Wilshire Bancorp (WIBC) 10-Q 2014 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

xQuarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2014.

OR

oTransition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from            to

Commission File Number 000-50923

WILSHIRE BANCORP, INC.

(Exact name of registrant as specified in its charter)

California	20-0711133
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
3200 Wilshire Blvd.
Los Angeles, California	90010
(Address of principal executive offices)	(Zip Code)

(213) 387-3200

(Registrant’s telephone number, including area code)

No change

(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. Yes x    No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x    No o

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

Large accelerated filer o	Accelerated filer x
Non-accelerated filer o (Do not check if a smaller reporting company)	Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o    No x

The number of shares of Common Stock of the registrant outstanding at July 31, 2014 was 78,302,260.

FORM 10-Q

INDEX

WILSHIRE BANCORP, INC.

Part I. FINANCIAL INFORMATION	1
Item 1. Consolidated Financial Statements (Unaudited)	1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	40
Item 3. Quantitative and Qualitative Disclosures about Market Risk	65
Item 4. Controls and Procedures	67
Part II. OTHER INFORMATION	68
Item 1. Legal Proceedings	68
Item 1A.Risk Factors	68
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	68
Item 3. Defaults Upon Senior Securities	68
Item 4. Mine Safety Disclosures	68
Item 5. Other Information	68
Item 6. Exhibits	68
SIGNATURES	69

i

Part I.  FINANCIAL INFORMATION

Item 1.Consolidated Financial Statements

WILSHIRE BANCORP, INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(DOLLARS IN THOUSANDS) (UNAUDITED)

	June 30, 2014		December 31, 2013
ASSETS:
Cash and due from banks	$	155,799	$	124,064
Federal funds sold and other cash equivalents	927		46,590
Cash and cash equivalents	156,726		170,654
Deposits held in other financial institutions	20,509		21,019
Securities available-for-sale, at fair value (amortized cost of $324 million and $356 million at June 30, 2014 and December 31, 2013, respectively)	327,239		352,437
Securities held-to-maturity, at amortized cost (fair value of $32 thousand and $37 thousand at June 30, 2014 and December 31, 2013, respectively)	30		35
Loans receivable (net of allowance for loan losses of $53 million and $54 million at June 30, 2014 and December 31, 2013, respectively)	2,917,226		2,763,279
Loans held-for-sale, at the lower of cost or market	6,207		47,557
Federal Home Loan Bank (“FHLB”) stock, at cost	16,989		15,983
Other real estate owned (“OREO”)	6,676		7,600
Due from customers on acceptances	3,090		1,517
Cash surrender value of bank owned life insurance	22,803		22,519
Investments in affordable housing partnerships	41,112		43,316
Bank premises and equipment	12,925		13,862
Accrued interest receivable	8,032		8,350
Deferred income taxes	32,459		39,672
Servicing assets	18,168		16,108
Goodwill	67,528		67,528
Core deposits intangibles	4,678		5,224
FDIC loss-share indemnification asset	267		4,856
Other assets	18,597		16,219
TOTAL	$	3,681,261	$	3,617,735
LIABILITIES:
Deposits:
Non-interest bearing	$	945,010	$	832,152
Interest bearing:
Savings	122,664		114,951
Money market and NOW accounts	796,324		810,878
Time deposits of $100,000 or more	856,681		869,337
Other time deposits	235,335		244,192
Total deposits	2,956,014		2,871,510
FHLB advances	150,260		190,325
Junior subordinated debentures	71,665		71,550
Commitments to fund investments in affordable housing partnerships	7,963		10,237
Accrued interest payable	2,349		2,418
Bank acceptances outstanding	3,090		1,517
Other liabilities	25,151		30,760
Total liabilities	3,216,492		3,178,317
SHAREHOLDERS’ EQUITY:
Preferred stock, $1,000 par value — authorized, 5,000,000 shares; issued and outstanding 0 shares at June 30, 2014 and December 31, 2013	—		—
Common stock, no par value — authorized, 200,000,000 shares; issued and outstanding, 78,276,758 and 78,061,307 shares at June 30, 2014 and December 31, 2013, respectively	231,368		229,836
Accumulated other comprehensive income (loss), net of tax	3,845		(23		)
Retained earnings	229,556		209,605
Total shareholders’ equity	464,769		439,418
TOTAL	$	3,681,261	$	3,617,735

See accompanying notes to unaudited consolidated financial statements.

1

WILSHIRE BANCORP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)

	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
INTEREST INCOME:
Interest and fees on loans	$	37,993	$	26,970	$	75,094	$	53,855
Interest on investment securities	2,023		1,743		4,124		3,468
Interest on federal funds sold and other earning assets	92		136		243		289
Total interest income	40,108		28,849		79,461		57,612
INTEREST EXPENSE:
Interest on deposits	3,486		2,750		7,162		5,599
Interest on FHLB advances and other borrowings	67		64		141		143
Interest on junior subordinated debentures	426		281		856		564
Total interest expense	3,979		3,095		8,159		6,306
NET INTEREST INCOME BEFORE PROVISION FOR LOSSES ON LOANS AND LOAN COMMITMENTS	36,129		25,754		71,302		51,306
PROVISION FOR LOSSES ON LOANS AND LOAN COMMITMENTS	—		—		—		—
NET INTEREST INCOME AFTER PROVISION FOR LOSSES ON LOANS AND LOAN COMMITMENTS	36,129		25,754		71,302		51,306
NON-INTEREST INCOME:
Service charges on deposit accounts	3,174		2,811		6,320		5,619
Net gain on sale of loans	4,687		3,135		9,016		6,621
Loan-related servicing fees	1,314		1,243		3,470		2,693
Gain on sale or call of securities	—		15		—		15
Other income	1,569		1,128		2,924		2,089
Total non-interest income	10,744		8,332		21,730		17,037
NON-INTEREST EXPENSE:
Salaries and employee benefits	12,449		9,548		25,104		18,353
FDIC loss-share indemnification impairment	597		—		597		—
Occupancy and equipment	3,444		2,038		6,753		4,078
Regulatory assessment fee	669		311		1,177		644
Loss on investments in affordable housing partnerships	1,347		823		2,204		1,643
Data processing	795		583		1,758		1,258
Professional fees	684		905		1,380		2,030
Amortization of intangibles	235		70		468		140
Merger related costs	213		—		3,577		—
Other operating expenses	4,117		2,804		7,789		6,220
Total non-interest expense	24,550		17,082		50,807		34,366
INCOME BEFORE INCOME TAXES	22,323		17,004		42,225		33,977
INCOME TAX PROVISION	7,659		5,465		14,448		10,849
NET INCOME	$	14,664	$	11,539	$	27,777	$	23,128
EARNINGS PER COMMON SHARE INFORMATION:
Basic	$	0.19	$	0.16	$	0.36	$	0.33
Diluted	$	0.19	$	0.16	$	0.35	$	0.32
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING:
Basic	78,267,128		70,944,626		78,191,872		71,119,180
Diluted	78,613,468		71,101,787		78,554,947		71,262,224

See accompanying notes to unaudited consolidated financial statements.

2

WILSHIRE BANCORP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(DOLLARS IN THOUSANDS) (UNAUDITED)

	Three Months Ended June 30,					Six Months Ended June 30,
	2014		2013			2014			2013
NET INCOME	$	14,664	$	11,539		$	27,777		$	23,128
UNREALIZED GAIN (LOSS) ON SECURITIES AVAILABLE-FOR-SALE SECURITIES:
Unrealized gains (losses) on securities available-for-sale arising during the period	3,431		(6,587		)	6,553			(7,100		)
Reclassification adjustment for gains realized in net income	—		(15		)	—			(15		)
Unrealized gains (losses) on securities available-for-sale after reclassification	3,431		(6,602		)	6,553			(7,115		)
Less income tax expense (benefit)	1,395		(2,773		)	2,706			(2,990		)
Net change in net unrealized gains (losses) on securities available-for-sale	2,036		(3,829		)	3,847			(4,125		)
UNREALIZED GAINS (LOSSES) ON INTEREST-ONLY STRIP:
Net unrealized gains on interest-only strips arising during the period	12		9			(7		)	30
Less income tax expense	5		4			(3		)	13
Net unrealized changes in net gains (losses) on interest-only strips	7		5			(4		)	17
BOLI UNRECOGNIZED PRIOR SERVICE COST:
AOCI on BOLI unrecognized prior service cost	12		10			25			(124		)
Less income tax expense	—		—			—			—
Net changes in AOCI on BOLI unrecognized prior service cost	12		10			25			(124		)
TOTAL OTHER COMPREHENSIVE INCOME (LOSS)	$	2,055	$	(3,814	)	$	3,868		$	(4,232	)
TOTAL COMPREHENSIVE INCOME	$	16,719	$	7,725		$	31,645		$	18,896

See accompanying notes to unaudited consolidated financial statements.

3

WILSHIRE BANCORP, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) (UNAUDITED)

	Common Stock					Accumulated Other						Total
	Number					Comprehensive			Retained			Shareholders’
	of Shares		Amount			Income (Loss)			Earnings			Equity
BALANCE—January 1, 2013	71,295,144		$	164,790		$	6,811		$	170,816		$	342,417
Stock options exercised	54,212		199									199
Stock repurchased	(651,412	)	(4,287		)							(4,287		)
Cash dividend declared or accrued:
Common stock ($0.03 per share)									(2,121		)	(2,121		)
Share-based compensation expense			230									230
Net income									23,128			23,128
Other comprehensive loss						(4,232		)				(4,232		)
BALANCE—June 30, 2013	70,697,944		$	160,932		$	2,579		$	191,823		$	355,334

	Common Stock			Accumulated Other						Total
	Number			Comprehensive			Retained			Shareholders’
	of Shares	Amount		Income (Loss)			Earnings			Equity
BALANCE—January 1, 2014	78,061,307	$	229,836	$	(23	)	$	209,605		$	439,418
Stock options exercised	143,501	680								680
Restricted stock granted and vested	71,950	249								249
Cash dividend declared or accrued:
Common stock ($0.10 per share)							(7,826		)	(7,826		)
Share-based compensation expense		354								354
Tax benefit from stock options exercised		249								249
Net income							27,777			27,777
Other comprehensive income				3,868						3,868
BALANCE—June 30, 2014	78,276,758	$	231,368	$	3,845		$	229,556		$	464,769

See accompanying notes to unaudited consolidated financial statements.

4

WILSHIRE BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(DOLLARS IN THOUSANDS) (UNAUDITED)

	Six Months Ended June 30,
	2014			2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	27,777		$	23,128
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of investment securities	889			1,687
Depreciation of bank premises and equipment	1,823			1,128
Accretion of discount on acquired loans	(5,493		)	(406		)
FDIC loss-share indemnification asset impairment	597			—
Amortization and accretion of liabilities acquired from acquisitions	(777		)	—
Amortization of other intangibles	468			140
Provision (credit) for losses on other real estate owned	268			(14		)
Deferred tax expense	4,510			5,978
Loss (gain) on disposition of bank premises and equipment	79			(2		)
Net realized gain on sale of loans held-for-sale	(9,016		)	(6,621		)
Proceeds from sale of loans held-for-sale	103,862			570,070
Origination of loans held-for-sale	(57,970		)	(480,113		)
Net realized gain on sale or call of available-for-sale securities	—			(15		)
Change in unrealized appreciation on servicing assets	(36		)	6
Disposition of servicing rights	702			191
Net realized gain on sale of other real estate owned	(49		)	(157		)
Gain on sale of repossessed assets	(20		)	—
Share-based compensation expense	603			230
Change in cash surrender value of life insurance	(284		)	(302		)
Servicing assets capitalized	(2,725		)	(1,629		)
Decrease in accrued interest receivable	318			155
Loss on investments in affordable housing partnerships	2,204			1,643
Increase in other assets	(481		)	(13,851		)
FHLB stock cash dividend	544			182
(Decrease) increase in accrued interest payable	(69		)	35
(Decrease) increase in other liabilities	(7,298		)	8,633
Net cash provided by operating activities	60,426			110,096
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from principal repayment of securities held-to-maturity	5			8
Purchase of securities available-for-sale	—			(30,811		)
Proceeds from principal repayment of securities available-for-sale	30,861			50,694
Net decrease in interest-bearing deposits in other financial institutions	510			—
Net increase in loans receivable	(146,692		)	(94,780		)
Payment of FDIC loss-share indemnification	2,511			682
Proceeds from sale of other loans	800			488
Proceeds from sale of other real estate owned	2,384			1,485
Proceeds from sale of repossessed assets	84			—
Purchases of investments in affordable housing partnerships	(2,274		)	(2,896		)
Purchases of bank premises and equipment	(716		)	(409		)
Purchases of bank owned life insurance	—			(710		)
Redemption of FHLB stock	—			158
Purchase of FHLB stock	(1,006		)	(1,348		)
Net cash used in investing activities	(113,533		)	(77,439		)

See accompanying notes to unaudited consolidated financial statements. (Continued)

5

WILSHIRE BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(DOLLARS IN THOUSANDS) (UNAUDITED)

	Six Months Ended June 30,
	2014			2013
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stock options exercised	$	680		$	199
Cash paid for stock repurchases	—			(4,287		)
Tax benefit from exercise of stock option	249			—
Payment of cash dividend on common stock	(6,254		)	—
Repayment of FHLB advances	(40,000		)	—
Net increase in deposits	84,504			15,489
Net cash provided by financing activities	39,179			11,401
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	(13,928		)	44,058
CASH AND CASH EQUIVALENTS — BEGINNING OF PERIOD	170,654			173,500
CASH AND CASH EQUIVALENTS — END OF PERIOD	$	156,726		$	217,558
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid	$	8,227		$	6,271
Income taxes paid	$	12,324		$	15,541
Income tax refunds received	$	338		$	—
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Real estate acquired through foreclosures	$	1,910		$	500
Loans transferred to held-for-sale from loans receivable	$	—		$	488
Loans transferred to loans receivable from held-for-sale	$	3,672		$	114
Other assets transferred to bank premises and equipment	$	249		$	784
Common stock cash dividend declared, but not paid	$	3,914		$	2,121

See accompanying notes to unaudited consolidated financial statements. (Concluded)

6

WILSHIRE BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

Note 1.     Business of Wilshire Bancorp, Inc.

Wilshire Bancorp, Inc. (hereafter, “the Company,” “we,” “us,” or “our”) is a bank holding company offering a broad range of financial products and services primarily through our main subsidiary, Wilshire Bank, a California state-chartered commercial bank, which we sometimes refer to in this report as “the Bank.” Our corporate headquarters and primary banking facilities are located at 3200 Wilshire Boulevard, Los Angeles, California 90010.The Bank has 35 full-service branch offices in Southern California, Texas, New Jersey, and the greater New York City metropolitan area. We also have 7 loan production offices, or “LPOs”, utilized primarily for the origination of loans under our Small Business Administration, or “SBA”, lending program in California, Colorado, Georgia, Texas, New Jersey, New York, and Virginia.

Note 2.     Basis of Presentation

The consolidated financial statements of the Company have been prepared in accordance with the Securities and Exchange Commission (“SEC”) rules and regulations for interim financial reporting and therefore do not necessarily include all information and footnote disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”). The information provided by these interim financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the Company’s consolidated statements of financial condition as of June 30, 2014 and December 31, 2013, statements of operations, statements of comprehensive income, statements of shareholders’ equity, and statements of cash flows for the three and six months ended June 30, 2014 and June 30, 2013.Operating results for interim periods are not necessarily indicative of operating results for an entire fiscal year.

The financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.The accounting policies used in the preparation of these interim financial statements were consistent with those used in the preparation of the financial statements for the year ended December 31, 2013.Some items in the prior period financial statements were reclassified to conform to the current presentation. The reclassifications had no effect on prior period net income or shareholders’ equity.

Note 3.   Recent Acquisitions

On October 1, 2013, the Company acquired BankAsiana for approximately $32.5 million, or $14.25 per share of BankAsiana’s common stock. The entire consideration was paid to BankAsiana shareholders in cash. BankAsiana was a New Jersey state chartered commercial bank serving the East Coast Korean-American community with three branch offices, two in the State of New Jersey, and one in the State of New York.

On November 20, 2013, the Company acquired Saehan for approximately $118.2 million. Pursuant to the merger agreement, holders of Saehan Bancorp common stock had a right to elect to receive either (a) $0.4247 in cash, (b) 0.06080 shares of Wilshire common stock, or (c) a unit consisting of a mix of $0.21235 in cash and 0.03040 share of Wilshire common stock (subject to proration, adjustment and certain limitations set forth in the Merger Agreement), for each share of Saehan Bancorp common stock. As a result, 7.2 million shares of the Company’s common stock were issued to former Saehan shareholders at $9.40 per share at the date of the acquisition for a total value of $67.8 million. In addition to the stock consideration, Saehan shareholders also received total cash consideration of $50.4 million. Saehan Bancorp was headquartered in Los Angeles, California and its main subsidiary, Saehan Bank operated ten branches all located in Southern California, and two LPO offices located in the states of Washington and New York.

The acquisition of BankAsiana helped to expand our market presence in the East Coast. The customer base and locations of BankAsiana’s branches had significant overlap when compared to the Company’s East Coast customer base and branch locations. Saehan Bancorp also had a similar customer base and operated in the same markets of our Southern California operations. Both acquisitions had the potential for large cost savings synergies with consolidation and the potential for future growth. With the Company’s level of excess capital at the time, the acquisitions fit well into the Company’s growth strategy. The total fair value of assets acquired from BankAsiana and Saehan were $204.1 million and $589.1 million, respectively. We recorded goodwill of $10.8 million for the acquisition of BankAsiana and $50.0 million for the acquisition of Saehan Bancorp. Total goodwill of $60.8 million from these two acquisitions is largely the result of the benefits discussed above as well as creating a platform for future operations, strengthening the Company’s presence in existing markets. Goodwill is not amortized for book purposes and is not tax deductible.

7

The acquisitions were accounted for in accordance with ASC 805 “Business Combinations,” using the acquisition method of accounting and were recorded at their estimated fair values on the dates of each acquisition. These fair value estimates are considered provisional, as additional analysis is ongoing on certain assets and liabilities in which fair values are primarily determined through the use of inputs that are not observable from market-based information. Management may further adjust the provisional fair values for a period of up to one year from the dates of the acquisitions. The assets and liabilities that continue to be provisional include loans, intangible assets, OREO, deferred tax assets, accrued assets and liabilities, and the residual effects that the adjustments would have on goodwill.

Note 4.     Fair Value Measurement for Financial and Non-Financial Assets and Liabilities

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value inputs of the instruments are classified and disclosed in one of the following three categories pursuant to ASC 820:

Level 1 — Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. The quoted price shall not be adjusted for any type of blockage factor (i.e., size of the position relative to trading volume).

Level 2 — Pricing inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Fair value is determined through the use of models or other valuation methodologies, including the use of pricing matrices. If the asset or liability has a specified (contractual) term, a Level 2 input must be observable for substantially the full term of the asset or liability.

Level 3 — Pricing inputs are inputs unobservable for the asset or liability. Unobservable inputs shall be used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date. The inputs into the determination of fair value require significant management judgment or estimation.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an asset’s or liability’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

The Company uses the following methods and assumptions in estimating our fair value for financial instruments. Financial assets and liabilities recorded at fair value on a recurring and non-recurring basis is listed as follows:

Cash and cash equivalents — The carrying value of our cash and cash equivalents is approximately equal to the fair value resulting in a Level 1 classification.

Federal funds sold — The carrying value of federal funds sold is approximately equal to the fair value resulting in a Level 1 classification.

Deposits held at other financial institutions — The carrying value of deposits held at other financial institutions is approximately equal to the fair value resulting in a Level 1 classification.

Investment securities — Investments securities are recorded at fair value pursuant to ASC 320-10 “Investments - Debt and Equity Securities.” Fair value measurements are based upon quoted prices for similar assets, if available (Level 1). If quoted prices are not available, fair values are measured using matrix pricing models, or other model-based valuation techniques requiring observable such as yield curves, prepayment speeds, and default rates (Level 2). Our existing investment security holdings as of June 30, 2014 are measured using matrix pricing models in lieu of direct price quotes and is recorded based on recurring Level 2 measurement inputs. Level 3 measurement inputs are not utilized to measure the fair value for any of our investment securities.

Loans — The fair value of variable rate loans that have no significant changes in credit risk are based on the carrying values. The fair values of other loans are estimated by discounting the future cash flows using current rates at which similar loans would be made to borrowers with similar risk characteristics. The aforementioned fair value techniques result in a Level 3 classification. See below for impaired loans.

8

Loans held-for-sale (excluding impaired loans held-for-sale) — Small Business Administration (“SBA”) loans and mortgage loans that are held-for-sale are reported at the lower of cost or fair value. Fair value is determined based on quotes, bids, or indications directly from potential purchasing parties. We record SBA and mortgage loans held-for-sale as non-recurring Level 2 measurement inputs.

Impaired loans — At the time a loan is considered impaired, it is valued at the lower of cost or fair value. Impaired loans that are carried at fair value generally having had a charge-off through the allowance for loan losses or a specific valuation allowance. The fair value of impaired loans that are not collateral dependent is measured based on the present value of estimated cash flows. For collateral dependent loans, the fair value is commonly based on recent real estate appraisals of the underlying collateral. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process to adjust for differences between the comparable sales and income data available. Such adjustments may be significant and typically result in a Level 3 classification of the inputs for determining fair value. Non-real estate collateral may also be valued using an appraisal, net book value per the borrower’s financial statements or aging reports, adjusted or discounted based on management’s historical knowledge, based on changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business resulting in a Level 3 fair value classification. Impaired loans are evaluated on a quarterly basis for additional impairment and adjustments are recorded accordingly.

Indications of value for both collateral dependent impaired loans and other real estate owned are obtained from third party providers or estimated internally by the Company’s internal Appraisal Department. All indications of value are reviewed for reasonableness by a member of the Appraisal Department who reviews the assumptions and approaches utilized in the appraisal. The resulting fair value is then compared with independent data sources such as recent market data or industry-wide statistics.

Other real estate owned — OREO is measured at fair value less estimated costs to sell when acquired, establishing a new cost basis. Fair value is commonly based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process to adjust for differences between the comparable sales and income data available. The Company records OREO as non-recurring with Level 3 measurement inputs.

Servicing assets — SBA and residential real estate loan servicing assets represent the value associated with servicing SBA and residential real estate loans that have been sold. The fair value for servicing assets is determined through discounted cash flow analysis and utilizes discount rates, prepayment speeds, and delinquency rate assumptions as inputs. All of these assumptions require a significant degree of management estimation and judgment. The fair market valuation is performed on a quarterly basis for servicing assets. The Company classifies loan servicing assets as recurring with Level 3 measurement inputs.

FHLB stock — It is not practical to determine the fair value of Federal Home Loan Bank (“FHLB”) stock due to the restrictions placed on the stock’s transferability.

Accrued interest receivable — The carrying amount of accrued interest receivable approximates its fair value due to the short-term nature of this asset resulting in a Level 2 or 3 classification which is consistent with its underlying asset.

FDIC loss-share indemnification asset — The fair value of the Federal Deposit Insurance Corporation (“FDIC”) loss-share indemnification asset is estimated by discounting the estimated future cash flows using current market rates for financial instruments with similar characteristics resulting in a Level 3 classification.

Due from customer on acceptances — The carrying value of due from customers on acceptances is approximately equal to the fair value resulting in a Level 1 classification.

Non-interest bearings deposits — The carrying value of our non-interest bearings deposits is approximately equal to the fair value resulting in a Level 1 classification.

Interest bearings deposits — The fair value of money market and savings accounts is estimated to be the amount that is payable on demand as of the reporting date resulting in Level 2 classification. Fair value for fixed-rate time deposits is estimated using a discounted cash flow analysis which utilizes current interest rates offered on deposits of similar maturities resulting in a Level 2 classification.

9

Junior subordinated debentures — The fair value for junior subordinated debentures is derived from a discounted cash flow analysis based on current rates that are given for securities with similar risk characteristics, resulting in a Level 2 classification.

Short-term FHLB advances — The carrying value of our short-term FHLB advances is approximately equal to the fair value as the borrowings are usually variable rate and are renewed daily. As such, these liabilities have a Level 1 classification.

Long-term FHLB advances — The fair value for long-term FHLB advances is derived from a discounted cash flow analysis based on current rates that are given for borrowings with similar risk characteristics, resulting in a Level 2 classification.

Accrued interest payable — The carrying amount of accrued interest payable approximates its fair value due to the short-term nature if this liability resulting in a Level 1 or 2 classification consistent with its underlying liabilities.

The table below summarizes the valuation measurements of our financial assets and liabilities in accordance with ASC 820-10 fair value hierarchy levels at June 30, 2014 and December 31, 2013:

Assets and Liabilities Measured at Fair Value on a Recurring Basis
(Dollars in Thousands)

	Fair Value Measurements Using:
As of June 30, 2014	Total Fair Value		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Investments:
Securities of government sponsored enterprises	$	60,793	$	—	$	60,793	$	—
Mortgage-backed securities (residential)	87,840		—		87,840		—
Collateralized mortgage obligations (residential)	121,052		—		121,052		—
Corporate securities	30,874		—		30,874		—
Municipal bonds	26,680		—		26,680		—
Servicing assets	18,168		—		—		18,168

	Fair Value Measurements Using:
As of December 31, 2013	Total Fair Value		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Investments:
Securities of government sponsored enterprises	$	60,789	$	—	$	60,789	$	—
Mortgage-backed securities (residential)	90,869		—		90,869		—
Collateralized mortgage obligations (residential)	135,653		—		135,653		—
Corporate securities	39,530		—		39,530		—
Municipal bonds	25,596		—		25,596		—
Servicing assets	16,108		—		—		16,108

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Assets measured for fair value on a recurring basis, which were part of the asset or liability balances that were deemed to have Level 3 fair value inputs when determining valuation, are identified in the table below by category with a summary of changes in fair value for periods indicated:

(Dollars in Thousands)	At April1, 2014		Net RealizedGains (Losses) in Net Income			UnrealizedGains in Other ComprehensiveIncome (Loss)		Net Purchases, Sales and Settlements		Transfers In or Out ofLevel 3		At June30, 2014		Net CumulativeUnrealized Loss inAccumulated OtherComprehensiveIncome (Loss)
Servicing assets	$	17,536	$	(527	)	$	—	$	1,159	$	—	$	18,168	$	—

(Dollars in Thousands)	At April1, 2013		Net RealizedGains (Losses) in Net Income			UnrealizedGains in Other ComprehensiveIncome (Loss)		Net Purchases, Sales and Settlements		Transfers In or Out ofLevel 3		At June30, 2013		Net CumulativeUnrealized Loss inAccumulated OtherComprehensiveIncome (Loss)
Servicing assets	$	10,421	$	(113	)	$	—	$	732	$	—	$	11,040	$	—

(Dollars in Thousands)	At January1, 2014		Net RealizedGains (Losses) in Net Income		UnrealizedGains in Other ComprehensiveIncome (Loss)		Net Purchases, Sales and Settlements		Transfers In or Out ofLevel 3		At June30, 2014		Net CumulativeUnrealized Loss inAccumulated OtherComprehensiveIncome (Loss)
Servicing assets	$	16,108	$	36	$	—	$	2,024	$	—	$	18,168	$	—

(Dollars in Thousands)	At January 1, 2013		Net RealizedGains (Losses) in Net Income			UnrealizedGains in Other ComprehensiveIncome (Loss)		Net Purchases, Sales and Settlements		Transfers In or Out ofLevel 3		At June30, 2013		Net CumulativeUnrealized Loss inAccumulated OtherComprehensiveIncome (Loss)
Servicing assets	$	9,610	$	(6	)	$	—	$	1,436	$	—	$	11,040	$	—

We had no transfers between Level 1, 2, or 3 during the quarters ended June 30, 2014, December 31, 2013, and June 30, 2013 or during the six months ended June 30, 2014 and June 30, 2013.

The following tables represent the aggregated balance of assets measured at fair value on a non-recurring basis at June 30, 2014 and December 31, 2013, and the total losses resulting from these fair value adjustments for the three months ended June 30, 2014 and December 31, 2013:

As of June 30, 2014

(Dollars in Thousands)	Level 1		Level 2		Level 3		Total		Net Realized Losses
Collateral Dependent Impaired Loans:
Commercial Real Estate	$	—	$	—	$	4,183	$	4,183	$	(389	)
Residential Real Estate	—		—		445		445		—
OREO:
Commercial Real Estate	—		—		6,565		6,565		(257		)
Residential Real Estate	—		—		111		111		—
Total	$	—	$	—	$	11,304	$	11,304	$	(646	)

As of December 31, 2013

(Dollars in Thousands)	Level 1		Level 2		Level 3		Total		Net Realized Losses
Collateral Dependent Impaired Loans:
Commercial Real Estate	$	—	$	—	$	9,330	$	9,330	$	(6,134	)
Residential Real Estate	—		—		649		649		(72		)
OREO:
Commercial Real Estate	—		—		4,866		4,866		(26		)
Impaired Loans Held-For-Sale :
Commercial Real Estate	—		—		800		800		(769		)
Total	$	—	$	—	$	15,645	$	15,645	$	(7,001	)

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Quantitative information about the significant unobservable inputs (level 3) used in the fair value measurement for asset and liabilities measured on a recurring and non-recurring basis at June 30, 2014 and December 31, 2013 are presented in the tables below:

As of June 30, 2014

(Dollars in Thousands)	Fair Value		Valuation Technique	Significant Unobservable Inputs	Range *
Servicing assets	$	18,168	Discounted cash flow	Discount rate	4.0% - 9.3%
				Constant prepayment rate	8.9% - 9.5%
Collateral dependent impaired loans:
Commercial Real Estate	4,183		Sales comparison approach	Adjustment for difference between comparable sales and expected sales amounts	57.9%
Residential Real Estate	445		Sales comparison approach	Adjustment for difference between comparable sales and expected sales amounts	20.0%
OREO:
Commercial Real Estate	6,565		Sales comparison approach	Adjustment for difference between comparable sales and expected sales amounts	32.15%
Residential Real Estate	111		Sales comparison approach	Adjustment for difference between comparable sales and expected sales amounts	8.7%

As of December 31, 2013

(Dollars in Thousands)	Fair Value		Valuation Technique	Significant Unobservable Inputs	Range *
Servicing assets	$	16,108	Discounted cash flow	Discount rate	4.5% - 7.8%
				Constant prepayment rate	10.1% - 10.9%
Collateral dependent impaired loans:
Commercial Real Estate	9,330		Sales Comparison Approach	Adjustment for difference between comparable sales and expected sales amounts	54.6%*
Residential Real Estate	649		Sales Comparison Approach	Adjustment for difference between comparable sales and expected sales amounts	50.1%*
OREO:
Commercial Real Estate	4,866		Sales Comparison Approach	Adjustment for difference between comparable sales and expected sales amounts	15.1%*
Impaired Loans Held-For-Sale:
Commercial Real Estate	800		Sales comparison approach	Adjustment for difference between comparable sales and expected sales amounts	63.9%*

* Represents weighted average percentage

The fair value estimates presented herein are based on pertinent information available to management at June 30, 2014 and December 31, 2013. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since that date, and therefore, current estimates of fair value may differ significantly from the amounts presented herein.

The fair value of servicing assets is measured using a discounted cash flow valuation. This method requires generating cash flow projections over multiple interest rate scenarios and discounting those cash flows at a risk adjusted rate. Increases or decreases in cash flow inputs, including changes to the discount rate and constant prepayment rate, will have a corresponding impact to the fair value of these assets.

The fair value of OREO and collateral-dependent impaired loans, including those that are held-for-sale, are based on third-party property appraisals. The majority of the appraisals utilize a single valuation approach or a combination of approaches including a market approach, where prices and other relevant information generated by market transactions involving identical or comparable properties are used to determine fair value. Appraisals may also utilize an income approach, such as the discounted cash flow method, to estimate future income, profits, or cash flows. Appraisals may include an ‘as is’ sales comparison approach and an ‘upon completion’ valuation approach.

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Adjustments are routinely made in the appraisal process by third-party appraisers to adjust for differences between the comparable sales and income data. Adjustments also result from the consideration of relevant economic and demographic factors with the potential to affect property values. Prospective values are also based on the market conditions which exist at the date of inspection combined with informed forecasts based on current trends in supply and demand for the property types under appraisal.

The table below is a summary of fair value estimates at June 30, 2014 and December 31, 2013, for financial instruments, as defined by ASC 825-10 “Financial Instruments”, including those financial instruments for which the Company did not elect fair value option.

		June 30, 2014				December 31, 2013
	Fair Value	Carrying		Estimated		Carrying		Estimated
(Dollars in Thousands)	Level	Amount		Fair Value		Amount		Fair Value
Assets:
Cash and due from banks	Level 1	$	155,799	$	155,799	$	124,064	$	124,064
Federal funds sold	Level 1	927		927		46,590		46,590
Deposits held in other financial institutions		20,509		20,509		21,019		21,019
Investment securities available-for-sale	Level 2	327,239		327,239		352,437		352,437
Investment securities held-to-maturity	Level 2	30		32		35		37
Loans receivable, net of allowance	Level 3	2,917,226		2,916,604		2,763,279		2,752,556
Loans held-for-sale	Level 2	6,207		6,741		47,557		52,169
FHLB stock	N/A	16,989		N/A		15,983		N/A
Accrued interest receivable	Level 2/3	8,032		8,032		8,350		8,350
FDIC loss-share indemnification asset	Level 3	267		267		4,856		4,856
Due from customer on acceptances	Level 1	3,090		3,090		1,517		1,517
Liabilities:
Non-interest bearing deposits	Level 1	$	945,010	$	945,010	$	832,152	$	832,152
Interest-bearing deposits	Level 2	2,011,004		1,974,449		2,039,358		1,993,563
Junior subordinated debentures	Level 2	71,665		65,818		71,550		66,186
Short-term FHLB advances	Level 1	140,000		140,000		180,000		180,000
Long-term FHLB advances	Level 2	10,260		10,168		10,325		10,238
Accrued interest payable	Level 1/2	2,349		2,349		2,418		2,418
Bank acceptances outstanding	Level 1	3,090		3,090		1,517		1,517

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Note 5.     Investment Securities

The following tables summarize the amortized cost, fair value, net unrealized gain and loss, and distribution of our investment securities for the dates indicated:

Investment Securities Portfolio

(Dollars in Thousands)

	As of June 30, 2014
	Amortized Cost		Fair Value		Gross Unrealized Losses			Gross Unrealized Gains		Net Unrealized Gains (Losses)
Held-to-Maturity:
Collateralized mortgage obligations (residential)	$	30	$	32	$	—		$	2	$	2
Total investment securities held-to-maturity	$	30	$	32	$	—		$	2	$	2
Available-for-Sale:
Securities of government sponsored enterprises	$	61,864	$	60,793	$	(1,149	)	$	78	$	(1,071	)
Mortgage backed securities (residential)	87,875		87,840		(890		)	855		(35		)
Collateralized mortgage obligations (residential)	119,243		121,052		(853		)	2,662		1,809
Corporate securities	30,076		30,874		—			798		798
Municipal securities	24,732		26,680		—			1,948		1,948
Total investment securities available-for-sale	$	323,790	$	327,239	$	(2,892	)	$	6,341	$	3,449

	As of December 31, 2013
	Amortized Cost		Fair Value		Gross Unrealized Losses			Gross Unrealized Gains		Net Unrealized Gains (Losses)
Held-to-Maturity:
Collateralized mortgage obligations (residential)	$	35	$	37	$	—		$	2	$	2
Total investment securities held-to-maturity	$	35	$	37	$	—		$	2	$	2
Available-for-Sale:
Securities of government sponsored enterprises	$	63,843	$	60,789	$	(3,054	)	$	—	$	(3,054	)
Mortgage backed securities (residential)	93,402		90,869		(3,062		)	529		(2,533		)
Collateralized mortgage obligations (residential)	135,154		135,653		(1,666		)	2,165		499
Corporate securities	38,442		39,530		—			1,088		1,088
Municipal securities	24,700		25,596		(58		)	954		896
Total investment securities available-for-sale	$	355,541	$	352,437	$	(7,840	)	$	4,736	$	(3,104	)

There were no realized gains or losses on calls or sales of securities during the second quarter of 2014. For the second quarter of 2013, there was a realized gain of $15,000 from the call of a security. Securities with a total fair value of approximately $302.3 million and $322.4 million were pledged to secure public deposits, or for other purposes required or permitted by law, at June 30, 2014 and December 31, 2013, respectively.

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The following table summarizes the maturity and repricing schedule of our investment securities at their carrying values (amortized cost for held-to maturity investment securities and fair value for available-for-sale investment securities):

Investment Maturities and Repricing Schedule (Dollars in Thousands)

At June 30, 2014

	Within One Year		After One & Within Five Years		After Five & Within Ten Years		After Ten Years		Total
Held-to-Maturity:
Collateralized mortgage obligations (residential)	$	—	$	30	$	—	$	—	$	30
Total investment securities held-to-maturity	$	—	$	30	$	—	$	—	$	30
Available-for-Sale:
Securities of government sponsored enterprises	$	1,002	$	22,939	$	36,852	$	—	$	60,793
Mortgage backed securities (residential)	6,202		1,981		1,016		78,641		87,840
Collateralized mortgage obligations (residential)	8,953		112,099		—		—		121,052
Corporate securities	23,158		7,716		—		—		30,874
Municipal securities	569		1,889		3,387		20,835		26,680
Total investment securities available-for-sale	$	39,884	$	146,624	$	41,255	$	99,476	$	327,239

The following tables summarize the gross unrealized losses and fair values of our investments, aggregated by investment category and length of time that they have been in continuous unrealized loss position at June 30, 2014 and December 31, 2013:

	As of June 30, 2014
	Less than 12 months					12 months or longer					Total
			Gross					Gross					Gross
			Unrealized					Unrealized					Unrealized
(Dollars in Thousands)	Fair Value		Losses			Fair Value		Losses			Fair Value		Losses
Available-for-Sale:
Securities of government sponsored enterprises	$	995	$	(2	)	$	36,853	$	(1,147	)	$	37,848	$	(1,149	)
Mortgage-backed securities (residential)	132		(3		)	53,875		(887		)	54,007		(890		)
Collateralized mortgage obligations (residential)	9,613		(39		)	24,856		(814		)	34,469		(853		)
Total investment securities	$	10,740	$	(44	)	$	115,584	$	(2,848	)	$	126,324	$	(2,892	)

	As of December 31, 2013
	Less than 12 months					12 months or longer					Total
			Gross					Gross					Gross
			Unrealized					Unrealized					Unrealized
(Dollars in Thousands)	Fair Value		Losses			Fair Value		Losses			Fair Value		Losses
Available-for-Sale:
Securities of government sponsored enterprises	$	60,789	$	(3,054	)	$	—	$	—		$	60,789	$	(3,054	)
Mortgage-backed securities (residential)	61,983		(2,966		)	4,340		(96		)	66,323		(3,062		)
Collateralized mortgage obligations (residential)	56,520		(1,329		)	9,095		(337		)	65,615		(1,666		)
Municipal securities	1,039		(58		)						1,039		(58		)
Total investment securities	$	180,331	$	(7,407	)	$	13,435	$	(433	)	$	193,766	$	(7,840	)

Credit related declines in the fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other-than-temporary are reflected in earnings as realized losses in the consolidated statements of operations and declines related to all other factors are reflected in other comprehensive income (loss), net of taxes. In estimating other-than-temporary impairment losses, the Company considers, among other things, (i) the length of time and the extent to which the fair value has been less than cost, (ii) the financial condition and near-term prospects of the issuer, and (iii) the Company’s intent and ability to retain the investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

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The Company performs an evaluation of the investment portfolio by assessing individual positions that have fair values that have declined below cost. In assessing whether there is other-than-temporary impairment, the Company considers:

·Whether or not all contractual cash flows due on a security will be collected; and

·Our positive intent and ability to hold the debt security until recovery in fair value or maturity

A number of factors are considered in the analysis, including but not limited to:

·Issuer’s credit rating;

·Likelihood of the issuer’s default or bankruptcy;

·Underlying collateral of the security;

·Industry in which the issuer operates;

·Nature of the investment;

·Severity and duration of the decline in fair value; and

·Analysis of the average life and effective maturity of the security.

Management determined that any individual unrealized loss as of June 30, 2014 and December 31, 2013 did not represent an other-than-temporary impairment. The unrealized losses on our government-sponsored enterprises (“GSE”) and collateralized mortgage obligations (“CMOs”) were attributable to both changes in interest rates (U.S. Treasury curve) and a repricing of risk (spreads widening against risk-fee rate) in the market. We do not own any non-agency mortgage-backed securities (“MBSs”) or CMOs. All GSE bonds, GSE CMOs, and GSE MBSs are backed by U.S. government sponsored and federal agencies and therefore rated “Aaa/AAA.”  We have no exposure to the “Subprime Market” in the form of asset backed securities (“ABSs”) and collateralized debt obligations (“CDOs”) that are below investment grade. At June 30, 2014, we have the intent and ability to hold these securities in an unrealized loss position until the market values recover or the securities mature.

Municipal bonds and corporate bonds are evaluated by reviewing the credit-worthiness of the issuer and market conditions. There were no unrealized losses on our municipal and corporate securities at June 30, 2014.

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Note 6.     Loans

The following footnote disclosure breaks out the Company’s loan portfolio in segments and classes. Segments are groupings of similar loans at a level which the Company has adopted systematic methods of documentation for determining its allowance for loan and credit losses. Classes are a disaggregation of the portfolio segments. The Company’s loan portfolio segments are:

Construction loans — The Company originates loans to finance construction projects including one to four family residences, multifamily residences, senior housing, and industrial projects. Residential construction loans are due upon the sale of the completed project and are generally collateralized by first liens on the real estate and have floating interest rates. Construction loans are considered to have higher risks than other loans due to the ultimate repayment being sensitive to interest rate changes, governmental regulation of real property, and the availability of long-term financing. Economic conditions may also impact the Company’s ability to recover its investment in construction loans. Adverse economic conditions may negatively impact the real estate market which could affect the borrowers’ ability to complete and sell the project. Additionally, the fair value of the underlying collateral may fluctuate as market conditions change. As construction loans make up only a small percentage of the total loan portfolio, these loans are not further broken down into classes.

Real estate secured loans — We offer real estate secured loans to finance the acquisition of, or to refinance the existing mortgages on commercial properties. Real estate secured loans are further broken out into classes based on the type of loans and underlying collateral. These classes include SBA loans secured by real estate, residential real estate loans, gas station loans, carwash loans, hotel/motel loans, land loans, and loans secured by other types of properties.

Our commercial real estate loans are typically collateralized by first or junior deeds of trust on specific commercial properties, and, when possible, subject to corporate or individual guarantees from financially capable parties. The properties collateralizing real estate loans are principally located in the markets where our retail branches are located. Real estate loans typically bear an interest rate that floats with our base rate, the prime rate, or another established index. However, an increasing amount of new real estate secured loan originations bear fixed rather than floating interest rates due to the current competitive market environment and trends. Commercial real estate loans typically have 7-year maturities with up to 25-year amortization of principal and interest and loan-to-value ratios of 60-70% of the appraised value or purchase price, whichever is lower at origination. We usually impose a prepayment penalty on real estate secured loans, usually a period within three to five years of the date of the loan.

Commercial and industrial loans — We offer commercial and industrial loans to various business enterprises. These loans include business lines of credit and business term loans to finance operations, to provide working capital, or for specific purposes, such as to finance the purchase of assets, equipment, or inventory. Since a borrower’s cash flow from operations is generally the primary source of repayment, our policies provide specific guidelines regarding required debt coverage and other important financial ratios.

Lines of credit are extended to businesses or individuals based on the financial strength and integrity of the borrower. These lines of credit are secured primarily by business assets such as accounts receivable or inventory, and have a maturity of one year or less. Such lines of credit bear an interest rate that floats with our base rate, the prime rate, or another established index.

Business term loans are typically made to finance the acquisition of fixed assets, refinance short-term debts, or to finance the purchase of businesses. Business term loans generally have terms from one to seven years. They may be collateralized by the assets being acquired or other available assets and bear interest rates which either floats with our base rate, prime rate, another established index, or is fixed for the term of the loan.

Commercial and industrial loans are broken down further into two different classes, SBA loans and other commercial and industrial loans.

Consumer loans — The Company provides a broad range of consumer loans to customers, including personal lines of credit, cash secured loans, and automobile loans. Repayment of these loans is dependent on the borrowers’ ability to pay and the fair value of any underlying collateral.

17

The loans in the portfolio that we acquired from Mirae Bank were covered by FDIC loss-share agreements and are referred to herein as “covered loans.” The loss-sharing agreements in regards to losses on covered loans expired on June 30, 2014. Subsequent to June 30, 2014, the FDIC will no longer share in any losses on loans acquired from Mirae Bank. The FDIC will still continue to share in loan recoveries on covered loans until June 30, 2017. The remaining FDIC loss-share indemnification balance is expected to be collected from the FDIC in the quarter ended September 30, 2014.

On October 1, 2013, the Company acquired BankAsiana and its loan portfolio at fair value and on November 20, 2013 acquired Saehan Bancorp and its loan portfolio also at fair value. The following table shows the carrying amount of loans acquired through acquisitions and legacy Wilshire loans:

	At June 30, 2014
	Loans Acquired From Former:									Legacy Wilshire
(Dollars in Thousands)	Mirae Bank*			BankAsiana			Saehan Bancorp			Loans			Total
Construction loans	$	—		$	3,755		$	—		$	40,843		$	44,598
Real estate secured loans	57,243			109,780			330,117			1,993,588			2,490,728
Commercial and industrial	3,174			28,650			27,239			377,984			437,047
Consumer loans	2			3			929			12,141			13,075
Gross Loans	60,419			142,188			358,285			2,424,556			2,985,448
Unearned Income	—			—			—			(9,346		)	(9,346		)
Total Loans	60,419			142,188			358,285			2,415,210			2,976,102
Allowance For Loan Losses	(1,558		)	(377		)	(121		)	(50,613		)	(52,669		)
Net Loans	$	58,861		$	141,811		$	358,164		$	2,364,597		$	2,923,433
Held-for-sale loans included above	$	384		$	—		$	—		$	5,823		$	6,207

	At December 31, 2013
	Loans Acquired From Former:							Legacy Wilshire
(Dollars in Thousands)	Mirae Bank*			BankAsiana		Saehan Bancorp		Loans			Total
Construction loans	$	—		$	5,030	$	—	$	35,337		$	40,367
Real estate secured loans	71,493			117,050		341,002		1,837,985			2,367,530
Commercial and industrial	6,316			39,550		36,356		367,450			449,672
Consumer loans	3			10		2,376		12,305			14,694
Gross Loans	77,812			161,640		379,734		2,253,077			2,872,263
Unearned Income	—			—		—		(7,864		)	(7,864		)
Total Loans	77,812			161,640		379,734		2,245,213			2,864,399
Allowance For Loan Losses	(3,943		)	—		—		(49,620		)	(53,563		)
Net Loans	$	73,869		$	161,640	$	379,734	$	2,195,593		$	2,810,836
Held-for-sale loans included above	$	—		$	2,052	$	—	$	45,505		$	47,557

* Loans that were covered by loss-sharing agreement with the FDIC. The loss-sharing agreement in regards to sharing of losses expired on June 30, 2014.

In accordance with ASC 310-30 (formerly AICPA Statement of Position “SOP 03-3”, Accounting for Certain Loans or Debt Securities Acquired in a Transfer), acquired loans were divided into “ASC 310-30 loans” and “Non-ASC 310-30 loans”, at the time of acquisition. ASC 310-30 loans are acquired loans that had evidence of deterioration in credit quality and it was probable, at the time of acquisition, that the Bank would be unable to collect all contractually required payments receivable. In contrast, Non-ASC 310-30 loans are all other acquired loans that do not qualify as ASC 310-30 loans. Acquired loans are categorized into four different loan segments by loan type: construction, real estate secured, commercial and industrial, and consumer.

18

The difference between contractually required payments at the time of acquisition and the cash flows expected to be collected at the time of acquisition is referred to as the non-accretable difference which is included in the carrying amount of the loans. Subsequent declines to the expected cash flows will generally result in a provision for loan losses. Subsequent increases in cash flows result in a reversal of the provision for loan losses to the extent of prior charges, or a reversal of the non-accretable difference with a positive impact to interest income. Further, any excess of cash flows expected at acquisition over the estimated fair value is referred to as the accretable yield and is recognized as interest income over the remaining life of the loan when there is a reasonable expectation about the amount and timing of such cash flows.

The following table represents the carrying balance, net of discount, of ASC 310-30 and Non-ASC 310-30 loans at June 30, 2014, December 31, 2013, and June 30, 2013. The unpaid principal balance, before discount, of ASC 310-30 loans was $12.8 million at June 30, 2014, $14.9 million at December 31, 2013, and $1.7 million at June 30, 2013.

(Dollars in Thousands)	June 30, 2014			December 31, 2013			June 30, 2013
Non-ASC 310-30 loans	$	559,021		$	616,500		$	99,235
ASC 310-30 loans	1,871			2,686			756
Total outstanding acquired loan balance	560,892			619,186			99,991
Allowance related to acquired loans	(2,056		)	(3,943		)	(4,227		)
Carrying amount, net of allowance	$	558,836		$	615,243		$	95,764

The following table represents by loan segment the current balance of ASC 310-30 loans acquired for which it was probable at the time of acquisition that all of the contractually required payments would not be collected for the periods indicated:

(Dollars in Thousands)	June 30, 2014		December 31, 2013		June 30, 2013
Breakdown of ASC 310-30 loans
Real Estate Secured	$	1,787	$	2,254	$	644
Commercial & Industrial	84		432		112
Total ASC 310-30 loans	$	1,871	$	2,686	$	756

Loans acquired in connection with the acquisitions of Mirae Bank, BankAsiana, and Saehan Bancorp were discounted based on their estimated cash flows to be received on the acquisition dates. For the three and six months ended June 30, 2014 and June 30, 2013, changes to the total discount on acquired loans is shown in the following table:

	Three Months Ended						Six Months Ended
(Dollars in Thousands)	June 30, 2014			June 30, 2013			June 30, 2014			June 30, 2013
Balance at beginning of period	$	30,865		$	3,146		$	34,201		$	3,448
Discount accretion income recognized	(2,677		)	(178		)	(5,493		)	(406		)
Disposals related to charge-offs	(306		)	(149		)	(826		)	(223		)
Balance at end of period	$	27,882		$	2,819		$	27,882		$	2,819

The following table is a breakdown of changes to the accretable portion of the discount related to acquired loans for the three and six months ended June 30, 2014 and June 30, 2013:

	Three Months Ended						Six Months Ended
(Dollars in Thousands)	June 30, 2014			June 30, 2013			June 30, 2014			June 30, 2013
Balance at beginning of period	$	28,374		$	2,973		$	31,450		$	3,275
Discount accretion income recognized	(2,619		)	(178		)	(5,410		)	(406		)
Disposals related to charge-offs	(145		)	(149		)	(430		)	(223		)
Balance at end of period	$	25,610		$	2,646		$	25,610		$	2,646

19

The table below summarizes for the periods indicated, changes to the allowance for loan losses and allowance for loan commitments arising from loans charged-off, recoveries on loans previously charged-off, provision for losses on loans and loan commitments, and certain ratios related to the allowance for loan losses:

Allowance for Losses on Loans and Loan Commitments (Dollars in Thousands)

	Three Months Ended,						Six Months Ended,
	June 30, 2014			June 30, 2013			June 30, 2014			June 30, 2013
Balances:
Allowance for loan losses:
Balances at beginning of period	$	53,464		$	58,577		$	53,563		$	63,285
Charge-offs: *
Real estate secured	782			3,668			1,454			8,073
Commercial and industrial	1,021			746			1,985			1,929
Consumer	—			—			1			1
Total charge-offs	1,803			4,414			3,440			10,003
Recoveries on loans previously charged off:
Construction	—			—			—			—
Real estate secured	586			340			1,614			555
Commercial and industrial	408			433			918			1,091
Consumer	14			1			14			9
Total recoveries	1,008			774			2,546			1,655
Net loan charge-offs	795			3,640			894			8,348
Provision for losses on loans	—			—			—			—
Balances at end of period	$	52,669		$	54,937		$	52,669		$	54,937
Allowance for loan commitments:
Balances at beginning of period	$	1,061		$	1,023		$	1,061		$	1,023
Provision for losses on loan commitments	—			—			—			—
Balance at end of period	$	1,061		$	1,023		$	1,061		$	1,023
Ratios:
Net loan charge-offs to average total loans (annualized)	0.11		%	0.67		%	0.06		%	0.78		%
Allowance for loan losses to gross loans at end of period (excluding loans held-for-sale)	1.77		%	2.62		%	1.77		%	2.62		%
Net loan charge-offs to allowance for loan losses at end of period	1.51		%	6.63		%	1.70		%	15.20		%
Net loan charge-offs to provision for loan losses and loan commitments	0.00		%	0.00		%	0.00		%	0.00		%

* Charge-off amount for the three months ended June 30, 2014 includes net charge-offs of covered loans amounting to $1.8 million which represents gross covered loan charge-offs of $1.3 million plus $530,000 in the reversal of FDIC receivable portions.

* Charge-off amount for the six months ended June 30, 2014 includes net charge-offs of covered loans amounting to $3.4 million, which represents gross covered loan charge-offs of $3.6 million less net FDIC receivable portions totaling $238,000.

20

The table below summarizes for the end of the periods indicated, the balance of our allowance for loan losses by loan type and the percentage of allowance for loan losses to gross loans receivable balance by loan segment:

Distribution and Percentage Composition of Allowance for Loan Losses

(Dollars in Thousands)

	June 30, 2014						December 31, 2013
	Reserve		Loans Receivable		(%)		Reserve		Loans Receivable		(%)
Construction	$	707	$	44,598	1.59	%	$	814	$	40,367	2.02	%
Real estate secured	38,795		2,485,875		1.56	%	41,401		2,332,121		1.78	%
Commercial and industrial	13,038		435,693		2.99	%	11,238		437,524		2.57	%
Consumer	129		13,075		0.99	%	110		14,694		0.75	%
Total Gross Loans Receivable *	$	52,669	$	2,979,241	1.77	%	$	53,563	$	2,824,706	1.90	%

* Held-for-sale loans of $6.2 million and $47.6 million at June 30, 2014 and December 31, 2013, respectively, were excluded from the total.

The following tables show the allowance for loan losses roll-forward and breakdown by loan segment for the three months ended June 30, 2014, and June 30, 2013:

	June 30, 2014
(Dollars in Thousands)	Construction			Real Estate Secured			Commercial & Industrial			Consumer			Total
Balance at beginning of quarter	$	791		$	39,164		$	13,353		$	156		$	53,464
Total charge-offs	—			(782		)	(1,021		)	—			(1,803		)
Total recoveries	—			586			408			14			1,008
(Credit) provision for losses on loans	(84		)	(173		)	298			(41		)	—
Balance at end of quarter	$	707		$	38,795		$	13,038		$	129		$	52,669

	June 30, 2013
(Dollars in Thousands)	Construction			Real Estate Secured			Commercial & Industrial			Consumer		Total
Balance at beginning of quarter	$	694		$	44,298		$	13,464		$	121	$	58,577
Total charge-offs	—			(3,668		)	(746		)	—		(4,414		)
Total recoveries	—			340			433			1		774
(Credit) provision for losses on loans	(88		)	688			(614		)	14		—
Balance at end of quarter	$	606		$	41,658		$	12,537		$	136	$	54,937

21

The following tables show the allowance for loan losses roll-forward and breakdown by loan segment for the six months ended June 30, 2014, and June 30, 2013:

	June 30, 2014
(Dollars in Thousands)	Construction			Real Estate Secured			Commercial & Industrial			Consumer			Total
Balance at beginning of period	$	814		$	41,401		$	11,238		$	110		$	53,563
Total charge-offs	—			(1,454		)	(1,985		)	(1		)	(3,440		)
Total recoveries	—			1,614			918			14			2,546
(Credit) provision for losses on loans	(107		)	(2,766		)	2,867			6			—
Balance at end of period	$	707		$	38,795		$	13,038		$	129		$	52,669

	June 30, 2013
(Dollars in Thousands)	Construction		Real Estate Secured			Commercial & Industrial			Consumer			Total
Balance at beginning of period	$	453	$	49,956		$	12,737		$	139		$	63,285
Total charge-offs	—		(8,073		)	(1,929		)	(1		)	(10,003		)
Total recoveries	—		555			1,091			9			1,655
Provision (credit) for losses on loans	153		(780		)	638			(11		)	—
Balance at end of period	$	606	$	41,658		$	12,537		$	136		$	54,937

The allowance for loan losses is comprised of general valuation allowance (“GVA”) based on quantitative and qualitative analyses and specific valuation allowances (“SVA”) for impaired loans.

A loan is impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement or if a concession was granted to the borrower current undergoing financial difficulties. At June 30, 2014, the outstanding balance of impaired loans totaled $75.0 million, of which $18.1 million had specific reserves of $9.2 million. At December 31, 2013, the outstanding balance of impaired loans totaled $72.8 million, of which $17.3 million had specific reserves of $3.8 million.

On a quarterly basis, we utilize a classification migration model combined with individual loan impairment as starting points for determining the adequacy of our allowance for losses on loans. Our loss migration analysis tracks a certain number of quarters of individual loan loss history to determine historical losses by classification category for different loan types, except for certain loans which are analyzed as homogeneous loan pools (i.e., home mortgage loans, home equity lines of credit, overdraft loans, express business loans, and automobile loans). These calculated loss factors are then applied to outstanding non-impaired loan balances. The Company also records a reserve for loan commitments based on historical loss rates and an internally defined utilization rate of exposure for unused off-balance sheet loan commitments.

To establish an adequate allowance, we must be able to recognize when loans initially become a problem. A risk grade of either pass, watch, special mention, substandard, or doubtful, is assigned to every loan in the portfolio, with the exception of homogeneous loans, or loans that are evaluated together in pools of similar loans. The following is a brief description of the loan classifications or risk grades used in our allowance calculation:

Pass Loans — Loans that are past due less than 30 days that do not exhibit signs of credit deterioration. The financial condition of the borrower is sound as well as the status of any collateral. Loans secured by cash (principal and interest) also fall within this classification.

Watch Loans — Performing loans with borrowers that have experienced adverse financial trends, higher debt/equity ratio, or weak liquidity positions, but not to the degree that the loan is considered a problem.

Special Mention — Loans that are currently protected but exhibit an increasing degree of risk based on weakening credit strength and/or repayment sources. Contingent or remedial plans to improve the Bank’s risk exposure should be documented.

22

Substandard — Loans inadequately protected by the current worth and paying capacity of the borrower or pledged collateral, if any. This grade is assigned when inherent credit weakness is apparent.

Doubtful — Loans having all the weakness inherent in a “substandard” classification but collection or liquidation is highly questionable with the possibility of loss at some future date.

The total allowance for loan losses at June 30, 2014 was $52.7 million, compared to $53.6 million at December 31, 2013. Allowance coverage of gross loans receivable (gross loans excluding loans held-for-sale) at the end of the second quarter of 2014 was 1.77%, compared to 1.90% at the end of the fourth quarter of 2013. Total GVA at June 30, 2014 totaled $43.5 million, or 82.6% of total allowance for loan losses, and SVA on impaired loans totaled $9.2 million, or 17.4% of the total allowance for loan losses. At December 31, 2013, the GVA portion of the allowance for loan losses totaled $49.8 million, or 92.9% of total allowance, while specific reserve on impaired loan totaled $3.8 million, or 7.1% of the total allowance for loan losses.

Allowance coverage ratio of construction and real estate secured loans receivable declined in the second quarter of 2014 from the fourth quarter of 2013, while commercial and industrial and consumer loan coverage ratios increased during the same period. The allowance coverage ratio for construction and real estate secured loans declined due to an increase in loan balance and a decline in allowance due to a reduction in historical loss rates. The increase in commercial and industrial loan allowance coverage ratios was largely due to one impaired loan that had an impairment of $2.2 million during the first half of 2014. Consumer loan coverage ratio increased due to an increase in historical loss rates.

The tables below represent the breakdown of the allowance for loan losses and gross loans receivable (gross loans excluding loans held-for-sale) balances at June 30, 2014 and December 31, 2013:

	June 30, 2014
(Dollars in Thousands)	Construction			Real Estate Secured			Commercial & Industrial			Consumer			Gross LoansReceivable
Impaired loans	$	—		$	65,304		$	9,691		$	4		$	74,999
Specific valuation allowance	$	—		$	3,879		$	5,288		$	4		$	9,171
Coverage ratio	0.00		%	5.94		%	54.57		%	100.00		%	12.23		%
Non-impaired loans	$	44,598		$	2,420,571		$	426,002		$	13,071		$	2,904,242
General valuation allowance	$	707		$	34,916		$	7,750		$	125		$	43,498
Coverage ratio	1.59		%	1.44		%	1.82		%	0.96		%	1.50		%
Gross loans receivable	$	44,598		$	2,485,875		$	435,693		$	13,075		$	2,979,241
Allowance for loan losses	$	707		$	38,795		$	13,038		$	129		$	52,669
Allowance coverage ratio	1.59		%	1.56		%	2.99		%	0.99		%	1.77		%

	December 31, 2013
(Dollars in Thousands)	Construction			Real Estate Secured			Commercial & Industrial			Consumer			Gross LoansReceivable
Impaired loans	$	2,471		$	63,363		$	6,980		$	—		$	72,814
Specific valuation allowance	$	—		$	1,857		$	1,958		$	—		$	3,815
Coverage ratio	0.00		%	2.93		%	28.05		%	0.00		%	5.24		%
Non-impaired loans	$	37,896		$	2,268,758		$	430,544		$	14,694		$	2,751,892
General valuation allowance	$	814		$	39,544		$	9,280		$	110		$	49,748
Coverage ratio	2.15		%	1.74		%	2.16		%	0.75		%	1.81		%
Gross loans receivable	$	40,367		$	2,332,121		$	437,524		$	14,694		$	2,824,706
Allowance for loan losses	$	814		$	41,401		$	11,238		$	110		$	53,563
Allowance coverage ratio	2.02		%	1.78		%	2.57		%	0.75		%	1.90		%

23

At June 30, 2014 and December 31, 2013, loans acquired with deteriorated credit quality (ASC 310-30 formerly SOP 03-3 loans) totaled $1.9 and $2.7 million, respectively. At June 30, 2014 loans acquired with deteriorated credit quality had an allowance of $275,000 and at December 31, 2013, there was no allowance recorded for these loans. The following is a breakdown of loan balances for loans acquired with deteriorated credit quality at June 30, 2014 and December 31, 2013:

	June 30, 2014
(Dollars in Thousands)	Construction		Real Estate Secured		Commercial & Industrial		Consumer		Total
Balance of Loans Acquired With Deteriorated Credit Quality	$	—	$	1,787	$	84	$	—	$	1,871
Total Allowance for Loans Acquired With Deteriorated Credit Quality	$	—	$	225	$	50	$	—	$	275

	December 31, 2013
(Dollars in Thousands)	Construction		Real Estate Secured		Commercial & Industrial		Consumer		Total
Balance of Loans Acquired With Deteriorated Credit Quality	$	—	$	2,254	$	432	$	—	$	2,686
Total Allowance for Loans Acquired With Deteriorated Credit Quality	$	—	$	—	$	—	$	—	$	—

Impaired loan net principal balances are broken down by those with and without specific reserves as shown in the following table for June 30, 2014 and December 31, 2013:

	For Three Months Ended
(Dollars in Thousands)	June 30, 2014			December 31, 2013
With Specific Reserves
Without Charge-Offs	$	15,616		$	17,265
With Charge-Offs	2,449			8
Without Specific Reserves
Without Charge-Off	41,992			36,781
With Charge-Offs	14,942			18,760
Total Impaired Loans*	74,999			72,814
Allowance on Impaired Loans	(9,171		)	(3,815		)
Impaired Loans Net of Allowance	$	65,828		$	68,999

* Balances net of SBA guaranteed portions and discount on acquired loans totaled $71.9 million and $65.9 million at June 30, 2014 and December 31, 2013, respectively.

24

Net principal balance and average quarterly balances for impaired loans with specific reserves, and those without specific reserves, at June 30, 2014 and December 31, 2013 are presented in the following tables by loan class:

	June 30, 2014								June 30, 2013
					3 Months		6 Months						3 Months		6 Months
					Ended		Ended						Ended		Ended
			Related		Average		Average				Related		Average		Average
(Dollars In Thousands)	Balance		Allowance		Balance		Balance		Balance		Allowance		Balance		Balance
With Specific Reserves:
Construction	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Real Estate Secured:
Residential Real Estate	451		6		475		475		484		168		486		487
SBA Real Estate	1,557		500		1,666		1,691		3,475		269		1,681		1,760
Gas Station	243		7		245		247		2,099		354		2,502		2,502
Carwash	—		—		—		—		—		—		—		—
Hotel/Motel	—		—		—		—		1,250		385		1,461		1,461
Land	—		—		—		—		600		257		612		619
Other	9,950		3,366		10,060		10,075		2,656		758		2,792		2,797
Commercial & Industrial:
SBA Commercial	992		840		1,107		1,171		1,054		777		1,207		1,277
Commercial	4,868		4,448		5,117		5,284		5,767		2,829		6,291		6,387
Consumer	4		4		5		7		—		—		—		—
Total With Related Allowance	18,065		9,171		18,675		18,950		17,385		5,797		17,032		17,290
Without Specific Reserves:
Construction	—		—		—		—		6,388		—		6,388		6,388
Real Estate Secured:											��
Residential Real Estate	805		—		888		930		1,441		—		1,805		1,805
SBA Real Estate	6,171		—		7,843		7,984		9,447		—		4,259		4,559
Gas Station	6,383		—		6,868		6,885		3,527		—		5,945		5,956
Carwash	4,990		—		5,117		5,127		3,055		—		3,698		3,704
Hotel/Motel	5,004		—		4,890		5,112		3,410		—		5,550		5,561
Land	262		—		263		264		1,119		—		1,121		1,122
Other	29,488		—		30,938		31,260		16,484		—		19,484		19,002
Commercial & Industrial:
SBA Commercial	438		—		505		598		162		—		58		59
Commercial	3,393		—		3,490		3,648		624		—		630		654
Consumer	—		—		—		—		—		—		—		—
Total Without Related Allowance	56,934		—		60,802		61,808		45,657		—		48,938		48,810
Total Impaired Loans	$	74,999	$	9,171	$	79,477	$	80,758	$	63,042	$	5,797	$	65,970	66,100

Income recognized from payments received for impaired loans is recorded on a cash basis and not accrued. The cash basis income recognized from impaired loans for the quarters ended June 30, 2014, December 31, 2013, and June 30, 2013 totaled $623,000, $411,000, and $451,000, respectively. For the six months ended June 30, 2014 and June 30, 2013, the total cash basis income recognized from impaired loans was $1.1 million and $784,000, respectively.

25

Delinquent loans, including non-accrual loans 30 days or more past due, at June 30, 2014 and December 31, 2013 are presented in the following table by loan class:

	June 30, 2014								December 31, 2013
(Dollars In Thousands) (Balances are net of SBA guaranteed portions)	30-59 DaysPast Due		60-89 DaysPast Due		90 Daysor MorePast Due		TotalPast Due*		30-59 DaysPast Due		60-89 DaysPast Due		90 Daysor MorePast Due		TotalPast Due*
Legacy Wilshire:
Construction	$	—	$	—	$	—	$	—	$	—	$	—	$	2,471	$	2,471
Real Estate Secured:
Residential Real Estate	133		231		628		992		—		179		617		796
SBA Real Estate	416		622		233		1,271		394		437		597		1,428
Gas Station	—		—		—		—		176		—		849		1,025
Carwash	—		—		770		770		—		—		769		769
Hotel/Motel	1,038		1,658		1,262		3,958		—		810		1,962		2,772
Other	402		959		12,619		13,980		945		4,221		9,536		14,702
Commercial & Industrial:
SBA Commercial	73		62		184		319		458		16		—		474
Commercial	1,572		265		230		2,067		41		—		39		80
Consumer	—		—		—		—		—		41		—		41
Total Legacy Loans	3,634		3,797		15,926		23,357		2,014		5,704		16,840		24,558
Acquired Loans:
Construction	—		—		—		—		—		—		—		—
Real Estate Secured:
Residential Real Estate	—		—		—		—		147		—		—		147
SBA Real Estate	260		591		271		1,122		225		—		528		753
Gas Station	—		—		716		716		—		—		—		—
Carwash	—		—		—		—		—		—		168		168
Hotel/Motel	—		—		—		—		—		—		—		—
Other	1,410		874		2,364		4,648		1,656		388		853		2,897
Commercial & Industrial:
SBA Commercial	108		—		—		108		287		267		17		571
Commercial	406		179		1,103		1,688		344		143		178		665
Consumer	—		—		—		—		10		—		—		10
Total Acquired Loans	2,184		1,644		4,454		8,282		2,669		798		1,744		5,211
Total Delinquencies	$	5,818	$	5,441	$	20,380	$	31,639	$	4,683	$	6,502	$	18,584	$	29,769
Non-Accrual and 30 Days or More Past Due:
Legacy Loans	$	626	$	818	$	15,924	$	17,368	$	615	$	3,572	$	16,841	$	21,028
Acquired Loans	636		1,633		4,454		6,723		1,222		403		1,576		3,201
Non-Accrual Loans Listed Above	$	1,262	$	2,451	$	20,378	$	24,091	$	1,837	$	3,975	$	18,417	$	24,229

*Total past due balances are net of SBA guaranteed portions totaling $9.4 million and $12.6 million at June 30, 2014 and December 31, 2013, respectively.

26

Non-performing loans consisting of non-accrual loans and loans past due 90 days or more and still accruing at June 30, 2014 and December 31, 2013 are presented in the following table by loan class:

	June 30, 2014						December 31, 2013
			90 Days		Total				90 Days		Total
	Total		or More		Non-		Total		or More		Non-
(Dollars In Thousands)	Non-Accrual		Past Due and		Performing		Non-Accrual		Past Due and		Performing
(Balances are net of SBA guaranteed portions)	Loans		Still Accruing		Loans*		Loans		Still Accruing		Loans*
Legacy Wilshire:
Construction	$	—	$	—	$	—	$	2,471	$	—	$	2,471
Real Estate Secured:
Residential Real Estate	1,202		—		1,202		1,050		—		1,050
SBA Real Estate	964		—		964		958		—		958
Gas Station	139		—		139		1,026		—		1,026
Carwash	770		—		770		770		—		770
Hotel/Motel	1,410		—		1,410		2,117		—		2,117
Land	—		—		—		—		—		—
Other	18,885		—		18,885		19,518		—		19,518
Commercial & Industrial:
SBA Commercial	340		—		340		137		—		137
Other Commercial	4,958		—		4,958		580		—		580
Consumer	—		—		—		—		—		—
Total Legacy Loans	28,668		—		28,668		28,627		—		28,627
Acquired Loans:
Construction	—		—		—		—		—		—
Real Estate Secured:
Residential Real Estate	134		—		134		215		—		215
SBA Real Estate	1,408		—		1,408		811		—		811
Gas Station	2,941		—		2,941		2,264		—		2,264
Carwash	—		—		—		—		168		168
Hotel/Motel	741		—		741		760		—		760
Land	—		—		—		—		—		—
Other	6,991		—		6,991		3,912		—		3,912
Commercial & Industrial:
SBA Commercial	30		—		30		69		—		69
Other Commercial	1,441		—		1,441		410		—		410
Consumer	4		—		4		—		—		—
Total Acquired Loans	13,690		—		13,690		8,441		168		8,609
Total	$	42,358	$	—	$	42,358	$	37,068	$	168	$	37,236

*      Balances are net of SBA guaranteed portions totaling $9.1 million and $12.4 million at June 30, 2014 and December 31, 2013, respectively.

No interest income related to non-accrual loans was included in interest income for the three and six months ended June 30, 2014 and June 30, 2013. Additional income of approximately $264,000 and $683,000 would have been recorded during the three months and six months ended June 30, 2014, respectively, had these loans been paid in accordance with their original terms throughout the period indicated. Additional income of approximately $254,000 and $453,000 would have been recorded during the three months and six months ended June 30, 2013, respectively, had these loans been paid in accordance with their original terms throughout the period indicated.

27

Loans classified as special mention, substandard, and doubtful at June 30, 2014 and December 31, 2013 are presented in the following table by classes of loans:

	June 30, 2014								December 31, 2013
(Dollars In Thousands) (Balances are net of SBA guaranteed portions)	Special Mention		Sub-standard		Doubtful		Total*		Special Mention		Sub-standard		Doubtful		Total*
Legacy Loans:
Construction	$	—	$	—	$	—	$	—	$	—	$	2,471	$	—	$	2,471
Real Estate Secured:
Residential Real Estate	—		2,633		603		3,236		—		2,342		166		2,508
SBA Real Estate	2,694		5,083		217		7,994		4,314		5,100		510		9,924
Gas Station	1,142		5,992		—		7,134		1,158		6,115		849		8,122
Carwash	813		10,305		769		11,887		—		10,437		770		11,207
Hotel/Motel	794		3,649		1,410		5,853		2,508		4,571		155		7,234
Land	262		—		—		262		266		662		—		928
Other	17,613		34,139		13,449		65,201		33,886		53,089		4,179		91,154
Commercial & Industrial:
SBA Commercial	1,335		1,744		—		3,079		1,364		1,774		—		3,138
Other Commercial	23,590		9,290		—		32,880		16,128		19,349		39		35,516
Consumer	—		2		—		2		—		2		—		2
Total Legacy Loans	48,243		72,837		16,448		137,528		59,624		105,912		6,668		172,204
Acquired Loans:
Construction	—		—		—		—		—		—		—		—
Real Estate Secured:
Residential Real Estate	—		134		—		134		—		1,228		—		1,228
SBA Real Estate	2,767		4,490		206		7,463		3,587		2,894		274		6,755
Gas Station	2,405		3,994		—		6,399		2,434		3,867		—		6,301
Carwash	11,672		1,421		—		13,093		12,256		1,435		—		13,691
Hotel/Motel	1,673		7,150		741		9,564		2,432		7,443		760		10,635
Land	—		—		—		—		—		—		—		—
Other	18,906		13,052		645		32,603		15,912		12,968		297		29,177
Commercial & Industrial:
SBA Commercial	1,050		828		—		1,878		950		1,609		16		2,575
Other Commercial	1,528		6,552		—		8,080		3,448		12,123		—		15,571
Consumer	138		4		—		142		155		—		—		155
Total Acquired Loans	40,139		37,625		1,592		79,356		41,174		43,567		1,347		86,088
Total Loans	$	88,382	$	110,462	$	18,040	$	216,884	$	100,798	$	149,479	$	8,015	$	258,292

*      Balances are net of SBA guaranteed portions totaling $11.1 million and $16.4 million at June 30, 2014 and December 31, 2013, respectively.

28

A loan restructuring constitutes a troubled debt restructuring (“TDR”) if the Company, for economic or legal reasons related to the borrower’s financial difficulties, grants a concession to the borrower that it would not otherwise consider. Restructured loans typically present an elevated level of credit risk as the borrowers are not able to perform according to the original contractual terms of the loan. Loans that are reported as TDRs are accounted for in accordance with ASC 310-10-35 and are considered impaired and measured for specific impairment.

Loans that are considered TDRs are classified as performing, unless they are on non-accrual status or greater than 90 days delinquent as of the end of the most recent quarter. All TDR loans are considered impaired by the Company regardless of whether it is performing or non-performing. At June 30, 2014, the balance of non-accrual TDR loans totaled $10.2 million, and TDR loans performing in accordance with their modified terms totaled $28.7 million. At December 31, 2013, the balance of non-accrual TDR loans totaled $8.2 million, and TDR loans performing in accordance with their modified terms totaled $28.0 million. New TDR loans did not have a material impact on the Company’s allowance for loan losses for the three and six months ended June 30, 2014 or December 31, 2013.

The following tables present the total balance of TDR loans by loan type and types of concessions made at June 30, 2014 and December 31, 2013:

	June 30, 2014
(Dollars In Thousands, Net of SBA Guarantee)	Balance		Term/Maturity		Interest Rate		Total*
Real Estate Secured	$	14,520	$	8,939	$	9,890	$	33,349
Commercial & Industrial	1,778		1,563		2,201		5,542
Total TDR Loans	$	16,298	$	10,502	$	12,091	$	38,891

	December 31, 2013
(Dollars In Thousands, Net of SBA Guarantee)	Balance		Term/Maturity		Interest Rate		Total*
Real Estate Secured	$	15,640	$	8,708	$	5,660	$	30,008
Commercial & Industrial	2,212		1,645		2,355		6,212
Total TDR Loans	$	17,852	$	10,353	$	8,015	$	36,220

* SBA guaranteed portions totaled $829,000 and $2.8 million at June 30, 2014 and December 31, 2013, respectively.

The following table represents the roll-forward of TDR loans with addition and reductions for the quarters ended June 30, 2014, December 31, 2013, and June 30, 2013:

(Dollars in Thousands, Net of SBA Guarantee)	June 30, 2014			December 31, 2013			June 30, 2013
Balance at Beginning of Period	$	40,128		$	29,472		$	30,867
New TDR Loans Added	836			8,212			2,434
TDR Loans Paid Off	(1,550		)	(463		)	(1,864		)
Reductions Due to Charge-Offs	(65		)	(412		)	(164		)
Other Changes (Payments, Amortization, and Other)	(458		)	(589		)	(872		)
Balance at End of Period	$	38,891		$	36,220		$	30,401

The following table represents the roll-forward of TDR loans with addition and reductions for the six months ended June 30, 2014 and June 30, 2013:

(Dollars in Thousands, Net of SBA Guarantee)	June 30, 2014			June 30, 2013
Balance at Beginning of Period	$	36,220		$	35,733
New TDR Loans Added	5,810			3,151
TDR Loans Paid Off	(1,550		)	(3,880		)
Reductions Due to Charge-Offs	(503		)	(3,366		)
Other Changes (Payments, Amortization, and Other)	(1,086		)	(1,237		)
Balance at End of Period	$	38,891		$	30,401

29

The following tables summarize the pre-modification and post-modification balances and types of concessions provided for new TDR loans for the quarters ended June 30, 2014, December 31, 2013, and June 30, 2013:

	June 30, 2014
(Dollars in Thousands, Net of SBA Guarantee)	Principal		Term/Maturity		Interest Rate		Total
Pre-Modification Balance:
Real Estate Secured	$	—	$	467	$	—	$	467
Commercial & Industrial	350		24		—		374
Total TDR Loans	$	350	$	491	$	—	$	841
Post-Modification Balance:
Real Estate Secured	$	—	$	463	$	—	$	463
Commercial & Industrial	349		24		—		373
Total TDR Loans	$	349	$	487	$	—	$	836
Number of Loans:
Real Estate Secured	—		2		—		2
Commercial & Industrial	7		1		—		8
Total TDR Loans	7		3		—		10

	December 31, 2013
(Dollars in Thousands, Net of SBA Guarantee)	Principal		Term/Maturity		Interest Rate		Total
Pre-Modification Balance:
Real Estate Secured	$	9,090	$	691	$	—	$	9,781
Commercial & Industrial	184		615		—		799
Total TDR Loans	$	9,274	$	1,306	$	—	$	10,580
Post-Modification Balance:
Real Estate Secured	$	6,868	$	680	$	—	$	7,548
Commercial & Industrial	157		507		—		664
Total TDR Loans	$	7,025	$	1,187	$	—	$	8,212
Number of Loans:
Real Estate Secured	13		1		—		14
Commercial & Industrial	3		2		—		5
Total TDR Loans	16		3		—		19

	June 30, 2013
(Dollars in Thousands, Net of SBA Guarantee)	Principal		Term/Maturity		Interest Rate		Total
Pre-Modification Balance:
Real Estate Secured	$	—	$	2,406	$	—	$	2,406
Commercial & Industrial	—		60		—		60
Total TDR Loans	$	—	$	2,466	$	—	$	2,466
Post-Modification Balance:	��
Real Estate Secured	$	—	$	2,378	$	—	$	2,378
Commercial & Industrial	—		56		—		56
Total TDR Loans	$	—	$	2,434	$	—	$	2,434
Number of Loans:
Real Estate Secured	—		6		—		6
Commercial & Industrial	—		2		—		2
Total TDR Loans	—		8		—		8

30

The following tables summarize the pre-modification and post-modification balances, and types of concessions provided for new TDR loans during the six months ended June 30, 2014, and June 30, 2013:

	June 30, 2014
(Dollars in Thousands, Net of SBA Guarantee)	Principal		Term/Maturity		Interest Rate		Total
Pre-Modification Balance:
Real Estate Secured	$	—	$	1,003	$	4,335	$	5,338
Commercial & Industrial	391		129		—		520
Total TDR Loans	$	391	$	1,132	$	4,335	$	5,858
Post-Modification Balance:
Real Estate Secured	$	—	$	977	$	4,323	$	5,300
Commercial & Industrial	391		119		—		510
Total TDR Loans	$	391	$	1,096	$	4,323	$	5,810
Number of Loans:
Real Estate Secured	—		4		1		5
Commercial & Industrial	10		4		—		14
Total TDR Loans	10		8		1		19

	June 30, 2013
(Dollars in Thousands, Net of SBA Guarantee)	Principal		Term/Maturity		Interest Rate		Total
Pre-Modification Balance:
Real Estate Secured	$	267	$	2,760	$	—	$	3,027
Commercial & Industrial	28		160		—		188
Total TDR Loans	$	295	$	2,920	$	—	$	3,215
Post-Modification Balance:
Real Estate Secured	$	265	$	2,730	$	—	$	2,995
Commercial & Industrial	—		156		—		156
Total TDR Loans	$	265	$	2,886	$	—	$	3,151
Number of Loans:
Real Estate Secured	1		7		—		8
Commercial & Industrial	2		4		—		6
Total TDR Loans	3		11		—		14

At June 30, 2014, December 31, 2013, and June 30, 2013, all TDR loans were modified with principal or payment, term or maturity, or interest rate concessions. Principal concessions usually consist of loans restructured to reduce the monthly payment through a reduction in principal, interest, or a combination of principal and interest payments for a certain period of time. Most of these types of concessions are usually interest only payments for three to six months. Term or maturity concessions are loans that are restructured to extend the maturity date beyond the original contractual term of loan. Interest rate concessions consist of TDR loans that are restructured with a lower interest rate than the original contractual rate and the reduced rate is lower than the current market interest rate for loans with similar risk characteristics.

The following tables summarize TDR loans that were modified during the twelve months ended June 30, 2014, December 31, 2013, and June 30, 2013 that had payment defaults during period indicated. We consider a TDR loan to be in payment default if the loan has been transferred to non-accrual status. This usually means the loan is past due 90 days or more, but in certain cases a loan that is less than 90 days past due can be deemed a non-accrual loan, if there exists evidence that the borrower will not be able to fulfill a portion or all of the obligated contractual payments. Defaulted TDR loans did not have material impact to the allowance for loan losses for the three months ended June 30, 2014, December 31, 2013, and June 30, 2013.

31

	TDRs With Payment Defaults During theThree Months Ended June 30, 2014
(Dollars in Thousands, Net of SBA Guarantee)	Principal		Term/Maturity		Interest Rate		Total
Pre-Modification Balance:
Real Estate Secured	$	—	$	520	$	—	$	520
Commercial & Industrial	—		—		—		—
Total TDRs Defaulted	$	—	$	520	$	—	$	520
Post-Modification Balance:
Real Estate Secured	$	—	$	498	$	—	$	498
Commercial & Industrial	—		—		—		—
Total TDRs Defaulted	$	—	$	498	$	—	$	498
Number of Loans:
Real Estate Secured	—		1		—		1
Commercial & Industrial	—		—		—		—
Total TDRs Defaulted Loans	—		1		—		1

	TDRs With Payment Defaults During theThree Months Ended December 31, 2013
(Dollars in Thousands, Net of SBA Guarantee)	Principal		Term/Maturity		Interest Rate		Total
Pre-Modification Balance:
Real Estate Secured	$	427	$	374	$	—	$	801
Commercial & Industrial	77		—		—		77
Total TDRs Defaulted	$	504	$	374	$	—	$	878
Post-Modification Balance:
Real Estate Secured	$	241	$	334	$	—	$	575
Commercial & Industrial	55		—		—		55
Total TDRs Defaulted	$	296	$	334	$	—	$	630
Number of Loans:
Real Estate Secured	1		1		—		2
Commercial & Industrial	1		—		—		1
Total TDRs Defaulted	2		1		—		3

	TDRs With Payment Defaults During theThree Months Ended June 30, 2013
(Dollars in Thousands, Net of SBA Guarantee)	Principal		Term/Maturity		Interest Rate		Total
Pre-Modification Balance:
Real Estate Secured	$	—	$	1,455	$	—	$	1,455
Commercial & Industrial	92		160		—		252
Total TDRs Defaulted	$	92	$	1,615	$	—	$	1,707
Post-Modification Balance:
Real Estate Secured	$	—	$	1,411	$	—	$	1,411
Commercial & Industrial	85		139		—		224
Total TDRs Defaulted	$	85	$	1,550	$	—	$	1,635
Number of Loans:
Real Estate Secured	—		3		—		3
Commercial & Industrial	1		3		—		4
Total TDRs Defaulted	1		6		—		7

32

The following tables summarize TDR loans that were modified during the past 12 months that had a payment default during the six months ended June 30, 2014 and June 30, 2013 by type of concessions made:

	TDRs With Payment Defaults During theSix Months Ended June 30, 2014
(Dollars in Thousands, Net of SBA Guarantee)	Principal		Term/Maturity		Interest Rate		Total
Pre-Modification Balance:
Real Estate Secured	$	417	$	520	$	—	$	937
Commercial & Industrial	3		—		—		3
Total TDRs Defaulted	$	420	$	520	$	—	$	940
Post-Modification Balance:
Real Estate Secured	$	384	$	498	$	—	$	882
Commercial & Industrial	—		—		—		—
Total TDRs Defaulted	$	384	$	498	$	—	$	882
Number of Loans:
Real Estate Secured	1		1		—		2
Commercial & Industrial	1		—		—		1
Total TDRs Defaulted	2		1		—		3

	TDRs With Payment Defaults During theSix Months Ended June 30, 2013
(Dollars in Thousands, Net of SBA Guarantee)	Principal		Term/Maturity		Interest Rate		Total
Pre-Modification Balance:
Real Estate Secured	$	—	$	1,455	$	—	$	1,455
Commercial & Industrial	92		160		—		252
Total TDRs Defaulted	$	92	$	1,615	$	—	$	1,707
Post-Modification Balance:
Real Estate Secured	$	—	$	1,411	$	—	$	1,411
Commercial & Industrial	85		139		—		224
Total TDRs Defaulted	$	85	$	1,550	$	—	$	1,635
Number of Loans:
Real Estate Secured	—		3		—		3
Commercial & Industrial	1		3		—		4
Total TDRs Defaulted	1		6		—		7

33

Note 7.     Shareholders’ Equity

Earnings Per Common Share

Basic earnings per common share (“EPS”) excludes dilution, and is calculated by dividing net income by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock, or resulted in the issuance of common stock that would then share in the earnings of the Company. The following table provides the basic and diluted EPS computations for the periods indicated below:

	For the Three Months Ended June 30,				For the Six Months Ended June 30
(Dollars in Thousands, Except per Share Data)	2014		2013		2014		2013
Numerator:
Net income	$	14,664	$	11,539	$	27,777	$	23,128
Denominator for basic earnings per share:
Weighted-average shares	78,267,128		70,944,626		78,191,872		71,119,180
Effect of dilutive securities:
Stock option dilution	346,340		157,161		363,075		143,044
Denominator for diluted earnings per share:
Adjusted weighted-average shares and assumed conversions	78,613,468		71,101,787		78,554,947		71,262,224
Basic earnings per common share	$	0.19	$	0.16	$	0.36	$	0.33
Diluted earnings per common share	$	0.19	$	0.16	$	0.35	$	0.32

For the three months and six months ended June 30, 2014, stock option awards totaling 276,075 were excluded from the dilutive earnings per common share calculation because the shares were deemed to be anti-dilutive. Stock option awards of 159,000 and 720,000 were excluded from the dilutive earnings per common share calculation for the three and six months ended June 30, 2013, respectively, because the shares were deemed to be anti-dilutive.

In March 2013, the Board of Directors of Wilshire Bancorp authorized the repurchase of up to 5% of the Company’s outstanding shares of common stock. During the term of the program, 651,412 shares of common stock were repurchased for a total price of $4.3 million. The program expired on March 28, 2014.

During the first quarter of 2014, the Company’s Board of Directors approved equity awards to certain employees in the form of stock options and restricted stock. A total of 42,200 stock options were granted on March 31, 2014 with an exercise price of $11.10 per share. The vesting period for the stock option awards began on the grant date, at which time 25% was immediately vested and the remainder will be vested in 25% annual increments over a period of three years. A total of 71,950 shares of restricted stock were also granted on March 31, 2014. The vesting period for the restricted stock grants began on the grant date, at which time 25% was immediately vested and the remainder will be vested in 25% annual increments over a period of three years.

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Note 8.   FHLB Advances and Junior Subordinated Debentures

The Company maintains a line of credit with the FHLB of San Francisco for use as a secondary source of funds. At June 30, 2014, the Company had approved financing with the San Francisco FHLB for maximum advances of up to 30% of total assets based on qualifying collateral. The Company’s borrowing capacity with the FHLB of San Francisco totaled $906.9 million at June 30, 2014, with $140.0 million in borrowings outstanding and a remaining borrowing capacity of $766.9 million. The Company also had $10.0 million in fixed rate term advances at June 30, 2014 from the FHLB of New York which was acquired through the acquisition of BankAsiana on October 1, 2013. The fair value of the acquired borrowings totaled $10.3 million at June 30, 2014. We had no further borrowing capacities at the FHLB of New York as of June 30, 2014.

The following table shows the Company’s outstanding advances from FHLB:

June 30, 2014
Issue Date	Balance		Rate		Maturity Date
October 25, 2013	$	40,000	0.11	%	Daily Advance (Open Maturity)
December 26, 2012	100,000		0.11	%	Daily Advance (Open Maturity)
May 20, 2011*	3,000		2.35	%	May 20, 2016
June 1, 2011*	1,000		2.16	%	June 1, 2016
June 8, 2011*	1,000		2.12	%	June 8, 2016
July 25, 2011*	5,000		2.10	%	July 25, 2016
Total Advances	$	150,000	0.18	%

*Advances acquired through the acquisition of BankAsiana had fair value of $10.3 million at June 30, 2014.

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

	For the Three Months Ended
(Dollars in Thousands)	June 30, 2014			December 31, 2013
Balance at quarter end	$	150,260		$	190,325
Average balance during the quarter	150,280			184,259
Maximum amount outstanding at any month-end	150,281			210,336
Average interest rate during the quarter	0.18		%	0.14		%
Weighted average interest rate at quarter-end	0.30		%	0.25		%

Total junior subordinated debentures at June 30, 2014 totaled $71.7 million compared to $71.6 at December 31, 2013. Wilshire Bancorp, as a wholly-owned subsidiary of the Bank in 2003 and as the parent company of the Bank in 2005 and 2007, issued an aggregate of $77.3 million in junior subordinated debentures as part of the issuance of $75.0 million in trust preferred securities by statutory trusts wholly-owned by Wilshire Bancorp. The purpose of these transactions was to raise additional capital.

On November 20, 2013, the Company acquired Saehan Bancorp. Saehan Bancorp had previously formed Saehan Capital Trust I, and issued junior subordinated debentures related to the trust totaling $20.6 million in March 2007. This debenture was acquired by Wilshire at a fair value of $9.7 million, or a discount of $10.9 million.

These junior subordinated debentures are senior in liquidation rights to the Company’s outstanding shares of common stock.

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The following table summarizes the Company’s outstanding junior subordinated debentures at June 30, 2014:

	June 30, 2014
(Dollars in Thousands)	Issued Date	Amount of Debenture Issued		InterestRate	CurrentRate		Callable Date	MaturityDate
Wilshire Statutory Trust II	03/17/2005	$	20,619	3 Month LIBOR + 1.79%	2.036	%	09/17/2014(1)	03/17/2035
Wilshire Statutory Trust III	09/15/2005	15,464		3 Month LIBOR + 1.40%	1.646	%	09/15/2014(2)	09/15/2035
Wilshire Statutory Trust IV	07/10/2007	25,774		3 Month LIBOR + 1.38%	1.626	%	09/15/2014(3)	09/15/2037
Saehan Capital Trust I	03/30/2007	9,808		3 Month LIBOR + 1.62%	1.866	%	09/30/2014(4)	03/30/2037
		$	71,665

(1) The Company has the right to redeem the $20.6 million debentures, in whole or in part, on any March 17, June 17, September 17, or December 17. The next callable date as of this report is September 17, 2014.

(2) The Company has the right to redeem the $15.5 million debentures, in whole or in part, on any March 15, June 15, September 15, or December 15. The next callable date as of this report is September 15, 2014.

(3) The Company has the right to redeem the $25.8 million debentures, in whole or in part, on any March 15, June 15, September 15, or December 15. The next callable date as of this report is September 15, 2014.

(4) The Company has the right to redeem the $20.6 million debentures, in whole or in part, on any March 30, June 30, September 30, or December 30. The next callable date as of this report is September 30, 2014.

Note 9.     Change in Accumulated Other Comprehensive Income

Accumulated other comprehensive income includes unrealized gain and losses on available-for-sale investments, unrealized gains and losses on interest only strips, and unrecognized prior service costs on bank owned life insurance (“BOLI”). Changes to other accumulated other comprehensive income are presented net of tax effect as a component of equity. Reclassifications out of accumulated other comprehensive income are recorded on the statement of operations either as a gain or loss. The reclassifications for available-for-sale securities are included in the “Consolidated Statement of Operations” as gain on sale or call of securities.

Changes to accumulated other comprehensive income by components are shown in the following tables for the periods indicated:

	For The Three Months Ended June 30, 2014
(Dollars in Thousands)	Unrealized Gain on AFS Securities			Unrealized Gain on Interest Only Strips			BOLI Unrecognized Prior Service Costs			Total
Balance at beginning of period	$	2,003		$	319		$	(532	)	$	1,790
Other comprehensive income before reclassification	3,431			12			12			3,455
Reclassifications from other comprehensive income	—			—			—			—
Tax effect of current period changes	(1,395		)	(5		)	—			(1,400		)
Current period changes net of taxes	2,036			7			12			2,055
Balance at end of period	$	4,039		$	326		$	(520	)	$	3,845

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	For The Three Months Ended June 30, 2013
(Dollars in Thousands)	Unrealized Gain and Loss on AFS Securities			Unrealized Gain on Interest Only Strips			BOLI Unrecognized Prior Service Costs			Total
Balance at beginning of period	$	6,546		$	332		$	(485	)	$	6,393
Other comprehensive (loss) income before reclassification	(6,587		)	9			10			(6,568		)
Reclassifications from other comprehensive (loss) income	(15		)	—			—			(15		)
Tax effect of current period changes	2,773			(4		)	—			2,769
Current period changes net of taxes	(3,829		)	5			10			(3,814		)
Balance at end of period	$	2,717		$	337		$	(475	)	$	2,579

	For The Six Months Ended June 30, 2014
(Dollars in Thousands)	Unrealized Gain on AFS Securities			Unrealized Gain and Loss on Interest Only Strip			BOLI Unrecognized Prior Service Costs			Total
Balance at beginning of period	$	192		$	330		$	(545	)	$	(23	)
Other comprehensive income before reclassification	6,553			(7		)	25			6,571
Reclassifications from other comprehensive income	—			—			—			—
Tax effect of current period changes	(2,706		)	3			—			(2,703		)
Current period changes net of taxes	3,847			(4		)	25			3,868
Balance at end of period	$	4,039		$	326		$	(520	)	$	3,845

	For The Six Months Ended June 30, 2013
(Dollars in Thousands)	Unrealized Gain and Loss on AFS Securities			Unrealized Gain on Interest Only Strip			BOLI Unrecognized Prior Service Costs			Total
Balance at beginning of period	$	6,842		$	320		$	(351	)	$	6,811
Other comprehensive (loss) income before reclassification	(7,100		)	30			(124		)	(7,194		)
Reclassifications from other comprehensive income (loss)	(15		)	—			—			(15		)
Tax effect of current period changes	2,990			(13		)	—			2,977
Current period changes net of taxes	(4,125		)	17			(124		)	(4,232		)
Balance at end of period	$	2,717		$	337		$	(475	)	$	2,579

For the three and six months ended June 30, 2014, there were no reclassifications out of accumulated other comprehensive income. For the three and six months ended June 30, 2013, there was one $15,000 reclassification out of comprehensive income as a realized gain from the contractual call of an available-for-sale investment security.

Note 10. Business Segment Reporting

With the recent acquisitions and integrations of BankAsiana and Saehan Bancorp, the Company has reassessed its classification of its segment reporting units under ASC 280 “Segment Reporting” to better reflect how the Company is now managed and how information is internally reviewed. Based on this internal evaluation the Company determined that the previously reported three business segments of “Banking Operation”, “Small Business Administration Lending Services”, and “Trade Finance Services” are no longer applicable. The Company is now managed as a single unit. The financial performance of the Company is reviewed by the chief operating decision maker on an aggregate basis and financial and strategic decisions are also made based on the Company as a whole. We now consider “Banking Operations” to be our single combined operating segment which raises funds from deposits and borrowings for loans and investments, and provides lending products, including construction, real estate, commercial, and consumer loans to its customers.

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Note 11. Commitments and Contingencies

We are a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of our customers. These financial instruments include commitments to extend credit, standby letters of credit, commercial letters of credit, commitments to fund investments in affordable housing partnerships, and operating lease commitments. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated statements of financial condition. Our exposure to credit loss in the event of nonperformance on commitments to extend credit and standby letters of credit is represented by the contractual notional amount of those instruments. We use the same credit policies in making commitments and conditional obligations as we do for extending loan facilities to customers. We evaluate each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary upon extension of credit, is based on our credit evaluation of the counterparty. The types of collateral that we may hold can vary and may include accounts receivable, inventory, property, plant and equipment, and income-producing properties.

Commitments at June 30, 2014 and December 31, 2013 are summarized as follows:

(Dollars in Thousands)	June 30, 2014		December 31, 2013
Commitments to extend credit	$	350,307	$	348,375
Standby letters of credit	14,292		8,687
Commercial letters of credit	14,287		12,769
Commitments to fund investments in affordable housing partnerships	7,963		10,237
Operating lease commitments	28,712		23,786

In the normal course of business, we are involved in various legal claims. We have reviewed all legal claims against us with counsel and have taken into consideration the views of such counsel as to the potential outcome of the claims. Loss contingencies for all legal claims totaled $69,000 at June 30, 2014 and $250,000 at both December 31, 2013 and June 30, 2013. It is possible we may incur losses in addition to the amounts we have accrued. However, at this time, we are unable to estimate the range of additional losses that are reasonably possible because of a number of factors, including the fact that certain of these litigation matters are still in their early stages and involve claims for which, at this point, we believe have little to no merit. Management has considered these and other possible loss contingencies and does not expect the amounts to be material to any of the consolidated financial statements.

Note 12.   Income Tax Provision

For the second quarter of 2014, we had an income tax provision totaling $7.7 million on pretax income of $22.3 million, representing an effective tax rate of 34.3%, compared with an income tax provision of $5.5 million on pretax net income of $17.0 million, representing an effective tax rate of 32.1%, for the second quarter of 2013.

For the first half of 2014, we recorded an income tax provision of $14.4 million on pretax income of $42.2 million, representing an effective tax rate of 34.2%, compared with an income tax provision of $10.8 million on pretax net income of $34.0 million, representing an effective tax rate of 31.9% for the same period in 2013.

The Company had unrecognized tax benefits of $3.7 million at both June 30, 2014 and December 31, 2013 that related to uncertainties associated with federal and state income tax matters. Other than the accrued interest of $38,000 related to uncertain tax positions from an entity acquired in 2013, the Company recognized interest related to uncertain tax positions as part of the provision for federal and state income tax expense. During the three months ended June 30, 2014, the Company recognized approximately $27,000 of interest expense associated with its unrecognized tax benefits. The Company had accrued interest payable associated with unrecognized tax benefits of approximately $396,000 and $364,000, at June 30, 2014 and December 31, 2013, respectively.

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In calculating its interim income tax provision, the Company must project or estimate its pretax income for the year to determine its estimated annual effective tax rate. If the Company is unable to reliably estimate its pretax income for the year, the Company must determine its interim tax provision using the actual effective tax rate for the period. As of June 30, 2014, the Company believed it could reliably project its pretax income for 2014 and had determined the tax provision using the estimated annual effective tax rate. The Company expects to continue using the estimated annual effective tax rate to calculate tax provision for future quarters.

The Company accounts for income taxes by recognizing deferred tax assets and liabilities based upon temporary differences between the financial reporting and tax basis of its assets and liabilities. Deferred tax valuation allowances are established when necessary to reduce the deferred tax assets when it is more-likely-than-not that a portion or all of the deferred tax assets will not be realized. Based on internal analysis, the Company determined that a valuation allowance for deferred tax assets was not required as of June 30, 2014 or December 31, 2013.

Note 13.   Recent Accounting Pronouncements

In January 2014, the FASB issued guidance ASU 2014-01, “Accounting for Investments in Qualified Affordable Housing Projects.” The amendments in ASU 2014-01 to Topic 323, “Equity Investments and Joint Ventures,” provide guidance on accounting for investments by a reporting entity in flow-through limited liability entities that manage or invest in affordable housing projects that qualify for the low-income housing tax credit. The amendments permit reporting entities to make an accounting policy election to account for their investments in qualified affordable housing projects using the proportional amortization method if certain conditions are met. Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received, and recognizes the net investment performance in the income statement as a component of income tax expense (benefit). The amendments are effective for fiscal years, and interim periods within those years, beginning after December 31, 2014 and should be applied retrospectively to all periods presented. Early adoption is permitted. All of the Company’s LIHTC investments are within the scope of this this guidance. The Company is in the process of evaluating the impact that adoption of this guidance will have on its consolidated financial statements.

In January 2014, the FASB issued ASU No. 2014-04, “Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure.” ASU 2014-04 clarifies when repossession or foreclosure has occurred, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure. ASU 2014-04 is effective using either the modified retrospective transition method or a prospective transition method for fiscal years and interim periods within those years, beginning after December 15, 2014, and early adoption is permitted. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers which supersedes the revenue recognition requirements in Topic 605, Revenue Recognition.” ASU 2014-09 is based on the principle that revenue is recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. ASU 2014-09 is effective for annual periods beginning after December 15, 2016, and interim periods within those years, using a retrospective application approach. The Company is in the process of evaluating the impact on its consolidated financial statements.

In June 2014, the FASB issued ASU No. 2014-12, “Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved After the Requisite Service Period.” ASU 2014-12 clarifies the proper method of accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period. ASU 2012-14 requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. The performance target should not be reflected in estimating the grant-date fair value of the award. ASU 2014-2012 is effective for annual periods beginning after December 15, 2015, and interim periods within those years using either a prospectively or retrospectively approach. The Company is in the process of evaluating the impact on its consolidated financial statements.

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Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

This discussion presents management’s analysis of our results of operations for the three and six months ended June 30, 2014 and June 30, 2013, financial condition as of June 30, 2014 and December 31, 2013, and includes the statistical disclosures required by the SEC Guide 3 (“Statistical Disclosure by Bank Holding Companies”). The discussion should be read in conjunction with our financial statements and the notes related thereto which appear elsewhere in this Quarterly Report on Form 10-Q.

Statements contained in this report that are not purely historical are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, including our expectations, intentions, beliefs, or strategies regarding the future. Any statements in this document about expectations, beliefs, plans, objectives, assumptions, or future events or performance are not historical facts and are forward-looking statements. These statements are often, but not always, made through the use of words or phrases such as “may,” “should,” “could,” “predict,” “potential,” “believe,” “expect,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “projection,” and “outlook,” and similar expressions. Accordingly, these statements involve estimates, assumptions and uncertainties, which could cause actual results to differ materially from those expressed in them. Any forward-looking statements are qualified in their entirety by reference to the factors discussed throughout this document. All forward-looking statements concerning economic conditions, rates of growth, rates of income or values as may be included in this document are based on information available to us on the dates noted, and we assume no obligation to update any such forward-looking statements. It is important to note that our actual results may differ materially from those in such forward-looking statements due to fluctuations in interest rates, inflation, government regulations, economic conditions, customer disintermediation, and competitive product and pricing pressures in the geographic and business areas in which we conduct operations, including our plans, objectives, expectations and intentions, and other factors discussed under the section entitled “Risk Factors,” in Item 1A of Part II of this report and in our Annual Report on Form 10-K for the year ended December 31, 2013 including the following:

·If a significant number of clients fail to perform on their loans, our business, profitability, and financial condition would be adversely affected.

·Increases in the level of non-performing loans could adversely affect our business, profitability, and financial condition.

·Increases in our allowance for loan losses could materially affect our earnings adversely.

·Banking organizations are subject to interest rate risk and variations in interest rates may negatively affect our financial performance.

·Liquidity risk could impair our ability to fund operations, meet our obligations as they become due, and jeopardize our financial condition.

·The profitability of Wilshire Bancorp will be dependent on the profitability of the Bank.

·Wilshire Bancorp relies heavily for funding its operations on the payment of dividends from the Bank.

·Our ability to continue our growth is partially dependent on our ability to identify and acquire other financial institutions.

·If we fail to successfully integrate BankAsiana and/or Saehan into our internal control over financial reporting or if the internal control of BankAsiana or Saehan over financial reporting were found to be ineffective, the integrity of our, and/or BankAsiana’s or Saehan’s, financial reporting could be compromised which could result in a material adverse effect on our reported financial results.

·Income that we recognized and continue to recognize in connection with our acquisitions of BankAsiana and Saehan Bancorp may be non-recurring or finite in duration.

·Our decisions regarding the fair value of assets acquired could be different than initially estimated which could materially and adversely affect our business, financial condition, results of operations, and future prospects.

·Our use of appraisals in evaluating whether to make a loan on or secured by real property does not ensure that the value of the real property collateral is as stated in the appraisal.

·We are subject to environmental risks associated with owning real estate or collateral.

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·Adverse changes in domestic or global economic conditions, especially in California, could have a material adverse effect on our business, growth, and profitability.

·Difficult economic and market conditions may continue to adversely affect our industry and business.

·The banking industry operates under certain regulatory requirements that may change significantly and in a manner that further impairs our revenue, operating income and financial condition.

·The new Consumer Financial Protection Bureau may reshape the consumer financial laws through rulemaking and enforcement of unfair, deceptive or abusive practices, which may directly impact the business operations of depository institutions offering consumer financial products or services including the Bank.

·The Bank is subject to federal and state and fair lending laws, and failure to comply with these laws could lead to material penalties.

·Our operations may require us to raise additional capital in the future, but that capital may not be available or may not be on terms acceptable to us when it is needed.

·We may be subject to more stringent capital and liquidity requirements which would adversely affect our net income and future growth.

·Maintaining or increasing our market share depends on market acceptance and regulatory approval of new products and services.

·Significant reliance on loans secured by real estate may increase our vulnerability to downturns in the California real estate market and other variables impacting the value of real estate.

·If we fail to retain our key employees, our growth and profitability could be adversely affected.

·We rely heavily on technology and computer systems, and computer failure could result in loss of business and adversely affect our financial condition and results of operations. The market for our common stock is limited, and potentially subject to volatile changes in price.

·Risks associated with our Internet-based systems and online commerce security, including “hacking” and “identify theft,” could adversely affect our business.

·We continually encounter technological changes which could result in the Company having fewer resources than many of its competitors to continue to invest in technological improvements.

·The market for our common stock is limited, and potentially subject to volatile changes in price.

·We may experience goodwill impairment.

·We face substantial competition in our primary market area.

·Anti-takeover provisions of our charter documents may have the effect of delaying or preventing changes in control or management.

·We could be negatively impacted by downturns in the South Korean economy.

·Additional shares of our common stock issued in the future could have a dilutive effect.

·Changes in accounting standards may affect how we record and report our financial condition and results of operations.

·Our business reputation is important and any damage to it may have a material adverse effect on our business.

These factors and the risk factors referred to in our Annual Report on Form 10-K for the year ended December 31, 2013, and under Item 1A of Part II of this report could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements made by us, and undue reliance should not be placed on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, except as required, and we do not undertake any obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for us to predict which will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

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Selected Financial Data

The following table presents selected historical financial information for the three months ended June 30, 2014 and June 30, 2013, and the period end balances at June 30, 2014, December 31, 2013, and June 30, 2013. In the opinion of management, the information presented reflects all adjustments considered necessary for a fair presentation of the results of each period. The operating results for the interim periods are not necessarily indicative of our future operating results.

	Three months ended,
(Dollars in thousands) (unaudited)	June 30, 2014			December 31, 2013			June 30, 2013
Net income	$	14,664		$	45,376		$	11,539
Net income per common share, basic	0.19			0.63			0.16
Net income per common share, diluted	0.19			0.63			0.16
Net interest income before provision for losses on loans and loan commitments	36,129			25,592			25,754
Average balances:
Assets	3,614,014			3,306,168			2,770,996
Cash and cash equivalents	149,384			197,980			174,837
Investment securities	338,060			360,675			323,502
Total loans	2,923,225			2,626,557			2,172,473
Total deposits	2,896,815			2,610,689			2,170,628
Shareholders’ equity	459,423			401,153			356,287
Performance Ratios:
Annualized return on average assets	1.62		%	1.32		%	1.67		%
Annualized return on average equity	12.77		%	10.88		%	12.95		%
Net interest margin	4.35		%	4.20		%	3.97		%
Efficiency ratio	52.38		%	59.20		%	50.11		%
Capital Ratios:
Tier 1 capital to adjusted total average assets	12.89		%	13.44		%	14.67		%
Tier 1 capital to risk-weighted assets	15.05		%	14.79		%	18.73		%
Total capital to risk-weighted assets	16.31		%	16.05		%	20.00		%

	Period End Balance as of:
	June 30, 2014			December 31, 2013			June 30, 2013
Total assets	$	3,681,261		$	3,617,735		$	2,787,401
Investment securities	327,269			352,472			303,878
Net loans	2,923,433			2,810,836			2,099,917
Total deposits	2,956,014			2,871,510			2,182,298
Junior subordinated debentures	71,665			71,550			61,857
FHLB advances	150,260			190,325			150,000
Total common equity	464,769			439,418			355,334
Asset Quality Ratios:
(Non-performing loans net of SBA guaranteed portion)
Quarter to date net charge-off to average total loans (annualized)	0.11		%	-0.18		%	0.67		%
Non-performing loans to total loans	1.42		%	1.30		%	1.24		%
Non-performing assets to total loans and other real estate owned	1.64		%	1.56		%	1.29		%
Allowance for loan losses to gross loans *	1.77		%	1.90		%	2.62		%
Allowance for loan losses to non-performing loans	124.34		%	143.85		%	205.13		%

* Excluding held-for-sale loans

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Executive Overview

We operate within the commercial banking industry, with our primary market encompassing the multi-ethnic population of the Los Angeles metropolitan area. Our full-service offices are located primarily in areas where a majority of the businesses are owned by diversified ethnic groups.

We provide many different products and services to our customers, but our primary focus is on commercial real estate, commercial and industrial, and consumer lending. Although our primary market is in Southern California, we also have full service branch offices in the States of Texas, New Jersey, and New York. In addition to our branch offices, we also have seven loan production offices in Newark, California; Aurora, Colorado; Atlanta, Georgia; Palisades Park, New Jersey; New York, New York; Dallas, Texas; and Annandale, Virginia.

Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with generally accepted accounting principles (“GAAP”). The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities at the date of our financial statements. Actual results may differ from these estimates under different assumptions or conditions.

Various elements of our accounting policies, by their nature, are inherently subject to estimation techniques, valuation assumptions, and other subjective assessments. We have identified several accounting policies that, due to judgments, estimates, and assumptions inherent in those policies are critical to an understanding of our consolidated financial statements. These policies relate to the classification and valuation of investment securities, the valuation of retained interests and servicing assets related to the sales of SBA loans, the methodologies that determine our allowance for losses on loans and loan commitments, the treatment of non-accrual loans, valuation of held-for-sale loans, treatment of acquired loans, valuation of OREO, the evaluation of goodwill and intangible assets, evaluation of FDIC loss-share indemnification asset, and the accounting for income tax provisions. In each area, we have identified the variables most important in the estimation process. We believe that we have used the best information available to make the necessary estimates to value the related assets and liabilities. Actual performance that differs from our estimates and future changes in key variables could change future valuations and could have an impact on our net income.

Our significant accounting policies are described in greater detail in our 2013 Annual Report on Form 10-K in the “Critical Accounting Policies” section of “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and are essential to understanding Management’s Discussion and Analysis of Financial Condition and Results of Operations. There has been no material modification to these policies during the quarter ended June 30, 2014.

43

Results of Operations

Net Interest Income and Net Interest Margin

Our primary source of revenue is net interest income, which is the difference between interest and fees derived from earning assets, and interest paid on liabilities obtained to fund those assets. Our net interest income is affected by changes in the level and mix of interest-earning assets and interest-bearing liabilities, referred to as volume changes. Net interest income is also affected by changes in the yields earned on assets and rates paid on liabilities, referred to as rate changes. Interest rates charged on our loans are affected principally by changes to market rates, the demand for such loans, the supply of money available for lending purposes, competition, and factors. Those factors are, in turn, affected by general economic conditions and factors beyond our control, such as federal economic policies, the general supply of money in the economy, legislative tax policies, governmental budgetary matters, and the actions of the Board of Governors of the Federal Reserve System (“FRB”).

In order to conform to the calculation of net interest margin within our peer group, the Company’s net interest margin calculation now excludes average allowance for loan losses from earnings assets and average loans, which slightly decreases loan yields and net interest margin as average loans and earning assets balances increase. Previous period calculations have been adjusted for comparative purposes.

Net interest income before provision for losses on loans and loan commitments increased $10.3 million, or 40.3%, to $36.1 million for the second quarter of 2014, compared to $25.8 million for the second quarter of 2013. Net interest income before provision for losses on loans and loan commitments for the six months ended June 30, 2014 was $71.3 million, an increase of $20.0 million or 39.0% from $51.3 million for the six months ended June 30, 2013. Net interest margin of 4.35% for the second quarter of 2014 was 38 basis points higher than net interest margin of 3.97% for the previous year’s same quarter. Net interest margin for the first half of 2014 was 4.29%, up 31 basis points from net interest margin of 3.98% for the first half of 2013. Excluding the effect of the amortization/accretion of the purchase accounting adjustments for the acquisitions for Saehan Bancorp and BankAsiana net interest margin was 4.00% for the second quarter of 2014 and 3.97% for the first half of 2014.

The increase in net interest income for the three and six months ended June 30, 2014, compared to the same periods in 2013, was primarily due to the increase in loans from the acquisitions of BankAsiana and Saehan Bancorp, and the increase in loan accretion income from loans acquired through the acquisitions. Total loan discount accretion income for the second quarter of 2014 was $2.7 million, compared to $178,000 for the second quarter of 2013. Loan discount accretion income for the six months ended June 30, 2014 was $5.5 million, compared to $406,000 for the six months ended June 30, 2013.

Interest income for the second quarter of 2014 totaled $40.1 million, an increase of $11.3 million, or 39.0%, from $28.8 million for the second quarter of 2013. Interest income for the six months ended June 30, 2014 totaled $79.5 million, an increase of $21.9 million, or 37.9%, from $57.6 million for the six months ended June 30, 2013. The increase in interest income was due to additional interest income from loans acquired from the acquisitions of BankAsiana and Saehan Bancorp during the fourth quarter of 2013, and an increase in loan discount accretion income during the three and six months ended June 30, 2014.

The average balance of total loans increased from $2.17 billion for the second quarter of 2013 and $2.15 billion for the first half of 2013, to $2.92 billion for the second quarter of 2014 and $2.90 billion for the second half of 2014. The increase in average total loans for the three and six months ended June 30, 2014, compared to the same periods in 2013, was primarily due to loans acquired from BankAsiana and Saehan Bancorp. Loan yields for the three months ended June 30, 2014 increased to 5.20%, from 4.97% for the three months ended June 30, 2013. Loan yields increased to 5.18% for the first half of 2014, compared to 5.01% for the first half of 2013. The increase in loan yields for period in 2014 compared to periods in 2013 was due to the discount accretion income from acquired loans. Excluding the effect of the accretion of the purchase accounting adjustments, loan yield were 4.83% for the second quarter of 2014 and 4.80% for the first half of 2014, compared to 4.93% for the second quarter of 2013 and 4.97% for the first half of 2013.

Total interest expense increased $884,000, or 28.6%, to $4.0 million for the second quarter of 2014, compared to $3.1 million for the second quarter of 2013. Interest expense for the first six months of 2014 was $8.2 million, an increase of $1.9 million, or 29.4%, compared to $6.3 million for the first six months of 2013. The average balance of our interest bearing liabilities for the three and six months ended June 30, 2014 totaled $2.25 billion and $2.28 billion, respectively, an increase from $1.77 billion for both the three and six months ended June 30, 2013. The increase in interest expense and average interest bearing liabilities was due to the acquisition of BankAsiana and Saehan Bancorp’s deposit portfolio. Total cost of interest bearing liabilities increased to 0.71% and 0.72% for the three and six months ended June 30, 2014, respectively, from 0.70% and 0.71% for the three and six months ended June 30, 2013, respectively

44

The following tables sets forth, for the periods indicated, our average balance of assets, liabilities, and shareholders’ equity, in addition to the major components of net interest income, net interest expense, and net interest margin:

Distribution, Yield and Rate Analysis of Net Interest Income

(Dollars in Thousands)

	Three Months Ended June 30,
	2014						2013
	Average Balance		Interest Income/ Expense		Average Rate/Yield		Average Balance		Interest Income/ Expense		Average Rate/Yield
Assets:
Earning assets:
Total loans (1)	$	2,923,225	$	37,993	5.20	%	$	2,172,473	$	26,970	4.97	%
Securities of government sponsored enterprises	273,743		1,503		2.20	%	254,037		1,186		1.87	%
Other investment securities (2)	64,317		520		4.32	%	69,465		557		4.29	%
Deposits held in other financial institutions	20,539		70		1.36	%	—		—		0.00	%
Federal funds sold	55,186		22		0.16	%	117,838		136		0.46	%
Total interest-earning assets	3,337,010		40,108		4.83	%	2,613,813		28,849		4.44	%
Total non-interest-earning assets	277,004						157,183
Total assets	$	3,614,014					$	2,770,996
Liabilities and Shareholders’ Equity:
Interest-bearing liabilities:
Money market deposits	$	770,512	$	1,276	0.66	%	$	617,837	$	971	0.63	%
NOW deposits	34,812		16		0.18	%	27,915		14		0.20	%
Savings deposits	120,274		445		1.48	%	101,263		447		1.77	%
Time deposits of $100,000 or more	865,110		1,296		0.60	%	586,136		884		0.60	%
Other time deposits	235,907		453		0.77	%	223,256		434		0.78	%
FHLB advances and other borrowings	150,280		67		0.18	%	150,000		64		0.17	%
Junior subordinated debenture	71,631		426		2.38	%	61,857		281		1.82	%
Total interest-bearing liabilities	2,248,526		3,979		0.71	%	1,768,264		3,095		0.70	%
Non-interest-bearing liabilities:
Non-interest-bearing deposits	870,200						614,221
Other liabilities	35,865						32,224
Total non-interest-bearing liabilities	906,065						646,445
Shareholders’ equity	459,423						356,287
Total liabilities and shareholders’ equity	$	3,614,014					$	2,770,996
Net interest income			$	36,129					$	25,754
Net interest spread (3)					4.12	%					3.74	%
Net interest margin (4)					4.35	%					3.97	%

(1) Net loan fees are included in the calculation of interest income and totaled approximately $987,000 and $760,000 for the quarters ended June 30, 2014 and 2013, respectively. Total loans are net of deferred fees, unearned income, related direct costs, and includes loans placed on non-accrual status.

(2) Represents tax equivalent yields, non-tax equivalent yields for three months ended June 30, 2014 and 2013 were 3.23% and 3.21%, respectively.

(3) Represents the average rate earned on interest-earning assets (tax equivalent) less the average rate paid on interest-bearing liabilities.

(4) Represents net interest income (adjusted for tax equivalent yields) as a percentage of average interest-earning assets.

45

Distribution, Yield and Rate Analysis of Net Interest Income

(Dollars in Thousands)

	Six Months Ended June 30,
	2014						2013
	Average Balance		Interest Income/ Expense		Average Rate/Yield		Average Balance		Interest Income/ Expense		Average Rate/Yield
Assets:
Earning assets:
Total loans (1)	$	2,901,713	$	75,094	5.18	%	$	2,149,832	$	53,855	5.01	%
Securities of government sponsored enterprises	278,911		3,075		2.21	%	253,346		2,338		1.85	%
Other investment securities (2)	64,852		1,049		4.31	%	70,533		1,130		4.30	%
Deposits held in other financial institutions	20,776		139		1.34	%	—		—		0.00	%
Federal funds sold	74,750		104		0.28	%	123,515		289		0.47	%
Total interest-earning assets	3,341,002		79,461		4.78	%	2,597,226		57,612		4.47	%
Total non-interest-earning assets	278,791						150,173
Total assets	$	3,619,793					$	2,747,399
Liabilities and Shareholders’ Equity:
Interest-bearing liabilities:
Money market deposits	$	778,796	$	2,577	0.66	%	$	620,639	$	1,947	0.63	%
NOW deposits	33,454		31		0.19	%	26,941		26		0.19	%
Savings deposits	117,543		921		1.57	%	100,914		912		1.81	%
Time deposits of $100,000 or more	868,318		2,781		0.64	%	583,688		1,808		0.62	%
Other time deposits	238,445		852		0.71	%	229,524		906		0.79	%
FHLB advances and other borrowings	171,727		141		0.16	%	150,022		143		0.19	%
Junior subordinated debenture	71,602		856		2.39	%	61,857		564		1.82	%
Total interest-bearing liabilities	2,279,885		8,159		0.72	%	1,773,585		6,306		0.71	%
Non-interest-bearing liabilities:
Non-interest-bearing deposits	849,086						591,428
Other liabilities	37,327						30,184
Total non-interest-bearing liabilities	886,413						621,612
Shareholders’ equity	453,495						352,202
Total liabilities and shareholders’ equity	$	3,619,793					$	2,747,399
Net interest income			$	71,302					$	51,306
Net interest spread (3)					4.06	%					3.76	%
Net interest margin (4)					4.29	%					3.98	%

(1)Net loan fees included in the calculation of interest income and totaled approximately $2.0 million and $1.5 million for the six months ended June 30, 2014 and 2013, respectively. Total loans are net of deferred fees, unearned income, related direct costs, and includes loans placed on non-accrual status.

(2)Represents tax equivalent yields, non-tax equivalent yields for six months ended June 30, 2014 and 2013 were 3.24% and 3.20%, respectively.

(3)Represents the average rate earned on interest-earning assets (tax equivalent) less the average rate paid on interest-bearing liabilities.

(4)Represents net interest income (adjusted for tax equivalent yields) as a percentage of average interest-earning assets.

46

For the periods indicated, the dollar amount of changes in interest earned and paid for interest-earning assets and interest-bearing liabilities, respectively, and the amount of change attributable to changes in average daily balances (volume), or changes in average daily interest rates (rate), is represented in the below table. All yields/rates were calculated without the consideration of tax effects, if any, and the variances attributable to both the volume and rate changes have been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amount of the changes in each:

Rate/Volume Analysis of Net Interest Income

(Dollars in Thousands)

	Three Months Ended June 30, 2014 vs. 2013 Increases (Decreases) Due to Change In									Six Months Ended June 30, 2014 vs. 2013 Increases (Decreases) Due to Change In
	Volume			Rate			Total			Volume			Rate			Total
Interest income:
Net loans	$	9,705		$	1,318		$	11,023		$	19,404		$	1,835		$	21,239
Securities of government sponsored enterprises	97			220			317			252			485			737
Other Investment securities	(42		)	5			(37		)	(92		)	11			(81		)
Deposits held in other financial institutions	—			70			70			—			139			139
Federal funds sold	(51		)	(63		)	(114		)	(91		)	(94		)	(185		)
Total interest income	9,709			1,550			11,259			19,473			2,376			21,849
Interest expense:
Money market deposits	251			54			305			519			111			630
NOW deposits	3			(1		)	2			6			(1		)	5
Savings deposits	77			(79		)	(2		)	139			(130		)	9
Time deposit of $100,000 or more	418			(6		)	412			910			63			973
Other time deposits	24			(5		)	19			34			(88		)	(54		)
FHLB advances and other borrowings	3			—			3			19			(21		)	(2		)
Junior subordinated debenture	49			96			145			98			194			292
Total interest expense	825			59			884			1,725			128			1,853
Change in net interest income	$	8,884		$	1,491		$	10,375		$	17,748		$	2,248		$	19,996

Provision for Losses on Loans and Loan Commitments

In anticipation of credit risks inherent in our lending business, we set aside allowance for loan losses through charges to earnings. These charges are made not only for our outstanding loan portfolio, but also for off-balance sheet items, such as commitments to extend credit. The charges made on our outstanding loan portfolio are recorded to allowance for loan losses, whereas charges made on loan commitments are recorded to the reserve for off-balance sheet items, and is presented as a component of other liabilities.

Due to the continued low level of charge-offs and stable credit quality in the loan portfolio, the Company did not record any provision for losses on loans and loan commitments during the three or six months ended June 30, 2014. The Company has not recorded any provisions or credits for loan losses since the fourth quarter of 2012.

Non-interest Income

Total non-interest income increased to $10.7 million for the second quarter of 2014, compared to $8.3 million for the same quarter of the previous year. Non-interest income as a percentage of average assets was 0.3% for the second quarter of 2014, unchanged from the second quarter of 2013. The increase in non-interest income from the second quarter of 2013 to the second quarter of 2014 was primarily due to an increase in gain on sale of loans. Total non-interest income for the six months ended June 30, 2014 was $21.7 million, compared to $17.0 million for the six months ended June 30, 2013. Non-interest income as a percentage of average assets for the first half of 2014 was 0.6%, unchanged from the first half of 2014. The increase in non-interest income from the first half of 2013 to the first half of 2014 was primarily due to the increase in the gain on sale of loan.

47

The following table sets forth the various components of our non-interest income for the periods indicated:

Non-interest Income
(Dollars in Thousands)

	For the Three Months Ended June 30,
	2014				2013
	(Amount)		(%)		(Amount)		(%)
Gain on sale of loans, net	$	4,687	43.6	%	$	3,135	37.7	%
Service charges on deposit accounts	3,174		29.6	%	2,811		33.7	%
Loan-related servicing fees	1,314		12.2	%	1,243		14.9	%
Gain on sale or call of securities	—		0.0	%	15		0.2	%
Other income	1,569		14.6	%	1,128		13.5	%
Total non-interest income	$	10,744	100.0	%	$	8,332	100.0	%
Average assets	$	3,614,014			$	2,770,996
Non-interest income as a % of average assets			0.3	%			0.3	%

	For the Six Months Ended June 30,
	2014				2013
	(Amount)		(%)		(Amount)		(%)
Gain on sale of loans, net	$	9,016	41.5	%	$	6,621	38.9	%
Service charges on deposit accounts	6,320		29.1	%	5,619		33.0	%
Loan-related servicing fees	3,470		16.0	%	2,693		15.8	%
Gain on sale or call of securities	—		0.0	%	15		0.1	%
Other income	2,924		13.4	%	2,089		12.2	%
Total non-interest income	$	21,730	100.0	%	$	17,037	100.0	%
Average assets	$	3,619,793			$	2,747,399
Non-interest income as a % of average assets			0.6	%			0.6	%

The net gain on sale of loans for the second quarter of 2014 was made up of $4.6 million in gains from the sale of SBA loans and $83,000 in gains from the sale of mortgage loans. Gain on sale of loans for the first half of 2014 was made up of $8.9 million in SBA gains and $159,000 in gains from mortgage loan sales. The increase in net gain on sale of loans for periods in 2014 compared to periods in 2013 was due to the larger volume of SBA loans sold. During the six months ended June 30, 2014 the Company sold $88.7 million in SBA loans, compared to $60.9 million for the six months ended June 30, 2013.

The increase in service charges on deposit accounts for the three and six months ended June 30, 2014, compared to the three and six months ended June 30, 2013, was primarily due to the increase in deposits from the acquisitions of BankAsiana and Saehan Bancorp. Particularly, the increase in demand deposit accounts helped to increase income from analysis fees and non-sufficient funds charges. Management constantly reviews service charge rates to maximize service charge income while still maintaining a competitive position in the markets we serve.

Loan related servicing fee income consists primarily of trade-financing fees and servicing fees on SBA and mortgage loans sold. With the expansion of our SBA department and the growth of our servicing loan portfolio, loan related fee income has continued to experience an increase as indicated by the increases for periods in 2014, compared to periods in 2013.

There were no gains on the sale or call of securities during the three and six months ended June 30, 2014. For the three and six months ended June 30, 2013, gain from the sale or call of investment securities totaled $15,000. The $15,000 represented a municipal security that was called for redemption during the second quarter of 2013.

Other non-interest income represents income from cash surrender value of bank owned life insurance (“BOLI”), FHLB dividends, loan referral fees, expense recoveries, checkbook sales, and other miscellaneous income. The increase in other non-interest income for the three and six months ended June 30, 2014, compared to the three and six months ended June 30, 2013, was due to an increase in dividend income received from the stock of the FHLB of San Francisco and an increase in miscellaneous expense recoveries.

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Non-interest Expense

Total non-interest expenses increased to $24.6 million for the second quarter of 2014 from $17.1 million for the same period in 2013. Non-interest expenses as a percentage of average assets was 0.7% for the second quarter of 2014, an increase from 0.6% for the second quarter of 2013. For the six months ended June 30, 2014, non-interest expense totaled $50.8 million, compared to $34.4 million for the six months ended June 30, 2013. As a percentage of average assets, non-interest expense was 1.4% and 1.3%, for the first half of 2014 and the first half of 2013, respectively. The increase in non-interest expense for the three and six months ended June 30, 2014, compared to the three and six months ended June 30, 2013 was largely due to additional expenses that arose from the acquisitions of BankAsiana and Saehan Bancorp, particularly salaries and benefits and occupancy and equipment expenses.

Our efficiency ratio was 52.38% for the second quarter of 2014, compared with 50.11% for the second quarter of 2013. The efficiency ratio for the six months ended June 30, 2014 was 54.6%, compared to 50.28% for the six months ended June 30, 2013. The increase in efficiency ratios for the three and six months ended June 30, 2014, compared to the same periods of the previous year, was largely due to additional expenses incurred as a result of the acquisitions of BankAsiana and Saehan Bancorp.

The following table sets forth the various components of non-interest expense for the periods indicated:

Non-interest Expenses
(Dollars in Thousands)

	For the Three Months Ended June 30,
	2014				2013
	(Amount)		(%)		(Amount)		(%)
Salaries and employee benefits	$	12,449	50.7	%	$	9,548	55.9	%
Occupancy and equipment	3,444		14.0	%	2,038		11.9	%
Loss on investments in affordable housing partnerships	1,347		5.5	%	823		4.8	%
Data processing	795		3.2	%	583		3.4	%
Professional fees	684		2.8	%	905		5.4	%
Regulatory assessment fees	669		2.7	%	311		1.8	%
FDIC loss-share indemnification impairment	597		2.4	%	—		0.0	%
Advertising and promotional	544		2.2	%	630		3.7	%
Amortization of intangibles	235		1.0	%	70		0.4	%
Merger related cost	213		0.9	%	—		0.0	%
Other operating expenses	3,573		14.6	%	2,174		12.7	%
Total non-interest expense	$	24,550	100.0	%	$	17,082	100.0	%
Average assets	$	3,614,014			$	2,770,996
Non-interest expense as a % of average assets			0.7	%			0.6	%

	For the Six Months Ended June 30,
	2014				2013
	(Amount)		(%)		(Amount)		(%)
Salaries and employee benefits	$	25,104	49.4	%	$	18,353	53.4	%
Occupancy and equipment	6,753		13.3	%	4,078		11.9	%
Loss on investments in affordable housing partnerships	2,204		4.4	%	1,643		4.8	%
Data processing	1,758		3.5	%	1,258		3.6	%
Professional fees	1,380		2.7	%	2,030		5.9	%
Regulatory assessment fees	1,177		2.3	%	644		1.9	%
FDIC loss-share indemnification impairment	597		1.2	%	—		0.0	%
Advertising and promotional	1,021		2.0	%	1,357		3.9	%
Amortization of intangibles	468		0.9	%	140		0.4	%
Merger related cost	3,577		7.0	%	—		0.0	%
Other operating expenses	6,768		13.3	%	4,863		14.2	%
Total non-interest expense	$	50,807	100.0	%	$	34,366	100.0	%
Average assets	$	3,619,793			$	2,747,399
Non-interest expense as a % of average assets			1.4	%			1.3	%

49

The number of full-time equivalent employees increased from 416 at June 30, 2013 to 529 at June 30, 2014. The increase in salary and employee benefits expenses for three and six months ended June 30, 2014, compared to the three and six months ended June 30, 2013, was largely due to the increase in employees from the acquisitions of BankAsiana and Saehan Bancorp.

The increase in occupancy and equipment expenses from periods in 2013 to period in 2014 was primarily due to the new lease contracts acquired from BankAsiana and Saehan Bancorp. The Company acquired 13 branch offices with the acquisitions of BankAsiana and Saehan Bancorp in 2013. During the six months ended June 30, 2014, three of these branches were closed.

Losses on investments in affordable housing partnerships are recorded based on financial statements of the individual investment projects. The Company received updated financial information on most of its affordable housing partnerships investment which resulted in increased losses during the second quarter of 2014. As a result, the Company had higher losses on investments in affordable housing partnerships during the three and six months ended June 30, 2014, compared to the same periods in 2013.

The increase in data processing fees during the second quarter and first half of 2014, compared to the second quarter and first half of 2013 was due the increase in number of deposit and loan accounts acquired from BankAsiana and Saehan Bancorp. Fluctuations in data processing expenses are largely due to changes in the number customer accounts as well as increases or decreases in number of transactions for these accounts.

Professional fees consist of legal, accounting, auditing, and consulting fees. The decrease in professional fees for the three and six months ended June 30, 2014, compared to the three and six months ended June 30, 2013 was primarily due a reduction in legal cost and consulting costs. Professional fees were higher in periods in 2013 due to legal and other consulting costs associated with the acquisitions of BankAsiana and Saehan Bancorp. With the completion of these acquisitions in the second half of 2013, the Company experienced a reduction in professional fees.

Regulatory assessment fees represent FDIC insurance premium and Financing Corporation assessment fees. The increase in regulatory assessment fees for the second quarter of and first half of 2014, compared to the second quarter and first half of 2013 was primarily due to the Bank’s larger assessment base as a result of the acquisitions of BankAsiana and Saehan Bancorp.

The Bank previously entered into loss-sharing agreements with the FDIC, under which the FDIC shared in the losses and recoveries on covered assets acquired from Mirae Bank. The Company accounted for the receivable balances under the loss-sharing agreements as an FDIC loss-share indemnification asset in accordance with ASC 805 (Business Combinations). On June 30, 2014, the loss-sharing agreement with the FDIC in respects to losses on covered loans expired. Any losses on loans acquired from Mirae Bank after June 30, 2014 will not be covered under the agreements. During the second quarter of 2014, the Company recorded an impairment on the remaining balance of the FDIC indemnification assets, less any reimbursement on previous claims that the Company has not yet received. There were no impairment charges during the three and six months ended June 30, 2013.

Advertising and promotional expenses represent marketing activities such as media advertisements, promotional gifts for customers, and deposit campaign promotions. These expenses were down during the three and six months ended June 30, 2014, compared to the three and six months ended June 30, 2013 due to a reduction in Bank’s advertising and promotional activities budget.

Amortization of intangibles represents the net amortization/accretion of core deposits intangibles and lease intangibles that were recorded from previous acquisitions. The increase in amortization of intangibles expenses was largely due to the additional amortization expense that arose from the acquisitions of BankAsiana and Saehan Bancorp during the fourth quarter of 2013.

Merger related costs represent one-time expenses associated with the acquisitions of BankAsiana and Saehan Bancorp. The bulk of merger related costs for the three and six months ended June 30, 2014 was from Saehan Bancorp’s data processing system de-conversion and contract termination expenses which totaled $2.8 million for the six months ended June 30, 2014. In addition, there were retention and severance payments to former BankAsiana and Saehan Bancorp employees totaling $627,000 that were also included in the merger related costs for the three and six months ended June 30, 2014.

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Other operating expenses include expenditure such as office supplies, communications, outsourced services for customers, director’s fees, investor relation expenses, amortization of intangible assets, expenses related to the maintenance and sale of OREO, other loan expenses, and other operating expenses. The increase in other non-interest expense for the three and six months ended June 30, 2014, compared to the three and six months ended June 30, 2014, was due to the increase in OREO provision, office supplies, and other loan expenses.

Income Tax Provision

For the second quarter of 2014, the Company had an income tax provision totaling $7.7 million on pretax income of $22.3 million, representing an effective tax rate of 34.3%, compared with an income tax provision of $5.5 million on pretax net income of $17.0 million, representing an effective tax rate of 32.1% for the second quarter of 2013.

For the first half of 2014, we recorded an income tax provision of $14.4 million on pretax income of $42.2 million, representing an effective tax rate of 34.2%, compared with an income tax provision of $10.8 million on pretax net income of $34.0 million, representing an effective tax rate of 31.9% for the same period in 2013.

In calculating its interim income tax provision, the Company must project or estimate its pretax income for the year to determine its estimated annual effective tax rate. If the Company is unable to reliably estimate its pretax income for the year, the Company must determine its interim tax provision using the actual effective tax rate for the period. As of June 30, 2014, the Company believed it could reliably project its pretax income for 2014 and determined the tax provision using the estimated annual effective tax rate. The Company expects to continue using the estimated annual effective tax rate to calculate tax provision for future quarters.

The Company accounts for income taxes by recognizing deferred tax assets and liabilities based upon temporary differences between the financial reporting and tax basis of its assets and liabilities. Deferred tax valuation allowances are established when necessary to reduce the deferred tax assets when it is more-likely-than-not that a portion or all of the deferred tax assets will not be realized. Based on internal analysis, the Company determined that a valuation allowance for deferred tax assets was not required as of June 30, 2014.

Goodwill and Other Intangible Assets

Goodwill and intangible assets arise from the acquisition method of accounting for business combinations. Goodwill and other intangible assets generated from business combinations and deemed to have indefinite lives are not subject to amortization and are instead tested for impairment at least annually. Intangible assets that have finite useful lives, such as core deposit intangibles and unfavorable lease intangibles, are amortized over their estimated useful lives.

Goodwill represents the excess of the purchase price over the sum of the estimated fair values of the tangible and identifiable intangible assets acquired less the estimated fair value of the liabilities assumed. We recognized goodwill of approximately $6.7 million in connection with the acquisition of Liberty Bank of New York in 2006, currently comprised of our four original East Coast branches prior to the acquisition of BankAsiana. Approximately $10.8 million in goodwill was recorded was from the acquisition of BankAsiana and an additional $50.0 million was recorded from the acquisition of Saehan Bancorp. At June 30, 2014, the total balance goodwill was $67.5 million.

The acquisitions of BankAsiana and Saehan Bancorp were accounted for in accordance with ASC 805 “Business Combinations,” using the acquisition method of accounting and assets and liabilities were recorded at their estimated fair values on the dates of each acquisition. These fair value estimates are considered provisional, as additional analysis will be performed on certain assets and liabilities in which fair values are primarily determined through the use of inputs that are not observable from market-based information. Management may further adjust the provisional fair values for a period of up to one year from the dates of the acquisitions. The assets and liabilities that continue to be provisional include loans, intangible assets, OREO, deferred tax assets, accrued assets and liabilities, and the residual effects that the adjustments would have on goodwill.

Goodwill is evaluated for impairment annually or more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount exceeds the asset’s fair value. The goodwill impairment analysis is a two-step test. The first step, used to identify potential impairment, involves comparing the East Coast branches’ estimated fair value to its carrying value, including goodwill. If the estimated fair value exceeds the carrying value, goodwill is considered not to be impaired. If the carrying value exceeds estimated fair value, there is an indication of potential impairment and the second step is performed to measure for actual impairment, if any exists. If required, the second step involves calculating an implied fair value of goodwill. Fair value is determined in a manner similar to the way goodwill is calculated in a business combination, by measuring the excess of the estimated fair value of the unit, as determined in the first step, over the aggregate estimated fair values of the individual assets, liabilities, and identifiable intangibles as if the unit was being acquired in a business combination. If the implied fair value of goodwill exceeds the carrying value of goodwill, there is no impairment. If the carrying value of goodwill exceeds the implied fair value of the goodwill, an impairment charge is recorded for the excess, and a new basis is established for goodwill. An impairment loss cannot exceed the carrying value of goodwill.

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If required, the second step involves calculating an implied fair value of goodwill. This fair value amount is determined in a manner similar to the way goodwill is calculated in a business combination, by measuring the excess of the estimated fair value of the unit, as determined in the first step, over the aggregate estimated fair values of the individual assets, liabilities and identifiable intangibles as if the unit was being acquired in a business combination. If the implied fair value of goodwill exceeds the carrying value of goodwill, there is no impairment. If the carrying value of goodwill exceeds the implied fair value of the goodwill, an impairment charge is recorded for the excess and a new basis is established for goodwill. An impairment loss cannot exceed the carrying value of goodwill.

Under ASU 2011-08, a Company is given the choice of assessing qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. Under ASU 2011-08, an entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount. Qualitative factors were assessed during the second quarter of 2014 and it was determined that goodwill was not impaired.

The Company evaluates the remaining useful lives of its core deposit intangible assets and unfavorable lease intangibles each reporting period, as required by ASC 350, Intangibles—Goodwill and Other, to determine whether events and circumstances warrant a revision to the remaining period of amortization. If the estimate of an intangible asset’s remaining useful life has changed, the remaining carrying amount of the intangible asset is amortized prospectively over that revised remaining useful life. The Company has not revised its estimates of the useful lives of its core deposit intangibles during the quarter ended June 30, 2014

Financial Condition

Investment Portfolio

Investments are one of our major sources of interest income and are acquired in accordance with a comprehensive investment policy that addresses strategies, types, and levels of allowable investments. Management of our investment portfolio is set in accordance with strategies developed and overseen by our Asset/Liability Committee. Investment balances, including cash equivalents and interest-bearing deposits in other financial institutions, are subject to change over time based on our asset/liability funding needs and interest rate risk management objectives. Our liquidity levels take into consideration anticipated future cash flows and all available sources of credit and is maintained at a level management believes is appropriate to assure future flexibility in meeting anticipated funding needs.

Cash Equivalents and Interest-bearing Deposits in Other Financial Institutions

Cash and cash equivalents include cash and due from banks, term and overnight federal funds sold, and securities purchased under agreements to resell, and usually have maturities of less than 90 days. We buy or sell federal funds and maintain deposits in interest-bearing accounts in other financial institutions to help meet liquidity requirements and provide temporary holdings until the funds can be otherwise deployed or invested.

Investment Securities

Management of our investment securities portfolio focuses on providing an adequate level of liquidity and establishing a balanced interest rate sensitive position, while earning an adequate level of investment income without taking undue risk. At June 30, 2014, our investment portfolio was comprised primarily of United States government agency securities, which accounted for 82.4% of the entire investment portfolio. Our U.S. government agency securities holdings are all “prime/conforming” residential mortgage backed securities (“MBS”), and residential collateralized mortgage obligations (“CMOs”) guaranteed by the Federal National Mortgage Association (“FNMA”), the Federal Home Loan Mortgage Corporation (“FHLMC”), or Government National Mortgage Association (“GNMA”). GNMAs are considered equivalent to U.S. Treasury securities, as they are backed by the full faith and credit of the U.S. government. There are no subprime mortgages in our investment portfolio. Besides the U.S. government agency securities, we also have as a percentage to total investments, an 8.2% investment in municipal debt securities, and a 9.4 % investment in corporate debt. Among our investment portfolio that is not comprised of U.S. government securities, 38.4%, or $22.1 million, carry the two highest “Investment Grade” ratings of “Aaa/AAA” or “Aa/AA”, while 59.2 %, or $34.1 million, carry an upper-medium “Investment Grade” rating of at least “A/A” or above, and 2.4 %, or $1.4 million, are unrated. Our investment portfolio does not contain any government sponsored enterprises (“GSE”) preferred securities or any distressed corporate securities that required an other-than-temporary impairment charge as of June 30, 2014.

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We classify our investment securities as “held-to-maturity” or “available-for-sale” pursuant to ASC 320-10. Investment securities that we intend to hold until maturity are classified as held-to-maturity, and all other investment securities are classified as available-for-sale. The carrying values of available-for-sale investment securities are adjusted for unrealized gains and losses as a valuation allowance and any gain or loss is reported on an after-tax basis as a component of other comprehensive income. Credit related declines in the fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other-than-temporary are reflected in earnings as realized losses. The Company did not have an other-than-temporary impairment in the investment portfolio during the second quarter of 2014. The fair market values of our held-to-maturity and available-for-sale securities were respectively, $32,000, and $327.2 million, at June 30, 2014.

The fair value of investments is accounted for in accordance with ASC 320-10. The Company currently utilizes an independent third party bond accounting service for our investment portfolio accounting. The third party provides market values derived from a proprietary matrix pricing model which utilizes several different sources for pricing. The fair values for our investment securities are updated on a monthly basis. The values received are tested annually and are validated using prices received from another independent third party source. All of these evaluations are considered as Level 2 in reference to ASC 820. As required under ASC 325, we consider all available information relevant to the collectability of our investment securities, including information about past events, current conditions, and reasonable and supportable forecasts, remaining payment terms, prepayment speeds, the financial condition of the issuer(s), expected defaults, and the value of any underlying collateral.

The following table summarizes the amortized cost, fair value, net unrealized gain (loss), and distribution of our investment securities at the dates indicated:

Investment Securities Portfolio

(Dollars in Thousands)

	As of June 30, 2014							As of December 31, 2013
	Amortized Cost		Fair Value		Net Unrealized Gain (Loss)			Amortized Cost		Fair Value		Net Unrealized Gain (Loss)
Held-to-Maturity:
Collateralized mortgage obligations (residential)	$	30	$	32	$	2		$	35	$	37	$	2
Total investment securities held-to-maturity	$	30	$	32	$	2		$	35	$	37	$	2
Available-for-Sale:
Securities of government sponsored enterprises	$	61,864	$	60,793	$	(1,071	)	$	63,843	$	60,789	$	(3,054	)
Mortgage backed securities (residential)	87,875		87,840		(35		)	93,402		90,869		(2,533		)
Collateralized mortgage obligations (residential)	119,243		121,052		1,809			135,154		135,653		499
Corporate securities	30,076		30,874		798			38,442		39,530		1,088
Municipal securities	24,732		26,680		1,948			24,700		25,596		896
Total investment securities available-for-sale	$	323,790	$	327,239	$	3,449		$	355,541	$	352,437	$	(3,104	)

Holdings of our investment securities decreased to $327.3 million at June 30, 2014, compared with holdings of $352.5 million at December 31, 2013. Total investment securities as a percentage of total assets were 8.9% and 9.7%, at June 30, 2014 and December 31, 2013, respectively. Securities with a total fair value of approximately $302.3 million and $322.4 million, were pledged to secure public deposits, or for other purposes required or permitted by law, at June 30, 2014 and December 31, 2013, respectively.

At June 30, 2014, our investment security classified as held-to-maturity, carried at amortized cost, decreased to $30,000, compared with $35,000 at December 31, 2013. Our investment securities classified as available-for-sale, stated at fair values, decreased to $327.2 million at June 30, 2014, from $352.4 million at December 31, 2013. The decrease was a result of $21.7 million in accretion/amortization and principal pay-downs of MBSs and CMOs, a $2.0 million called agency security, and an $8.1 million matured corporate security during the six ended June 30, 2014, offset with a $6.6 million increase in unrealized gains.

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As of June 30, 2014, the net unrealized gain in the investment portfolio was $3.4 million, compared to $3.1 million in net unrealized losses at December 31, 2013. The change from an unrealized loss position to an unrealized gain position can be attributed to a decrease in long term Treasury yields at June 30, 2014, compared to rates at December 31, 2013.

Loan Portfolio

Gross loans are the sum of loans receivable and loans held-for-sale and is reported as net outstanding active principal balances. Total loans are net of any unearned income which consists of unamortized deferred fees and costs, premiums, and discounts. Interest from loans is accrued daily on a simple interest basis. Net loans, or total loans net of allowance for loan losses (including loans held-for-sale), totaled $2.92 billion at June 30, 2014, compared to $2.81 billion at December 31, 2013. Net loans as a percentage of total assets increased to 79.4% at June 30, 2014, from 77.7% at December 31, 2013. The increase in net loans is attributable to loan originations that were greater than loan pay-downs during the six months ended June 30, 2014.

The following table presents the amount of loans outstanding and the percentage distributions of each loan segment, as of the dates indicated:

Distribution of Loans and Percentage Composition of Loan Portfolio

(Dollars in Thousands)

	June 30, 2014			December 31, 2013
Construction	$	44,598		$	40,367
Real estate secured	2,490,728			2,367,530
Commercial and industrial	437,047			449,672
Consumer	13,075			14,694
Gross loans(1)	2,985,448			2,872,263
Unearned Income	(9,346		)	(7,864		)
Total loans, net of unearned income	2,976,102			2,864,399
Allowance for losses on loans	(52,669		)	(53,563		)
Net loans	$	2,923,433		$	2,810,836
Percentage breakdown of gross loans:
Construction	1.5		%	1.4		%
Real estate secured	83.5		%	82.4		%
Commercial and industrial	14.6		%	15.7		%
Consumer	0.4		%	0.5		%

(1)Includes loans held-for-sale, which are recorded at the lower of cost or market, of $6.2 million and $47.6 million, at June 30, 2014 and December 31, 2013, respectively.

Construction loans represented 1.5% of our total loan portfolio at June 30, 2014. During the six months ended June 30, 2014, we originated two construction loan totaling $16.1 million. The originations which were offset by loan pay-downs resulted in an increase in construction loans to $44.6 million at the end of the second quarter of 2014, compared to $40.4 million, or 1.4% of gross loans at the end of the fourth quarter of 2013.

Real estate secured loans totaled $2.49 billion at June 30, 2014 and $2.37 billion at December 31, 2013. Real estate secured loans as a percentage of gross loans were 83.5% and 82.4%, at June 30, 2014 and December 31, 2013, respectively. Home mortgage loans represent a small but growing portion of our total real estate secured loan portfolio. Total home mortgage loans outstanding remained relatively unchanged at $159.5 million at June 30, 2014, compared to $159.8 million at December 31, 2013.

Commercial and industrial loans at June 30, 2014 decreased to $437.0 million from $449.7 million at December 31, 2013. Commercial and industrial loans as a percentage of gross loans totaled 14.6% at June 30, 2014, and 15.7% at December 31, 2013. Due to the high concentration of real estate secured loans, the Company has focused more on originating commercial and industrial loans to diversify the loan portfolio. However, during the six months ended June 30, 2014, we experienced a decline in commercial and industrial loans due to large loan pay-downs.

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Consumer loans represented less than 1% of gross loans at both June 30, 2014 and December 31, 2013. The majority of consumer loans are concentrated in cash secured personal lines of credit. Given current economic conditions, we have reduced our efforts in consumer lending, but continue to originate consumer loans that are secured by cash due to the minimal risk associated with these types of loans. At June 30, 2014, consumer loans declined to $13.1 million, or 0.4% of gross loans, from $14.7 million, or 0.5% of gross loans, at December 31, 2013.

Our loan terms vary according to loan type. Commercial term loans have typical maturities of three to five years and are extended to finance the purchase of business entities, business equipment, leasehold improvements, or to provide permanent working capital. We generally limit real estate loan maturities to five to eight years. Lines of credit, in general, are extended on an annual basis to businesses that need temporary working capital and/or import/export financing. We generally seek diversification in our loan portfolio, and our borrowers are diverse as to their industries, locations, and their target markets.

A majority of the properties that are collateralized against our loans are located in Southern California. The loans generated by our branch and loan production offices in other states, are generally collateralized by properties in close proximity to those offices.

The table below shows the contractual maturity distribution and repricing intervals of gross outstanding loans in our portfolio at June 30, 2014. The table also shows the distribution between loans with variable or floating interest rates, and loans with fixed or pre-determined interest rates.

Loan Maturities and Repricing Schedule

(Dollars in Thousands)

	June 30, 2014
	Within One Year		After One But within Five Years		After Five Years		Total
Construction	$	44,598	$	—	$	—	$	44,598
Real estate secured	929,138		1,380,317		181,273		2,490,728
Commercial and industrial	409,762		26,605		680		437,047
Consumer	11,995		1,080		—		13,075
Gross loans	$	1,395,493	$	1,408,002	$	181,953	$	2,985,448
Loans with variable interest rates	$	1,243,109	$	—	$	—	$	1,243,109
Loans with fixed interest rates	152,384		1,408,002		181,953		1,742,339
Gross loans	$	1,395,493	$	1,408,002	$	181,953	$	2,985,448

Non-performing Assets

Non-performing assets (“NPAs”) consist of non-performing loans (“NPLs”) and other real estate owned. NPLs are reported at their outstanding net active principal balances, net of any portion guaranteed by SBA, and consist of loans on non-accrual status and loans 90 days or more past due and still accruing interest. Restructured loans are loans for which the terms for repayment have been renegotiated, resulting in a reduction or deferral of term, interest, or principal. At June 30, 2014, the Company had $38.9 million in troubled debt restructured (“TDR”) loans of which $28.7 million were performing in accordance with their modified terms. The remaining $10.2 million in TDR loans were classified as non-performing at June 30, 2014. As such, not all of our TDR loans are classified as non-performing. All of our TDR loans are considered impaired loans. OREO properties, which management intends to sell, were acquired through loan foreclosures or by similar means and are classified as non-performing assets. We had 11 OREO properties at June 30, 2014 with a total balance of $6.7 million.

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The following is a summary of total non-performing loans and OREO for the dates indicated:

Non-performing Assets (Dollars in Thousands)

	June 30,2014			December 31,2013			June 30,2013
Total non-accrual loans (net of SBA guarantee): (1)
Construction	$	—		$	2,471		$	5,467
Real estate secured	35,585			33,401			19,964
Commercial and industrial	6,769			1,196			1,224
Consumer	4			—			—
Total non-accrual loans	42,358			37,068			26,655
Loans 90 days or more past due and still accruing (net of SBA guarantee):
Real estate secured	—			168			126
Commercial and industrial	—			—			—
Total loans 90 days or more past due and still accruing	—			168			126
Total non-performing loans	42,358			37,236			26,781
Other real estate owned	6,676			7,600			982
Total non-performing assets, net of SBA guarantee (2)	$	49,034		$	44,836		$	27,763
Non-performing loans as a percentage of total loans	1.42		%	1.30		%	1.24		%

(1)During the three months ended June 30, 2014, December 31, 2013, and June 30, 2013, interest income on these loans were not included in interest income.

(2)SBA guaranteed portions totaled $9.1 million, $12.4 million, and $18.2 million at June 30, 2014, December 31, 2013, and June 30, 2013, respectively.

Loans are generally placed on non-accrual status when they become 90 days or more past due, unless management believes the loan is adequately collateralized and in the process of collection. Past due loans may or may not be adequately collateralized, but collection efforts are continuously pursued. Loans may be restructured by management when a borrower experiences changes to their financial condition, causing an inability to meet the original repayment terms, and where we believe the borrower will eventually overcome those circumstances and repay the loan in full.

Total NPLs, net of SBA guaranteed portions, totaled $42.4 million, or 1.42% of total loans (gross loans net of deferred fees and costs), at June 30, 2014, compared with $37.2 million, or 1.30% of total loans, at December 31, 2013, and $26.8 million, or 1.24% of total loans, at June 30, 2013. There were no loans past due 90 or more days and still accruing at June 30, 2014. Loans past due 90 days or more and still accruing interest totaled $168,000 at December 31, 2013 and $126,000 at June 30, 2013. Allowance coverage of non-performing loans at June 30, 2014 stood at 124.34%, compared to 143.85% at December 31, 2013, and 205.13% at June 30, 2013.

No interest income related to non-accrual loans was included in interest income for the three and six months ended June 30, 2014 and June 30, 2013. Additional income of approximately $264,000 and $683,000 would have been recorded during the three months and six months ended June 30, 2014, respectively, had these loans been paid in accordance with their original terms throughout the period indicated. Additional income of approximately $254,000 and $453,000 would have been recorded during the three months and six months ended June 30, 2013, respectively, had these loans been paid in accordance with their original terms throughout the period indicated.

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Trouble Debt Restructurings

A restructuring of a debt constitutes a troubled debt restructuring if the Company for economic or legal reasons related to the borrower’s financial difficulties, grants a concession to the borrower that it would not otherwise consider. Restructured loans typically present an elevated level of credit risk as the borrowers are not able to perform in accordance with the loan’s original contractual terms. Loans that are reported as TDRs are accounted for in accordance with ASC 310-10-35 and are considered impaired and individually evaluated for impairment.

TDR loans are classified as performing unless they are in non-accrual status, or 90 days or more delinquent, as of the end of the most recent quarter. All TDR loans, regardless of whether they are performing or non-performing, are considered impaired. At June 30, 2014, the balance of non-accrual TDR loans totaled $10.2 million, and TDRs performing in accordance with their modified terms totaled $28.7 million. At December 31, 2013, the balance of non-accrual TDR loans totaled $8.2 million, and TDR loans performing in accordance with their modified terms totaled $28.0 million.

At June 30, 2014, the balance of total TDR loans, net of SBA guaranteed portions, totaled $38.9 million, compared to $36.2 million at December 31, 2013. TDR loan inflows totaled $836,000 and $5.8 million during the three and six months ended June 30, 2014, respectively. TDR outflows during the three and six months ended June 30, 2014 totaled $2.1 million and $3.1 million, respectively.

Allowance for Losses on Loans and Loan Commitments

Based on the credit risk inherent in our lending business, we set aside allowance for losses on loans and loan commitments which are charged to earnings. These charges are not only made for the outstanding loan portfolio, but also for off-balance sheet loan commitments, such as commitments to extend credit or letters of credit. The charges made on the outstanding loan portfolio are credited to the allowance for loan losses, whereas charges related to loan commitments are credited to the reserve for loan commitments, which is presented as a component of other liabilities. The provision for losses on loans and loan commitments is discussed in the previous section entitled “Provision for Losses on Loans and Loan Commitments”.

The allowance for loan losses is comprised of two components, SVA or allowance on impaired loans that are individually evaluated, and GVA, which is the combination of loss rates based on historical experience and QA, or estimated losses from factors not captured by historical experience. Management performs a review of the historical loss rates used in GVA as well as the factors in our QA methodology on a quarterly basis due to the increased significance of GVA when estimating losses in the current economic environment.

To establish an adequate allowance, we must be able to recognize when loans have become a problem, or may become a problem. A risk grade of either pass, watch, special mention, substandard, or doubtful, is assigned to every loan in the loan portfolio, with the exception of homogeneous loans, or loans that are evaluated together in pools of similar loans (i.e., home mortgage loans, home equity lines of credit, overdraft loans, express business loans, and automobile loans). The following is a brief description of the loan classifications or risk grades used in our allowance calculation:

Pass Loans — Loans that are past due less than 30 days that do not exhibit signs of credit deterioration. The financial condition of the borrower is sound as well as the status of any collateral. Loans secured by cash (principal and interest) also fall within this classification.

Watch Loans — Performing loans with borrowers that have experienced adverse financial trends, higher debt/equity ratio, or weak liquidity positions, but not to the degree that the loan is considered a problem.

Special Mention — Loans that are currently protected but exhibit an increasing degree of risk based on weakening credit strength and/or repayment sources. Contingent or remedial plans to improve the Bank’s risk exposure should be documented.

Substandard — Loans inadequately protected by the current worth and paying capacity of the borrower or pledged collateral, if any. This grade is assigned when inherent credit weakness is apparent.

Doubtful — Loans having all the weakness inherent in a “substandard” classification but collection or liquidation is highly questionable with the possibility of loss at some future date.

We currently use migration analysis as a factor in calculating our allowance for loan losses in addition to a software program that produces historical loss rates for different loan types used in our GVA estimations. The Company also utilizes a QA matrix to estimate losses not captured by historical experience. The QA matrix takes into consideration both internal and external factors, and includes forecasted economic environments (unemployment & GDP), problem loan trends (non-accrual, delinquency, and impaired loans), real estate value trends, and other factors. Although the QA takes into consideration different loan segments and loan types, the adjustments made are to the loan portfolio as a whole. For impaired loans, or SVA allowance, we evaluate loans on an individual basis to determine impairment in accordance with generally accepted accounting principles or “GAAP”. All these components are added together for a final allowance for loan losses figure on a quarterly basis.

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Net loan charge-offs for the second quarter of 2014 totaled $795,000, compared to $3.6 million for the second quarter of 2013. Total net charge-offs for the second quarter of 2014 was comprised of $196,000 in real estate secured net loan net charge-offs, $613,000 in commercial and industrial loan net charge-offs, and $14,000 in consumer loan net recoveries. Annualized net charge-offs to average total loans for the second quarter of 2014 was 0.11%. Total net charge-offs for the second quarter of 2013 was comprised of $3.3 million in real estate secured net loan charge-offs, $313,000 in commercial and industrial loan net charge-offs, and $1,000 in consumer loan net recoveries. Annualized net charge-offs to average net loans for the second quarter of 2013 was 0.69%.

The allowance for loan losses at June 30, 2014 totaled $52.7 million, compared to $53.6 million at December 31, 2013. Allowance coverage of gross loans (excluding held-for-sale loans) at the end of the second quarter of 2014 was 1.77%, and was 1.90% at the end of the fourth quarter of 2013. General valuation allowance at June 30, 2014 totaled $43.5 million, or 82.6% of total allowance for loan losses, and SVA on impaired loans totaled $9.2 million, or 17.4% of the total allowance. The qualitative adjustment included in the GVA portion of the allowance for loan losses totaled $28.5 million June 30, 2014. At December 31, 2013, GVA totaled $49.8 million, or 92.9% of total allowance, while specific reserve on impaired loan totaled $3.8 million, or 7.1% of the total allowance for loan losses. QA at the end of the fourth quarter of 2013 totaled $20.4 million.

The total GVA at June 30, 2014 declined $6.3 million compared to December 31, 2013. The decrease is largely due the declining trend in net charge-offs, or losses on loans, experienced during recent quarters. This has led to a decline in historical loss ratios reducing the overall required GVA portion of the allowance for loan losses. Higher level net charge-offs periods are dropping out of our historical horizon and more recent low levels of net charge-off are taking their place resulting in lower loss rates in most of the Company’s loan categories. Loss rates for real estate secured loans declined the most during the six months ended June 30, 2014. This reduction offset by an increase in QA was responsible for the decline in overall GVA.

Although historical loss rate declined during the six months ended June 30, 2014, with uncertainty in our current economic environment and increase in non-performing and delinquent loans, the QA portion of the allowance increased at June 30, 2014 compared to December 31, 2013. The QA portion of the allowance increased $8.1 million to $28.5 million at June 30, 2014, compared to $20.4 million at December 31, 2013. Total SVA portion of our allowance experienced an increase of $5.4 million during the six months ended June 30, 2014. The increase in SVA was largely attributable to two loans impaired for a total $4.9 million during the first half of 2014.

Allowance for loan commitments at June 30, 2014 totaled $1.1 million, unchanged from December 31, 2013. At June 30, 2014, commitments to extend credit totaled $350.3 million, compared to $348.4 million at December 31, 2013. Total commitments to extend credit increased by $1.9 million during the first half of 2014, but total allowance for loan commitments remained the same.

Although management believes our allowance for loan losses at June 30, 2014 is adequate to absorb losses from any known inherent risks in the portfolio, no assurance can be given that economic conditions which could adversely affect our service areas, or other variables, will not result in increased losses in the loan portfolio in the future.

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The table below summarizes for the periods indicated, changes to the allowance for loan losses and allowance for loan commitments arising from loan charge-offs, recoveries on loans previously charged-off, credit  for losses on loans and loan commitments, and certain ratios related to the allowance for loan losses and loan commitments:

Allowance for Loan Losses and Loan Commitments

(Dollars in Thousands)

	Three Months Ended,						Six Months Ended,
Balances:	June 30, 2014			June 30, 2013			June 30, 2014			June 30, 2013
Allowance for loan losses:
Balances at beginning of period	$	53,464		$	58,577		$	53,563		$	63,285
Charge-offs: *
Real estate secured	782			3,668			1,454			8,073
Commercial and industrial	1,021			746			1,985			1,929
Consumer	—			—			1			1
Total charge-offs	1,803			4,414			3,440			10,003
Recoveries on loans previously charged off:
Construction	—			—			—			—
Real estate secured	586			340			1,614			555
Commercial and industrial	408			433			918			1,091
Consumer	14			1			14			9
Total recoveries	1,008			774			2,546			1,655
Net loan charge-offs	795			3,640			894			8,348
Provision for losses on loans	—			—			—			—
Balances at end of period	$	52,669		$	54,937		$	52,669		$	54,937
Allowance for loan commitments:
Balances at beginning of period	$	1,061		$	1,023		$	1,061		$	1,023
Provision for losses on loan commitments	—			—			—			—
Balance at end of period	$	1,061		$	1,023		$	1,061		$	1,023
Ratios:
Net loan charge-offs to average total loans (annualized)	0.11		%	0.67		%	0.06		%	0.78		%
Allowance for loan losses to gross loans at end of period (excluding loans held-for-sale)	1.77		%	2.62		%	1.77		%	2.62		%
Net loan charge-offs to allowance for loan losses at end of period	1.51		%	6.63		%	1.70		%	15.20		%
Net loan charge-offs to provision for loan losses and loan commitments	0.00		%	0.00		%	0.00		%	0.00		%

*Charge-off amount for the three months ended June 30, 2014 includes net charge-offs of covered loans amounting to $1.8 million which represents gross covered loan charge-offs of $1.3 million plus $530,000 in the reversal of FDIC receivable portions.

*Charge-off amount for the six months ended June 30, 2014 includes net charge-offs of covered loans amounting to $3.4 million, which represents gross covered loan charge-offs of $3.6 million less net FDIC receivable portions totaling $238,000.

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Contractual Obligations

The following table represents our aggregate contractual obligations to make future payments (principal and interest):

	June 30, 2014
(Dollars in Thousands)	One Year or Less		Over One Year To Three Years		Over Three Years To Five Years		Over Five Years		Indeterminate Maturity			Total
FHLB Advances	$	140,001	$	10,433	$	—	$	—	$	292		$	150,726
Junior Subordinated Debentures	322		—		—		82,476		(10,811		)	71,987
Operating Leases	6,739		10,348		6,997		4,627		���			28,711
Investments in Affordable Housing Partnerships	5,246		2,425		106		186		—			7,963
Time Deposits	997,523		94,169		4,792		77		791			1,097,352
Total	$	1,149,831	$	117,375	$	11,895	$	87,366	$	(9,728	)	$	1,356,739

Off-Balance Sheet Arrangements

During the ordinary course of business, we provide various forms of credit lines to meet the financing needs of our customers. These commitments, which represent a credit risk to us, are not shown or stated in on our balance sheet.

At June 30, 2014 and December 31, 2013, we had commitments to extend credit of $350.3 million and $348.4 million, respectively. Obligations under standby letters of credit totaled $14.3 million and $8.7 million at June 30, 2014 and December 31, 2013, respectively. Total commercial letters of credit totaled $14.3 million at June 30, 2014 and $12.8 million at December 31, 2013. Commitments to fund investments in affordable housing partnerships totaled $8.0 million at the end of the second quarter of 2014, compared to $10.2 million at the end of the fourth quarter of 2013. Operating lease commitments totaled $28.7 million at the end of the second quarter of 2014, and $23.8 million at the end of the fourth quarter of 2013.

In the normal course of business, we are involved in various legal claims. We have reviewed all legal claims against us with counsel and have taken into consideration the views of such counsel as to the potential outcome of the claims. Loss contingencies for all legal claims totaled $69,000 at June 30, 2014 and $250,000 at both December 31, 2013 and June 30, 2013. It is possible we may incur losses in addition to the amounts we have accrued. However, at this time, we are unable to estimate the range of additional losses that are reasonably possible because of a number of factors, including the fact that certain of these litigation matters are still in their early stages and involve claims for which, at this point, we believe have little to no merit. Management has considered these and other possible loss contingencies and does not expect the amounts to be material to any of the consolidated financial statements.

Deposits and Other Sources of Funds

Deposits are our primary funding source for loans originations and investment purchases. Total deposits increased to $2.96 billion at June 30, 2014, compared with $2.87 billion at December 31, 2013. Non-time deposits at June 30, 2014 increased to $1.86 billion, from $1.76 billion at December 31, 2013, and time deposits decreased to $1.09 billion at June 30, 2014, from $1.11 billion at December 31, 2013.

The increase in deposits of $84.5 million, from December 31, 2013 to June 30, 2014, was primarily attributable to an increase in demand deposit accounts of $112.9 million and an increase in savings of $7.7 million, during the six months ended June 30, 2014. The increases were offset by a decline in time deposits of $21.5 million and a decline in money market and NOW accounts of $14.6 million during the first half of 2014.

The average rate paid on time deposits in denominations of $100,000 or more for the second quarter of 2014 remained at 0.60%, unchanged from the same period of the prior year. The average rate paid on other time deposits decreased from 0.78% for the second quarter of 2013, to 0.77% for the second quarter of 2014. The average rate paid on money market, savings, and NOW accounts also decreased from 0.77% for second quarter of 2013, to 0.75% for the second quarter of 2014. We plan to closely monitor interest rate trends and our deposit rates, in order to maximize our net interest margin and profitability in future quarters. Total cost of deposits declined from 0.51% for the quarter ended June 30, 2013, to 0.48% for the quarter ended June 30, 2014.

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The following table summarizes the distribution of average deposits and the average rates paid for the quarters indicated:

Average Deposits

(Dollars in Thousands)

	For the Three Months Ended,
	June 30, 2014				December 31, 2013				June 30, 2013
	Average Balance		Average Rate		Average Balance		Average Rate		Average Balance		Average Rate
Demand, non-interest-bearing deposits	$	870,200	N/A		$	639,957	N/A		$	614,221	N/A
Savings deposits	120,274		1.48	%	630,050		0.63	%	101,263		1.77	%
NOW deposits	34,812		0.18	%	27,656		0.20	%	27,915		0.20	%
Money market deposits	770,512		0.66	%	103,102		1.75	%	617,837		0.63	%
Time deposits of $100,000 or more	865,110		0.60	%	658,483		0.65	%	586,136		0.60	%
Other time deposits	235,907		0.77	%	225,900		0.80	%	223,256		0.78	%
Total deposits	$	2,896,815	0.48	%	$	2,285,148	0.53	%	$	2,170,628	0.51	%

The scheduled maturities of our time deposits of denominations of $100,000 or greater at June 30, 2014 was as follows:

Maturities of Time Deposits of $100,000 or More

(Dollars in Thousands)

	June 30, 2014
Three months or less	$	453,819
Over three months through six months	84,785
Over six months through twelve months	238,765
Over twelve months	79,312
Total	$	856,681

At June 30, 2014, we did not have any depositor that had an aggregate of more than 1% of total deposits aside from the California State Treasury which had total deposit balances representing 7.5% of our total deposits at June 30, 2014, and 7.7% of our total deposits at December 31, 2013.

In addition to our regular customer base, we also accept brokered deposits from time to time on a selective basis to augment deposit growth. The Company had brokered deposits totaling $19.7 million at June 30, 2014, and $43.6 million in brokered deposits at December 31, 2013. The decline in brokered time deposits was due to the maturity of a $29.8 million brokered deposit in the first quarter of 2014. Continued reduction in deposit interest rates helped to reduce our cost of deposits during the three months ended June 30, 2014. However, as competition for deposits increases in our market, to improve our net interest margin, as well as to maintain flexibility in our cost of funds, we will now focus on our deposit mix, particularly an increase in demand deposits, to keep our cost of funds down.

Although deposits are our the primary source for funding loans, investing activities, and for other general business purposes, we may from time to time obtain advances from the FHLB as an alternative to retail deposit funds. We have historically utilized borrowings from the FHLB in order to take advantage of their flexibility and comparatively low cost. At June 30, 2014, the Company had $150.3 million in FHLB advances outstanding.

Asset/Liability Management

We seek to ascertain optimum and stable utilization of available assets and liabilities as a means to attain our overall business plans and objectives. In this regard, we focus on measurement and control of liquidity risk, interest rate risk and market risk, capital adequacy, operation risk, and credit risk. See further discussion on these risks in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2013. Information concerning interest rate risk management is set forth under “Item 3 - Quantitative and Qualitative Disclosures about Market Risk.”

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Liquidity Management

Maintenance of adequate liquidity requires that sufficient resources be available at all times to meet our cash outflow requirements. Liquidity is also required to meet regulatory guidelines and requirements, while providing for deposit withdrawals, the credit needs of customers, and to take advantage of investment opportunities as they arise. Liquidity management involves our ability to convert assets into cash or cash equivalents without incurring significant losses, and involves raising cash or maintaining funds without incurring excessive additional costs. For this purpose, we maintain a portion of our funds in cash and cash equivalents, deposits in other financial institutions, loans held-for-sale, and securities available-for-sale. Our liquid assets at June 30, 2014 and December 31, 2013 totaled $490.2 million and $591.7 million, respectively. Included in liquid assets are securities pledged to secure deposits totaling $248.5 million and $247.6 million at June 30, 2014 and December 31, 2013, respectively. Our liquidity levels measured as the percentage of liquid assets to total assets was 13.3% and 16.4%, at June 30, 2014 and December 31, 2013, respectively. Not including securities pledged to secure deposits, liquid assets to total assets ratio at June 30, 2014 and December 31, 2013 were 6.6% and 9.5%, respectively.

Our primary source of liquidity is derived from our core operating activity of accepting customer deposits. This funding source is augmented by payments of principal and interest on loans, the routine pay-down and liquidation of securities from the available-for-sale portfolio, and liquidation of loans held-for-sale. Government programs may influence deposit behavior and ultimately our liquidity position. Primary use of funds include withdrawal of and interest payments on deposits, originations and purchases of loans, purchases of investment securities, and payment of operating expenses.

As a secondary source of liquidity, we accept brokered deposits, federal funds facilities, repurchase agreement facilities, and we obtain advances from the FHLB to supplement our supply of lendable funds and to meet deposit withdrawal requirements. Advances from the FHLB are typically secured by our loans, securities, and/or stock issued by the FHLB and owned by the Company. Advances are made pursuant to several different programs. Each credit program has its own range of interest rates and maturities. Depending on the program, limitations on the amount of advances available are based either on a fixed percentage of an institution’s net worth, the FHLB’s assessment of the institution’s creditworthiness, or the amount of collateral pledged at the FHLB. At June 30, 2014, our borrowing capacity with the FHLB of San Francisco was $906.9 million, with $140.0 million in outstanding borrowings, leaving $766.9 million in available capacity. We also had $10.0 million in outstanding advances at the FHLB of New York, with no additional borrowing capacities available at June 30, 2014. In addition to our FHLB borrowing capacity, we also maintain lines of credit with correspondent banks and the Federal Reserve Bank Discount Window to be utilized as needed. At June 30, 2014, the availability of these lines totaled $107.2 million, with no outstanding borrowings.

Capital Resources and Capital Adequacy Requirements

Historically, our primary source of capital has been internally generated operating income recorded as retained earnings. In order to ensure adequate levels of capital, we conduct ongoing assessments of projected sources and uses of capital in conjunction with projected increases in assets and levels of risk. We have considered, and we will continue to consider, additional sources of capital as the need arises, whether through the issuance of additional equity, debt, or hybrid securities.

We are also subject to various regulatory capital requirements administered by federal banking agencies. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, we must meet specific capital guidelines that rely on quantitative measures of our assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. Failure to meet minimum capital requirements can trigger regulatory actions under the prompt corrective action rules which could have a material adverse effect on our financial condition and operations. Prompt corrective action may include regulatory enforcement actions that restricts dividend payments, requires the adoption of remedial measures to increase capital, terminates FDIC deposit insurance, and mandates the appointment of a conservator or receiver in severe cases. In addition, failure to maintain a well-capitalized status may adversely affect the evaluation of regulatory applications for specific transactions and activities, including acquisitions, continuation and expansion of existing activities, commencement of new activities, and could adversely affect our business relationships with our existing and prospective clients. The aforementioned regulatory consequences for failing to maintain adequate ratios of Tier 1 and Tier 2 capital could have a material adverse effect on our financial condition and results of operations. The amount of capital and classification of capital are also subject to qualitative judgments by regulators about components, risk weightings, and other factors. See Part I, Item 1 “Description of Business — Regulation and Supervision — Capital Adequacy Requirements” in our Annual Report on Form 10-K for the year ended December 31, 2013 for additional information regarding regulatory capital requirements.

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As of June 30, 2014, we qualified as a “well capitalized institution” under the regulatory framework for prompt corrective action. The following table presents the regulatory capital ratio standards for well-capitalized institutions compared to capital ratios for the Company and the Bank as of the dates specified:

	Regulatory Adequately-		Regulatory Well-		Capital Ratios as of:
	Capitalized		Capitalized		June 30, 2014				December 31, 2013				June 30, 2013
Wilshire Bancorp & Wilshire Bank:	Standards		Standards		Bancorp		Bank		Bancorp		Bank		Bancorp		Bank
Total capital to risk-weighted assets	8.00	%	10.00	%	16.31	%	15.57	%	16.05	%	15.03	%	20.00	%	18.93	%
Tier I capital to risk-weighted assets	4.00	%	6.00	%	15.05	%	14.32	%	14.79	%	13.77	%	18.73	%	17.66	%
Tier I capital to average quarterly assets	4.00	%	5.00	%	12.89	%	12.27	%	13.44	%	12.51	%	14.67	%	13.35	%

 At June 30, 2014, the Company’s Tier 1 capital totaled $456.1 million, compared to $434.2 million at December 31, 2013, and $404.1 million at June 30, 2013. At the Bank level, Tier 1 capital totaled $433.5 million at June 30, 2014, compared to $404.2 million at December 31, 2013, and $380.4 million at June 30, 2013.

During the second quarter of 2013, the Company’s Board of Directors approved the reinstatement of the Company’s quarterly dividend of $0.03 cents per common share. The Board of Directors subsequently approved an increase in quarterly dividends to $0.05 cents per common share starting with the dividend payable on April 15, 2014.

In July 2013, the Federal banking regulators approved a final rule to implement the revised capital adequacy standards of the Basel Committee on Banking Supervision, commonly called Basel III, and to address relevant provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). The final rule strengthens the definition of regulatory capital, increases risk-based capital requirements, makes selected changes to the calculation of risk-weighted assets, and adjusts the prompt corrective action thresholds. Community banking organizations, such as the Company and the Bank, become subject to the new rule on January 1, 2015 and certain provisions of the new rule will be phased in over the period of 2015 through 2019.

The final rule:

·Permits banking organizations that had less than $15 billion in total consolidated assets as of December 31, 2009, or were mutual holding companies as of May 19, 2010, to include in Tier 1 capital trust preferred securities and cumulative perpetual preferred stock that were issued and included in Tier 1 capital prior to May 19, 2010, subject to a limit of 25% of Tier 1 capital elements, excluding any non-qualifying capital instruments and after all regulatory capital deductions and adjustments have been applied to Tier 1 capital.

·Establishes new qualifying criteria for regulatory capital, including new limitations on the inclusion of deferred tax assets and mortgage servicing rights.

·Requires a minimum ratio of common equity Tier 1 capital to risk-weighted assets of 4.5%.

·Increases the minimum Tier 1 capital to risk-weighted assets ratio requirement from 4% to 6%.

·Retains the minimum total capital to risk-weighted assets ratio requirement of 8%.

·Establishes a minimum leverage ratio requirement of 4%.

·Retains the existing regulatory capital framework for 1-4 family residential mortgage exposures.

·Permits banking organizations that are not subject to the advanced approaches rule, such as the Company and the Bank, to retain, through a one-time election, the existing treatment for most accumulated other comprehensive income, such that unrealized gains and losses on securities available for sale will not affect regulatory capital amounts and ratios.

·Implements a new capital conservation buffer requirement for a banking organization to maintain a common equity capital ratio more than 2.5% above the minimum common equity Tier 1 capital, Tier 1 capital and total risk-based capital ratios in order to avoid limitations on capital distributions, including dividend payments, and certain discretionary bonus payments. The capital conservation buffer requirement will be phased in beginning on January 1, 2016 at 0.625% and will be fully phased in at 2.50% by January 1, 2019. A banking organization with a buffer of less than the required amount would be subject to increasingly stringent limitations on such distributions and payments as the buffer approaches zero. The new rule also generally prohibits a banking organization from making such distributions or payments during any quarter if its eligible retained income is negative and its capital conservation buffer ratio was 2.5% or less at the end of the previous quarter. The eligible retained income of a banking organization is defined as its net income for the four calendar quarters preceding the current calendar quarter, based on the organization’s quarterly regulatory reports, net of any distributions and associated tax effects not already reflected in net income.

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·Increases capital requirements for past-due loans, high volatility commercial real estate exposures, and certain short-term commitments and securitization exposures.

·Expands the recognition of collateral and guarantors in determining risk-weighted assets.

·Removes references to credit ratings consistent with the Dodd Frank Act and establishes due diligence requirements for securitization exposures.

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Item 3.Quantitative and Qualitative Disclosures about Market Risk

Market risk is the risk of loss from adverse changes in market prices and rates. Our market risk arises primarily from interest rate risk inherent in lending, investing, and deposit activities. Our profitability is affected by fluctuations in interest rates. A sudden and substantial change in interest rates may adversely impact our 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. We evaluate market risk pursuant to policies reviewed and approved annually by our Board of Directors. The Company’s Board delegates responsibility for market risk management to the Asset/Liability Management Committee, which reports to the Board on activities related to market risk management. As part of the management of our market risk, the Asset/Liability Management Committee may direct changes in the mix of assets and liabilities. To that end, we actively monitor and manage interest rate risk exposures.

Interest rate risk management involves development, analysis, implementation, and monitoring of earnings to provide stable income and capital levels during periods of changing interest rates. In the management of interest rate risk, we utilize gap analysis and simulation modeling to determine the sensitivity of net interest income and economic value of equity (“EVE”). These techniques are complementary and are used together to provide a more accurate measurement of interest rate risk.

Gap analysis measures the repricing mismatches between assets and liabilities. The interest rate sensitivity gap is determined by subtracting the amount of liabilities that reprice from the amount of assets that reprice in a particular time interval. If repricing assets exceed repricing liabilities in any given time period, we would be deemed to be “asset-sensitive” for that period. Conversely, if repricing liabilities exceed repricing assets in a given time period, we would be deemed to be “liability-sensitive” for that period.

We usually seek to maintain a balanced position over the period of one year to ensure net interest income stability in times of volatile interest rates. This is accomplished by maintaining a similar level of interest-earning assets and interest-paying liabilities available to be repriced within one year.

The change in net interest income may not always follow the general expectations of an “asset-sensitive” or a “liability-sensitive” balance sheet during periods of changing interest rates. This possibility results from interest rates earned or paid changing by differing increments and at different time intervals for each type of interest-sensitive asset and liability. Interest rate gaps arise when assets are funded with liabilities that have different repricing intervals. Because these gaps are actively managed and change daily as adjustments are made in interest rate views and market outlooks, positions at the end of any period may not reflect our interest rate sensitivity in subsequent periods. We attempt to balance longer-term economic views against prospects for short-term interest rate changes.

Although the interest rate sensitivity gap is a useful measurement tool and contributes to effective asset and liability management, it is difficult to predict the effect of changing interest rates based solely on that measure. As a result, the Asset/Liability Management Committee also regularly uses simulation modeling as a tool to measure the sensitivity of earnings and EVE to interest rate changes. The EVE is defined as the net present value of an institution’s existing assets less liabilities. The simulation model captures all assets and liabilities, and accounts for significant variables that are believed to be affected by interest rates. These variables include prepayment speeds on loans and securities, cash flows of loans and deposits, principal amortization, call options on securities, balance sheet growth assumptions, and changes in rate relationships as various rate indices react differently to market rates.

Although the simulation measures the volatility of net interest income and EVE under immediate increase or decrease of market interest rate scenarios in 100 basis point increments, our main concern is the negative effect of a reasonably-possible worst case scenario. The Asset/Liability Management Committee policy prescribes that for the worst reasonably-possible rate-change scenario, the expected reduction of net interest income and EVE should not exceed 25% of the base net interest income and 30% of the base EVE, respectively.

In general, based upon our current mix of deposits, loans, and investments, a decrease in interest rates of 100, 200 and 300 basis points would result in a small increase in our net interest income but lower our EVE. An increase in interest rates would result in increasing net interest income, while EVE would decline as interest rates rise above 200 basis points. This is mainly due to negative convexity as securities and longer term assets tend to lose value at an increasing rate as interest rates rise. Structurally, cash flows on longer term assets are expected to extend as anticipated prepayment speeds slow down with higher interest rates. Based on these results, our balance sheet is currently “asset sensitive” from a net interest income sensitivity perspective in a short-term time horizon.

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Management believes that the assumptions used to evaluate the vulnerability of our operations to changes in interest rates approximates actual experience and considers them reasonable; however, the interest rate sensitivity of our assets and liabilities, and the estimated effects of changes in interest rates on our net interest income and EVE, could vary substantially, if different assumptions are used or actual experience differs from the historical experience on which the assumptions are based.

The following table sets forth the interest rate sensitivity of our interest-earning assets and interest-bearing liabilities at June 30, 2014 using the interest rate sensitivity gap ratio. For purposes of the following table, an asset or liability is considered rate-sensitive within a specified period, if it can be repriced or if it matures within that timeframe. However, actual payment patterns may differ from contractual payment patterns.

Interest Rate Sensitivity Analysis (Dollars in Thousands)

	At June 30, 2014
	Amounts Subject to Repricing Within
	0-3 months			3-12 months			1-5 years			After 5 years			Total
Interest-earning assets:
Gross loans	$	1,300,075		$	95,418		$	1,408,002		$	181,953		$	2,985,448
Investment securities	22,379			17,505			146,654			140,731			327,269
Deposits at other institutions	11,250			2,009			7,250			—			20,509
Federal funds sold and other cash equivalents	55,534			—			—			—			55,534
Total	$	1,389,238		$	114,932		$	1,561,906		$	322,684		$	3,388,760
Interest-bearing liabilities:
Savings deposits	$	122,664		$	—		$	—		$	—		$	122,664
Time deposits of $100,000 or more	453,819			323,550			79,312			—			856,681
Other time deposits	73,976			142,659			18,630			70			235,335
Other interest-bearing deposits	796,324			—			—			—			796,324
FHLB advances	140,000			—			10,260			—			150,260
Junior Subordinated Debenture	71,665			—			—			—			71,665
Total	$	1,658,448		$	466,209		$	108,202		$	70		$	2,232,929
Interest rate sensitivity gap	$	(269,210	)	$	(351,277	)	$	1,453,704		$	322,614		$	1,155,831
Cumulative interest rate sensitivity gap	$	(269,210	)	$	(620,487	)	$	833,217		$	1,155,831
Cumulative interest rate sensitivity gap ratio (based on total assets)	-7.31		%	-16.86		%	22.63		%	21.40		%	31.40		%

The following table sets forth our estimated net interest income percentage change and EVE percentage change over a 12-month period based on the indicated changes in market interest rates as of June 30, 2014. The net interest income percentages represent changes for twelve months in a stable interest rate environment.

June 30, 2014
Change(In Basis Points)	Net Interest Income Change (%)		Economic Value of Equity (EVE) Change (%)
+400	13.09	%	-2.99	%
+300	9.41	%	-1.16	%
+200	6.01	%	0.99	%
+100	2.73	%	1.48	%
0	0.00	%	0.00	%
- 100	1.17	%	-5.92	%
- 200	0.40	%	-16.73	%
- 300	0.31	%	-22.53	%

Our strategies in protecting both net interest income and EVE from significant movements in interest rates involve restructuring our investment portfolio and using FHLB advances. Although our policy also permits us to purchase rate caps, floors, and interest rate swaps, we are not currently engaged in any of those types of transactions.

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Item 4.Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of June 30, 2014, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, regarding the effectiveness of the design and operation of our “disclosure controls and procedures,” as defined under Exchange Act Rules 13a-15(e) and 15d-15(e).

Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2014, such disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC, and accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance in achieving the desired control objectives and in reaching a reasonable level of assurance our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal controls over financial reporting during the quarter ended June 30, 2014 that materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

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Part II.OTHER INFORMATION

Item 1.Legal Proceedings

In the normal course of business, we are involved in various legal claims. We have reviewed all legal claims against us with counsel and have taken into consideration the views of such counsel as to the potential outcome of the claims. Loss contingencies for all legal claims totaled $69,000 at June 30, 2014 and $250,000 at both December 31, 2013 and June 30, 2013. It is possible we may incur losses in addition to the amounts we have accrued. However, at this time, we are unable to estimate the range of additional losses that are reasonably possible because of a number of factors, including the fact that certain of these litigation matters are still in their early stages and involve claims for which, at this point, we believe have little to no merit. Management has considered these and other possible loss contingencies and does not expect the amounts to be material to any of the consolidated financial statements.

Item 1A.	Risk Factors
	No material changes from previous disclosures in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013.
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds
	None.
Item 3.	Defaults Upon Senior Securities
	None.
Item 4.	Mine Safety Disclosures
	Not applicable.
Item 5.	Other Information
	None.
Item 6.	Exhibits

31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32	Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101	The following materials from the Company’s quarterly report on Form 10-Q for the three and six months ended June 30, 2014, formatted in XBRL (eXtensible Business Reporting Language): (i) Unaudited Consolidated Statements of Financial Condition as of June 30, 2014 and December 31, 2013, (ii) Unaudited Consolidated Statements of Operations for the three and six months ended June 30, 2014 and 2013, (iii) Unaudited Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2014 and 2013, (iv) Unaudited Consolidated Statements of Shareholders’ Equity for the six months ended June 30, 2014 and 2013, (v) Unaudited Consolidated Statements of Cash Flows, for the six months ended June 30, 2014 and 2013, and (vi) Unaudited Notes to Consolidated Financial Statements.

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SIGNATURES

Pursuant to the requirement 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.

	WILSHIRE BANCORP, INC.
Date: August 4, 2014	By:	/s/ Alex Ko
		Alex Ko
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

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Exhibit Index

Reference Number	Item
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32	Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101	The following materials from the Company’s quarterly report on Form 10-Q for the three and six months ended June 30, 2014, formatted in XBRL (eXtensible Business Reporting Language): (i) Unaudited Consolidated Statements of Financial Condition as of June 30, 2014 and December 31, 2013, (ii) Unaudited Consolidated Statements of Operations for the three and six months ended June 30, 2014 and 2013, (iii) Unaudited Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2014 and 2013, (iv) Unaudited Consolidated Statements of Shareholders’ Equity for the six months ended June 30, 2014 and 2013, (v) Unaudited Consolidated Statements of Cash Flows, for the six months ended June 30, 2014 and 2013, and (vi) Unaudited Notes to Consolidated Financial Statements.

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