loan losses reflects management’s judgment of the level of allowance adequate to provide for probable losses inherent in the loan portfolio as of the balance sheet date. On a quarterly basis, the Company assesses the overall adequacy of the allowance for loan losses, utilizing a disciplined and systematic approach which includes the application of a specific allowance for identified problem loans, a formula allowance for identified graded loans, and an allocated allowance for large groups of smaller balance homogenous loans.

Allowance for Specifically Identified Problem Loans. The specific allowance is determined based on the present value of expected future cash flows discounted at the loan’s effective interest rate, except that as a practical expedient, the Company may measure impairment based on a loan’s observable market price, or the fair value of the collateral if the loan is collateral dependent. Regardless of the measurement method, the Company measures impairment based on the fair value of the collateral when it is determined that foreclosure is probable.

Formula Allowance for Identified Graded Loans. Non-homogenous loans such as commercial real estate, construction, commercial business, trade finance (including country risk exposure) and SBA loans that are not impaired are subject to a formula allowance. The formula allowance is calculated by applying loss factors to outstanding pass, special mention, substandard, and doubtful loans. The evaluation of inherent loss for these loans involves a high degree of uncertainty, subjectivity, and judgment, because probable loan losses are not identified with specific loan. In determining the formula allowance, management relies on a mathematical calculation that incorporates a twelve-quarter rolling average of historical losses.

The formula allowance may be further adjusted to account for the following qualitative factors:

• Changes in lending policies and procedures, including underwriting standards and collection, charge-off, and recovery practices;

• Changes in national and local economic and business conditions and developments, including the condition of various market segments;

• Changes in the nature and volume of the loan portfolio;

• Changes in the experience, ability, and depth of lending management and staff;

• Changes in the trend of the volume and severity of past due and classified loans, and trends in the volume of nonaccrual loans and troubled debt restructurings, and other loan modifications;

• Changes in the quality of our loan review system and the degree of oversight by the Directors;

• The existence and effect of any concentrations of credit, and changes in the level of such concentrations; and

• The effect of external factors such as competition and legal and regulatory requirements on the level of estimated losses in our loan portfolio.

Allowance for Large Groups of Smaller Balance Homogeneous Loans. The portion of the allowance allocated to large groups of smaller balance homogenous loans is focused on loss experience for the pool rather than on analyses of individual loans. Large groups of smaller balance homogenous loans consist of consumer loans to individuals. The allowance for groups of performing loans is based on historical losses over a three-year period. In determining the level of allowance for delinquent groups of loans, the Company classifies groups of homogenous loans based on the number of days delinquent.

The process of assessing the adequacy of the allowance for loan losses involves judgmental discretion, and eventual losses may differ from even the most recent estimates. Further, the Company’s independent loan review consultants, as well as the Company’s external auditors, the FDIC and the California Department of Financial Institutions, review the allowance for loan losses as an integral part of their examination process.

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The following table sets forth the composition of the allowance for loan losses as of March 31, 2006 and December 31, 2005:

Composition of Allowance for Loan Losses

	March 31, 2006		December 31, 2005
	(Dollars in thousands)
Specific (Impaired loans)	$	110	$	41
Formula (non-homogeneous)		13,445		13,481
Homogeneous		363		349
Total allowance for loan losses	$	13,918	$	13,871

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The table below summarizes the activity in the Company’s allowance for loan losses for the periods indicated:

Allowance for Loan Losses

	Three Months Ended March 31, 2006			Year Ended December 31, 2005			Three Months Ended March 31, 2005
	(Dollars in thousands)
Balances
Average total loans outstanding during the period(15)	$	1,241,701		$	1,123,880		$	1,039,245
Total loans outstanding at end of period(15)	$	1,244,563		$	1,234,615		$	1,043,675
Allowance for Loan Losses:
Balance at beginning of period	$	13,871		$	11,227		$	11,227
Charge-offs:
Real estate		—			—			—
Commercial		143			623			52
Consumer		61			227			61
SBA		35			37			—
Total charge-offs		239			887			113
Recoveries
Real estate		—			—			—
Commercial		13			102			10
Consumer		14			12			6
Trade finance		—			23			—
SBA		2			24			3
Total recoveries		29			161			19
Net loan charge-offs		210			726			94
Provision for loan losses		257			3,370			650
Balance at end of period	$	13,918		$	13,871		$	11,783
Ratios:
Net loan charge-offs to average loans		0.02	%		0.06	%		0.01	%
Provision for loan losses to average total loans		0.02			0.30			0.06
Allowance for loan losses to gross loans at end of period		1.12			1.12			1.13
Allowance for loan losses to total nonperforming loans		385.96			471.32			336.75
Net loan charge-offs to allowance for loan losses at end of period		1.51			5.23			0.80
Net loan charge-offs to provision for loan losses		81.71			21.54			14.50

¹⁵ Total loans are net of deferred loan fees and discount on SBA loans sold.

The allowance for loan losses was $13.9 million as of March 31, 2006, compared to $13.9 million at December 31, 2005. The Company recorded a provision of $257,000 for the first three months of 2006. For the three months ended March 31, 2006, the Company charged off $239,000 and recovered $29,000, resulting in net charge-offs of $210,000, compared to net charge-offs of $94,000 for the same period in 2005. The allowance for loan losses remained constant at 1.12% of total gross loans at March 31, 2006 and March 31, 2005. The Company provides an allowance for the new credits based on the migration analysis discussed previously. Because of a slight increase in nonperforming assets, the ratio of the allowance for loan losses to total

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nonperforming loans decreased to 386% as of March 31, 2006 compared to 471% as of December 31, 2005 and 337% at March 31, 2005. Management believes that the ratio of the allowance to nonperforming loans at March 31, 2006 was adequate based on its overall analysis of the loan portfolio.

The balance of the allowance for loan losses remained constant at $13.9 million as of March 31, 2006 and December 31, 2005. This increase was mainly due to slower loan growth and improving asset quality.

The provision for loan losses for the first quarter of 2006 was $257,000, a decrease of 60.5%, compared to $650,000 for the same period in 2005. This decrease was due to slower loan growth and improving asset quality.

Management believes the level of allowance as of March 31, 2006 is adequate to absorb the estimated losses from any known or inherent risks in the loan portfolio and the loan growth for the quarter. However, no assurance can be given that economic conditions which adversely affect our service areas or other circumstances may not require increased provisions for loan losses in the future.

Management is committed to maintaining the allowance for loan losses at a level that is considered commensurate with estimated and known risks in the portfolio. Although the adequacy of the allowance is reviewed quarterly, management performs an ongoing assessment of the risks inherent in the portfolio. Real estate is the principal collateral for the Company’s loans.

Deposits

An important balance sheet component affecting the Company’s net interest margin is its deposit base. The Company’s average interest bearing deposit cost increased to 4.14% during the first three months of 2006, compared to 2.37% for the same period of 2005. This increase is primarily due to the increases in short term rates set by the Federal Reserve Board, which caused the average rates paid on deposits and other liabilities to increase.

The Company can deter, to some extent, the rate hunting customers who demand high cost CDs because of local market competition by using wholesale funding sources. However, as of March 31, 2006 the Company had no brokered CD’s. In addition, the Company maintained a $60.0 million time certificate of deposit with the State of California as of March 31, 2006, which is $20.0 million less as compared to December 31, 2005. The deposit is subject to renewal every 3 to 6 months.

Deposits consist of the following as of the dates indicated:

	March 31, 2006		December 31, 2005
	(Dollars in thousands)
Demand deposits (noninterest-bearing)	$	389,356	$	395,050
Money market accounts and NOW		202,159		221,083
Savings		82,411		81,654
Time deposits
Less than $100,000		102,117		97,433
$100,000 or more		715,039		685,336
Total	$	1,491,082	$	1,480,556

Total deposits increased by $10.5 million or .7% to $1.49 billion at March 31, 2006 compared to $1.48 billion at December 31, 2005.

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Time deposits by maturity dates are as follows at March 31, 2006:

	$100,000 or Greater		Less Than $100,000		Total
	(Dollars in thousands)
2006	$	601,087	$	81,966	$	683,053
2007		106,166		19,068		125,234
2008		5,403		942		6,345
2009		1,080		120		1,200
2010 and thereafter		1,303		21		1,324
Total	$	715,039	$	102,117	$	817,156

Information concerning the average balance and average rates paid on deposits by deposit type for the three months ended March 31, 2006 and 2005 is contained in the “Distribution, Yield and Rate Analysis of Net Income” tables above in the section entitled “Net Interest Income and Net Interest Margin.”

Other Borrowed Funds

The Company regularly uses Federal Home Loan Bank of San Francisco (“FHLB”) advances and short-term borrowings, which consist of notes issued to the U.S. Treasury to manage Treasury Tax and Loan payments. The Company’s outstanding FHLB borrowing was $37.1 million and $27.1 million, at March 31, 2006 and December 31, 2005, respectively. This increase was due to management’s decision to fund anticipated loan growth by increasing FHLB advances. Notes issued to the U.S. Treasury amounted to $85,000 as of March 31, 2006 compared to $1.1 million as of December 31, 2005. The total borrowed amount outstanding at March 31, 2006 and December 31, 2005 was $37.2 million and $28.6 million, respectively.

In addition, the issuance of long-term subordinated debenture at the end of 2003 of $18.0 million in “pass-through” trust preferred securities created another source of funding.

Contractual Obligations

The following table presents, as of March 31, 2006, the Company’s significant fixed and determinable contractual obligations, within the categories described below, by payment date. These contractual obligations, except for the operating lease obligations, are included in the Consolidated Statements of Financial Condition. The payment amounts represent those amounts contractually due to the recipient.

	Less than		1-3		1-3		More than
	1 year		years		years		5 years		Total
	(Dollars in thousands)
Debt obligations*	$	30,482	$	4,590	$	653	$	20,075	$	55,800
Deposits		1,103,446		243,910		147,417		—		1,494,773
Operating lease obligations		57		5,593		3,282		3,218		12,150
Total contractual obligations	$	1,133,985	$	254,093	$	151,352	$	23,293	$	1,562,723

* Includes principal payment only

LIQUIDITY AND MARKET RISK/INTEREST RISK MANAGEMENT

Liquidity

Liquidity is the Company’s ability to maintain sufficient cash flow to meet deposit withdrawals and loan demands and to take advantage of investment opportunities as they arise. The Company’s principal sources of

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liquidity have been growth in deposits, proceeds from the maturity of securities, and repayments from loans. To supplement its primary sources of liquidity, the Company maintains contingent funding sources, which include a borrowing capacity of up to 25% of total assets upon providing collateral with the Federal Home Loan Bank of San Francisco, access to the discount window of the Federal Reserve Bank of San Francisco, a deposit facility with the California State Treasurer upon providing collateral, and unsecured Fed funds lines with correspondent banks.

As of March 31, 2006, the Company’s liquidity ratio, which is the ratio of available liquid funds to net deposits and short-term liabilities, was 19.1%. Total available liquidity as of that date was $291.4 million, consisting of excessive cash holdings or balances in due from banks, overnight Fed funds sold, money market funds and unpledged available for sale securities. The Company’s net non-core fund dependence ratio was 41.8% under applicable regulatory guidelines, which assumes all certificates of deposit over $100,000 (“Jumbo CD’s”) as volatile sources of funds. The Company has identified approximately $150.0 million of Jumbo CD’s as stable and core sources of funds based on past historical analysis. The net non-core fund dependence ratio was 32.8% with the assumption of $150.0 million as stable and core fund sources and certain portion of MMDA as volatile. The net non-core fund dependence ratio is the ratio of net short-term investment less non-core liabilities divided by the long-term assets.

Market Risk/Interest Rate Risk Management

Market risk is the risk of loss from adverse changes in market prices and rates. The Company’s market risk arises primarily from interest rate risk inherent in its lending, investment and deposit taking activities. The Company’s profitability is affected by fluctuations in interest rates. A sudden and substantial change in interest rates may adversely impact the Company’s earnings to the extent that the interest rates borne by assets and liabilities do not change at the same speed, to the same extent or on the same basis. To that end, management actively monitors and manages its interest rate risk exposure.

Asset/liability management is concerned with the timing and magnitude of the repricing of assets and liabilities. The Company actively monitors its assets and liabilities to mitigate risks associated with interest rate movements. In general, management’s strategy is to match asset and liability balances within maturity categories to limit the Company’s exposure to earnings fluctuations and variations in the value of assets and liabilities as interest rates change over time. The Company’s strategy for asset/liability management is formulated and monitored by the Company’s Asset/Liability Management Board Committee. This Board Committee is composed of four outside directors and the President. The Board Committee meets quarterly to review and adopt recommendations of the Management Committee.

The Asset/Liability Management Committee consists of executive and manager level officers from various areas of the Company including lending, investment, and deposit gathering, and this committee acts in accordance with policies approved by the Board of Directors. The primary goal of the Company’s Asset/Liability Management Committee is to manage the financial components of the Company to optimize the net income under varying interest rate environments. The focus of this process is the development, analysis, implementation, and monitoring of earnings enhancement strategies, which provide stable earnings and capital levels during periods of changing interest rates.

The Asset/Liability Management Committee meets regularly to review, among other matters, the sensitivity of the Company’s assets and liabilities to interest rate changes, the book and market values of assets and liabilities, unrealized gains and losses, and maturities of investments and borrowings. The Asset/Liability Management Committee also approves and establishes pricing and funding decisions with respect to overall asset and liability composition, and reports regularly to the Asset/Liability Board Committee and the Board of Directors.

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Interest Rate Risk

Interest rate risk occurs when assets and liabilities reprice at different times as interest rates change. In general, the interest the Company earns on its assets and pays on its liabilities are established contractually for specified period of time. Market interest rates change over time and if a financial institution cannot quickly adapt to changes in interest rate, it may be exposed to volatility in earnings. For instance, if the Company were to fund long-term fixed rate assets with short-term variable rate deposits, and interest rates were to rise over the term of the assets, the short-term variable deposits would rise in cost, adversely affecting net interest income. Similar risks exist when rate sensitive assets (for example, prime rate based loans) are funded by longer-term fixed rate liabilities in a falling interest rate environment.

In order to monitor and manage interest rate risk, management utilizes quarterly gap analysis and quarterly simulation modeling as a tool to determine the sensitivity of net interest income and economic value sensitivity of the balance sheet. These techniques are complementary and both are used to provide a more accurate measurement of interest rate risk. The Company also uses interest rate swaps to hedge the interest rate risk of specifically identified variable rate loans.

Gap analysis measures the repricing mismatches between assets and liabilities. The interest rate sensitivity gap is determined by subtracting the amount of liabilities from the amount of assets that reprice during a particular time interval. A liability sensitive position results when more liabilities than assets reprice or mature within a given period. Conversely, an asset sensitive position results when more assets than liabilities reprice within a given period. As of March 31, 2006, the Company was asset sensitive with a positive one-year gap of $167.4 million or 9.9% of total assets and 10.9% of earning assets. As the Company’s assets tend to reprice more frequently than its liabilities over a one-year horizon, the Company will generally realize higher net interest income in a rising rate environment and lower net interest income in a falling rate environment. However, this has been mitigated by recent market competitive conditions relating to rising interest rates for certain deposit accounts.

Although the interest rate sensitivity gap analysis is a useful measurement tool and contributes to effective asset/liability management, it is difficult to predict the effect of changing interest rates based solely on that measure. As a result, the Asset/Liability Management Committee also uses simulation modeling on a quarterly basis as a tool to measure the sensitivity of earnings and economic value of equity (“EVE”) to interest rate changes. EVE is defined as the net present value of an institution’s existing assets, minus the present value of liabilities and off-balance sheet instruments. The simulation model captures all assets, liabilities, and off-balance sheet financial instruments, such as the interest rate swaps, and other significant variables considered to be affected by interest rates. These other significant variables include prepayment speeds on mortgage-backed securities, cash flows on loans and deposits, principal amortization, call options on investment securities purchased, balance sheet growth assumptions, and changes in interest rate relationships as various rate indices react differently to market rates. The simulation measures the volatility of net interest income and net portfolio value under immediate rising or falling market rate scenarios in 100-basis-point increments up to 300 basis points.

The following table sets forth, as of March 31, 2006, the estimated impact of changes on the Company’s net interest income over a twelve-month period and EVE, assuming a parallel shift of 100 to 300 basis points in both directions.

Change (In Basis Points)	Net Interest Income (Next Twelve Months)		% Change		Economic Value of Equity (EVE)		% Change
	(Dollars in thousands)
+300	$	86,285	14.58	%	$	108,332	-9.66	%
+200	$	82,808	9.96	%	$	112,229	-6.41	%
+100	$	79,088	5.02	%	$	116,035	-3.23	%
Level	$	75,304	0.00	%	$	119,911	0.00	%
-100	$	71,369	-5.23	%	$	123,609	3.08	%
-200	$	67,048	-10.96	%	$	127,096	5.99	%
-300	$	62,254	-17.33	%	$	129,029	7.60	%

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As previously indicated, net income increases (decreases) as market interest rates rise (fall), since the Company is asset sensitive. The EVE decreases (increases), as the rate rises (falls), since the EVE has a negative convexity (reverse relationship) with the discount rate. As the above table indicates, a 300 basis points drop in rates impacts net interest income by $13.0 million or a 17.3% decrease, whereas a rate increase of 300 basis points impacts net interest income by $11.0 million or a 14.6% increase.

All interest-earning assets and interest-bearing liabilities and related derivative contracts are included in the rate sensitivity analysis at March 31, 2006. At March 31, 2006, the Company’s estimated changes in net interest income and EVE were within the ranges established by the Board of Directors.

The primary analytical tool used by the Company to gauge interest rate sensitivity is a simulation model used by many community banks, which is based upon the actual maturity and repricing characteristics of interest-rate-sensitive assets and liabilities. The model attempts to forecast changes in the yields earned on assets and the rates paid on liabilities in relation to changes in market interest rates. As an enhancement to the primary simulation model, other factors are incorporated into the model, including prepayment assumptions and market rates of interest provided by independent broker/dealer quotations, an independent pricing model, and other available public information. The model also factors in projections of anticipated activity levels of the Company’s product lines. Management believes that the assumptions it uses to evaluate the vulnerability of the Company’s operations to changes in interest rates approximate actual experience and considers them reasonable; however, the interest rate sensitivity of the Company’s assets and liabilities and the estimated effects of changes in interest rates on the Company’s net interest income and EVE could vary substantially if different assumptions were used or if actual experience were to differ from the historical experience on which they are based.

CAPITAL RESOURCES

Shareholders’ equity as of March 31, 2006 was $118.5 million, compared to $112.7 million as of December 31, 2005. The primary sources of increases in capital have been retained earnings increases and relatively nominal proceeds from the exercise of employee incentive and/or nonqualified stock options. Shareholders’ equity is also affected by increases and decreases in unrealized losses on securities classified as available-for-sale. The Company is committed to maintaining capital at a level sufficient to assure shareholders, customers, and regulators that the Company is financially sound and able to support its growth from its retained earnings.

The Company is subject to risk-based capital regulations adopted by the federal banking regulators. These guidelines are used to evaluate capital adequacy and are based on an institution’s asset risk profile and off-balance sheet exposures. The risk-based capital guidelines assign risk weightings to assets both on and off-balance sheet and place increased emphasis on common equity. According to the regulations, institutions whose Tier I risk based capital ratio, total risk based capital ratio and leverage ratio meet or exceed 6%, 10%, and 5%, respectively, are deemed to be “well-capitalized.” As of March 31, 2006 all of the Company’s capital ratios were well above the minimum regulatory requirements for a “well-capitalized” institution.

The following table compares the Company’s and Bank’s actual capital ratios at March 31, 2006, to those required by regulatory agencies for capital adequacy and well-capitalized classification purposes:

Risk Based Ratios

	Center Financial Corporation		Center Bank		Minimum Regulatory Requirements		Well Capitalized Requirements
Total Capital (to Risk-Weighted Assets)	11.05	%	11.09	%	8.00	%	10.00	%
Tier 1 Capital (to Risk-Weighted Assets)	9.99	%	10.03	%	4.00	%	6.00	%
Tier 1 Capital (to Average Assets)	8.17	%	8.21	%	4.00	%	5.00	%

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Item 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information concerning quantitative and qualitative disclosures about market risk is included as part of Part I, Item 2 above. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Market Risk/Interest Rate Risk Management.”

Item 4: CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures. Our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer) have concluded that the design and operation of our disclosure controls and procedures are effective as of March 31, 2006. This conclusion is based on an evaluation conducted under the supervision and with the participation of management. Disclosure controls and procedures are those controls and procedures which ensure that information required to be disclosed in this filing is accumulated and communicated to management and is recorded, processed, summarized and reported in a timely manner and in accordance with Securities and Exchange Commission rules and regulations.

Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Controls. During the quarter ended March 31, 2006, there were no changes in our internal controls over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1: LEGAL PROCEEDINGS

From time to time, the Bank is a party to claims and legal proceedings arising in the ordinary course of business. With the exception of the potentially adverse outcome in the litigation described in the next three paragraphs, after taking into consideration information furnished by counsel as to the current status of these claims and proceedings, we do not believe that the aggregate potential liability resulting from such proceedings would have a material adverse effect on our financial condition or results of operation.

On or about March 3, 2003, the Bank was served with a complaint filed by Korea Export Insurance Corporation (“KEIC”) in Orange County, California Superior Court, naming the Bank as one of several defendants. KEIC is seeking to recover alleged losses from a number of parties involved in international trade transactions that gave rise to bills of exchange financed by various Korean Banks but not ultimately paid. KEIC is seeking to recover damages of approximately $56 million based on a claim that the Bank, in its capacity as a presenting bank for these bills of exchange, acted negligently in presenting and otherwise handling trade documents for collection.

On November 10, 2005, the Orange County Superior Court dismissed all claims of KEIC against the Bank on the grounds that federal courts have exclusive jurisdiction over KEIC’s claims against the Bank. KEIC has appealed the dismissal; and, in addition, has filed a new claim against the Bank in federal court.

The Bank intends to continue to vigorously defend both the state court appeal and this new federal claim. However, we cannot predict the outcome of this litigation, and it will be expensive and time-consuming to defend. One of the Bank’s insurance companies, BancInsure, has informed the Bank that there is coverage for a portion of the defense. While it is possible that the claims may ultimately be determined to be covered by insurance, BancInsure has reserved its rights to determine whether coverage exists and ultimately may deny coverage. If the outcome of this litigation is adverse to the Bank, and the Bank is required to pay significant monetary damages, our financial condition and results of operations are likely to be materially and adversely affected.

Item 1A: RISK FACTORS

No material changes identified.

Item 2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Not applicable

Item 3: DEFAULTS UPON SENIOR SECURITIES

Not applicable

Item 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

Item 5: OTHER INFORMATION

On May 10, 2005, Center Bank entered into a memorandum of understanding (the “MOU”) with the FDIC and the California Department of Financial Institutions (the “DFI”). The MOU is an informal administrative agreement primarily concerning the Bank’s compliance with Bank Secrecy Act (“BSA”) regulations. In

41

accordance with the MOU, the Bank agreed to (i) implement a written action plan, policies and procedures, and comprehensive independent compliance testing to ensure compliance with all BSA-related rules and regulations; (ii) correct any apparent BSA violations previously disclosed by the FDIC; (iii) develop the expertise to ensure that generally accepted accounting principles and regulatory reporting guidelines are observed in all of the Bank’s financial transactions and reporting; and (iv) furnish written quarterly progress reports to the FDIC and the DFI detailing the form and manner of any actions taken to secure compliance with the memorandum and the results thereof.

Management does not believe that the MOU will have a material impact on the Bank’s operating results or financial condition. However, if the DFI and FDIC determine that the Bank’s compliance with the MOU is not satisfactory, the MOU will constrain our business. We believe we are in substantial compliance with the MOU and have taken the measures that we deem necessary to correct the identified deficiencies.

42

Item 6: EXHIBITS

Exhibit No.	Description
2.1	Plan of Reorganization and Agreement of Merger dated June 7, 2002 among California Center Bank, Center Financial Corporation and CCB Merger Company1
2.2	Branch Purchase and Assumption Agreement dated January 7, 20042
3.1	Restated Articles of Incorporation of Center Financial Corporation1
3.2	Amendment to the Articles of Incorporation of Center Financial Corporation5
3.3	Amended and restated Bylaws of Center Financial Corporation3
10.1	Employment Agreement between California Center Bank and Seon Hong Kim dated March 30, 20044
10.2	Amended and Restated 1996 Stock Option Plan (assumed by Registrant in the reorganization)4
10.3	Lease for Corporate Headquarters Office1
10.4	Indenture dated as of December 30, 2003 between Wells Fargo Bank, National Association, as Trustee, and Center Financial Corporation, as Issuer2
10.5	Amended and Restated Declaration of Trust of Center Capital Trust I, dated as of December 30, 20032
10.6	Guarantee Agreement between Center Financial and Wells Fargo Bank, National Association dated as of December 30, 20032
10.7	Deferred compensation plan and list of participants
10.8	Split dollar plan and list of participants
10.9	Survivor income plan and list of participants
11	Statement of Computation of Per Share Earnings (included in Note 8 to Consolidated Financial Statements included herein.)
31.1	Certification of Chief Executive Officer (Section 302 Certification)
31.2	Certification of Chief Financial Officer (Section 302 Certification)
32	Certification of Periodic Financial Report (Section 906 Certification)

¹ Filed as an Exhibit to the Company’s Registration Statement on Form S-4 filed on June 14, 2002 and incorporated herein by reference

² Filed as an Exhibit to the Form 10-K filed with Securities and Exchange Commission on March 30, 2004 and incorporated herein by reference

³ Filed as Exhibit 3.2 to the Company’s Registration Statement on Form S-4 filed on June 14, 2002 and incorporated herein by reference

⁴ Filed as an Exhibit to the Form 10-Q filed with Securities and Exchange Commission on May 13, 2004 and incorporated herein by reference

⁵ Filed as an Exhibit to the Form 10-K filed with Securities and Exchange Commission on March 16, 2006 and incorporated herein by reference

43

SIGNATURES

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

Date: April 20, 2006	/s/    SEON HONG KIM
	Center Financial Corporation Seon Hong Kim President & Chief Executive Officer

Date: April 20, 2006	/s/    PATRICK HARTMAN
	Center Financial Corporation Patrick Hartman Chief Financial Officer & Executive Vice President

44

EX-10.7

EXHIBIT 10.7

CENTER BANK

EXECUTIVE DEFERRED COMPENSATION PLAN

THIS PLAN is adopted this 1^st day of May 2004, by CENTER BANK, a state-chartered commercial bank located in Los Angeles, California (the “Company”). The purpose of this Plan is to provide specified benefits to a select group of management or highly compensated employees who contribute materially to the continued growth, development and future business success of the Company. This Plan shall be unfunded for tax purposes and for purposes of Title I of the Employee Retirement Income Security Act of 1974 (“ERISA”), as amended from time to time.

Article 1

Definitions

Whenever used in this Plan, the following words and phrases shall have the meanings specified:

1.1 “Beneficiary” means each designated person, or the estate of a deceased Participant, entitled to benefits, if any, upon the death of a Participant determined pursuant to Article 7.

1.2 “Board” means the Board of Directors of the Company as from time to time constituted.

1.3 “Beneficiary Designation Form” means the form established from time to time by the Plan Administrator that a Participant completes, signs and returns to the Plan Administrator to designate one or more beneficiaries.

1.4 “Change of Control” means the transfer of shares of the Company’s voting common stock such that one entity or one person acquires (or is deemed to acquire when applying Section 318 of the Code) more than fifty percent (50%) of the Company’s outstanding voting common stock.

1.5 “Code” means the Internal Revenue Code of 1986, as amended.

1.6 “Compensation” means the salary and bonus that would be paid to a Participant during a Plan Year, absent deferrals, less FICA taxes associated with such salary and bonus.

1.7 “Deferral Account” means the Company’s accounting of a Participant’s accumulated Deferrals, plus accrued interest.

1.8 “Deferrals” means the amount of a Participant’s Compensation which the Participant elects to defer according to this Plan.

1.9 “Disability” means the Participant’s suffering a sickness, accident or injury which has been determined by the carrier of any individual or group disability insurance policy covering the Participant, or by the Social Security Administration, to be a disability rendering the Participant totally and permanently disabled. The Participant must submit proof to the Plan Administrator of the carrier’s or Social Security Administration’s determination upon the request of the Plan Administrator.

1.10 “Disability Benefit” means the benefit set forth in Section 5.3.1.

1.11 “Early Termination” means that the Executive, prior to Normal Retirement Age, has terminated for reasons other than an approved leave of absence, Termination for Cause or Disability.

1.12 “Effective Date” means May 1, 2004.

1.13 “Election Form” means the form established from time to time by the Plan Administrator that a Participant completes, signs and returns to the Plan Administrator to make an election under the Plan.

1.14 “Normal Distribution Date” means the later of the Normal Retirement Age or Termination of Employment.

1.15 “Normal Retirement Age” means the Participant attaining age sixty-five (65).

1.16 “Normal Retirement Benefit” means the benefit set forth in Section 5.1.1.

1.17 “Participant” shall mean any employee (i) who is selected to participate in the Plan, (ii) who elects to participate in the Plan, (iii) who signs a Participation Agreement, an Election Form and a Beneficiary Designation Form, (iv) whose signed Participation Agreement, Election Form and Beneficiary Designation Form are accepted by the Plan Administrator, (v) who commences participation in the Plan, and (vi) whose Participation Agreement has not terminated.

1.18 “Participation Agreement” shall mean a written agreement, as may be amended from time to time, which is entered into by and between the Company and a Participant. Each Participation Agreement executed by a Participant and the Company shall provide for the entire benefit to which such Participant is entitled under the Plan; should there be more than one Participation Agreement, the Participation Agreement bearing the latest date of acceptance by the Company shall supersede all previous Participation Agreements in their entirety and shall govern such entitlement. The terms of any Participation Agreement may be different for any Participant, and any Participation Agreement may provide additional benefits not set forth in the Plan or limit the benefits otherwise provided under the Plan; provided, however, that any such additional benefits or benefit limitations must be agreed to by both the Company and the Participant.

1.19 “Plan Administrator” means the plan administrator described in Article 9.

1.20 “Plan Year” means a twelve-month period commencing on January 1 and ending on December 31 of each year. The initial Plan Year shall commence on the Effective Date of this Agreement.

1.21 “Termination of Employment” means that the Participant ceases to be employed by the Company for any reason, voluntary or involuntary, other than by reason of a leave of absence approved by the Company.

1.22 “Unforeseeable Financial Emergency” means a severe financial hardship to the Participant resulting from a sudden and unexpected illness or accident of the Participant, the Participant’s spouse, or a dependent (as defined in Section 152(a) of the Code) of the Participant, loss of the Participant’s property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant.

1.23 “Years of Service” means the twelve consecutive month period beginning on a Participant’s date of hire and any twelve (12) month anniversary thereof, during the entirety of which time the Participant is an employee of the Company. Service with a subsidiary or other entity controlled by the Company before the time such entity became a subsidiary or under such control shall not be considered “credited service” unless the Plan Administrator specifically agrees to credit such service. In addition, the Plan Administrator in its discretion may also grant additional Years of Service in such circumstances where it deems such additional service appropriate.

Article 2

Selection, Enrollment and Eligibility

2.1 Selection by Plan Administrator. Participation in the Plan shall be limited to a select group of management and highly compensated employees of the Company, as determined by the Plan Administrator in its sole discretion. From that group, the Plan Administrator shall select, in its sole discretion, employees to participate in the Plan.

2.2 Enrollment Requirements. As a condition to participation, each selected employee shall complete, execute and return to the Plan Administrator a Participation Agreement, an Election Form and a Beneficiary Designation Form, all within thirty (30) days after the employee is notified by the Plan Administrator of his or her selection to participate in the Plan. In addition, the Plan Administrator shall establish from time to time such other enrollment requirements as it determines in its sole discretion are necessary.

2.3 Eligibility; Commencement of Participation. Provided an employee selected to participate in the Plan has met all enrollment requirements set forth in this Plan and required by the Plan Administrator, including returning all required documents to the Plan Administrator within the specified time period, that employee shall commence participation in the Plan on the first day of the month following the month in which the employee completes all enrollment requirements (the “Participation Date”). If an employee fails to meet all such requirements within the period required, in accordance with Section 2.2, that employee shall not be eligible to participate in the Plan until the first day of the Plan Year following the delivery to and acceptance by the Plan Administrator of the required documents.

2.4 Termination of Participation and/or Deferrals. If the Plan Administrator determines in good faith that a Participant no longer qualifies as a member of a select group of management or highly compensated employees, as membership in such group is determined in accordance with Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA, the Plan Administrator shall have the right, in its sole discretion, to (i) terminate any deferral election the Participant has made for the remainder of the Plan Year in which the Participant’s membership status changes, (ii) prevent the Participant from making future deferral elections and/or (iii) immediately distribute the Participant’s then Deferral Account and terminate the Participant’s participation in the Plan.

Article 3

Deferral Election

3.1 Initial Election. A Participant shall make an initial deferral election under this Agreement by delivering to the Plan Administrator a signed Participation Agreement, Election Form and Beneficiary Designation Form within thirty (30) days after being notified by the Plan Administrator of selection for participation in the Plan. The Election Form shall set forth the amount of Compensation to be deferred and shall be effective to defer only Compensation earned after the date the Election Form is received by the Plan Administrator.

3.2 Election Changes

3.2.1 Generally. The Participant may modify the amount of Compensation to be deferred annually by filing a new Election Form with the Plan Administrator within forty-five (45) days prior to the first day of the Plan Year in which the Compensation is to be deferred. The modified deferral election shall not be effective until the calendar year following the year in which the subsequent Election Form is received and approved by the Plan Administrator.

3.2.2 Disability. In the event of a Disability, Participant’s Deferrals will be suspended immediately.

3.2.3 Leave of Absence—Paid and Unpaid. If a Participant is authorized by the Company to take a paid leave of absence from Company, (i) the Participant shall continue to be considered eligible for the benefits provided in Articles 5 and 6 in accordance with the provisions of those Articles, and (ii) any previously elected Deferrals shall continue to be withheld during such paid leave of absence in accordance with Article 4.

If a Participant is authorized by the Company to take an unpaid leave of absence, for any reason, such Participant shall continue to be eligible for the benefits provided in Articles 5 and 6 in accordance

with the provisions of those Articles. However, the Participant shall be excused from fulfilling his or her Deferral election commitment that would otherwise have been withheld during the remainder of the Plan Year in which the unpaid leave of absence is taken. During the unpaid leave of absence, the Participant shall not be allowed to make any additional deferral elections. However, if the Participant returns to employment, the Participant may elect to make Deferrals for the Plan Year following his or her return to employment and for every Plan Year thereafter while a Participant in the Plan; provided such deferral elections are otherwise allowed and an Election Form is delivered to and accepted by the Board for each such election in accordance with Article 2 of this Plan.

3.2.4 Hardship. If Participant experiences an Unforeseeable Financial Emergency, the Participant, subject to Section 5.6, may reduce future Deferrals under this Agreement.

Article 4

Deferral Account

4.1 Establishing and Crediting. The Company shall establish a Deferral Account on its books for the Participant and shall credit to the Deferral Account the following amounts:

4.1.1 Deferrals. The Compensation deferred by the Participant as of the time the Compensation would have otherwise been paid to the Participant.

4.1.2 Interest. At the end of Plan Year, and immediately prior to the payment of any benefits, but only until commencement of benefit payments under this Plan, interest shall be credited on the Deferral Account at a rate equal to the Wall Street Journal Prime Rate plus one percent (1%) on the first business day of each month of the Plan Year. After benefit payments have commenced under this Plan, during any applicable installment period interest shall be credited at an annual rate of Prime Rate plus one percent (1%), compounded monthly.

4.2 Statement of Accounts. The Plan Administrator shall provide to the Participant, within ninety (90) days after the end of each Plan Year, a statement setting forth the Deferral Account balance.

4.3 Accounting Device Only. The Deferral Account is solely a device for measuring amounts to be paid under this Plan. The Deferral Account is not a trust fund of any kind. The Participant is a general unsecured creditor of the Company for the payment of benefits. The benefits represent the mere Company promise to pay such benefits. The Participant’s rights are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by the Participant’s creditors.

Article 5

Benefits During Lifetime

5.1 Normal Retirement Benefit. Upon the Normal Distribution Date, the Company shall pay to the Participant the benefit described in this Section 5.1 in lieu of any other benefit under this Article.

5.1.1 Amount of Benefit. The benefit under this Section 5.1 is the Deferral Account balance at the Normal Distribution Date.

5.1.2 Payment of Benefit. The Company shall pay the benefit to the Participant in twelve (12) equal monthly installments commencing on the first of the month following the Normal Distribution Date. The annual benefit shall be paid to the Executive for the number of years designated by the Participant on the Election Form.

5.2 Early Termination Benefit. Upon the Participant’s Early Termination, the Company shall pay to the Participant the benefit described in this Section 5.2 in lieu of any other benefit under this Article.

5.2.1 Amount of Benefit. The benefit under this Section 5.2 is the Participant’s Deferrals at Participant’s Termination of Employment plus the Interest credited thereon pursuant to the schedule set forth in Section 4.1.4.

5.2.2 Payment of Benefit. The Company shall pay the benefit to the Participant in a lump sum within thirty (30) days following Participant’s Termination of Employment.

5.3 Disability Benefit. If the Participant terminates employment due to Disability prior to Normal Retirement Age, the Company shall pay to the Participant the benefit described in this Section 5.3 in lieu of any other benefit under this Article.

5.3.1 Amount of Benefit. The benefit under this Section 5.3 is one hundred percent (100%) of the Deferral Account balance at the Participant’s Termination of Employment plus the Interest credited thereon pursuant to the schedule set forth in Section 4.1.4.

5.3.2 Payment of Benefit. The Company shall pay the benefit to the Participant in a lump sum within thirty (30) days following the Participant’s Termination of Employment due to Disability.

5.4 Change of Control Benefit. Upon a Change of Control, the Company shall pay to the Participant the benefit described in this Section 5.4 in lieu of any other benefit under this Article.

5.4.1 Amount of Benefit. The benefit under this Section 5.4 is one hundred percent (100%) of the Deferral Account balance on the Participant’s Termination of Employment plus the Interest credited thereon pursuant to the schedule set forth in Section 4.1.4.

5.4.2 Payment of Benefit. The Company shall pay the benefit to the Participant in a lump sum within thirty (30) days following Participant’s Termination of Employment.

5.5 Interim Distribution. The Participant may elect to have certain amounts payable from the Participant’s Deferral Account at an interim distribution date designated by the Participant on the Election Form, instead of payable pursuant to the terms other provisions of this Article 5. Such amount(s) shall be measured on the applicable interim distribution date and shall be payable within thirty (30) days of such interim distribution date. The Participant’s selection of an interim distribution date must comply with the requirements set forth in this Section 5.5. Notwithstanding a Participant’s advance election to designate an interim distribution date(s), the amounts which would otherwise be subject to such interim distribution date(s) shall be distributable pursuant to Articles 5 or 6 if such event triggers payment of the Deferral Account balance prior to any interim distribution date.

Selection of Interim Distribution Date. The Plan Year designated by the Participant must be at least three Plan Years after the end of the Plan Year in which the Deferrals are credited to Participant. By way of example, if an interim distribution date is elected for Deferrals that are deferred in the Plan Year commencing January 1, 2004, the interim distribution would become payable during a thirty (30) day period commencing January 1, 2008. Notwithstanding the language set forth above, the Company shall, in its sole discretion, adjust the amount distributable as an interim distribution if any portion of the Deferral Account is unvested on the interim distribution date.

5.6 Hardship Distribution.

(a) If the Participant experiences an Unforeseeable Financial Emergency, the Participant may petition the Board’s compensation committee to suspend Deferrals required to be made by such Participant, to the

extent deemed necessary by the Board to satisfy the Unforeseeable Financial Emergency. If suspension of Deferrals is not sufficient to satisfy the Participant’s Unforeseeable Financial Emergency, or if

(i) Reimbursement or compensation by insurance or otherwise; or

(ii) Liquidation of Participant’s assets (to the extent the liquidation would not itself cause severe financial hardship)

cannot satisfy the Participant’s Unforeseeable Financial Emergency, then the Participant may further petition the Board to receive a partial or full payout from the Plan. The Participant shall only receive a payout from the Plan to the extent such payout is deemed necessary by the Board to satisfy the Participant’s Unforeseeable Financial Emergency, plus an amount necessary to pay taxes reasonably anticipated as a result of the distribution.

(b) The payout shall not exceed the lesser of (i) the Participant’s Account Balance, calculated as of the close of business on or around the date on which the amount becomes payable, as determined by the Board in its sole discretion, or (ii) the amount reasonably needed to satisfy the Unforeseeable Financial Emergency, plus an amount necessary to pay taxes reasonably anticipated as a result of the distribution.

(c) If the Board, in its sole discretion, approves a Participant’s petition for suspension, the Participant’s deferrals under this Plan shall be suspended as of the date of such approval. If the Board, in its sole discretion, approves a Participant’s petition for suspension and payout, the Participant’s Deferrals under this Plan shall be suspended as of the date of such approval and the Participant shall receive a payout from the Plan within sixty (60) days of the date of such approval.

5.7 No Withdrawal Election. A Participant may not elect, at any time, to withdraw any portion of his or her Deferral Account.

Article 6

Death Benefits

If the Participant dies while in the employment of the Company or after Termination of Employment, the Company shall pay to the Beneficiary one hundred percent (100%) of the Deferral Account balance as of the date of the Participant’s death, in a lump sum within thirty (30) days following the Participant’s death.

Article 7

Beneficiaries

7.1 Beneficiary. Each Participant shall have the right, at any time, to designate a Beneficiary(ies) to receive any benefits payable under the Plan to a beneficiary upon the death of a Participant. The Beneficiary designated under this Plan may be the same as or different from the Beneficiary designation under any other plan of the Company in which the Participant participates.

7.2 Beneficiary Designation; Change; Spousal Consent. A Participant shall designate a Beneficiary by completing and signing the Beneficiary Designation Form, and delivering it to the Plan Administrator or its designated agent. If the Participant names someone other than his or her spouse as a Beneficiary, a spousal consent, in the form designated by the Plan Administrator, must be signed by that Participant’s spouse and returned to the Plan Administrator. The Participant’s beneficiary designation shall be deemed automatically revoked if the beneficiary predeceases the Participant or if the Participant names a spouse as beneficiary and the marriage is subsequently dissolved. A Participant shall have the right to change a Beneficiary by completing, signing and otherwise complying with the terms of the Beneficiary Designation Form and the Plan Administrator’s rules and procedures, as in effect from time to time. Upon the acceptance by the Plan

Administrator of a new Beneficiary Designation Form, all Beneficiary designations previously filed shall be cancelled. The Plan Administrator shall be entitled to rely on the last Beneficiary Designation Form filed by the Participant and accepted by the Plan Administrator prior to the Participant’s death.

7.3 Acknowledgment. No designation or change in designation of a Beneficiary shall be effective until received, accepted and acknowledged in writing by the Plan Administrator or its designated agent.

7.4 No Beneficiary Designation. If the Participant dies without a valid beneficiary designation, or if all designated Beneficiaries predecease the Participant, then the Participant’s spouse shall be the designated Beneficiary. If the Participant has no surviving spouse, the benefits shall be made to the personal representative of the Participant’s estate.

7.5 Facility of Payment. If the Plan Administrator determines in its discretion that a benefit is to be paid to a minor, to a person declared incompetent, or to a person incapable of handling the disposition of that person’s property, the Plan Administrator may direct payment of such benefit to the guardian, legal representative or person having the care or custody of such minor, incompetent person or incapable person. The Plan Administrator may require proof of incompetence, minority or guardianship as it may deem appropriate prior to distribution of the benefit. Any payment of a benefit shall be a payment for the account of the Participant and the Beneficiary, as the case may be, and shall be a complete discharge of any liability under the Plan for such payment amount.

Article 8

General Limitations

8.1 Termination for Cause. Notwithstanding any provision of this Plan to the contrary, the Company shall not pay any benefit under this Plan that is in excess of the Participant’s Deferrals if the Board terminates the Participant’s employment for:

(a) Gross negligence or gross neglect of duties to the Company;

(b) Commission of a felony or of a gross misdemeanor involving moral turpitude in connection with the Participant’s employment with the Company;

(c) Fraud, disloyalty, dishonesty or willful violation of any law or significant Company policy committed in connection with the Participant’s employment and resulting in an adverse effect on the Company; or

(d) If the Participant is subject to a final removal or prohibition order issued by an appropriate federal banking agency pursuant to Section 8(e) of the Federal Deposit Insurance Act (“FDIA”)

Article 9

Administration Of Plan

9.1 Plan Administrator Duties. This Plan shall be administered by a Plan Administrator which shall consist of the Board, or such committee or person(s) as the Board shall appoint. Members of the Plan Administrator may be Participants under this Plan. The Plan Administrator shall also have the discretion and authority to (i) make, amend, interpret and enforce all appropriate rules and regulations for the administration of this Plan and (ii) decide or resolve any and all questions including interpretations of this Plan, as may arise in connection with the Plan.

9.2 Agents. In the administration of this Plan, the Plan Administrator may employ agents and delegate to them such administrative duties as it sees fit, (including acting through a duly appointed representative), and may from time to time consult with counsel who may be counsel to the Company.

9.3 Binding Effect of Decisions. The decision or action of the Plan Administrator with respect to any question arising out of or in connection with the administration, interpretation and application of the Plan and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Plan.

9.4 Indemnity of Plan Administrator. The Company shall indemnify and hold harmless the members of the Plan Administrator against any and all claims, losses, damages, expenses or liabilities arising from any action or failure to act with respect to this Plan, except in the case of willful misconduct by the Plan Administrator or any of its members.

9.5 Company Information. To enable the Plan Administrator to perform its functions, the Company shall supply full and timely information to the Plan Administrator on all matters relating to the Compensation of its Participants, the date and circumstances of the retirement, Disability, death or Termination of Employment of its Participants, and such other pertinent information as the Plan Administrator may reasonably require.

Article 10

Claims and Review Procedures

10.1 Claims Procedure. A Participant or Beneficiary (“claimant”) who has not received benefits under the Plan that he or she believes should be paid shall make a claim for such benefits as follows:

10.1.1 Initiation—Written Claim. The claimant initiates a claim by submitting to the Company a written claim for the benefits.

10.1.2 Timing of Company Response. The Company shall respond to such claimant within 90 days after receiving the claim. If the Company determines that special circumstances require additional time for processing the claim, the Company can extend the response period by an additional 90 days by notifying the claimant in writing, prior to the end of the initial 90-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Company expects to render its decision.

10.1.3 Notice of Decision. If the Company denies part or all of the claim, the Company shall notify the claimant in writing of such denial. The Company shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth:

(a) The specific reasons for the denial,

(b) A reference to the specific provisions of the Plan on which the denial is based,

(c) A description of any additional information or material necessary for the claimant to perfect the claim and an explanation of why it is needed,

(d) An explanation of the Plan’s review procedures and the time limits applicable to such procedures, and

(e) A statement of the claimant’s right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review.

10.2 Review Procedure. If the Company denies part or all of the claim, the claimant shall have the opportunity for a full and fair review by the Company of the denial, as follows:

10.2.1 Initiation—Written Request. To initiate the review, the claimant, within 60 days after receiving the Company’s notice of denial, must file with the Company a written request for review.

10.2.2 Additional Submissions—Information Access. The claimant shall then have the opportunity to submit written comments, documents, records and other information relating to the claim. The Company shall also provide the claimant, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant’s claim for benefits.

10.2.3 Considerations on Review. In considering the review, the Company shall take into account all materials and information the claimant submits relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.

10.2.4 Timing of Company Response. The Company shall respond in writing to such claimant within 60 days after receiving the request for review. If the Company determines that special circumstances require additional time for processing the claim, the Company can extend the response period by an additional 60 days by notifying the claimant in writing, prior to the end of the initial 60-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Company expects to render its decision.

10.2.5 Notice of Decision. The Company shall notify the claimant in writing of its decision on review. The Company shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth:

(a) The specific reasons for the denial,

(b) A reference to the specific provisions of the Plan on which the denial is based,

(c) A statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant’s claim for benefits, and

(d) A statement of the claimant’s right to bring a civil action under ERISA Section 502(a).

Article 11

Amendments and Termination

11.1 Termination. The Company reserves the right to terminate the Plan at any time with respect to any or all of its participating employees, by action of its Board. Upon the termination of the Plan, the Participation Agreements of the affected Participants shall terminate and their Deferral Account balances shall be determined (i) as if they had experienced Early Termination on the date of Plan termination; or (ii) if Plan termination occurs after a Participant’s Normal Retirement Age, then with respect to that Participant as if he or she had retired on the date of Plan termination. The Deferral Account balance shall be paid to the affected Participants in a lump sum within thirty (30) days following such Plan termination. The termination of the Plan shall not adversely affect any Participant or Beneficiary who has become entitled to the payment of any benefits under the Plan as of the date of termination; provided however, that the Company shall have the right to accelerate applicable installment payments without a premium or prepayment penalty by paying the Deferral Account balance in a lump sum within thirty (30) days following such termination.

Notwithstanding the previous paragraph, the Company may amend or terminate the plan at any time if, pursuant to legislative, judicial or regulatory action, continuation of the Agreement would (i) cause benefits to be taxable to the Executive prior to actual receipt, or (ii) result in significant financial penalties or other significantly detrimental ramifications to the Company (other than the financial impact of paying the benefits).

11.2 Amendment. The Company may, at any time, amend or modify the Plan in whole or in part by the action of its Board; provided, however, that: (i) no amendment or modification shall be effective to decrease or restrict the value of a Participant’s Deferral Account balance in existence at the time the amendment or modification is made, calculated as if the Participant had experienced Early Termination as of the effective date of the amendment or modification, or if the amendment or modification occurs after a Participant’s Normal Retirement Age, as if the Participant had retired as of the effective date of the amendment or modification, and (ii) no amendment or modification of this Section 11.2 of the Plan shall be effective. The amendment or modification of the Plan shall not affect any Participant or Beneficiary who has become entitled to the payment of benefits under the Plan as of the date of the amendment or modification; provided, however, that the Company shall have the right to accelerate applicable installment payments by paying the Deferral Account balance in a lump sum within thirty (30) days following such amendment.

11.3 Participation Agreement. Despite the provisions of Sections 11.1 and 11.2 above, if a Participant’s Participation Agreement contains benefits or limitations that are not in this Plan document, the Company may only amend or terminate such provisions with the consent of the Participant.

Article 12

Miscellaneous

12.1 Binding Effect. This Plan shall bind the Participant and the Company and their beneficiaries, survivors, executors, administrators and transferees.

12.2 No Guarantee of Employment. This Plan is not a contract for employment. It does not give the Participant the right to remain an employee of the Company, nor does it interfere with the Company’s right to discharge the Participant. It also does not require the Participant to remain an employee nor interfere with the Participant’s right to terminate employment at any time.

12.3 Non-Transferability. Benefits under this Plan cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner.

12.4 Tax Withholding. The Company shall withhold any taxes that are required to be withheld from the benefits provided under this Plan.

12.5 Applicable Law. The Plan and all rights hereunder shall be governed by the laws of California, except to the extent preempted by the laws of the United States of America.

12.6 Unfunded Arrangement. The Participant and the Beneficiary are general unsecured creditors of the Company for the payment of benefits under this Plan. The benefits represent the mere promise by the Company to pay such benefits. The rights to benefits are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors. Any insurance on the Participant’s life is a general asset of the Company to which the Participant and the Beneficiary have no preferred or secured claim.

12.7 Reorganization. The Company shall not merge or consolidate into or with another company, or reorganize, or sell substantially all of its assets to another company, firm, or person unless such succeeding or continuing company, firm, or person agrees to assume and discharge the obligations of the Company under this Plan. Upon the occurrence of such event, the term “Company” as used in this Plan shall be deemed to refer to the successor or survivor company.

12.8 Entire Agreement. This Plan and the Participant’s Participation Agreement constitute the entire agreement between the Company and the Participant as to the subject matter hereof. No rights are granted to the Participant by virtue of (i) this Plan other than those specifically set forth herein; or (ii) the Participation Agreement other than those specifically set forth therein.

12.9 Interpretation. Wherever the fulfillment of the intent and purpose of this Plan requires, and the context will permit, the use of the masculine gender includes the feminine and use of the singular includes the plural

12.10 Alternative Action. In the event it shall become impossible for the Company or the Plan Administrator to perform any act required by this Plan, the Company or Plan Administrator may in its discretion perform such alternative act as most nearly carries out the intent and purpose of this Plan and is in the best interests of the Company.

12.11 Headings. Article and section headings are for convenient reference only and shall not control or affect the meaning or construction of any of its provisions.

12.12 Validity. In case any provision of this Plan shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Plan shall be construed and enforced as if such illegal and invalid provision has never been inserted herein.

12.13 Notice. Any notice or filing required or permitted to be given to the Plan Administrator under this Plan shall be sufficient if in writing and hand-delivered, or sent by registered or certified mail, to the address below:

Center Bank

3435 Wilshire Boulevard, #700

Los Angeles, CA 90010

Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark or the receipt for registration or certification.

Any notice or filing required or permitted to be given to a Participant under this Plan shall be sufficient if in writing and hand-delivered, or sent by mail, to the last known address of the Participant.

IN WITNESS WHEREOF, the Company has signed this Plan document as of the 1^st day of May 2004.

CENTER BANK:
By:	/S/    YONG HWA KIM
Title:	Senior Vice President & Controller

Participants—Board of Directors and Named Executive

Seon Hong Kim—CEO and President

EX-10.8

EXHIBIT 10.8

CENTER BANK

SPLIT DOLLAR PLAN

Pursuant to due authorization by its Board of Directors, the undersigned, CENTER BANK, a state-chartered commercial bank located in Los Angeles, California (the “Company”), did constitute, establish and adopt the following Split Dollar Plan (the “Plan”), effective the 1^st day of May 2004.

The purpose of this Plan is to attract, retain, and reward Employees, by dividing the death proceeds of certain life insurance policies which are owned by the Company on the lives of the participating Employees with the designated beneficiary of each insured participating Employee. The Company will pay the life insurance premiums from its general assets.

ARTICLE 1

DEFINITIONS

Whenever used in this Plan, the following terms shall have the meanings specified:

1.1 “Beneficiary” means each designated person, or the estate of a deceased Participant, entitled to benefits, if any, upon the death of a Participant.

1.2 “Beneficiary Designation Form” means the form established from time to time by the Plan Administrator that a Participant completes, signs and returns to the Plan Administrator to designate one or more Beneficiaries.

1.3 “Board” means the Board of Directors of the Company as from time to time constituted.

1.4 “Disability” means the Participant’s suffering a sickness, accident or injury which has been determined by the insurance carrier of any individual or group disability insurance policy covering the Participant, or by the Social Security Administration, to be a disability rendering the Participant totally and permanently disabled. Upon the request of the Plan Administrator, the Participant must submit proof to the Plan Administrator of the insurance carrier’s or Social Security Administration’s determination.

1.5 “Company’s Interest” means the benefit set forth in Section 3.2.

1.6 “Early Termination” means the Termination of Employment before Normal Retirement Age for reasons other than death, Disability or Termination for Cause.

1.7 “Election to Participate” means the form required by the Plan Administrator of an eligible Employee to indicate acceptance of participation in this Plan.

1.8 “Employee” means an active employee of the Company.

1.9 “Insured” means the individual Participant whose life is insured.

1.10 “Insurer” means the insurance company issuing the life insurance policy on the life of the Insured.

1.11 “Normal Retirement Age” means the Participant attaining age sixty-five (65).

1.12 “Normal Retirement Date” means the later of the Normal Retirement Age or the date of Termination of Employment for any reason other than Termination for Cause.

1.13 “Participant” means an Employee (i) who is selected to participate in the Plan, (ii) who elects to participate in the Plan, (iii) who signs an Election to Participate and a Beneficiary Designation Form, (iv) whose signed Election to Participant and Beneficiary Designation Form are accepted by the Plan Administrator, (v) who commences participation in the Plan, and (vi) whose Participation has not terminated.

1.14 “Participant’s Interest” means the benefit set forth in Section 3.1.

1.15 “Participation Schedule” schedule applies to the pre- Normal Retirement Age benefit only and shall be as follows:

Directors or Senior Vice President and Above		Vice Presidents and First Vice Presidents
Years of Plan Service	Percentage of Participation	Years of Plan Service	Percentage of Participation
Less than 3	0%	Less than 5	0%
3 but less than 5	50%	5 but less than 10	50%
5 or more	100%	10 or more	100%

1.16 “Policy” means the individual insurance policy or policies adopted by the Plan Administrator for purposes of insuring a Participant’s life under this Plan.

1.17 “Plan Administrator” means the plan administrator described in Article 10.

1.18 “Termination of Employment” means that the Participant ceases to be employed by the Company for any reason, voluntary or involuntary, other than by reason of a leave of absence approved by the Company.

1.19 “Termination for Cause” means that the Participant’s employment with the Company has been or is terminated by the Board for any of the following reasons:

(a) Gross negligence or gross neglect of duties; or

(b) Commission of a felony or of a gross misdemeanor involving moral turpitude; or

(c) Fraud, disloyalty, dishonesty or willful violation of any law or significant Company policy committed in connection with the Participant’s employment and resulting in an adverse effect on the Company; or

(d) Issuance by the Company’s banking regulators of an order for removal of the Participant.

1.20 “Years of Plan Service” The initial Year of Plan Service is the date on which the Participant began active employment in their current position with the Company. Participant shall be credited with an additional Year of Plan Service on each subsequent anniversary of the initial Year of Plan Service until termination of plan participation. The Plan Administrator, in its sole discretion, may also grant additional Years of Plan Service in such circumstances where it deems such additional service appropriate.

ARTICLE 2

PARTICIPATION

2.1 Selection by Plan Administrator. Participation in the Plan shall be limited to those Employees of the Company selected by the Plan Administrator, in its sole discretion, to participate in the Plan.

2.2 Enrollment Requirements. As a condition to participation, each selected Employee shall complete, execute and return to the Plan Administrator (i) an Election to Participate, and (ii) a Beneficiary Designation Form. In addition, the Plan Administrator shall establish from time to time such other enrollment requirements as it determines in its sole discretion are necessary.

2.3 Eligibility; Commencement of Participation. Provided an Employee selected to participate in the Plan has met all enrollment requirements set forth in this Plan and required by the Plan Administrator, that Employee will become a Participant, be covered by the Plan and will be eligible to receive benefits at the time and in the manner provided hereunder, subject to the provisions of the Plan.

2.4 Termination of Participation. A Participant’s rights under this Plan shall automatically cease and his or her participation in this Plan shall automatically terminate if there is a Termination for Cause. In the event that the Company decides to maintain the Policy after the Participant’s termination of participation in the Plan, the Company shall be the direct beneficiary of the entire death proceeds of the Policy.

2.5 Disability. If the Participant’s employment with the Company is terminated because of the Participant’s Disability, the Company shall maintain the Policy in full force and effect and, in no event, shall the Company amend, terminate or otherwise abrogate the Participant’s Interest in the Policy. However, the Company may replace the Policy with a comparable insurance policy to cover the benefit provided under this Plan.

2.6 Retirement. If the Participant remains in the continuous employ of the Company, upon the Participant’s Normal Retirement Date, the Company shall maintain the Policy in full force and effect and in no event shall the Company amend, terminate or otherwise abrogate the Participant’s Interest in the Policy. However, the Company may replace the Policy with a comparable insurance policy to cover the benefit under this Plan.

ARTICLE 3

POLICY OWNERSHIP/INTERESTS

3.1 Participant’s Interest. The Participant, or the Participant’s assignee, shall have the right to designate the Beneficiary of an amount of death proceeds equal to the amount indicated on the participant’s Election to Participate, subject to:

(a) Forfeiture of Participant’s rights upon Termination for Cause;

(b) Reduction based on the Participation Schedule upon Early Termination;

(c) Termination of the Plan and the corresponding forfeiture of rights for all Participants or any one Participant in accordance with Section 9.1 hereof; and

(d) Forfeiture of the Participant’s rights and interest hereunder that the Company may reasonably consider necessary to conform with applicable law (including the Sarbanes-Oxley Act of 2002).

3.2 Company’s Interest. The Company shall own the Policy and shall have the right to exercise all incidents of ownership except that the Company shall not sell, surrender or transfer ownership of a Policy so long as a Participant has an interest in the Policy as described in Section 3.1. This provision shall not impair the right of the Company, subject to Article 9, to terminate this Plan. With respect to each Policy, the Company shall be the beneficiary of the remaining death proceeds of the Policy after the Participant’s Interest is determined according to Section 3.1.

ARTICLE 4

PREMIUMS

4.1 Premium Payment. The Company shall pay all premiums due on all Policies.

4.2 Economic Benefit. The Plan Administrator shall determine the economic benefit attributable to any Participant based on the amount of the current term rate for the Participant’s age multiplied by the

aggregate death benefit payable to the Participant’s Beneficiary. The “current term rate” is the minimum amount required to be imputed under Internal Revenue Notice 2002-8, or any subsequent applicable authority.

4.3 Imputed Income. The Company shall impute the economic benefit to the Participant on an annual basis, by adding the economic benefit to the Participant’s W-2, or if applicable, Form 1099.

ARTICLE 5

BENEFICIARIES

5.1 Beneficiary. Each Participant shall have the right, at any time, to designate a Beneficiary(ies) to receive any benefits payable under the Plan to a beneficiary upon the death of a Participant. The Beneficiary designated under this Plan may be the same as or different from the Beneficiary designation under any other plan of the Company in which the Participant participates.

5.2 Beneficiary Designation; Change. A Participant shall designate a Beneficiary by completing and signing the Beneficiary Designation Form, and delivering it to the Plan Administrator or its designated agent. The Participant’s beneficiary designation shall be deemed automatically revoked if the Beneficiary predeceases the Participant or if the Participant names a spouse as Beneficiary and the marriage is subsequently dissolved. A Participant shall have the right to change a Beneficiary by completing, signing and otherwise complying with the terms of the Beneficiary Designation Form and the Plan Administrator’s rules and procedures, as in effect from time to time. Upon the acceptance by the Plan Administrator of a new Beneficiary Designation Form, all Beneficiary designations previously filed shall be cancelled. The Plan Administrator shall be entitled to rely on the last Beneficiary Designation Form filed by the Participant and accepted by the Plan Administrator prior to the Participant’s death.

5.3 Acknowledgment. No designation or change in designation of a Beneficiary shall be effective until received, accepted and acknowledged in writing by the Plan Administrator or its designated agent.

5.4 No Beneficiary Designation. If the Participant dies without a valid designation of beneficiary, or if all designated Beneficiaries predecease the Participant, then the Participant’s surviving spouse shall be the designated Beneficiary. If the Participant has no surviving spouse, the benefits shall be made payable to the personal representative of the Participant’s estate.

5.5 Facility of Payment. If the Plan Administrator determines in its discretion that a benefit is to be paid to a minor, to a person declared incompetent, or to a person incapable of handling the disposition of that person’s property, the Plan Administrator may direct payment of such benefit to the guardian, legal representative or person having the care or custody of such minor, incompetent person or incapable person. The Plan Administrator may require proof of incompetence, minority or guardianship as it may deem appropriate prior to distribution of the benefit. Any payment of a benefit shall be a payment for the account of the Participant and the Participant’s Beneficiary, as the case may be, and shall be a complete discharge of any liability under the Plan for such payment amount.

ARTICLE 6

ASSIGNMENT

Any Participant may irrevocably assign without consideration all or part of such Participant’s Interest in this Plan to any person, entity or trust. In the event a Participant shall transfer all or part of such Participant’s Interest, then all or part of that Participant’s Interest in this Plan shall be vested in his or her transferee, who shall be substituted as a party hereunder, and that Participant shall have no further interest in this Plan.

ARTICLE 7

INSURER

The Insurer shall be bound only by the terms of its given Policy. Any payments the Insurer makes or actions it takes in accordance with a Policy shall fully discharge it from all claims, suits and demands of all persons relating to that Policy. The Insurer shall not be bound by or deemed to have notice of the provisions of this Plan. The Insurer shall have the right to rely on the Plan Administrator’s representations with regard to any definitions, interpretations or Policy interests as specified under this Plan.

ARTICLE 8

CLAIMS AND REVIEW PROCEDURE

8.1 Claims Procedure. A Participant or Beneficiary (“claimant”) who has not received benefits under the Plan that he or she believes should be paid shall make a claim for such benefits as follows:

8.1.1 Initiation – Written Claim. The claimant initiates a claim by submitting to the Plan Administrator a written claim for the benefits.

8.1.2 Timing of Plan Administrator Response. The Plan Administrator shall respond to such claimant within 90 days after receiving the claim. If the Plan Administrator determines that special circumstances require additional time for processing the claim, the Plan Administrator can extend the response period by an additional 90 days by notifying the claimant in writing, prior to the end of the initial 90-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Plan Administrator expects to render its decision.

8.1.3 Notice of Decision. If the Plan Administrator denies part or all of the claim, the Plan Administrator shall notify the claimant in writing of such denial. The Plan Administrator shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth:

(a) The specific reasons for the denial;

(b) A reference to the specific provisions of the Plan on which the denial is based;

(c) A description of any additional information or material necessary for the claimant to perfect the claim and an explanation of why it is needed;

(d) An explanation of the Plan’s review procedures and the time limits applicable to such procedures; and

(e) A statement of the claimant’s right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review.

8.2 Review Procedure. If the Plan Administrator denies part or all of the claim, the claimant shall have the opportunity for a full and fair review by the Plan Administrator of the denial, as follows:

8.2.1 Initiation – Written Request. To initiate the review, the claimant, within 60 days after receiving the Plan Administrator’s notice of denial, must file with the Plan Administrator a written request for review.

8.2.2 Additional Submissions – Information Access. The claimant shall then have the opportunity to submit written comments, documents, records and other information relating to the claim. The Plan Administrator shall also provide the claimant, upon request and free of charge, reasonable access to,

and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant’s claim for benefits.

8.2.3 Considerations on Review. In considering the review, the Plan Administrator shall take into account all materials and information the claimant submits relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.

8.2.4 Timing of Plan Administrator’s Response. The Plan Administrator shall respond in writing to such claimant within 60 days after receiving the request for review. If the Plan Administrator determines that special circumstances require additional time for processing the claim, the Plan Administrator can extend the response period by an additional 60 days by notifying the claimant in writing, prior to the end of the initial 60-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Plan Administrator expects to render its decision.

8.2.5 Notice of Decision. The Plan Administrator shall notify the claimant in writing of its decision on review. The Plan Administrator shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth:

(a) The specific reasons for the denial;

(b) A reference to the specific provisions of the Plan on which the denial is based;

(c) A statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant’s claim for benefits; and

(d) A statement of the claimant’s right to bring a civil action under ERISA Section 502(a).

ARTICLE 9

AMENDMENTS AND TERMINATION

9.1 Amendment or Termination of Plan. Except as otherwise provided in Sections 2.5 and 2.6, or as otherwise agreed to in writing, this Plan may be amended or terminated only by a written agreement signed by the Company and the Participants. Provided, however, if a Participant waives participation, that Participant’s Interest will terminate upon receipt by the Plan Administrator of such waiver. In the event that the Company decides to maintain the Policy after the Participant’s termination of participation in the Plan, the Company shall be the direct beneficiary of the entire death proceeds of the Policy.

Notwithstanding the previous paragraph, the Company may amend or terminate the plan at any time if, pursuant to legislative, judicial or regulatory action, continuation of the Agreement would (i) cause benefits to be taxable to the Participant prior to actual receipt, or (ii) result in significant financial penalties or other significantly detrimental ramifications to the Company (other than the financial impact of paying the benefits).

9.2 Option to Purchase Upon Termination. If the Company exercises the right to terminate the Plan or a Participant’s participation in the Plan, the Company shall not sell, surrender or transfer ownership of a Policy without first giving a Participant or the Participant’s transferee the option to purchase the Policy for a period of sixty (60) days from written notice of such intention. The purchase price shall be an amount equal to the cash surrender value of the Policy.

9.3 Waiver of Participation. A Participant may, in the Participant’s sole and absolute discretion, waive his or her rights under the Plan at any time. Any waiver permitted under this Section 9.3 shall be in writing and delivered to the Plan Administrator.

ARTICLE 10

ADMINISTRATION

10.1 Plan Administrator Duties. This Plan shall be administered by a Plan Administrator which shall consist of the Board, or such committee or persons as the Board may choose. Members of the Plan Administrator may be Participants under this Plan. The Plan Administrator shall also have the discretion and authority to (i) make, amend, interpret and enforce all appropriate rules and regulations for the administration of this Plan and (ii) decide or resolve any and all questions including interpretations of this Plan, as may arise in connection with the Plan.

10.2 Agents. In the administration of this Plan, the Plan Administrator may employ agents and delegate to them such administrative duties as it sees fit, (including acting through a duly appointed representative), and may from time to time consult with counsel who may be counsel to the Company.

10.3 Binding Effect of Decisions. The decision or action of the Plan Administrator with respect to any question arising out of or in connection with the administration, interpretation and application of the Plan and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Plan.

10.4 Indemnity of Plan Administrator. The Company shall indemnify and hold harmless the members of the Plan Administrator against any and all claims, losses, damages, expenses or liabilities arising from any action or failure to act with respect to this Plan, except in the case of willful misconduct by the Plan Administrator or any of its members.

10.5 Information. To enable the Plan Administrator to perform its functions, the Company shall supply full and timely information to the Plan Administrator on all matters relating to the Compensation of its Participants, the date and circumstances of the retirement, Disability, death or Termination of Employment of its Participants, and such other pertinent information as the Plan Administrator may reasonably require.

ARTICLE 11

MISCELLANEOUS

11.1 Binding Effect. This Plan shall bind each Participant and the Company, their beneficiaries, survivors, executors, administrators and transferees and any Beneficiary.

11.2 No Guarantee of Employment. This Plan is not an employment policy or contract. It does not give a Participant the right to remain an Employee of the Company, nor does it interfere with the Company’s right to discharge a Participant. It also does not require a Participant to remain an Employee nor interfere with a Participant’s right to terminate employment at any time.

11.3 Applicable Law. The Plan and all rights hereunder shall be governed by and construed according to the laws of the State of California, except to the extent preempted by the laws of the United States of America.

11.4 Reorganization. The Company shall not merge or consolidate into or with another company, or reorganize, or sell substantially all of its assets to another company, firm or person unless such succeeding or continuing company, firm or person agrees to assume and discharge the obligations of the Company under this Plan. Upon the occurrence of such event, the term “Company” as used in this Plan shall be deemed to refer to the successor or survivor company.

11.5 Notice. Any notice or filing required or permitted to be given to the Plan Administrator under this Plan shall be sufficient if in writing and hand-delivered, or sent by registered or certified mail, to the address below:

Center Bank

3435 Wilshire Boulevard #700

Los Angeles, CA 90010

Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark or the receipt for registration or certification.

Any notice or filing required or permitted to be given to a Participant under this Plan shall be sufficient if in writing and hand-delivered, or sent by mail, to the last known address of the Participant.

11.6 Entire Agreement. This Plan, along with a Participant’s Election to Participate, Beneficiary Designation Form and any agreement in writing between the Company and any Participant, constitute the entire agreement between the Company and the Participant as to the subject matter hereof. No rights are granted to the Participant under this Plan other than those specifically set forth herein.

IN WITNESS WHEREOF, the Company executes this Plan as of the date indicated above.

CENTER BANK
By	/S/    YONG HWA KIM
	First Vice President & Controller

Participants—Board of Directors and Named Executives

Sean Hong Kim—CEO and President

EX-10.9

EXHIBIT 10.9

CENTER BANK

SURVIVOR INCOME PLAN

Pursuant to due authorization by its Board of Directors, the undersigned, CENTER BANK, a state-chartered commercial bank located in Los Angeles, California (“the Company”), did constitute, establish and adopt the following Survivor Income Plan (the “Plan”), effective the 1^st day of May 2004.

The purpose of this Plan is to attract, retain, and reward highly qualified Employees, by providing death benefits to the designated beneficiary of each participating Employee. The Company will pay the death benefits from its general assets.

ARTICLE 1

DEFINITIONS

Whenever used in this Plan, the following terms shall have the meanings specified:

1.1 “Beneficiary” means each designated person, or the estate of a deceased Participant, entitled to benefits, if any, upon the death of a Participant.

1.2 “Beneficiary Designation Form” means the form established from time to time by the Plan Administrator that a Participant completes, signs and returns to the Plan Administrator to designate one or more Beneficiaries.

1.3 “Board” means the Board of Directors of the Company as from time to time constituted.

1.4 “Disability” means the Participant’s suffering a sickness, accident or injury which has been determined by the insurance carrier of any individual or group disability insurance policy covering the Participant, or by the Social Security Administration, to be a disability rendering the Participant totally and permanently disabled. Upon the request of the Plan Administrator, the Participant must submit proof to the Plan Administrator of the insurance carrier’s or Social Security Administration’s determination.

1.5 “Election to Participate” means the form required by the Plan Administrator of an eligible Employee to indicate acceptance of participation in this Plan.

1.6 “Employee” means an active employee of the Company.

1.7 “Normal Retirement Age” means the Participant attaining age sixty-five (65).

1.8 “Participant” means an Employee (i) who is selected to participate in the Plan, (ii) who elects to participate in the Plan, (iii) who signs an Election to Participate and a Beneficiary Designation Form, (iv) whose signed Election to Participant and Beneficiary Designation Form are accepted by the Plan Administrator, (v) who commences participation in the Plan, and (vi) whose Participation has not terminated.

1.9 “Plan Administrator” means the plan administrator described in Article 6.

1.10 “Termination of Employment” means that the Participant ceases to be employed by the Company for any reason, voluntary or involuntary, other than by reason of a leave of absence approved by the Company.

1.11 “Termination for Cause” means that the Participant’s employment with the Company has been or is terminated by the Board for any of the following reasons:

(a) Gross negligence or gross neglect of duties; or

(b) Commission of a felony or of a gross misdemeanor involving moral turpitude; or

(c) Fraud, disloyalty, dishonesty or willful violation of any law or significant Company policy committed in connection with the Participant’s employment and resulting in an adverse effect on the Company; or

(d) Issuance by the Company’s banking regulators of an order for removal of the Participant.

1.12 “Years of Plan Service” The initial Year of Plan Service is the date on which the Participant began active employment in their current position with the Company. Participant shall be credited with an additional Year of Plan Service on each subsequent anniversary of the initial Year of Plan Service until termination of plan participation. The Plan Administrator, in its sole discretion, may also grant additional Years of Plan Service in such circumstances where it deems such additional service appropriate.

ARTICLE 2

PARTICIPATION AND BENEFITS

2.1 Selection by Plan Administrator. Participation in the Plan shall be limited to those Employees of the Company selected by the Plan Administrator, in its sole discretion, to participate in the Plan.

2.2 Enrollment Requirements. As a condition to participation, each selected Employee shall complete, execute and return to the Plan Administrator (i) an Election to Participate, and (ii) a Beneficiary Designation Form. In addition, the Plan Administrator shall establish from time to time such other enrollment requirements as it determines in its sole discretion are necessary.

2.3 Eligibility; Commencement of Participation. Provided an Employee selected to participate in the Plan has met all enrollment requirements set forth in this Plan and required by the Plan Administrator, that Employee will be covered by the Plan and will be eligible to receive benefits at the time and in the manner provided hereunder, subject to the provisions of the Plan.

2.4 Participant’s Benefit. Upon the Participant’s death while employed by the Company, the Participant’s designated Beneficiary shall be entitled to the amount indicated on the participant’s Election to Participate. The benefit shall be paid to the Beneficiary in a lump sum within sixty (60) days following the Participant’s death.

2.5 Termination of Participation. A Participant’s rights under this Plan shall cease and his or her participation in this Plan shall terminate upon Termination of Employment.

2.6 Option to Convert to Split Dollar Arrangement. Upon the Participant’s Termination of Employment for any reason except Termination for Cause, this Agreement shall convert to an Endorsement Split Dollar arrangement that conforms to all applicable laws and regulations governing split dollar life insurance, unless the Participant elects otherwise by written notice to the Company, or Participant has not met the following Participation requirements at the time the agreement was signed:

Directors or Senior Vice President and Above		Vice Presidents and First Vice Presidents
Years of Plan Service	Percentage of Participation	Years of Plan Service	Percentage of Participation
Less than 3	0%	Less than 5	0%
3 but less than 5	50%	5 but less than 10	50%
5 or more	100%	10 or more	100%

ARTICLE 3

BENEFICIARIES

3.1 Beneficiary Designation. The Participant shall have the right, at any time, to designate a Beneficiary(ies) to receive any benefits payable under this Plan to a Beneficiary upon the death of the Participant. The Beneficiary designated under this Plan may be the same as or different from the Beneficiary designation under any other plan of the Company in which the Participant participates.

3.2 Beneficiary Designation: Change. The Participant shall designate a Beneficiary by completing and signing the Beneficiary Designation Form, and delivering it to the Plan Administrator or its designated agent. The Participant’s Beneficiary designation shall be deemed automatically revoked if the Beneficiary predeceases the Participant or if the Participant names a spouse as Beneficiary and the marriage is subsequently dissolved. The Participant shall have the right to change a Beneficiary by completing, signing and otherwise complying with the terms of the Beneficiary Designation Form and the Plan Administrator’s rules and procedures, as in effect from time to time. Upon the acceptance by the Plan Administrator of a new Beneficiary Designation Form, all Beneficiary designations previously filed shall be cancelled. The Plan Administrator shall be entitled to rely on the last Beneficiary Designation Form filed by the Participant and accepted by the Plan Administrator prior to the Participant’s death.

3.3 Acknowledgment. No designation or change in designation of a Beneficiary shall be effective until received, accepted and acknowledged in writing by the Plan Administrator or its designated agent.

3.4 No Beneficiary Designation. If the Participant dies without a valid beneficiary designation, or if all designated Beneficiaries predecease the Participant, then the Participant’s spouse shall be the designated Beneficiary. If the Participant has no surviving spouse, the benefits shall be made to the personal representative of the Participant’s estate.

3.5 Facility of Payment. If the Plan Administrator determines in its discretion that a benefit is to be paid to a minor, to a person declared incompetent, or to a person incapable of handling the disposition of that person’s property, the Plan Administrator may direct payment of such benefit to the guardian, legal representative or person having the care or custody of such minor, incompetent person or incapable person. The Plan Administrator may require proof of incompetence, minority or guardianship as it may deem appropriate prior to distribution of the benefit. Any payment of a benefit shall be a payment for the account of the Participant and the Beneficiary, as the case may be, and shall be a complete discharge of any liability under the Plan for such payment amount.

ARTICLE 4

CLAIMS AND REVIEW PROCEDURE

4.1 Claims Procedure. A Participant or Beneficiary (“claimant”) who has not received benefits under the Plan that he or she believes should be paid shall make a claim for such benefits as follows:

4.1.1 Initiation—Written Claim. The claimant initiates a claim by submitting to the Plan Administrator a written claim for the benefits.

4.1.2 Timing of Plan Administrator Response. The Plan Administrator shall respond to such claimant within ninety (90) days after receiving the claim. If the Plan Administrator determines that special circumstances require additional time for processing the claim, the Plan Administrator can extend the response period by an additional ninety (90) days by notifying the claimant in writing, prior to the end of the initial 90-day period that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Plan Administrator expects to render its decision.

4.1.3 Notice of Decision. If the Plan Administrator denies part or the entire claim, the Plan Administrator shall notify the claimant in writing of such denial. The Plan Administrator shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth:

(a) The specific reasons for the denial;

(b) A reference to the specific provisions of the Plan on which the denial is based;

(c) A description of any additional information or material necessary for the claimant to perfect the claim and an explanation of why it is needed;

(d) An explanation of the Plan’s review procedures and the time limits applicable to such procedures; and

(e) A statement of the claimant’s right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review.

4.2 Review Procedure. If the Plan Administrator denies part or the entire claim, the claimant shall have the opportunity for a full and fair review by the Plan Administrator of the denial, as follows:

4.2.1 Initiation – Written Request. To initiate the review, the claimant, within 60 days after receiving the Plan Administrator’s notice of denial, must file with the Plan Administrator a written request for review.

4.2.2 Additional Submissions – Information Access. The claimant shall then have the opportunity to submit written comments, documents, records and other information relating to the claim. The Plan Administrator shall also provide the claimant, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant’s claim for benefits.

4.2.3 Considerations on Review. In considering the review, the Plan Administrator shall take into account all materials and information the claimant submits relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.

4.2.4 Timing of Plan Administrator’s Response. The Plan Administrator shall respond in writing to such claimant within sixty (60) days after receiving the request for review. If the Plan Administrator determines that special circumstances require additional time for processing the claim, the Plan Administrator can extend the response period by an additional sixty (60) days by notifying the claimant in writing, prior to the end of the initial 60-day period that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Plan Administrator expects to render its decision.

4.2.5 Notice of Decision. The Plan Administrator shall notify the claimant in writing of its decision on review. The Plan Administrator shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth:

(a) The specific reasons for the denial;

(b) A reference to the specific provisions of the Plan on which the denial is based;

(c) A statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant’s claim for benefits; and

(d) A statement of the claimant’s right to bring a civil action under ERISA Section 502(a).

ARTICLE 5

AMENDMENTS AND TERMINATION

5.1 Amendment or Termination of Plan. This Plan may be amended or terminated only by a written agreement signed by the Company and the Participants. Provided, however, if a Participant waives participation, that Participant’s Interest will terminate upon receipt by the Plan Administrator of such waiver. In the event that the Company decides to maintain any insurance policy after the Participant’s termination of participation in the Plan, the Company shall be the direct beneficiary of the entire death proceeds of such policy.

Notwithstanding the previous paragraph, the Company may amend or terminate the Plan at any time if, pursuant to legislative, judicial or regulatory action, continuation of the Plan would (i) cause benefits to be taxable to the Participants prior to actual receipt, or (ii) result in significant financial penalties or other significantly detrimental ramifications to the Company (other than the financial impact of paying the benefits).

5.2 Waiver of Participation. A Participant may, in the Participant’s sole and absolute discretion, waive his or her rights under the Plan at any time. Any waiver permitted under this Section 5.2 shall be in writing and delivered to the Plan Administrator. In the event that the Company decides to maintain the Policy after the Participant’s termination of participation in the Plan, the Company shall be the direct beneficiary of the entire death proceeds of the Policy.

ARTICLE 6

ADMINISTRATION

6.1 Plan Administrator Duties. This Plan shall be administered by a Plan Administrator which shall consist of the Board, or such committee as the Board shall appoint. Members of the Plan Administrator may be Participants under this Plan. The Plan Administrator shall also have the discretion and authority to (i) make, amend, interpret and enforce all appropriate rules and regulations for the administration of this Plan and (ii) decide or resolve any and all questions including interpretations of this Plan, as may arise in connection with the Plan.

6.2 Agents. In the administration of this Plan, the Plan Administrator may employ agents and delegate to them such administrative duties as it sees fit, (including acting through a duly appointed representative), and may from time to time consult with counsel who may be counsel to the Company.

6.3 Binding Effect of Decisions. The decision or action of the Plan Administrator with respect to any question arising out of or in connection with the administration, interpretation and application of the Plan and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Plan.

6.4 Indemnity of Plan Administrator. The Company shall indemnify and hold harmless the members of the Plan Administrator against any and all claims, losses, damages, expenses or liabilities arising from any action or failure to act with respect to this Plan, except in the case of willful misconduct by the Plan Administrator or any of its members.

6.5 Information. To enable the Plan Administrator to perform its functions, the Company shall supply full and timely information to the Plan Administrator on all matters relating to the Compensation of its Participants, the date and circumstances of the Termination of Employment of its Participants, and such other pertinent information as the Plan Administrator may reasonably require.

ARTICLE 7

MISCELLANEOUS

7.1 Unsecured General Creditor. Participants and their Beneficiaries successors and assigns shall have no legal or equitable rights, interests or claims in any property or assets of the Company. Any and all of the Company’s assets shall be, and remain, the general, unpledged unrestricted assets of the Company. The Company’s obligation under the Plan shall be merely that of an unfunded and unsecured promise to pay money in the future.

7.2 Not a Contract of Employment. The terms and conditions of this Plan shall not be deemed to constitute a contract of employment between the Company and the Participant. Nothing in this Plan shall be deemed to give a Participant the right to be retained in the service of the Company or to interfere with the right of the Company to discipline or discharge the Participant at any time.

7.3 Participation in Other Plans. Nothing herein contained shall be construed to alter, abridge, or in any manner affect the rights and privileges of the Participant to participate in and be covered by any pension, profit sharing, group insurance, bonus or similar employee plans which the Company may now or hereafter maintain.

7.4 Alienability. Neither the Participant nor any Beneficiary under this Plan shall have any power or right to transfer, assign, anticipate, hypothecate, mortgage, commute, modify, or otherwise encumber in advance any of the benefits payable hereunder, nor shall any of said benefits be subject to seizure for the payment of any debts, judgments, alimony, or separate maintenance owed by the Participant or the Beneficiary or any of them, to be transferable by operation of law in the event of bankruptcy, insolvency, or otherwise. In the event the Participant or any Beneficiary attempts assignment, commutation, hypothecation, transfer, or disposal of the benefit hereunder, the Company’s liabilities shall forthwith cease and terminate.

7.5 Successors. The provisions of this Plan shall bind and inure to the benefit of the Company and its successors and assigns and the Participant and the Beneficiary.

7.6 Reorganization. The Company shall not merge or consolidate into or with another corporation, or reorganize, or sell substantially all of its assets to another corporation, firm, or person unless and until such succeeding or continuing corporation, firm, or person agrees to assume and discharge the obligations of the Company under this Plan. Upon the occurrence of such event, the term “Company” as used in this Plan shall be deemed to refer to such succeeding or continuing company, firm, or person.

7.7 Interpretation. Wherever the fulfillment of the intent and purpose of this Plan requires, and the context will permit, the use of the masculine gender includes the feminine and use of the singular includes the plural.

7.8 Alternative Action. In the event it shall become impossible for the Company or the Plan Administrator to perform any act required by this Plan, the Company or Plan Administrator may in its discretion perform such alternative act as most nearly carries out the intent and purpose of this Plan and is in the best interests of the Company.

7.9 Applicable Law. Subject to ERISA, the provisions of this Plan shall be construed and interpreted in accordance with the laws of the State of California without regard to its conflict of law principles.

7.10 Headings. Article and section headings are for convenient reference only and shall not control or affect the meaning or construction of any of its provisions.

7.11 Furnishing Information. A Participant or his or her Beneficiary will cooperate with the Plan Administrator by furnishing any and all information requested by the Plan Administrator and take such other actions as

may be requested in order to facilitate the administration of the Plan and the payments of benefits hereunder, including but not limited to taking such physical examinations as the Plan Administrator may deem necessary.

7.12 Validity. In case any provision of this Plan shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Plan shall be construed and enforced as if such illegal and invalid provision has never been inserted herein.

7.13 Notice. Any notice or filing required or permitted to be given to the Plan Administrator under this Plan shall be sufficient if in writing and hand-delivered, or sent by registered or certified mail, to the address below:

Center Bank

3435 Wilshire Boulevard # 700

Los Angeles, CA 90010

Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark or the receipt for registration or certification.

Any notice or filing required or permitted to be given to a Participant under this Plan shall be sufficient if in writing and hand-delivered, or sent by mail, to the last known address of the Participant.

7.14 Signed Copies. This Plan may be executed in any number of counterparts, each of which shall be deemed to be an original, and such counterparts taken together shall constitute one (1) and the same instrument.

IN WITNESS WHEREOF, the Company has caused this Plan to be duly executed by its President and its corporate seal affixed at Los Angeles, California, on the 1^st day of May 2004.

CENTER BANK
By	/S/    YONG HWA KIM
	Senior Vice President & Controller

Participants—Board of Directors and Named Executives

Chung Hyun Lee—Director

Sang Hoon Kim—Director

Peter Y. S. Kim—Director

James Z. Hong—Director

James Hong—Executive Vice President and Chief Credit Officer

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Seon Hong Kim, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Center Financial Corporation;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 20, 2006	By	/s/    SEON HONG KIM
		Seon Hong Kim
		President & Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Patrick Hartman, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Center Financial Corporation;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 20, 2006	By	/s/    PATRICK HARTMAN
		Patrick Hartman
		Chief Financial Officer & Executive Vice President

EX-32

EXHIBIT 32

Certification of Chief Executive Officer and Chief Financial Officer

Certification of Periodic Financial Report

Seon Hong Kim and Patrick Hartman hereby certify as follows:

1. They are the Chief Executive Officer and Chief Financial Officer, respectively, of Center Financial Corporation.

2. The Form 10-Q of Center Financial Corporation for the Quarter Ended March 31, 2006 (the “Report”) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)) and the information contained in the report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Center Financial Corporation.

Dated: April 20, 2006	/s/    SEON HONG KIM
	Seon Hong Kim
	President and Chief Executive Officer
Dated: April 20, 2006	/s/    PATRICK HARTMAN
	Patrick Hartman
	Chief Financial Officer & Executive Vice President