10-Q

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 September 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 October 23, 2007, there were 16,730,407 outstanding shares of the issuer’s Common Stock with no par value.

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	18
FORWARD-LOOKING STATEMENTS	18
SUMMARY OF FINANCIAL DATA	21
EARNINGS PERFORMANCE ANALYSIS	23
FINANCIAL CONDITION ANALYSIS	31
LIQUIDITY AND MARKET RISK/INTEREST RISK MANAGEMENT	42
CAPITAL RESOURCES	45
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	45
ITEM 4: CONTROLS AND PROCEDURES	45
PART II—OTHER INFORMATION	47
ITEM 1: LEGAL PROCEEDINGS	47
ITEM 1A. RISK FACTORS	47
ITEM 2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	51
ITEM 3: DEFAULTS UPON SENIOR SECURITIES	51
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	51
ITEM 5: OTHER INFORMATION	51
ITEM 6: EXHIBITS	52
SIGNATURES	53

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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 SEPTEMBER 30, 2007 AND DECEMBER 31, 2006

	9/30/2007		12/31/2006
	(Dollars in thousands)
ASSETS
Cash and due from banks	$	64,070	$	71,504
Federal funds sold		6,470		—
Money market funds and interest-bearing deposits in other banks		2,233		1,872
Cash and cash equivalents		72,773		73,376
Securities available for sale, at fair value		132,162		148,913
Securities held to maturity, at amortized cost (fair value of $10,295 as of September 30, 2007 and $10,571 as of December 31, 2006)		10,373		10,591
Federal Home Loan Bank and Pacific Coast Bankers Bank stock, at cost		13,437		11,065
Loans, net of allowance for loan losses of $19,619 as of September 30, 2007 and $17,412 as of December 31, 2006		1,681,650		1,518,666
Loans held for sale, at the lower of cost or market		36,621		18,510
Premises and equipment, net		13,407		13,322
Customers’ liability on acceptances		3,748		4,871
Accrued interest receivable		9,336		8,574
Deferred income taxes, net		11,318		11,723
Investments in affordable housing partnerships		6,150		6,878
Cash surrender value of life insurance		11,482		11,183
Goodwill		1,253		1,253
Intangible assets, net		280		320
Other assets		3,453		4,067
Total Assets	$	2,007,443	$	1,843,312
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities
Deposits:
Noninterest-bearing	$	361,137	$	388,163
Interest-bearing		1,159,132		1,041,236
Total deposits		1,520,269		1,429,399
Acceptances outstanding		3,748		4,871
Accrued interest payable		11,927		11,458
Other borrowed funds		285,324		229,490
Trust preferred securities		18,557		18,557
Accrued expenses and other liabilities		8,771		8,803
Total liabilities		1,848,596		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, 16,730,407 (including 8,700 shares of unvested restricted stock) as of September 30, 2007 and 16,632,601 as of December 31, 2006		71,088		69,172
Retained earnings		87,471		71,777
Accumulated other comprehensive income (loss), net of tax		288		(215	)
Total shareholders’ equity		158,847		140,734
Total Liabilities and Shareholders’ Equity	$	2,007,443	$	1,843,312

See accompanying notes to interim consolidated financial statements.

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CENTER FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(UNAUDITED)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006

	Three Months Ended September 30,					Nine Months Ended September 30,
	2007		2006			2007		2006
	(Dollars in thousands, except per share data)
Interest and Dividend Income:
Interest and fees on loans	$	34,781	$	29,906		$	100,252	$	81,961
Interest on federal funds sold		67		88			180		1,506
Interest on taxable investment securities		1,595		1,757			4,771		6,001
Interest on tax-advantaged investment securities		125		144			387		393
Dividends on equity stock		151		107			506		265
Money market funds and interest-earning deposits		16		119			48		232
Total interest and dividend income		36,735		32,121			106,144		90,358
Interest Expense:
Interest on deposits		14,767		11,843			39,775		35,187
Interest on borrowed funds		2,258		1,499			8,120		1,780
Interest expense on trust preferred securities		378		383			1,120		1,076
Total interest expense		17,403		13,725			49,015		38,043
Net interest income before provision for loan losses		19,332		18,396			57,129		52,315
Provision for loan losses		2,000		2,494			4,370		4,269
Net interest income after provision for loan losses		17,332		15,902			52,759		48,046
Noninterest Income:
Customer service fees		1,676		2,019			5,215		6,233
Fee income from trade finance transactions		615		849			2,046		2,599
Wire transfer fees		206		221			643		674
Gain on sale of loans		—		819			618		2,616
Gain on sale of equipment		—		—			12		—
Loan service fees		409		480			1,398		1,448
Insurance settlement—legal fees		—		—			—		2,520
Other income		477		520			1,596		1,532
Total noninterest income		3,383		4,908			11,528		17,622
Noninterest Expense:
Salaries and employee benefits		6,342		5,632			19,220		17,142
Occupancy		1,079		957			3,022		2,736
Furniture, fixtures, and equipment		575		487			1,539		1,456
Data processing		530		539			1,567		1,622
Professional service fees		359		704			2,449		3,118
Business promotion and advertising		480		552			1,549		1,888
Stationery and supplies		137		179			408		505
Telecommunications		160		169			442		507
Postage and courier service		185		212			565		548
Security service		268		247			779		749
Loss on sale of investment securities		—		115			—		115
(Gain) loss on interest rate swaps		—		(57	)		—		26
Other operating expenses		1,332		1,043			3,574		3,124
Total noninterest expense		11,447		10,779			35,114		33,536
Income before income tax provision		9,268		10,031			29,173		32,132
Income tax provision		3,570		3,671			11,136		12,324
Net income		5,698		6,360			18,037		19,808
Other comprehensive income—unrealized gain on available-for-sale securities, net of income tax expense of $(345), $(633), $(365) and $(336)		476		872			503		463
Comprehensive income	$	6,174	$	7,232		$	18,540	$	20,271
EARNINGS PER SHARE:
Basic	$	0.34	$	0.38		$	1.08	$	1.20
Diluted	$	0.34	$	0.38		$	1.07	$	1.19
Weighted average shares outstanding—basic		16,720,539		16,564,111			16,689,622		16,503,416
Weighted average shares outstanding—diluted		16,785,290		16,681,811			16,785,126		16,648,779

See accompanying notes to interim consolidated financial statements.

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CENTER FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006

	9/30/2007			9/30/2006
	(Dollars in thousands)
Cash flows from operating activities:
Net income	$	18,037		$	19,808
Adjustments to reconcile net income to net cash provided by operating activities:
Compensation expenses related to stock options and restricted stocks		862			532
Depreciation and amortization		2,016			1,804
Amortization of deferred fees		(1,550	)		(1,109	)
Mark to market adjustments on interest rate swaps		—			229
Amortization of premium, net of accretion of discount, on securities available for sale and held to maturity		50			(221	)
Provision for loan losses		4,370			4,269
Net (gain) loss on sale of premises and equipment		(9	)		125
Net loss on sale of securities available for sale		—			115
Net originations of SBA loans held for sale		(25,608	)		(53,783	)
Gain on sale of loans		(618	)		(2,616	)
Proceeds from sale of loans		21,680			49,410
Deferred tax provision (benefit)		39			(698	)
Federal Home Loan Bank stock dividend		(496	)		(217	)
Increase in accrued interest receivable		(762	)		(1,533	)
Net increase in cash surrender value of life insurance policy		(299	)		(282	)
Decrease (increase) in other assets and servicing assets		1,523			(6,353	)
Increase in accrued interest payable		469			2,120
(Decrease) increase in accrued expenses and other liabilities		(1,331	)		2,595
Net cash provided by operating activities		18,373			14,195
Cash flows from investing activities:
Purchase of securities available for sale		(34,656	)		(7,605	)
Proceeds from principal repayment, matured, or called securities available for sale		52,240			68,886
Proceeds from sale of securities available for sale		—			13,920
Purchase of securities held to maturity		(1,382	)		(518	)
Proceeds from matured, called or principal repayment on securities held to maturity		1,586			2,187
Purchase of Federal Home Loan Bank and other equity stock		(1,876	)		(3,194	)
Payments from net swap settlement		—			(256	)
Net increase in loans		(179,265	)		(238,122	)
Proceeds from recoveries of loans previously charged-off		80			540
Purchases of premises and equipment		(1,492	)		(1,234	)
Proceeds from disposal of equipment		12			252
Net increase in investments in affordable housing partnerships		186			—
Net cash used in investing activities		(164,567	)		(165,144	)
Cash flows from financing activities:
Net increase (decrease) in deposits		90,871			(65,058	)
Net increase in other borrowed funds		55,834			153,015
Proceeds from stock options exercised		1,225			2,202
Tax benefit in excess of recognized cumulative compensation costs		—			523
Payment of cash dividend		(2,168	)		(1,974	)
Purchases of common stock		(171	)		—
Net cash provided by financing activities		145,591			88,708
Net decrease in cash and cash equivalents		(603	)		(62,241	)
Cash and cash equivalents, beginning of the year		73,376			143,376
Cash and cash equivalents, end of the period	$	72,773		$	81,135
Supplemental disclosure of cash flow information:
Interest paid	$	48,546		$	35,923
Income taxes paid	$	10,408		$	17,040
Supplemental schedule of noncash investing, operating, and financing activities:
Cash dividend accrual	$	840		$	664

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 seven Loan Production Offices (“LPOs”) in 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 fourth 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 investor relations, legal and accounting and Nasdaq listing fees, have been and will generally be paid from dividends paid to Center Financial by the Bank.

Acquisition

On September 18, 2007, the Company entered into a definitive agreement to acquire First Intercontinental Bank (“FICB”), a Georgia State chartered commercial bank with assets of approximately $232 million as of June 30, 2007, for an aggregate purchase price of approximately $65.2 million. Under the agreement, the Company will acquire all outstanding shares of FICB for consideration consisting of 60% cash and 40% in the

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Company’s common stock. FICB shareholders may elect to receive cash, stock or a combination of both. Included in the total purchase price, the Company will pay approximately $3.6 million related to the outstanding stock options of FICB.

Under the agreement, FICB will be merged into a newly formed Georgia state-chartered banking subsidiary of the Company that will operate under the First Intercontinental Bank name. The Company will become a multi-bank holding company with the Bank and FICB as its two wholly-owned banking subsidiaries.

The closing of the transaction is subject to the approvals of the Federal Reserve Board, the Federal Deposit Insurance Corporation (“FDIC”) and the Georgia Department of Banking and Finance, as well as the approval of FICB’s shareholders. The acquisition is expected to close in the first quarter of 2008.

Organized in 2000, FICB is a Georgia state-chartered commercial bank headquartered in Doraville, Georgia, a commercial business center of Atlanta’s Asian community. FICB currently operates four full-service branches, one located in Doraville, two in Duluth and one in Suwannee, all in Georgia, targeting the Korean-American and other ethnic communities in the greater Atlanta metropolitan area.

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, 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 nine months ended September 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. The consolidated statement of shareholders’ equity and comprehensive income is omitted as there were no significant changes in shareholders’ equity and comprehensive income during nine months ended September 30, 2007.

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

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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 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, 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 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 adopted FIN 48 and the adoption has had no material impact 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 is currently assessing whether fair value accounting is appropriate for items and currently cannot estimate the impact, if any, 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

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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 SFAS No. 158 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 is currently assessing the impact and currently cannot estimate the impact, if any, 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 EITF Issue No. 06-5 as of January 1, 2007 and the adoption 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 SFAS No. 159 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 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 incentive stock options to officers and employees, and non-qualified stock options and restricted stock awards to employees (including officers) and non-employee 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 $389,000 and $862,000 ($306,000 and $687,000 after tax effect of non-qualified stock options) for the three and nine months ended September 30, 2007, respectively. Calculations of 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 nine months ended September 30, 2007.

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The Company granted 63,000 and 670,000 options with a weighted average grant-date fair value of $4.45 and $6.93 for the three and nine months ended September 30, 2007, respectively. The Company granted 68,000 options with a weighted average grant-date fair value of $8.91 for both the three and nine months ended September 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.

	Nine Months Ended 9/30/2007	Nine Months Ended 9/30/2006
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%	32% – 34%
Expected dividend yield	0.00% – 1.29%	0.00% – 1.05%
Weighted average grant-date fair value	$6.93	$8.91

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 nine months ended September 30, 2007.

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A summary of the Company’s stock option activity and related information for the three and nine months ended September 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 June 30, 2007	2,148,752		908,931		$	17.15
Options granted	(63,000	)	63,000			15.24
Options forfeited	15,900		(15,900	)		15.11
Options exercised	—		(12,960	)		8.65
Balance at September 30, 2007	2,101,652		943,071			17.17
Balance at June 30, 2006	2,713,442		541,249		$	14.44
Net options granted authorized under new plan	—		—			—
Options granted	(68,000	)	68,000			23.56
Options forfeited	5,000		(5,000	)		13.42
Options exercised	—		(102,000	)		15.73
Balance at September 30, 2006	2,650,442		502,249			18.62
Balance at December 31, 2006	2,670,290		473,593		$	15.33
Options granted	(670,000	)	670,000			18.09
Options forfeited	101,362		(101,362	)		19.85
Options exercised	—		(99,160	)		12.42
Balance at September 30, 2007	2,101,652		943,071			17.17
Balance at December 31, 2005	936,389		638,804		$	13.38
Net options granted authorized under new plan	1,762,250		—			—
Options granted	(68,000	)	68,000			23.56
Options forfeited	19,803		(19,803	)		9.93
Options exercised	—		(184,752	)		11.92
Balance at September 30, 2006	2,650,442		502,249			18.62

Options outstanding as of September 30, 2007 have been segregated into three ranges for additional disclosure as follows:

	Options Outstanding				Options Exercisable
	Options Outstanding as of 9/30/2007	Weighted- Average Remaining Contractual Life in Years	Weighted- Average Exercise Price		Options Exercisable as of 9/30/2007	Weighted- Average Remaining Contractual Life in Years	Weighted- Average Exercise Price
Range of Exercise Prices
$2.23 – $ 7.99	69,771	4.15	$	4.99	67,611	4.11	$	4.96
$8.00 – $20.00	619,300	9.08		16.21	59,500	6.35		13.12
$20.01 – $25.10	254,000	8.97		22.86	27,500	8.26		23.82
	943,071	8.69		17.17	154,611	5.71		11.46

Aggregate intrinsic value of options outstanding and options exercisable at September 30, 2007 was $727,000 and $663,000, respectively. Aggregate intrinsic value represents the difference between the Company’s closing stock price on the last trading day of the period, which was $13.91 as of September 28, 2007, and the exercise price multiplied by the number of options outstanding. Total intrinsic value of options exercised was approximately $83,000 and $915,000 for the three months ended September 30, 2007 and 2006, respectively, and $557,000 and $2.3 million for the nine months ended September 30, 2007 and 2006, respectively.

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As of September 30, 2007, the Company had approximately $4.7 million of unrecognized compensation costs related to non-vested options. The Company expects to recognize these costs over a weighted average period of 3.78 years.

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

	Three Months Ended September 30, 2007				Nine Months Ended September 30, 2007
	Number of Shares		Weighted- Average Grant-Date Fair Value per Share		Number of Shares		Weighted- Average Grant-Date Fair Value per Share
Restricted Stock:
Nonvested, beginning of period	9,700		$	17.00	—		$	—
Granted	—			17.00	9,700			17.00
Vested	—			—	—			—
Cancelled and forfeited	(1,000	)		17.00	(1,000	)		17.00
Nonvested, at end of period	8,700			17.00	8,700			17.00

The Company recorded compensation cost of $7,000 and $10,000 related to the restricted stock granted under the 2006 Plan for the three and nine months ended September 30, 2007, respectively.

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 $285.3 million and $229.5 million at September 30, 2007 and December 31, 2006, respectively. Interest expense on other borrowed funds was $8.0 million and $1.8 million for the nine months ended September 30, 2007 and 2006, respectively, reflecting average interest rates of 5.20% and 5.25%, respectively.

As of September 30, 2007, the Company had outstanding borrowings of $284.6 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 $145 million contain features that allow the FHLB to require repayment of the borrowings in as early as 1 year (September of 2008). 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 $512.3 million at September 30, 2007 as compared to $411.6 million at September 30, 2006. Total interest expense on the notes was $8.0 million and $1.7 million for the nine months ended September 30, 2007 and 2006, respectively, reflecting average interest rates of 5.20% and 5.18%, respectively.

Subject to the right of the FHLB to require earlier repayment of $145 million in borrowings, FHLB advances outstanding as of September 30, 2007 mature as follows:

	(Dollars in thousands)
2007	$	112,105
2008		25,325
2009		343
2010		361
2011 and thereafter		146,477
	$	284,611

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Borrowings obtained from the Treasury Tax and Loan Investment Program mature within a month from the transaction date. Under the program the Company receives funds from the U.S. Treasury Department in the form of open-ended notes, up to a total of $2.2 million. The Company has pledged U.S. government agencies and mortgage-backed securities or some combination thereof with a total carrying value of $2.6 million at September 30, 2007, as collateral to participate in the program. The total borrowed amount under the program, outstanding at September 30, 2007 and December 31, 2006 was $642,000 and $675,000, respectively. These borrowings reflect interest rates of 4.59% and 5.04% as of September 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 September 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%. The 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 September 30, 2007, trust preferred securities comprised 10.3% 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.

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8. EARNINGS PER SHARE

The actual number of shares outstanding at September 30, 2007 was 16,730,407. Basic earnings per share are calculated on the basis of weighted average number of shares outstanding during the period. Diluted earnings per 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 nine months ended September 30, 2007 and 2006:

	Three Months Ended September 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	$	5,698	16,721	$	0.34		$	6,360	16,564	$	0.38
Effect of dilutive securities:
Stock options and restricted stock		—	64		—			—	118		—
Diluted earnings per share	$	5,698	16,785	$	0.34		$	6,360	16,682	$	0.38
	Nine Months Ended September 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	$	18,037	16,690	$	1.08		$	19,808	16,503	$	1.20
Effect of dilutive securities:
Stock options and restricted stock		—	95		(0.01	)		—	146		(0.01	)
Diluted earnings per share	$	18,037	16,785	$	1.07		$	19,808	16,649	$	1.19

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 729,000 and 730,000 shares for the three and nine months ended September 30, 2007, respectively, and 54,500 shares for both the three and nine months ended September 30, 2006.

On May 24, 2007, the Company announced a $10 million stock buyback program. As of September 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 September 12, 2007, the Board of Directors declared a quarterly cash dividend of $0.05 per share. This cash dividend was paid on October 10, 2007 to shareholders of record as of September 26, 2007.

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 $182,000 and $142,000 as of September 30, 2007 and December 31, 2006, respectively. Core deposit intangible, net of

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amortization, was approximately $280,000 and $320,000 at September 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 three months)	$	14
2008		53
2009		53
2010		53
2011		53
Thereafter		54
	$	280

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.

A summary of the notional amounts of the Company’s financial instruments relating to extension of credit with off-balance-sheet risk at September 30, 2007 and December 31, 2006 follows:

	September 30, 2007		December 31, 2006
	(Dollars in thousands)
Loans	$	232,182	$	265,989
Standby letters of credit		9,475		12,222
Performance bonds		177		217
Commercial letters of credit		29,590		28,181
	$	271,424	$	306,609
Accrued liability for off-balance sheet risk	$	283	$	357

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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. 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.

12. DERIVATIVE FINANCIAL INSTRUMENTS

As of September 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     September 30,					Nine Months Ended     September 30,
	2007		2006			2007		2006
	(Dollars in thousands)					(Dollars in thousands)
Net swap settlement payments	$	—	$	62		$	—	$	255
Increase in market value		—		(119	)		—		(229	)
Net change in market value	$	—	$	(57	)	$	—	$	26

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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 September 30, 2006 with $2.75 million utilized as an immediate recovery of past legal costs. The Bank has fully utilized the reserve for these litigation costs during 2006 and 2007. The Bank utilized the remaining reserve of approximately $469,000 during the first half of 2007.

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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 nine months ended September 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. All statements other than statements of historical fact are forward looking statements. 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, many of which are difficult to predict and are generally beyond the control of the Company. Risks and uncertainties include, but not limited to, 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; increased competition among depository institutions; successful completion of planned acquisitions and effective integration of the acquired entities; the economic and regulatory effects of the continuing war on terrorism and other events of war, including the wars in Iraq and Afghanistan; the effect of natural disasters, including earthquakes and hurricanes; 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.

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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 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 September 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’s Discussion and Analysis of Financial Condition and Results of Operations—Financial Condition Analysis—Allowance for Loan Losses.”

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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 the fair value at the original grant date, is recognized on a straight-line basis in the consolidated statements of operations over the remaining vesting period. For share-based payments granted subsequent to January 1, 2006, compensation expense, based on the fair value on the date of grant, is recognized in the consolidated statements of operations on a straight-line basis over the vesting period. In determining the fair value of stock options, the Company uses the Black-Scholes option-pricing model that employs the following assumptions:

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

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

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

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

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

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SUMMARY OF FINANCIAL DATA

Executive Overview

Consolidated net income for the third quarter of 2007 decreased by $663,000 to $5.7 million, or $0.34 per diluted share compared to $6.4 million, or $0.38 per diluted share in the third quarter of 2006. Consolidated net income for the nine months ended September 30, 2007 decreased by $1.8 million to $18.0 million, or $1.07 per diluted share compared to $19.8 million, or $1.19 per diluted share for the nine months ended September 30, 2006. The following were significant highlights related to the third quarter of 2007 results as compared to the corresponding period of 2006:

• For the three months ended September 30, 2007, net interest income before provision for loan losses increased by 5.1% to $19.3 million as compared to $18.4 million for the corresponding period in 2006. For the nine months ended September 30, 2007, net interest income before provision for loan losses increased by 9.2% to $57.1 million as compared to $52.3 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 growth which was funded by the growth in deposits, the increase in borrowings and utilization of the investment portfolio maturities.

• For the three months ended September 30, 2007, consolidated net income decreased by 10.4% to $5.6 million as compared to $6.4 million for the same period in 2006. The decrease was primarily due to the decrease in gain on sale of loans of $819,000 as a result of no sale of loans during the current quarter, the overall increase in salary and benefits expenses of $710,000 offset by the improvement of net interest income before provision for loan loss of $2.0 million. The decrease in consolidated net income for the nine months ended September 30, 2007 to $18.0 million as compared to the corresponding period in 2006 was primarily due to the decrease in gain on sale of loans of $2.0 million resulting from the lower sales volume in 2007, the non-recurring insurance settlement of $2.5 million in 2006, and the overall increases in salary and benefits expenses of $2.1 million offset by the improvement of net interest income before provision for loan loss of $4.8 million.

• Net interest margin for the three and nine months ended September 30, 2007 declined to 4.22% and 4.33%, respectively, compared to 4.63% and 4.54% during the same periods in 2006. The reduction in net interest margin was mainly attributable to an increase in fixed rate lending with lower rates than variable rate lending and general rate increases in funding liabilities, and an increase in the proportion of interest-bearing to noninterest-bearing deposits. Lastly the Federal Open Market Committee lowered the Federal funds rates by 50 basis points on September 18, 2007 which resulted in a corresponding prime rate reduction to 7.75%.

• Return on average assets and return on average equity decreased to 1.2% and 14.5%, respectively, for the three months ended September 30, 2007, compared to 1.5% and 19.4% during the same period in 2006. Return on average assets and return on average equity decreased to 1.3% and 16.0%, respectively, for the nine months ended September 30, 2007, compared to 1.6% and 21.6% during the same period in 2006.

• The provision for loan loss was $2.0 million and $4.4 million for the three and nine months ended September 30, 2007, respectively, compared to $2.5 million and $4.3 million for the same periods in 2006. The decrease for the three months ended September 30, 2007 was primarily due to lower loan originations in the current three month period ended September 30, 2007 compared to the same period in 2006. The nominal increase for the nine months was a result of the slight increase in charge-offs offset by a large recovery in 2006, and the Company’s detailed quarterly analysis of the credit quality of the loan portfolio. Management believes that the $4.4 million loan loss provision was adequate for the first nine months of 2007.

• The Company’s efficiency ratio increased to 50.4% and 51.1% for the three and nine months ended September 30, 2007, compared to 46.3% and 48.0% for the same periods in 2006. This change primarily relates to the decrease in noninterest income and the increase in salary and benefit expense

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for the three and nine months ended September 30, 2007 and the insurance settlement of $2.5 million 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 incurred during 2006.

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

• Net loans grew $181.1 million or 11.8% to $1.72 billion at September 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 $16.3 million or 37.5%, real estate commercial loans of $100.3 million or 9.6%, commercial loans of $28.7 million or 10.4% and SBA loans of $15.0 million or 29.6%.

• Total deposits increased $91 million or 6.4% to $1.52 billion at September 30, 2007 compared to $1.43 billion at December 31, 2006. This increase was primarily the result of brokered time deposits and money market accounts from promotions carried out during the current year.

• Despite the increase in deposits for the nine months ended September 30, 2007, the higher loan growth as compared to deposit growth contributed to additional borrowed funds resulting in an increase in the ratio of net loans to total deposits to 113.0% at September 30, 2007 as compared to 107.5% at December 31, 2006.

• The ratio of nonperforming loans to total loans increased to 0.38% at September 30, 2007 compared to 0.21% at December 31, 2006. Our ratio of allowance for loan losses to total nonperforming loans decreased to 297% at September 30, 2007, as compared to 534% at December 31, 2006 and our allowance for losses to total gross loans increased nominally to 1.13% at September 30, 2007 compared to 1.12% at December 31, 2006 as a result of the increase in overall delinquency and nonperforming loans. The Company experienced an increase in nonperforming loans at September 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 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 September 2007.

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EARNINGS PERFORMANCE ANALYSIS

As previously noted and reflected in the consolidated statements of operations, the Company generated net income of $5.7 million during the three months ended September 30, 2007 compared to $6.4 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.

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 September 30, 2007 and 2006:

	Three Months Ended September 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)	$	1,662,816	$	34,781	8.30	%	$	1,382,189	$	29,909	8.58	%
Federal funds sold		4,582		67	5.80			6,428		88	5.43
Investments 3) 4)		152,387		1,907	4.96			188,378		2,151	4.71
Total interest-earning assets 4)		1,819,785		36,755	8.01			1,576,995		32,148	8.08
Noninterest—earning assets:
Cash and due from banks		63,727						77,246
Bank premises and equipment, net		13,564						13,675
Customers’ acceptances outstanding		3,241						5,774
Accrued interest receivables		8,286						7,236
Other assets		32,399						32,127
Total noninterest-earning assets		121,217						136,058
Total assets	$	1,941,002					$	1,713,053
Liabilities and Shareholders’ Equity:
Interest-bearing liabilities:
Deposits:
Money market and NOW accounts	$	263,320	$	2,854	4.30	%	$	206,719	$	1,633	3.13	%
Savings		60,946		487	3.17			79,517		766	3.82
Time certificates of deposit over $100,000		763,632		10,148	5.27			649,063		8,360	5.11
Other time certificates of deposit		104,879		1,278	4.83			97,158		1,084	4.43
		1,192,777		14,767	4.91			1,032,457		11,843	4.55
Other borrowed funds		180,667		2,258	4.96			110,855		1,499	5.36
Long-term subordinated debentures		18,557		378	8.08			18,557		383	8.19
Total interest-bearing liabilities		1,392,001		17,403	4.96			1,161,869		13,725	4.69
Noninterest-bearing liabilities:
Demand deposits		370,254						397,470
Total funding liabilities		1,762,255			3.92	%		1,559,339			3.49	%
Other liabilities		22,572						23,919
Total noninterest-bearing liabilities		392,826						421,389
Shareholders’ equity		156,175						129,795
Total liabilities and shareholders’ equity	$	1,941,002					$	1,713,053
Net interest income 4)			$	19,352					$	18,423
Cost of deposits					3.75	%					3.29	%
Net interest spread 5)					3.05	%					3.39	%
Net interest margin 6)					4.22	%					4.63	%

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 $561,000 for the three months ended September 30, 2007 and $304,000 for the same period in 2006. Amortized loan fees have been included in the calculation of net interest income. Nonperforming 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 in the amount of $20,000 and $27,000 for the three months ended September 30, 2007 and 2006, respectively.

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 as adjusted for tax equivalent basis for any tax advantaged income.

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 nine months ended September 30, 2007 and 2006:

	Nine Months Ended September 30,
	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)	$	1,601,321	$	100,252	8.37	%	$	1,285,291	$	81,961	8.53	%
Federal funds sold		4,214		180	5.71			42,929		1,506	4.69
Investments 9) 10)		158,883		5,775	4.86			212,816		6,978	4.42
Total interest-earning assets 10)		1,764,418		106,207	8.05			1,541,036		90,445	7.84
Noninterest—earning assets:
Cash and due from banks		68,010						77,124
Bank premises and equipment, net		13,512						13,805
Customers’ acceptances outstanding		3,774						5,020
Accrued interest receivables		7,939						6,895
Other assets		32,625						31,522
Total noninterest-earning assets		125,860						134,366
Total assets	$	1,890,278					$	1,675,402
Liabilities and Shareholders’ Equity:
Interest-bearing liabilities:
Deposits:
Money market and NOW accounts	$	224,431	$	6,556	3.91	%	$	209,808	$	4,629	2.95	%
Savings		67,653		1,723	3.41			80,711		2,285	3.79
Time certificates of deposit over $100,000		717,074		28,075	5.23			687,668		25,171	4.89
Other time certificates of deposit		97,635		3,421	4.68			99,786		3,102	4.16
		1,106,793		39,775	4.80			1,077,973		35,187	4.36
Other borrowed funds		208,329		8,120	5.21			45,290		1,780	5.25
Long-term subordinated debentures		18,557		1,120	8.07			18,557		1,076	7.75
Total interest-bearing liabilities		1,333,679		49,015	4.91			1,141,820		38,043	4.45
Noninterest-bearing liabilities:
Demand deposits		384,593						388,068
Total funding liabilities		1,718,272			3.81	%		1,529,888			3.32	%
Other liabilities		21,461						22,710
Total noninterest-bearing liabilities		406,054						410,778
Shareholders’ equity		150,545						122,804
Total liabilities and shareholders’ equity	$	1,890,278					$	1,675,402
Net interest income 10)			$	57,192					$	52,315
Cost of deposits					3.57	%					3.21	%
Net interest spread 11)					3.13	%					3.39	%
Net interest margin 12)					4.33	%					4.54	%

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

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 $1.6 million for the nine months ended September 30, 2007 and $927,000 for the same period in 2006. Amortized loan fees have been included in the calculation of net interest income. Nonperforming 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 in the amount of $63,000 and $87,000 for the nine months ended September 30, 2007 and 2006, respectively.

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 as adjusted for tax equivalent basis for any tax advantaged income.

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 September 30, 2007 vs. 2006 Increase (Decrease) Due to Change In									Nine Months Ended September 30, 2007 vs. 2006 Increase (Decrease) Due to Change In
	Volume			Rate 13)			Total			Volume			Rate 13)			Total
Earning assets:
Interest income:
Loans 14)	$	5,829		$	(958	)	$	4,871		$	19,757		$	(1,465	)	$	18,292
Federal funds sold		(27	)		6			(21	)		(1,596	)		270			(1,326	)
Investments 15)		(489	)		245			(244	)		(2,104	)		901			(1,203	)
Total earning assets		5,313			(707	)		4,606			16,057			(294	)		15,763
Interest expense:
Deposits and borrowed funds:
Money market and super NOW accounts		518			704			1,222			342			1,586			1,928
Savings deposits		(161	)		(117	)		(278	)		(347	)		(215	)		(562	)
Time Certificates of deposits		1,607			377			1,984			1,041			2,183			3,224
Other borrowings		864			(104	)		760			6,355			(15	)		6,340
Long-term subordinated debentures		—			(5	)		(5	)		—			44			44
Total interest-bearing liabilities		2,828			855			3,683			7,391			3,583			10,974
Net interest income before provision for loan losses	$	2,485		$	(1,562	)	$	923		$	8,666		$	(3,877	)	$	4,789

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 $561,000 and $304,000 for the three months ended September 30, 2007 and 2006, respectively, and $1.6 million and $927,000 for the nine months ended September 30, 2007 and 2006, respectively. Amortized loan fees have been included in the calculation of net interest income. Nonperforming 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 in the amount of $20,000 and $63,000 for the three and nine months ended September 30, 2007, respectively, and $27,000 and $87,000 for the same periods in 2006.

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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 nine months ended September 30, 2007 was $36.8 million and $106.2 million, respectively, compared to $32.1 million and $90.4 million, respectively, for the same periods in 2006. The increase was primarily due to growth in loans. Growth in earning assets was mainly driven by loan production from our branches and loan production offices. Average net loans increased by $280.6 million and $316.0 million, or 20.3% and 24.6%, for the three and nine months ended September 30, 2007, respectively, compared to the same periods in 2006.

Total interest expense for the three and nine months ended September 30, 2007 increased by $3.7 million or 26.8% and $11.0 million or 28.8%, respectively, compared to the same periods in 2006. These increases were primarily due to increased borrowings from the FHLB, interest-bearing deposit growth, general market rate increases due in part to increases in the Federal funds rates during most of 2007, and an increase in the proportion of interest-bearing to noninterest-bearing deposits. At September 30, 2007, the money market and time deposits represented 16% and 57%, respectively, as compared to 13% and 54% at December 31, 2006. Average interest-bearing liabilities increased by $230.1 million and $191.9 million, or 19.8% and 16.8%, for the three and nine months ended September 30, 2007, respectively, compared to the same periods in 2006.

Net interest income before provision for loan losses increased by $0.9 million for the three months ended September 30, 2007 compared to the same period in 2006. The increase was comprised of a $2.5 million increase due to volume changes offset by a $1.6 million decrease due to rate changes. The average yield on loans for the third quarter of 2007 decreased to 8.30% compared to 8.58% for the same period in 2006, a decrease of 28 basis points due to a greater mix of lower yielding fixed rate loans in the loan portfolio. The average investment portfolio for the third quarter of 2007 and 2006 was $152.4 million and $188.4 million, respectively. The average yields on the investment portfolio for the third quarter of 2007 and 2006 were 4.96% and 4.71%, respectively.

Net interest income before provision for loan losses increased by $4.8 million for the nine months ended September 30, 2007 compared to the same period in 2006. The increase was comprised of a $8.7 million increase due to volume changes offset by a $3.9 million decrease due to rate changes. The average yield on loans for the nine months ended September 30, 2007 decreased to 8.37% compared to 8.53% for the same period in 2006, a decrease of 6 basis points due to a greater mix of lower yielding fixed rate loans in the loan portfolio. The average investment portfolio for the nine months ended September 30, 2007 and 2006 was $158.9 million and $212.8 million, respectively. The average yields on the investment portfolio for the nine months ended September 30, 2007 and 2006 were 4.86% and 4.42%, respectively.

Net interest margin for the second quarter of 2007 decreased to 4.22% compared to 4.63% for the same period in 2006. For the nine months ended September 30, 2007 interest margin decreased to 4.33% compared to 4.54% for the same period in 2006. The reductions in net interest margin were mainly attributable to an increase in fixed rate lending versus variable rate lending for the quarter and year, general rate increases in funding liabilities, and an increase in the proportion of higher cost interest-bearing deposits to lower cost or noninterest-bearing deposits. At September 30, 2007, 59% of our loan portfolio consisted of fixed rate loans which generally have lower rates than our variable rate loans. Cost of interest-bearing liabilities increased to 4.96% and 4.91% for the three and nine months ended September 30, 2007, respectively, as compared to 4.69% and 4.45% 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

26

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.

The provisions for loan losses were $2.0 million and $4.4 million, respectively, for the three and nine months ended September 30, 2007 compared to $2.5 million and $4.3 million, respectively, for the same periods in 2006. The decrease for the three months ended September 30, 2007 was primarily due to lower loan originations in the current three month period ended September 30, 2007 compared to the same period in 2006. The nominal increase for the nine months was a result of the slight increase in charge-offs offset by a large recovery in 2006, and the Company’s detailed quarterly analysis of the credit quality of the loan portfolio. Management believes that the $4.4 million loan loss provision was adequate for the first nine months of 2007.

While management believes that the allowance for loan losses of 1.13% of total loans at September 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 September 30,								Nine Months Ended September 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	$	1,676	49.54	%	$	2,019	41.14	%	$	5,215	45.24	%	$	6,233	35.37	%
Fee income from trade finance transactions		615	18.18			849	17.30			2,046	17.75			2,599	14.75
Wire transfer fees		206	6.09			221	4.50			643	5.58			674	3.83
Net gain on sale of loans		—	—			819	16.69			618	5.36			2,616	14.85
Net gain on sale of premises and equipment		—	—			—	—			12	0.10			—	—
Loan service fees		409	12.09			480	9.78			1,398	12.13			1,448	8.22
Insurance settlement—legal fees		—	—			—	—			—	0.00			2,520	14.30
Other income		477	14.10			520	10.59			1,596	13.84			1,532	8.68
Total noninterest income	$	3,383	100.00	%	$	4,908	100.00	%	$	11,528	100.00	%	$	17,622	100.00	%
As a percentage of average earning assets			0.74	%			1.24	%			0.87	%			1.53	%

For the three and nine months ended September 30, 2007, noninterest income was $3.4 million and $11.5 million, respectively, compared to $4.9 million and $17.6 million, respectively, for the same periods in 2006. For the three and nine months ended September 30, 2007, noninterest income, as a percentage of average earning assets, decreased to 0.74% and 0.87%, respectively, from 1.24% and 1.53%, respectively, for the same periods in 2006. The decreases are related to the reduction of customer service fees, trade finance transactions fees, and gain on sale of loans for the three and nine months ended September 30, 2007 as compared to the same periods in 2006, as discussed below. In addition, the non-recurring insurance settlement income that occurred during the second quarter of 2006 resulted in increased noninterest income that was not recurring in 2007. 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.

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Customer service fees for the three and nine months ended September 30, 2007 decreased by $343,000 or 17.0% and $1.0 million or 16.3%, 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, 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 nine months ended September 30, 2007 decreased by $234,000, or 27.6% and $552,000 or 21.2%, 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 $0 and $819,000 net gain on sale of loans for the three months ended September 30, 2007 and 2006, respectively. For the nine months ended September 30, 2007, the Company recorded a $618,000 and $2.6 million gain on sale of loans, respectively. For the three months ended September 30, 2007, the Company did not sell any of its SBA loans as compared to a sale of $17.2 million during the same period in 2006. For the nine months ended September 30, 2007 and 2006, the Company sold $7.7 million of its SBA loans comprised of only the unguaranteed portion and $42.0 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 September 30,									Nine Months Ended September 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	$	6,342	55.40	%	$	5,632		52.25	%	$	19,220	54.74	%	$	17,142	51.12	%
Occupancy		1,079	9.43			957		8.88			3,022	8.61			2,736	8.16
Furniture, fixtures, and equipment		575	5.02			487		4.52			1,539	4.38			1,456	4.34
Data processing		530	4.63			539		5.00			1,567	4.46			1,622	4.84
Professional service fees		359	3.14			704		6.53			2,449	6.97			3,118	9.30
Business promotion and advertising		480	4.19			552		5.12			1,549	4.41			1,888	5.63
Stationery and supplies		137	1.20			179		1.66			408	1.16			505	1.51
Telecommunications		160	1.40			169		1.57			442	1.26			507	1.51
Postage and courier service		185	1.62			212		1.97			565	1.61			548	1.63
Security service		268	2.34			247		2.29			779	2.22			749	2.23
Loss on sale of investment securities		—	0.00			115		1.07			—	0.00			115	0.34
(Gain) loss on interest rate swaps		—	0.00			(57	)	-0.53			—	0.00			26	0.08
Other operating expenses		1,332	11.64			1,043		9.68			3,574	10.18			3,124	9.32
Total noninterest expenses	$	11,447	100.00	%	$	10,779		100.00	%	$	35,114	100.00	%	$	33,536	100.00	%
As a percentage of average earning assets			2.5	%				2.7	%			2.7	%			2.9	%
Efficiency ratio			50.4	%				46.3	%			51.1	%			48.0	%

The Company’s noninterest expenses increased 6.2% to $11.4 million for the three months ended September 30, 2007, compared to $10.8 million during the same period in 2006 and increased 4.7% to $35.1 million for the nine months ended September 30, 2007 from $33.5 million for the same period in 2006. The

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increases in noninterest expenses for the three and nine months ended September 30, 2007 were primarily attributable to increases in salaries and employee benefits and occupancy expense offset by the decrease in professional services, business promotions and advertising expenses. Noninterest expense as a percentage of average earning assets decreased to 2.5% and 2.7% for the three and nine months ended September 30, 2007, respectively, compared to 2.7% and 2.9% for the same periods in 2006.

The Company’s efficiency ratio increased to 50.4% and 51.1% for the three and nine months ended September 30, 2007, respectively, compared to 46.3% and 48.0% for the same periods in 2006. This change primarily relates to the decrease in noninterest income as described above, the increase in salary and benefit expense and the non-recurring insurance settlement recorded in other income in the three months ended June 30, 2006 offset by the reduction of costs from consulting services relative to the Bank Secrecy Act compliance efforts from 2007 as compared to the same periods in 2006.

Salaries and benefits expenses were $6.3 million and $19.2 million for the three and nine months ended September 30, 2007, respectively, compared to $5.6 million and $17.1 million for the same periods in 2006. For the three months ended September 30, 2007, the increase was due primarily to the increased hiring activity of senior level personnel and normal salary increases. For the nine months ended September 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, through March 30, 2007, as well as the normal salary increases, a severance agreement payment of approximately $42,000 in the second quarter for the Chief Operating Officer’s departure and filling vacant positions at the Bank.

Occupancy expenses increased by 12.7% and 10.4% to $1.1 million and $3.0 million for the three and nine months ended September 30, 2007, respectively, compared to $957,000 and $2.7 million in the same periods in 2006. These increases were due mainly to increased property insurance costs and depreciation expenses resulting from additional leased office spaces and tenant improvements over the past year.

Professional service fees were $359,000 and $2.4 million for the three and nine months ended September 30, 2007, respectively, compared to $704,000 and $3.1 million for the same periods in 2006. For the three months ended September 30, 2007, the decrease was primarily due to lower expenses for accounting, legal and consulting services. The decrease for the nine months period ended September 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 13.0% and 18.0% to $480,000 and $1.5 million for the three and nine months ended September 30, 2007, respectively, as compared to $552,000 and $1.9 million for the same periods in 2006. These decreases were mainly due to the decreases in 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. The increase is primarily due to accrual for FDIC quarterly assessment for the third quarter of 2007 in the amount of $210,000.

Provision for Income Taxes

Income tax expense is the sum of two components, current tax expense and deferred tax expense. Current tax expense is the result of applying the current tax rate to current taxable income. The deferred portion is 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 September 30, 2007 and 2006, the provision for income taxes was $3.6 million and $3.7 million representing effective tax rates of 38.5% and 36.6%, respectively. The primary difference in the

29

effective tax rates relates to the increase in stock-based compensation expense during the third quarter of 2007. For the nine months ended September 30, 2007 and 2006, the provision for income taxes was $11.1 million and $12.3 million representing effective tax rates of 38.2% and 38.4%, 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 $472,000 for the nine months ended September 30, 2007 compared to $439,000 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 income tax returns. The Company’s deferred tax assets were $11.3 million as of September 30, 2007 and $11.7 million as of December 31, 2006. As of September 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 nine months ended September 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.

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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. As of September 30, 2007, the amount invested in Fed Funds was $6.5 million and none at December 31, 2006. The average yield earned on these funds was 5.67% for the nine months ended September 30, 2007 compared to 4.69% for the same period in 2006.

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 September 30, 2007				As of December 31, 2006
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(Dollars in thousands)
Available for Sale:
U.S. Treasury	$	500	$	502	$	489	$	488
U.S. Governmental agencies securities and U.S Government sponsored enterprise securities		44,999		44,931		65,995		65,545
U.S. Governmental agencies and U.S. Government sponsored and enterprise mortgage-backed securities		52,054		53,596		58,008		57,178
U.S. Government sponsored enterprise preferred stock		4,865		5,792		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		4,427		4,500		4,444
Fixed rate collateralized mortgage obligations		10,548		10,594		2,230		2,203
Corporate debt securities		1,199		1,188		2,197		2,179
Total available for sale	$	129,665	$	132,162	$	149,284	$	148,913
Held to Maturity:
U.S. Government agencies and U.S. Government sponsored enterprise mortgage-backed securities	$	5,494	$	5,394	$	4,961	$	4,909
Municipal securities		4,879		4,901		5,630		5,662
Total held to maturity	$	10,373	$	10,295	$	10,591	$	10,571
Total investment securities	$	140,038	$	142,457	$	159,875	$	159,484

As of September 30, 2007, investment securities totaled $142.5 million or 7.1% 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 primarily due to investment proceeds utilized to fund new loans rather than purchase additional investment securities.

As of September 30, 2007, available-for-sale securities totaled $132.1 million, compared to $148.9 million as of December 31, 2006. Available-for-sale securities as a percentage of total assets decreased to 6.6% as of September 30, 2007 compared to 8.1% at December 31, 2006. Held-to-maturity securities decreased to $10.4 million as of September 30, 2007, compared to $10.6 million as of December 31, 2006. The composition of

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available-for-sale and held-to-maturity securities was 92.7% and 7.3% as of September 30, 2007, compared to 93.4% and 6.6% as of December 31, 2006, respectively. For the three and nine months ended September 30, 2007, the yield on the average investment portfolio was 4.89% and 4.81%, respectively, as compared to 4.71% and 4.42%, respectively, for the same periods in 2006. The Company used the proceeds from the decrease in the investment portfolio to fund loan growth.

The following table summarizes, as of September 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	$	29,435	4.29	%	$	15,998	4.76	%	$	—	—	%	$	—	—	%	$	45,433	4.46	%
U.S. Governmental agencies and U.S. Government sponsored and enterprise mortgage-backed securities		291	4.81			861	4.39			6,396	4.87			46,047	4.72			53,595	4.73
U.S Government sponsored enterprise preferred stock		—	—			—	—			—	—			5,792	4.56			5,792	4.56
Corporate trust preferred securities		—	—			—	—			—	—			11,132	7.09			11,132	7.09
Mutual Funds backed by adjustable rate mortgages		4,427	4.47			—	—			—	—			—	—			4,427	4.47
Fixed rate collateralized mortgage obligations		—	—			—	—			1,824	4.69			8,771	5.87			10,595	5.67
Corporate debt securities		1,188	3.85			—	—			—	—			—	—			1,188	3.85
Total available for sale	$	35,341	4.30		$	16,859	4.74		$	8,220	4.83		$	71,742	5.21		$	132,162	4.89
Held to Maturity (Amortized Cost):
U.S. Government agencies and U.S. Government sponsored enterprise mortgage-backed securities	$	—	—	%	$	—	—	%	$	—	—	%	$	5,494	4.80	%	$	5,494	4.80	%
Municipal securities		175	4.15			1,649	4.11			2,828	3.68			227	3.71			4,879	3.84
Total held to maturity	$	175	4.15		$	1,649	4.11		$	2,828	3.68		$	5,721	4.75		$	10,373	4.35
Total investment securities	$	35,516	4.30	%	$	18,508	4.57	%	$	11,048	4.54	%	$	77,463	5.18	%	$	142,535	4.85	%

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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 September 30, 2007.

	As of September 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	$	—	$	—		$	18,883	$	(116	)	$	18,883	$	(116	)
U.S. Governmental agencies and U.S. Government sponsored enterprise mortgage-backed securities		10,102		(99	)		39,174		(529	)		49,276		(628	)
Municipal securities and corporate debt securites		298		(2	)		2,811		(17	)		3,109		(19	)
Total	$	10,400	$	(101	)	$	60,868	$	(662	)	$	71,268	$	(763	)

As of September 30, 2007, the Company had a total fair value of $71.3 million of securities, with unrealized losses of $763,000. 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 loss position for 12 months or more totaled $60.9 million, with unrealized losses of $662,000.

All individual securities that have been in a continuous unrealized loss position at September 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 September 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:

	September 30, 2007				December 31, 2006
	Amount		Percent of Total		Amount		Percent of Total
	(Dollars in thousands)
Real Estate:
Construction	$	59,821	3.44	%	$	43,508	2.79	%
Commercial 16)		1,142,899	65.66			1,042,562	66.91
Commercial		306,037	17.58			277,296	17.79
Trade Finance 17)		75,526	4.34			66,925	4.29
SBA 18)		65,561	3.77			50,606	3.24
Consumer and other 19)		90,675	5.21			77,682	4.97
Total Gross Loans		1,740,519	100.00	%		1,558,579	100.00	%
Less:
Allowance for Losses		19,619				17,412
Deferred Loan Fees		1,833				2,347
Discount on SBA Loans Retained		796				1,644
Total Net Loans and Loans Held for Sale	$	1,718,271			$	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 $36.6 million and $18.5 million, at the lower of cost or market, at September 30, 2007 and December 31, 2006, respectively.

¹⁹⁾ Consists of transactions in process and overdrafts.

The Company’s gross loans grew $181.9 million, or 11.7%, during the nine months ended September 30, 2007. Net loans increased $181.1 million, or 11.8%, to $1.72 billion at September 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 September 30, 2007 represented 85.6% of total assets, compared to 83.4% as of December 31, 2006.

The growth in net loans is comprised primarily of net increases in real estate construction loans of $16.3 million or 37.5%, real estate commercial loans of $100.3 million, or 9.6%, commercial loans of $28.7 million, or 10.4%, SBA loans of $15.0 million or 29.6% and consumer loans of $13.0 million, or 16.7%.

As of September 30, 2007, commercial real estate remained the largest component of the Company’s total loan portfolio with loans totaling $1.1 billion, representing 65.7% of total loans, compared to $1.0 billion or 66.9% of total loans at December 31, 2006. This reflects the continued demand for commercial real estate lending in Southern California.

Commercial business loans increased to $306.0 million as of September 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 and diversifying portfolio concentrations from commercial real estate loans.

The Company sold $7.7 million of the unguaranteed portion of SBA loans during the nine months ended September 30, 2007 compared to $41.6 million of the 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 September 30, 2007, the Company was servicing $129.9 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 $65.6 million at September 30, 2007, an increase of $15.0 million, or 29.6%, compared to December 31, 2006. The management has evaluated the long-term benefit of holding SBA loan’s guaranteed portion versus the sale of the loans. Through the three quarters of 2007, management has determined that the sale of SBA loan’s guaranteed portion is not in the best interest of the Company. The credit environment recently has negatively impacted the market values of SBA loans by approximately 25 to 30%.

Management 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:

	September 30, 2007			December 31, 2006			September 30, 2006
	(Dollars in thousands)
Nonperforming loans:
Commercial	$	1,428		$	1,502		$	1,540
Trade Finance		199			—			—
SBA		4,535			1,330			893
Consumer		445			429			252
Total nonperforming assets		6,607			3,261			2,685
Guaranteed portion of nonperforming SBA loans		2,418			973			484
Total nonperforming assets, net of SBA guarantee	$	4,189		$	2,288		$	2,201
Nonperforming loans as a percent of total gross loans		0.38	%		0.21	%		0.18	%
Nonperforming assets as a percent of total loans and other real estate owned		0.38	%		0.21	%		0.18	%
Allowance for loan losses to nonperforming loans		297	%		534	%		616	%

Management’s classification of a loan as nonperforming 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 $6.6 million as of September 30, 2007 from $3.3 million as of December 31, 2006 and $2.7 million as of September 30, 2006, respectively. The increases were the result of additions to nonaccrual status in the Company’s SBA, trade finance and consumer loan portfolio offset by the reductions in the commercial loan portfolios. Approximately $3.1 million or 67.9% of nonperforming SBA loans of $4.5 million were located in Denver, Colorado, $815,000 or 18.0% in Chicago, Illinois, $322,000 or 7.1% in Seattle, Washington and $318,000 or 7.0% in California. One of the SBA loans from Denver in the amount of $791,000 was brought current during the current quarter but is still reported as nonperforming in accordance with accounting guidelines and bank collection procedures.

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 nine months ended September 30, 2007			As of and for the twelve months ended December 31, 2006
	(Dollars in thousands)
Nonperforming impaired loans with specific reserves	$	2,610		$	329
Performing impaired loans without specific reserves		1,233			—
Total impaired loans		3,843			329
Specific reserves on impaired loans		(391	)		(329	)
Net recorded investment in impaired loans	$	3,452		$	—
Average total recorded investment in impaired loans	$	9,685		$	1,404
Interest income recognized on impaired loans on a cash basis	$	1,729		$	3

At September 30, 2007 the Company assessed its loan portfolio in accordance to SFAS No. 5 and SFAS No. 114 and determined that nine loans are deemed impaired in accordance with SFAS No. 114. The nonperforming impaired loans totaling $2.6 million relate to six loans of which three loans are SBA loans from Denver Colorado totaling $2.2 million and three loans totaling $400,000 from the international department in Los Angeles, California. One of the nonperforming SBA loans in Denver, Colorado for $791,000 was brought current during the quarter and is still reported as nonperforming and impaired in accordance with accounting guidelines and bank collection procedures. Three performing impaired loans totaling $1.2 million comprised of one SBA loan for approximately $200,000 located in Denver, Colorado and two loans for $1.0 million located in Los Angeles, California. These loans have always been performing and are current.

The average total recorded investment in impaired loans was $9.7 million for the nine months ended September 30, 2007 primarily due to two loan relationships which were deemed impaired totaling $20.5 million at March 31, 2007 which were removed as a result of a payoff and a note sale relating to these two relationships during the second quarter of 2007.

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.

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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.

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 nonperforming 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.

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

	September 30, 2007		December 31, 2006
	(Dollars in thousands)
Specific (Impaired loans)	$	391	$	329
Formula (non-homogeneous)		18,718		16,621
Homogeneous		510		462
Total allowance for loan losses	$	19,619	$	17,412

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

	Nine Months Ended September 30, 2007			Year Ended December 31, 2006			Nine Months Ended September 30, 2006
	(Dollars in thousands)
Balances
Average total loans outstanding during the period 20)	$	1,619,267		$	1,356,169		$	1,299,913
Total loans outstanding at end of period 20)	$	1,737,890		$	1,554,588		$	1,477,089
Allowance for Loan Losses:
Balance at beginning of period	$	17,412		$	13,871		$	13,871
Charge-offs:
Commercial Real Estate		—			258			257
Commercial		2,032			1,635			1,280
Consumer		127			333			249
SBA		84			473			364
Total charge-offs		2,243			2,699			2,150
Recoveries
Real estate		—			423			423
Commercial		19			44			38
Consumer		54			101			76
SBA		7			6			3
Total recoveries		80			574			540
Net loan charge-offs		2,163			2,125			1,610
Provision for loan losses		4,370			5,666			4,269
Balance at end of period	$	19,619		$	17,412		$	16,530
Ratios:
Net loan charge-offs to average loans		0.13	%		0.16	%		0.12	%
Provision for loan losses to average total loans		0.27			0.42			0.33
Allowance for loan losses to gross loans at end of period		1.13			1.12			1.12
Allowance for loan losses to total nonperforming loans		297			534			616
Net loan charge-offs to allowance for loan losses at end of period		11.03			12.20			9.73
Net loan charge-offs to provision for loan losses		49.50			37.50			37.70

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

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Based on a quarterly migration analysis which evaluates loan portfolio credit quality, the allowance for loan losses grew to $19.6 million as of September 30, 2007 compared to $17.4 million at December 31, 2006. The Company recorded a provision of $2.0 million and $4.4 million for the three and nine months ended September 30, 2007, respectively, compared to $2.5 million and $4.3 million for the same periods of 2006. For the nine months ended September 30, 2007, the Company charged off $2.2 million and recovered $80,000 resulting in net loan charge-offs of $2.2 million, compared to net loan charge-offs of $1.6 million for the same period in 2006.

The increase in net loan charge-offs comparing the nine months ended September 30, 2007 to the same period in 2006 was due to a larger than normal recovery of $423,000 related to one commercial real estate loan in the first nine 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 nine months ended September 30, 2007. Total charge-offs for the B2B portfolio was $1.2 million for the nine months ended September 30, 2007 or 53.6% of net charge-offs for the period. Management has taken corrective measures by tightening the scoring criteria on new loan originations since the second quarter and is no long underwriting lines of credit through this program which appears to be where most of the nonperforming B2B loans and delinquency are occurring. As of September 30, 2007, the B2B loan portfolio totaled $34.0 million and the nonperforming loans totaled $783,000 or 11.9% of the total nonperforming loans.

The allowance for loan losses increased to 1.13% of gross loans at September 30, 2007 compared to 1.12% at both December 31, 2006 and September 30, 2006 as a result of the increase in delinquency and nonperforming loans. The Company provides an allowance for new credits based on the migration analysis discussed previously.

Management believes the level of allowance as of September 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.

Due to the increase in nonperforming loans, the ratio of the allowance for loan losses to total nonperforming loans decreased to 297% as of September 30, 2007 compared to 534% as of December 31, 2006. As of September 30, 2007, the SBA loans comprised 69% of the total nonperforming assets compared to 41% as of December 31, 2006. These loans typically have approximately a 75% guaranty by the SBA. In addition, each non-SBA nonperforming loan was individually evaluated for impairment, where necessary specific reserves were provided in accordance with SFAS No. 114. Even with the decline in the ratio of the allowance for loan losses to total nonperforming loans, management believes that the allowance for loan loss, as compared to nonperforming loans as of September 30, 2007, is adequate. 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 4.80% for the nine months ended September 30, 2007, compared to 4.36% for the same period in 2006. This increase is primarily due to the increases in short term rates set by the Federal Reserve Board and a reduction in non-interest bearing demand deposit accounts, which caused the average rates paid on deposits and other liabilities to increase. In addition, noninterest-bearing deposits and relatively low cost savings deposits decreased to 27.7%, compared to 32.6% as of December 31, 2006, and high cost money market accounts and time deposits increased, as a proportion of total deposits, to 72.4% for the nine months ended September 30, 2007 compared to 67.4% for the same period in 2006. On September 18, 2007, the Federal Open Market Committee (FOMC) lowered the federal funds rate 50 basis points. The repricing of time deposits generally lags the market activities by the FOMC and likewise minimal corresponding reduction of time deposit rates and costs were noted during the quarter.

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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 September 30, 2007, the Company held brokered CD’s in the amount of $46.9 million. The Company also had time certificates of deposit with the State of California in the amount of $75.0 million as of both September 30, 2007 and December 31, 2006.

Deposits consist of the following:

	September 30, 2007		December 31, 2006
	(Dollars in thousands)
Demand deposits (noninterest-bearing)	$	361,137	$	388,163
Money market accounts and NOW		237,457		190,453
Savings		58,764		76,846
		657,358		655,462
Time deposits
Less than $100,000		105,038		91,830
$100,000 or more		757,873		682,107
Total	$	1,520,269	$	1,429,399

Total deposits increased $90.9 million or 6.4% to $1.52 billion at September 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 $46.9 million of brokered time deposits during the nine months with an average funding cost of 5.31%. These efforts also 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.

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

	$100,000 or Greater		Less Than $100,000		Total
	(Dollars in thousands)
2007	$	298,208	$	36,528	$	334,736
2008		452,487		67,238		519,725
2009		3,583		958		4,541
2010		1,404		195		1,599
2011 and thereafter		2,192		119		2,310
Total	$	757,873	$	105,038	$	862,911

Information concerning the average balance and average rates paid on deposits by deposit type for the three and nine months ended September 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 $284.6 million and $223.8 million at September 30, 2007 and December 31, 2006, respectively. The increase is due to loan growth exceeding deposit growth during the period. Notes issued to the U.S. Treasury amounted to $642,000 as of September 30, 2007 compared to $675,000 as of December 31, 2006. The total borrowed amounts outstanding at September 30, 2007 and December 31, 2006 was $285.3 million and $229.5 million, respectively.

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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 September 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 3 months in 2007		2008		2009		2010		2011 and thereafter		Total
	(Dollars in thousands)
Debt obligations 21)	$	—	$	—	$	—	$	—	$	18,557	$	18,557
FHLB advances		112,105		25,325		343		361		146,477		284,611
Deposits		338,846		530,757		12,944		7,343		7,615		897,505
Operating lease obligations		573		2,320		2,224		1,995		1,265		8,377
Total contractual obligations	$	451,524	$	558,402	$	15,511	$	9,699	$	173,914	$	1,209,050

²¹⁾ Includes principal payments only

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LIQUIDITY AND MARKET RISK/INTEREST RISK MANAGEMENT

Liquidity

The objective of liquidity risk management is to ensure that the Company has the continuing ability to maintain cash flows that are adequate to fund operations and meet its other obligations on a timely and cost-effective basis in various market conditions. Changes in each of the composition of its balance sheet, the ongoing diversification of its funding sources, risk tolerance levels and market conditions are among the factors that influence the Company’s liquidity profile. The Company establishes liquidity guidelines and maintains contingency liquidity plans that provide for specific actions and timely responses to liquidity stress situations.

As a means of augmenting the liquidity sources, the Company has available a combination of borrowing sources comprised of FHLB advances, federal funds lines with various correspondent banks, and access to the wholesale markets. The Company believes these liquidity sources to be stable and adequate. At September 30, 2007, the Company was not aware of any information that was reasonably likely to have a material adverse effect on our liquidity position.

The liquidity of the Company is primarily dependent on the payment of cash dividends by its subsidiary, Center Bank, subject to limitations imposed by the Financial Code of the State of California.

Liquidity is the Company’s ability to maintain sufficient cash flow to meet deposit withdrawals and loan demands and to take advantage of investment opportunities as they arise. The Company’s principal sources of 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, respectively, 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, wholesale deposits 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 September 30, 2007			At December 31, 2006
Net loans	$	1,718,271		$	1,537,176
Deposits		1,520,269			1,429,399
Net loan to deposit ratio		113.0	%		107.5	%

As of September 30, 2007, the Company’s liquidity ratio, which is the ratio of available liquid funds to net deposits and short-term liabilities, was 5.6%, compared to 8.2% at December 31, 2006. The Company’s liquidity ratio decreased as a result of a reduction in cash and other marketable assets during the nine months ended September 30, 2007 as investments matured and cash and due from banks accounts were more efficiently managed. Total available liquidity as of September 30, 2007 was $93.5 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 54.4% 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 43.9% 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

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long-term assets. All of the ratios were in compliance with internal guidelines as of and for nine months ended September 30, 2007. The Company is looking toward the growth of retail deposits, borrowings and brokered deposits to meet its liquidity needs in the future. At September 30, 2007, the Bank had $80 million in federal funds lines, $115 million FHLB borrowings and a $25 million line of credit held at the holding company totaling $220 million of available funding sources. This does not include the Company’s ability to purchase wholesale broker deposits. It is anticipated that the Company will utilize a combination of existing liquidity sources and long-term debt to fund the acquisition of FICB which is expected to close in the first quarter of 2008.

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.

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.

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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 September 30, 2007 and June 30, 2007, assuming a parallel shift of 100 to 300 basis points in both directions.

	Net Interest Income (NII) 22)				Economic Value of Equity (EVE) 23)
Change in Interest Rates (In Basis Points)	September 30, 2007 % Change		June 30, 2007 % Change		September 30, 2007 % Change		June 30, 2007 % Change
+300	8.04	%	10.41	%	-28.97	%	-27.81	%
+200	5.48	%	7.00	%	-19.20	%	-18.38	%
+100	2.80	%	3.57	%	-9.65	%	-9.19	%
-100	-3.14	%	-3.09	%	7.30	%	8.16	%
-200	-6.82	%	-6.44	%	12.16	%	14.25	%
-300	-10.73	%	-11.00	%	16.20	%	18.50	%

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

All interest-earning assets, interest-bearing liabilities and related derivative contracts are included in the interest rate sensitivity analysis at September 30, 2007 and June 30, 2007. At September 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 June 30, 2007 at 55% to September 30, 2007 at 59% had the most significant impact on the change in EVE.

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CAPITAL RESOURCES

Shareholders’ equity as of September 30, 2007 was $158.0 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 September 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 September 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)	11.08	%	10.85	%	8.00	%	10.00	%
Tier 1 Capital (to Risk-Weighted Assets)	9.93	%	9.70	%	4.00	%	6.00	%
Tier 1 Capital (to Average Assets)	9.01	%	8.80	%	4.00	%	5.00	%

Stock Repurchase Activities

As of September 30, 2007, the Company had purchased during the second quarter 10,054 shares for $171,000 at approximately $17.03 per share. These shares have been retired. No shares were repurchased during the third quarter of 2007.

Item 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

Item 4: CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

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.

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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 September 30, 2007. Based on the evaluation, our CEO and CFO have concluded that our disclosure controls and procedures were adequate and effective as of September 30, 2007.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during the third 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.

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 certain general ledger balances and subsidiary ledgers being certified by each department and reviewed by the accounting department.

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 audits the certification process on a quarterly basis. As a result of these actions, management of the Company believes this material weakness has been satisfactorily remediated as of September 30, 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. 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

The following discussion describes material changes from the risk factors included in our annual report on Form 10-K for the fiscal year ended December 31, 2006, and should be read in conjunction with the risk factors section of the Form 10-K and all other information contained in this Form 10-Q and other reports filed by Center Financial with the Securities and Exchange Commission. In addition, the Company will be filing a registration statement with the Securities and Exchange Commission on Form S-4 in connection with the acquisition, and a complete updated discussion of risk factors relating to the acquisition as well as to the Company generally will appear in the Form S-4.

The acquisition of First Intercontinental Bank may subject us to unknown risks.

On September 18, 2007, the Company entered into a definitive agreement to acquire First Intercontinental Bank (“FICB”), a Georgia state-chartered commercial bank with assets of approximately $225 million as of September 30, 2007. The acquisition involves potential risks that may materially affect the Company’s business,

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results of operations and financial condition as a result of our acquisition of FICB. In addition, the trading price of the Company’s common stock could decline due to any of the events described in these risks.

Certain events may arise after the date of the acquisition of FICB, or we may learn of certain facts, events or circumstances after the closing of the acquisition, that may affect our financial condition or performance or subject us to risk of loss. These events include, but are not limited to: litigation resulting from circumstances occurring at FICB prior to the date of acquisition, loan downgrades and credit loss provisions resulting from underwriting of certain acquired loans determined not to meet our credit standards, increased risk from fluctuations in interest rates, delays in implementing new policies or procedures or implementing our internal control over financial reporting at FICB, or the failure to apply new policies or procedures and other events relating to the performance of our business. We also make certain estimates and assumptions in order to determine purchase price allocation and estimate the fair value of acquired assets and liabilities. If our estimates or assumptions used to value acquired assets and liabilities are not accurate, we may be exposed to gains or losses that may be material.

Unanticipated costs relating to the merger could reduce the Company’s future earnings per share.

The Company believes it has reasonably estimated the likely costs of integrating the operations of FICB into the Company and the incremental costs of operating as a combined company. However, it is possible that unexpected transaction costs such as taxes, fees or professional expenses or unexpected future operating expenses such as increased personnel costs or increased taxes, as well as other types of unanticipated adverse developments, could have a material adverse effect on the results of operations and financial condition of the Company after the merger. If unexpected costs are incurred, the merger could have a significant dilutive effect on the Company’s earnings per share. In other words, if the merger is completed and the Company incurs such unexpected costs and expenses as a result of the merger, the Company believes that the earnings per share of the Company’s common stock could be less than they would have been if the merger had not been completed. In addition, the merger is not expected to be accretive to the Company’s earnings per share until approximately two years following the close of the merger, assuming an annual growth rate comparable to that experienced by FICB over the past several years. FICB had total assets of approximately $225 million as of September 30, 2007, compared to $183 million, $131.4 million and $96.2 million as of December 31, 2006, 2005 and 2004, respectively.

The Company may be unable to successfully integrate FICB’s operations and retain key FICB’s employees.

The merger involves the integration of two companies that have previously operated independently. The difficulties of combining the companies’ operations include:

• coordinating geographically separated organizations;

• integrating personnel with diverse business backgrounds;

• combining different corporate cultures; and

• retaining key employees.

The process of integrating operations could cause an interruption of, or loss of momentum in, the activities of one or more of the combined company’s businesses and the loss of key personnel. The integration of the two companies will require the experience and expertise of certain key employees of First Intercontinental who are expected to be retained by the Company. There can be no assurances, however, that the Company will be successful in retaining these employees for the time period necessary to successfully integrate FICB’s operations with those of the Company. FICB’s president and chief executive officer is currently serving pursuant to a three year employment agreement expiring on September 30, 2009. It is currently anticipated that he will continue to serve in his current capacity following the merger, but he has not yet indicated definitively whether he intends to serve until the end of the contract term. Moreover, three of FICB’s senior personnel - the Chief Financial

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Officer, the Chief Operating Officer, and the Senior Loan Officer - recently resigned. The Company is working very closely with FICB to appoint replacement officers and to assist in overseeing and supporting critical functions in order to maintain the business momentum during the interim period until the closing. The Company plans to replace some, but not all, of the vacant positions effective as of the closing. The diversion of management’s attention and any delays or difficulties encountered in connection with the merger and the integration of the two companies’ operations could have an adverse effect on the business and results of operations of the combined company. As with any merger of banking institutions, there also may be business disruption that causes the Company and FICB to lose customers or cause customers to take their deposits or move their loans out of our banks and move their business to other financial institutions.

The Company has specific risks associated with Small Business Administration loans.

The Company realized $618,000 in the nine months ended September 30, 2007, and $3.3 million, $2.5 million, and $4.2 million in the years ended December 31, 2006, 2005 and 2004, respectively, in gains recognized on secondary market sales of SBA loans. The Company has regularly sold the guaranteed and unguaranteed portions of these loans in the secondary market in previous years. The Company can provide no assurance that it will be able to continue originating these loans, or that a secondary market will continue to exist for, or that it will continue to realize premiums upon, the sale of the SBA loans. Through the three quarters of 2007, management has determined that the sale of SBA loan’s guaranteed portion is not in the best interest of the Company. The credit environment recently has negatively impacted the market values of SBA loans by approximately 25 to 30%.

The federal government presently guarantees approximately 75% of the principal amount of each qualifying SBA loan. The Company can provide no assurance that the federal government will maintain the SBA program, or if it does, that such guaranteed portion will remain at its current funding level. Furthermore, the Company can provide no assurance that it will retain the preferred lender status, which, subject to certain limitations, allows it to approve and fund SBA loans without the necessity of having the loan approved in advance by the SBA, or that if it does, the federal government will not reduce the amount of such loans. The Company believes that the SBA loan portfolio does not involve more than a normal risk of collectibility. However, since the Company has sold some of the guaranteed portions of the SBA loan portfolio, the Company incurs a pro rata credit risk on the non-guaranteed portion of the SBA loans since the Company shares pro rata with the SBA in any recoveries. In the event of default on an SBA loan, pursuit of remedies against a borrower subject to SBA approval, and where the SBA establishes that its loss is attributable to deficiencies in the manner in which the loan application has been prepared and submitted, the SBA may decline to honor its guarantee with respect to the SBA loans or it may seek the recovery of damages from the Company. As of September 30, 2007, SBA loans comprised 69% of the Company’s total nonperforming assets compared to 41% as of December 31, 2006. These loans typically have approximately 75% guaranteed by the SBA. For additional discussion see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Financial Condition—Loan Portfolio” in Item 2.

The Company faces regulatory risks related to its commercial real estate loan concentrations.

Commercial real estate lending is cyclical and poses risks of possible loss due to concentration levels and similar risks of the asset, especially since 69.1% of the Company’s loan portfolio consisted of CRE loans at September 30, 2007. The banking regulators have begun giving commercial real estate lending greater scrutiny, and may require banks with higher levels of commercial real estate loans to implement more stringent underwriting, internal controls, risk management policies and portfolio stress testing, as well as possibly requiring higher levels of allowances for possible loan losses and capital levels as a result of commercial real estate lending growth and exposures

The Company may not be able to attract and retain banking customers at current levels.

Competition in the banking industry in the markets served and to be served by the Company may limit The Company’s ability to attract and retain banking customers following the merger. The banking business in the Company’s current and intended future market areas is highly competitive with respect to virtually all products

49

and services. While the Company’s primary market area is generally dominated by a relatively small number of major banks with many offices operating over a wide geographic area, competitors also include several locally owned and operated Korean-American banks and their subsidiaries. These other banks have branches located in many of the same neighborhoods as the Company, provide similar types of products and services and use the same Korean language publications and media for their marketing purposes. There is a high level of competition within this specific market. While major banks have not historically focused their marketing efforts on the Korean-American customer base in Southern California, their competitive influence could increase in the future. Such banks have substantially greater lending limits than the Company, offer certain services the Company cannot, and often operate with “economies of scale” that result in lower operating costs than the Company on a per loan or per asset basis. In addition to competitive factors impacting the bank’s specific market niche, the Company is affected by more general competitive trends in the banking industry, including intra-state and interstate consolidation, competition from non-bank sources and technological innovations. Many of the Company’s competitors have advantages conducting certain businesses and providing certain services, and there can be no assurance that the Company will be able to compete successfully.

The Company also competes with other financial institutions such as savings and loan associations, credit unions, thrift and loan companies, mortgage companies, securities brokerage companies and insurance companies located within and without the Company’s service area and with quasi-financial institutions such as money market funds for deposits and loans. Financial services are increasingly offered over the Internet on a national and international basis, and the Company competes with the providers of these services as well. Ultimately, competition can drive down the Company’s interest margins and reduce profitability. It also can make it more difficult for us to continue to increase the size of the loan portfolio and deposit base.

The Company’s cost of funds for banking operations may increase as a result of general economic conditions, interest rates and competitive pressures.

The Company’s cost of funds for banking operations may increase as a result of general economic conditions, interest rates and competitive pressures. The Company has traditionally obtained funds principally through deposits and through borrowings. As a general matter, deposits are a cheaper source of funds than borrowings, because interest rates paid for deposits are typically less than interest rates charged for borrowings. Within the banking industry, the amounts of such deposits are generally considered more likely to fluctuate than deposits of smaller denominations. If as a result of general economic conditions, market interest rates, competitive pressures or otherwise, the value of deposits at the Company decreases relative to its overall banking operations, it may have to rely more heavily on borrowings as a source of funds in the future.

The Company depends on its executive officers and key personnel to implement its business strategy and could be harmed by the loss of their services.

The Company believes that its growth and future success will depend in large part upon the skills of its management team. The competition for qualified personnel in the financial services industry is intense, and the loss of the Company’s key personnel or an inability to continue to attract, retain or motivate key personnel could adversely affect the Company’s business. There can be no assurance that the Company will be able to retain its existing key personnel or to attract additional qualified personnel. The Company’s President and Chief Executive Officer joined the company in January 2007; its Executive Vice President and Chief Financial Officer joined the Company in an acting capacity in February 2007 and as permanent Chief Financial Officer in April 2007; its Executive Vice President and General Counsel joined the company in February 2007; its Senior Vice President and Chief Credit Officer joined the Company in 1991 as Senior Vice President and Manager of the SBA Department, and was promoted to his current position in April 2007; and its Senior Vice President and Chief Lending Officer joined the Company in April 2006 as Senior Vice President and Chief Marketing Officer, and was promoted to her current position in April 2007. While the President and Chief Executive Officer has a 3-year employment agreement for a term beginning in January 2007, his employment may be terminated by him or by the Company at any time. None of the Company’s other officers have employment agreements.

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The Company may face risks with respect to future expansion and acquisitions or mergers.

The Company expects to acquire other financial institutions or parts of those institutions, and to continue to engage in de novo branch expansion in the future. The Company may also consider and enter into new lines of business or offer new products or services. Acquisitions and mergers involve a number of risks, including:

• the risk that the acquired banks will not perform in accordance with management’s expectations;

• the risk that difficulties will arise in connection with the integration of the operations of the acquired banks with the operations of the Company’s banking businesses;

• the risk that management will divert its attention from other aspects of the Company’s business;

• the risk that the Company may lose key employees of the acquired banks;

• the risks associated with entering into geographic and product markets in which the Company has limited or no direct prior experience; and

• the risks of the acquired banks which the Company may assume as a result of the acquisition.

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

(c) Issuer Purchases of Equity Securities

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

	Total Number of Shares Purchased	Average Price Paid per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs 22)
Period:
July 2007	—	N/A	—	$	9,829,000
August 2007	—	N/A	—		9,829,000
September 2007	—	N/A	—		9,829,000
Total	—	N/A	—	$	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. Since its inception, we have repurchased a total of 10,054 shares through this program. No shares were repurchased during the third quarter of 2007.

Item 3: DEFAULTS UPON SENIOR SECURITIES

Not applicable

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

Not applicable

Item 5: OTHER INFORMATION

Not applicable

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Item 6: EXHIBITS

Exhibit No.	Description
2.1	Agreement and Plan of Reorganization dated September 18, 2007 by and between Center Financial Corporation and First Intercontinental Bank (filed herewith)
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, 20075
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 Issuer6
10.5	Amended and Restated Declaration of Trust of Center Capital Trust I, dated as of December 30, 20036
10.6	Guarantee Agreement between Center Financial and Wells Fargo Bank, National Association dated as of December 30, 20036
10.7	Deferred compensation plan and list of participants7
10.8	Split dollar plan and list of participants7
10.9	Survivor income plan and list of participants7
10.10	Resignation Agreement for Seon Hong Kim8
10.11	Waiver and Release Agreement for James Hong5
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 Exhibit 3.2 to the Form 8-K filed with the Commission on May 12, 2006 and incorporated herein by reference

⁴ Filed as 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-Q for the quarterly period ended June 30, 2007 and incorporated herein by reference

⁶ 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

⁷ 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

⁸ 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:

	Center Financial Corporation
Date: October 24, 2007	By:	/s/    JAE WHAN YOO
		Jae Whan Yoo President & Chief Executive Officer
Date: October 24, 2007	By:	/s/    LONNY D. ROBINSON
		Lonny D. Robinson Executive Vice President & Chief Financial Officer

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EX-2.1

EXHIBIT 2.1

AGREEMENT

AND

PLAN OF REORGANIZATION

September 18, 2007

by and between

Center Financial Corporation

and

First Intercontinental Bank

TABLE OF CONTENTS

		Page No.
ARTICLE 1		1
1.1	Definitions	1
ARTICLE 2		6
CONSUMMATION OF THE MERGER		6
2.1	The Merger; Plan of Reorganization.	6
2.2	Effective Time	7
2.3	Conversion of Shares	7
2.4	Certain Exceptions and Limitations	7
2.5	Exchange Procedures.	8
2.6	Non-Competition and Voting Agreements	9
2.7	Election and Proration Procedures.	9
2.8	Stock Options for Seller Stock	11
2.9	Corporate Governance	12
ARTICLE 3		12
REPRESENTATIONS AND WARRANTIES OF CENTER		12
3.1	Incorporation, Standing and Power.	12
3.2	Capitalization	12
3.3	Authority of Center	12
3.4	Available Funds	13
3.5	CG Bank	13
3.6	Litigation	13
3.7	Compliance with Laws and Regulations; SEC Documents; Financial Statements; Reports.	14
3.8	Regulatory Approvals	14
3.9	Licenses and Permits	14
3.10	Brokers and Finders	14
3.11	Performance of Obligations	15
3.12	Absence of Material Change	15
3.13	Absence of Adverse Agreements	15
3.14	Disclosure	15
3.15	S-4; Proxy Statement	15
ARTICLE 4		15
REPRESENTATIONS AND WARRANTIES OF SELLER		15
4.1	Incorporation, Standing and Power	15
4.2	Capitalization	16
4.3	Subsidiaries	16
4.4	Financial Statements	16
4.5	Authority of Seller	16
4.6	Insurance	17
4.7	Title to and Condition of Assets	17
4.8	Real Estate	17
4.9	Litigation	18
4.10	Taxes	18
4.11	Compliance with Laws and Regulations.	18
4.12	Performance of Obligations	19
4.13	Employees	19
4.14	Brokers and Finders	19
4.15	Absence of Material Change	19

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		Page No.
4.16	Licenses and Permits	19
4.17	Undisclosed Liabilities	19
4.18	Employee Benefit Plans.	19
4.19	Accounting Records and Internal Controls.	21
4.20	Loan Portfolio	22
4.21	Operating Losses	22
4.22	Environmental Matters	22
4.23	Community Reinvestment Act	23
4.24	Material Contracts	23
4.25	Regulatory Approvals	24
4.26	Intellectual Property	24
4.27	Bank Secrecy Act	24
4.28	Absence of Adverse Agreements	25
4.29	Disclosure	25
4.30	S-4; Proxy Statement	25
4.31	Anti-takeover Provisions Inapplicable	25
ARTICLE 5		25
AGREEMENTS WITH RESPECT TO CONDUCT OF		25
CENTER AFTER THE DATE HEREOF		25
5.1	Material Adverse Effect	25
5.2	Disclosure Letter	26
5.3	CG Bank	26
5.4	Consents and Approvals	26
5.5	Compliance with Rules	26
5.6	Directors’ and Officers’ Indemnification.	26
5.7	Center Stock	27
ARTICLE 6		27
AGREEMENTS WITH RESPECT TO		27
CONDUCT OF SELLER AFTER THE DATE HEREOF		27
6.1	Access	27
6.2	Material Adverse Effect; Reports; Financial Statements; Filings.	27
6.3	Conduct of Business.	28
6.4	Certain Loans and Other Extensions of Seller	31
6.5	Disclosure Letter	32
6.6	Change of Recommendation	32
6.7	Consents and Approvals.	32
6.8	Preservation of Employment Relations Prior to Effective Time	32
6.9	Compliance with Rules	32
6.10	Seller Benefit Arrangements	33
6.11	No Shop	33
6.12	Affiliates	33
6.13	Access to Operations	33
6.14	Access to Employees	34
ARTICLE 7		34
FURTHER COVENANTS OF CENTER AND SELLER		34
7.1	Shareholder Meeting; S-4 and Proxy Statement.	34
7.2	Filings	35
7.3	Applications	35
7.4	Further Assurances	35
7.5	Establishment of Accruals	35

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		Page No.
ARTICLE 8		35
CONDITIONS TO THE PARTIES’ OBLIGATIONS TO CLOSE		35
8.1	Conditions to Each Party’s Obligations to Close	35
8.2	Additional Conditions to Obligations of Center to Close	36
8.3	Additional Conditions to Obligations of Seller to Close	37
ARTICLE 9		38
EMPLOYEE BENEFITS		38
9.1	Employee Benefits.	38
ARTICLE 10		38
TERMINATION OF AGREEMENT; WAIVER OF CONDITIONS		38
10.1	Termination of Agreement	38
10.2	Effect of Termination	39
10.3	Waiver of Conditions	39
ARTICLE 11		39
GENERAL		39
11.1	Expenses/Termination Expenses.	39
11.2	Amendments	40
11.3	Disclosure Letter; Exhibits; Integration	40
11.4	Reasonable Best Efforts	40
11.5	Governing Law; Arbitration	40
11.6	No Assignment	41
11.7	Headings	41
11.8	Counterparts	41
11.9	Publicity and Reports	41
11.10	Confidentiality	41
11.11	Specific Performance	41
11.12	Notices	42
11.13	Severability	43
11.14	Attorneys’ Fees	43
11.15	Termination of Representations, Warranties and Covenants	43

iii

Exhibits
Exhibit A	-	Agreement of Merger
Exhibit B	-	Non-Competition Agreement
Exhibit C	-	Voting Agreement
Exhibit D	-	Rule 145 Letter
Schedules
Schedule 6.3	-	Center’s Designated Officers

iv

AGREEMENT AND PLAN OF REORGANIZATION

This Agreement and Plan of Reorganization (“Agreement”) is entered into as of September 18, 2007, among Center Financial Corporation, a corporation organized under the laws of California (“Center”) located in Los Angeles, California, and First Intercontinental Bank, a Georgia banking corporation (“Seller”), located in Atlanta, Georgia.

R E C I T A L S:

A. Center and Seller believe that it would be in their respective best interests and in the best interests of Seller’s shareholders for Seller to merge with and into a banking subsidiary to be formed and wholly owned by Center (the “Merger”), all in accordance with the terms set forth in this Agreement and applicable law.

B. The respective boards of directors of Center and Seller have adopted by at least majority vote resolutions approving and authorizing the Merger, this Agreement and the transactions contemplated herein.

C. Center and Seller desire to make certain representations, warranties, covenants and agreements in connection with the transactions contemplated by this Agreement.

D. It is the intention of the parties to this Agreement that the business combination contemplated hereby be treated as a “reorganization” under Section 368 of the Internal Revenue Code of 1986, as amended (the “Code”).

A G R E E M E N T

In consideration of the premises and mutual covenants hereinafter contained, Center and Seller agree as follows:

ARTICLE 1

DEFINITIONS AND DETERMINATIONS

1.1 Definitions. Capitalized terms used in this Agreement shall have the meanings set forth below:

“Accountants’ Letter” shall mean a letter prepared by Seller’s regular independent accountants, or such other independent accounting firm as may be reasonably approved by the Parties, setting forth the total shareholders’ equity of Seller as of the Measurement Date determined in accordance with the standards of Section 8.2(i), and setting forth a reasonable summary of the determinations made by such accountants in determining Seller’s shareholders’ equity based upon (a) limited procedures, not including an audit, including a review of the statement of condition of Seller and related statements of income and cash flows as and for the periods ending on Measurement Date, but without performing an audit, (b) inquiries of management of Seller responsible for financial and accounting matters, and (c) such limited other procedures and inquiries as are set forth in such letter.

“Affiliate” means a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified.

“Agreement of Merger” means the Agreement of Merger substantially in the form attached as Exhibit A.

1

“Award” means, with regard to any Person, a right of any kind, contingent or accrued, to acquire or receive Rights, other than, with regard to Seller, Seller Stock Options.

“Benefit Arrangement” means any plan or arrangement maintained or contributed to by a Party, including an “employee benefit plan” within the meaning of ERISA, (but exclusive of base salary and base wages) which provides for any form of current or deferred compensation, bonus, stock option, profit sharing, benefit, retirement, incentive, group health or insurance, welfare or similar plan or arrangement for the benefit of any employee, officer or director or class of employee, officer or director, whether active or retired, of a Party.

“BHC Act” means the Bank Holding Company Act of 1956, as amended.

“Business Day” means any day other than a Saturday, Sunday or day on which commercial banks in California are authorized or required to be closed.

“Cash Election” shall have the meaning given such term in Section 2.7(a).

“Cash Proration Factor” shall have the meaning given such term in Section 2.7(d).

“Center” shall have the meaning given such term in the introductory clause.

“Center Stock” means the common stock, no par value, of Center.

“Certificates” shall have the meaning given such term in Section 2.5(b).

“CG Bank” means a Georgia banking corporation to be established by Center.

“CG Bank Stock” means the common stock no par value of CG Bank.

“Change in Recommendation” shall have the meaning given such term in Section 6.6.

“Charter Documents” means, with respect to any business organization, any certificate of incorporation, or articles of incorporation and any bylaws, each as amended to date, that regulate the basic organization of the business organization and its internal relations.

“Closing” means the consummation of the Merger on the Effective Day at the main office of Center or at such other place as may be agreed upon by the Parties.

“Code” shall have the meaning given such term in the Recitals.

“Combination Cash Election” shall have the meaning given such term in Section 2.7(a).

“Combination Stock Election” shall have the meaning given such term in Section 2.7(a).

“Competing Transaction” shall have the meaning given such term in Section 6.11.

“Confidential Information” means all information exchanged heretofore or hereafter between Seller and its Affiliates and agents, on the one hand, and Center and its Affiliates and agents, on the other hand, which is information related to the business, financial position or operations of the Person responsible for furnishing the information or an Affiliate of such Person (such information to include, by way of example only and not of limitation, trade secrets, client lists, company manuals, internal memoranda, strategic plans, budgets, forecasts/ projections, computer models, marketing plans, files relating to loans originated by such Person, loans and loan participations purchased by such Person from others, investments, deposits, leases, contracts, employment records, minutes of board of directors meetings (and committees thereof) and shareholder meetings, legal proceedings, reports of examination by any Governmental Entity, and such other records or documents such Person may supply to the other Party pursuant to the terms of this Agreement or as contemplated hereby). Notwithstanding the foregoing, “Confidential Information” shall not include any information that (i) at the time of disclosure or thereafter is generally available to and known by the public (other than as a result of a disclosure directly or indirectly by the recipient or any of, its Affiliates, or any of their respective officers, directors, employees or other representatives or agents), (ii) was available to the recipients on a non-confidential basis from a source other than Persons responsible for furnishing the

2

information, provided that such source is not and was not bound by a confidentiality agreement with respect to the information, or (iii) has been independently acquired or developed by the recipients without violating any obligations under this Agreement.

“Consents” means every required consent, approval, absence of disapproval, waiver or authorization from, or notice to, or registration or filing with, any Person.

“DBF” means the Georgia Department of Banking and Finance.

“Disclosure Letter” means a disclosure letter from the Party making the disclosure and delivered to the other Party.

“DPC Property” means voting securities, other personal property and real property acquired by foreclosure or otherwise, in the ordinary course of collecting a debt previously contracted for in good faith, retained with the object of sale for any applicable statutory holding period, and recorded in the holder’s business records as such.

“D&O Insurance” shall have the meaning given such term in Section 5.6.

“Effective Day” means the day on which the Effective Time occurs.

“Effective Time” shall have the meaning given such term in Section 2.2.

“Election” shall have the meaning given such term in Section 2.7(a).

“Election Deadline” shall have the meaning given such term in Section 2.7(b).

“Election Form” shall have the meaning given such term in Section 2.7(a).

“Election Form Mailing Date” shall have the meaning given such term in Section 2.7(a).

“Encumbrances” means any option, pledge, security interest, lien, charge, encumbrance, mortgage, assessment, claim or restriction (whether on voting, disposition or otherwise), whether imposed by agreement, understanding, Rule or otherwise.

“Environmental Laws” shall have the meaning given such term in Section 4.22.

“Equity Securities” means capital stock or any options, rights, warrants or other rights to subscribe for or purchase capital stock, or any plans, contracts or commitments that are exercisable in such capital stock or that provide for the issuance of, or grant the right to acquire, or are convertible into, or exchangeable for, such capital stock.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and all regulations thereunder.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Exchange Agent” means Computershare Investor Services, formerly known as U.S. Stock Transfer Corporation, or such other financial institution appointed by Center to reflect the exchange contemplated by Section 2.5 hereof.

“Exchange Fund” shall have the meaning given such term in Section 2.5.

“Exchange Ratio” means 1.3971 of a share of Center Stock for a share of Seller Stock, determined by dividing the Per Share Cash Consideration by the average closing price per share of Center Stock for the thirty (30) calendar days ending with the Business Day immediately prior to the date hereof of $15.94 (the “Center Trading Price”); provided, that if the average closing price per share of Center Stock for the thirty (30) calendar days ending with the Business Day immediately prior to the Effective Day (the “Adjusted Trading Price”) varies from the Center Trading Price by fifteen percent (15%) or more, then the Exchange Ratio shall be adjusted as follows:

(a) If the Adjusted Trading Price is equal to or greater than $18.33 ($18.33 being the “Ceiling Price”), then the Exchange Ratio shall be equal to the quotient of the Per Share Cash Consideration divided by the Ceiling Price;

3

(b) If the Adjusted Trading Price is equal to or less than $13.55 ($13.55 being the “Floor Price”), then the Exchange Ratio shall be equal to the quotient of the Per Share Cash Consideration divided by the Floor Price; and

(c) If the Adjusted Trading Price is greater than the Floor Price and less than the Ceiling Price, the Exchange Ratio shall remain unchanged.

“Executive Officer” means with respect to any company a natural Person who participates or has the authority to participate (other than solely in the capacity of a director) in major policy making functions of the company, whether or not such Person has a title or is serving with salary or compensation and, in the case of Seller, shall mean Seller’s Chief Executive Officer, Chief Financial Officer (if such position is filled), Senior Vice President and Senior Loan Officer and Chief Operating Officer.

“FDIC” means the Federal Deposit Insurance Corporation.

“Financial Statements of Seller” means the audited financial statements (balance sheets, statements of income, statements of cash flow and statements of changes in financial position) and notes thereto of Seller and the related opinions thereon for the years ended December 31, 2004, 2005 and 2006 and the unaudited statements of financial condition and statements of operations and cash flow of Seller for the six months ended June 30, 2007.

“FRB” shall mean the Board of Governors of the Federal Reserve System.

“GAAP” means generally accepted accounting principles in the United States of America.

“GBCC” shall mean the Georgia Business Corporation Code.

“Governmental Entity” means any court or tribunal in any jurisdiction within any United States federal, state, district, domestic, or other administrative agency, department, commission, board, bureau or other governmental authority or instrumentality.

“Hazardous Materials” shall have the meaning given such term in Section 4.22.

“Holder of Seller Stock” shall have the meaning given such term in Section 2.7(c).

“Immediate Family” shall mean a Person’s spouse, parents, in-laws, children and siblings.

“IRS” shall mean the Internal Revenue Service.

“Intellectual Property” shall have the meaning given such term in Section 4.26.

“Investment Securities” means any equity security or debt security as defined in Statement of Financial Accounting Standard No. 115.

“Knowledge” means: (a) with respect to the Seller, the actual of knowledge of Daniel Lee and Juan Lago after reasonable investigation; (b) with respect to the Seller, for purposes of Section 4.22, the actual knowledge of Daniel Lee and Juan Lago without the imposition of any duty of inquiry beyond that required in Seller’s lending policies; and (c) with respect to Center or CG Bank, the actual of knowledge of Jae Whan Yoo, Lonny Robinson and Jason Kim after reasonable investigation.

“Material Adverse Effect” means, with respect to any Party, any change, circumstance or effect, individually or in the aggregate, that is materially adverse (i) to the business, results of operations, prospects, or condition (financial or otherwise), of such Party and its Subsidiaries taken as a whole, other than any change, circumstance or effect relating to (A) changes, after the date hereof, in generally accepted accounting principles or regulatory accounting requirements applicable to banks generally, except to the extent such change disproportionately adversely affects such Party relative to other banking institutions, (B) changes, after the date hereof, in laws of general applicability or interpretations thereof by courts or governmental authorities, (C) actions or omissions required under or contemplated by this Agreement, or (D) changes, after the date hereof, in global or national or regional political conditions (including the outbreak of war or acts of terrorism) or in general or regional economic or market conditions affecting

4

banks or their holding companies generally except to the extent that any such changes in general or regional economic or market conditions have a disproportionate adverse effect on such Party relative to other banking institutions, or (ii) to the ability of such Party to timely consummate the transactions contemplated by this Agreement.

“Material Personal Property” shall have the meaning set forth in Section 4.7.

“Measurement Date” shall have the meaning set forth in Section 8.2(i).

“Merger” shall have the meaning set forth in Section 2.1(a).

“Non-Competition Agreement” shall mean an agreement substantially in the form attached as Exhibit B.

“NPAs” shall mean (i) all loans (excluding the guaranteed portion of any loan that is partially guaranteed by the U.S. Small Business Administration) and leases (A) that are contractually past due 90 days or more in the payment of principal and/or interest, (B) that are on nonaccrual status, (C) where a reasonable doubt exists, in the reasonable judgment of Seller, as to the timely future collectibility of principal and/or interest, whether or not interest is still accruing or the loan is less than 90 days past due, (D) where the interest rate terms have been reduced and/or the maturity dates have been extended subsequent to the agreement under which the loan was originally created due to concerns regarding the borrower’s ability to pay in accordance with such initial terms, (E) where a specific reserve allocation exists in connection therewith or (F) that have been classified “Doubtful,” “Loss” or the equivalent thereof by any Governmental Entity, and (ii) all DPC Property.

“Operating Loss” shall have the meaning given such term in Section 4.21.

“Party” means Center or Seller.

“Per Share Cash Consideration” means $22.27, subject to adjustment as provided in Section 2.3(d).

“Permit” means any United States federal, foreign, state, local or other license, permit, franchise, and certificate of authority, order of approval necessary or appropriate under applicable Rules.

“Person” means any natural person, corporation, trust, association, unincorporated body, partnership, joint venture, Governmental Entity, statutorily or regulatory sanctioned unit or any other person or organization.

“Proxy Statement” means the proxy statement used to solicit proxies for the Seller Shareholders’ Meeting to approve the Merger.

“Related Group of Persons” means Affiliates, members of an Immediate Family or Persons the obligation of whom would be attributed to another Person pursuant to the regulations promulgated by the SEC.

“Required Stock Amount” shall have the meaning given such term in Section 2.7(c).

“Rights” means, with respect to any Person, the stock options, stock appreciation rights, warrants, and any other securities or obligations convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire, or any options, calls or commitments relating to, or other instrument the value of which is determined in whole or in part by reference to the market price or value of, any shares of capital stock or any other property or assets of such Person.

“Rule” means any statute or law or any judgment, decree, injunction, order, regulation or rule of any Governmental Entity.

“S-4” has the meaning set forth in Section 7.1.

“SEC” means the Securities and Exchange Commission.

“SEC Documents” has the meaning set forth in Section 3.7.

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“Securities Act” means the Securities Act of 1933, as amended.

“Seller” shall have the meaning given such term in the introductory clause.

“Seller Benefit Arrangement” shall have the meaning given such term in Section 4.18.

“Seller Options” means the amount of Seller Stock Options outstanding at the Effective Time.

“Seller Property” shall have the meaning given such term in Section 4.22.

“Seller Scheduled Contracts” shall have the meaning given such term in Section 4.24.

“Seller Shareholders’ Meeting” shall have the meaning given such term in Section 7.1(a).

“Seller Shares” means the number of shares of Seller Stock outstanding at the Effective Time.

“Seller Stock” means the common stock, no par value of Seller.

“Seller Stock Option Plan” means Seller’s 2005 Stock Option Plan, as amended.

“Seller Stock Options” means the stock options issued pursuant to Seller Stock Option Plan and as listed on Seller’s Disclosure Letter pursuant to Section 4.2.

“Small Cash Election” shall have the meaning given such term in Section 2.7(d).

“Stock Election” shall have the meaning given such term in Section 2.7(a).

“Stock Proration Factor” shall have the meaning given such term in Section 2.7(d).

“Subsidiary” means, as to any Person, a corporation, limited liability company, partnership or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, limited liability company, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person.

“Surviving Bank” means the CG Bank as the Georgia banking corporation surviving the Merger of Seller with and into CG Bank. CG Bank will change its name to First Intercontinental Bank in connection with the Merger.

“Tank” shall have the meaning given such term in Section 4.22.

“Third Party Consent” shall have the meaning given such term in Section 5.4(b).

“Undesignated Shares” shall have the meaning given such term in Section 2.7(a).

“Voting Agreement” shall mean an agreement substantially in the form attached as Exhibit C.

“Well” shall have the meaning given such term in Section 4.22.

ARTICLE 2

CONSUMMATION OF THE MERGER

2.1 The Merger; Plan of Reorganization.

(a) Subject to the terms and conditions of this Agreement, at the Effective Time, Seller will be merged with and into CG Bank (the “Merger”) and the separate corporate existence of Seller shall cease. CG Bank shall be the surviving corporation in the Merger (sometimes hereinafter referred to as the “Surviving Bank”), and shall continue to exist as a Georgia banking corporation with all its rights, privileges, immunities, powers and franchises continuing unaffected by the Merger. Pursuant to the Agreement of

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Merger, the name of CG Bank shall be changed to First Intercontinental Bank at the Effective Time. All assets, rights, franchises, titles and interests of Seller in and to every type of property (real, personal and mixed, including all the right, title and interest to Seller’s names, trade names, service marks and the like) and chooses in action shall be transferred to and vested in Surviving Bank by virtue of the Merger without any deed or other transfer, and Surviving Bank, without order or action on the part of any court or otherwise, shall hold and enjoy all rights of property, franchises and interests in the same manner and to the same extent that such rights, franchises and interests were held by Seller at the Effective Time. At the Effective Time, the Surviving Bank shall be liable for all liabilities of Seller, and all debts, liabilities, obligations and contracts of Seller, whether matured or unmatured, accrued, absolute, contingent or otherwise, and whether or not reflected or reserved against on balance sheets, books of accounts or records of Seller shall be those of Surviving Bank; and all rights of creditors or other obligees and all liens on property of Seller shall be preserved unimpaired.

(b) The Charter Documents of CG Bank as in effect immediately prior to the Effective Time shall continue in effect after the Merger until thereafter amended in accordance with applicable law, the members of the board of directors and the Executive Officers of CG Bank immediately prior to the Merger shall continue in their respective positions after the Merger and be the board of directors and Executive Officers of CG Bank and the operations of CG Bank shall continue in effect after the Merger, in each case subject to any changes contemplated by Section 2.9.

2.2 Effective Time. The Closing shall take place as soon as practicable following (i) the satisfaction or waiver of the conditions set forth in Sections 8.1, 8.2 and 8.3 and (ii) receipt of approval of all required Governmental Entities for the Merger and the expiration of all waiting periods required by Rule, or such other time and date as to which the Parties may agree. The Merger shall be effective upon the filing of the Agreement of Merger with the Georgia Secretary of State. Such time is referred to herein as the “Effective Time.”

2.3 Conversion of Shares. At the Effective Time and pursuant to the Agreement of Merger:

(a) Each outstanding share of Seller Stock shall, by virtue of the Merger, be converted into the right to receive, at the election of the holder thereof as provided in Section 2.7, either:

(1) an amount of Center Stock equal to the Exchange Ratio; or

(2) cash in the amount of the Per Share Cash Consideration.

(b) Each outstanding share of CG Bank Stock shall remain outstanding and shall not be converted or otherwise affected by the Merger.

(c) If, following the date of this Agreement and prior to the Effective Time, the outstanding shares of Center Stock shall have been increased, decreased, changed into or exchanged for a different number or kind of shares or securities as a result of a reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split, or other similar change in capitalization, or a record date with respect to any of the foregoing shall occur during such period, then an appropriate and proportionate adjustment shall be made to the Exchange Ratio to provide the holders of Seller Stock the same economic effect as contemplated by this Agreement prior to the consummation of such event.

(d) In the event the Accountants’ Letter shall determine that the total shareholders’ equity of Seller, calculated with the adjustments permitted under Section 8.2(i) is less than $22,500,000, the Per Share Cash Consideration shall be reduced by an amount equal to such shortfall divided by the number of Seller Shares outstanding at the Effective Time.

2.4 Certain Exceptions and Limitations. (A) No fractional shares of Center Stock shall be issued in the Merger and, in lieu thereof, each Holder of Seller Stock who would otherwise be entitled to receive a fractional share shall receive an amount in cash equal to the product (calculated to the nearest hundredth) obtained by multiplying such fractional share interest by the Per Share Cash Consideration; and (B) any perfected dissenter’s shares shall receive the consideration provided for in Article 13 of the GBCC.

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2.5 Exchange Procedures.

(a) As of the Effective Time, Center shall have deposited with the Exchange Agent for the benefit of the holders of shares of Seller Stock, for exchange in accordance with this Section 2.5 through the Exchange Agent, certificates representing the shares of Center Stock issuable pursuant to Section 2.3 and funds in an amount equal to the sum of (i) the product of (A) the difference between the Seller Shares and the Required Stock Amount, multiplied by (B) the Per Share Cash Consideration and (ii) the amount to be paid for fractional shares of Center Stock which would otherwise be issued in connection with Section 2.3 hereof, but for the operation of Section 2.4 of this Agreement (collectively, the “Exchange Fund”).

(b) Center shall direct the Exchange Agent to mail within five (5) Business Days following the Effective Day to each holder of record of certificates formerly representing shares of Seller Stock (the “Certificates”): (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Exchange Agent), (ii) an Election Form (as hereinafter defined), and (iii) instructions for use in effecting the surrender of the Certificates. Upon surrendering of a Certificate for cancellation to the Exchange Agent or to such other agent or agents as may be appointed by Center, together with such letters of transmittal, duly executed, the holder of such Certificate shall be entitled to receive in exchange therefor the consideration provided herein (subject to the provisions of Section 2.7), and the Certificate so surrendered shall forthwith be canceled. In the event a Certificate is surrendered representing Seller Stock, the ownership of which is not registered in the records of Seller, the consideration provided herein will be paid if the Certificate representing such Seller Stock is presented to the Exchange Agent, accompanied by all documents required to evidence and effect the transfer and by evidence that any applicable stock transfer taxes have been paid. Until surrendered as contemplated by this Section 2.5 and except as provided in subsection (g) hereof, each Certificate shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender the consideration provided herein. Notwithstanding anything to the contrary set forth herein, if any holder of shares of Seller Stock should be unable to surrender the Certificates for such shares, because they have been lost or destroyed, such holder may deliver in lieu thereof, in the discretion of Center, such bond in form and substance and with surety reasonably satisfactory to Center, or customary affidavits and indemnification regarding the loss or destruction of such certificates or the guaranteed delivery of such certificates, and thereafter shall be entitled to receive the consideration provided herein. No interest shall be paid on the Per Share Cash Consideration.

(c) No dividends or other distributions declared or made after the Effective Time with respect to Center Stock with a record date after the Effective Time shall be paid, nor any voting rights granted, to the holder of any unsurrendered Certificate who is to receive Center Stock pursuant to the provisions hereof until the holder of record of such Certificate shall surrender such Certificate. Subject to the effect of applicable laws, following surrender of any such Certificate by a holder receiving Center Stock pursuant to the provisions hereof, there shall be paid to the record holder of the certificates representing whole shares of Center Stock issued in exchange therefore, without interest, (i) at the time of such surrender, the amount of any cash payable in lieu of a fractional share of Center Stock to which such holder is entitled pursuant to Section 2.4 and the amount of dividends or other distributions with a record date after the Effective Time theretofore paid with respect to such whole shares of Center Stock, and (ii) at the appropriate payment date, the amount of dividends or other distributions with a record date after the Effective Time but prior to surrender and a payment date subsequent to surrender payable with respect to such whole shares of Center Stock.

(d) As of the Effective Time, there shall be no further registration of transfers on the stock transfer books of Seller or Center of the shares of Seller Stock, which were outstanding immediately prior to the Effective Time.

(e) Any portion of the Exchange Fund which remains undistributed to the shareholders of Seller following the passage of six months after the Effective Time shall be delivered to Center, upon demand, and any shareholders of Seller who have not theretofore complied with this Section 2.5 shall thereafter look only to Center for payment of their claim for the consideration provided herein.

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(f) Neither Center nor Seller shall be liable to any holder of shares of Seller Stock for such shares (or dividends or distributions with respect thereto) or cash from the Exchange Fund delivered to a public official pursuant to any applicable abandoned property, escheat or similar law.

(g) The Exchange Agent shall not be entitled to vote or exercise any rights of ownership with respect to the shares of Center Stock held by it from time to time hereunder, except that it shall receive and hold all dividends or other distributions paid or distributed with respect to such shares of Center Stock for the account of the Persons entitled thereto.

2.6 Non-Competition and Voting Agreements. Concurrently with the execution of this Agreement, Seller shall cause each of its directors, other than the Chief Executive Officer, to enter into a Non-Competition Agreement in the form attached hereto as Exhibit B, and each of its directors, including the Chief Executive Officer, to enter into a Voting Agreement in the form attached hereto as Exhibit C.

2.7 Election and Proration Procedures.

(a) An election form and other appropriate and customary transmittal materials (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates theretofore representing Seller Stock shall pass only upon delivery of such Certificates to the Exchange Agent) in such form as Center and Seller shall mutually agree (“Election Form”) shall be mailed by the Exchange Agent no less than five (5) Business Days after the Effective Day (the “Election Form Mailing Date”) to each holder of record of Seller Stock as of the Effective Day. Seller shall provide to the Exchange Agent all information reasonably necessary for it to perform its obligations as specified herein. Each Election Form shall permit the holder (or the beneficial owner through appropriate and customary documentation and instructions) to elect (an “Election”) to receive either (i) Center Stock (a “Stock Election”) with respect to all of such holder’s Seller Stock, (ii) cash (a “Cash Election”) with respect to all of such holder’s Seller Stock, or (iii) a specified number of shares of Center Stock in respect of some of such holder’s Seller Shares (a “Combination Stock Election”) and a specified amount of cash in respect of such holder’s remaining Seller Shares (a “Combination Cash Election”), subject to the provisions contained in this Agreement. Any Seller Stock with respect to which the holder (or the beneficial owner, as the case may be) shall not have submitted to the Exchange Agent, an effective, properly completed Election Form prior to the Election Deadline shall be deemed to be “Undesignated Shares” hereunder.

(b) Any Election shall have been properly made and effective only if the Exchange Agent shall have actually received a properly completed Election Form by 5:00 P.M. California time on or before the 30th day following the Election Form Mailing Date, or such later time and date as Center and Seller may mutually agree prior to the Effective Time (the “Election Deadline”). An Election Form shall be deemed properly completed only if an Election is indicated for each share of Seller Stock covered by such Election Form and if accompanied by one or more Certificates (or customary affidavits and indemnification regarding the loss or destruction of such certificates or the guaranteed delivery of such certificates) representing all shares of Seller Stock covered by such Election Form, together with duly executed transmittal materials included in or required by the Election Form. Any Election Form may be revoked or changed by the person submitting such Election Form at or prior to the Election Deadline. In the event an Election Form is revoked prior to the Election Deadline, the shares of Seller Stock represented by such Election Form shall automatically become Undesignated Shares unless and until a new Election Form is properly completed and made with respect to such shares on or before the Election Deadline. Subject to the terms of this Agreement and of the Election Form, the Exchange Agent shall have reasonable discretion to determine whether any election, revocation or change has been properly or timely made and to disregard immaterial defects in the Election Forms, and any decisions made in good faith in determining such matters shall be binding and conclusive. Neither Center, Seller nor the Exchange Agent shall be under any obligation to notify any person of any defect in an Election Form.

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(c) For purposes of this Section 2.7, the following definitions shall apply:

(i) “Required Stock Amount” shall mean an amount equal to Forty percent (40%) of the Seller Shares.

(ii) “Holder of Seller Stock” shall mean a holder of Seller Shares as of the Effective Time.

(d) Center shall use its best efforts to cause the Exchange Agent to effect the allocation among the holders of Seller Stock of rights to receive Center Stock or cash in the Merger as follows:

(i) If the conversion of shares of Seller Stock for which Cash Elections and Combination Cash Elections shall have effectively been made would result in Center Stock being issued for an amount of Seller Shares that is greater than the Required Stock Amount (which shall be determined for this purpose on the assumption that all Seller Shares [other than those for which Cash Elections or Combination Cash Elections have been made] would be entitled to receive Center Stock), then, to the extent necessary so that the number of Seller Shares being exchanged for Center Stock in the Merger shall be equal to the Required Stock Amount, the Exchange Agent shall make the following allocations and adjustments in the following order:

(1) shares of Seller Stock for which effective Cash Elections or Combination Cash Elections have been made shall be converted into the right to receive cash in an amount equal to the Per Share Cash Consideration;

(2) the Undesignated Shares shall be converted into the right to receive the Per Share Cash Consideration;

(3) a stock proration factor (the “Stock Proration Factor”) shall be determined by dividing (x) the Required Stock Amount by (y) the total number of shares of Seller Stock with respect to which effective Stock Elections and Combination Stock Elections were made. Each Holder of Seller Stock who made an effective Stock Election or Combination Stock Election shall be entitled to:

(a) the number of shares of Center Stock equal to the product of (x) the Exchange Ratio, multiplied by (y) the number of shares of Seller Stock covered by such Stock Election or Combination Stock Election, multiplied by (z) the Stock Proration Factor; and

(b) cash in an amount equal to the product of (x) the Per Share Cash Consideration, multiplied by (y) the number of shares Seller Stock covered by such Stock Election or Combination Stock Election, multiplied by (z) one minus the Stock Proration Factor.

(ii) If the conversion of the shares of Seller Stock for which Cash Elections and Combination Cash Elections shall have effectively been made would result in less than the Required Stock Amount of Seller Shares being exchanged for Center Stock (which shall be determined for this purpose on the assumption that all shares of Seller Stock [other than those for which Stock Elections or Combination Stock Elections have been made] would be entitled to receive the Per Share Cash Consideration), then, to the extent necessary so that the number of Seller Shares to be exchanged for Center Stock in the Merger shall be equal to the Required Stock Amount, the Exchange Agent shall make the following allocations and adjustments in the following order:

(1) each Holder of Seller Stock who made an effective Stock Election or Combination Stock Election shall receive the number of shares of Center Stock equal to the product of the Exchange Ratio multiplied by the number of shares of Seller Stock covered by such Stock Election or Combination Stock Election;

(2) the Exchange Agent shall allocate the Undesignated Shares between those exchanged for cash and those exchanged for Center Stock as shall be necessary so that the Seller Shares to be exchanged in the Merger (including the Seller Shares for which a Stock Election or Combination Stock Election has been made) shall be equal to the Required Stock Amount. If all Undesignated

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Shares plus all shares as to which Stock Elections and Combination Stock Elections have been made together are still less than the Required Stock Amount, then;

(3) a cash proration factor (the “Cash Proration Factor”) shall be determined by dividing (x) the Required Stock Amount (less the Seller Shares for which an effective Stock Election and Combination Stock Election has been made, plus all the Undesignated Shares) by (y) the total number Seller Shares with respect to which effective Cash Elections and Combination Cash Elections were made (less the Seller Shares for which effective Small Cash Elections (as hereinafter defined) were made). Each Holder of Seller Stock who made an effective Cash Election, except for an effective Small Cash Election, or Combination Cash Election shall be entitled to:

(a) cash equal to the product of (x) the Per Share Cash Consideration, multiplied by (y) the number of Seller Shares covered by such Cash Election or Combination Cash Election, multiplied by (z) the Cash Proration Factor; and

(b) the number of shares of Center Stock equal to the product of (x) the Exchange Ratio, multiplied by (y) the number of Seller Shares covered by such Cash Election or Combination Cash Election, multiplied by (z) one minus the Cash Proration Factor.

Holders of Seller Stock which made effective Small Cash Elections shall be entitled to receive cash in an amount equal to the Per Share Cash Consideration for each Seller Share covered by such Small Cash Election. “Small Cash Election” shall mean an effective Cash Election made for 100 or fewer shares of Seller Stock held of record by such holder. Any Combination Cash Election shall not be deemed to be a “Small Cash Election” even if the number of shares of Seller Stock for which cash is elected in such Combination Cash Election is for 100 or fewer shares.

(iii) If the aggregate number of shares of Seller Stock for which Stock Elections and Combination Stock Elections shall have effectively been made would result in a number of shares of Center Stock being issued that is equal to the Required Stock Amount,

(1) Seller Shares for which effective Stock Elections and Combination Stock Elections have been made shall be converted into the right to receive Center Stock equal to the product of the Exchange Ratio multiplied by the number of Seller Shares covered by such Stock Elections and Combination of Stock Elections;

(2) Seller Shares for which effective Cash Elections and Combination Cash Elections have been made shall be converted into the right to receive the Per Share Cash Consideration; and

(3) the Undesignated Shares shall be converted into the right to receive the Per Share Cash Consideration.

(e) Center and Seller shall cooperate to prepare the calculations required by Section 2.7(d) as soon as practicable following the Election Deadline. Any calculation of a portion of a share of Center Stock shall be rounded to the nearest 1/100 of a share, and any cash payment shall be rounded to the nearest $0.0001.

2.8 Stock Options for Seller Stock

(a) As soon as practicable following the date of this Agreement, the Board of Directors of Seller (or, if appropriate, any committee thereof administering the Seller Stock Option Plan) shall adopt such resolutions or take such other actions, including the execution by each option holder of an agreement approved by Center, as may be required to adjust the terms of all outstanding Seller Stock Options, whether vested or unvested, as necessary to provide that the Seller Stock Options will become fully exercisable and may be exercised before the Effective Time, and, at the Effective Time, each Seller Stock Option outstanding immediately prior to the Effective Time shall be canceled and the holder thereof shall then become entitled

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to receive from Seller prior to the Effective Time, a single lump sum cash payment equal to (i) the difference between the Per Share Cash Consideration and the per share exercise price of the cancelled options, (ii) multiplied by the number of option shares so cancelled; and

(b) All amounts payable to holders of the Seller Stock Options pursuant to Section 2.8(a) shall be subject to any required withholding of taxes and shall be paid without interest as soon as practicable following the Effective Time.

2.9 Corporate Governance. Surviving Bank’s board of directors, at the Effective Time, will consist of the individuals appointed by Center and designated prior to the Effective Time, which shall include up to five (5) of the Seller’s current directors who shall agree to continue. The officers of Surviving Bank shall be appointed by the board of directors as of the Effective Time.

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF CENTER

Except as set forth in Center’s Disclosure Letter, which identifies exceptions by specific section references (provided that any information set forth in any one section of the Center Disclosure Letter shall be deemed to apply to each other applicable section or subsection thereof if its relevance to the information called for in such section or subsection is reasonably apparent), Center represents and warrants to Seller as follows:

3.1 Incorporation, Standing and Power.

(a) Center has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of California, is registered as a bank holding company under the BHC Act, and, at the Effective Time, will be registered as a banking holding company with the DBF. Center has all requisite corporate power and authority necessary to own, lease and operate its properties and assets and to carry on its businesses as presently conducted. Neither the scope of the business of Center nor the location of any of its properties requires that Center be licensed to do business in any jurisdiction other than California, except where the failure to be so licensed would not have a Material Adverse Effect.

(b) Center has full power and authority to execute and deliver, and to perform its obligations under, the Agreement.

3.2 Capitalization. As of the date of this Agreement, the authorized capital stock of Center consisted of 40,000,000 shares of Center Stock, of which 16,718,447 shares were outstanding and 10,000,000 shares of preferred stock, of which no shares are outstanding. 971,931 shares of Center Stock are reserved for issuance for outstanding options or warrants (the “Center Options”). All the outstanding shares of Center Stock are, and the Center Stock issued in exchange for Seller Shares pursuant to the Merger will be, duly authorized, validly issued, fully paid, nonassessable and without preemptive rights. Except as set forth in Center’s Disclosure Letter, and for the Center Options, there are no Awards outstanding respecting Center.

3.3 Authority of Center. The execution and delivery by Center of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action on the part of Center, and this Agreement is a valid and binding obligation of Center, enforceable in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, liquidation, receivership, conservatorship, insolvency, moratorium or other similar laws affecting the rights of creditors generally and by general equitable principles. Neither the execution and delivery by Center of this Agreement, the consummation of the Merger or the transactions contemplated herein, nor compliance by Center with any of the provisions hereof, will: (a) violate any provision of its Charter Documents; (b) constitute a breach of or result in a default (or give rise to any rights of termination, cancellation or acceleration, or any right to acquire any securities or assets) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, franchise,

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license, permit, agreement, Encumbrances or other instrument or obligation to which it is a party, or by which Center or any of its respective properties or assets is bound, if in any such circumstances, such event could have a Material Adverse Effect; or (c) assuming that the Consents referred to in the following sentence are duly obtained, violate any Rule applicable to Center or any of its properties or assets. No Consent of any Governmental Entity having jurisdiction over any aspect of the business or assets of Center, and no Consent of any Person or shareholder approval, is required in connection with the execution and delivery by Center of this Agreement or the consummation by Center of the Merger and the transactions contemplated hereby, except (i) the approval of the Merger and the transactions contemplated hereby by Center as the sole shareholder of CG Bank; (ii) such Consents as may be required by Governmental Entities including, without limitation, the effectiveness of the S-4 and any Blue Sky permits and approvals; and (iii) as otherwise set forth in Center’s Disclosure Letter.

3.4 Available Funds. Immediately prior to the Effective Time, Center will have cash sufficient to pay or cause to be deposited cash into the Exchange Fund as required by Section 2.5.

3.5 CG Bank. On and as of immediately prior to the Effective Time,

(a) CG Bank is a Georgia banking corporation duly organized, validly existing and in good standing under the laws of the State of Georgia and all of its outstanding capital stock is owned by Center. There are no outstanding options, warrants or other rights in or with respect to the unissued shares of CG Bank’s capital stock or any other securities convertible into such stock, and CG Bank is not obligated to issue any additional shares of its capital stock or any options, warrants or other rights in or with respect to the unissued shares of its capital stock or any other securities convertible into such stock. CG Bank’s deposits are insured by the FDIC in the manner and to the extent provided by law. Since the date of its incorporation, CG Bank has not engaged in any activities other than in connection with or as contemplated by this Agreement.

(b) CG Bank has full power and authority (corporate and other) to execute and deliver, and to perform its obligations under, the Agreement of Merger. The execution, delivery and performance of the Agreement of Merger by CG Bank and the consummation of the transactions contemplated by the Agreement of Merger have been duly authorized by all necessary corporate or other action on the part of CG Bank and will not (A) violate any provision of its Charter Documents or any provision of any applicable Rule, or (B) require any Consent of any person or entity under, conflict with, terminate or result in a breach of or accelerate the performance required by any of the terms of, any contract or other agreement to which CG Bank is a party or by which it is bound, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) thereunder, which, in any such event, could have a Material Adverse Effect.

(c) CG Bank has duly executed and delivered the Agreement of Merger and it constitutes a valid, binding and enforceable obligation of CG Bank, except as the enforceability thereof may be limited by bankruptcy, liquidation, receivership, conservatorship, insolvency, moratorium or other similar laws affecting the rights of creditors generally and by general equitable principles.

3.6 Litigation. Except as set forth in Center’s Disclosure Letter, neither Center nor any Subsidiary of Center is a party to any pending or, to its Knowledge, threatened legal, administrative or other claim, action, suit, investigation, arbitration or proceeding which, in any event, is reasonably likely to have a Material Adverse Effect. There is no private or governmental suit, claim, action, investigation or proceeding pending, nor to Center’s Knowledge is one threatened, against Center or any Subsidiary of Center, or against any of their respective directors, officers or employees relating to the performance of their duties in such capacities or against or affecting any properties of Center or any Subsidiary of Center. There are no judgments, decrees, stipulations or orders against Center or any Subsidiary of Center enjoining them or any of their respective directors, officers or employees in respect of, or the effect of which is to prohibit, any business practice or the acquisition of any property or the conduct of business in any area of Center or Subsidiary of Center.

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3.7 Compliance with Laws and Regulations; SEC Documents; Financial Statements; Reports.

(a) Neither Center nor any Subsidiary of Center is in default under or in breach of any provision of its Charter Documents or any Rule promulgated by any Governmental Entity having authority over them or any agreement with any Governmental Entity, where such default or breach would have a Material Adverse Effect.

(b) No investigation or review by any Governmental Entity with respect to Center or any Subsidiary of Center is pending or, to the Knowledge of Center, threatened, nor has any Governmental Entity indicated in writing to Center or any Subsidiary of Center an intention to conduct the same, other than normal regulatory examinations and other investigations or reviews the outcome of which will not have a Material Adverse Effect on Center.

(c) Center has timely filed and made available to Seller all documents required to be filed by Center under the Exchange Act and Securities Act (the “SEC Documents”) since January 1, 2005, all of which: (i) at the time filed, complied in all material respects with the applicable requirements of the Exchange Act, the Securities Act, and the rules and regulations thereunder, and (ii) did not, at the time they were filed (or, if amended or superseded by a filing prior to the date of this Agreement, then on the date of such filing) contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. No Subsidiary of Center is required to file any SEC Documents.

(d) Each of Center’s financial statements (including, in each case, any related notes) contained in the SEC Documents, including any SEC Documents filed after the date of this Agreement until the Effective Day, complied as to form in all material respects with the applicable published rules and regulations of the SEC with respect thereto, was prepared in accordance with GAAP applied on a consistent basis throughout the periods involved (except, in the case of unaudited interim statements, as permitted by Form 10-Q of the SEC), and fairly presented in all material respects the consolidated financial position of Center and its Subsidiaries as at the respective dates and the consolidated results of operations and cash flows for the periods indicated, except that the unaudited interim financial statements were or are subject to normal and recurring year-end adjustments.

(e) Since January 1, 2005, Center and each of its Subsidiaries has filed all reports and statements, together with any amendments required to be made with respect thereto, that it was required to file with Governmental Entities. As of their respective dates, each of such reports and documents, including the financial statements, exhibits, and schedules thereto, complied in all material respects with all applicable Rules. As of their respective date, each such report, statement and document did not, in all material respects, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading.

3.8 Regulatory Approvals. To the Knowledge of Center, Center has no reason to believe that it would not receive all required Consents from any Governmental Entity of any application to consummate the transactions contemplated by this Agreement without the imposition of a materially burdensome condition in connection with the approval of any such application.

3.9 Licenses and Permits. Center has all licenses and permits that are necessary for the conduct of its businesses, and such licenses are in full force and effect, except for any failure to be in full force and effect that would not have a Material Adverse Effect. The properties and operations of Center and its Subsidiaries are and have been maintained and conducted, in all material respects, in compliance with all applicable Rules.

3.10 Brokers and Finders. Except as set forth in Center’s Disclosure Letter with copies of any such agreements attached, Center is not a party to or obligated under any agreement with any broker or finder relating to the transactions contemplated hereby, and neither the execution of this Agreement nor the consummation of the transactions provided for herein or therein will result in any liability by Center to any broker or finder.

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3.11 Performance of Obligations. Center and each Subsidiary of Center has performed all of the material obligations required to be performed by it to date and is not in material default or breach of any term or provision of any material contract, and no event has occurred that, with the giving of notice or the passage of time or both, would constitute such default or breach. To the Knowledge of Center, no party with whom Center or any Subsidiary of Center has an agreement that is material to their business is in material default thereunder.

3.12 Absence of Material Change. Since December 31, 2006, there has not occurred any event that has had or may reasonably be expected to have a Material Adverse Effect.

3.13 Absence of Adverse Agreements. Center is not subject to any judgment, order, decree or Rule of any court or other Governmental Entity or authority which may reasonably be anticipated to or in the future have a Materially Adverse Effect.

3.14 Disclosure. No representation or warranty contained herein, nor any information delivered or to be delivered by Center pursuant to this Agreement, contains or shall contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

3.15 S-4; Proxy Statement. The information to be supplied by Center for inclusion in the S-4 will not, at the time the S-4 is declared effective and at the Effective Time, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading. The information to be supplied by Center for inclusion in the Proxy Statement will not, on the date the Proxy Statement (or any amendment thereof or supplement thereto) is first mailed to Seller’s shareholders, at the time of the Seller Shareholders’ Meeting and at the Effective Time, contain any statement that, in light of the circumstances under which it is made, is false or misleading with respect to any material fact, omits to state any material fact necessary in order to make the statements made therein not false or misleading, or omits to state any material fact necessary to correct any statement in any earlier communication with respect to the solicitation of proxies for the Seller Shareholders’ Meeting that has become false or misleading. If, at any time prior to the Effective Time, any event relating to Center or any of its affiliates, officers or directors is discovered by Center that should be set forth in an amendment to the S-4 or a supplement to the Proxy Statement, Center will promptly inform Seller and such amendment or supplement will be promptly filed with the SEC and, as required by law, disseminated to the shareholders of Seller. Notwithstanding the foregoing, Center makes no representation or warranty with respect to any information supplied by Seller that is contained in the S-4 or the Proxy Statement. The Proxy Statement and the S-4 will (with respect to Center) comply in all material respects as to form and substance with the requirements of the Exchange Act, the Securities Act, and the rules and regulations thereunder.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF SELLER

Except as set forth in Seller’s Disclosure Letter, which identifies exceptions by specific section references (provided that any information set forth in any one section of the Seller Disclosure Letter shall be deemed to apply to each other applicable section or subsection thereof if its relevance to the information called for in such section or subsection is reasonably apparent), Seller represents and warrants to Center as follows:

4.1 Incorporation, Standing and Power. Seller has been duly incorporated and is validly existing as a banking corporation in good standing under the laws of the State of Georgia and is authorized by the DBF to conduct a general banking business. Seller’s deposits are insured by the FDIC in the manner and to the extent provided by law. Seller has all requisite corporate power and authority necessary to own, lease and operate its properties and assets and to carry on its businesses as presently conducted. Neither the scope of the business of

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Seller nor the location of any of its properties requires that Seller be licensed to do business in any jurisdiction other than in Georgia where the failure to be so licensed would have a Material Adverse Effect.

4.2 Capitalization. As of the date of this Agreement, the authorized capital stock of Seller consists of 10,000,000 shares of Seller Stock, of which 2,765,481 shares are outstanding. All the outstanding shares of Seller Stock are duly authorized, validly issued, fully paid, nonassessable and without preemptive rights. Except as set forth in Seller’s Disclosure Letter, there are no outstanding options, warrants or other rights in or with respect to the unissued shares of Seller Stock or any other securities convertible into such stock, and Seller is not obligated to issue any additional shares of its capital stock or any options, warrants or other rights in or with respect to the unissued shares of its capital stock or any other securities convertible into such stock. Seller’s Disclosure Letter sets forth a list (i) of all Seller Stock Options, including the name of the optionee, the number of shares of Seller Stock to be issued pursuant to the option and the exercise price of the option and (ii) for each other Award of Seller, the name of the grantee or holder, the date of the grant and the number of shares of Seller Stock subject to such Award.

4.3 Subsidiaries. The Seller’s Disclosure Letter sets forth each of the Seller’s Subsidiaries, if any, and the ownership interest of the Seller in each such Subsidiary, as well as the ownership interest of any other Person or Persons in each such Subsidiary. The outstanding shares of capital stock of each Subsidiary of the Seller have been duly authorized and are validly issued, fully paid and nonassessable, and are not subject to preemptive rights (and were not issued in violation of any preemptive rights). There are no shares of capital stock of any Subsidiary of the Seller authorized and reserved for issuance, no such Subsidiary has any other Rights issued or outstanding with respect to such capital stock, and no such Subsidiary has any commitment to authorize, issue or sell any such capital stock or Rights. Other than the Subsidiaries of the Seller, the Seller does not beneficially own, directly or indirectly, any outstanding stock, Equity Securities or other voting interest in any corporation, partnership, joint venture or other entity or Person, other than DPC Property.

4.4 Financial Statements. Seller has previously furnished to Center a copy of the Financial Statements of Seller. The Financial Statements of Seller: (a) fairly present in all material respects the financial condition of Seller as of the respective dates indicated and results of operations and cash flow for the respective periods indicated; and (b) have been prepared in accordance with GAAP (other than, with respect to unaudited financial statements, for the absence of notes thereto and year-end adjustments). The books and records of Seller are being maintained in material compliance with applicable legal and accounting requirements. Except to the extent (i) reflected in the Financial Statements of Seller, (ii) of liabilities incurred since December 31, 2006 in the ordinary course of business and consistent with past practice and (iii) liabilities incurred in connection with the transactions contemplated in this Agreement, Seller has no liabilities, whether absolute, accrued, contingent or otherwise.

4.5 Authority of Seller. The execution and delivery by Seller of this Agreement and, subject to the requisite approval of the shareholders of Seller, the consummation of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action on the part of Seller, and this Agreement is a valid and binding obligation of Seller enforceable in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, liquidation, receivership, conservatorship, insolvency, moratorium or other similar laws affecting the rights of creditors generally and by general equitable principles. Except as set forth in Seller’s Disclosure Letter, neither the execution and delivery by Seller of this Agreement, the consummation of the Merger or the transactions contemplated herein, nor compliance by Seller with any of the provisions hereof, will: (a) violate any provision of Seller’s Charter Documents; (b) constitute a breach of or result in a default (or give rise to any rights of termination, cancellation or acceleration, or any right to acquire any securities or assets) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, franchise, license, permit, agreement, Encumbrances or other instrument or obligation to which Seller is a party, or by which Seller or any of Seller’s properties or assets is bound, if in any such circumstances, such event could have a Material Adverse Effect; or (c) assuming that the Consents referred to in the following sentence are duly obtained, violate any Rule applicable to Seller or any of Seller’s properties or assets. No Consent of any Governmental Entity

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having jurisdiction over any aspect of the business or assets of Seller, and no Consent of any Person, is required in connection with the execution and delivery by Seller of this Agreement or the consummation by Seller of the Merger and the transactions contemplated hereby, except (i) the approval of this Agreement and the transactions contemplated hereby by the shareholders of Seller; (ii) such Consents as may be required by Governmental Entities including, without limitation, the effectiveness of the S-4 and any Blue Sky permits and approvals; and (iii) as otherwise set forth in Seller’s Disclosure Letter.

4.6 Insurance. Seller has policies of insurance and bonds covering its assets and businesses against such casualties and contingencies and in such amounts, types and forms as are customary in the banking industry for its business, operations, properties and assets. All such insurance policies and bonds are in full force and effect. Except as set forth in Seller’s Disclosure Letter, Seller has not received notice from any insurer that any such policy or bond has canceled or indicating an intention to cancel or not to renew any such policy or bond or generally disclaiming liability thereunder. Except as set forth in Seller’s Disclosure Letter, Seller is not in default under any such policy or bond and all material claims thereunder have been filed in a timely fashion. Seller’s Disclosure Letter sets forth a list of all policies of insurance carried and owned by Seller, showing the name of the insurance company, the nature of the coverage, the policy limit, the annual premiums and the expiration dates. The existing insurance carried by Seller is sufficient for compliance by Seller with all material requirements of law and regulations and agreements to which Seller is subject or is a party and, except as set forth in Seller’s Disclosure Letter, will be in effect immediately after the Effective Time.

4.7 Title to and Condition of Assets. Seller’s Disclosure Letter sets forth a summary of all items of personal property and equipment with a net book value of $50,000 or more, or having an annual lease payment of $10,000 or more, owned or leased by Seller (the “Material Personal Property”). Seller has good and valid title to all Material Personal Property and equipment owned by it, free and clear of all Encumbrances except: (a) as set forth in the Financial Statements of Seller; (b) Encumbrances for current taxes not yet due; (c) Encumbrances that, to the Knowledge of Seller, (i) do not materially detract from the value, and (ii) do not materially interfere with present use, of the property subject thereto or affected thereby, and (d) as set forth in Seller’s Disclosure Letter. To the Knowledge of Seller, all such Material Personal Property and equipment used by Seller are in good operating condition and repair (subject to normal wear and tear), suitable for the purposes for which they are currently utilized, and comply with all applicable Rules related thereto.

4.8 Real Estate. Seller’s Disclosure Letter sets forth a list of all real property, including leaseholds, owned by Seller, together with (i) a description of the locations thereof, (ii) a description of each real property lease, sublease, installment purchase, or similar arrangement to which Seller is a party, and (iii) a description of each contract for the purchase, sale or development of real estate to which Seller is a party. Seller has good and valid title to the owned real property, and valid leasehold interests in such leaseholds, free and clear of all Encumbrances, except (a) for rights of lessors, co-lessees or subleases in such matters that are reflected in the lease; (b) Encumbrances for current taxes not yet due and payable; (c) Encumbrances that, to the Knowledge of Seller, (i) do not materially detract from the value and (ii) do not materially interfere with present use, of the property subject thereto or affected thereby; and (d) as set forth in Seller’s Disclosure Letter. Seller, as lessee, has the right under valid and subsisting leases to occupy, use and possess all property leased by Seller, and, to the Knowledge of Seller, there has not occurred under any such lease any breach, violation or default which would result in a Material Adverse Effect. Except as set forth in Seller’s Disclosure Letter and except with respect to deductibles under insurance policies set forth in Seller’s Disclosure Letter, since December 31, 2005, Seller has not experienced any material uninsured damage or destruction with respect to the properties identified in Seller’s Disclosure Letter. Seller has quiet enjoyment of the real property it occupies under leases and, to the Knowledge of Seller, all leases to which Seller is a party are valid and enforceable in all material respects in accordance with the terms thereof except as may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting creditors’ rights and except as may be limited by the exercise of judicial discretion in applying principles of equity. To the Knowledge of the Seller, Seller is not in material default with respect to any such lease, and to its Knowledge no event has occurred which with the lapse of time or the giving of notice, or both, would constitute a default under any such lease. Copies of each such lease are attached to Seller’s Disclosure Letter.

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4.9 Litigation. Except as set forth in Seller’s Disclosure Letter, there is no private or governmental suit, claim, action, investigation or proceeding pending, nor to Seller’s Knowledge is one threatened, against Seller, or against any of its directors, officers or employees relating to the performance of their duties in such capacities or against or affecting any properties of Seller. There are no judgments, decrees, stipulations or orders against Seller enjoining it or any of their directors, officers or employees in respect of, or the effect of which is to prohibit, any business practice or the acquisition of any property or the conduct of business in any area of Seller. To the Knowledge of Seller, except as set forth in Seller’s Disclosure Letter, Seller is not a party to any pending or threatened legal, administrative or other claim, action, suit, investigation, arbitration or proceeding which, in any event, is reasonably likely to have a Material Adverse Effect.

4.10 Taxes. Except as set forth in Seller’s Disclosure Letter, Seller has filed all federal and foreign income tax returns, all material state and local franchise and income tax, real and personal property tax, sales and use tax, premium tax, excise tax and other tax returns of every character required to be filed by Seller and has paid all taxes, together with any interest and penalties owing in connection therewith, shown on such returns to be due in respect of the periods covered by such returns, other than taxes which are being contested in good faith and for which adequate reserves have been established. Except as set forth in Seller’s Disclosure Letter, Seller has filed all required payroll tax returns, has fulfilled all tax withholding obligations and has paid over to the appropriate governmental authorities the proper amounts with respect to the foregoing. The tax and audit positions taken by Seller in connection with the tax returns described in the preceding sentences were asserted in good faith. Adequate provision has been made in the books and records of Seller and, to the extent required by GAAP, reflected in the Financial Statements of Seller, for all tax liabilities, including interest or penalties, whether or not due and payable and whether or not disputed, with respect to any and all federal, foreign, state, local and other taxes for the periods covered by such financial statements and for all prior periods. Seller’s Disclosure Letter sets forth (i) the date or dates through which the IRS has examined the federal tax returns of Seller and the date or dates through which any foreign, state, local or other taxing authority has examined any other tax returns of Seller; (ii) a complete list of each year for which any federal, state, local or foreign tax authority has obtained or has requested an extension of the statute of limitations from Seller and lists each tax case of Seller currently pending in audit, at the administrative appeals level or in litigation; and (iii) the date and issuing authority of each statutory notice of deficiency, notice of proposed assessment and revenue agent’s report issued to Seller within the last twelve (12) months. Except as set forth in Seller’s Disclosure Letter, to the Knowledge of Seller, neither the IRS nor any foreign, state, local or other taxing authority has, during the past three years, examined or is in the process of examining any federal, foreign, state, local or other tax returns of Seller. To the Knowledge of Seller, neither the IRS nor any foreign, state, local or other taxing authority is now asserting or threatening to assert any deficiency or claim for additional taxes (or interest thereon or penalties in connection therewith) except as set forth in Seller’s Disclosure Letter. Seller is not a party to any tax sharing, tax indemnity or other agreement with respect to taxes with any person under which Seller will have any continuing rights or obligations following the Closing. Seller is not, nor has it ever been, a “United States real property holding corporation” within the meaning of Code Section 897(c)(2) at any time during the applicable period referred to in Code Section 897(c)(1)(A)(ii). Seller has not participated in a transaction that is one of the types of transactions that the Internal Revenue Service has determined to be a tax avoidance transaction and identified by notice, regulation, or other form of published guidance as a listed transaction, as set forth in Section 6707A(c)(2) of the Code. Seller has not (i) agreed to and is not required to make any adjustment under Section 481 of the Code that will require an adjustment to taxable income for any period following the Closing, (ii) received written notification that the Internal Revenue Service is proposing any such adjustment, or (iii) filed an application that is still pending with the Internal Revenue Service requesting permission for any changes in methods of accounting.

4.11 Compliance with Laws and Regulations.

(a) Neither Seller nor any Subsidiary of Seller is in default under or in breach of any provision of its Charter Documents or any Rule promulgated by any Governmental Entity having authority over it, where such default or breach would have a Material Adverse Effect.

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(b) No investigation or review by any Governmental Entity with respect to Seller or any Subsidiary of Seller is pending or, to the Knowledge of Seller, threatened, nor has any Governmental Entity indicated in writing to Seller or any Subsidiary of Seller an intention to conduct the same, other than normal regulatory examinations and other investigations or reviews the outcome of which will not have a Material Adverse Effect on Seller.

4.12 Performance of Obligations. Seller and each Subsidiary of Seller has performed all of the material obligations required to be performed by it to date and is not in material default or breach of any term or provision of any material contract, and no event has occurred that, with the giving of notice or the passage of time or both, would constitute such default or breach. To Seller’s Knowledge, no party with whom it or any Subsidiary of Seller has an agreement that is material to its business is in material default thereunder.

4.13 Employees. There are no controversies pending or to Seller’s Knowledge, threatened between Seller and any of its employees that are likely to have a Material Adverse Effect. Seller is not a party to any collective bargaining agreement with respect to any of its employees or any labor organization to which its employees or any of them belong.

4.14 Brokers and Finders. Except as provided in Seller’s Disclosure Letter with copies of any such agreements attached, Seller is not a party to or obligated under any agreement with any broker or finder relating to the transactions contemplated hereby, and, except as provided in Seller’s Disclosure Letter, neither the execution of this Agreement nor the consummation of the transactions provided for herein or therein will result in any liability to any broker or finder.

4.15 Absence of Material Change. Since December 31, 2006, the business of Seller has been conducted in all material respects only in the ordinary course, in substantially the same manner as theretofore conducted, and, except as set forth in Seller’s Disclosure Letter, there has not occurred since December 31, 2006 any event that has had or may reasonably be expected to have a Material Adverse Effect.

4.16 Licenses and Permits. Seller has all licenses and permits necessary for the conduct of its business, and such licenses are in full force and effect, except for any failure to be in full force and effect that would not have a Material Adverse Effect. The properties and operations of Seller and its Subsidiaries are and have been maintained and conducted, in all material respects, in compliance with all applicable Rules.

4.17 Undisclosed Liabilities. Except for those liabilities that are disclosed or fully reserved against in the Financial Statements of Seller and for liabilities incurred in the ordinary course of business consistent in nature and amount with past practice in prior periods, since December 31, 2006, Seller has not incurred any liability that, either individually or in the aggregate, has had or is reasonably like to have a Material Adverse Effect.

4.18 Employee Benefit Plans.

(a) Except as set forth in Seller’s Disclosure Letter, Seller does not have any “employee benefit plan,” as defined in Section 3(3) of ERISA, any “multiemployer plan” as defined in Section 3(37) of ERISA, any “defined benefit pension plan” within the meaning of Section 3(35) of ERISA and Seller has never sponsored or maintained any such multiemployer plan or defined benefit pension plan.

(b) Seller’s Disclosure Letter sets forth copies and descriptions of each Benefit Arrangement maintained or otherwise contributed to by Seller (such plans and arrangements being collectively referred to herein as “Seller Benefit Arrangements”). Except as set forth in Seller’s Disclosure Letter, there has been no material amendment thereof or increase in the cost thereof or benefits payable thereunder since December 31, 2006. Except as set forth in Seller’s Disclosure Letter, there has been no material increase in the compensation of or benefits payable to any Executive Officer or other executive at the level of Senior Vice President or above of Seller since December 31, 2006, nor any employment, severance or similar contract entered into with any such Person, nor any amendment to any such contract, since December 31,

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2006. Except as set forth in Seller’s Disclosure Letter, there is no contract, agreement or Benefit Arrangement covering any employee of Seller which individually or collectively could give rise to the payment of any amount which would constitute an “excess parachute payment,” as such term is defined in Section 280(G) of the Code.

(c) Except as set forth in Seller’s Disclosure Letter, with respect to all Seller Benefit Arrangements, Seller is in substantial compliance (other than noncompliance the cost or liability for which is not material) with the requirements prescribed by any and all statutes, governmental or court orders, or governmental rules or regulations currently in effect, applicable to such plans or arrangements.

(d) Except as set forth in Seller’s Disclosure Letter, each Seller Benefit Arrangement and each personal services contract, fringe benefit, consulting contract or similar arrangement with or for the benefit of any officer, director, employee or other person can be terminated by Seller within a period of 30 days following the Effective Time of the Merger, without payment of any amount as a penalty, bonus, premium, severance pay or other compensation for such termination.

(e) Except as set forth on Seller’s Disclosure Letter, there are no Seller Benefit Arrangements as to which Seller, Surviving Bank or Center will be required to make any contribution or to make any other payments, whether on behalf of any of the current employees, directors or officers of Seller or on behalf of any other person after the Closing. Seller has no formal plan or commitment, whether legally binding or not, to create any additional Benefit Arrangement, or to modify or change any existing Seller Benefit Arrangement.

(f) Except as set forth in Seller’s Disclosure Letter, none of the Seller Benefit Arrangements nor any trust created thereunder has an “accumulated funding deficiency” as such term is defined in Section 412 of the Code, whether or not waived. Furthermore, to Seller’s Knowledge, Seller has no unfunded liability under ERISA in respect of any of the Seller Benefit Arrangements. Seller has made timely all material contributions and paid all material amounts due and owing under all of the Seller Benefit Arrangements. Each of the Seller Benefit Arrangements that is intended to be a qualified plan under Section 401(a) of the Code has received a favorable determination letter that it is so qualified from the Internal Revenue Service. All amendments required to bring all of the Seller Benefit Arrangements into conformity with all of the applicable provisions of ERISA, the Code, COBRA, HIPAA and all other applicable laws have been made. All contributions required to be made to each of the Seller Benefit Arrangements under the terms of the Seller Benefit Arrangements, ERISA, the Code or any other applicable laws have been timely made. The Financial Statements properly reflect all amounts required under GAAP to be accrued as liabilities to date under each of the Seller Benefit Arrangements.

(g) Except as set forth in Seller’s Disclosure Letter, to Seller’s Knowledge there has not occurred and there does not exist (i) any pending litigation or controversy against any of the Seller Benefit Arrangements or against Seller as the “Employer” or “Sponsor” under the Seller Benefit Arrangements or against the trustee, fiduciaries or administrators of any of the Benefit Arrangements or (ii) any pending or, to Seller’s Knowledge, threatened investigation, proceeding, lawsuit, dispute, action or controversies involving any of the Seller Benefit Arrangements, the administrator or trustee of any of the Benefit Arrangements with any of the Internal Revenue Service, Department of Labor, Pension Benefit Guaranty Corporation, any participant in the Benefit Arrangements, any service provider to any of the Benefit Arrangements or any other person whatsoever.

(h) Except as set forth in Seller’s Disclosure Letter, Seller has not used the services of (i) workers who have been provided by a third party contract labor supplier for more than six months or, to Seller’s Knowledge, who may otherwise be eligible to participate in any of the Seller Benefit Arrangements or, to Seller’s Knowledge, to an extent that would reasonably be expected to result in the disqualification or loss of preferred tax status of any of the Seller Benefit Arrangements or the imposition of penalties or excise taxes with respect to the Internal Revenue Service, Department of Labor, Pension benefit Guaranty Corporation or any other governmental entity; (ii) temporary employees who have worked for more than six months or who may otherwise be eligible to participate in any of the Seller Benefit Arrangements or to an

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extent that would reasonably be expected to result in the disqualification or loss of preferred tax status of any of the Seller Benefit Arrangements or the imposition of penalties or excise taxes with respect to the Internal Revenue Service, Department of Labor, Pension Benefit Guaranty Corporation or any other governmental entity; (iii) individuals who have provided services to Seller as independent contractors for more than six months or who may otherwise be eligible to participate in any of the Seller Benefit Arrangements or to an extent that would reasonably be expected to result in the disqualification or loss of preferred tax status of any of the Seller Benefit Arrangements or the imposition of penalties or excise taxes with respect to the Internal Revenue Service, Department of Labor, Pension Benefit Guaranty Corporation or any other governmental entity; or (iv) leased employees, as that term is defined in section 414(n) of the Code.

(i) Except as set forth in Seller’s Disclosure Letter, the execution of this Agreement and the consummation of the transactions contemplated hereby will not (either alone or upon the occurrence of any individual’s termination of employment) constitute an event under any Seller Benefit Arrangements that will result in (A) other than with respect to Seller’s Stock Options, any payment (whether of severance pay or otherwise), acceleration, forgiveness of indebtedness, vesting, distribution, increase in benefits or obligation to fund benefits with respect to any employee of Seller or any member of Seller’s “controlled group” for purposes of the Code and (B) any payment, vesting of benefits or compensation or provision of benefits or compensation which could be characterized as or deemed to be a “parachute payment”, within the meaning of Code Section 280G(b)(2). There are no Seller Benefit Arrangements that require Seller (or any member of its controlled group) to compensate any employee, former employee or any person providing services to Seller (or any member of its controlled group) for excise taxes paid pursuant to Code Section 4999 or for liability such employee, former employee or service provider incurs pursuant to Code Section 409A.

4.19 Accounting Records and Internal Controls.

(a) Seller maintains accounting records which fairly and validly reflect, in all material respects, its transactions and accounting controls sufficient to provide reasonable assurances that such transactions are (i) executed in accordance with its management’s general or specific authorization, and (ii) recorded as necessary to permit the preparation of financial statements in conformity with GAAP. Such records, to the extent they contain material information pertaining to Seller which is not easily and readily available elsewhere, have been duplicated, and such duplicates are stored safely and securely.

(b) Seller’s internal controls are effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and (i) include policies and procedures that pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of Seller, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of Seller are being made only in accordance with authorizations of management and directors of Seller, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of Seller’s assets that could have a material effect on its financial statements.

(c) Set forth in Seller’s Disclosure Letter is (i) a summary of any such disclosure made by management to Seller’s auditors and audit committee since January 1, 2005 and (ii) any material communication since January 1, 2005 made by management or Seller’s auditors to the audit committee required or contemplated by the audit committee’s charter that impact Seller. Since January 1, 2005, no material complaints from any source regarding accounting, internal accounting controls or auditing matters, and no concerns from Seller employees regarding questionable accounting or auditing matters, have been received by Seller. Set forth in Seller’s Disclosure Letter is a summary of all material complaints or concerns relating to other matters made since January 1, 2005 through Seller’s whistleblower hot-line or equivalent system for receipt of employee concerns regarding possible violations that impact upon the business of Seller.

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4.20 Loan Portfolio. Seller’s Disclosure Letter sets forth a description of: (a) by type and classification, all loans, leases, other extensions and commitments to extend credit of Seller of $10,000 or more that have been classified by itself, any external loan reviewer or grader, its bank examiners or auditors (external or internal) as “Watch List,” “Special Mention,” “Substandard,” “Doubtful,” “Loss” or any comparable classification; and (b) all loans due to Seller as to which any payment of principal, interest or any other amount is 30 days or more past due. Seller’s allowance for loan losses is and will be at the Effective Time in accordance (i) with its existing methodology for determining the adequacy of its allowance for loan losses, (ii) with GAAP in all materials respects, and (iii) with all applicable regulatory requirements of any Governmental Entity.

4.21 Operating Losses. Seller’s Disclosure Letter sets forth any Operating Loss or irreconcilable difference in excess of $10,000, which has occurred at Seller during the period after December 31, 2006. To Seller’s Knowledge, no action has been taken or omitted to be taken by an employee of Seller that has resulted in the incurrence by Seller of an Operating Loss or that might reasonably be expected to result in an Operating Loss after December 31, 2006, which, net of any insurance proceeds payable in respect thereof, would exceed $10,000. “Operating Loss” means any loss resulting from cash shortages, lost or misposted items, disputed clerical and accounting errors, forged checks, payment of checks over stop payment orders, counterfeit money, wire transfers made in error, theft, robberies, defalcations, check kiting, fraudulent use of credit cards or electronic teller machines or other similar acts or occurrences.

4.22 Environmental Matters. Except as set forth in Seller’s Disclosure Letter, to Seller’s Knowledge, (i) Seller is in compliance with all Environmental Laws for which the noncompliance with which, or the presence of which, would have a Material Adverse Effect; (ii) there are no Tanks which have been utilized for Hazardous Materials or Wells on or about any Seller Property; (iii) there are no Hazardous Materials contamination on, below or above the surface of, or migrating to or from Seller Property; (iv) Seller does not have loans outstanding secured by real property that is not in compliance with Environmental Laws, for which the noncompliance with which, or the presence of which, would have a Material Adverse Effect, or which has a leaking Tank containing Hazardous Materials or upon which there is Hazardous Materials contamination on or migrating to or from; and (v) without limiting the foregoing representations and warranties contained in clauses (i) through (iv), as of the date of this Agreement, to the Knowledge of Seller, there is no claim, action, suit, or proceeding or notice thereof before any Governmental Entity pending against Seller or concerning property securing Seller’s loans and there is no outstanding judgment, order, writ, injunction, decree, or award against or affecting Seller Property, or property securing Seller loans, relating to the foregoing representations (i)—(iv), in any case for which the noncompliance with which, or the presence of which would have a Material Adverse Effect. “Seller Property” shall mean real estate currently owned, leased, or otherwise used by Seller, or in which it has an investment or security interest by mortgage, deed of trust, sale and lease-back or otherwise, including without limitation, properties under foreclosure and properties held by Seller its capacity as a trustee or otherwise. For purposes of this Agreement, the term “Environmental Laws” shall mean all applicable statutes, regulations, rules, ordinances, codes, licenses, permits, orders, approvals, plans, authorizations, concessions, franchises, and similar items of applicable Governmental Entities and all applicable judicial, administrative, and regulatory decrees, judgments, and orders Rules relating to the protection of human health or the environment with jurisdiction over Seller, including, without limitation: all requirements, including, but not limited to, those pertaining to reporting, licensing, permitting, investigation, and remediation of emissions, discharges, releases, or threatened releases of Hazardous Materials, chemical substances, pollutants, contaminants, or hazardous or toxic substances, materials or wastes whether solid, liquid, or gaseous in nature, into the air, surface water, groundwater, or land, or relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of chemical substances, pollutants, contaminates, or hazardous or toxic substances, materials, or wastes, whether solid, liquid, or gaseous in nature. “Tank” shall mean treatment or storage tanks or sumps and associated piping conveyance devices. “Well” shall mean water, gas or oil wells and associated piping conveyance devices. “Hazardous Materials” shall mean any substance the presence of which requires investigation or remediation under any federal, state, or local statute, regulation, ordinance, order, action, policy or common law, or which is or becomes defined as a hazardous waste, hazardous substance, hazardous material, used oil, pollutant or contaminant under any federal, state or local statute, regulation, rule or ordinance or amendments thereto including without

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limitation, the Comprehensive Environmental Response; Compensation and Liability Act (42 USC 9601, et seq.); the Resource Conservation and Recovery Act (42 USC 6901, et seq.); the Clean Air Act, as amended (42 USC 7401, et seq.); the Federal Water Pollution Control Act, as amended (33 USC 1251, et seq.); the Toxic Substances Control Act, as amended (15 USC 2601, et seq.); the Occupational Safety and Health Act, as amended (29 USC 65); the Emergency Planning and Community Right-to-Know Act of 1986 (42 USC 11001, et seq.); the Mine Safety and Health Act of 1977, as amended (30 USC 801, et seq.); the Safe Drinking Water Act (42 USC 300f, et seq.); and all comparable applicable state and local laws; laws of other applicable jurisdictions or orders and regulations. For purposes of this Section only, “Knowledge” shall mean the actual knowledge of Seller without the imposition of any duty of inquiry beyond that required in Seller’s lending policies.

4.23 Community Reinvestment Act. Seller received a rating of “satisfactory” or better in its most recent examination or interim review with respect to the Community Reinvestment Act. Seller has not been advised in writing of any non-compliance by Seller with the Community Reinvestment Act by any Governmental Entity.

4.24 Material Contracts. Except as set forth in Seller’s Disclosure Letter (all items listed or required to be listed in Seller’s Disclosure Letter as a result of this Section being referred to herein as “Seller Scheduled Contracts”), Seller is not a party or otherwise subject to:

(a) any employment agreement (other than employment agreements terminable by Seller on not more than 30 days’ notice without penalty and which will not in any respect be affected by a change of control of Seller) with, or any agreement or arrangement that contains any severance pay or post-employment liabilities or obligations (other than as required by law) to, any current or former director, officer or employee of Seller;

(b) any advertising, brokerage, licensing, dealership, representative or agency relationship or contract providing for annual payments by or to Seller in excess of $10,000 per annum;

(c) any contract or agreement that would restrict Center or CG Bank after the Effective Time from competing in any line of business with any Person or using or employing the services of any Person;

(d) any collective bargaining agreement or other such contract or agreement with any labor organization;

(e) any lease of real or personal property providing for annual lease payments by or to Seller in excess of $50,000 per annum other than financing leases entered into in the ordinary course of business in which Seller is lessor and leases of real property presently used by Seller as banking offices.

(f) any mortgage, pledge, conditional sales contract, security agreement, option, or any other similar agreement with respect to any interest of Seller (other than as mortgagor or pledgor in the ordinary course of their banking business or as mortgagee, secured party or deed of trust beneficiary in the ordinary course of Seller’s business) in personal property having a value of $50,000 or more;

(g) any stock purchase, Stock Option, Award, stock bonus, stock ownership, profit sharing, group insurance, bonus, deferred compensation, severance pay, pension, retirement, savings or other incentive, welfare or employment plan or material agreement providing benefits to any present or former employees, officers or directors of Seller;

(h) any agreement to acquire equipment or any commitment to make capital expenditures of $25,000 or more;

(i) any agreement for the sale of any property or assets in which Seller has an ownership interest (other than a mortgage or other security interest) or for the grant of any preferential right to purchase any such property or asset;

(j) any agreement for the borrowing by the Seller of any money (other than liabilities or interbank borrowings made in the ordinary course of their banking business and reflected in the financial records of Seller);

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(k) any guarantee or indemnification obligation which involves the sum of $25,000 or more, other than letters of credit or loan commitments issued in the normal course of business and customary agreements with vendors providing goods or services to Seller;

(l) any supply, maintenance or landscape contracts not terminable by Seller without penalty on 30 days or less notice and which provides for payments in excess of $10,000 per annum;

(m) any agreement disclosed pursuant to this Section 4.24 which would be terminable other than by Seller as a result of the consummation of the transactions contemplated by this Agreement;

(n) any contract of participation with any other bank in any loan entered into by Seller subsequent to December 31, 2006 in excess of $25,000, or any sales of assets of Seller with recourse of any kind to Seller, or any agreement providing for the sale or servicing of any loan or other asset which constitutes a “recourse arrangement” under applicable regulation or policy promulgated by a Governmental Entity (except for agreements for the sale of guaranteed portions of loans guaranteed in part by the U.S. Small Business Administration and related servicing agreements);

(o) any other agreement of any other kind, including for data processing and similar services, which, to Seller’s Knowledge, involves future payments or receipts or performances of services or delivery of items requiring aggregate payment of $10,000 per annum or more to or by Seller other than payments made under or pursuant to loan agreements, participation agreements and other agreements for the extension of credit to the Seller’s customers in the ordinary course of Seller’s business;

(p) any written agreement, supervisory agreement, resolution, memorandum of understanding, consent order, cease and desist order, capital order, or condition of any regulatory order or decree with or by the DBF, the FDIC or any other Governmental Entity;

(q) any agreement, arrangement or understanding relating to the election or retention in office of any present or former director, officer or employee of Seller; or

(r) any exchange traded or over-the-counter equity, interest rate, foreign exchange or other swap, forward, future, option, cap, floor or collar or any other contract that is not included on the balance sheet and is a derivative contract (including various combinations thereof) or any securities that are referred to generically as “structured notes,” “high risk mortgage derivatives,” “capped floating rate notes,” or “capped floating rate mortgage derivatives.”

True copies of all Seller Scheduled Contracts, including all amendments and supplements thereto, are attached to Seller’s Disclosure Letter.

4.25 Regulatory Approvals. To the Knowledge of Seller, except as described in Seller’s Disclosure Letter, Seller has no reason to believe that all required Consents from any Governmental Entity of any application to consummate the transactions contemplated by this Agreement would not be received without the imposition of a materially burdensome condition in connection with the approval of any such application.

4.26 Intellectual Property. Except as set forth in Seller’s Disclosure Letter, Seller owns or is licensed or otherwise entitled to use all material patents, copyrights, trade secrets, trade names, service marks and trademarks used in its business (the “Intellectual Property”). The use of any Intellectual Property by Seller does not, to Seller’s Knowledge, infringe on or otherwise violate the rights of any person and is used in all material respects in accordance with any applicable license pursuant to which Seller acquired the right to use any Intellectual Property. To Seller’s Knowledge, no person is challenging, infringing on or otherwise violating any right of Seller with respect to any material Intellectual Property owned by Seller. Seller has not received any written notice of any pending claim with respect to any Intellectual Property used by Seller.

4.27 Bank Secrecy Act. Except as set forth in Seller’s Disclosure Letter, Seller has not been advised of any supervisory concerns regarding its compliance with the Bank Secrecy Act (31 USC 5322, et seq.) or related state

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or federal anti-money laundering laws, regulations and guidelines, including without limitation those provisions of federal regulations requiring (a) the filing of reports, such as Currency Transaction Reports and Suspicious Activity Reports, (b) the maintenance of records and (c) the exercise of due diligence in identifying customers.

4.28 Absence of Adverse Agreements. Seller is not subject to any judgment, order, decree or Rule of any court or other Governmental Entity or authority which now or in the future may have a Materially Adverse Effect.

4.29 Disclosure. Neither the Seller Financial Statements nor any representation or warranty contained herein, nor any information delivered or to be delivered by Seller pursuant to this Agreement (including in the Proxy Statement), contains or shall contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

4.30 S-4; Proxy Statement. The information to be supplied by Seller for inclusion in the S-4 will not, at the time the S-4 is declared effective and at the Effective Time, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading. The information to be supplied by Seller for inclusion in the Proxy Statement will not, on the date the Proxy Statement (or any amendment thereof or supplement thereto) is first mailed to Seller’s shareholders, at the time of the Seller Shareholders’ Meeting and at the Effective Time, contain any statement that, in light of the circumstances under which it is made, is false or misleading with respect to any material fact, omits to state any material fact necessary in order to make the statements made therein not false or misleading, or omits to state any material fact necessary to correct any statement in any earlier communication with respect to the solicitation of proxies for the Seller Shareholders’ Meeting that has become false or misleading. If at any time prior to the Effective Time, any event relating to Seller or any of its affiliates, officers or directors is discovered by Seller that should be set forth in an amendment to the S-4 or a supplement to the Proxy Statement, Seller will promptly inform Center, and such amendment or supplement will be promptly filed with the SEC and, as required by law, disseminated to the shareholders of Seller. Notwithstanding the foregoing, Seller makes no representation or warranty with respect to any information supplied by Center that is contained in the S-4 or the Proxy Statement. The Proxy Statement will (with respect to Seller) comply in all material respects as to form and substance with the requirements of the DBF and Exchange Act and the rules and regulations thereunder.

4.31 Anti-takeover Provisions Inapplicable. No “business combination,” “moratorium,” “control share” or other state antitakeover statute or regulation, (i) applies to the Merger or the Voting Agreements, (ii) prohibits or restricts the ability of Seller to perform its obligations under this Agreement or the ability of Seller to consummate the Merger, (iii) would have the effect of invalidating or voiding this Agreement and the Voting Agreements, or any provision hereof or thereof, or (iv) would subject Center to any material impediment or condition in connection with the exercise of any of its rights under this Agreement with respect to the Merger or any of the Voting Agreements.

ARTICLE 5

AGREEMENTS WITH RESPECT TO CONDUCT OF

CENTER AFTER THE DATE HEREOF

Center covenants and agrees with Seller, from the date hereof, to the Effective Day, as follows:

5.1 Material Adverse Effect. Center will promptly notify Seller (i) of any event of which Center obtains Knowledge which may have a Material Adverse Effect on Center; (ii) in the event Center determines that it is possible that the conditions to the performance of Seller set forth in Sections 8.1 and 8.3 will not be satisfied, or (iii) of the scheduling or commencement of any examination or audit by a Governmental Entity.

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5.2 Disclosure Letter. Promptly in the case of material matters, and, as to all other matters, not less than five (5) Business Days prior to the Effective Day, Center shall amend or supplement the Center Disclosure Letter provided for herein pertaining to Center as necessary so that the information contained therein accurately reflects the then current status of Center and shall transmit copies of such amendments or supplements to Seller in accordance with Section 11.12 of this Agreement. Such update of the Center Disclosure Letter shall not in any way affect the representations and warranties set forth in Article 3.

5.3 CG Bank. Prior to the Effective Time, Center will take all necessary action to cause (i) CG Bank to be organized, (ii) CG Bank to become a wholly-owned subsidiary of Center, (iii) the board of directors and shareholder of CG Bank to approve the transactions contemplated by this Agreement, and (iv) CG Bank to take all actions reasonably deemed by Center to be necessary or appropriate, in order to cause the Merger to be consummated on the terms and subject to the conditions provided in this Agreement.

5.4 Consents and Approvals.

(a) Center will cooperate with Seller in the preparation of all filings, applications, notices and requests for waiver for Consents necessary or desirable for the transactions contemplated in this Agreement. Center’s cooperation hereunder shall include, but not be limited to, providing all information concerning Center as may be required for such filings, applications, notices and requests for Consents and signing, to the extent required, all such filings, applications, notices and requests.

(b) To the extent that the Consent of a third party (“Third Party Consent”) with respect to any contract, agreement, license, franchise, lease, commitment, arrangement, Permit or release that is material to the business of Center that is contemplated in this Agreement is required in connection with the transactions contemplated in this Agreement, Center shall use its commercially reasonable efforts to obtain such Consent prior to the Effective Time.

(c) Center shall promptly take action necessary to obtain all Consents that are required in connection with the consummation by Center of the Merger and the transactions contemplated hereby, including (i) such Consents as may be required by Governmental Entities, and (ii) the effectiveness of the S-4 and any Blue Sky permits and approvals.

5.5 Compliance with Rules. Center shall comply with the requirements of all applicable Rules, the noncompliance with which would materially and adversely affect the assets, liabilities, business, financial condition or results of operations or prospects of Center.

5.6 Directors’ and Officers’ Indemnification.

(a) Center agrees to indemnify current and former directors or officers of Seller to the same extent that such directors or officers are entitled to indemnification as of the date of this Agreement under Seller’s Charter Documents to the full extent permitted under applicable law for a period of four (4) years from the Effective Time, provided that in the event that any claim is asserted or made relating to such current or former director or officer within such four-year period, the right to indemnification in respect of such claim shall continue until the disposition of such claim. The provisions of this Section 5.6 are specifically for the benefit of those present and former directors and officers entitled to indemnification as of the date of this Agreement under Seller’s Charter Documents.

(b) Center shall maintain Seller’s existing directors’ and officers’ liability insurance (the “D&O Insurance”) covering persons who are currently covered by Seller’s D&O Insurance by purchasing a tail insurance policy covering a period of four (4) years after the Effective Time on terms no less favorable than those in effect on the date hereof and shall at the Effective Time, either pay or direct Seller to pay, for the entire premium associated with the tail policy for the four (4) year period and provide evidence of such extension of coverage to Seller; provided, however, that Center may substitute therefor a tail insurance policy from a reasonably comparable insurer providing substantially comparable coverage and containing

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terms and conditions no less favorable than those in effect on the date hereof. Seller agrees to permit Center to obtain such coverage through Center’s designated insurance broker and to cooperate with Center in such regard.

(c) In the event that Center or any of its successors or assigns (i) consolidates with or merges into any other Person and shall not be the continuing or surviving bank or entity of such consolidation or merger or (ii) transfers all or substantially all of its properties and assets to any Person, then, and in each such case, proper provision shall be made so that the successors and assigns of Center shall assume the obligations set forth in this Section 5.6.

5.7 Center Stock. Center shall use its best efforts to cause the Center Stock issued in connection with the Merger to be listed on the NASDAQ Global Market.

ARTICLE 6

AGREEMENTS WITH RESPECT TO

CONDUCT OF SELLER AFTER THE DATE HEREOF

Seller covenants and agrees with Center, from the date hereof to the Effective Day, as follows:

6.1 Access

(a) Seller will authorize and permit Center, its representatives, accountants and counsel, to have reasonable access during normal business hours, in such manner as will not unreasonably interfere with the conduct of the businesses of Seller, to all properties, books, records, branch operating reports, branch audit reports, operating instructions and procedures, tax returns, tax settlement letters, contracts and documents, and all other information with respect to its business affairs, financial condition, assets and liabilities as Center may reasonably request. Seller shall permit Center, its representatives, accountants and counsel to make copies of such books, records and other documents and to discuss the business affairs, condition (financial and otherwise), assets and liabilities of Seller with such third Persons, including, without limitation, its directors, officers, employees, accountants, counsel and creditors, Center reasonably considers as necessary for the purposes of familiarizing itself with the businesses and operations of Seller, obtaining any necessary orders, Consents or approvals of the transactions contemplated by this Agreement by any Governmental Entity. Seller will cause its auditors to make available to Center, its accountants, counsel and other agents, such personnel, work papers and other documentation of such firm relating to its work papers and its audits of the books and records of Seller as may be requested by Center in connection with its review of the foregoing matters. Notwithstanding any of the foregoing, Seller shall not be required to provide access to or to disclose information relating to the transactions contemplated by this Agreement or the obligations of Seller under this Agreement or where such access or disclosure would jeopardize the attorney-client or other privilege with respect to such information or contravene any Rule.

(b) A representative of Center shall be invited by Seller to attend all regular and special board of directors and committee meetings of Seller from the date all applications for Consents from the FRB, FDIC and DBF required in connection with the Merger have been filed with such Governmental Entities and the S-4 has been filed with the SEC and until the Effective Time. Seller shall inform Center of all such board meetings at least four (4) Business Days in advance of each such meeting; provided, however, that the attendance of such representative of Center shall not be permitted at any meeting, or portion thereof, for the sole purpose of discussing the transaction contemplated by this Agreement or the obligations of Seller under this Agreement or where such attendance would jeopardize Seller’s attorney-client privilege.

6.2 Material Adverse Effect; Reports; Financial Statements; Filings.

(a) Seller will promptly notify Center (i) of any event of which Seller obtains Knowledge which may have a Material Adverse Effect; (ii) in the event Seller determines that it is possible that the conditions to

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the performance of Center set forth in Sections 8.1 and 8.2 will not be satisfied; (iii) of any event, development or circumstance other than the transactions contemplated by this Agreement that, to Seller’s Knowledge, will or, with the passage of time or the giving of notice or both, is reasonably expected to result in the loss to Seller of the services of any Executive Officer or other employee at the Senior Vice President level or above; or (iii) of the scheduling or commencement of any examination or audit by a Governmental Entity.

(b) Seller will furnish to Center, as provided in Section 11.12 of this Agreement, as soon as practicable, and in any event within five (5) Business Days after it is prepared or becomes available to Seller, (i) a copy of any report submitted to the board of directors of Seller and access to the working papers related thereto and copies of other operating or financial reports prepared for management of any of its businesses and access to the working papers related thereto provided, however, that Seller need not furnish Center any privileged communications of or memoranda prepared by its legal counsel in connection with the transactions contemplated by, and the rights and obligations of Seller under this Agreement; (ii) monthly and quarterly unaudited balance sheets and statements of operations, and changes in shareholders’ equity for Seller; and (iii) as soon as available, all letters and written communications sent by Seller to its shareholders and all reports filed by Seller with the DBF, FDIC and any other Person; and (iv) such other reports as Center may reasonably request relating to Seller and the FDIC.

(c) Each of the financial statements delivered pursuant to subsection (b) shall be prepared in accordance with GAAP on a basis consistent with that of the Financial Statements of Seller, except that such financial statements may omit statements of cash flows and footnote disclosures required by GAAP.

6.3 Conduct of Business.

(a) Between the date hereof and the Effective Time, except as contemplated by this Agreement, and subject to requirements of applicable Rules and regulations generally applicable to banks or Seller specifically, Seller shall not, without prior written Consent of Center (which Consent shall not be unreasonably withheld and which Consent [except with respect to subparagraph (29) of this Section 6.3(a)] shall be deemed granted if within five (5) Business Days of receipt by the officers of Center listed on Schedule 6.3 of written notice of a request for prior written Consent, written notice of objection is not received by Seller):

(1) amend, modify, terminate or fail to renew or preserve its material Permits;

(2) amend or modify in any material respect, or, except as they may expire in accordance with their terms, terminate any Seller Scheduled Contract or any other material contract or agreement to which Seller is a party, or materially default in the performance of any of its obligations under any such contract or agreement;

(3) enter into any agreement or contract that would be required to be included as a Seller Scheduled Contract providing for payments in excess of $25,000 per annum;

(4) terminate or unilaterally fail to renew any existing insurance coverage or bonds;

(5) make any loan or other extension of credit, or enter into any commitment to make any loan or other extension of credit, to any director, officer, employee or shareholder holding 5% or more of the outstanding shares of Seller Stock;

(6) grant any general or uniform increase in the rate of pay to any employee or employee benefit or profit sharing plan or increase the salary, bonus or employee benefits of any non-exempt employee or agent except in the ordinary course of business and consistent with past practice or established practices; or pay any severance or similar payment to any Person other than pursuant to an agreement disclosed in the Seller Disclosure Letter;

(7) grant any promotion or any increase in the rate of pay to any employee or pursuant to any profit sharing plan or increase in any employee benefits or pay any bonus, severance or similar

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payment to any employee except in the ordinary course of business and consistent with past practice or established practices or pay any severance or similar payment to any Person other than pursuant to an agreement disclosed in the Seller Disclosure Letter;

(8) sell, transfer, mortgage, encumber or otherwise dispose of any assets (other than loans) or release or waive any claim, except in the ordinary course of business or as required by law or any existing contract or for ordinary repairs, renewals or replacements or as contemplated in this Agreement, or sell, transfer, mortgage, encumber or otherwise dispose of any loans other than pledges to secure short-term borrowings otherwise permitted hereunder;

(9) except for the exercise of Seller Stock Options outstanding on the date hereof, issue, sell, or grant any Equity Securities of Seller, any Award, any other securities (including long term debt), or any rights, options or securities to acquire any stock of Seller Stock, or any Equity Securities of Seller, or any other securities (including long term debt) of Seller;

(10) declare, issue or pay any dividend or other distribution of assets, whether consisting of money, other personal property, real property or other things of value, to the shareholders of Seller, or split, combine or reclassify any shares of its capital stock or other Equity Securities;

(11) purchase, redeem or otherwise acquire any Equity Securities, or other securities of Seller or any rights, options, or securities to acquire any Equity Securities of Seller, except as required by any contract disclosed on the Seller Disclosure Letter;

(12) amend or modify its Charter Documents;

(13) materially amend its credit underwriting policies, standards or practices relating to the making of loans and other extensions of credit, or commitments to make loans and other extensions of credit, less stringent than those in effect as of the date hereof;

(14) make any capital expenditures, or commitments with respect thereto, in excess of $25,000;

(15) make extraordinary payments to any Person other than as contemplated, or as disclosed, in this Agreement;

(16) make any investment by purchase of stock or securities (including an Investment Security), contributions to capital, property transfers or otherwise in any other Person, except for federal funds or obligations of the United States Treasury, or in the ordinary course of business and consistent with past or established practices;

(17) compromise or otherwise settle or adjust any assertion or claim of a deficiency in taxes (or interest thereon or penalties in connection therewith); file any appeal from an asserted deficiency except in a form previously approved by Center in writing; or make any tax election or change any method or period of accounting unless required by GAAP or applicable law;

(18) enter into or consent to any new employment agreement or other Benefit Arrangement, or amend or modify any employment agreement or other Seller Benefit Arrangement in effect on the date of this Agreement to which Seller is a party or bound;

(19) grant any Person a power of attorney or similar authority except in accordance with a written policy previously disclosed to Center;

(20) agree or make any commitment to take any actions prohibited by this Section 6.3;

(21) materially modify any of Seller’s basic policies and practices with respect to liquidity management and cash flow planning, marketing, deposit origination, lending, budgeting, profit and tax planning, personnel practices or any other material aspect of Seller’s business or operations, except such changes as may be required in the opinion of management to respond to economic or market conditions or as may be required by any Governmental Entity;

(22) knowingly take any action which would or is reasonably likely to (i) adversely affect the ability to obtain any necessary approval of any Governmental Entity required for the transactions

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contemplated hereby; (ii) adversely affect Seller’s ability to perform its covenants and agreements under this Agreement; or (iii) result in any of the conditions as set forth in Article 8 herein not being satisfied;

(23) reclassify any Investment Security from hold-to-maturity or available for sale to trading;

(24) sell any Investment Security prior to maturity, except in the ordinary course of business;

(25) knowingly take or cause to be taken any action intended to disqualify the Merger as a “reorganization” within the meaning of Section 368 of the Code;

(26) settle any claim, action or proceeding involving any material liability for monetary damages or enter into any settlement agreement containing material obligations;

(27) make, acquire a participation in, or reacquire an interest in a participation sold of, any loan that is not in compliance with its credit underwriting standards, policies and procedures as in effect as of the date of this Agreement; or renew, extend the maturity of, or alter any of the material terms of any such loan for a period of greater than six months;

(28) incur any indebtedness for borrowed money or assume, guaranty, endorse or otherwise as an accommodation become responsible for the obligations of any other Person, except for (i) in the ordinary course of business in connection with banking transactions with banking customers, or (ii) short-term borrowings (90 days or less) made at prevailing market rates and terms;

(29) grant , renew or commit to grant or renew any extension of credit if such extension of credit, together with all other credit then outstanding to the same Person and all Affiliated Persons, would exceed $100,000 on unsecured basis or $250,000 on a secured basis for new loans, or (ii) $250,000 on an unsecured basis or $500,000 on a secured basis for loans renewed to existing borrowers. Consent shall be deemed granted if within two (2) Business Days of written notice delivered to Center’s Chief Credit Officer accompanied by a complete write-up of the credit, written notice of objection is not received by Seller (for purposes of this subparagraph, written notice shall include notice by email);

(30) except as required by applicable Rule or the DBF or the FDIC, (i) implement or adopt any material change in its interest rate and other risk management policies, procedures or practices, or (ii) fail to follow its existing policies or practices with respect to managing its exposure to interest rate and other risk; or

(31) incur any travel and entertainment expenses outside the ordinary course of business in excess of $5,000 per month, or make charitable donations aggregating $5,000 or more.

(b) Between the date hereof and the Effective Time, Seller shall:

(1) duly observe and conform in all material respects to all lawful requirements applicable Seller’s business and conduct Seller’s business in the ordinary course in substantially the manner heretofore conducted and in accordance with sound banking practice;

(2) use its commercially reasonable efforts to maintain its assets and properties in good condition and repair, normal wear and tear excepted;

(3) promptly upon learning of such information, advise Center in writing of any event or any other transaction within its Knowledge whereby any Person or Related Group of Persons acquires, directly or indirectly, record or beneficial ownership or control (as defined in Rule 13d-3 promulgated by the SEC under the Exchange Act) of five percent (5%) or more of the outstanding Seller Stock prior to the record date fixed for the Seller Shareholders’ Meeting or any adjourned meeting thereof to approve this Agreement and the transaction contemplated herein;

(4) promptly notify Center regarding receipt from any tax authority of any notification of the commencement of an audit, any request to extend the statute of limitations, any statutory notice of deficiency, any revenue agent’s report, any notice of proposed assessment, or any other similar

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notification of potential adjustments to the tax liabilities of Seller, or any actual or threatened collection enforcement activity by any tax authority with respect to tax liabilities of Seller; and

(5) maintain an allowance for loan losses consistent with GAAP and practices and methodology as in effect on the date of the execution of this Agreement; and

(6) cooperate with Center in keeping all of its current insurance policies and coverage effective after the Effective Time with such modifications as Center may reasonably request. Seller’s cooperation hereunder shall include, but not be limited to, providing all information concerning Seller and its insurers as may be required for such discussions.

6.4 Certain Loans and Other Extensions of Seller. Seller will promptly inform Center of the amounts and categories of any NPAs or loans, leases or other extensions of credit that have been classified by any Governmental Entity or by any internal or external loan reviewer of Seller as “Watch List,” “Special Mention,” “Substandard,” “Doubtful,” “Loss” or any comparable classification. Seller will furnish to Center, as soon as practicable, and in any event within 10 days after the end of each calendar month, schedules including a listing of the following:

(a) classified credits, showing with respect to each such credit in amount equal to or exceeding $10,000, the classification category, credit type, and office, and with respect to all other such credits, by credit type and office, the aggregate dollar amount;

(b) nonaccrual credits, showing with respect to each such credit in amount equal to or exceeding $10,000, the credit type and office, and with respect to all other such credits, by credit type and office, the aggregate dollar amount;

(c) accrual exception credits that are delinquent 90 or more days and have not been placed on nonaccrual status, showing with respect to each such credit in amount equal to or exceeding $10,000, the credit type and office, and with respect to all other such credits, by credit type and office, the aggregate dollar amount, together with an explanation of why the loan or loans were not placed on non-accrual;

(d) delinquent credits showing with respect to each such credit in amount equal to or exceeding $10,000, the credit type, office and an aging schedule broken down into 30-59, 60-89, 90 + day categories, and with respect to all other such credits, by credit type, office and by aging category, the aggregate dollar amount;

(e) loan and lease participations, stating, with respect to each, whether it is purchased or sold, the loan or lease type, and the office;

(f) loans or leases (including any commitments) by Seller to any director, officer, or employee of Seller, or any shareholder holding 5% or more of the capital stock of Seller, including with respect to each such loan or lease, the identity and, to the Knowledge of Seller, the relation of the borrower to Seller, the loan or lease type and the outstanding and undrawn amounts;

(g) letters of credit, showing with respect to each letter of credit in an amount equal to or exceeding $10,000, the credit type and office, and showing with respect to all other such letters of credit, by credit type and office, the aggregate dollar amount;

(h) loans or leases charged off and recoveries during the previous month, showing with respect to each such loan or lease, the credit type and office;

(i) loans or leases written down during the previous month, including with respect to each the original amount, the write-off amount, credit type and office;

(j) other real estate or assets owned, stating with respect to each its credit type;

(k) a reconciliation of the allowance for loan losses, identifying specifically the amount and sources of all additions and reductions to the allowance (which may be by reference to specific portions of another

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schedule furnished pursuant to this Section 6.4 and, in the case of unallocated adjustments, shall disclose the methodology and calculations through which the amount of such adjustment was determined);

(l) extensions of credit whether unsecured or secured in amount equal to or exceeding $100,000, originated on or after the date of the schedule previously provided to Center (or if it is the first such schedule, the date of this Agreement) and before the date of the schedule in which reported, showing with respect to each, the complete credit write-up, including the credit type and the office and the draft or final minutes of the meeting during which the credits were approved;

(m) renewals or extensions of maturity of outstanding extensions of credit whether unsecured or secured in amount equal to or exceeding $100,000, showing with respect to each, the credit type and the office; and

(n) collateral and insurance reports, including all reports provided by third party vendors monitoring insurance or collateral.

6.5 Disclosure Letter. Promptly in the case of material matters, and, as to all other matters not less than five (5) Business Days prior to the Effective Day, Seller shall amend or supplement the Seller Disclosure Letter provided for herein pertaining to Seller as necessary so that the information contained therein accurately reflects the then current status of Seller and shall transmit copies of such amendments or supplements to Center in accordance with Section 11.12 of this Agreement. Such update of the Seller Disclosure Letter shall not in any way affect the representations and warranties set forth in Article 4.

6.6 Change of Recommendation. The board of directors of Seller shall unanimously recommend approval of the Merger to the shareholders of Seller at the Seller Shareholders’ Meeting and neither the board of directors of Seller, nor any member thereof, shall, in a manner adverse to Center, (x) withdraw, modify or qualify, or propose to withdraw, modify or qualify, such recommendation, (y) take any action or make any statement in connection with the Seller Shareholders’ Meeting inconsistent with such recommendation or (z) recommend any Competing Transaction (as defined in Section 6.11) (any action referred to in clause (x), (y) or (z) being a “Change in Recommendation”). Notwithstanding the foregoing, the board of directors of Seller shall be permitted to take the actions described in clauses (x) through (z) above if Seller has complied in all material respects with Section 6.11.

6.7 Consents and Approvals.

(a) Seller will cooperate with Center in the preparation of all filings, applications, notices and requests for waiver for Consents necessary or desirable for the consummation of the transactions contemplated in this Agreement. Seller’s cooperation hereunder shall include, but not be limited to, providing all information concerning Seller and its shareholders as may be required for such filings, applications, notices and requests for Consents and signing, to the extent required, all such filings, applications, notices and requests.

(b) To the extent that a Third Party Consent with respect to any contract, agreement, license, franchise, lease, commitment, arrangement, Permit or release that is material to the business of Seller or that is contemplated in this Agreement is required in connection with the transactions contemplated in this Agreement, Seller shall use its commercially reasonable efforts to obtain such Consent prior to the Effective Time.

6.8 Preservation of Employment Relations Prior to Effective Time. Seller will use its commercially reasonable efforts consistent with current employment practices and policies to maintain the services of the officers and employees of Seller through the Effective Time.

6.9 Compliance with Rules. Seller shall comply with the requirements of all applicable Rules, the noncompliance with which would have a Material Adverse Effect.

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6.10 Seller Benefit Arrangements. At the Effective Time, the Seller Stock Option Plan shall be terminated, without the imposition of any liability therefor to Center, CG Bank or Seller. Subject to Section 9.1, all other Seller Benefit Arrangements will be assumed by CG Bank at the Effective Time.

6.11 No Shop. Seller shall not, on or before the earlier of the Effective Time or the date of termination of this Agreement, initiate, solicit or encourage (including by way of furnishing information or assistance), or take any other action to facilitate, any inquiries or the making of any proposal which constitutes, or may reasonably be expected to lead to any Competing Transaction (as such term is defined below), or negotiate with any Person in furtherance of such inquiries or to obtain a Competing Transaction, or agree to or endorse any Competing Transaction, or authorize any of its officers, directors or employees or any investment banker, financial advisor, attorney, accountant or any other representative retained by it or any of its Affiliates to take any such action, and Seller shall promptly notify Center (orally and in writing) of all of the relevant details relating to all inquiries and proposals which they may receive relating to any of such matters. For purposes of this Agreement, “Competing Transaction” shall mean any of the following involving Seller: any merger, consolidation, share exchange or other business combination; a sale, lease, exchange, mortgage, pledge, transfer or other disposition of assets representing twenty-five percent (25%) or more of the assets of Seller; a sale of shares of capital stock (or securities convertible or exchangeable into or otherwise evidencing, or any agreement or instrument evidencing, the right to acquire capital stock) or other Equity Security, representing twenty-five percent (25%) or more of the voting power of Seller; a tender offer or exchange offer for at least twenty-five percent (25%) of the outstanding shares of Seller Stock; a solicitation of proxies in opposition to approval of the Merger by Seller shareholders; or a public announcement by another Person (besides Center) of an unsolicited bona fide proposal, plan, or intention to do any of the foregoing. Notwithstanding any other provision in this Section 6.11 or elsewhere in this Agreement, nothing shall prevent Seller from (i) engaging in any discussions or negotiations with, or providing any information to, any Person in response to an unsolicited bona fide written proposal concerning a Competing Transaction by such Person or (ii) recommending such an unsolicited bona fide written proposal concerning a Competing Transaction to the holders of Seller Stock if and only if, prior to participating in any of the foregoing, (A) the board of directors of Seller concludes in good faith that the Competing Transaction is reasonably likely to be consummated in accordance with its terms, and, if consummated, would result in a transaction more favorable to holders of Seller Stock from a financial point of view than the transaction contemplated by this Agreement; and (B) the board of directors of Seller determines in good faith that participating in any such action is necessary or advisable for it to act in a manner not inconsistent with its fiduciary duties under applicable law; and (C) prior to providing any information or data to any Person or entering into discussion or negotiations with any Person, the board of directors of Seller notifies Center of such inquiries, proposals or offers received by, any information requested from, or any such discussion or negotiations sought to be initiated or continued with Seller and thereafter shall keep Center informed, on a prompt basis, of the status and terms of any such proposals or offers and the status of any discussions or negotiations; provided, that such disclosure shall not be required if Seller determines in good faith, after advice of counsel, that such disclosure is inconsistent with the fiduciary duties of its board of directors under applicable law.

6.12 Affiliates. Within sixty (60) days following the execution of this Agreement, (a) Seller shall deliver to Center a letter identifying all persons who are then “affiliates” of Seller for purposes of Rule 145 under the Securities Act and (b) Seller shall advise the persons identified in such letter of the resale restrictions imposed by applicable securities laws and shall use its commercially reasonable efforts to obtain from each person identified in such letter a written agreement substantially in the form attached hereto as Exhibit D. Seller shall use its commercially reasonable efforts to obtain from any person who becomes an affiliate of Seller after Seller’s delivery of the letter referred to above, and on or prior to the date of the Seller Shareholders’ Meeting to approve this Agreement, a written agreement substantially in the form attached as Exhibit D hereto as soon as practicable after obtaining such status.

6.13 Access to Operations. Seller shall afford to Center and its authorized agents and representatives, access to the operations, books, and other information relating to Seller for the sole purpose of assuring an orderly transition of operations, including any data processing conversion, in the Merger. Center shall give reasonable

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notice for access to Seller, and the date and time of such access will then be mutually agreed to by Center and Seller. Center’s access shall be conducted in a manner which does not unreasonably interfere with Seller’s normal operations, customers and employee relations and which does not interfere with the ability of Seller to consummate the transactions contemplated by this Agreement.

6.14 Access to Employees. Center shall have the right, but not the obligation, prior to the Effective Day, to provide training to employees of Seller who will become employees of the Surviving Bank. Such training shall be at the expense of Center and shall be conducted during normal business hours, or, if the foregoing is not possible, after business hours at a location reasonably requested by Center. At the request of Center, Center shall compensate employees, in accordance with Seller’s customary policies and practices, for the employee’s time being trained by Center. Seller shall cooperate with Center to make such employees available for such training prior to Closing. All travel and other reimbursable expense incurred by the employee for training are Center’s responsibility, subject to Section 11.1(a). Nothing in this Section is intended, nor shall it be construed, to confer any rights or benefits upon any persons other than Center or Seller.

ARTICLE 7

FURTHER COVENANTS OF CENTER AND SELLER

7.1 Shareholder Meeting; S-4 and Proxy Statement.

(a) Seller will promptly take action necessary in accordance with applicable law and its Charter Documents to convene a meeting of its shareholders (the “Seller Shareholders’ Meeting”) to be held as soon as practicable, for the purpose of voting on this Agreement and the Merger. In connection with the Seller Shareholders’ Meeting, (i) the board of directors of Seller shall, subject to the board’s fiduciary duties, recommend shareholder approval of the Merger, this Agreement and related matters; and (ii) Seller shall use its reasonable efforts to obtain such required shareholder approval.

(b) As promptly as practicable, Center and Seller shall cooperate with each other and exercise their commercially reasonable efforts to prepare and file with the SEC a registration statement on Form S-4 (the “S-4”), in which the Proxy Statement will be included as a prospectus. The Parties hereto agree to provide the information necessary for inclusion in the Proxy Statement and S-4 and further agree that the information provided by each Party shall be the sole responsibility of that Party. Each of the parties will use its respective reasonable best efforts to have the S-4 declared effective under the Securities Act as promptly as practicable after it is filed. Center shall use its commercially reasonable efforts to qualify the Center Stock under the securities laws of such jurisdictions as may be required and to keep the S-4 effective and such qualifications current and in effect for so long as is necessary to consummate the transactions hereby. Center shall pay all third party costs (except Seller’s legal and accounting fees) associated with the preparation and filing of the S-4 and with obtaining all Blue Sky permits and approvals, including the filing fees with the SEC and Blue Sky regulators. At the time the S-4 becomes effective, the S-4 will comply in all material respects with the provisions of the Securities Act and the published rules and regulations thereunder, and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not false or misleading, and at the time of mailing thereof to the Seller’s shareholders, at the time of the Seller Shareholders’ Meeting and at the Effective Time, the prospectus included as part of the S-4, as amended or supplemented by any amendment or supplement filed by Center, will not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not false or misleading.

(c) After the date of the filing of the S-4 with the SEC, each of the Parties agrees promptly to notify the other of and to correct any information furnished by such Party that shall have become false or misleading in any material respect and to cooperate with the other to take all steps necessary to file with the SEC and have declared effective or cleared by the SEC any amendment or supplement to the S-4 so as to correct such

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information and to cause the Proxy Statement as so corrected to be disseminated to the shareholders of Seller and Center to the extent required by applicable Rules. All documents that the Parties file with the SEC or any other Governmental Entity in connection with this Agreement will comply as to form in all material respects with the provisions of applicable Rules.

(d) Center shall take all required action with appropriate Governmental Entities under state securities or Blue Sky laws in connection with the issuance of Center Stock pursuant to this Agreement.

7.2 Filings. Each of the Parties agree that through the Effective Time, each of its reports, registration statements and other filings required to be filed with any applicable Governmental Entity will comply in all material respects with the applicable Rules enforced or promulgated by the Governmental Entity with which it will be filed and none will contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Any financial statement contained in any such report, registration statement or other filing that is intended to represent the financial position of the entities or entity to which it relates will fairly present the financial position of such entities or entity and will be prepared in accordance with GAAP consistently applied during the periods involved.

7.3 Applications. Center will promptly prepare and file, or cause to be prepared and filed, any applications or notices to bank regulatory agencies necessary to consummate the transactions contemplated hereby. The Parties covenant and agree that the Proxy Statement and all applications to the appropriate Governmental Entities for approval or Consent to the transactions contemplated hereby, with respect to information relating to it, will comply in all material respects with the provisions of applicable law. Center will use its best efforts to obtain all required regulatory approvals or Consents and Seller shall cooperate with Center in such efforts.

7.4 Further Assurances. Center and Seller agree that from time to time, whether before, at or after the Effective Time, they will execute and deliver such further instruments of conveyance and transfer and to take such other action as may be reasonable or necessary to consummate the Merger and the transactions contemplated in this Agreement. Center and Seller agree to take such further action as may reasonably be requested to facilitate consummation of the transactions contemplated in this Agreement and that are not inconsistent with the other provisions of this Agreement.

7.5 Establishment of Accruals. If requested by Center, immediately prior to the Effective Time, Seller shall, consistent with GAAP, establish such additional accruals and reserves as may be necessary to conform its accounting and credit loss reserve practices and methods to those to be adopted by Center (as such practices and methods are to be applied to Seller from and after the Effective Time) and reflect Center’s plans with respect to the conduct of Seller’s business following the Merger and to provide for the costs and expenses relating to the consummation by Seller of the transactions contemplated by this Agreement. The establishment of such accrual and reserves shall not, in and of itself, constitute a breach of any representation or warranty of Seller contained in the Agreement, be deemed to have a Material Adverse Effect, or be taken into consideration in determining total shareholders’ equity for purposes of Section 8.2(i).

ARTICLE 8

CONDITIONS TO THE PARTIES’ OBLIGATIONS TO CLOSE

8.1 Conditions to Each Party’s Obligations to Close. The respective obligations of Center and Seller to consummate the Merger and the other transactions contemplated hereby are subject to the satisfaction or waiver at or prior to the Effective Time of each of the following conditions:

(a) The Agreement and the transactions contemplated hereby shall have received all requisite approvals of the shareholders of Seller.

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(b) No judgment, decree, injunction, order or proceeding shall be outstanding or threatened by or before any Governmental Entity which prohibits or restricts the effectuation of, or threatens to invalidate or set aside, the Merger substantially in the forms contemplated by this Agreement.

(c) The Parties shall have received any required Consent from the DBF, FDIC, and FRB, and, at or prior to the Effective Time, this Agreement and the transactions contemplated hereby shall have been approved by any other Governmental Entity whose Consent is required for consummation of the transactions contemplated in this Agreement and in each case either unconditionally or without the imposition of conditions or limitations that are applicable to any Party or would become applicable to Center or the Surviving Bank after the Merger that Center reasonably concludes in good faith would have a Material Adverse Effect or otherwise would be materially burdensome to any Party and all such Consents shall be in effect at the Effective Time, which Consents shall permit the Merger and permit the Surviving Bank to acquire and conduct all direct and indirect activities as previously conducted by Seller, at or prior to the Effective Time.

(d) No Rule shall be outstanding or threatened by or before any Governmental Entity which prohibits or materially restricts the consummation of, or threatens to invalidate or set aside, the Merger substantially in the forms contemplated by this Agreement or which would not permit the businesses presently carried on by Seller and Center to continue materially unimpaired following the Effective Time.

(e) All Third Party Consents necessary to permit the Parties to consummate the transactions contemplated in the Agreement shall have been obtained prior to the Effective Time, unless the failure to obtain any such Third Party Consent would not have a Material Adverse Effect.

(f) The S-4 shall have been declared effective, shall not be the subject of any stop order or proceedings seeking or threatening a stop order and all “Blue Sky” permits and approvals shall have been obtained.

(g) Seller and Center shall have received from Grant Thornton LLP, an opinion reasonably satisfactory to each of them to the effect that the Merger shall not result in the recognition of gain or loss for federal income tax purposes to Seller, Center, or CG Bank, nor shall the issuance of Center Stock result in the recognition of gain or loss by the holders of Seller Stock who receive such stock in connection with the Merger, and that such holders will be entitled to carryover the basis of their Seller Stock and tack holding periods relating thereto. Such opining firm may require and rely upon representations contained in certificates of officers of Seller and Center, reasonably satisfactory in form and substance to it.

8.2 Additional Conditions to Obligations of Center to Close. The obligations of Center to consummate the Merger and the other transactions contemplated hereby are subject to the satisfaction or waiver at or prior to the Effective Time of each of the following conditions:

(a) All actions necessary to authorize the execution, delivery and performance of this Agreement, the consummation of the Merger, and the consummation of the transactions contemplated by this Agreement shall have been duly and validly taken by the board of directors and shareholders of Seller.

(b) The representations and warranties of Seller contained in Article 4 of this Agreement shall have been true and correct (i) on the date of this Agreement; and (ii) in all material respects at and as of the Effective Time as though all such representations and warranties had been made on and as of the Effective Time, except with respect to representations and warranties that, by their terms, speak as of a different time.

(c) Each of the covenants and agreements of Seller contained in this Agreement to be performed at or before the Effective Time shall have been so performed in all material respects.

(d) During the period from the date of this Agreement to the Effective Time, no event shall have occurred or circumstance arisen that, individually or taken together with all other facts, circumstances or events, has had or could reasonably be expected to have a Material Adverse Effect, whether or not such event, change or effect is reflected in any amendment or supplement to Seller’s Disclosure Letter to this Agreement after the date of this Agreement.

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(e) Concurrently with the execution of this Agreement, Center shall have received executed versions of Non-Competition Agreements and Voting Agreements from the Persons identified in Section 2.6.

(f) Within 60 days of the execution of this Agreement, Center shall have received from each person named in the letter or otherwise referred to in Section 6.12 of this Agreement an executed copy of Exhibit D.

(g) Center shall have received satisfactory evidence that option cancellation agreements respecting Seller Stock Options have been executed as provided in Section 2.8 of this Agreement.

(h) Center shall have received the written resignation of each director of Seller dated as of the Effective Day.

(i) As of the last day of the month immediately preceding the Effective Day (the “Measurement Date”), as recorded on its books, which shall be maintained in accordance with GAAP, Seller shall have: (i) total shareholders’ equity of not less than $22,500,000 plus an amount equal to the aggregate exercise price of Seller Stock Options exercised from the date of this Agreement through the Measurement Date; provided, that the calculation of the Seller’s net income for purposes of determining its shareholders’ equity as of the Measurement Date shall exclude (1) all reasonable professional fees directly related to this Agreement, including, without limitation, for attorneys, accountants, financial advisors, investment bankers, experts and consultants, and (2) all other costs directly related to this Agreement, including severance payments, filing fees, printing costs, costs for extended reporting period coverage for Seller’s existing officers’ and directors’ liability insurance, and any deductions for any payments made in connection with the cancellation of Seller Stock Options; (ii) Seller’s loan loss allowance shall be fixed at the amount required by GAAP less $600,000; and (iii) Center shall receive the Accountant’s Letter at least three (3) Business Days before the Effective Day.

(j) Center shall have received an opinion from Hinton, Kreditor & Gronroos, LLP, reasonably satisfactory to it that the Merger will not result in the recognition of any gain or loss for federal income tax purposes to Center, Seller or Surviving Bank.

(k) Center shall have received a certificate signed by the Chief Executive Officer of Seller, dated as of the Effective Time, certifying to the best of his Knowledge that the conditions set forth in Sections 8.2(b), (c) and (d) have been satisfied.

8.3 Additional Conditions to Obligations of Seller to Close. The obligations of Seller to consummate the Merger and the other transactions contemplated herein are subject to the satisfaction or waiver, at or prior to the Effective Time, of each of the following conditions:

(a) All actions necessary to authorize the execution, delivery and performance of this Agreement, consummation of the Merger and the consummation of the transactions contemplated by this Agreement shall have been duly and validly taken by the board of directors of Center.

(b) The representations and warranties of Center contained in Article 3 of this Agreement shall be true and correct in all material respects at and as of the Effective Time as though all such representations and warranties had been made at and as of such time, except with respect to representations and warranties that, by their terms, speak as of a different time.

(c) The covenants and agreements of Center to be performed at or before the Effective Time shall have been duly performed in all material respects, except for Center’s obligations under Section 2.5, which shall have been duly performed in all respects.

(d) During the period from the date of this Agreement to the Effective Time, no event shall have occurred or circumstance arisen that, individually or taken together with all other facts, circumstances or events, has had or could reasonably be expected to have a Material Adverse Effect, whether or not such event, change or effect is reflected in any amendment or supplement to Center’s Disclosure Letter to this Agreement after the date of this Agreement.

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(e) Seller shall have received a certificate signed by the Chief Executive Officer of Center, dated as of the Effective Time, certifying to the best of their Knowledge that the conditions set forth in Sections 8.3(b), (c) and (d) have been satisfied.

(f) Seller shall have received evidence of the D&O insurance coverage required by Section 5.5.

(g) The shares of Center Stock to be issued to holders of Seller Stock shall be eligible for listing on the NASDAQ Global Market upon official notice of issuance.

ARTICLE 9

EMPLOYEE BENEFITS

9.1 Employee Benefits.

(a) Following the Closing, employees of the Seller will have the opportunity to continue their at-will employment with the Surviving Bank; provided, however, that nothing herein contained shall be deemed to change such employees’ at-will status nor to create a contract of employment with any such employee.

(b) Except for the Seller Stock Option Plan, Center shall use its best efforts to cause all other Seller Benefit Arrangements to be assumed by the Surviving Bank at the Effective Time. Employees of Seller shall continue to participate in the Seller Benefit Arrangements to the same extent as immediately prior to the Effective Time. Each of Seller’s employees will be credited for eligibility, participation and vesting purposes with such employee’s respective years of past service with Seller (or other prior service so credited by Seller) and all accrued vacation and sick time shall be carried over. Center anticipates conducting a review of the Seller Benefit Arrangements after the Closing and nothing herein contained shall, after the Effective Time (i) restrict the rights of Center to make changes or replace one or more of the Seller Benefit Arrangements nor (ii) create any rights in any person to continue to participate in Seller Benefit Arrangements other than as otherwise provided by law.

ARTICLE 10

TERMINATION OF AGREEMENT; WAIVER OF CONDITIONS

10.1 Termination of Agreement. Anything herein to the contrary notwithstanding, this Agreement and the transactions contemplated hereby including the Merger may be terminated at any time before the Effective Time, whether before or after approval by the shareholders of Seller as follows, and in no other manner:

(a) By mutual Consent of Center and Seller;

(b) By Center or Seller, if any conditions set forth in Section 8.1 shall not have been met by April 30, 2008;

(c) By Center, if any conditions set forth in Section 8.2 shall not have been met, or by Seller, if any conditions set forth in Section 8.3 shall not have been met, by the later of (i) sixty (60) days from the date of execution of this Agreement and (ii) thirty (30) days following receipt of all Consents required to complete the Merger, or such earlier time as it becomes apparent that such conditions cannot be met, unless the failure of such condition is due to the willful breach of the terminating Party of its obligations hereunder;

(d) By Center, if Seller should (i) materially breach any of its representations or warranties contained herein or (ii) materially default in the observance or in the due and timely performance of any of its covenants and agreements herein contained, and in either case, such breach and/or default shall not have been fully cured within twenty (20) Business Days from the date of delivery of written notice specifying the alleged breach and/or default;

(e) By Seller, if Center should (i) materially breach any of its representation or warranties contained herein or (ii) materially default in the observance or in the due and timely performance of any of their

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covenants and agreements herein contained, and in either case, such breach and/or default shall not have been fully cured within twenty (20) Business Days from the date of delivery of written notice specifying the alleged breach and/or default;

(f) By Center or Seller, if the shareholders of Seller fail to approve this Agreement and the Merger by the requisite vote at the Seller Shareholders’ Meeting, subject to payment of any amounts due Center under Section 11.1 in the event the conditions precedent to the payment of a fee under Section 11.1 are satisfied at the time such payment would otherwise be due thereunder;

(g) By Seller upon the election of Seller to accept a Competing Transaction and upon immediate payment of the amounts due Center under Section 11.1;

(h) By Center if a Competing Transaction is either (i) completed, or (ii) proposed by a third party and within five (5) days of the making of such proposal the Board of Directors of Seller has not rejected such proposal in writing and reaffirmed in writing its agreement to conclude the Merger as contemplated by this Agreement, in which case Seller shall immediately pay to Center the amounts otherwise due under Section 11.1.

10.2 Effect of Termination. In the event that this Agreement shall be terminated pursuant to Section 10.1 hereof, all further obligations of the Parties hereto under this Agreement shall terminate without further liability of any Party to another; provided, however, that no termination of this Agreement under Section 10.1 for any reason or in any manner shall release, or be construed as so releasing, any Party from its obligations under Sections 11.1, 11.9 or 11.10.

10.3 Waiver of Conditions. If any of the conditions specified in Section 8.2 have not been satisfied, Center may nevertheless, at its election, proceed with the transactions contemplated in this Agreement. If any of the conditions specified in Section 8.3 have not been satisfied, Seller may nevertheless, at its election, proceed with the transactions contemplated in this Agreement. If any Party elects to proceed pursuant to the provisions of this Section 10.3, the conditions that are unsatisfied immediately prior to the Effective Time shall be deemed to be satisfied, as evidence by a certificate delivered by the electing Party.

ARTICLE 11

GENERAL

11.1 Expenses/Termination Expenses.

(a) Seller hereby agrees that if (i) (X) the board of directors of Seller fails to recommend approval of this Agreement and the Merger to the stockholders of Seller or effects a Change in Recommendation, and this Agreement and the Merger are not approved by the stockholders of Seller by the requisite vote at the Seller Stockholders’ Meeting, or (Y) a Competing Transaction is proposed between the date hereof and the time of the Seller Stockholders’ Meeting and the stockholders of Seller fail to approve this Agreement and the Merger under circumstances where the board of directors of Seller continuously maintained its favorable recommendation of this Agreement and the Merger, or (Z) this Agreement is terminated after a Competing Transaction is proposed, and (ii) after the occurrence of (X), (Y) or (Z), either a definitive agreement relating to a Competing Transaction is executed by Seller, or a Competing Transaction is consummated, within twelve (12) months after the termination of this Agreement, then, upon the earlier to happen of the entering into of a definitive agreement for a Competing Transaction or of the consummating of the Competing Transaction, Seller shall promptly (and in no event later than two (2) Business Days following such event) pay Center a termination fee of $3,100,000, representing liquidated damages, payable by wire transfer of immediately available funds to an account specified by Center. If this Agreement is terminated by Center for a willful breach by Seller, the termination fee of $3,100,000, representing liquated damages, shall be paid by Seller whether or not a Competing Transaction is consummated or a definitive agreement therefore executed.

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(b) In the event this Agreement is terminated by Seller for a willful breach by Center, Center shall pay Seller a termination fee of $3,100,000, representing liquidated damages, whether or not a Competing Transaction is consummated or a definitive agreement therefore executed.

(c) The amounts set forth in Sections 11.1 (a) and (b) are in the nature of liquidated damages and do not constitute a penalty. The Parties agree that it would be impracticable or extremely difficult to fix actual damages and the amounts set forth in Sections 11.1 (a) and (b) are reasonably intended to compensate for expenses incurred in connection with the negotiation of this Agreement and any lost opportunity resulting from the pendency of the transactions contemplated by this Agreement. Upon payment of an amount by a Party pursuant to Sections 11.1 (a) or (b), the other Party waives any and all rights to any payments, damages, amounts, costs, fees or other expenses, and agrees that it shall not bring any action, suit or proceeding of any kind to recover any amounts in connection with any breach of this Agreement. If any Party fails to promptly pay the other Party any amounts due under Section 11.1 within the time period specified therein, the breaching Party shall pay all costs and expenses (including attorneys’ fees) incurred by the other Party, from the date such amounts were required to be paid in connection with any action, including the filing of any lawsuit, taken to collect payment of such amounts, together with interest on the amount of any such unpaid amounts at the publicly announced prime rate of interest printed in The Wall Street Journal on the date such payment was required to be made. The provisions of Section 11 shall not limit the rights of any Party to seek to specifically enforce this Agreement or to otherwise obtain equitable remedies.

(d) Except as otherwise provided in this Section and in Section 7.1, all expenses incurred by Center or Seller in connection with or related to the authorization, preparation and execution of this Agreement, the solicitation of shareholder approvals and all other matters related to the closing of the transactions contemplated hereby, including, without limitation of the generality of the foregoing, all fees and expenses of agents, representatives, counsel, and accountants employed by either of the Parties or its affiliates, shall be borne solely and entirely by the Party which has incurred the same.

11.2 Amendments. To the fullest extent permitted by law, this Agreement may be amended by agreement in writing of the Parties hereto at any time prior to the Effective Time; provided, however, that: (a) each amendment shall have been duly authorized by the respective boards of directors of Center, CG Bank and Seller; and (b) after adoption of this Agreement by Seller’s stockholders, no amendment shall be made which by applicable law requires further approval of the Seller’s stockholders without the further approval of such stockholders.

11.3 Disclosure Letter; Exhibits; Integration. Each Disclosure Letter and exhibit delivered pursuant to this Agreement shall be in writing and shall constitute a part of the Agreement, although Disclosure Letters need not be attached to each copy of this Agreement. This Agreement, together with such Disclosure Letters, the exhibits and any other agreement entered into on the date hereof by the Parties constitute the entire agreement between the Parties pertaining to the subject matter hereof and supersedes all prior agreements and understanding of the Parties in connection therewith.

11.4 Reasonable Best Efforts. Subject to the terms and conditions of this Agreement, each of the Parties agrees to cooperate with the other and use its reasonable best efforts in good faith to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or desirable, or advisable on its part under this Agreement or under applicable Rule to consummate and make effective the Merger and the other transactions contemplated hereby as promptly as practicable, including the satisfaction of the conditions set forth in Article 8 hereof.

11.5 Governing Law; Arbitration. This Agreement and the legal relations between the Parties shall be governed by and construed in accordance with the laws of Georgia except to the extent that the provisions of federal law are mandatorily applicable. The Parties hereby irrevocably submit to the jurisdiction of the courts of the State of Georgia and the federal courts of the United States of America located in the State of Georgia solely in respect of the interpretation and enforcement of the provisions of this Agreement and of the documents

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referred to in this Agreement, and in respect of the transactions contemplated hereby and thereby. The Parties hereby waive, and agree not to assert, as a defense in any action, suit or proceeding for the interpretation or enforcement hereof or of any such documents, that it is not subject thereto or that such action, suit or proceeding may not be brought or is not maintainable in said courts or that the venue thereof may not be appropriate or that this Agreement or any such document may not be enforced in or by such courts, and the Parties hereto irrevocably agree that all claims with respect to such action or proceeding shall be heard and determined in such Georgia state or federal court. The Parties hereby consent to and grant any such court jurisdiction over the person of such Parties and over the subject matter of such dispute and agree that mailing of process or other papers in connection with any such action or proceeding in the manner provided in Section 11.12 or in such other manner as may be permitted by law, shall be valid and sufficient service thereof. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.

11.6 No Assignment. Neither this Agreement nor any rights, duties or obligations hereunder shall be assignable by Center or Seller, in whole or in part, without the prior written Consent of the other Party. Any attempted assignment in violation of this prohibition shall be null and void. Subject to the foregoing, all of the terms and provisions hereof shall be binding upon, and inure to the benefit of, the successors and assigns of the Parties hereto.

11.7 Headings. The descriptive headings contained in this Agreement are inserted for convenience only and do not constitute a part of this Agreement.

11.8 Counterparts. This Agreement and any exhibit hereto may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each Party hereto and delivered to each Party hereto.

11.9 Publicity and Reports. Center and Seller shall coordinate all publicity relating to the transactions contemplated by this Agreement and no Party shall issue any press release, publicity statement or other public notice relating to this Agreement or any of the transactions contemplated hereby without obtaining the prior Consent of the other Party, except to the extent that legal counsel to any Party shall deliver a written opinion to the other Party to the effect that a particular action is required by applicable Rules.

11.10 Confidentiality. All Confidential Information disclosed heretofore or hereafter by any Party to this Agreement to any other Party to this Agreement shall be kept confidential by such other Party and shall not be used by such other Party otherwise than as herein contemplated, except to the extent that (a) it is necessary or appropriate to disclose to the DBF, the FRB, the FDIC or any other Governmental Entity having jurisdiction over any of the Parties or as may be otherwise be required by Rule (any disclosure of Confidential Information to a Governmental Entity shall be accompanied by a request that such Governmental Entity preserve the confidentiality of such Confidential Information); or (b) to the extent such duty as to confidentiality is waived by the other Party. Such obligation as to confidentiality and non-use shall survive the termination of this Agreement pursuant to Article 10. In the event of such termination and on request of another Party, each Party shall use best efforts to (1) return to the other Parties all documents (and reproductions thereof) received from such other Parties that contain Confidential Information (and, in the case of reproductions, all such reproductions made by the receiving Party), provided that such return does not violate document retention policies of such Party; and (2) destroy the originals and all copies of any analyses, computations, studies or other documents prepared for the internal use of such Party that included Confidential Information.

11.11 Specific Performance. Notwithstanding the provisions of Section 11.1 concerning liquidated damages, Seller and Center each acknowledge that, in view of the uniqueness of their respective businesses and the transactions contemplated in this Agreement, each Party would not have an adequate remedy at law for money

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damages in the event that this Agreement has not been performed in accordance with its terms, and therefore each Party agrees that the other shall be entitled to specific enforcement of the terms hereof in addition to any other remedy to which it may be entitled, at law or in equity.

11.12 Notices. Any notice or communication required or permitted hereunder, including, without limitation, supplemental Disclosure Letters shall be given in writing and deemed to have been given (a) the day of receipt, if delivered in person, (b) the first Business Day following delivery by facsimile, with confirmation of delivery, or (c) the third Business Day following deposit, if mailed by certified or registered mail, postage prepaid, to the following addresses:

If to Center, addressed to:

Mr. Jae Whan Yoo

President and Chief Executive Officer

Center Financial Corporation

3435 Wilshire Boulevard

Suite 700

Los Angeles, CA 90010

Fax No. (213) 251-2202

With a copy addressed to:

Ms. Lisa K. Pai

Executive Vice President and General Counsel

Center Financial Corporation

3435 Wilshire Boulevard

Suite 700

Los Angeles, CA 90010

Fax No. (213) 384-2106

With a copy addressed to:

Keith T. Holmes, Esq.

King, Holmes, Paterno & Berliner, LLP

1900 Avenue of the Stars, 25^th Floor

Los Angeles, CA 90067

Fax No. (310) 282-8903

If to Seller, addressed to:

Mr. Daniel C. Lee

President and Chief Executive Officer

First Intercontinental Bank

5593 Buford Highway

Doraville, GA 30340

Fax No. (770) 451-2053

With a copy addressed to:

Brennan Ryan, Esq.

Nelson Mullins Riley & Scarborough LLP

999 Peachtree Street, NE, Suite 1400

Atlanta, GA 30309

Fax No. (404) 817-6050

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or at such other address and to the attention of such other Person as a Party may notice to the others in accordance with this Section 11.12.

11.13 Severability. If any portion of this Agreement shall be deemed by a court of competent jurisdiction to be unenforceable, the remaining portions shall be valid and enforceable only if, after excluding the portion deemed to be unenforceable, the remaining terms hereof shall provide for the consummation of the transactions contemplated herein in substantially the same manner as originally set forth at the date this Agreement was executed.

11.14 Attorneys’ Fees. In addition to the liquidated damages set forth in Section 11.1, in the event any of the parties to this Agreement brings an action or suit against any other party by reason of any breach of any covenant, agreement, representation, warranty or other provision hereof, or any breach of any duty or obligation created hereunder by such other party, the prevailing party, as determined by the court or the body having jurisdiction, shall be entitled to have and recover of and from the losing party, as determined by the court or other party having jurisdiction, all reasonable costs and expenses incurred or sustained by such prevailing party in connection with such prevailing action, including, without limitation, legal fees and court costs (whether or not taxable as such).

11.15 Termination of Representations, Warranties and Covenants. The representations, warranties and covenants of each Party contained herein or in any certificate or other writing delivered by such party pursuant hereto or in connection herewith shall not survive the Effective Time, except Section 5.6.

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WITNESS, the signature of Center Financial Corporation as of the 18th day of September, 2007, set by its President and Chief Executive Officer and its Secretary, pursuant to a resolution of its board of directors, acting by at least a majority:

CENTER FINANCIAL CORPORATION
By:	/s/    JAE WHAN YOO	By:	/s/    LISA PAI
	President &		Secretary
	Chief Executive Officer

WITNESS, the signature of First Intercontinental Bank as of the 18th day of September, 2007, set by its President and Chief Executive Officer and its Secretary pursuant its authority:

FIRST INTERCONTINENTAL BANK
By:	/s/    DANIEL C. LEE	By:	/s/    DONG WON SHIN
	President &		Secretary
	Chief Executive Officer

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Exhibit A

Agreement of Merger

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Exhibit B

Non-Competition Agreement

46

Exhibit C

Voting Agreement

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Exhibit D

Rule 145 Letter

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Schedule 6.3

Center’s Designated Officers

Jae Whan Yoo, President and Chief Executive Officer

Lonny Robinson, Executive Vice President and Chief Financial Officer

Lisa Pai, Executive Vice President and General Counsel

Jason Kim, Chief Credit Officer

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EX-31.1

EXHIBIT 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, Jae Whan Yoo, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date: October 24, 2007	/S/    JAE WHAN YOO
	Jae Whan Yoo President & Chief Executive Officer (Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, Lonny D. Robinson, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date: October 24, 2007	/S/    LONNY D. ROBINSON
	Lonny D. Robinson Executive Vice President & Chief Financial Officer (Principal Financial Officer)

EX-32

EXHIBIT 32

Certification of Principal Executive Officer and Principal Financial Officer

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, Jae Whan Yoo and Lonny D. Robinson hereby certify as follows:

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

2. The Form 10-Q of Center Financial Corporation for the Quarter Ended September 30, 2007 (the “Report”) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o (d)) and the information contained in the report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Center Financial Corporation.

Dated: October 24, 2007	/S/    JAE WHAN YOO
	Jae Whan Yoo President & Chief Executive Officer (Principal Executive Officer)
Dated: October 24, 2007	/S/    LONNY D. ROBINSON
	Lonny D. Robinson Executive Vice President & Chief Financial Officer (Principal Financial Officer)