UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2007

OR

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

For the transition period from             to            .

Commission file number: 000-50050

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)	(Zip Code)

Registrant’s telephone number, including area code—(213) 251-2222

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 July 23, 2007 there were 16,718,447 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	17
FORWARD-LOOKING STATEMENTS	17
SUMMARY OF FINANCIAL DATA	19
EARNINGS PERFORMANCE ANALYSIS	20
FINANCIAL CONDITION ANALYSIS	29
LIQUIDITY AND MARKET RISK/INTEREST RISK MANAGEMENT	39
CAPITAL RESOURCES	42
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	43
ITEM 4: CONTROLS AND PROCEDURES	43
PART II - OTHER INFORMATION	44
ITEM 1: LEGAL PROCEEDINGS	44
ITEM 1A. RISK FACTORS	44
ITEM 2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	44
ITEM 3: DEFAULTS UPON SENIOR SECURITIES	45
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	45
ITEM 5: OTHER INFORMATION	45
ITEM 6: EXHIBITS	46
SIGNATURES	47

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PART I—FINANCIAL INFORMATION

Item 1: INTERIM CONSOLIDATED FINANCIAL STATEMENTS

CENTER FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED)

AS OF JUNE 30, 2007 AND DECEMBER 31, 2006

	6/30/2007			12/31/2006
	(Dollars in thousands)
ASSETS
Cash and due from banks	$	77,784		$	71,504
Federal funds sold		6,745			—
Money market funds and interest-bearing deposits in other banks		1,972			1,872
Cash and cash equivalents		86,501			73,376
Securities available for sale, at fair value		130,057			148,913
Securities held to maturity, at amortized cost (fair value of $11,021 as of June 30, 2007 and $10,571 as of December 31, 2006)		11,257			10,591
Federal Home Loan Bank and Pacific Coast Bankers Bank stock, at cost		13,181			11,065
Loans, net of allowance for loan losses of $18,289 as of June 30, 2007 and $17,412 as of December 31, 2006		1,583,793			1,518,666
Loans held for sale, at the lower of cost or market		30,367			18,510
Premises and equipment, net		13,606			13,322
Customers’ liability on acceptances		3,115			4,871
Accrued interest receivable		8,314			8,574
Deferred income taxes, net		11,140			11,723
Investments in affordable housing partnerships		6,219			6,878
Cash surrender value of life insurance		11,380			11,183
Goodwill		1,253			1,253
Intangible assets, net		293			320
Other assets		3,731			4,067
Total Assets	$	1,914,207		$	1,843,312
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities
Deposits:
Noninterest-bearing	$	393,108		$	388,163
Interest-bearing		1,192,244			1,041,236
Total Deposits		1,585,352			1,429,399
Acceptances outstanding		3,115			4,871
Accrued interest payable		11,623			11,458
Other borrowed funds		133,258			229,490
Trust preferred securities		18,557			18,557
Accrued expenses and other liabilities		9,289			8,803
Total liabilities		1,761,194			1,702,578
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 40,000,000 shares; issued and outstanding, 16,718,447 (including 9,700 shares of unvested restricted stock) as of June 30, 2007 and 16,632,601 as of December 31, 2006		70,587			69,172
Retained earnings		82,614			71,777
Accumulated other comprehensive loss, net of tax		(188	)		(215	)
Total shareholders’ equity		153,013			140,734
Total Liabilities and Shareholders’ Equity	$	1,914,207		$	1,843,312

See accompanying notes to interim consolidated financial statements.

3

CENTER FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2007 AND 2006 (UNAUDITED)

	Three Months Ended June 30,						Six Months Ended June 30,
	2007			2006			2007		2006
	(Dollars in thousands, except per share data)
Interest and Dividend Income:
Interest and fees on loans	$	33,490		$	26,767		$	65,471	$	52,055
Interest on federal funds sold		62			595			114		1,418
Interest on taxable investment securities		1,551			2,058			3,177		4,244
Interest on tax-advantaged investment securities		129			152			262		249
Dividends on equity stock		181			92			355		158
Money market funds and interest-earning deposits		16			53			32		113
Total interest and dividend income		35,429			29,717			69,411		58,237
Interest Expense:
Interest on deposits		13,431			11,920			25,008		23,344
Interest on borrowed funds		2,426			177			5,862		281
Interest expense on trust preferred securities		373			359			743		693
Total interest expense		16,230			12,456			31,613		24,318
Net interest income before provision for loan losses		19,199			17,261			37,798		33,919
Provision for loan losses		1,100			1,518			2,370		1,775
Net interest income after provision for loan losses		18,099			15,743			35,428		32,144
Noninterest Income:
Customer service fees		1,772			2,084			3,539		4,214
Fee income from trade finance transactions		682			797			1,431		1,750
Wire transfer fees		226			237			437		453
Gain on sale of loans		618			1,123			618		1,797
Loan service fees		612			414			990		968
Insurance settlement—legal fees		—			2,520			—		2,520
Other income		585			532			1,131		1,012
Total noninterest income		4,495			7,707			8,146		12,714
Noninterest Expense:
Salaries and employee benefits		6,218			5,315			12,476		10,878
Occupancy		983			896			1,943		1,779
Furniture, fixtures, and equipment		497			509			964		969
Data processing		533			541			1,037		1,083
Professional service fees		1,082			354			2,090		2,414
Business promotion and advertising		830			1,123			1,471		1,968
Stationery and supplies		138			167			271		326
Telecommunications		146			165			282		338
Postage and courier service		191			195			381		336
Security service		271			239			511		502
Loss on interest rate swaps		—			30			—		83
Other operating expenses		1,240			1,133			2,241		2,081
Total noninterest expense		12,129			10,667			23,667		22,757
Income before income tax provision		10,465			12,783			19,907		22,101
Income tax provision		3,982			5,104			7,566		8,653
Net income		6,483			7,679			12,341		13,448
Other comprehensive income—unrealized (loss) gain on available-for-sale securities, net of income tax benefit (expense) of $207, $450, ($27) and $296		(436	)		(622	)		27		(409	)
Comprehensive income	$	6,047		$	7,057		$	12,368	$	13,039
EARNINGS PER SHARE:
Basic	$	0.39		$	0.47		$	0.74	$	0.82
Diluted	$	0.39		$	0.46		$	0.74	$	0.81
Weighted average shares outstanding—basic		16,679,653			16,494,337			16,671,814		16,481,486
Weighted average shares outstanding—diluted		16,761,144			16,634,626			16,788,787		16,641,017

See accompanying notes to interim consolidated financial statements.

4

CENTER FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2007 AND 2006 (UNAUDITED)

	6/30/2007			6/30/2006
	(Dollars in thousands)
Cash flows from operating activities:
Net income	$	12,341		$	13,448
Adjustments to reconcile net income to net cash provided by operating activities:
Compensation expenses related to stock options and restricted stocks		472			343
Depreciation and amortization		1,348			1,202
Amortization of deferred fees		(989	)		(623	)
Mark to market adjustments on interest rate swaps		—			110
Amortization of premium, net of accretion of discount, on securities available for sale and held to maturity		34			(253	)
Provision for loan losses		2,370			1,775
Net (gain) loss on sale of premises and equipment		(9	)		114
Net originations of SBA loans held for sale		(19,354	)		(29,848	)
Gain on sale of loans		(618	)		(1,797	)
Proceeds from sale of loans		21,680			30,923
Deferred tax provision		562			296
Federal Home Loan Bank stock dividend		(320	)		(130	)
Decrease (increase) in accrued interest receivable		260			(826	)
Net increase in cash surrender value of life insurance policy		(197	)		(186	)
Decrease (increase) in other assets and servicing assets		1,908			(2,359	)
Increase in accrued interest payable		165			3,138
(Decrease) increase in accrued expenses and other liabilities		(1,442	)		1,297
Net cash provided by operating activities		18,211			16,624
Cash flows from investing activities:
Purchase of securities available for sale		(22,783	)		(7,408	)
Proceeds from principal repayment, matured, or called securities available for sale		41,662			62,881
Purchase of securities held to maturity		(1,382	)		(518	)
Proceeds from matured, called or principal repayment on securities held to maturity		707			276
Purchase of Federal Home Loan Bank and other equity stock		(1,796	)		(1,594	)
Payments from net swap settlement		—			(193	)
Net increase in loans		(79,934	)		(89,052	)
Proceeds from recoveries of loans previously charged-off		45			520
Purchases of premises and equipment		(1,239	)		(711	)
Proceeds from disposal of equipment		12			—
Net increase in investments in affordable housing partnerships		290			—
Net cash used in investing activities		(64,418	)		(35,799	)
Cash flows from financing activities:
Net increase (decrease) in deposits		155,953			(36,398	)
Net (decrease) increase in other borrowed funds		(96,232	)		7,524
Proceeds from stock options exercised		1,114			597
Tax benefit in excess of recognized cumulative compensation costs		—			158
Payment of cash dividend		(1,332	)		(1,314	)
Purchases of common stock		(171	)		—
Net cash provided by (used in) financing activities		59,332			(29,433	)
Net increase (decrease) in cash and cash equivalents		13,125			(48,608	)
Cash and cash equivalents, beginning of the year		73,376			143,376
Cash and cash equivalents, end of the period	$	86,501		$	94,768
Supplemental disclosure of cash flow information:
Interest paid	$	31,448		$	21,180
Income taxes paid	$	7,057		$	10,360
Supplemental schedule of noncash investing, operating, and financing activities:
Cash dividend accrual	$	836		$	660

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 are located at 3435 Wilshire Boulevard, Suite 700, Los Angeles, California 90010. The Bank provides comprehensive financial services for small to medium sized business owners, primarily 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 Southern California 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 eight Loan Production Offices (“LPOs”) in Phoenix, Seattle, Denver, Washington D.C., Las Vegas, Atlanta, Dallas and Northern California.

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 dissolving the entity. We anticipate that the dissolution will be completed in the third quarter of 2007.

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 information furnished in these interim statements reflects all adjustments that are, in the opinion of management,

6

necessary for the fair statement of results for the periods presented. All adjustments are of a normal and recurring nature. Results for the three and six months ended June 30, 2007 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, 2006 as filed with the Securities and Exchange Commission.

Reclassifications

Reclassifications have been made to the prior year financial statements to conform to the current presentation.

3. SIGNIFICANT ACCOUNTING POLICIES

Accounting policies are fully described in Note 2 to the consolidated financial statements in Center Financial’s Annual Report on Form 10-K for the year ended December 31, 2006 and there have been no material changes noted.

4. RECENT ACCOUNTING PRONOUNCEMENTS

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 has adopted SFAS No. 155 and the adoption has had no 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 No.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 securitization in which the transferor retains 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 No. 156 requires all separately recognized servicing asset and liabilities to be initially measured at fair value, if practicable. SFAS No. 156 must be adopted as of the first fiscal year that begins after September 15, 2006. The Company adopted SFAS No. 156 and the adoption has had no material impact on the consolidated financial statements or results of operations of the Company.

In June 2006, the FASB issued Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109, that clarifies the accounting for uncertainties in incomes taxes recognized in accordance with SFAS No. 109. The interpretation prescribes a recognition threshold and measurement attribute for the recognition and measurement of a tax position taken or expected to be taken in a tax return. Companies are required to determine whether it is more likely than not that a tax position will be

7

sustained upon examination based on the technical merits of the position (assuming the taxing authority has full knowledge of all relevant facts). If the tax position meets the more likely than not criteria, the position is to be measured at the largest amount of benefit that is greater than 50 percent likely to be realized upon settlement with the taxing authorities. The Company has had no material impact with the adoption of FIN 48 on the consolidated financial statements or results of operations of the Company.

In addition, in May 2007, the FASB issued FASB Staff Position (“FSP”) FIN 48-1, Definition of “Settlement” in FASB Interpretation No. 48. This FSP provides guidance on how a company should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits. The FASB clarifies that a tax position could be effectively settled upon examination by a taxing authority. This guidance should be applied upon the initial adoption of FIN 48. The Company’s adoption of FIN 48 effective January 1, 2007 was consistent with this FSP.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, which provides enhanced guidance for using fair value to measure assets and liabilities. The standard applies whenever other standards require or permit assets or liabilities to be measured at fair value. The Standard does not expand the use of fair value in any new circumstances. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. Early adoption is permitted. The Company does not expect the adoption of SFAS No. 157 to have a material impact on the consolidated financial statements or results of operations of the Company.

In September 2006, the FASB issued SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans—an amendment of FASB Statements No. 87, 88, 106, and 132(R), which requires an employer to recognize in its statement of financial position the overfunded or underfunded status of a defined benefit postretirement plan measured as the difference between the fair value of plan assets and the benefit obligation. Employers must also recognize as a component of other comprehensive income, net of tax, the actuarial and experience gains and losses and the prior service costs and credits. The recognition provisions of the Statement are effective for public entities for fiscal years ending after December 15, 2006 and for nonpublic entities for fiscal years ending after June 15, 2007. The measurement date provisions are effective for fiscal years ending after December 15, 2008. The Company does not expect the adoption of SFAS No.158 to have a material impact on the consolidated financial statements or results of operations of the Company.

In September 2006, EITF Issue No. 06-5, “Accounting for Purchases of Life Insurance—Determining the Amount That Could Be Realized in Accordance with FASB Technical Bulletin No. 85-4, Accounting for Purchases of Life Insurance” was issued. The Task Force reached a consensus that a policyholder should consider any additional amounts included in the contractual terms of the policy in determining the amount that could be realized under the insurance contract. The Task Force also reached a consensus that a policyholder should determine the amount that could be realized under the life insurance contract assuming the surrender of an individual-life by individual-life policy (or certificate by certificate in a group policy). Furthermore, the Task Force reached a consensus that the cash surrender value should not be discounted when contractual limitations on the ability to surrender a policy exist if the policy continues to operate under its normal terms (continues to earn interest) during the restriction period. The consensus is effective for fiscal years beginning after December 15, 2006. The Company has adopted the Issue as of January 1, 2007 and the adoption of the Issue has had no material impact on the consolidated financial statements or results of operations of the Company.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities—Including an Amendment of FASB Statement No. 115, which permits entities to choose to measure many financial instruments and certain warranty and insurance contracts at fair value. The Statement applies to all reporting entities, including not-for-profit organizations, and contains financial statement presentation and disclosure requirements for assets and liabilities reported at fair value. SFAS No. 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Early adoption is permitted subject to certain conditions including the adoption of SFAS No. 157 at the same time. The Company

8

will adopt SFAS No. 159 on January 1, 2008. The Company is currently assessing whether fair value accounting is appropriate for any of its eligible items and currently cannot estimate the impact, if any, on the consolidated financial statements or results of operations of the Company.

5. STOCK-BASED COMPENSATION

The Company has a Stock Incentive Plan which was adopted by the Board of Directors in April 2006, approved by the shareholders in May 2006, and amended by the Board in June 2007 (the “2006 Plan”). The 2006 Plan provides for the granting of non-qualified and incentive stock options and restricted stock awards to employees (including officers) and directors. The 2006 Plan replaced the Company’s former stock option plan (the “1996 Plan”) which expired in February 2006, and all options under the 1996 Plan which were outstanding on April 12, 2006 were transferred to and made part of the 2006 Plan. The option prices of all options granted under the 2006 Plan (including options transferred from the 1996 Plan) must be not less than 100% of the fair market value at the date of grant. All options granted generally vest at the rate of 20% per year except that the options granted to the CEO and to the non-employee directors vest at the rate of 33 1/3% per year. All options not exercised generally expire ten years after the date of grant.

The Company accounts for stock-based compensation in accordance with SFAS No. 123R since its adoption effective January 1, 2006. The Company’s pre-tax compensation expense for stock-based employee compensation was $267,000 and $472,000 ($213,000 and $380,000 after tax effect of non-qualified stock options) for the three and six months ended June 30, 2007, respectively. Calculations of this compensation expense utilized the assumptions noted below. This expense is the result of vesting of portions of previously granted stock options and those awarded during the three and six months ended June 30, 2007.

The Company granted 455,500 and 607,000 options with a weighted average grant-date fair value of $6.53 and $7.19 for the three and six months ended June 30, 2007, respectively. No options were granted during the six months ended June 30, 2006.

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 No. 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.

	Six Months Ended 6/30/2007	Six Months Ended 6/30/2006
Risk-free interest rate	2.05% -  5.07%	2.05% - 6.21%
Expected life	3 -  6.5 years	3 -  6.5 years
Expected volatility	32% - 36%	30% - 34%
Expected dividend yield	0.00% -1.05%	0.00% -1.05%

These assumptions were utilized in the calculation of the compensation expense noted above. This expense is the result of previously granted stock options and those awarded during the three and six months ended June 30, 2007.

9

A summary of the Company’s stock option activity and related information for the three and six months ended June 30, 2007 and 2006 is set forth in the following table:

			Outstanding Options
	Shares Available For Grant		Number of Shares		Weighted Average Exercise Price
Balance at March 31, 2007	2,586,652		528,711		$	17.07
Options granted	(455,500	)	455,500			17.11
Options forfeited	17,600		(17,600	)		21.72
Options exercised	—		(57,680	)		14.67
Balance at June 30, 2007	2,148,752		908,931			17.15
Balance at March 31, 2006	936,389		601,089		$	13.76
Net options granted authorized under new plan	1,762,250		—			—
Options granted	—		—			—
Options forfeited	14,803		(14,803	)		8.76
Options exercised	—		(45,037	)		7.22
Balance at June 30, 2006	2,713,442		541,249			14.44
Balance at December 31, 2006	2,670,290		473,593		$	15.33
Options granted	(607,000	)	607,000			18.38
Options forfeited	85,462		(85,462	)		20.87
Options exercised	—		(86,200	)		12.98
Balance at June 30, 2007	2,148,752		908,931			17.15
Balance at December 31, 2005	936,389		638,804		$	13.38
Net options granted authorized under new plan	1,762,250		—			—
Options granted	—		—			—
Options forfeited	14,803		(14,803	)		8.76
Options exercised	—		(82,752	)		7.21
Balance at June 30, 2006	2,713,442		541,249			14.44

The options as of June 30, 2007 have been segregated into three ranges for additional disclosure as follows:

	Options Outstanding				Options Exercisable
	Options Outstanding as of 6/30/2007	Weighted- Average Remaining Contractual Life in Years	Weighted- Average Exercise Price		Options Exercisable as of 6/30/2007	Weighted- Average Remaining Contractual Life in Years	Weighted- Average Exercise Price
Range of Exercise Prices
$ 2.23 -   $7.99	77,331	4.43	$	5.01	75,171	4.40	$	4.99
$ 8.00     $20.00	577,600	9.22	$	16.26	60,400	6.58	$	13.02
$ 20.01   $25.10	254,000	9.22	$	22.86	10,900	8.07	$	23.56
	908,931	8.81	$	17.15	146,471	5.57	$	9.68

Aggregate intrinsic value of options outstanding and options exercisable at June 30, 2007 was $1.4 million and $1.1 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 $16.92 as of June 29, 2007, and the exercise price multiplied by the number of options outstanding. Total intrinsic value of options exercised was approximately $113,000 and $752,000 for the three months ended June 30, 2007 and 2006, respectively, and $473,000 and $1.4 million for the six months ended June 30, 2007 and 2006, respectively.

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As of June 30, 2007, the Company had approximately $5.1 million of unrecognized compensation costs related to non-vested options. The Company expects to recognize these costs over a weighted average period of 3.85 years.

Restricted stock activity under the 2006 Plan as of June 30, 2007, and changes during the six months period ended June 30, 2007 are as follows:

	Number of Shares	Weighted-Average Grant-Date Fair Value per Share
Restricted Stock:
Granted	9,700	$	17.00
Vested	—		—
Cancelled and forfeited	—		—
Nonvested, at end of period	9,700	$	17.00

The Company recorded compensation cost of $3,000 related to the restricted stock granted under the 2006 Plan for the six months ended June 30, 2007.

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 $133.3 million and $229.5 million at June 30, 2007 and December 31, 2006, respectively. Interest expense on other borrowed funds was $5.9 million and $281,000 for the six months ended June 30, 2007 and 2006, respectively, reflecting average interest rates of 5.34% and 4.74%, respectively.

As of June 30, 2007, the Company had outstanding borrowings of $132.7 million from the Federal Home Loan Bank of San Francisco, or FHLB, with note terms from less than 1 year to 15 years. Notes of 10-year and 15-year terms are amortizing at predetermined schedules over the life of the notes. Borrowings of $50 million contain features that allow the FHLB to require repayment of the borrowings in 2 years (May of 2009). Under the FHLB borrowing agreement, the Company has pledged under a blanket lien all qualifying commercial and residential loans as collateral with a total carrying value of $495.5 million at June 30, 2007 as compared to $384.7 million at June 30, 2006. Total interest expense on the notes was $5.8 million and $248,000 for the six months ended June 30, 2007 and 2006, respectively, reflecting average interest rates of 5.29% and 4.54%, respectively.

Subject to the right of the FHLB to require earlier repayment of $50 million in borrowings, FHLB advances outstanding as of June 30, 2007 mature as follows:

	(Dollars in thousands)
2007	$	80,156
2008		325
2009		343
2010		362
2011 and thereafter		51,477
	$	132,663

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

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of open-ended notes, up to a total of $2.2 million. The Company has pledged U.S. government agencies and mortgage-backed securities or some combination thereof with a total carrying value of $2.8 million at June 30, 2007, as collateral to participate in the program. The total borrowed amount under the program, outstanding at June 30, 2007 and December 31, 2006 was $389,000 and $675,000, respectively. These borrowings reflect interest rates of 5.06% and 3.81% as of June 30, 2007 and December 31, 2006, 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 2003, Center Capital Trust I issued 18,000 Capital Trust Preferred Securities (“TP Securities”), with 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, with interest based on 3-month LIBOR plus 2.85% (8.21% at June 30, 2007), 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 7, April 7, July 7, and October 7 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 8.21%. Interest rate defined as per annum rate of interest, resets quarterly, equal to 3-month 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. As of June 30, 2007, trust preferred securities comprised 10.6% of the Company’s Tier I capital.

In accordance with FASB Interpretation No. 46 (FIN 46), Consolidation of Variable Interest Entities, 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 June 30, 2007 was 16,718,447. Basic earnings per share are calculated on the basis of weighted average number of shares outstanding during the period. Diluted earnings per

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share reflect additional common shares that would have been outstanding if dilutive potential common shares had been issued. Diluted earnings per share do not include all potentially dilutive shares that may result from outstanding stock options and restricted stock awards that may eventually vest.

The following table sets forth the Company’s earnings per share calculation for the three and six months ended June 30, 2007 and 2006:

	Three Months Ended June 30,
	2007					2006
	(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	$	6,483	16,680	$	0.39	$	7,679	16,494	$	0.47
Effect of dilutive securities:
Stock options and restricted stock		—	81		—		—	141		(0.01	)
Diluted earnings per share	$	6,483	16,761	$	0.39	$	7,679	16,635	$	0.46
	Six Months Ended June 30,
	2007					2006
	(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	$	12,341	16,672	$	0.74	$	13,448	16,481	$	0.82
Effect of dilutive securities:
Stock options and restricted stock		—	117		—		—	160		(0.01	)
Diluted earnings per share	$	12,341	16,789	$	0.74	$	13,448	16,641	$	0.81

The number of common shares underlying stock options and shares of restricted stock which were outstanding but not included in the calculation of diluted earnings per share because they would have had an anti-dilutive effect amounted to 412,000 and 353,000 shares for the three and six months ended June 30, 2007, respectively, and 54,500 shares for both the three and six months ended June 30, 2006.

On May 24, 2007, the Company announced a $10 million stock buyback program. At June 30, 2007, the Company purchased 10,054 shares for $171,000 at approximately $17.03 per share. These shares have been retired.

9. CASH DIVIDENDS

On June 13, 2007, the Board of Directors declared a quarterly cash dividend of $0.05 per share. This cash dividend was paid on July 11, 2007 to shareholders of record as of June 27, 2007.

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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 Company amortizes premiums on acquired deposits using the straight-line method over 5 to 9 years. Accumulated amortization was approximately $169,000 and $142,000 as of June 30, 2007 and December 31, 2006, respectively. Core deposit intangible, net of amortization, was approximately $293,000 and $320,000 at June 30, 2007 and December 31, 2006, respectively. Estimated amortization expense, for the five succeeding fiscal years and thereafter, is as follows:

(Dollars in thousands)

2007 (remaining six months)	$	27
2008		53
2009		53
2010		53
2011		53
Thereafter		54
	$	293

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 June 30, 2007 and December 31, 2006 follows:

(Dollars in thousands)

	June 30, 2007		December 31, 2006
Loans	$	244,738	$	265,989
Standby letters of credit		9,437		12,222
Performance bonds		239		217
Commercial letters of credit		38,557		28,181
	$	292,971	$	306,609

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 herein described, 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.

KEIC Claims—In March 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 seeks 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.

Korean Bank Claims—In July 2006, the Bank was served with cross-claims from a number of Korean banks who are also third party defendants in the KEIC action. The Korean banks are Citibank Korea, Inc. (formerly known as KorAm Bank), Industrial Bank of Korea, Kookmin Bank, Korea Exchange Bank and Hana Bank (hereinafter the Korean Banks). The Korean Banks allege, in both suits, various claims for breach of contract, negligence, negligent misrepresentation and breach of fiduciary duty in the handling of similar but a different set of documents against acceptance transactions that occurred in the years 2000 and 2001. The total amount of the Korean Bank claims is approximately $46.1 million plus interest and punitive damages. These claims are in addition to KEIC’s claims against the Bank in the approximate amount of $56 million originally filed in March 2003.

Status of the Consolidated Action—The claims brought by KEIC and the Korean Banks, which total approximately $100 million, have been consolidated into a single action. In November 2005, the Orange County Superior Court had dismissed all claims of KEIC against the Bank in state court on the grounds that federal courts have exclusive jurisdiction over the claims. In December 2006, the court of appeals reversed the earlier decision by the state court and remanded the case back to state court. Currently, several parties have filed preemptory challenges for the reassignment of the judge. One of the parties filed a petition for a writ of mandate to review the judge assignment order dated June 26, 2007. A status conference is scheduled for September 17, 2007. No trial date has been scheduled.

If the outcome of this litigation is adverse and the Bank is required to pay significant monetary damages, the Company’s financial condition and results of operations are likely to be materially and adversely affected. Although the Bank believes that it has meritorious defenses and intends to vigorously defend these lawsuits, management cannot predict the outcome of this litigation.

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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 was 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.

Effective May 17, 2007, the MOU was terminated by the FDIC and the DFI as a result of the Company’s remediation of the above issues.

12. DERIVATIVE FINANCIAL INSTRUMENTS

As of June 30, 2007 and December 31, 2006, the Company had no interest rate swap agreements in place. The Company’s only remaining interest rate swap matured in August 2006, which had a total notional amount of $25 million. Under the swap agreement, the Company received a fixed rate and paid a variable rate based on Wall Street Journal published Prime Rate.

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

	Three Months Ended June 30,					Six Months Ended June 30,
	(Dollars in thousands)					(Dollars in thousands)
	2007		2006			2007		2006
Net swap settlement payments	$	—	$	104		$	—	$	193
Decrease in market value		—		(74	)		—		(110	)
Net change in market value	$	—	$	30		$	—	$	83

13. NON-RECURRING ITEMS

On June 21, 2006, the Bank entered into a settlement with one of its insurance carriers, BancInsure, pursuant to which BancInsure paid $3.75 million to settle its past and future obligations for legal fees under its insurance policies concerning the KEIC litigation. At that time, $1.0 million of the settlement was designated for future litigation costs as of June 30, 2006. The Bank has utilized the reserve for these litigation costs during 2006 and 2007. There is no remaining reserve as of June 30, 2007. The Bank utilized approximately $200,000 and $469,000 for the three and six months ended June 30, 2007, respectively.

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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 as of and for the three and six months ended June 30, 2007 and 2006. This analysis should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2006 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, 2006, as supplemented by the information contained in this report.

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, 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 Company’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

17

arise, whereas with respect to available-for-sale securities, they are recorded as a separate component of shareholders’ equity (accumulated comprehensive other income or loss) and do not affect earnings until realized. The fair values of the Company’s investment securities are generally determined by reference to quoted market prices and reliable independent sources. The Company is obligated to assess, at each reporting date, whether there is an “other-than-temporary” impairment to the Company’s investment securities. Such impairment must be recognized in current earnings rather than in other comprehensive income. The Company has not identified any investment securities that were deemed to be “other-than-temporarily” impaired as of June 30, 2007 or December 31, 2006.

Loan Sales

Certain Small Business Administration (“SBA”) loans that the Company 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 Company’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 Company’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 Company’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 Company adds new products, increases the complexity of the loan portfolio, and expands the geographic coverage, the Company 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 Company believes that its methodologies continue to be appropriate given its size and level of complexity. Detailed information concerning the Company’s loan loss methodology is contained in “Item 2, Management Discussion and Analysis of Financial Condition and Results of Operations—Allowance for Loan Losses.”

Share-based Compensation

The Company adopted SFAS No. 123R as of January 1, 2006 as discussed in Note 5 to the consolidated financial statements. SFAS No. 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

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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.

SUMMARY OF FINANCIAL DATA

Executive Overview

Consolidated net income for the second quarter of 2007 decreased by $1.3 million to $6.5 million, or $0.39 per diluted share compared to $7.7 million or $0.46 per diluted share in the second quarter of 2006. Consolidated net income for the six months ended June 30, 2007 decreased by $1.2 million to $12.3 million, or $0.74 per diluted share compared to $13.4 million or $0.81 per diluted share for the six months ended June 30, 2006. The following were significant highlights related to the second quarter of 2007 results as compared to the corresponding period of 2006:

• For the three months ended June 30, 2007, net interest income before provision for loan losses increased by 11.2% to $19.2 million as compared to $17.3 million for the corresponding period in 2006. For the six months ended June 30, 2007, net interest income before provision for loan losses increased by 11.4% to $37.8 million as compared to $33.9 million in the same period in 2006. These increases were primarily due to growth in earning assets. Growth in earning assets was mainly driven by loan production and utilization of the investment portfolio to fund this growth with loans being high-yielding assets.

• The decreases in consolidated net income for both three and six months ended June 30, 2007 compared to the same periods in 2006 are primarily due to the decrease in gain on sale of loans resulting from the lower sales volume in 2007 and non-recurring insurance settlement of $2.5 million in 2006 and to the general increase in salary and benefits expenses.

• Net interest margin for the three and six months ended June 30, 2007 declined slightly to 4.39%, compared to 4.58% and 4.49% during the same periods in 2006. The changes in net interest margin were mainly attributable to an increase in fixed rate lending with lower rates versus variable rate lending for the second quarter and general rate increases in funding liabilities.

• Return on average assets and return on average equity decreased to 1.39% and 17.27%, respectively, for the three months ended June 30, 2007, compared to 1.87% and 25.16% during the same period in 2006. Return on average assets and return on average equity decreased to 1.33% and 16.86%, respectively, for the six months ended June 30, 2007, compared to 1.64% and 22.74% during the same period in 2006. Return on average assets declined and the return on average equity decreased due to lower net income as a result of the non-recurring insurance settlement recorded during the second quarter of 2006 and an increase in average equity from prior periods.

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• The provision for loan loss was $1.1 million and $2.4 million for the three and six months ended June 30, 2007, respectively, compared to $1.5 million and $1.8 million for the same periods in 2006. The decrease for the three months ended June 30, 2007 was due to lower loan growth compared to the same period in 2006. The increase for the six months ended June 30, 2007 was a result of increased loan originations and the associated loan portfolio growth compared to the six months ended June 30, 2006, and the Company’s detailed quarterly migration analysis of the credit quality of the loan portfolio.

• The Company’s efficiency ratio was 51.2% and 51.5% for the three and six months ended June 30, 2007, respectively, compared to 42.7% and 48.8% for the same periods in 2006. The increases relate to the non-recurring insurance settlement recorded in other income in the second quarter of 2006, and the increase in salary and benefit expenses in the first half of 2007 compared to 2006, partially offset by the reduction of costs from consulting services relative to the Bank Secrecy Act Compliance efforts from the first quarter in 2007 as compared to the same periods in 2006.

The Company’s financial condition and liquidity remained strong at June 30, 2007. The following are important factors in understanding the Company’s financial condition and liquidity:

• Net loans grew $77.0 million or 5.0% to $1.61 billion at June 30, 2007 compared to $1.54 billion at December 31, 2006. The growth in net loans was comprised primarily of net increases in commercial construction loans of $15.4 million or 35.3%, real estate commercial loans of $37.6 million or 3.6%, commercial loans of $11.4 million, or 4.1% and SBA loans of $7.9 million or 15.5%.

• Total deposits increased $156.0 million or 10.9% to $1.59 billion at June 30, 2007 compared to $1.43 billion at December 31, 2006. This increase was primarily the result of adding $66.9 million of brokered time deposits and $85 million money market accounts from promotions carried out during the second quarter.

• Due to the increase in deposits for the six months ended June 30, 2007, the Company was able to reduce borrowed funds resulting in the decrease in the ratio of net loans to total deposits to 101.8% at June 30, 2007 as compared to 107.5% at December 31, 2006.

• The ratio of nonaccrual loans to total loans increased to 0.37% at June 30, 2007 compared to 0.21% at December 31, 2006. Our ratio of allowance for loan losses to total nonperforming loans decreased to 306% at June 30, 2007, as compared to 534% at December 31, 2006 and our allowance for losses to total gross loans remained unchanged at 1.12% at June 30, 2007 and December 31, 2006. The Company experienced an increase in nonperforming loans at June 30, 2007 which caused the decline in the ratio of the allowance for loan losses to total nonperforming loans. The increase in nonperforming loans during this period relates primarily to SBA loans of which a portion of these loans is guaranteed by the SBA.

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

• The Company declared its quarterly cash dividend of $0.05 per share in June 2007.

EARNINGS PERFORMANCE ANALYSIS

As previously noted and reflected in the consolidated statements of operations, the Company generated net income of $6.5 million during the three months ended June 30, 2007 compared to $7.7 million during the same period in 2006. 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 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 June 30, 2007 and 2006:

	Three Months Ended June 30,
	2007						2006
	Average Balance		Interest Income/ Expense		Annualized Average Rate/Yield(1)		Average Balance		Interest Income/ Expense		Annualized Average Rate/Yield(1)
Assets:
Interest-earning assets:
Loans (2)	$	1,591,648	$	33,490	8.44	%	$	1,244,273	$	26,767	8.63	%
Federal funds sold		4,401		62	5.65			49,293		595	4.84
Investments (3) (4)		156,539		1,877	4.81			218,259		2,355	4.60
Total interest-earning assets		1,752,588		35,429	8.11			1,511,825		29,717	7.88
Noninterest—earning assets:
Cash and due from banks		66,295						79,629
Bank premises and equipment, net		13,553						13,769
Customers’ acceptances outstanding		4,446						5,228
Accrued interest receivables		7,642						6,930
Other assets		31,631						32,613
Total noninterest-earning assets		123,567						138,169
Total assets	$	1,876,155					$	1,649,994
Liabilities and Shareholders’ Equity:
Interest-bearing liabilities:
Deposits:
Money market and NOW accounts	$	228,726	$	2,285	4.01	%	$	219,626	$	1,636	2.99	%
Savings		69,258		593	3.43			81,958		775	3.80
Time certificates of deposit over $100,000		718,716		9,417	5.26			680,426		8,419	4.96
Other time certificates of deposit		97,148		1,136	4.69			101,748		1,090	4.30
		1,113,848		13,431	4.84			1,083,758		11,920	4.45
Other borrowed funds		181,339		2,426	5.37			14,463		177	4.92
Long-term subordinated debentures		18,557		373	8.06			18,557		359	7.76
Total interest-bearing liabilities		1,313,744		16,230	4.96			1,116,778		12,456	4.47
Noninterest-bearing liabilities:
Demand deposits		389,084						387,106
Total funding liabilities		1,702,828			3.82	%		1,503,884			3.32	%
Other liabilities		22,745						23,686
Total noninterest-bearing liabilities		411,829						410,792
Shareholders’ equity		150,582						122,424
Total liabilities and shareholders’ equity	$	1,876,155					$	1,649,994
Net interest income			$	19,199					$	17,261
Cost of deposits					3.58	%					3.25	%
Net interest spread (5)					3.15	%					3.41	%
Net interest margin (6)					4.39	%					4.58	%

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

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⁽²⁾ Loans are net of the allowance for loan losses, deferred fees, and discount on SBA loans retained. Loan fees included in interest income were approximately $581,000 for the three months ended June 30, 2007 and $437,000 for the same period in 2006. 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 on such loans is excluded.

⁽³⁾ Investments include securities available for sale, securities held to maturity, Federal Home Loan Bank and Pacific Coast Bankers Bank stock and money market funds and interest-bearing deposits in other banks.

⁽⁴⁾ Investment yields, where applicable, have been computed on a tax equivalent basis for any tax-advantaged income.

⁽⁵⁾ Represents the weighted average yield on interest-earning assets less the weighted average cost of interest-bearing liabilities.

⁽⁶⁾ Represents net interest income (before provision for loan losses) as a percentage of average interest-earning assets.

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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 six months ended June 30, 2007 and 2006:

	Six Months Ended June 30, 2007
	2007						2006
	Average Balance		Interest Income/ Expense		Annualized Average Rate/Yield(7)		Average Balance		Interest Income/ Expense		Annualized Average Rate/Yield(7)
Assets:
Interest-earning assets:
Loans (8)	$	1,570,071	$	65,471	8.41	%	$	1,236,045	$	52,055	8.49	%
Federal funds sold		4,027		114	5.71			61,482		1,418	4.65
Investments (9) (10)		162,888		3,826	4.74			225,237		4,764	4.48
Total interest-earning assets		1,736,986		69,411	8.06			1,522,764		58,237	7.71
Noninterest—earning assets:
Cash and due from banks		70,187						77,062
Bank premises and equipment, net		13,486						13,871
Customers’ acceptances outstanding		4,046						4,636
Accrued interest receivables		7,762						6,722
Other assets		31,995						31,209
Total noninterest-earning assets		127,476						133,500
Total assets	$	1,864,462					$	1,656,264
Liabilities and Shareholders’ Equity:
Interest-bearing liabilities:
Deposits:
Money market and NOW accounts	$	204,663	$	3,700	3.65	%	$	211,339	$	2,996	2.86	%
Savings		71,063		1,236	3.51			81,317		1,519	3.77
Time certificates of deposit over $100,000		693,410		17,928	5.21			707,290		16,811	4.80
Other time certificates of deposit		93,953		2,144	4.60			101,122		2,018	4.02
		1,063,089		25,008	4.74			1,101,068		23,344	4.28
Other borrowed funds		221,391		5,862	5.34			11,964		281	4.74
Long-term subordinated debentures		18,557		743	8.07			18,557		693	7.53
Total interest-bearing liabilities		1,303,037		31,613	4.89			1,131,589		24,318	4.33
Noninterest-bearing liabilities:
Demand deposits		391,881						383,290
Total funding liabilities		1,694,918			3.76	%		1,514,879			3.24	%
Other liabilities		21,894						22,135
Total noninterest-bearing liabilities		413,775						405,425
Shareholders’ equity		147,650						119,250
Total liabilities and shareholders’ equity	$	1,864,462					$	1,656,264
Net interest income			$	37,798					$	33,919
Cost of deposits					3.47	%					3.17	%
Net interest spread (11)					3.17	%					3.38	%
Net interest margin (12)					4.39	%					4.49	%

⁽⁷⁾ Average rates/yields for these periods have been annualized.

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⁽⁸⁾ Loans are net of the allowance for loan losses, deferred fees, and discount on SBA loans retained. Loan fees included in interest income were approximately $854,000 for the six months ended June 30, 2007 and $623,000 for the same period in 2006. 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 on such loans is excluded.

⁽⁹⁾ Investments include securities available for sale, securities held to maturity, Federal Home Loan Bank and Pacific Coast Bankers Bank stock and money market funds and interest-bearing deposits in other banks.

⁽¹⁰⁾ Investment yields, where applicable, have been computed on a tax equivalent basis for any tax-advantaged income.

⁽¹¹⁾ Represents the weighted average yield on interest-earning assets less the weighted average cost of interest-bearing liabilities.

⁽¹²⁾ 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 (i) changes in average daily balances (volume) and (ii) changes in interest rates (rate):

	Three Months Ended June 30, 2007 vs. 2006 Increase (Decrease) Due to Change In									Six Months Ended June 30, 2007 vs. 2006 Increase (Decrease) Due to Change In
	Volume			Rate(13)			Total			Volume			Rate(13)			Total
Earning assets:
Interest income:
Loans (14)	$	7,297		$	(565	)	$	6,732		$	13,926		$	(500	)	$	13,426
Federal funds sold		(619	)		85			(534	)		(1,567	)		263			(1,304	)
Investments (15)		(780	)		294			(486	)		(1,551	)		603			(948	)
Total earning assets		5,898			(186	)		5,712			10,808			366			11,174
Interest expense:
Deposits and borrowed funds:
Money market and super NOW accounts		70			577			647			(91	)		827			736
Savings deposits		(113	)		(69	)		(182	)		(184	)		(99	)		(283	)
Time Certificates of deposits		420			625			1,045			(474	)		1,685			1,211
Other borrowings		2,231			20			2,251			5,540			41			5,581
Long-term subordinated debentures		—			13			13			—			50			50
Total interest-bearing liabilities		2,608			1,166			3,774			4,791			2,504			7,295
Net interest income before provision for loan losses	$	3,290		$	(1,352	)	$	1,938		$	6,017		$	(2,138	)	$	3,879

⁽¹³⁾ Average rates/yields for these periods have been annualized.

⁽¹⁴⁾ Loans are net of the allowance for loan losses, deferred fees, and discount on SBA loans retained. Loan fees included in interest income were approximately $581,000 and $437,000 for the three months ended June 30, 2007 and 2006, respectively, and $854,000 and $623,000 for the six months ended June 30, 2007 and 2006, 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 on such loans is excluded.

⁽¹⁵⁾ Investment yields have been computed on a tax equivalent basis for any tax-advantaged income.

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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 three and six months ended June 30, 2007 was $35.4 million and $69.4 million, respectively, compared to $29.7 million and $58.2 million, respectively, for the same periods in 2006. The increase was primarily due to growth in earning assets and market rate increases. Growth in earning assets was mainly driven by loan production from our branches and loan production offices. Average net loans increased by $347.4 million and $334.0 million, or 27.9% and 27.0%, for the three and six months ended June 30, 2007, respectively, compared to the same periods in 2006.

Total interest expense for the three and six months ended June 30, 2007 increased by $3.8 million or 30.3% and $7.3 million or 30.0%, respectively, compared to the same periods in 2006. These increases were primarily due to increased borrowings from the FHLB, interest-bearing deposit growth and general market rate increases due in part to increases in Federal funds target rate set by the Federal Reserve Board. Average interest bearing liabilities increased by $197.0 million and $171.4 million, or 17.6% and 15.2%, for the three and six months ended June 30, 2007, respectively, compared to the same periods in 2006.

Net interest income before provision for loan losses increased by $1.9 million for the three months ended June 30, 2007 compared to the same period in 2006. The increase was comprised of a $3.3 million increase due to volume changes offset by a $1.4 million decrease due to rate changes. The average yield on loans for the second quarter of 2007 decreased to 8.44% compared to 8.63% for the same period in 2006, a decrease of 19 basis points due to a greater mix of lower yielding fixed rate loans in the loan portfolio. The average investment portfolio for the second quarter of 2007 and 2006 was $156.5 million and $218.3 million, respectively. The average yields on the investment portfolio for the second quarter of 2007 and 2006 were 4.81% and 4.60%, respectively.

Net interest income before provision for loan losses increased by $3.9 million for the six months ended June 30, 2007 compared to the same period in 2006. The increase was comprised of a $6.0 million increase due to volume changes offset by a $2.1 million decrease due to rate changes. The average yield on loans for the six months ended June 30, 2007 decreased to 8.41% compared to 8.49% for the same period in 2006, a decrease of 8 basis points due to a greater mix of lower yielding fixed rate loans in the loan portfolio. The average investment portfolio for the six months ended June 30, 2007 and 2006 was $162.9 million and $225.2 million, respectively. The average yields on the investment portfolio for the six months ended June 30, 2007 and 2006 were 4.74% and 4.48%, respectively.

Net interest margin for the second quarter of 2007 decreased to 4.39% compared to 4.58% for the same period in 2006. For the six months ended June 30, 2007 interest margin decreased to 4.39% compared to 4.49% for the same period in 2006. The changes in net interest margin were mainly attributable to an increase in fixed rate lending versus variable rate lending for the quarter and general rate increases in funding liabilities. At June 30, 2007, 55% of our loan portfolios consist of fixed rate loans which generally have lower rates. Cost of interest-bearing liabilities increased to 4.96% and 4.89% for the three and six months ended June 30, 2007, respectively, as compared to 4.47% and 4.33% for the same periods in 2006.

Provision for Loan Losses

Credit risk is inherent in the business of making loans. The Company sets aside an allowance for 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.

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The provisions for loan losses were $1.1 million and $2.4 million, respectively, for the three and six months ended June 30, 2007 compared to $1.5 million and $1.8 million, respectively, for the same periods in 2006. The decrease for the three months ended June 30, 2007 was primarily due to lower loan charge-offs in the current three month period ended June 30, 2007 compared to the same period in 2006. The increase for the six months was a result of increased loan originations and the associated loan portfolio growth, and the Company’s detailed quarterly analysis of the credit quality of the loan portfolio. Management believes that the $2.4 million loan loss provision was adequate for the first six months of 2007.

While management believes that the allowance for loan losses of 1.12% of total loans at June 30, 2007 was adequate, future additions to the allowance will be subject to continuing evaluation of the estimation and 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:

	Three Months Ended June 30,								Six Months Ended June 30,
	2007				2006				2007				2006
	Amount		Percent of Total		Amount		Percent of Total		Amount		Percent of Total		Amount		Percent of Total
	(Dollars in thousands)								(Dollars in thousands)
Customer service fees	$	1,772	39.42	%	$	2,084	27.04	%	$	3,539	43.44	%	$	4,214	33.15	%
Fee income from trade finance transactions		682	15.17			797	10.34			1,431	17.57			1,750	13.77
Wire transfer fees		226	5.03			237	3.08			437	5.36			453	3.56
Net gain on sale of loans		618	13.75			1,123	14.57			618	7.59			1,797	14.13
Loan service fees		612	13.62			414	5.37			990	12.16			968	7.61
Insurance settlement—legal fees		—	—			2,520	32.70			—	—			2,520	19.82
Other income		585	13.01			532	6.90			1,131	13.88			1,012	7.96
Total noninterest income	$	4,495	100.00	%	$	7,707	100.00	%	$	8,146	100.00	%	$	12,714	100.00	%
As a percentage of average earning assets			1.03	%			2.04	%			0.95	%			1.68	%

For the three and six months ended June 30, 2007, noninterest income was $4.5 million and $8.1 million, respectively, compared to $7.7 million and $12.7 million, respectively, for the same periods in 2006. For the three and six months ended June 30, 2007, noninterest income, as a percentage of average earning assets, decreased to 1.03% and 0.95%, respectively, from 2.04% and 1.68%, respectively, for the same periods in 2006. The decreases are related to the reduction of customer service fees and trade finance transactions fees and less gain on sale of loans for the three months ended June 30, 2007 as compared to the same period in 2006, as discussed below. In addition, non-recurring insurance settlement income occurred during the second quarter of 2006 contributing to the decreases in 2007 as compared to the same period in 2006. The primary sources of recurring noninterest income continue to be customer service fees, fee income from trade finance transactions and loan service fees. Management is currently evaluating strategies to increase fees related to trade finance and loan services, and to tighten controls on fee waivers on customer service fees.

Customer service fees for the three and six months ended June 30, 2007 decreased by $312,000 or 15.0% and $675,000 or 16.0%, respectively, as compared to the same periods in 2006. This decrease was due primarily to management’s decision to close certain customer accounts whose activities, while generating service charges,

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were inconsistent with the Company’s risk management process and requirements. The decision was consistent with the Company’s policy of maintaining full compliance with all risk management policies and regulatory requirements.

Fee income from trade finance transactions for the three and six months ended June 30, 2007 decreased by $115,000, or 14.4% and $319,000 or 18.2%, respectively, as compared to the same periods in 2006. These decreases were due to less international trade activity by the Company’s customers. As mentioned previously, management is evaluating strategies to increase fees in the trade finance operations.

The Company recorded $618,000 and $1.1 million net gain on sale of loans for the three months ended June 30, 2007 and 2006, respectively. For the six months ended June 30, 2007, the Company recorded a $618,000 and $1.8 million gain on sale of loans, respectively. For the three months ended June 30, 2007 and 2006 the Company sold approximately $7.7 million and $13.9 million, respectively, of its unguaranteed portion of SBA loans. A substantial portion of the gain generated from the sale of unguaranteed loans occurs from the recognition of the deferred gain that resulted from the sale of the guaranteed portion. For the six months ended June 30, 2007 and 2006, the Company sold $7.7 million of its SBA loans comprised of only the unguaranteed portion and $24.8 million comprised of guaranteed and unguaranteed portions of SBA loans, respectively.

Insurance settlement—legal fees represents a settlement that occurred in the second quarter of 2006 with our insurance carrier, BancInsure, regarding coverage of our ongoing litigation with KEIC.

Noninterest Expense

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

	Three Months Ended June 30,								Six Months Ended June 30,
	2007				2006				2007				2006
	Amount		Percent of Total		Amount		Percent of Total		Amount		Percent of Total		Amount		Percent of Total
	(Dollars in thousands)								(Dollars in thousands)
Salaries and employee benefits	$	6,218	51.27	%	$	5,315	49.83	%	$	12,476	52.71	%	$	10,878	47.80	%
Occupancy		983	8.10			896	8.40			1,9436	8.21			1,779	7.81
Furniture, fixtures, and equipment		497	4.10			509	4.77			964	4.07			969	4.26
Data processing		533	4.39			541	5.07			1,037	4.38			1,083	4.80
Professional service fees		1,082	8.92			354	3.32			2,090	8.83			2,414	10.61
Business promotion and advertising		830	6.84			1,123	10.53			1,471	6.22			1,968	8.64
Stationery and supplies		138	1.14			167	1.57			271	1.15			326	1.43
Telecommunications		146	1.20			165	1.54			282	1.19			338	1.48
Postage and courier service		191	1.57			195	1.83			381	1.61			336	1.47
Security service		271	2.24			239	2.25			511	2.16			502	2.20
Loss on interest rate swaps		—	0.00			30	0.28			—	0.00			83	0.36
Other operating expenses		1,240	10.23			1,133	10.63			2,241	9.47			2,081	9.14
Total noninterest expenses	$	12,129	100.00	%	$	10,667	100.00	%	$	23,667	100.00	%	$	22,757	100.00	%
As a percentage of average earning assets			2.9	%			2.8	%			2.7	%			3.0	%
Efficiency ratio			51.2	%			42.7	%			51.5	%			48.8	%

The Company’s noninterest expenses increased 14.0% to $12.1 million for the three months ended June 30, 2007, compared to $10.7 million during the same period in 2006 and increased 4.0% to $23.7 million for the six months ended June 30, 2007 from $22.8 million for the same period in 2006. The increase in noninterest

27

expenses for the second quarter was primarily attributable to increases in salaries and employee benefits and professional services, offset by the decrease in business promotions and advertising expenses. The increase in noninterest expenses for the six months period was mainly attributable to increases in salaries and employee benefits and occupancy expenses, offset by the decreases in professional services and business promotion and advertising expenses. Noninterest expense as a percentage of average earning assets was 2.9% and 2.7% for the three and six months ended June 30, 2007 compared to 2.8% and 3.0% for the same periods in 2006.

The Company’s efficiency ratio increased to 51.2% and 51.5% for the three and six months ended June 30, 2007, compared to 42.7% and 48.8% for the same periods in 2006. This change primarily relates to the non-recurring insurance settlement recorded in other income in the second quarter of 2006 offset by the reduction of costs from consulting services relative to the Bank Secrecy Act Compliance efforts from the first quarter in 2007 as compared to the same periods in 2006.

Salaries and benefits expenses were $6.2 million and $12.5 million for the three and six months ended June 30, 2007, respectively, compared to $5.3 million and $10.9 million for the same periods in 2006. For the three months ended June 30, 2007, the increase was due primarily to the increased hiring activity of senior level personnel and normal salary increases. For the six months ended June 30, 2007 these increases were due in part to expenses associated with the compensation for the new CEO who was hired in January 2007 and the fact that the former CEO remained an employee at full salary until March 30, 2007, as well as the normal salary increases along with a severance agreement payment of approximately $42,000 for the Chief Operating Officer’s departure and filling vacant positions at the Bank when the new CEO and President commenced employment.

Occupancy expenses increased by 9.7% and 9.2% to $983,000 and $1.9 million for the three and six months ended June 30, 2007, respectively, compared to $896,000 and $1.8 million in the same periods in 2006. These increases were due mainly to increased property insurance costs and depreciation expenses resulting from tenant improvements over the past year.

Furniture, fixtures and equipment expenses remained at similar level with slight decreases for both the three and six months ended June 30, 2007 compared to the same periods in 2006. There were no significant activities associated with these expenses during the periods in both years.

Professional service fees were $1.1 million and $2.1 million for the three and six months ended June 30, 2007, respectively, compared to $354,000 and $2.4 million for the same periods in 2006. For the three months ended June 30, 2007, the increase was primarily due to the recouping of legal expenses associated with the settlement with our insurance carrier during the same period in 2006. The decrease for the six months period ended June 30, 2007 was due primarily to non-recurring professional service fees attributable to expenses related to resolving issues identified with the Company’s BSA compliance program incurred during the first quarter of 2006.

Business promotion and advertising expenses decreased by 26.1% and 13.4% to $830,000 and $1.5 million for the three and six months ended June 30, 2007 as compared to $1.1 million and $2.0 million for the same periods in 2006. These decreases were mainly due to the decreases in business referral fees and non-recurring expenses associated with the 20^th anniversary celebration in 2006.

The remaining noninterest expenses include such items as data processing, stationery and supplies, telecommunications, postage, courier service, security service expenses, loss on interest rate swaps and other miscellaneous operating expenses.

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 current taxable income. The deferred portion is

28

intended to reflect income that 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 three months ended June 30, 2007 and 2006, the provision for income taxes was $4.0 million and $5.1 million representing effective tax rates of 38.1% and 39.9%, respectively. For the six months ended June 30, 2007 and 2006, the provision for income taxes was $7.6 million and $8.7 million representing effective tax rates of 38.0% and 39.2%, 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, dividend exclusions, treatment of SFAS 123R amortization, increase in cash surrender value of bank owned life insurance and California enterprise zone deductions. The Company reduced taxes utilizing the tax credits from investments in the low-income housing projects in the amount of $314,000 for the six months ended June 30, 2007 compared to $294,000 for the same period in 2006.

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 assets were $11.1 million as of June 30, 2007 and $11.7 million as of December 31, 2006. As of June 30, 2007, the Company’s deferred tax assets were primarily due to the allowance for loan losses and impairment losses on U.S. Government sponsored enterprise preferred stock.

In accordance with FIN 48, as amended by FIN 48-1, it is management’s policy to separately disclose any penalties or interest arising from the application of federal or state income taxes. There were no penalties or interest assessed for the six months ended June 30, 2007.

Generally, the Company is subject to federal income tax audit examination for years beginning in 2003 and thereafter and years beginning in 2004 for state income tax purposes. Presently, there are no federal or state income tax examinations in process. In addition, the Company does not have any unrecognized tax benefits subject to significant increase or decrease as a result of uncertainty.

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.

The Company invests its excess available funds from daily operations primarily 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 June 30, 2007, the amount invested in Fed Funds was $6.7 million. No amounts were invested in Fed Funds at December 31, 2006. The average yield earned on these funds was 5.71% for the six months ended June 30, 2007 compared to 4.65% for the same period last year.

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Investment Portfolio

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

	As of June 30, 2007				As of December 31, 2006
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(Dollars in thousands)
Available for Sale:
U.S. Treasury	$	499	$	499	$	489	$	488
U.S. Governmental agencies securities and U.S Government sponsored enterprise securities		48,313		47,979		65,995		65,545
U.S. Governmental agencies and U.S. Government sponsored and enterprise mortgage-backed securities		51,071		50,032		58,008		57,178
U.S. Government sponsored enterprise preferred stock		4,865		5,957		4,865		5,744
Corporate trust preferred securities		11,000		11,132		11,000		11,132
Mutual Funds backed by adjustable rate mortgages		4,500		4,376		4,500		4,444
Fixed rate collateralized mortgage obligations		7,934		7,903		2,230		2,203
Corporate debt securities		2,198		2,179		2,197		2,179
Total available for sale	$	130,380	$	130,057	$	149,284	$	148,913
Held to Maturity:
U.S. Government agencies and U.S. Government sponsored enterprise mortgage-backed securities	$	5,886	$	5,709	$	4,961	$	4,909
Municipal securities		5,371		5,312		5,630		5,662
Total held to maturity	$	11,257	$	11,021	$	10,591	$	10,571
Total investment securities	$	141,637	$	141,078	$	159,875	$	159,484

As of June 30, 2007, investment securities totaled $141.3 million or 7.4% of total assets, compared to $159.5 million or 8.7% of total assets as of December 31, 2006. The decrease in the investment portfolio was due to investment proceeds utilized to fund new loans.

As of June 30, 2007, available-for-sale securities totaled $130.1 million, compared to $148.9 million as of December 31, 2006. Available-for-sale securities as a percentage of total assets decreased to 6.8% as of June 30, 2007 compared to 8.1% at December 31, 2006. Held-to-maturity securities increased to $11.3 million as of June 30, 2007, compared to $10.6 million as of December 31, 2006. The composition of available-for-sale and held-to-maturity securities was 92.0% and 8.0% as of June 30, 2007, compared to 93.4% and 6.6% as of December 31, 2006, respectively. For the three and six months ended June 30, 2007, the yield on the average investment portfolio was 4.81% and 4.74%, respectively, as compared to 4.60% and 4.48%, respectively, for the same periods in 2006. The Company used the proceeds from the decrease in the investment portfolio to fund loan growth and a return to utilization of retail deposits to fund growth in the future.

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The following table summarizes, as of June 30, 2007, 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.

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	$	35,648	4.46	%	$	12,830	4.60	%	$	—	—	%	$	—	—	%	$	48,478	4.50	%
U.S. Governmental agencies and U.S. Government sponsored and enterprise mortgage-backed securities		79	5.34			1,185	4.93			6,734	4.88			42,034	4.39			50,032	4.47
U.S Government sponsored enterprise preferred stock		5,957	4.36			—	—			—	—			—	—			5,957	4.36
Corporate trust preferred securities		—	—			—	—			—	—			11,132	7.21			11,132	7.21
Mutual Funds backed by adjustable rate mortgages		4,376	4.56			—	—			—	—			—	—			4,376	4.56
Fixed rate collateralized mortgage obligations		—	—			—	—			1,934	4.70			5,969	5.98			7,903	5.67
Corporate debt securities		2,179	4.76			—	—			—	—			—	—			2,179	4.76
Total available for sale	$	48,239	4.47		$	14,015	4.63		$	8,668	4.84		$	59,135	5.08		$	130,057	4.79
Held to Maturity (Amortized Cost):
U.S. Government agencies and U.S. Government sponsored enterprise mortgage-backed securities	$	—	—	%	$	—	—	%	$	—	—	%	$	5,886	4.86	%	$	5,886	4.86	%
Municipal securities		665	4.19			1,649	4.12			2,830	3.66			227	3.70			5,371	3.87
Total held to maturity	$	665	4.19		$	1,649	4.12		$	2,830	3.66		$	6,113	4.82		$	11,257	4.39
Total investment securities	$	48,904	4.47	%	$	15,664	4.57	%	$	11,498	4.55	%	$	65,248	5.06	%	$	141,314	4.76	%

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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 June 30, 2007.

	As of June 30, 2007
	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	$	21,767	$	(47	)	$	26,711	$	(286	)	$	48,478	$	(333	)
U.S. Governmental agencies and U.S. Government sponsored enterprise mortgage-backed securities		10,000		(222	)		46,558		(1,039	)		56,558		(1,261	)
Municipal securities and corporate debt securities		1,871		(35	)		2,773		(56	)		4,644		(91	)
Total	$	33,638	$	(304	)	$	76,042	$	(1,381	)	$	109,680	$	(1,685	)

As of June 30, 2007, the Company had a total fair value of $109.7 million of securities, with unrealized losses of $1.7 million. We believe these unrealized losses are due to a temporary condition, primarily increases 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 $76.0 million, with unrealized losses of $1.4 million.

All individual securities that have been in a continuous unrealized loss position at June 30, 2007 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 June 30, 2007. These securities have decreased in value since their purchase dates as market interest rates have increased. 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, including loans held for sale, as of the dates indicated:

	June 30, 2007				December 31, 2006
	Amount		Percent of Total		Amount		Percent of Total
	(Dollars in thousands)
Real Estate:
Construction	$	58,865	3.60	%	$	43,508	2.79	%
Commercial (16)		1,080,128	66.04			1,042,562	66.92
Commercial		288,736	17.66			277,296	17.79
Trade Finance (17)		67,000	4.10			66,925	4.29
SBA (18)		58,464	3.58			50,606	3.24
Consumer and other (19)		82,084	5.02			77,682	4.97
Total Gross Loans		1,635,277	100.00	%		1,558,579	100.00	%
Less:
Allowance for Losses		18,289				17,412
Deferred Loan Fees		1,954				2,347
Discount on SBA Loans Retained		874				1,644
Total Net Loans and Loans Held for Sale	$	1,614,160			$	1,537,176

⁽¹⁶⁾ Real estate commercial loans are loans secured by deeds of trust on real estate.

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⁽¹⁷⁾ Includes advances on trust receipts, clean advances, cash advances, acceptances discounted, and documentary negotiable advances under commitments.

⁽¹⁸⁾ Balance includes SBA loans held for sale of $30.4 million and $18.5 million, at the lower of cost or market, at June 30, 2007 and December 31, 2006, respectively.

⁽¹⁹⁾ Consists of transactions in process and overdrafts.

The Company’s gross loans grew $76.7 million, or 4.9%, during the six months ended June 30, 2007. Net loans increased $77.0 million, or 5.0%, to $1.61 billion at June 30, 2007, as compared to $1.54 billion at December 31, 2006. The increase in loans was funded primarily through liquidity created from deposit growth and FHLB borrowings. While management believes that it can continue to leverage the Company’s current infrastructure to achieve growth in the loan portfolio, no assurance can be given that such growth will occur. Net loans as of June 30, 2007 represented 84.3% of total assets, compared to 83.4% as of December 31, 2006.

The growth in net loans is comprised primarily of net increases in commercial construction loans of $15.4 million or 35.3%, real estate commercial loans of $37.6 million, or 3.6%, commercial loans of $11.4 million, or 4.1%, SBA loans of $7.9 million or 15.5% and consumer loans of $4.7 million, or 6.1%.

As of June 30, 2007, commercial real estate remained the largest component of the Company’s total loan portfolio with loans totaling $1.1 billion, representing 66.1% of total loans, compared to $1.0 billion or 66.9% of total loans at December 31, 2006. The increase in commercial real estate loans resulted from a continued demand for the Company’s commercial loan products.

Commercial business loans increased to $288.7 million as of June 30, 2007, compared to $277.3 million at December 31, 2006. The increase resulted from management’s efforts to continue focusing on the Company’s commercial business loan products to meet the needs of our customer base.

The Company sold $7.7 million of unguaranteed portion of SBA loans during the six months ended June 30, 2007 compared to $24.8 million of guaranteed and unguaranteed portion of SBA loans sold with the retained obligation to service the loans for a servicing fee and to maintain customer relations during the same period in 2006. As of June 30, 2007, the Company was servicing $140.7 million of sold SBA loans, compared to $160.7 million of sold SBA loans as of December 31, 2006. The Company’s SBA portfolio increased to $58.5 million at June 30, 2007, an increase of $7.9 million, or 15.5%, compared to December 31, 2006.

The Company has determined it has no reportable foreign credit risk.

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:

	June 30, 2007			December 31, 2006			June 30, 2006
	(Dollars in thousands)
Nonaccrual loans:
Commercial Real Estate	$	—		$	—		$	355
Commercial		1,401			1,502			2,249
Consumer		365			429			191
Trade Finance		120			—			—
SBA		4,087			1,330			687
Total nonperforming loans and assets		5,973			3,261			3,482
Guaranteed portion of nonperforming SBA loans		2,657			973			255
Total nonperforming assets, net of SBA guarantee	$	3,316		$	2,288		$	3,227
Nonperforming loans as a percent of total gross loans		0.37	%		0.21	%		0.26	%
Nonperforming assets as a percent of total loans and other real estate owned		0.37	%		0.21	%		0.26	%
Allowance for loan losses to nonperforming loans		306	%		534	%		430	%

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 interest income 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 external 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 increased to $6.0 million as of June 30, 2007 from $3.3 million as of December 31, 2006 and $3.5 million as of June 30, 2006, respectively. The increases were the result of additions to nonaccrual status in the Company’s SBA loan portfolios and trade finance loan portfolios offset by the deletions in the commercial and consumer loan portfolios. Approximately $2.8 million or 69.0% of nonperforming SBA loans were located in Denver, Colorado, $527,000 or 12.9% in Chicago, Illinois and $325,000 or 8.0% in California. The Company believes that the two nonperforming loan relationships located in Denver are isolated situations and not indicative of general market conditions.

The Company evaluates loan impairment 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. The Company utilizes a $300,000 threshold for the evaluation of loan impairment. Impaired loans are measured for impairment 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.

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The following table provides information on impaired loans:

	As of and for the six months ended June 30, 2007			As of and for the twelve months ended December 31, 2006
	(Dollars in thousands)
Nonperforming impaired loans with specific reserves	$	1,852		$	329
Performing impaired loans without specific reserves		750			—
Total impaired loans		2,602			329
Allowance on impaired loans		(278	)		(329	)
Net recorded investment in impaired loans	$	2,324		$	—
Average total recorded investment in impaired loans	$	12,774		$	1,404
Interest income recognized on impaired loans on a cash basis	$	1,618		$	3

At June 30, 2007, the Company assessed its loan portfolio and through its migration analysis the Company has determined that three loans are deemed impaired in accordance with SFAS No. 114. The nonperforming impaired loans are two SBA loans with a 75% guarantee located in Denver, Colorado. The performing impaired loan is current and has never been delinquent. During the second quarter, two loan relationships which were deemed impaired totaling $20.5 million at March 31, 2007 were removed from that status as a result of a payoff and a note sale relating to these two loan relationships.

Allowance for Loan Losses

The Company’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 Company’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 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 Company’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 Company adds new products, increases the complexity of the loan portfolio, and expands the geographic coverage, the Company 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 Company believes that its methodologies continue to be appropriate given its size and level of complexity.

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 adjusted for related selling costs of the collateral when it is determined that foreclosure is probable.

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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, and substandard 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 a 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. To assist management in monitoring the loan loss allowance the Company’s independent loan review consultants review the allowance as an integral part of their examination process.

The following table sets forth the composition of the allowance for loan losses as of June 30, 2007 and December 31, 2006:

	June 30, 2007		December 31, 2006
	(Dollars in thousands)
Specific (Impaired loans)	$	278	$	329
Formula (non-homogeneous)		17,540		16,621
Homogeneous		471		462
Total allowance for loan losses	$	18,289	$	17,412

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

	Six Months Ended June 30, 2007			Year Ended December 31, 2006			Six Months Ended June 30, 2006
	(Dollars in thousands)
Balances
Average total loans outstanding during the period (20)	$	1,587,641		$	1,356,169		$	1,250,187
Total loans outstanding at end of period ( 20)	$	1,632,449		$	1,554,588		$	1,322,215
Allowance for Loan Losses:
Balance at beginning of period	$	17,412		$	13,871		$	13,871
Charge-offs:
Commercial Real Estate		—			258			258
Commercial		1,363			1,635			783
Consumer		92			333			126
SBA		84			473			35
Total charge-offs		1,539			2,699			1,202
Recoveries
Real estate		—			423			423
Commercial		14			44			34
Consumer		25			101			60
SBA		7			6			3
Total recoveries		46			574			520
Net loan charge-offs		1,493			2,125			682
Provision for loan losses		2,370			5,666			1,775
Balance at end of period	$	18,289		$	17,412		$	14,964
Ratios:
Net loan charge-offs to average loans		0.09	%		0.16	%		0.05	%
Provision for loan losses to average total loans		0.15			0.42			0.14
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		306			534			430
Net loan charge-offs to allowance for loan losses at end of period		8.16			12.20			4.56
Net loan charge-offs to provision for loan losses		63.00			37.50			38.42

⁽²⁰⁾ Total loans are net of deferred loan fees and discount on SBA loans sold.

Based on a quarterly migration analysis which evaluates loan portfolio credit quality, allowance for loan losses grew to $18.3 million as of June 30, 2007 compared to $17.4 million at December 31, 2006. The Company recorded a provision of $1.1 million and $2.4 million for the three and six months ended June 30, 2007, respectively, compared to $1.5 million and $1.8 million for the same periods of 2006. For the six months ended June 30, 2007, the Company charged off $1.5 million and recovered $46,000 resulting in net loan charge-offs of $1.5 million compared to net loan charge-offs of $682,000 for the same period in 2006.

The increase in net loan charge-offs comparing the six months ended June 30, 2007 to the same period in 2006 was due to a larger than normal recovery in the first six months in 2006 and partly due to an increase in commercial loan charge-offs relating to our scoring-based express loan program, also known as Bank to Business (B2B) loan portfolio during the six months ended June 30, 2007. Total charge-offs for the B2B portfolio was

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$799,000 for the six months ended June 30, 2007. The B2B loan portfolio totaled $34.3 million and the nonperforming loans totaled $448,000 or 7.5% of the total nonperforming loans at June 30, 2007. Management has taken corrective measures by tightening the scoring criteria on new loan origination going forward.

The allowance for loan losses remained unchanged at 1.12% of total gross loans at June 30, 2007 compared to December 31, 2006 and decreased by 1 basis point compared to June 30, 2006. The Company provides an allowance for new credits based on the migration analysis discussed previously.

Management believes the level of allowance as of June 30, 2007 is adequate to absorb the estimated losses from any known or inherent risks in the loan portfolio and the loan growth during the period. 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.

The ratio of the allowance for loan losses to total nonperforming loans decreased to 306% as of June 30, 2007 compared to 534% as of December 31, 2006. 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 4.68% for the six months ended June 30, 2007, compared to 4.28% for the same period in 2006. 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 sensitive customers who demand high cost certificates of deposit because of local market competition by using wholesale funding sources. As of June 30, 2007, the Company held brokered CD’s in the amount of $66.9 million. The Company also had time certificates of deposit with the State of California in the amount of $75.0 million as of both June 30, 2007 and December 31, 2006.

Deposits consist of the following:

	June 30, 2007		December 31, 2006
	(Dollars in thousands)
Demand deposits (noninterest-bearing)	$	393,108	$	388,163
Money market accounts and NOW		275,403		190,453
Savings		65,838		76,846
		734,349		655,462
Time deposits
Less than $100,000		102,582		91,830
$100,000 or more		748,421		682,107
Total	$	1,585,352	$	1,429,399

Total deposits increased $157.1 million or 11.0% to $1.59 billion at June 30, 2007 compared to $1.43 billion at December 31, 2006. This increase was the result of efforts to manage the Company’s balance sheet and to improve the performance of the earning assets and funding liabilities portfolios by adding $66.9 million of brokered time deposits during the six months with an average funding cost of 5.31%. These efforts included the use of other funding liabilities (e.g., FHLB borrowings) to manage the repricing period of the interest bearing liabilities and replace time deposits which were generally more expensive.

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Time deposits by maturity dates are as follows at June 30, 2007:

	$100,000 or Greater		Less Than $100,000		Total
	(Dollars in thousands)
2007	$	587,371	$	67,322	$	654,693
2008		153,557		34,521		188,078
2009		3,198		527		3,725
2010		2,103		99		2,202
2011 and thereafter		2,192		113		2,305
Total	$	748,421	$	102,582	$	851,003

Information concerning the average balance and average rates paid on deposits by deposit type for the three and six months ended June 30, 2007 and 2006 is contained in the tables above in the section entitled “Net Interest Income and Net Interest Margin.”

Other Borrowed Funds

The Company regularly uses 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 borrowings were $132.7 million and $223.8 million at June 30, 2007 and December 31, 2006, respectively. This decrease is due to an increase in customer deposits relating to the Company’s promotion of money market accounts. Notes issued to the U.S. Treasury amounted to $389,000 as of June 30, 2007 compared to $675,000 as of December 31, 2006. The total borrowed amounts outstanding at June 30, 2007 and December 31, 2006 was $133.3 million and $229.5 million, respectively.

In addition, the long-term subordinated debentures of $18.6 million in pass-through trust preferred securities created another source of funding.

Contractual Obligations

The following table presents, as of June 30, 2007, 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.

	Remaining 6 months in 2007		2008		2009		2010		2011 and thereafter		Total
	(Dollars in thousands)
Debt obligations (21)	$	80,156	$	325	$	343	$	362	$	70,034	$	152,220
Deposits		667,512		198,200		11,469		7,596		6,561		891,338
Operating lease obligations		1,092		2,092		1,992		1,758		4,539		11,473
Total contractual obligations	$	748,760	$	200,617	$	13,804	$	9,716	$	81,134	$	1,054,031

⁽²¹⁾ Includes principal payments 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

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demands and to take advantage of investment opportunities as they arise. The Company’s principal sources of liquidity have been growth in deposits, proceeds from the maturity of securities, and repayments from loans.

As part of the Company’s asset liability management, the Company utilizes FHLB borrowings to supplement our deposit source of funds. Therefore, there could be fluctuations in these balances depending on the short-term liquidity and longer-term financing need of the Company. The Company’s primary sources of liquidity are derived from financing activities, which include customer and broker deposits, federal funds facilities, and advances from the Federal Home Loan Bank of San Francisco.

Because the Company’s primary sources and uses of funds are deposits and loans, the relationship between net loans and total deposits provides one measure of the Company’s liquidity. Typically, if the ratio is over 100%, the Company relies more on borrowings and repayments from the loan portfolio to provide liquidity. Alternative sources of funds such as FHLB advances and brokered deposits and other collateralized borrowings provide liquidity as needed from liability sources are an important part of the Company’s asset liability management strategy.

	At June 30, 2007			At December 31, 2006
Net loans	$	1,614,160		$	1,537,176
Deposits		1,585,352			1,429,399
Net loan to deposit ratio		101.8	%		107.5	%

As of June 30, 2007, the Company’s liquidity ratio, which is the ratio of available liquid funds to net deposits and short-term liabilities, was 6.9%, compared to 8.2% at December 31, 2006. Total available liquidity as of June 30, 2007 was $115.3 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 48.1% 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 $190 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 37.4% assuming this $190 million is stable and core fund sources and certain portions of money market account as volatile. The net non-core fund dependence ratio is the ratio of net short-term investment less non-core liabilities divided by long-term assets. All of the ratios were in compliance with internal guidelines as of and for six months ended June 30, 2007. The Company is looking toward the growth of deposits to meet its liquidity needs in the future.

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 Asset/Liability Management Committee.

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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’s balance sheet 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.

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 periods of time. Market interest rates change over time and if a financial institution cannot quickly adapt to changes in interest rates, 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.

The Company’s overall strategy is to minimize the adverse impact of immediate incremental changes in market interest rates (rate shock) on net interest income and economic value of equity. Economic value of equity is defined as the present value of assets, minus the present value of liabilities and off-balance sheet instruments. The attainment of this goal requires a balance between profitability, liquidity and interest rate risk exposure. To minimize the adverse impact of changes in market interest rates, the bank simulates the effect of instantaneous interest rate changes on net interest income and economic value of equity on a quarterly basis. The table below shows the estimated impact of changes in interest rates on our net interest income and market value of equity as of June 30, 2007 and March 31, 2007, assuming a parallel shift of 100 to 300 basis points in both directions.

	Net Interest Income(22)				Economic Value of Equity (EVE)(23)
Change (In Basis Points)	June 30, 2007 % Change		March 31, 2007 % Change		June 30, 2007 % Change		March 31, 2007 % Change
+300	10.41	%	12.91	%	-27.81	%	-25.37	%
+200	7.00	%	8.67	%	-18.38	%	-16.88	%
+100	3.57	%	4.39	%	-9.19	%	-8.41	%
Level
-100	-3.09	%	-4.01	%	8.16	%	7.95	%
-200	-6.44	%	-8.47	%	14.25	%	14.13	%
-300	-11.00	%	-13.53	%	18.50	%	18.89	%

⁽²²⁾ The percentage change represents net interest income for twelve months in a stable interest rate environment versus net interest income in the various rate scenarios

⁽²³⁾ The percentage change represents economic value of equity of the Bank in a stable interest rate environment versus economic value of equity in the various rate scenarios

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All interest-earning assets, interest-bearing liabilities and related derivative contracts are included in the interest rate sensitivity analysis at June 30, 2007 and March 31, 2007. At June 30, 2007 and December 31, 2006, our estimated changes in net interest income and economic value of equity 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. The increase in fixed rate loans as a percentage of the total loan portfolio from March 31, 2007 at 51% to June 30, 2007 at 55% had the most significant impact on the change in EVE.

CAPITAL RESOURCES

Shareholders’ equity as of June 30, 2007 was $153.0 million, compared to $140.7 million as of December 31, 2006. The primary sources of increases in capital have been retained earnings 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 total risk-based capital ratio, Tier I risk-based capital ratio, and Tier I leverage ratio meet or exceed 10%, 6%, and 5%, respectively, are deemed to be “well-capitalized.” As of June 30, 2007 all of the Company’s capital ratios were above the minimum regulatory requirements for a “well-capitalized” institution.

The following table compares the Company’s and Bank’s actual capital ratios at June 30, 2007, 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)	10.96	%	10.70	%	8.00	%	10.00	%
Tier 1 Capital (to Risk-Weighted Assets)	9.85	%	9.59	%	4.00	%	6.00	%
Tier 1 Capital (to Average Assets)	9.03	%	8.80	%	4.00	%	5.00	%

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Stock Repurchase Activities

As of June 30, 2007, the Company purchased 10,054 shares for $171,000 at approximately $17.03 per share. These shares have been retired. Repurchase program activity for the second quarter of 2007 is disclosed in Part II, Item 2 of this Form 10-Q.

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

Disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports it files or submits 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 the Company in the reports that it files under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer (principal executive officer) and the Chief Financial Officer (principal financial officer), as appropriate to allow timely decisions regarding required disclosure.

Management previously disclosed a material weakness in internal control over financial reporting in its quarterly report on Form 10-Q, filed on April 27, 2007 for the quarter ended March 31, 2007, relating to our internal controls over the accuracy of the general ledger balance and subsidiary ledger being certified by each department and reviewed by the accounting department.

An evaluation was performed under the supervision and with the participation of our management, including our CEO and CFO, of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2007. Based on the evaluation, our CEO and CFO have concluded that the previously identified deficiency in internal control over financial reporting could cause our disclosure controls and procedures to be not fully effective at the reasonable assurance level.

There were no changes in our internal control over financial reporting during the second quarter of 2007 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting, except for the remediation of the material weakness described below.

To remediate this material weakness, management implemented an additional review process by having independent departments review the certifications for branches and departments prior to the review by the accounting department. In addition, the Company’s internal audit department will audit the certification process on a quarterly basis. As a result of these actions, management of the Company anticipates this material weakness will be remediated by the end of the third quarter of 2007.

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PART II—OTHER INFORMATION

Item 1: LEGAL PROCEEDINGS

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 herein described, 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.

KEIC Claims—In March 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 seeks 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.

Korean Bank Claims—In July 2006 the Bank was served with cross-claims from a number of Korean banks who are also third party defendants in the KEIC action. The Korean banks are Citibank Korea, Inc. (formerly known as KorAm Bank), Industrial Bank of Korea, Kookmin Bank, Korea Exchange Bank and Hana Bank (hereinafter the Korean Banks). The Korean Banks allege, in both suits, various claims for breach of contract, negligence, negligent misrepresentation and breach of fiduciary duty in the handling of similar but a different set of documents against acceptance transactions that occurred in the years 2000 and 2001. The total amount of the Korean Bank claims is approximately $46.1 million plus interest and punitive damages. These claims are in addition to KEIC’s claims against the Bank in the approximate amount of $56 million originally filed in March 2003.

Status of the Consolidated Action—The claims brought by KEIC and the Korean Banks, which total approximately $100 million, have been consolidated into a single action. The consolidated action was recently remanded back from the federal to the state court. In November 2005, the Orange County Superior Court had dismissed all claims of KEIC against the Bank in the state court on the grounds that federal courts have exclusive jurisdiction over the claims. In December 2006, the court of appeals reversed the earlier decision by the state court and remanded the case back to the state court. Back in the state court, several parties filed preemptory challenges to the reassignment of a judge for this action. One of the parties filed a petition for a writ of mandate for a review of the latest judge assignment order dated June 26, 2007. A status conference is scheduled for September 17, 2007. No trial date has been set.

If the outcome of this litigation is adverse and the Bank is required to pay significant monetary damages, the Company’s financial condition and results of operations are likely to be materially and adversely affected. Although the Bank believes that it has meritorious defenses and intends to vigorously defend these lawsuits, management cannot predict the outcome of this litigation.

Item 1A: RISK FACTORS

No material changes identified

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

(c) Stock Repurchase

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The following table provides information concerning the Company’s repurchase of its Common Stock during the second quarter of 2007:

	June
Total shares purchased		10,054
Average per share price	$	17.03
Number of shares purchased as part of publicly announced plan or program		10,054
Maximum approximate dollar value of shares that may yet be purchased under the plan or program (22)	$	9,829,000

⁽²²⁾ On May 24, 2007, the Company announced a $10 million stock buyback, under which up to $10 million of the Company’s issued and outstanding common shares in the open market can be repurchased for a period of twelve months ending in May 2008. No shares were repurchased in May 2007.

Item 3: DEFAULTS UPON SENIOR SECURITIES

Not applicable

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

The Company’s annual meeting of shareholders was held on May 23, 2007. A total of 13,614,337 shares were represented in person or by proxy at the meeting, constituting 81.8% of the 16,638,201 shares of the issued and outstanding shares entitled to vote at the meeting. Proxies were solicited pursuant to Regulation 14A under the Securities Exchange Act of 1934, there was no solicitation in opposition to the Board of Directors’ nominees for directors as listed in the proxy statement, and all of such nominees were elected pursuant to the vote of shareholders. The directors noted below were elected to two-year terms. The votes tabulated were:

	Authority Given	Authority Withheld
David Z. Hong	11,794,589	1,819,948
Chang Hwi Kim	11,832,877	1,781,660
Sang Hoon Kim	11,832,677	1,781,860
Jae Whan Yoo	11,832,677	1,781,860

In addition, the terms of the following directors continued after the shareholders’ meeting: Jin Chul Jhung, Peter Y.S. Kim and Chung Hyun Lee.

The ratification of the appointment of Grant Thornton, LLP as our independent registered public accounting firm for 2007 was approved at the 2007 annual meeting of shareholders by the following vote:

For	Against	Abstain	Broker Non-Votes
13,597,082	3,502	13,953	0

Item 5: OTHER INFORMATION

Not applicable

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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
3.1	Restated Articles of Incorporation of Center Financial Corporation1
3.2	Amendment to the Articles of Incorporation of Center Financial Corporation2
3.3	Amended and Restated Bylaws of Center Financial Corporation3
10.1	Employment Agreement between Center Financial Corporation and Jae Whan Yoo effective January 16, 20074
10.2	2006 Stock Incentive Plan, as Amended and Restated June 13, 2007 (filed herewith)
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 Issuer5
10.5	Amended and Restated Declaration of Trust of Center Capital Trust I, dated as of December 30, 20035
10.6	Guarantee Agreement between Center Financial and Wells Fargo Bank, National Association dated as of December 30, 20035
10.7	Deferred compensation plan and list of participants6
10.8	Split dollar plan and list of participants6
10.9	Survivor income plan and list of participants6
10.10	Resignation Agreement for Seon Hong Kim7
10.11	Waiver and Release Agreement for James Hong (filed herewith)
11	Statement of Computation of Per Share Earnings (included in Note 8 to Interim 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 of the same number to the Company’s Registration Statement on Form S-4 filed with the Securities and Exchange Commission (the “Commission”) on June 14, 2002 and incorporated herein by reference

² Filed as an Exhibit of the same number to the Form 10-K for the fiscal year ended December 31, 2005 and incorporated herein by reference

³ Filed as an Exhibit 3.2 to the Form 8-K filed with the Commission on May 12, 2006 and incorporated herein by reference

⁴ Filed as an Exhibit 10.1 to the Form 8-K filed with the Commission on February 1, 2007 and incorporated herein by reference

⁵ Filed as an Exhibit of the same number to the Form 10-K for the fiscal year ended December 31, 2003 and incorporated herein by reference

⁶ Filed as an Exhibit of the same number to the Form 10-Q for the quarterly period ended March 31, 2006 and incorporated herein by reference

⁷ Filed as an Exhibit of the same number to the Form 10-Q for the quarterly period ended March 31, 2007 and incorporated herein by reference

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SIGNATURES

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

Date: July 25, 2007	By:	/s/    JAE WHAN YOO
		Center Financial Corporation Jae Whan Yoo President & Chief Executive Officer

Date: July 25, 2007	By:	/s/    LONNY D. ROBINSON
		Center Financial Corporation Lonny D. Robinson Executive Vice President & Chief Financial Officer

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