Certain matters discussed in this Annual Report may constitute forward- looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the "1933 Act" and Section 21E of the Securities Exchange Act of 1934, as amended, or the "Exchange Act" and as such, may involve risks and uncertainties. These forward-looking statements relate to, among other things, expectations of the environment in which the Company operates and projections of future performance. The Company's actual results, performance, or achievements may differ significantly from the results, performance, or achievements expected or implied in such forward-looking statements. For discussion of some of the factors that might cause such differences, see "Item 1. BUSINESS - Risk Factors That May Affect Future Results." The Company does not undertake, and specifically disclaims any obligation to update any forward looking statements to reflect the occurrence of events or circumstances after the date of such statements.

East West Bancorp, Inc. East West Bancorp, Inc. (referred to herein on an unconsolidated basis as "East West" and on a consolidated basis as the "Company") is a bank holding company incorporated in Delaware on August 26, 1998 and registered under the Bank Holding Company Act of 1956, as amended. The Company commenced business on December 30, 1998 when, pursuant to a reorganization, it acquired all of the voting stock of East West Bank, or the "Bank". The Bank is the Company's principal asset. In addition to the Bank, the Company has six other operating subsidiaries, namely East West Insurance Services, Inc., East West Capital Trust I, East West Capital Trust II, East West Capital Statutory Trust III, East West Capital Trust IV, and East West Capital Trust V.

East West Insurance Services, Inc. On August 22, 2000, East West completed the acquisition of East West Insurance Services, Inc. or, the "Agency", in a stock exchange transaction. In exchange for all of the outstanding stock of the Agency, East West issued a total of 206,582 new shares of East West Bancorp, Inc. common stock, par value of $.001. The total value of the shares issued was approximately $1.7 million. The Agency, with assets of approximately $789 thousand as of the acquisition date, provides business and consumer insurance services to the Southern California market. The Agency runs its operations autonomously from the operations of the Company.

Other Subsidiaries of East West Bancorp, Inc. The Company has established five other subsidiaries as statutory business trusts, East West Capital Trust I and East West Capital Trust II in 2000, East West Capital Statutory Trust III in 2003, and East West Capital Trust IV and East West Capital Trust V in 2004, collectively referred to as the "Trusts". In five separate private placement transactions, the Trusts have issued either fixed or variable rate capital securities representing undivided preferred beneficial interests in the assets of the Trusts. East West is the owner of all the beneficial interests represented by the common securities of the Trusts. The purpose of issuing the capital securities was to provide the Company with a cost-effective means of obtaining Tier I capital for regulatory purposes. In accordance with Financial Accounting Standards Interpretation No. 46R, Consolidation of Variable Interest Entities ("FIN No. 46R"), the Trusts are not consolidated into the accounts of East West Bancorp, Inc.

3

East West's principal business is to serve as a holding company for the Bank and other banking or banking-related subsidiaries which East West may establish or acquire. East West has not engaged in any other activities to date. As a legal entity separate and distinct from its subsidiaries, East West's principal source of funds is, and will continue to be, dividends that may be paid by its subsidiaries. East West's other sources of funds include proceeds from the issuance of its common stock in connection with stock option and warrant exercises and employee stock purchase plans. At December 31, 2004, the Company had $6.03 billion in total consolidated assets, $5.08 billion in net consolidated loans, and $4.52 billion in total consolidated deposits.

The principal office of the Company is located at 415 Huntington Drive, San Marino, California 91108, and its telephone number is (626) 799-5700.

East West Bank. East West Bank was chartered by the Federal Home Loan Bank Board in June 1972, as the first federally chartered savings institution focused primarily on the Chinese-American community, and opened for business at its first office in the Chinatown district of Los Angeles in January 1973. From 1973 until the early 1990's, the Bank conducted a traditional savings and loan business by making predominantly long-term, single family residential and commercial and multifamily real estate loans. These loans were made principally within the ethnic Chinese market in Southern California and were funded primarily with retail savings deposits and advances from the Federal Home Loan Bank of San Francisco. The Bank has emphasized commercial lending since its conversion to a state-chartered commercial bank on July 31, 1995. The Bank now also provides loans for commercial, construction, and residential real estate projects and for the financing of international trade for companies in California.

Acquisitions of existing banks have contributed to the Bank's growth. On May 28, 1999, the Bank completed its acquisition of First Central Bank, N.A. for an aggregate cash price of $13.5 million. First Central Bank had three branches in Southern California--one branch located in the Chinatown sector of Los Angeles, one branch in Monterey Park and one branch in Cerritos. The Bank acquired approximately $55.0 million in loans and assumed approximately $92.6 million in deposits.

On January 18, 2000, the Bank completed its acquisition of American International Bank for an aggregate cash price of $33.1 million. American International Bank had eight branches in Southern California. The Bank acquired approximately $107.9 million in loans and assumed approximately $170.8 million in deposits.

On January 16, 2001, the Bank completed the acquisition of Prime Bank for a combination of shares and cash valued at $16.6 million. Prime Bank was a one- branch commercial bank located in the Century City area of Los Angeles. The Bank acquired approximately $45.0 million in loans and assumed approximately $98.1 million in deposits.

On March 14, 2003, the Bank completed its acquisition of Pacific Business Bank for an aggregate cash price of $25.0 million. Pacific Business Bank operated four branches in Southern California located in Santa Fe Springs, Carson, El Monte, and South El Monte. The Bank acquired approximately $110.1 million in loans and $134.9 million in deposits.

On August 6, 2004, the Bank completed its acquisition of Trust Bancorp, parent company of Trust Bank, in an all-stock transaction valued at $32.9 million. Trust Bank operated four branches in Southern California, located in Monterey Park, Rowland Heights, West Covina and Arcadia. The Bank acquired approximately $164.0 million in loans and assumed $193.4 million in deposits through this acquisition.

4

The Bank has also grown through strategic partnerships and office locations. On August 30, 2001, the Bank entered into an exclusive ten-year agreement with 99 Ranch Market to provide retail banking services in their stores throughout California. 99 Ranch Market is the largest Asian-focused chain of supermarkets on the West Coast, with twenty-two full service stores in California, two in Washington, and affiliated licensee stores in Arizona, Georgia, Hawaii, Nevada and Indonesia. Tawa Supermarket Companies or "Tawa" is the parent company of 99 Ranch Market. Tawa's property development division owns and operates many of the shopping centers where 99 Ranch Market stores are located. We are currently providing in-store banking services to seven 99 Ranch Market locations in Southern California and one in Northern California.

On January 20, 2003, the Bank opened its first overseas office in Beijing, China. The Beijing representative office serves to further develop the Bank's existing international banking capabilities. In addition to facilitating traditional letters of credit and trade finance business, the Beijing office allows the Bank to assist existing clients, as well as develop new business relationships. Through this office, the Bank intends to focus on growing its export-import lending volume by aiding domestic exporters in identifying and developing new sales opportunities to China-based customers as well as capturing additional letters of credit business generated from China-based exports through broader correspondent banking relationships with a variety of Chinese financial institutions.

At December 31, 2004 the Bank had three wholly owned subsidiaries. The first subsidiary, E-W Services, Inc., is a California corporation organized by the Bank in 1977. E-W Services, Inc. holds property used by the Bank in its operations. At December 31, 2004 the Bank's total investment in E-W Services, Inc. was $9.4 million. The second subsidiary, East-West Investment, Inc., is a California corporation organized by the Bank in 1972. East-West Investment, Inc. primarily acts as a trustee in connection with real estate secured loans. At December 31, 2004 the Bank's total investment in East-West Investment, Inc. was $125 thousand. The third subsidiary, East West Mortgage Securities, LLC, is a California limited liability company organized by the Bank in September 2002. East West Mortgage Securities, LLC acts primarily as a special purpose entity in connection with private label securitization activities. At December 31, 2004 the Bank's total investment in East West Mortgage Securities, LLC, was $561 thousand.

The Bank was the third largest independent commercial bank in Southern California as of December 31, 2004, and one of the largest banks in the United States that focuses on the Chinese-American community. Through its network of 49 banking locations, the Bank provides a wide range of personal and commercial banking services to small and medium-sized businesses, business executives, professionals, and other individuals. The Bank offers multilingual services to its customers in English, Cantonese, Mandarin, Vietnamese, and Spanish. The Bank also offers a variety of deposit products which includes the traditional range of personal and business checking and savings accounts, time deposits and individual retirement accounts, travelers' checks, safe deposit boxes, and Master Card and Visa merchant deposit services.

The Bank's lending activities include residential and commercial real estate, construction, commercial, trade finance, account receivables, small business administration, or the "SBA", inventory and working capital loans. It provides commercial loans to small and medium-sized businesses with annual revenues that generally range from several million to $200 million. In addition, the Bank provides short-term trade finance facilities for terms of less than one year primarily to U.S. importers and manufacturers doing business in the Asia Pacific region. The Bank's commercial borrowers are engaged in a wide variety of manufacturing, wholesale trade, and service businesses.

The Company's management has identified four principal operating segments within the organization: retail banking, commercial lending, treasury, and residential lending. Although all four operating segments offer financial products and services, they are managed separately based on each segment's strategic focus. While the retail banking segment focuses primarily on retail operations through the Bank's branch network, certain designated branches have responsibility for generating commercial deposits and loans.

5

The commercial lending segment primarily generates commercial loans and deposits through the efforts of commercial lending officers located in the Northern and Southern California production offices. The treasury department's primary focus is managing the Bank's investments, liquidity, and interest rate risk; while the residential lending segment is mainly responsible for the Bank's portfolio of single family and multifamily loans. Information about the financial results of our operating segments can be found in Note 23 of our consolidated financial statements presented elsewhere herein.

The Bank concentrates on marketing its services in the Los Angeles metropolitan area, Orange County, the San Francisco Bay area, San Mateo County, the Silicon Valley area in Santa Clara County and Alameda County, with a particular focus on regions with a high concentration of ethnic Chinese. The ethnic Chinese markets within the Bank's primary market area have experienced rapid growth in recent years. According to information provided by the California State Department of Finance, there were an estimated 4.7 million Asians and Pacific Islanders residing in California, or 13.2% of the total population, as of March 2004. As California continues to gain momentum as the hub of the Pacific Rim, the Bank provides important competitive advantages to its customers participating in the Asia Pacific marketplace. We believe that our customers benefit from our understanding of Asian markets and cultures, our corporate and organizational ties throughout Asia, as well as our international banking products and services. We believe that this approach, combined with the extensive ties of our management and Board of Directors to the growing Asian and ethnic Chinese communities, provide us with an advantage in competing for customers in our market area.

The banking and financial services industry in California generally, and in our market areas specifically, is highly competitive. The increasingly competitive environment is a result primarily of changes in regulation, changes in technology and product delivery systems, and the accelerating pace of consolidation among financial services providers.

The Bank competes for loans, deposits, and customers with other commercial banks, savings and loan associations and savings banks, securities and brokerage companies, mortgage companies, insurance companies, finance companies, money market funds, credit unions, and other nonbank financial service providers. Some of these competitors are larger in total assets and capitalization, have greater access to capital markets and offer a broader range of financial services than the Bank. The Bank has 49 locations located in the following counties: Los Angeles, Orange, San Francisco, San Mateo, Santa Clara and Alameda. Neither the deposits nor loans of the offices of the Bank exceed 1% of the deposits or loans of all financial services companies located in the counties in which it operates.

In December 2003, the Accounting Standards Executive Committee of the AICPA issued Statement of Position No. 03-3 ("SOP 03-3"), Accounting for Certain Loans or Debt Securities Acquired in a Transfer. SOP 03-3 addresses the accounting for differences between contractual cash flows and the cash flows expected to be collected from purchased loans or debt securities if those differences are attributable, in part, to credit quality. SOP 03-3 requires purchased loans and debt securities to be recorded initially at fair value based on the present value of the cash flows expected to be collected with no carryover of any valuation allowance previously recognized by the seller. Interest income should be recognized based on the effective yield from the cash flows expected to be collected. To the extent that the purchased loans or debt securities experience subsequent deterioration in credit quality, a valuation allowance would be established for any additional cash flows that are not expected to be received. However, if more cash flows subsequently are expected to be received than originally estimated, the effective yield would be adjusted on a prospective basis. SOP 03-3 will be effective for loans and debt securities acquired in the years beginning after December 15, 2004. Management does not expect the adoption of this statement to have a material impact on the Company's financial position, results of operations, or cash flows.

6

In March 2004, the Emerging Issues Task Force (EITF) reached consensus on the guidance provided in EITF Issue No. 03-1, The Meaning of Other- Than-Temporary Impairment and its Application to Certain Investments (EITF 03-1) as applicable to debt and equity securities that are within the scope of SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities and equity securities that are accounted for using the cost method specified in Accounting Policy Board Opinion No. 18, The Equity Method of Accounting for Investments in Common Stock. An investment is impaired if the fair value of the investment is less than its cost. EITF 03- 1 outlines that an impairment would be considered other-than-temporary unless: a) the investor has the ability and intent to hold an investment for a reasonable period of time sufficient for the recovery of the fair value up to (or beyond) the cost of the investment, and b) evidence indicating that the cost of the investment is recoverable within a reasonable period of time outweighs evidence to the contrary. Although not presumptive, a pattern of selling investments prior to the forecasted recovery of fair value may call into question the investor's intent. In addition, the severity and duration of the impairment should also be considered in determining whether the impairment is other-than-temporary. In September 2004, the FASB staff issued a proposed Board-directed FASB Staff Position, FSP EITF Issue 03-1-a, Implementation Guidance for the Application of Paragraph 16 of EITF Issue No. 03-1. The proposed FSP would provide implementation guidance with respect to debt securities that are impaired solely due to interest rates and/or sector spreads and analyzed for other-than-temporary impairment under paragraph 16 of Issue 03- 1. The Board also issued FSP EITF Issue 03-1-b, which delays the effective date for the measurement and recognition guidance contained in paragraphs 10-20 of EITF 03-1. The delay does not suspend the requirement to recognize other-than- temporary impairments as required by existing authoritative literature. Adoption of this standard may cause the Company to recognize impairment losses in the Consolidated Statements of Income which would not have been recognized under the current guidance or to recognize such losses in earlier periods, especially those due to increases in interest rates. Since fluctuations in the fair value for available-for-sale securities are already recorded in Accumulated Other Comprehensive Income, adoption of this standard is not expected to have a significant impact on stockholders' equity.

In December 2004, the FASB issued SFAS No. 123R, Share-Based Payment. This Statement supersedes APB Opinion No. 25, and its related implementation guidance, is a revision of SFAS No. 123, and amends SFAS No. 95, Statement of Cash Flows. This revision of SFAS No. 123 eliminates the ability for public companies to measure share-based compensation transactions at the intrinsic value as allowed by APB Opinion No. 25, and requires that such transactions be accounted for based on the grant date fair value of the award. This Statement also amends SFAS No. 95, to require that excess tax benefits be reported as a financing cash inflow rather than as a reduction of taxes paid. Under the intrinsic value method allowed under APB Opinion No. 25, the difference between the quoted market price as of the date of the grant and the contractual purchase price of the share is charged to operations over the vesting period, and no compensation expense is recognized for fixed stock options with exercise prices equal to the market price of the stock on the dates of grant. Under the fair value based method as prescribed by SFAS No. 123R, the Company is required to charge the value of all newly granted stock-based compensation to expense over the vesting period based on the computed fair value grant date of the award. Additionally, the fair value of the award is to be remeasured subsequently at each reporting date through the settlement date. Changes in fair value during the requisite service period are to be recognized as compensation cost over that period. The Statement does not specify a valuation technique to be used to estimate the fair value but states that the use of option-pricing models such as a lattice model (i.e. a binomial model) or a closed-end model (i.e. the Black-Scholes model) would be acceptable. The revised accounting for stock-based compensation requirements must be adopted no later than the beginning of the first interim or annual reporting period that begins after June 15, 2005.

The Company will adopt this Standard effective July 1, 2005, using the modified prospective method, recording compensation expense for all awards granted after the date of adoption and for the unvested portion of previously granted awards that remain outstanding at the date of adoption.

7

Currently, the Company does not recognize compensation expense for stock-based compensation. Management does not anticipate that this will have a material effect on the Company's results of operations, financial position or cash flows. Had the Company adopted SFAS No. 123R in prior periods, the impact on net income and earnings per share would have been similar to the pro forma net income and earnings per share in accordance with SFAS No. 123 as previously disclosed.

The Company's profitability, like that of most financial institutions, is primarily dependent on interest rate differentials. In general, the difference between the interest rates paid by the Bank on interest- bearing liabilities, such as deposits and other borrowings, and the interest rates received by the Bank on interest-earning assets, such as loans extended to its clients and securities held in its investment portfolio, comprise the major portion of the Company's earnings. These rates are highly sensitive to many factors that are beyond the control of the Company and the Bank, such as inflation, recession and unemployment. Additionally, the impact which future changes in domestic and foreign economic conditions might have on the Company and the Bank cannot be predicted.

The business of the Company is also influenced by the monetary and fiscal policies of the federal government and the policies of regulatory agencies, particularly the Board of Governors of the Federal Reserve System, or the "FRB" or "Federal Reserve." The FRB implements national monetary policies (with objectives such as curbing inflation and combating recession) through its open-market operations in U.S. Government securities by adjusting the required level of reserves for depository institutions subject to its reserve requirements and by varying the target federal funds and discount rates applicable to borrowings by depository institutions. The actions of the FRB in these areas influence the growth of bank loans, investments and deposits and also affect interest rates earned on interest-earning assets and paid on interest-bearing liabilities. The nature and impact of any future changes in monetary and fiscal policies cannot be predicted.

From time to time, legislation, as well as regulations, are enacted which have the effect of increasing the cost of doing business, limiting or expanding permissible activities, or affecting the competitive balance between banks and other financial services providers. Proposals to change the laws and regulations governing the operations and taxation of banks, bank holding companies, financial holding companies, and other financial institutions and financial services providers are frequently made in the U.S. Congress, in the state legislatures, and before various regulatory agencies. This legislation may change banking statutes and the operating environment of the Company and its subsidiaries in substantial and unpredictable ways. If enacted, such legislation could increase or decrease the cost of doing business, limit or expand permissible activities or affect the competitive balance among banks, savings associations, credit unions, and other financial institutions. The Company cannot predict whether any of this potential legislation will be enacted, and if enacted, the effect that it, or any implementing regulations, would have on the financial condition or results of operations of the Company or any of its subsidiaries. See "Item 1. BUSINESS - Supervision and Regulation."

Supervision and Regulation

Bank holding companies and banks are extensively regulated under both federal and state law. This regulation is intended primarily for the protection of depositors and the deposit insurance fund and not for the benefit of stockholders of the Company. Set forth below is a summary description of the material laws and regulations that relate to the operations of the Company. The description is qualified in its entirety by reference to the applicable laws and regulations.

8

The Company

The Company, as a registered bank holding company, is subject to regulation and supervision under the Bank Holding Company Act of 1956, as amended, or the "BHCA". The Company is required to file with the FRB periodic reports and such additional information as the FRB may require pursuant to the BHCA. The FRB may conduct examinations of the Company and its subsidiaries.

The FRB may require that the Company terminate an activity or terminate control of or liquidate or divest certain subsidiaries, affiliates or investments if the FRB believes the activity or the control of the subsidiary or affiliate constitutes a significant risk to the financial safety, soundness or stability of our bank subsidiaries. The FRB also has the authority to regulate provisions of certain bank holding company debt, including the authority to impose interest ceilings and reserve requirements on such debt. Under certain circumstances, the Company must file written notice and obtain approval from the FRB prior to purchasing or redeeming its equity securities.

Further, the Company is required by the FRB to maintain certain levels of capital. See "Item 1. BUSINESS - Supervision and Regulation - Capital Standards."

The Company is required to obtain the prior approval of the FRB for the acquisition of more than 5% of the outstanding shares of any class of voting securities or substantially all of the assets of any bank or bank holding company. Prior approval of the FRB is also required for the merger or consolidation of the Company and another bank holding company.

The Company is prohibited by the BHCA, except in certain statutorily prescribed instances, from acquiring direct or indirect ownership or control of more than 5% of the outstanding voting shares of any company that is not a bank or bank holding company and from engaging directly or indirectly in activities other than those of banking, managing or controlling banks, or furnishing services to its subsidiaries. However, the BHCA provides that, subject to notice or approval from the FRB, a bank holding company may engage in any, or acquire shares of companies engaged in, activities that are deemed by the FRB to be so closely related to banking or managing or controlling banks as to be a proper incident thereto. The Company may also engage in these and certain other activities pursuant to its election to become a financial holding company.

Under FRB regulations, a bank holding company is required to serve as a source of financial and managerial strength to its subsidiary banks and may not conduct its operations in an unsafe or unsound manner. In addition, it is the FRB's policy that a bank holding company should stand ready to use available resources to provide adequate capital funds to its subsidiary banks during periods of financial stress or adversity and should maintain the financial flexibility and capital-raising capacity to obtain additional resources for assisting its subsidiary banks. A bank holding company's failure to meet its obligations to serve as a source of strength to its subsidiary banks will generally be considered by the FRB to be an unsafe and unsound banking practice or a violation of the FRB's regulations or both.

The Company is also a bank holding company within the meaning of Section 3700 of the California Financial Code. As such, the Company and its subsidiaries are subject to the jurisdiction of the California Commissioner of Financial Institutions, or the "Commissioner" and are subject to examination by, and may be required to file reports with, the California Department of Financial Institutions, or the "DFI" ..

9

The Company's securities are registered with the Securities and Exchange Commission, or the "SEC" under the Exchange Act. As such, the Company is subject to the information, proxy solicitation, insider trading, corporate governance, and other requirements and restrictions of the Exchange Act.

Bank holding companies that elect to become a financial holding company may affiliate with securities firms and insurance companies and engage in other activities without prior FRB notice or approval that are determined by the FRB to be financial in nature or are incidental or complementary to activities that are financial in nature. "Financial in nature" activities include:

• lending, exchanging, transferring, investing for others, or safeguarding financial assets other than money or securities;
• providing any device or other instrumentality for transferring money or other financial assets;
• arranging, effecting or facilitating financial transactions for the account of third parties
• securities underwriting;
• dealing and market making;
• sponsoring mutual funds and investment companies;
• insurance underwriting and agency sales;
• merchant banking investments
• activities that the FRB, in consultation with the Secretary of the Treasury, determines from time to time to be so closely related to banking or managing or controlling banks as to be a proper incident thereto.

In order to elect or retain financial holding company status, all of a bank holding company's depository institution subsidiaries must be well capitalized, well managed, and, except in limited circumstances, be in satisfactory compliance with the Community Reinvestment Act, or the "CRA". Failure to sustain compliance with these requirements or correct any non-compliance within a fixed time period could lead to divestiture of subsidiary banks or require all activities to conform to those permissible for a bank holding company. A bank holding company that is not also a financial holding company can only engage in banking and such other activities determined by the FRB to be so closely related to banking or managing or controlling banks as to be a proper incident thereto.

The Company elected to become a financial holding company on July 17, 2000 and is currently in compliance with the financial holding company election requirements.

As a California-chartered bank, the Bank is subject to primary supervision, periodic examination, and regulation by the Commissioner and the DFI. In addition to activities and investments permissible under the California Financial Code, because California permits commercial banks chartered by the state to engage in any activity permissible for national banks, the Bank can establish "financial subsidiaries" to engage to the same extent as a national bank in activities that are "financial in nature", except that a financial subsidiary may not engage as principal in underwriting insurance, issue securities or engage in real estate development or investment or merchant banking. In order to form a financial subsidiary, the bank must be well-capitalized and would be subject to the certain capital deduction, risk management and affiliate transaction rules. Presently, none of Bank's subsidiaries are financial subsidiaries.

Wellington Chen joined East West Bank in December 2003 as Executive Vice President and Director of Corporate Banking Division. Prior to joining the Bank, Mr. Chen was Senior Executive Vice President of Far East National Bank ("Far East") heading up their Commercial Banking and Consumer Banking groups. He also served on the Board of Directors of Far East. Mr. Chen began his career with Far East in 1986 where he held a variety of branch and credit management positions. Prior to that, Mr. Chen was employed for 3 years with Security Pacific National Bank where he completed the management training program and served as an asset-based lending auditor.

Kwok-Yin Cheng serves as Executive Vice President and Director of International Banking of East West Bank. Prior to joining the Bank in June 1999, Mr. Cheng was the general manager of the Pacific Rim Business Division at Union Bank of California. Mr. Cheng has over 25 years of experience in international banking, including 13 years at Wells Fargo Bank, two years at First Interstate Bank and six years at Mitsui Manufacturing Bank. He currently serves as the Chairman of the Los Angeles-Long Beach World Trade Center Association, Executive Director of the Los Angeles Economic Development Corporation and President of the National Association of Chinese American Bankers. Mr. Cheng is also a member of the Pacific Council on International Policy.

Donald Chow serves as Executive Vice President and Director of Commercial Lending of East West Bank. Mr. Chow joined the Bank in 1993 as First Vice President and Commercial Lending Manager and was promoted to Senior Vice President in 1994. Mr. Chow has over 30 years of experience in commercial lending. Before joining the Bank, Mr. Chow was First Vice President and Senior Credit Officer for Mitsui Manufacturers Bank, from 1987 to 1993, and prior to that spent over 14 years with Security Pacific National Bank where he held a number of management positions in the commercial lending area.

Julia Gouw is Executive Vice President and Chief Financial Officer of East West Bancorp, Inc. and East West Bank.  Ms. Gouw joined the Bank in 1989 as Vice President and Controller and was promoted to her current position in 1994.  Prior to joining East West, she spent over five years as a Certified Public Accountant with KPMG LLP where she reached the position of Senior Audit Manager. Ms. Gouw serves on the Board of Visitors of the UCLA School of Medicine and Chairs the Executive Advisory Board of the Iris Cantor-UCLA Women's Health Center. Ms. Gouw is also on the Board of Directors of Huntington Memorial Hospital and is a member of the Financial Executives' Institute and the California Society of Certified Public Accountants.

Douglas Krause serves as Executive Vice President, General Counsel, and Secretary of East West Bancorp, Inc. and East West Bank. Prior to joining the Bank in 1996 as Senior Vice President, Mr. Krause was Corporate Senior Vice President and General Counsel of Metrobank from 1991 to 1996. Prior to that, Mr. Krause was with the law firms of Dewey Ballantine and Jones, Day, Reavis and Pogue where he specialized in financial services.

Michael Lai serves as Executive Vice President of East West Bank's Northern California operations. Mr. Lai has over 25 years of experience in banking and has held a number of senior management positions. Before joining the Bank October 2000, Mr. Lai managed several private investments and provided consulting services to various financial institutions related to business organization and financing issues. Prior to that, Mr. Lai served as President, Chief Executive Officer and Director of United Savings Bank from 1994 to 1996, and as Senior Vice President, Chief Credit Officer and Director from 1991 to 1994. Mr. Lai has also worked in various management capacities for financial institutions located in New York and Hong Kong.

21

William Lewis joined East West Bank in January 2002 as Executive Vice President and Chief Credit Officer. Mr. Lewis has over 30 years of experience in banking, including a number of senior management positions.  He was Executive Vice President and Chief Credit Officer of PriVest Bank from 1998 to 2002 and held the same positions with Eldorado Bank from 1994 to 1998. Prior to this, Mr. Lewis was with Sanwa Bank for over 12 years where he administered a 35 branch region.  Before that, Mr. Lewis spent 13 years with First Interstate Bank where he held a variety of branch and credit management positions.

David Spigner joined East West Bank in April 2004 as Executive Vice President and Chief Strategic Officer. Prior to joining the Bank, Mr. Spigner served as Managing Principal of Strategic Business Management, a management consulting practice of which the Bank was a client. His career includes eight years in management consulting, five of which he worked for Deloitte & Touche LLP. He served as President and Chief Executive Officer of Lil Tots, LLC for five years and prior to that served as President of Seyen Trading Inc. for approximately three years.

Market Information

East West Bancorp, Inc. commenced trading on the NASDAQ National Market on February 8, 1999 under the symbol "EWBC." The following table sets forth the range of sales prices for the Company's common stock for the years ended December 31, 2004 and 2003. All sales prices have been adjusted to reflect the two-for-one stock split that became effective on or about June 21, 2004.

                               2004                2003
                        ------------------  ------------------
                          High      Low       High      Low
                        --------  --------  --------  --------
       First quarter   $  28.05  $  24.45  $  19.24  $  14.63
       Second quarter     31.13     26.55     18.75     15.22
       Third quarter      37.25     29.70     22.79     17.74
       Fourth quarter     43.68     33.40     27.51     21.31

The foregoing reflects information available to the Company and does not necessarily include all trades in the Company's stock during the periods indicated. The closing price of our common stock on March 10, 2005 was $37.63 per share, as reported by the Nasdaq National Market.

Holders

As of February 28, 2005, there were 1,029 holders of record of the Company's common stock.

Dividends

We declared and paid cash dividends of $0.05 per share during each of the four quarters of 2003 and 2004. We also declared a dividend of $0.05 per share in the first quarter of 2005. Refer to "Item 1. BUSINESS -- Regulation and Supervision -- Restrictions on Transfer of Funds to the Company by the Bank" for information regarding dividend payment restrictions.

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The following selected financial data should be read in conjunction with the Company's consolidated financial statements and the accompanying notes presented elsewhere herein.

                                                            2004         2003        2002         2001         2000
                                                         -----------  ----------  -----------  -----------  -----------
                                                                         (In thousands, except per share data)         
Summary of Operations:                                                                                                 
Interest and dividend income                            $   252,070  $  178,543  $   167,288  $   183,695  $   186,594
Interest expense                                             52,897      35,232       48,979       83,348       96,593
                                                         -----------  ----------  -----------  -----------  -----------
Net interest income                                         199,173     143,311      118,309      100,347       90,001
Provision for loan losses                                    16,750       8,800       10,200        6,217        4,400
                                                         -----------  ----------  -----------  -----------  -----------
Net interest income after provision for loan losses         182,423     134,511      108,109       94,130       85,601
Noninterest income                                           31,826      32,766       24,511       20,761       14,495
Noninterest expense                                          92,916      77,617       63,804       62,291       50,001
                                                         -----------  ----------  -----------  -----------  -----------
Income before provision for income taxes                    121,333      89,660       68,816       52,600       50,095
Provision for income taxes                                   43,311      30,668       20,115       13,730       14,628
                                                         -----------  ----------  -----------  -----------  -----------
Income before cumulative effect of change in
  accounting principle                                       78,022      58,992       48,701       38,870       35,467
                                                         -----------  ----------  -----------  -----------  -----------
Cumulative effect of change in accounting principle,
  net of tax                                                     --          --          788          (87)          --
                                                         -----------  ----------  -----------  -----------  -----------
Net income                                              $    78,022  $   58,992  $    49,489  $    38,783  $    35,467
                                                         ===========  ==========  ===========  ===========  ===========

Basic earnings per share (1)                            $      1.54  $     1.23  $      1.05  $      0.84  $      0.79
Diluted earnings per share (1)                          $      1.49  $     1.19  $      1.00  $      0.81  $      0.77
Dividends per share (1)                                 $      0.20  $     0.20  $      0.14  $      0.06  $      0.06
Average number of shares outstanding, basic (1)              50,654      48,112       47,192       46,066       44,896
Average number of shares outstanding, diluted (1)            52,297      49,486       49,260       48,108       46,336

At Year End:                                                                                                           
Total assets                                            $ 6,028,880  $4,055,433  $ 3,321,489  $ 2,825,303  $ 2,485,971
Loans receivable, net                                     5,080,454   3,234,133    2,313,199    2,132,838    1,789,988
Investment securities available-for-sale                    534,452     445,142      531,607      323,099      488,290
Deposits                                                  4,522,517   3,312,667    2,926,352    2,417,974    1,948,562
Federal Home Loan Bank advances                             860,803     281,300       34,000      104,000      268,000
Stockholders' equity                                        514,309     361,983      302,117      244,415      186,149

Shares outstanding (1)                                       52,501      48,858       47,764       46,752       45,322
Book value per share (1)                                $      9.80  $     7.41  $      6.33  $      5.23  $      4.11

Financial Ratios:                                                                                                      
Return on average assets                                       1.57 %      1.64 %       1.63 %       1.47 %       1.51
Return on average equity                                      17.86       18.12        18.29        17.73        21.57
Dividend payout ratio                                         12.93       16.31        12.87         7.13         7.60
Average stockholders' equity to average assets                 8.77        9.04         8.92         8.26         7.02
Net interest margin                                            4.24        4.26         4.14         4.02         4.06
Efficiency ratio (2)                                          36.05       39.16        40.12        45.30        40.88

Asset Quality Ratios:                                                                                                  
Net chargeoffs to average loans                                0.12 %      0.06 %       0.11 %       0.21 %       0.22
Nonperforming assets to year end total assets                  0.10        0.16         0.37         0.20         0.30
Allowance for loan losses to year end total gross loans        0.99        1.20         1.50         1.28         1.31

____________

25

The following discussion provides information about the results of operations, financial condition, liquidity, and capital resources of East West Bancorp, Inc. and its subsidiaries, or the "Company". This information is intended to facilitate the understanding and assessment of significant changes and trends related to our financial condition and the results of our operations. This discussion and analysis should be read in conjunction with the Company's consolidated financial statements and the accompanying notes presented elsewhere herein. Information related to share volume and per share amounts have been adjusted to reflect the two-for-one stock split that became effective on or about June 21, 2004.

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States of America and general practices within the banking industry. The financial information contained within these statements is, to a significant extent, financial information that is based on approximate measures of the financial effects of transactions and events that have already occurred. All our significant accounting principles are described in Note 1 of our consolidated financial statements presented elsewhere herein and are essential to understanding Management's Discussion and Analysis of Financial Condition and Results of Operations. Some of our accounting principles require significant judgment to estimate values of either assets or liabilities. In addition, certain accounting principles require significant judgment in applying complex accounting principles to individual transactions to determine the most appropriate treatment. We have established procedures and processes to facilitate making the judgments necessary to prepare financial statements.

The following is a summary of the more judgmental and complex accounting estimates and principles. In each area, we have identified the variables most important in the estimation process. We have used the best information available to make the estimations necessary to value the related assets and liabilities. Actual performance that differs from our estimates and future changes in the key variables could change future valuations and impact net income.

The classification and accounting for investment securities are discussed in detail in Note 1 of the consolidated financial statements presented elsewhere herein. Under SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, investment securities generally must be classified as held-to-maturity, available-for-sale or trading. The appropriate classification is based partially on our ability to hold the securities to maturity and largely on management's intentions with respect to either holding or selling the securities. The classification of investment securities is significant since it directly impacts the accounting for unrealized gains and losses on securities. Unrealized gains and losses on trading securities flow directly through earnings during the periods in which they arise, whereas for available-for-sale securities, they are recorded as a separate component of stockholders' equity (accumulated comprehensive other income or loss) and do not affect earnings until realized. The fair values of our investment securities are generally determined by reference to quoted market prices and reliable independent sources. We are obligated to assess, at each reporting date, whether there is an "other-than-temporary" impairment to our investment securities. Such impairment must be recognized in current earnings rather than in other comprehensive income. Aside from the Freddie Mac preferred stock that was determined to be impaired and written down during the second quarter of 2004, we did not have any other investment securities that were deemed to be "other-than-temporarily" impaired as of December 31, 2004. Investment securities are discussed in more detail in Note 5 to the consolidated financial statements presented elsewhere herein.

26

Allowance for Loan Losses

Our allowance for loan loss methodologies incorporate a variety of risk considerations, both quantitative and qualitative, in establishing an allowance for loan loss that management believes is appropriate at each reporting date. Quantitative factors include our historical loss experience, delinquency and charge-off trends, collateral values, changes in nonperforming loans, and other factors. Quantitative factors also incorporate known information about individual loans, including borrowers' sensitivity to interest rate movements and borrowers' sensitivity to quantifiable external factors including commodity and finished good prices as well as acts of nature (earthquakes, floods, fires, etc.) that occur in a particular period. Qualitative factors include the general economic environment in our markets and, in particular, the state of certain industries. Size and complexity of individual credits, loan structure, extent and nature of waivers of existing loan policies and pace of portfolio growth are other qualitative factors that are considered in our methodologies. As we add new products, increase the complexity of our loan portfolio, and expand our geographic coverage, we will enhance our methodologies to keep pace with the size and complexity of the loan portfolio. Changes in any of the above factors could have significant impact to the loan loss calculation. We believe that our methodologies continue to be appropriate given our size and level of complexity. This discussion should be read in conjunction with the consolidated financial statements and the accompanying notes presented elsewhere herein including the section "Loans and Allowance for Loan Losses."

Loan Sales

We routinely sell, and occasionally securitize, residential mortgage loans to secondary market investors. When mortgage loans are sold, we generally retain the right to service these loans and we may retain residual and other interests, which are considered retained interests in the sold or securitized loans. The gain on sale recorded on these loans depends, in part, on our allocation of the previous carrying amount of the loans to the retained interests. Previous carrying amounts are allocated in proportion to the relative fair values of the loans sold and the interests retained. The fair values of retained interests are estimated based upon the present value of the associated expected future cash flows taking into consideration future prepayment rates, discount rates, expected credit losses, and other factors that impact the value of the retained interests.

We may also record mortgage-servicing assets ("MSA") when the benefits of servicing are expected to be more than adequate compensation to a servicer. The Company determines whether the benefits of servicing are expected to be more than adequate compensation to a servicer by discounting all of the future net cash flows associated with the contractual rights and obligations of the servicing agreement. The expected future net cash flows are discounted at a rate equal to the return that would adequately compensate a substitute servicer for performing the servicing. In addition to the anticipated rate of loan prepayments and discount rates, other assumptions such as the cost to service the underlying loans, foreclosure costs, ancillary income and float rates are also used in determining the value of the MSAs. Mortgage-servicing assets are discussed in more detail in Notes 1 and 11 to the consolidated financial statements presented elsewhere herein.

We estimate tax expense based on the amount we expect to owe various tax authorities. Taxes are discussed in more detail in Note 16 to the consolidated financial statements presented elsewhere herein. Accrued taxes represent the net estimated amount due or to be received from taxing authorities. In estimating accrued taxes, we assess the relative merits and risks of the appropriate tax treatment of transactions taking into account statutory, judicial and regulatory guidance in the context of our tax position.

27

Overview

We achieved our eighth consecutive year of record earnings and growth during 2004. Net income for the year totaled $78.0 million, or $1.49 on a per diluted share basis, a 25% increase from the $59.0 million, or $1.19 per diluted share, earned during 2003. Our earnings performance is attributable to a significant increase in net interest income resulting from continued strong loan growth as well as continued operating efficiencies and solid asset quality.

Our return on average assets in 2004 was 1.57%, compared to 1.64% in 2003 and return on average equity was 17.86% in 2004, compared to 18.12% in 2003. Management expects net income per diluted common share for 2005 to be approximately 18% to 19% higher than in 2004 based on a projected loan growth of 18% to 20% and deposit growth of approximately 15% to 17%. Our earnings projection for 2005 also assumes a stable interest rate environment and continued operating efficiency.

One of the highlights of 2004 was the approval by the Company's Board of Directors of a two-for-one stock split in the form of a 100% stock dividend. Shareholders of record at the close of business on June 3, 2004 received one additional share of common stock for each share of common stock held by them on that date. The additional stock was distributed to shareholders of record on June 21, 2004.

Another major highlight during the year was the completion of the Trust Bancorp acquisition in August 2004 in an all-stock transaction valued at $32.9 million. Trust Bancorp is the parent company of Trust Bank which was founded in 1981 and offered community banking services to both retail and commercial customers through four branches located in the greater Los Angeles area. As of the acquisition date, Trust Bank had total assets of $250.5 million, loans of $164.0 million and total deposits of $193.4 million. We were able to successfully integrate all of Trust Bank's systems into our infrastructure shortly after the closing of the transaction. The acquisition also added over 4,000 deposit customers to our existing customer base, generating additional lending and deposit opportunities for the Company.

Total noninterest income decreased 3% to $31.8 million during 2004, compared to the $32.8 million earned during 2003. This decline is primarily attributable to a decrease in income from secondary marketing activities of 82% to $1.0 million in 2004, from $5.7 million in 2003. As a result of increases in interest rates by the Federal Reserve, we have seen a marked shift in loan origination activity from fixed rate mortgages to adjustable rate mortgages. As we typically sell fixed rate mortgage loans in the secondary market and retain the adjustable rate mortgage loans in our portfolio, we decreased our overall secondary market activity in 2004, as compared to 2003. Partially offsetting this decrease in secondary marketing revenues during 2004 was a $3.0 million net gain on sale of fixed assets, compared to a net loss of $167 thousand during 2003. The net gain on sale of fixed assets can be predominantly attributed to the sale of three buildings previously owned by the Company.

As a result of our continued expansion during 2004, total noninterest expense increased 20% to $92.9 million in 2004, compared with $77.6 million for the prior year. This increase is primarily driven by a 23% increase in compensation and employee benefits and an 18% increase in occupancy expenses. The addition of several relationship and operational personnel during late 2003 and throughout 2004 to enhance and support our loan and deposit growth was the primary catalyst for the increase in compensation expense. The addition of four branches and personnel from Trust Bank further contributed to higher compensation and occupancy expenses during 2004. Despite the increase in overall expenses, our efficiency ratio, which represents noninterest expense (excluding the amortization of intangibles and investments in affordable housing partnerships) divided by the aggregate of net interest income before provision for loan losses and noninterest income, decreased to 36.05% during 2004, compared to 39.16% during 2003. We believe this to be a reflection of our ability to efficiently and effectively utilize our resources and operating platform to support our continuing growth. Due to the overall growth of the Bank and the scheduled relocation of our corporate headquarters, we anticipate noninterest expenses for 2005 to increase by 19% to 23%, but expect our efficiency ratio to remain in the 36% to 38% range.

28

Total consolidated assets at December 31, 2004 increased 49% to $6.03 billion, compared with $4.06 billion at December 31, 2003. A 57% growth in gross loans was the primary driver of this increase. Excluding the impact of the Trust Bank acquisition, organic loan growth was 52% during 2004. We attribute overall loan growth to the expansion of relationships throughout California, the addition of seasoned and skilled banking professionals, the attractiveness of a number of our loan programs and increased loan origination volume from our branch network. We estimate loan growth in 2005 to be 18% to 20%, reflecting the core rate of growth in the Bank's lending markets, the addition of new client relationships, and the utilization of additional lending programs and products.

Total average assets increased 38% to $4.98 billion in 2004, compared to $3.60 billion in 2003, due primarily to average loan growth. Total average loans grew to $4.17 billion during 2004, an increase of 51% over the prior year. Year- over-year average loan growth was driven largely by increases in residential multifamily and commercial real estate loans. Total average deposits rose 24% during 2004 to $3.78 billion, compared to $3.06 billion in 2003. Almost all deposit categories experienced double-digit gains during 2004, with the most significant contributions coming from time, money market and noninterest bearing demand deposits. The growth in time deposits is due to the introduction of various new products and promotions during the year while the growth in core deposits can be attributed to the Bank's efforts to expand its small- and mid-sized commercial customer base through innovative programs at the retail branches that better fulfill the needs of these customers.

Net interest income increased 39% to $199.2 million during 2004, compared with $143.3 million during 2003. The increase in net interest income is predominantly due to the significant loan growth experienced during 2004 partially offset by fairly robust increases in time deposits and FHLB advances. Despite steady increases in interest rates by the Federal Reserve during the second half of 2004, our net interest margin decreased slightly to 4.24% during 2004, from 4.26% during 2003, primarily due to a substantial increase in average earning assets which grew 40% during 2004. Assuming a stable interest rate environment during 2005, we anticipate the net interest margin for 2005 to be in the range of 4.35% to 4.40%.

Total nonperforming assets were $5.9 million, or 0.10% of total assets at December 31, 2004, compared with $6.6 million, or 0.16% of total assets, at December 31, 2003. The allowance for loan losses totaled $50.9 million at December 31, 2004, or 0.99% of outstanding total loans. Net loan chargeoffs totaled $5.1 million, or 0.12% of average loans, during 2004, compared with $1.5 million, or 0.06% of average loans, during 2003. We anticipate our overall asset quality to remain sound throughout 2005. We project that nonperforming assets will continue to be below 0.50% of total assets and that net chargeoffs will remain below 0.35% of average loans in 2005.

We continue to be well-capitalized under all regulatory guidelines with a Tier I risk-based capital ratio of 9.8%, a total risk-based capital ratio of 10.9%, and a Tier I leverage ratio of 9.1% at December 31, 2004. During 2004, we raised $25.8 million in additional regulatory capital through the issuance of trust preferred securities in two separate trust preferred offerings. Trust preferred securities currently qualify as Tier I capital for regulatory purposes. We also completed a private placement of common stock with two institutional investors amounting to approximately $30 million in March 2004. In addition, these investors exercised their option to purchase additional shares of the Company's common stock amounting to $10.0 million during August 2004. The net proceeds from the trust preferred offerings and private placement transactions were used for general corporate purposes, including support for the continued growth of the Bank.

29

Results of Operations

Net income for 2004 totaled $78.0 million, compared with $59.0 million for 2003 and $49.5 million for 2002, representing an increase of 32% for 2004 and 19% for 2003. On a per diluted share basis, net income was $1.49, $1.19 and $1.00 for 2004, 2003 and 2002, respectively. The increase in net earnings during 2004 is attributable to significantly higher net interest income, partially offset by higher provision for loan losses, operating expenses and provision for income taxes. Earnings in 2003 improved over 2002 due to higher net interest income and noninterest-related revenues and lower provision for loan losses, partially offset by higher operating expenses and provision for income taxes.

Our return on average total assets declined to 1.57% in 2004, compared to 1.64% in 2003 and 1.63% in 2002, while the return on average stockholders' equity declined to 17.86% in 2004, compared with 18.12% in 2003 and 18.29% in 2002. The lower return on average total assets in 2004, as compared to prior years, can be attributed to the 38% increase in average total assets primarily due to loan growth. Similarly, the decrease in average stockholders' equity in 2004, in comparison to prior years, is due to a higher level of average stockholders' equity arising from increased retained earnings, as well as additional issuances of common stock pursuant to private placement transactions, the employee stock purchase plan, and stock option and warrant exercises.

Table 1: Components of Net Income

                                                         2004       2003       2002
                                                       ---------  ---------  ---------
                                                                (In millions)        
Net interest income                                   $   199.2  $   143.3  $   118.3
Provision for loan losses                                 (16.8)      (8.8)     (10.2)
Noninterest income                                         31.8       32.8       24.5
Noninterest expense                                       (92.9)     (77.6)     (63.8)
Provision for income taxes                                (43.3)     (30.7)     (20.1)
Cumulative effect of change in accounting principle          --         --        0.8
                                                       ---------  ---------  ---------
  Net income                                          $    78.0  $    59.0  $    49.5
                                                       =========  =========  =========
Return on average total assets                             1.57%      1.64%      1.63%
                                                       =========  =========  =========
Return on average stockholders' equity                    17.86%     18.12%     18.29%
                                                       =========  =========  =========

Our primary source of revenue is net interest income, which is the difference between interest earned on loans, investment securities and other earning assets less the interest expense on deposits, borrowings and other interest-bearing liabilities. Net interest income in 2004 totaled $199.2 million, a 39% increase over net interest income of $143.3 million in 2003.

Total interest and dividend income during 2004 increased 41% to $252.1 million compared with $178.5 million during 2003 primarily due to a 40% growth in average earning assets, partially offset by lower yields on all categories of earning assets. The net growth in average earning assets was fueled by a 51% growth in average loans, which increased to $4.17 billion in 2004, from $2.75 billion in 2003. Increases in all deposit categories and FHLB advances funded the growth in average earning assets.

30

Total interest expense during 2004 increased 50% to $52.9 million compared with $35.2 million a year ago. This increase in interest expense is primarily attributable to the higher volume of average FHLB advances, time deposit and money market accounts, and junior subordinated debt during 2004. These volume increases are partially offset by lower rates paid on time deposits, FHLB advances, and junior subordinated debt.

Net interest margin, defined as taxable equivalent net interest income divided by average earning assets, remained relatively stable, decreasing 2 basis points to 4.24% during 2004, from 4.26% during 2003. The overall yield on earning assets increased 5 basis points to 5.36% in 2004, from 5.31% in 2003, due to Federal Reserve interest rate increases during the second half of 2004 as well as loans comprising a larger percentage of average earning assets in 2004 relative to 2003. Similarly, our overall cost of funds in 2004 increased by 5 basis points to 1.50% in response to the increasing interest rate environment, compared to 1.45% for 2003. To facilitate the funding of our significant loan growth during 2004, we increased our utilization of FHLB advances and time deposits, which contributed to the overall increase in our cost of funds for the year. Notwithstanding our increased utilization of FHLB advances and time deposits to fund our substantial loan growth during 2004, we continue to rely heavily on noninterest-bearing demand deposits as a significant funding source, with average noninterest-bearing demand deposits increasing 19% to $950.9 million during 2004, compared with $796.8 million during 2003.

Comparing 2003 to 2002, our net interest margin increased 12 basis points to 4.26% in 2003, compared to 4.14% in 2002 due to the disproportionate impact of lower interest rates on our overall yields compared to our overall cost of funds. In 2003, our overall yield on earning assets decreased 55 basis points to 5.31%, from 5.86% in 2002, due to Federal Reserve interest rate cuts, while our overall cost of funds decreased 79 basis points to 1.45%, from 2.24% during 2002, in response to the declining interest rate environment. The steady downward repricing of our time deposit portfolio accounted for the majority of the reduction in our cost of funds during 2003.

The following table presents the net interest spread, net interest margin, average balances, interest income and expense, and the average yields and rates by asset and liability component for the years ended December 31, 2004, 2003 and 2002:

31

Table 2: Summary of Selected Financial Data

                                                                               Year Ended December 31,
                                   ----------------------------------------------------------------------------------------------
                                                 2004                            2003                            2002
                                   ------------------------------  ------------------------------  ------------------------------
                                                          Average                         Average                         Average
                                    Average                Yield    Average                Yield    Average                Yield
                                    Balance    Interest    Rate     Balance    Interest    Rate     Balance    Interest    Rate  
                                   ----------  ---------  -------  ----------  ---------  -------  ----------  ---------  -------
                                                                         (Dollars in thousands)                                 
ASSETS                                                                                                                                      
Interest-earning assets:
 Short-term investments           $   54,739  $     639     1.17% $  139,985  $   1,830     1.31% $  156,739  $   2,806     1.79%
 Investment securities (1)(2)(3)     440,456     14,597     3.31%    457,234     16,309     3.57%    379,668     13,916     3.67%
 Loans receivable (1)(4)           4,170,524    235,385     5.64%  2,754,620    159,910     5.81%  2,309,909    150,053     6.50%
 FHLB and FRB stock                   35,811      1,449     4.05%     11,025        494     4.48%      9,110        513     5.63%
                                   ----------  ---------           ----------  ---------           ----------  ---------
  Total interest-earning assets    4,701,530    252,070     5.36%  3,362,864    178,543     5.31%  2,855,426    167,288     5.86%
                                               ---------  -------              ---------  -------              ---------  -------

Noninterest-earning assets:
 Cash and due from banks              89,857                          80,643                          66,081
 Allowance for loan losses           (44,273)                        (39,135)                        (31,579)
 Other assets                        232,913                         196,093                         144,138
                                   ----------                      ----------                      ----------
  Total assets                    $4,980,027                      $3,600,465                      $3,034,066
                                   ==========                      ==========                      ==========

LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                                        
Interest-bearing liabilities:
 Checking accounts                $  291,761  $   1,175     0.40% $  267,981  $     776     0.29% $  212,281  $   1,409     0.66%
 Money market accounts               416,548      4,797     1.15%    224,951      1,710     0.76%    163,789      2,237     1.37%
 Savings deposits                    322,511        486     0.15%    290,251        362     0.12%    241,894        930     0.38%
 Time deposits                     1,798,397     31,438     1.75%  1,476,099     27,098     1.84%  1,453,295     38,999     2.68%
 Short-term borrowings                 3,028         61     2.01%      3,044         47     1.54%      3,393         76     2.24%
 FHLB advances                       648,529     11,801     1.82%    146,822      2,959     2.02%     87,040      3,064     3.52%
 Junior subordinated debt             39,857      3,139     7.88%     21,161      2,280    10.77%     20,750      2,264    10.91%
                                     --------  ---------           ----------  ---------           ----------  ---------
  Total interest-bearing
   liabilities                     3,520,631     52,897     1.50%  2,430,309     35,232     1.45%  2,182,442     48,979     2.24%
                                               ---------  -------              ---------  -------              ---------  -------

Noninterest-bearing liabilities:
 Demand deposits                     950,890                         796,800                         546,332
 Other liabilities                    71,771                          47,711                          34,666
Stockholders' equity                 436,735                         325,645                         270,626
                                    ----------                      ----------                      ----------
   Total liabilities and
     stockholders' equity          $4,980,027                      $3,600,465                      $3,034,066
                                   ==========                      ==========                      ==========
Interest rate spread                                        3.86%                           3.86%                           3.62%
                                                          =======                         =======                         =======
Net interest income and
  net interest margin                         $ 199,173     4.24%             $ 143,311     4.26%             $ 118,309     4.14%
                                               =========  =======              =========  =======              =========  =======

(1)Includes amortization of premiums and accretion of discounts on investment securities and loans receivable totaling $1.6 million, $1.9 million, and $1.7 million for the years ended December 31, 2004, 2003 and 2002, respectively. Also includes the amortization of deferred loan fees totaling $2.8 million, $1.2 million, and $1.5 million for the years ended December 31, 2004, 2003 and 2002, respectively.
(2) Average balances exclude unrealized gains or losses on available-for-sale securities.
(3) The yields are not presented on a tax-equivalent basis as the effects are not material.
(4) Average balances include nonperforming loans.

32

Table 3: Analysis of Changes in Net Interest Margin

____________

33

Noninterest Income

                                                      2004       2003       2002
                                                    ---------  ---------  ---------
                                                              (In millions)        
Letters of credit fees and commissions             $    7.98  $    7.12  $    5.64
Branch fees                                             6.99       7.23       6.19
Ancillary loan fees                                     4.75       4.16       3.37
Income from secondary market activities                 1.00       5.66       2.36
Net gain on investment securities available-for-sale    2.26       1.95       0.01
Net gain on sales of loans                              0.57       0.41       1.52
Net gain (loss) on disposal of fixed assets             3.03      (0.17)      0.04
Income from life insurance policies                     2.99       3.29       1.94
Other operating income                                  2.26       3.12       3.44
                                                    ---------  ---------  ---------
   Total                                           $   31.83  $   32.77  $   24.51
                                                    =========  =========  =========

                                                             At December 31,
                                                     -------------------------------
                                                       2004       2003       2002
                                                     ---------  ---------  ---------
                                                               (In thousands)       
U.S. Treasury securities                            $   2,496  $  26,228  $  28,769
U.S. Government agency securities and U.S.
  Government sponsored enterprise securities          336,614    273,105    281,491
Mortgage-backed securities                            133,652     67,761    159,410
Corporate debt securities                              18,288     30,050     25,890
U.S. Goverment sponsored enterprise
  equity securities                                    42,448     46,053     31,300
Residual interest in securitized loans                    954      1,945      4,747
                                                     ---------  ---------  ---------
  Total investment securities available-for-sale    $ 534,452  $ 445,142  $ 531,607
                                                     =========  =========  =========

East West Bancorp, Inc. (referred to herein on an unconsolidated basis as "East West" and on a consolidated basis as the "Company" or "we") is a registered bank holding company that offers a full range of banking services to individuals and small to mid-size businesses through its subsidiary bank, East West Bank and its subsidiaries (the "Bank"). The Bank is the Company's principal asset. The Bank operates 49 banking locations throughout California and specializes in financing international trade and lending for commercial, construction, and residential real estate projects. Included in the Bank's 49 locations are 8 in-store branches located in 99 Ranch Market stores in Southern and Northern California. The Bank's revenues are derived from providing financing for residential and commercial real estate and business customers, as well as investing activities. Funding for lending and investing activities is obtained through acceptance of customer deposits, Federal Home Loan Bank advances and other borrowing activities.

Formation of East West Mortgage Securities, LLC - On August 16, 2002, the Bank formed East West Mortgage Securities, LLC, a California limited liability company and wholly-owned subsidiary of the Bank. East West Mortgage Securities, LLC primarily acts as a special purpose entity in connection with mortgage loan securitization activities. In September 2002, East West Mortgage Securities, LLC issued $159.7 million of mortgage-backed securities in a securitization of performing residential single family loans. A portion of these mortgage-backed securities, totaling $50.0 million, were sold to an independent third party, while the remaining $109.7 million was retained in the Bank's available-for-sale investment securities portfolio.

Deregistration of Regulated Investment Company - On December 30, 2002, the Company deregistered its regulated investment company, East West Securities Company, Inc. (the "Fund"). The Fund was incorporated under the general laws of the State of Maryland as a closed-end, non- diversified, management investment company registered under the Investment Company Act of 1940, as amended, on July 13, 2000. The Company also dissolved EWSC Holdings, LLC, a California limited liability company and wholly-owned subsidiary of the Bank, which owned 100% of the voting shares of the Fund, as well as six subsidiaries of the Fund, namely EW Assets, LLC, EW Assets 2, LLC, EW Assets 3, LLC, EW Assets 4, LLC, EW Assets 5, LLC, and EW Assets 6, LLC. The deregistration of the Fund and dissolution of the aforementioned companies had no effect on the consolidated financial statements of the Company.

Basis of Presentation - The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America and general practices within the banking industry. The following is a summary of significant principles used in the preparation of the accompanying financial statements. In preparing the financial statements, management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities, including the allowance for loan losses, the disclosure of contingent assets and liabilities and the disclosure of income and expenses for the periods presented in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from those estimates.

73

Principles of Consolidation - The financial statements include the accounts of the Company and its subsidiaries, East West Bank and East West Insurance Services, Inc. All intercompany transactions and accounts have been eliminated in consolidation. The Company also has five wholly-owned subsidiaries that are statutory business trusts (the "Trusts"). In accordance with Financial Accounting Standards Board Interpretation No. 46R, Consolidation of Variable Interest Entities ("FIN No. 46R"), the Trusts are not consolidated into the accounts of East West Bancorp, Inc.

Securities Purchased Under Agreements to Resell - The Company purchases securities under agreements to resell with terms of up to 90 days; however, repurchase agreements are typically overnight investments. These agreements are collateralized by mortgage-backed securities and mortgage or commercial loans that are generally held by a third party custodian. The purchases are overcollateralized to ensure against unfavorable market price movements. In the event that the fair market value of the securities decreases below the carrying amount of the related repurchase agreement, the counterparty is required to designate an equivalent value of additional securities. The counterparties to these agreements are nationally recognized investment banking firms that meet credit eligibility criteria and with whom a master repurchase agreement has been duly executed. These agreements are accounted for as short- term investments and are included in cash and cash equivalents.

Investment Securities - The Company classifies its investment securities as either trading account securities, if the securities are intended to be sold within a short period of time, or available-for-sale securities. Trading account securities are typically investment grade securities which are generally held by the Bank for a period of seven days or less. Trading account securities are carried at market value. Realized and unrealized gains or losses on trading account securities are included in noninterest income. As of December 31, 2004 and 2003, there were no trading account securities in the investment portfolio.

Investment securities available-for-sale are reported at estimated fair value, with unrealized gains and losses, excluded from operations and reported as a separate component of accumulated other comprehensive income or loss, net of tax, in stockholders' equity. Amortization of premiums and accretion of discounts on securities are recorded as yield adjustments on such securities using the effective interest method. The specific identification method is used for purposes of determining cost in computing realized gains and losses on investment securities sold. At each reporting date, available-for-sale securities are assessed to determine whether there are any securities that are deemed to be other-than-temporarily impaired. Such impairment is required to be recognized in current earnings rather than other comprehensive income or loss.

Derivative Financial Instruments - As part of its asset and liability management strategy, the Company may use derivative financial instruments to mitigate exposure to risk. Effective January 1, 2001, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended and interpreted. Pursuant to the requirements of SFAS No. 133, all derivative instruments, including certain derivative instruments embedded in other contracts, are to be recognized on the balance sheets at fair value. Depending on the nature of the derivative, the corresponding change in fair value is either reported in current earnings or accumulated other comprehensive income.

Loans Receivable - Loans receivable that the Company has the intent and ability to hold for the foreseeable future, or until maturity, are stated at their outstanding principal, reduced by an allowance for loan losses and net deferred loan fees or costs on originated loans and unamortized premiums or discounts on purchased loans. Nonrefundable fees and direct costs associated with the origination or purchase of loans are deferred and netted against outstanding loan balances. The deferred net loan fees and costs are recognized in interest income as an adjustment to yield over the loan term using the effective interest method. Discounts or premiums on purchased loans are accreted or amortized to interest income using the effective interest method over the remaining period to contractual maturity adjusted for anticipated prepayments.

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Interest on loans is calculated using the simple- interest method on daily balances of the principal amount outstanding. Accrual of interest is discontinued on a loan when management believes, after considering economic and business conditions and collection efforts, that the borrower's financial condition is such that collection of interest is doubtful. Generally, loans are placed on nonaccrual status when they become 90 days past due. When interest accrual is discontinued, all unpaid accrued interest is reversed against current earnings. In general, subsequent payments received are applied to the outstanding principal balance of the loan. A loan is returned to accrual status when the borrower has demonstrated a satisfactory payment trend subject to management's assessment of the borrower's ability to repay the loan.

Loans held for sale are carried at the lower of aggregate cost or market value. Origination fees on loans held for sale, net of certain costs of processing and closing the loans, are deferred until the time of sale and are included in the computation of the gain or loss from the sale of the related loans. A valuation allowance is established if the market value of such loans is lower than their cost and operations are charged for valuation adjustments.

Lease Financing Transactions - Loans receivable include the Company's share of aggregate rentals on lease financing transactions and residual values, net of unearned income. Lease financing transactions are primarily direct financing leases. Unearned income on lease financing transactions is amortized utilizing the interest method.

Allowance for Loan Losses - The allowance for loan losses is established as management's estimate of probable incurred losses that are inherent in the loan portfolio, and records a charge to earnings through a provision for loan losses. Loan losses are charged against the allowance when management believes the uncollectibility of a loan is confirmed. Subsequent recoveries, if any, are credited to the allowance. The allowance for loan losses is evaluated on a regular basis by management and is based upon management's periodic review of the collectibility of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower's ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

The allowance consists of allocated and unallocated components. The allocated component relates to loans that are classified as either doubtful, substandard, or special mention. For loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. Additionally, the allocated component also covers non-classified loans and is based on historical loss experience adjusted for various qualitative factors. An unallocated component is maintained to cover uncertainties, such as economic risk factors, that could affect management's estimate of probable incurred losses. The unallocated component of the allowance also reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating losses in the portfolio.

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all scheduled payments of principal or interest due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of delay, the reasons for the delay, the borrower's prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis for real estate, construction, and commercial loans based on the present value of expected future cash flows discounted at the loan's effective interest rate or, as an expedient, at the loan's observable market price or the fair value of the collateral if the loan is collateral dependent, less costs to sell. If the measure of the impaired loan is less than the recorded investment in the loan, the deficiency will be charged off against the allowance for loan losses or, alternatively, a specific allocation will be established. Consumer and other homogeneous smaller balance loans are reviewed on a collective basis for impairment.

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Stock of Federal Home Loan Bank of San Francisco - As a member of the Federal Home Loan Bank ("FHLB") of San Francisco, the Bank is required to own common stock in the FHLB of San Francisco based upon our balance of residential mortgage loans and outstanding FHLB advances. FHLB stock is carried at cost and may be sold back to the FHLB at its carrying value. Both cash and stock dividends received are reported as dividend income.

Stock of Federal Reserve Bank - As a member of the Federal Reserve Bank ("FRB") of San Francisco, the Bank is required to maintain stock in the FRB of San Francisco based on a specified ratio relative to our capital. FRB stock is carried at cost and may be sold back to the FRB at its carrying value. Both cash and stock dividends received are reported as dividend income.

Mortgage-Servicing Assets - Mortgage-servicing assets are recorded at the lower of amortized cost or fair value in accordance with the provisions of SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. The fair values of servicing assets represent either the price paid if purchased, or the allocated carrying amounts based on relative values when retained in a sale. Servicing assets are amortized in proportion to, and over the period of, estimated net servicing income. The fair value of servicing assets is determined based on the present value of estimated net future cash flows related to contractually specified servicing fees. The Company utilizes the services of an outside third party to provide independent valuations of its servicing assets. In conjunction with this process, servicing assets are stratified based on one or more predominant risk characteristics of the underlying financial assets, and the resulting strata are assessed for impairment, which is measured as the excess of cost over fair value. Impairment, if it occurs, is recognized through a valuation allowance for each strata. Predominant risk characteristics include financial asset type, size, interest rate, origination date, term, and geographic location. Evaluation of impairment is conducted on a quarterly basis.

Other Real Estate Owned - Other real estate owned represents real estate acquired through foreclosure, is considered held for sale, and is recorded at fair value at the time of foreclosure. Loan balances in excess of fair value of the real estate acquired at the date of foreclosure are charged against the allowance for loan losses. After foreclosure, valuations are periodically performed by management and the real estate is carried at the lower of carrying value or fair value less costs to sell. Any subsequent operating expenses or income, reduction in estimated values, and gains or losses on disposition of such properties are charged to current operations. Revenue recognition upon disposition of a property is dependent on the sale having met certain criteria relating to the buyer's initial investment in the property sold.

Investment in Affordable Housing Partnerships - The Company owns limited partnership interests in projects of affordable housing for lower income tenants. The investments in which the Company has significant influence or has a limited partnership interest that exceeds 5% are recorded using the equity method of accounting. The remaining investments are being amortized using the level-yield method over the life of the related tax credits. The tax credits are being recognized in the consolidated financial statements to the extent they are utilized on our income tax returns.

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Premises and Equipment - The Company's premises and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation and amortization are computed based on the straight-line method over the estimated useful lives of the various classes of assets. The ranges of useful lives for the principal classes of assets are as follows:

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

Goodwill and Intangible Assets - Effective January 1, 2002, we adopted SFAS No. 142, Goodwill and Other Intangible Assets, which requires companies to cease amortizing goodwill that existed at June 30, 2001. Prior to 2002, excess of purchase price over fair value of net assets acquired and fair value of net assets acquired in excess of purchase price, also known as positive goodwill and negative goodwill, respectively, were amortized using the straight-line method over 15 to 25 years. Premiums on deposits, which represent the intangible value of depositor relationships resulting from deposit liabilities assumed in acquisitions, are amortized using the straight-line method over the projected useful life of the deposits. SFAS No. 142 also established a new method of testing goodwill for impairment on an annual basis or on an interim basis if an event occurs or circumstances change that would reduce the fair value of a reporting unit below its carrying value. The adoption of SFAS No. 142 on January 1, 2002 resulted in cumulative pre-tax income of $1.4 million ($788 thousand after-tax) representing the remaining balance of negative goodwill at December 31, 2001. Also, pursuant to the provisions of SFAS No. 142, the Company conducted its annual impairment test of goodwill as of December 31, 2004 and determined that no impairment existed as of that date. Goodwill will continue to be reviewed for impairment on an annual basis.

Junior Subordinated Debt - The Company has established five statutory business trusts that are wholly-owned subsidiaries of the Company. In five separate private placement transactions, the Trusts issued both fixed and variable rate capital securities representing undivided preferred beneficial interests in the assets of the Trusts. The Company is the owner of all the beneficial interests represented by the common securities of the Trusts. The purpose of issuing the capital securities was to provide the Company with a cost-effective means of obtaining Tier I capital for regulatory purposes.

Effective December 31, 2003, we adopted FIN No. 46R. FIN No. 46R requires that variable interest entities be consolidated by a company if that company is subject to a majority of expected loss from the variable interest entity's activities or is entitled to receive a majority of the entity's expected residual returns or both. As a consequence of adopting the provisions of FIN No. 46R, the Trusts are no longer being consolidated by the Company. Junior subordinated debt represents liabilities of the Company to the Trusts.

Income Taxes - Deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year-end, based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income.

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Stock-Based Compensation - The Company issues stock-based compensation to certain employees, officers, and Directors. SFAS No. 123, Accounting for Stock-based Compensation, encourages, but does not require, companies to account for stock-based compensation using the fair value method, which generally results in compensation expense recognition. As permitted by SFAS No. 123, the Company continues to account for its fixed stock options using the intrinsic-value method, prescribed in APB Opinion No. 25, Accounting for Stock Issued to Employees, and its related interpretations, which generally does not result in compensation expense recognition. Under the intrinsic value method, compensation cost for stock options is measured at the date of grant as the excess, if any, of the quoted market price of our stock over the exercise price of the options. (See Note 1 under the caption "RECENT ACCOUNTING PRONOUNCEMENTS.") Had compensation cost for these plans been determined based on the fair value at the grant dates of options consistent with the method defined in SFAS No. 123, the Company's net income and earnings per share would have been reduced to the pro forma amounts indicated below for the years ended December 31, 2004, 2003 and 2002:

                                                                 Year Ended December 31,
                                                             -------------------------------
                                                               2004       2003       2002
                                                             ---------  ---------  ---------
                                                                  (Dollars in thousands,
                                                                  except per share data)
Net income, as reported                                     $  78,022  $  58,992  $  49,489

Add:  Stock-based employee compensation expense included
     in reported net income, net of related tax effects           847        256         99
Deduct:  Total stock-based employee compensation expense
     determined under fair value based method for all awards
     subject to SFAS No. 123, net of related tax effects       (2,186)    (1,464)    (1,447)
                                                             ---------  ---------  ---------
Net income, pro forma                                       $  76,683  $  57,784  $  48,141
                                                             =========  =========  =========

Basic earnings per share
     As reported                                            $    1.54  $    1.23  $    1.05
     Pro forma                                              $    1.51  $    1.20  $    1.02

Diluted earnings per share
     As reported                                            $    1.49  $    1.19  $    1.00
     Pro forma                                              $    1.47  $    1.17  $    0.98

The weighted average fair value for options granted during 2004, 2003 and 2002 was $6.55, $4.28 and $4.19, respectively. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:

                               2004        2003              2002
                            ----------  ----------  ----------------------
                                            Contractual life
                            ----------------------------------------------
                             7 years     7 years     7 years     10 years
                            ----------  ----------  ----------  ----------
Expected dividend yield           0.8%        1.2%        1.2%        1.2%
Expected volatility              30.5%       33.4%       34.0%       34.0%
Risk-free interest rate           2.4%        2.3%        2.3%        3.2%
Expected lives              3.5 years   3.5 years   3.5 years    5 years

In addition, the Company grants restricted stock awards to employees. The Company records the cost of the restricted shares at market value. The restricted stock grants are reflected as a component of common stock and additional paid-in capital with an offsetting amount of deferred compensation in the consolidated statements of changes in stockholders' equity. The restricted shares awarded become fully vested after three years of continued employment from the date of grant. The Company becomes entitled to an income tax deduction in an amount equal to the taxable income reported by the holders of the restricted shares when the restrictions are released and the shares are issued.

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The deferred compensation cost reflected in stockholders' equity is being amortized as compensation expense over three years using the straight-line method. Restricted shares are forfeited if officers and employees terminate prior to the lapsing of restrictions. The Company records forfeitures of restricted stock as treasury share repurchases and any compensation cost previously recognized is reversed in the period of forfeiture.

Transfers and Servicing of Financial Assets and Extinguishments of Liabilities - Transfers of financial assets are accounted for as sales, when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2) the transferee has the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through either (a) an agreement that entitles and obligates the Company to repurchase or redeem them before their maturity or (b) the ability to unilaterally cause the holder to return specific assets. The difference between the net proceeds received and the allocated carrying amount of the financial assets being sold or securitized is recognized as a gain or loss on sale.

Stock Split - All share and per share information in the accompanying consolidated financial statements have been retroactively adjusted to reflect the two-for-one stock split in the form of a 100% stock dividend approved by the Board of Directors on May 18, 2004. All shareholders of record on June 3, 2004 received one additional share of common stock for each share held by them at that date.

Earnings Per Share (EPS) - Basic EPS is computed by dividing income available to common stockholders 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 from issuance of common stock that then shared in the earnings of the Company.

Comprehensive Income - The term "comprehensive income" describes the total of all components of comprehensive income including net income. "Other comprehensive income" refers to revenues, expenses, and gains and losses that are included in comprehensive income but are excluded from net income because they have been recorded directly in equity under the provisions of other Financial Accounting Standards Board statements. The Company presents the comprehensive income disclosure as a part of the statements of changes in stockholders' equity by identifying each element of other comprehensive income, including net income.

Reclassifications - Certain reclassifications have been made to the prior period financial statements to conform to the current presentation.

In December 2003, the Accounting Standards Executive Committee of the AICPA issued Statement of Position No. 03-3 ("SOP 03-3"), Accounting for Certain Loans or Debt Securities Acquired in a Transfer. SOP 03-3 addresses the accounting for differences between contractual cash flows and the cash flows expected to be collected from purchased loans or debt securities if those differences are attributable, in part, to credit quality. SOP 03-3 requires purchased loans and debt securities to be recorded initially at fair value based on the present value of the cash flows expected to be collected with no carryover of any valuation allowance previously recognized by the seller. Interest income should be recognized based on the effective yield from the cash flows expected to be collected. To the extent that the purchased loans or debt securities experience subsequent deterioration in credit quality, a valuation allowance would be established for any additional cash flows that are not expected to be received. However, if more cash flows subsequently are expected to be received than originally estimated, the effective yield would be adjusted on a prospective basis. SOP 03-3 will be effective for loans and debt securities acquired in the years beginning after December 15, 2004. Management does not expect the adoption of this statement to have a material impact on the Company's financial position, results of operations, or cash flows.

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In March 2004, the Emerging Issues Task Force (EITF) reached consensus on the guidance provided in EITF Issue No. 03-1, The Meaning of Other- Than-Temporary Impairment and its Application to Certain Investments (EITF 03-1) as applicable to debt and equity securities that are within the scope of SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities and equity securities that are accounted for using the cost method specified in Accounting Policy Board Opinion No. 18, The Equity Method of Accounting for Investments in Common Stock. An investment is impaired if the fair value of the investment is less than its cost. EITF 03- 1 outlines that an impairment would be considered other-than-temporary unless: a) the investor has the ability and intent to hold an investment for a reasonable period of time sufficient for the recovery of the fair value up to (or beyond) the cost of the investment, and b) evidence indicating that the cost of the investment is recoverable within a reasonable period of time outweighs evidence to the contrary. Although not presumptive, a pattern of selling investments prior to the forecasted recovery of fair value may call into question the investor's intent. In addition, the severity and duration of the impairment should also be considered in determining whether the impairment is other-than-temporary. In September 2004, the FASB staff issued a proposed Board-directed FASB Staff Position, FSP EITF Issue 03-1-a, Implementation Guidance for the Application of Paragraph 16 of EITF Issue No. 03-1. The proposed FSP would provide implementation guidance with respect to debt securities that are impaired solely due to interest rates and/or sector spreads and analyzed for other-than-temporary impairment under paragraph 16 of Issue 03-1. The Board also issued FSP EITF Issue 03-1-b, which delays the effective date for the measurement and recognition guidance contained in paragraphs 10-20 of EITF 03-1. The delay does not suspend the requirement to recognize other-than- temporary impairments as required by existing authoritative literature. Adoption of this standard may cause the Company to recognize impairment losses in the Consolidated Statements of Income which would not have been recognized under the current guidance or to recognize such losses in earlier periods, especially those due to increases in interest rates. Since fluctuations in the fair value for available-for-sale securities are already recorded in Accumulated Other Comprehensive Income, adoption of this standard is not expected to have a significant impact on stockholders' equity.

In December 2004, the FASB issued SFAS No. 123R, Share-Based Payment. This Statement supersedes APB Opinion No. 25, and its related implementation guidance, is a revision of SFAS No. 123, and amends SFAS No. 95, Statement of Cash Flows. This revision of SFAS No. 123 eliminates the ability for public companies to measure share-based compensation transactions at the intrinsic value as allowed by APB Opinion No. 25, and requires that such transactions be accounted for based on the grant date fair value of the award. This Statement also amends SFAS No. 95, to require that excess tax benefits be reported as a financing cash inflow rather than as a reduction of taxes paid. Under the intrinsic value method allowed under APB Opinion No. 25, the difference between the quoted market price as of the date of the grant and the contractual purchase price of the share is charged to operations over the vesting period, and no compensation expense is recognized for fixed stock options with exercise prices equal to the market price of the stock on the dates of grant. Under the fair value based method as prescribed by SFAS No. 123R, the Company is required to charge the value of all newly granted stock-based compensation to expense over the vesting period based on the computed fair value of the award on the grant date. Additionally, the fair value of the award is to be remeasured subsequently at each reporting date through the settlement date. Changes in fair value during the requisite service period are to be recognized as compensation cost over that period. The Statement does not specify a valuation technique to be used to estimate the fair value but states that the use of option-pricing models such as a lattice model (i.e. a binomial model) or a closed-end model (i.e. the Black-Scholes model) would be acceptable. The revised accounting for stock-based compensation requirements must be adopted no later than the beginning of the first interim or annual reporting period that begins after June 15, 2005.

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The Company will adopt this Standard effective July 1, 2005, using the modified prospective method, recording compensation expense for all awards granted after the date of adoption and for the unvested portion of previously granted awards that remain outstanding at the date of adoption. Currently, the Company does not recognize compensation expense for stock-based compensation. Management does not anticipate that this will have a material effect on the Company's results of operations, financial position or cash flows. Had the Company adopted SFAS No. 123R in prior periods, the impact on net income and earnings per share would have been similar to the pro forma net income and earnings per share in accordance with SFAS No. 123 as previously disclosed.

The Company has completed several business acquisitions that have all been accounted for using the purchase method of accounting. Accordingly, all assets and liabilities were adjusted to and recorded at their estimated fair values as of the acquisition date. The excess of purchase price over fair value of net assets acquired, if identifiable, was recorded as a premium on purchased deposits, and if not identifiable, was recorded as goodwill. The estimated tax effect of differences between tax bases and fair values has been reflected in deferred income taxes. The following table provides detailed information on acquisitions from 2002 through 2004:

                                                       Pacific
                                                       Business           Trust
                                                         Bank              Bank
                                                   ----------------  ----------------  
                                                             (In thousands)               
Date of acquisition                                 March 14, 2003    August 6, 2004
Purchase price                                    $         25,000  $         32,888
Type of transaction                                     All-Cash         All-Stock
Value of assets acquired                          $        153,350  $        232,931
Value of liabilities assumed                      $        140,082  $        217,461
Goodwill                                          $          9,679  $         15,045
Premium on deposits acquired                      $          2,053  $          2,373

Cash and cash equivalents include cash, amounts due from banks, and short- term investments with original maturities of less than three months. Short-term investments, which include federal funds sold and securities purchased under agreements to resell, are recorded at cost, which approximates market.

The composition of cash and cash equivalents at December 31, 2004 and 2003 is presented as follows:

                                                        December 31,
                                                   ----------------------------
                                                       2004           2003
                                                   -------------  -------------  
                                                          (In thousands)            
Cash                                              $      70,575  $      81,589
Cash equivalents:
  Federal funds sold                                     22,500         10,000
  Securities purchased under agreements to resell            --         50,000
                                                   -------------  -------------
    Total cash equivalents                               22,500         60,000
                                                   -------------  -------------
       Total cash and cash equivalents            $      93,075  $     141,589
                                                   =============  =============

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4. RESIDUAL INTEREST IN SECURITIZATION

In September 2002, the Company securitized residential single family loans totaling $159.7 million. A significant portion of these securities were rated AAA by Standard & Poor's and Aaa by Moody's. A pre-tax gain of $202 thousand was recognized in earnings upon the sale of $50.0 million of such securities to an independent third party. The Company retained $109.7 million of the securities in its available-for-sale investment portfolio.

Security holders are entitled to receive the principal collected on the loans and the stated interest rate on the securities. In addition, the Company is entitled to receive the excess spread which generally represents, over the estimated life of the loans, the excess of the weighted average coupon on the loans securitized over the sum of the securities interest rate less other expenses, including a trustee fee. The Company recorded the fair value of this excess spread or residual interest, amounting to $3.6 million, in the consolidated balance sheet as an available-for-sale asset at September 12, 2002. The value of the residual interest is subject to substantial credit, prepayment, and interest rate risk on the underlying loans. Fair value is determined based on a discounted cash flow analysis. These cash flows are projected over the lives of the receivables using prepayment, default, and interest rate assumptions that management believes market participants would use for similar financial instruments. In accordance with the provisions of SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, changes in the fair value of the residual interest are recorded as unrealized gains or losses in accumulated other comprehensive income or loss, net of tax, until realized. The fair value of the residual interest in securitized loans amounted to $954 thousand as of December 31, 2004, compared with $1.9 million as of December 31, 2003.

At December 31, 2004, key assumptions used to estimate the fair value of the residual interest based on projected cash flows, and the sensitivity of the value to immediate adverse changes in those assumptions, are as follow:

                                                                     December 31, 2004
                                                                   ---------------------
                                                                   (Dollars in thousands)
Fair value of retained interest                                     $            954.4
Weighted average life (in years)                                                  1.86

Prepayment speed assumptions (constant prepayment rate)                           40.0%
Impact on fair value of 10% adverse change                          $              2.1
Impact on fair value of 20% adverse change                          $              4.3

Expected credit losses (annual rate)                                               1.2%
Impact on fair value of 10% adverse change                          $             (0.1)
Impact on fair value of 20% adverse change                          $             (0.3)

Residual cash flow discount rate (annual)                                         20.0%
Impact on fair value of 10% adverse change                          $             14.1
Impact on fair value of 20% adverse change                          $             27.9

Interest rate on variable rate loans and bonds
  (forward LIBOR curve)
Impact on fair value of 10% adverse change                          $             54.5
Impact on fair value of 20% adverse change                          $             94.5

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These sensitivities are hypothetical. As the figures indicate, changes in the fair value of the residual are based on a variation in assumptions and generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, in the above table, the effect of a variation in a particular assumption on the fair value of the residual interest is calculated without changing any other assumption; in reality, changes in one factor may result in changes in another (for example, increases in market interest rates may result in lower prepayments but increased credit losses), which might magnify or counteract the sensitivities, and depending on the severity of such changes, the results of operations may be materially affected.

An analysis of the available-for-sale investment securities portfolio is presented as follows:

                                                                   Gross       Gross     Estimated
                                                     Amortized   Unrealized  Unrealized     Fair
                                                        Cost       Gains       Losses      Value
                                                     ----------  ----------  ----------  ----------
                                                                    (In thousands)                 
As of December 31, 2004:
  U.S. Treasury securities                          $    2,507  $       --  $      (11) $    2,496
  U.S. Government agency securities and
    U.S. Government sponsored enterprise securities    338,458         204      (2,048)    336,614
  Mortgage-backed securities                           132,428       1,503        (279)    133,652
  Corporate debt securities                             18,991          --        (703)     18,288
  U.S. Government sponsored enterprise equity
    securities                                          42,075         512        (139)     42,448
  Residual interest in securitized loans                    --         954          --         954
                                                     ----------  ----------  ----------  ----------
     Total investment securities available-for-sale $  534,459  $    3,173  $   (3,180) $  534,452
                                                     ==========  ==========  ==========  ==========

As of December 31, 2003:
  U.S. Treasury securities                          $   26,188  $       40  $       --  $   26,228
  U.S. Government agency securities and
    U.S. Government sponsored enterprise securities    271,021       2,376        (292)    273,105
  Mortgage-backed securities                            67,259         644        (142)     67,761
  Corporate debt securities                             31,902          --      (1,852)     30,050
  U.S. Government sponsored enterprise equity
    securities                                          46,505         223        (675)     46,053
  Residual interest in securitized loans                    --       1,945          --       1,945
                                                     ----------  ----------  ----------  ----------
     Total investment securities available-for-sale $  442,875  $    5,228  $   (2,961) $  445,142
                                                     ==========  ==========  ==========  ==========

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The following table shows the Company's investment portfolio's gross unrealized losses and related fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, for the years ended December 31, 2004 and 2003:

                                                 Less Than 12 Months    12 Months or More           Total
                                               --------------------  --------------------  --------------------
                                                          Unrealized            Unrealized            Unrealized
Description                                    Fair Value  Losses    Fair Value  Losses    Fair Value  Losses
- --------------------------------------------   ---------  ---------  ---------  ---------  ---------  ---------
As of December 31, 2004                                                   (In thousands)                       
 U.S. Treasury securities                     $   2,174  $     (11) $      --  $      --  $   2,174  $     (11)
 U.S. Government agency securities and U.S.
   Government sponsored enterprise securities   229,521     (1,815)    20,002       (233) $ 249,523     (2,048)
 Mortgage-backed securities                      48,690       (184)    25,664        (95)    74,354       (279)
 Corporate debt securities                          920        (80)    14,568       (623)    15,488       (703)
 U.S. Government sponsored enterprise equity
   securities                                     8,227       (139)        --         --      8,227       (139)
                                               ---------  ---------  ---------  ---------  ---------  ---------
 Total temporarily impaired securities        $ 289,532  $  (2,229) $  60,234  $    (951) $ 349,766  $  (3,180)
                                               =========  =========  =========  =========  =========  =========

As of December 31, 2003
 U.S. Government agency securities and U.S.
   Government sponsored enterprise securities $  20,240  $    (292) $      --  $      --  $  20,240  $    (292)
 Mortgage-backed securities                          --         --     45,544       (142)    45,544       (142)
 Corporate debt securities                          966        (33)    26,084     (1,819)    27,050     (1,852)
 U.S. Government sponsored enterprise equity
   securities                                        --         --      4,729       (675)     4,729       (675)
                                               ---------  ---------  ---------  ---------  ---------  ---------
 Total temporarily impaired securities        $  21,206  $    (325) $  76,357  $  (2,636) $  97,563  $  (2,961)
                                               =========  =========  =========  =========  =========  =========

All individual securities that have been in a continuous unrealized loss position for twelve months or longer at December 31, 2004 had investment grade ratings upon purchase. The issuers of these securities have not, to our knowledge, established any cause for default on these securities and the various rating agencies have reaffirmed these securities' long term investment grade status at December 31, 2004. These securities have fluctuated in value since their purchase dates as market interest rates have fluctuated. However, the Company has the ability, and management intends to hold these securities until their fair values recover to cost. Therefore, in management's opinion, all securities that have been in a continuous unrealized loss position for the past twelve months or longer as of December 31, 2004 are not other-than- temporarily impaired, and therefore, no impairment charges as of December 31, 2004 are warranted.

The scheduled maturities of investment securities available-for-sale at December 31, 2004 are presented as follows:

                                             Amortized   Estimated
                                                Cost     Fair Value
                                             ----------  ----------
                                                  (In thousands)   
Due within one year                         $  317,934  $  317,953
Due after one year through five years           52,674      52,256
Due after five years through ten years          21,235      20,922
Due after ten years                            142,616     143,321
                                             ----------  ----------
   Total                                    $  534,459  $  534,452
                                             ==========  ==========

84

Actual maturities of mortgage-backed securities can differ from contractual maturities because borrowers have the right to prepay obligations. In addition, such factors as prepayments and interest rates may affect the yields on the carrying values of mortgage-backed securities.

Proceeds from sales of available-for-sale securities during 2004, 2003 and 2002 were $279.1 million, $78.5 million and $720 thousand, respectively. Gross realized gains were $3.1 million, $2.0 million and $13 thousand during 2004, 2003, and 2002, respectively. The Company recorded gross realized losses amounting to $41 thousand in 2004 and $3 thousand in 2003. There were no gross realized losses arising from securities sales during 2002. During 2004, the Company recorded a $757 thousand impairment writedown on preferred stock that was held in the available-for-sale investment portfolio at a carrying value of $4.7 million.

During the years ended December 31, 2004 and 2002, respectively, the Company securitized $24.6 million and $35.1 million in loans through the Federal National Mortgage Association ("FNMA"). The resulting securities were retained in the Company's available-for-sale securities portfolio. Accordingly, no gain or loss resulted from these pass-through transactions. The Company also recorded $278 thousand in mortgage servicing assets as a result of the 2004 securitization as the Bank continues to service the underlying loans.

At December 31, 2004 and 2003, investment securities available-for-sale with a carrying value of $388.2 million and $356.2 million, respectively, were pledged to secure public deposits, FHLB advances, and for other purposes required or permitted by law.

Warrants - At December 31, 2004 and 2003, the Company had outstanding warrants to purchase the common stock of various companies. The Company received these warrants in connection with certain lending relationships, primarily with small, privately-held companies. In management's opinion, the fair value of these warrants is approximately zero.

Equity Linked Certificate of Deposits - During the third and fourth quarters of 2004, the Company offered customers a promotional equity index certificate of deposit that has an interest rate linked to the Hang Seng China Enterprises Index (the "HSCEI"). The Bank took in a total of $24.6 million in time deposits with 5 1/2 year maturities as a result of this promotion. Under SFAS No. 133, a certificate of deposit that pays interest based on changes in an equity index is a hybrid instrument with an embedded derivative (i.e. the equity call option) that must be accounted for separately from the host contract (i.e. the certificate of deposit). The combined fair value of the embedded derivatives at December 31, 2004 amounted to $3.3 million and is included in interest-bearing deposits on the consolidated balance sheet. To manage our equity exposure on this product, we have entered into four freestanding equity swap agreements with an investment brokerage firm where we pay a LIBOR based floating rate monthly and receive any appreciation on the HSCEI at the termination of the swap. The fair value of the equity swap agreements total $(422) thousand at December 31, 2004. The notional amounts and terms of the equity swap agreements match the principal amounts and terms of the issued certificates of deposit. In accordance with SFAS No. 133, both the embedded equity call options on the certificates of deposit and the freestanding equity swap agreements are marked-to-market every month with resulting changes in fair value recorded in the consolidated income statements. For the year ended December 31, 2004, the net impact on the consolidated statements of income related to these swap agreements was an expense of $114 thousand.

85

7. LOANS AND ALLOWANCE FOR LOAN LOSSES

The following is a summary of loans receivable:

                                                            December 31,
                                                     ----------------------
                                                        2004        2003
                                                     ----------  ----------
                                                           (In thousands)  
Real estate loans:
  Residential, one to four units                    $  327,554  $  146,686
  Residential, multifamily                           1,121,107     809,311
  Commercial and industrial real estate              2,556,827   1,558,594
  Construction                                         348,501     179,544
                                                     ----------  ----------
    Total real estate loans                          4,353,989   2,694,135
                                                     ----------  ----------
Other loans:
  Business, commercial                                 594,346     431,942
  Automobile                                            10,151      13,696
  Other consumer                                       175,008     133,454
                                                     ----------  ----------
     Total other loans                                 779,505     579,092
                                                     ----------  ----------
       Total gross loans                             5,133,494   3,273,227
Unearned fees, premiums and discounts, net              (2,156)        152
Allowance for loan losses                              (50,884)    (39,246)
                                                     ----------  ----------
        Loans receivable, net                       $5,080,454  $3,234,133
                                                     ==========  ==========

Included in residential one to four units loans are loans held for sale totaling $4.3 and $3.0 million at December 31, 2004 and 2003, respectively. At December 31, 2004 and 2003, commercial business loans included finance leases totaling $1.1 million and $2.6 million, respectively. Accrued interest on loans receivable amounted to $19.4 million and $11.6 million at December 31, 2004 and 2003, respectively.

Loans serviced for others amounted to approximately $561.8 million and $514.7 million at December 31, 2004 and 2003, respectively.

At December 31, 2004 and 2003 a director was the guarantor for one commercial loan, amounting to $222 thousand and $528 thousand, respectively. Both terms of the loan and the credit underwriting procedures for this loan are substantially the same as those for comparable transactions.

An analysis of the activity in the allowance for loan losses is as follows:

                                                                            Year Ended
                                                                            December 31,
                                                                 -------------------------------
                                                                   2004       2003       2002
                                                                 ---------  ---------  ---------
                                                                          (In thousands)        

Balance, beginning of year                                      $  39,246  $  35,292  $  27,557
Allowance from acquisitions                                         1,583      2,821         --
Allowance for unfunded loan commitments and letters of credit      (1,566)    (6,129)        --
Provision for loan losses                                          16,750      8,800     10,200
Chargeoffs                                                         (5,860)    (2,777)    (3,540)
Recoveries                                                            731      1,239      1,075
                                                                 ---------  ---------  ---------
Balance, end of year                                            $  50,884  $  39,246  $  35,292
                                                                 =========  =========  =========

86

Generally, impaired loans include residential mortgage loans, multifamily residential real estate loans, commercial real estate loans, construction loans, commercial business loans and consumer loans that are designated as nonaccrual or restructured. When the value of an impaired loan is less than the recorded investment in the loan, the deficiency will be charged off against the allowance for loan losses or alternatively, a specific allocation will be established.

The following is a summary of interest foregone on impaired loans for the years ended December 31:

                                                                   2004       2003       2002
                                                                 ---------  ---------  ---------
                                                                          (In thousands)        
Interest income that would have been recognized had impaired
   loans performed in accordance with their original terms      $     496  $     317  $     995
Less:  Interest income  recognized on impaired loans                 (272)      (257)      (783)
                                                                 ---------  ---------  ---------
Interest foregone on impaired loans                             $     224  $      60  $     212
                                                                 =========  =========  =========

The following table provides information on impaired loans for the periods indicated:

                                                                    As of and for the Year Ended
                                                                            December 31,
                                                                 -------------------------------
                                                                   2004       2003       2002
                                                                 ---------  ---------  ---------
                                                                          (In thousands)        
Recorded investment with related allowance                      $   3,009  $      --  $      --
Recorded investment with no related allowance                       2,596      5,949     12,159
Allowance on impaired loans                                        (1,060)        --         --
                                                                 ---------  ---------  ---------
  Net recorded investment in impaired loans                     $   4,545  $   5,949  $  12,159
                                                                 =========  =========  =========

Average total recorded investment in impaired loans             $   7,660  $   6,104  $  13,074

There were no commitments to lend additional funds to borrowers whose loans are included above.

Nonaccrual Loans - Nonaccrual loans totaled $4.9 million and $5.3 million at December 31, 2004 and 2003, respectively.

Loans Past Due 90 Days or More but not on Nonaccrual - At December 31, 2004 and 2003, we had loans past due 90 days or more but not on nonaccrual amounting to $681 thousand and $636 thousand, respectively. These loans represent commercial business loans that are fully guaranteed by another banking institution.

Restructured Loans - We had no restructured loans as of December 31, 2004. This compares to restructured loans amounting to $638 thousand as of December 31, 2003 representing one commercial real estate loan that was paid-off in February 2004.

Other Real Estate Owned - As of December 31, 2004, we owned one other real estate owned ("OREO") property with a carrying value of $299 thousand. We had no OREO properties at December 31, 2003.

Allowance for Unfunded Loan Commitments and Letters of Credit - - The allowance for unfunded loan commitments and letters of credit is maintained at a level believed by management to be sufficient to absorb estimated probable losses related to these unfunded credit facilities. The determination of the adequacy of the allowance is based on periodic evaluations of the unfunded credit facilities including an assessment of the probability of commitment usage, credit risk factors for loans outstanding to these same customers, and the terms and expiration dates of the unfunded credit facilities.

Net adjustments to the allowance for unfunded loan commitments and letters of credit are included in the provision for loan losses.

87

Credit Risk and Concentrations - Substantially all of the Company's real estate loans are secured by real properties located in California. Declines in the California economy and in real estate values could have a significant effect on the collectibility of our loans and on the level of allowance for loan losses required. In addition, although most of the Company's trade finance activities are related to trade with Asian countries, all of its loans are made to companies domiciled in the United States.

The Company has invested in certain limited partnerships that were formed to develop and operate apartment complexes designed as high-quality affordable housing for lower income tenants throughout the United States. The Company's ownership in each limited partnership varies from 1% to 20%. Seven of the investments, with a net carrying value of $20.5 million at December 31, 2004, are accounted for using the equity method of accounting, as the Company has significant influence or has a limited partnership interest that exceeds 5%. The costs of the remaining investments owned as of December 31, 2004, with a net carrying value of $16.9 million, are being amortized using a level-yield method over the lives of the related tax credits. Each of the partnerships must meet the regulatory requirements for affordable housing for a minimum 15-year compliance period to fully utilize the tax credits. If the partnerships cease to qualify during the compliance period, the credits may be denied for any period in which the projects are not in compliance and a portion of the credits previously taken may be subject to recapture with interest.

The remaining federal tax credits to be utilized over a multiple-year period are $38.8 million as of December 31, 2004. The Company's usage of tax credits approximated $5.9 million, $4.9 million and $5.0 million during 2004, 2003 and 2002, respectively. Investment amortization amounted to $7.4 million, $6.7 million and $4.7 million for the years ended December 31, 2004, 2003 and 2002 respectively.

The Company finances the purchase of certain real estate tax credits generated by partnerships which own multiple properties currently under construction. These transactions were financed with non-recourse notes which are collateralized by the Company's partnership interests in the real estate investment tax credits. The notes are payable upon demand and if defaulted, interest will be imposed at an annual rate equal to the lesser of 18% per annum or the higher rate permitted by applicable law. No interest is due if the notes are paid on demand. At December 31, 2004, outstanding notes payable related to the purchase of real estate tax credits amounted to $11.0 million, compared with $2.2 million at December 31, 2003. The Company has no liabilities in addition to these notes payable or any contingent liabilities to the partnerships.

Premises and equipment consist of the following:

                                                           December 31,
                                                   ----------------------------
                                                       2004           2003
                                                   -------------  -------------  
                                                          (In thousands)         
Land                                              $       5,440  $      11,157
Office buildings                                          7,565         10,717
Leasehold improvements                                    6,511          6,037
Furniture, fixtures and equipment                        18,768         16,173
                                                   -------------  -------------
        Total cost                                       38,284         44,084
Accumulated depreciation and amortization               (18,535)       (19,127)
                                                   -------------  -------------
            Net book value                        $      19,749  $      24,957
                                                   =============  =============

88

10. GOODWILL AND OTHER INTANGIBLE ASSETS

As discussed in Note 1, the Company changed its method of accounting for goodwill in 2002. The following tables set forth a reconciliation of net income and earnings per share information, before the cumulative effect of changes in accounting principle, for the years ended December 31, 2004, 2003 and 2002:

                                                                      For the Year Ended
                                                                          December 31,
                                                              ----------------------------------
                                                                 2004        2003        2002
                                                              ----------  ----------  ----------
                                                             (In thousands, except per share data)
Reported net income                                          $   78,022  $   58,992  $   49,489
  Deduct:  Recognition of negative goodwill, net of tax                          --        (788)
                                                              ----------  ----------  ----------
Adjusted net income                                          $   78,022  $   58,992  $   48,701
                                                              ==========  ==========  ==========

Basic earnings per share:
    Reported net income per share                            $     1.54  $     1.23  $     1.05
    Recognition of negative goodwill                                                      (0.02)
                                                              ----------  ----------  ----------
Adjusted net income per share                                $     1.54  $     1.23  $     1.03
                                                              ==========  ==========  ==========

Diluted earnings per share:
    Reported net income per share                            $     1.49  $     1.19  $     1.00
    Recognition of negative goodwill                                 --          --       (0.01)
                                                              ----------  ----------  ----------
Adjusted net income per share                                $     1.49  $     1.19  $     0.99
                                                              ==========  ==========  ==========

The carrying amount of remaining goodwill amounted to $43.7 million and $28.7 million at December 31, 2004 and 2003, respectively. The change in the carrying value of goodwill during the year ended December 31, 2004 represents goodwill arising from the acquisition of Trust Bank in August 2004. The Company did not recognize any impairment losses as a result of its annual impairment test of goodwill as of December 31, 2004.

Estimated future amortization expense of premiums on acquired deposits is as follows:

  Year Ending December 31,     (In thousands)
- -----------------------------  --------------


2005                          $        2,412
2006                                   2,208
2007                                   1,224
2008                                     634
2009                                     634
Thereafter                               611
                                --------------
   Total                      $        7,723
                                ==============

89

11. MORTGAGE SERVICING ASSETS

In estimating the fair value of mortgage servicing assets at December 31, 2004 and 2003, the Company used a weighted-average prepayment speed of 12.9% and 10.8%, respectively, and a weighted-average discount rate of 9.1% and 8.5%, respectively. Mortgage servicing assets which are included in other assets in the accompanying consolidated balance sheets had a carrying value of $2.3 million and $1.6 million at December 31, 2004 and 2003, respectively. As of December 31, 2004 and 2003, the fair value of servicing assets approximated carrying value and no impairment was identified as of December 31, 2004 and 2003. The Company capitalized $1.1 million and $1.7 million of servicing assets during the years ended December 31, 2004 and 2003, respectively. The related amortization expense on servicing assets amounted to $382 thousand and $108 thousand during the years ended December 31, 2004 and 2003, respectively. There were no servicing assets recorded during the year ended December 31, 2002.

Estimated future amortization of mortgage servicing assets is as follows:

  Year Ending December 31,       (In thousands)
- -----------------------------    -----------

2005                            $       467
2006                                    373
2007                                    299
2008                                    239
2009                                    191
Thereafter                              764
                                --------------
   Total                        $     2,333
                                ==============

                                                 December 31,
                                          ------------------------
                                             2004         2003
                                          -----------  -----------
                                               (In thousands)     

Demand deposits (non-interest bearing)   $ 1,097,851  $   922,946
Checking accounts (interest bearing)         334,747      276,390
Money market accounts                        507,949      289,217
Savings deposits                             340,399      301,154
                                          -----------  -----------
      Total core deposits                  2,280,946    1,789,707
                                          -----------  -----------
Time deposits:
  Less than $100,000                         747,858      647,840
  $100,000 or greater                      1,493,713      875,120
                                          -----------  -----------
      Total time deposits                  2,241,571    1,522,960
                                          -----------  -----------
          Total deposits                 $ 4,522,517  $ 3,312,667
                                          ===========  ===========

                                                  $100,000 or   Less Than
                                                   Greater       $100,000     Total
                                                  ----------    ----------  ---------- 
                                                              (In thousands)          
2005                                             $1,318,144    $  672,421  $1,990,565
2006                                                158,410        44,057     202,467
2007                                                 11,553        10,613      22,166
2008                                                    101           480         581
2009                                                    215           692         907
Thereafter                                            5,290        19,595      24,885
                                                  ----------    ----------  ----------
     Total                                       $1,493,713    $  747,858  $2,241,571
                                                  ==========    ==========  ==========

                                                              December 31,
                                                  ----------------------------------
                                                     2004        2003        2002
                                                  ----------  ----------  ---------- 
                                                             (In thousands)          
Checking accounts                                $    1,175  $      776  $    1,409
Money market accounts                                 4,797       1,710       2,237
Savings deposits                                        486         362         930
Time deposits:
  Less than $100,000                                 11,390      10,410      16,990
  $100,000 or greater                                20,048      16,688      22,009
                                                  ----------  ----------  ----------
     Total                                       $   37,896  $   29,946  $   43,575
                                                  ==========  ==========  ==========

                                                       As of and for the Year Ended
                                                              December 31,
                                                  ----------------------------------
                                                     2004        2003        2002
                                                  ----------  ----------  ---------- 
                                                          (Dollars in thousands)     

Federal funds purchased:
  Total federal funds purchased at end of year   $       --  $   12,000  $       --
  Average balance outstanding during the year    $    3,028  $    3,044  $    3,393
  Maximum amount outstanding at any month-end
    during the year                              $   19,500  $   12,000  $   10,000
  Weighted average interest rate during the year       1.76 %      1.40 %      2.02 %
  Weighted average interest rate at end of year          -- %      1.00 %        -- %

                                                      December 31,
                                           ---------------------------------
                                                  2004               2003
                                           ---------------    -------------- 
                                                     (In thousands)        
Maturing during year ending December 31,
      2004                                $      --    -- %  $261,300  1.45 %
      2005                                  648,122  1.95 %    20,000  1.33 %
      2006                                  150,144  2.35 %        --    -- %
      2007                                   61,537  2.38 %        --    -- %
      2008                                       --    -- %        --    -- %
      2009                                    1,000  4.98 %        --    -- %
                                           --------- -----    -------- -----
            Total                         $ 860,803  2.05 %  $281,300  1.44 %
                                           ========= =====    ======== =====

                                                                                     Interest
                                                                                      Rate at
                          Principal       Issuance           Stated        Coupon   December 31  Payment
      Trust Name           Balance          Date            Maturity        Rate       2004       Dates
- ----------------------  ------------- ----------------- ----------------- --------  ---------- ------------         
East West Capital      $  10,750,000   March 23, 2000     March 8, 2030    10.875%     10.875%      March 8
 Trust I                                                                                        September 8

East West Capital         10,000,000    July 26, 2000     July 19, 2030    10.945%     10.945%   January 19
 Trust II                                                                                           July 19

East West Capital         10,000,000  December 17, 2003 December 17, 2033  3-month      5.351%     March 17
 Statutory Trust III                                                         LIBOR                  June 17
                                                                           + 2.85%             September 17
                                                                                                December 17

East West Capital         10,000,000    June 10, 2004     June 23, 2034    3-month      4.650%   January 23
 Trust IV                                                                    LIBOR                 April 23
                                                                           + 2.55%                  July 23
                                                                                                 October 23

East West Capital         15,000,000  November 5, 2004  November 23, 2034  3-month      4.010%  February 23
 Trust V                                                                     LIBOR                   May 23
                                                                           + 1.80%                August 23
                                                                                                November 23

                                                         Year Ended December 31,
                                                    -------------------------------
                                                      2004       2003       2002
                                                    ---------  ---------  ---------
                                                            (In thousands)       
Current income tax expense:
  Federal                                          $  33,300  $  24,988  $  21,278
  State                                               11,999      8,918      4,356
                                                    ---------  ---------  ---------
     Total current income tax expense                 45,299     33,906     25,634
                                                    ---------  ---------  ---------
Deferred income tax benefit:
  Federal                                             (1,821)    (2,915)    (4,466)
  State                                                 (167)      (323)    (1,053)
                                                    ---------  ---------  ---------
     Total deferred income tax benefit                (1,988)    (3,238)    (5,519)
                                                    ---------  ---------  ---------
Provision for income taxes                         $  43,311  $  30,668  $  20,115
                                                    =========  =========  =========

The difference between the effective tax rate implicit in the consolidated financial statements and the statutory federal income tax rate can be attributed to the following:

                                                         Year Ended December 31,
                                                    -------------------------------
                                                      2004       2003       2002
                                                    ---------  ---------  ---------
Federal income tax provision at statutory rate          35.0 %     35.0 %     35.0 %
State franchise taxes, net of federal tax effect         6.3        6.2        3.1
Tax credits                                             (4.7)      (5.3)      (7.7)
Other, net                                              (0.9)      (1.7)      (1.2)
                                                    ---------  ---------  ---------
Effective income tax rate                               35.7 %     34.2 %     29.2 %
                                                    =========  =========  =========

                                                                    December 31,
                                              ----------------------------------------------------------
                                                          2004                          2003
                                              ----------------------------  ----------------------------
                                                                     (In thousands)                     
                                              Federal    State     Total    Federal    State     Total
                                              --------  --------  --------  --------  --------  --------
Deferred tax liabilities:
  Core deposit premium                       $  2,639  $    818  $  3,457  $  2,557  $    792  $  3,349
  Depreciation                                    871       330     1,201     1,477       545     2,022
  FHLB stock dividends                          2,053       636     2,689     1,568       485     2,053
  Deferred loan fees                           11,366     3,520    14,886     8,361     2,590    10,951
  Affordable housing partnership tax loss      10,355     3,207    13,562     7,228     2,239     9,467
  Purchased loan discounts                        650       201       851       465       144       609
  Unrealized gain on securities                    --        --        --       805       161       966
  Other, net                                    1,434     1,911     3,345     1,393     1,483     2,876
                                              --------  --------  --------  --------  --------  --------
     Total gross deferred tax liabilities      29,368    10,623    39,991    23,854     8,439    32,293
                                              --------  --------  --------  --------  --------  --------

Deferred tax assets:
  Bad debt deduction                          (20,503)   (6,330)  (26,833)  (15,881)   (4,919)  (20,800)
  Affordable housing partnership book loss    (10,469)   (3,242)  (13,711)   (7,979)   (2,471)  (10,450)
  Deferred compensation accrual                (6,060)   (1,901)   (7,961)   (2,706)     (838)   (3,544)
  California franchise tax                     (3,304)       --    (3,304)   (3,226)       --    (3,226)
  Unrealized loss on securities                  (734)     (262)     (996)       --        --        --
  Net operating loss carryforwards             (2,191)       --    (2,191)   (2,938)       --    (2,938)
  Other, net                                   (4,219)     (199)   (4,418)   (1,172)     (174)   (1,346)
                                              --------  --------  --------  --------  --------  --------
     Total gross deferred tax assets          (47,480)  (11,934)  (59,414)  (33,902)   (8,402)  (42,304)
                                              --------  --------  --------  --------  --------  --------
       Net deferred tax (assets) liabilities $(18,112) $ (1,311) $(19,423) $(10,048) $     37  $(10,011)
                                              ========  ========  ========  ========  ========  ========

Year Ending December 31,                       (In thousands)
- ---------------------------------------------  -------------
       2005                                   $       5,047
       2006                                           5,229
       2007                                           4,517
       2008                                           3,489
       2009                                           3,010
       Thereafter                                    22,352
                                               -------------
            Total                             $      43,644
                                               =============

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

Outstanding at beginning of year        3,940,750  $  10.64   4,604,266  $   9.87   4,018,986  $   6.59
Granted                                   170,800     27.14     148,500     17.12   1,637,300     15.39
Exercised                                (501,694)     7.56    (667,002)     7.06    (944,154)     5.36
Forfeited                                 (53,402)    15.46    (145,014)    12.78    (107,866)    10.81
                                       ---------------------  --------------------  --------------------
Outstanding at end of year              3,556,454  $  11.79   3,940,750  $  10.64   4,604,266  $   9.87
                                       =====================  ====================  ====================

Options exercisable at year-end         2,388,129             2,219,850             2,243,130
Weighted-average fair value of
   options granted during the year    $      6.55            $     4.28            $     4.19

                                     Options Outstanding               Options Exercisable
                           ----------------------------------------  ---------------------
                             Number        Weighted       Weighted     Number    Weighted
                               of          Average         Average       of       Average
                           Outstanding    Remaining       Exercise   Exercisable Exercise
Range of Exercise Prices     Options    Contractual Life    Price     Options      Price
- -------------------------  -----------  --------------   ----------  ----------  ---------
     $5.00 to $9.99         1,380,282     3.8 years     $    5.44   1,380,282  $    5.44
    $10.00 to $14.99          922,746     6.7 years         12.52     504,996      12.43
    $15.00 to $19.99        1,087,326     4.7 years         16.89     501,851      16.89
    $20.00 to $24.99            2,000     5.6 years         21.06         500      21.06
    $25.00 to $29.99          149,600     6.2 years         26.57         500      26.91
    $30.00 to $34.99           11,000     6.6 years         32.18          --         --
    $35.00 to $39.99            2,500     6.7 years         35.14          --         --
    $40.00 to $44.99            1,000     6.9 years         42.97          --         --
                           -----------  --------------   ----------  ----------  ---------
     $5.00 to $44.99        3,556,454     4.9 years     $   11.79   2,388,129  $    9.33
                           ===========  ===============   =========  ==========  =========

                                           2004                  2003
                                  --------------------  --------------------
                                             Weighted              Weighted
                                              Average               Average
                                   Shares      Price     Shares      Price
                                  ---------  ---------  ---------  ---------
Outstanding at beginning of year   165,574  $   21.64      3,000  $    6.00
Granted                            129,285      33.98    166,674      21.66
Vested                                  --         --     (3,000)      6.00
Forfeited                          (26,853)     24.60     (1,100)     23.92
                                  ---------  ---------  ---------  ---------
Outstanding at end of year         268,006  $   27.30    165,574  $   21.64
                                  =========  =========  =========  =========

                                        Net          Number     Per Share
                                       Income      of Shares     Amounts
                                    ------------  ------------  ----------
                                    (In thousands, except per share data) 
2004
Basic EPS                          $     78,022        50,654  $     1.54
Effect of dilutive securities:
  Stock Options                              --         1,416
  Restricted Stock                           --            82
  Stock Warrants                             --           145
                                    ------------  ------------
Diluted EPS                        $     78,022        52,297  $     1.49
                                    ============  ============

2003
Basic EPS                          $     58,992        48,112  $     1.23
Effect of dilutive securities:
  Stock Options                              --         1,228
  Restricted Stock                           --            38
  Stock Warrants                             --           108
                                    ------------  ------------
Diluted EPS                        $     58,992        49,486  $     1.19
                                    ============  ============

2002
Basic EPS                          $     49,489        47,192  $     1.05
Effect of dilutive securities:
  Stock Options                              --         1,886
  Restricted Stock                           --            54
  Stock Warrants                             --           128
                                    ------------  ------------
Diluted EPS                        $     49,489        49,260  $     1.00
                                    ============  ============

                                                                                        To Be Well Capitalized
                                                                   For Capital Adequacy Under Prompt Corrective
                                                    Actual               Purposes          Action Provisions
                                            --------------------  --------------------  ----------------------
                                             Amount      Ratio     Amount      Ratio      Amount      Ratio
                                            ---------  ---------  ---------  ---------  ----------  ----------
                                                                  (Dollars in thousands)                      
As of December 31, 2004:                                                                                      

Total Capital (to Risk-Weighted Assets)
  Consolidated Company                     $ 576,232       10.9% $ 421,903        8.0%        n/a         n/a
  East West Bank                           $ 557,143       10.6% $ 421,584        8.0% $  526,980        10.0%
Tier I Capital (to Risk-Weighted Assets)
  Consolidated Company                     $ 518,405        9.8% $ 210,951        4.0%        n/a         n/a
  East West Bank                           $ 498,396        9.5% $ 210,792        4.0% $  316,188         6.0%
Tier I Capital (to Average Assets)
  Consolidated Company                     $ 518,405        9.1% $ 228,334        4.0%        n/a         n/a
  East West Bank                           $ 498,396        8.7% $ 228,362        4.0% $  285,452         5.0%
                                                                                                              
As of December 31, 2003:                                                                                      

Total Capital (to Risk-Weighted Assets)
  Consolidated Company                     $ 398,921       10.9% $ 293,614        8.0%        n/a         n/a
  East West Bank                           $ 379,390       10.4% $ 293,103        8.0% $  366,379        10.0%
Tier I Capital (to Risk-Weighted Assets)
  Consolidated Company                     $ 354,511        9.7% $ 146,807        4.0%        n/a         n/a
  East West Bank                           $ 334,014        9.1% $ 146,552        4.0% $  219,827         6.0%
Tier I Capital (to Average Assets)
  Consolidated Company                     $ 354,511        9.1% $ 155,298        4.0%        n/a         n/a
  East West Bank                           $ 334,014        8.6% $ 155,089        4.0% $  193,861         5.0%

                                                                   December 31,
                                               --------------------------------------------------
                                                         2004                      2003
                                               ------------------------  ------------------------
                                                Carrying                  Carrying
                                               or Contract   Estimated   or Contract   Estimated
                                                 Amount     Fair Value     Amount     Fair Value
                                               -----------  -----------  -----------  -----------
                                                                  (In thousands)                 
Financial Assets:
  Cash and cash equivalents                   $    93,075  $    93,075  $   141,589  $   141,589
  Interest-bearing deposit in other banks             100          100          594          594
  Investment securities available-for-sale        534,452      534,452      445,142      445,142
  Loans receivable, net                         5,080,454    5,104,234    3,234,133    3,274,055
  Investment in Federal Home Loan Bank stock       47,482       47,482       17,122       17,122
  Investment in Federal Reserve Bank stock          6,923        6,923           --           --
  Accrued interest receivable                      22,228       22,228       14,743       14,743

Financial Liabilities:
  Customer deposit accounts:
    Demand accounts                            (2,280,946)  (2,280,946)  (1,789,707)  (1,789,707)
    Time deposits                              (2,241,571)  (2,232,845)  (1,522,960)  (1,524,631)
  Short-term borrowings                                --           --      (12,000)     (12,000)
  Federal Home Loan Bank advances                (860,803)    (858,183)    (281,300)    (281,232)
  Notes payable                                   (11,018)     (11,018)      (2,192)      (2,192)
  Junior subordinated debt                        (57,476)     (65,403)     (31,702)     (37,864)
  Accrued interest payable                         (2,437)      (2,437)      (1,556)      (1,556)
  Equity swap agreements                           24,596         (422)          --           --

Off-balance sheet financial instruments:
  Commitments to extend credit                  1,021,326        5,118      655,829        3,224
  Standby letters of credit                       315,623        3,583      358,671        4,577
  Commercial letters of credit                     32,707         (123)      28,700         (108)

                                                              Year Ended December 31, 2004
                                        ----------------------------------------------------------------------
                                          Retail    Commercial              Residential
                                         Banking     Lending     Treasury    Lending      Other       Total
                                        ----------  ----------  ----------  ----------  ----------  ----------
                                                                (In thousands)                                
Interest income                        $   79,491  $  116,115  $   16,447  $   36,945  $    3,072  $  252,070
Charge for funds used                     (34,447)    (49,205)     (1,097)    (19,292)         --    (104,041)
                                        ----------  ----------  ----------  ----------  ----------  ----------
     Interest spread on funds used         45,044      66,910      15,350      17,653       3,072     148,029
                                        ----------  ----------  ----------  ----------  ----------  ----------
Interest expense                          (29,097)     (3,397)    (20,403)         --          --     (52,897)
Credit on funds provided                   62,232       6,889      34,920          --          --     104,041
                                        ----------  ----------  ----------  ----------  ----------  ----------
     Interest spread on funds provided     33,135       3,492      14,517          --          --      51,144
                                        ----------  ----------  ----------  ----------  ----------  ----------
        Net interest income            $   78,179  $   70,402  $   29,867  $   17,653  $    3,072  $  199,173
                                        ==========  ==========  ==========  ==========  ==========  ==========
Depreciation and amortization          $    4,298  $      390  $      213  $    1,244  $    5,312  $   11,457
Segment pretax profit                      30,379      67,374       6,714      16,479         387     121,333
Segment assets                          1,653,858   2,418,352     614,709   1,096,406     245,556   6,028,880

                                                              Year Ended December 31, 2003
                                        ----------------------------------------------------------------------
                                          Retail    Commercial              Residential
                                         Banking     Lending     Treasury    Lending      Other       Total
                                        ----------  ----------  ----------  ----------  ----------  ----------
                                                                (In thousands)                                
Interest income                        $   48,210  $   80,260  $   18,467  $   30,265  $    1,341  $  178,543
Charge for funds used                     (17,052)    (28,402)    (10,360)    (14,242)         --     (70,056)
                                        ----------  ----------  ----------  ----------  ----------  ----------
     Interest spread on funds used         31,158      51,858       8,107      16,023       1,341     108,487
                                        ----------  ----------  ----------  ----------  ----------  ----------
Interest expense                          (25,707)     (1,078)     (8,447)         --          --     (35,232)
Credit on funds provided                   49,271       2,537      18,248          --          --      70,056
                                        ----------  ----------  ----------  ----------  ----------  ----------
     Interest spread on funds provided     23,564       1,459       9,801          --          --      34,824
                                        ----------  ----------  ----------  ----------  ----------  ----------
        Net interest income            $   54,722  $   53,317  $   17,908  $   16,023  $    1,341  $  143,311
                                        ==========  ==========  ==========  ==========  ==========  ==========
Depreciation and amortization          $    3,776  $      154  $      314  $    1,680  $    6,215  $   12,139
Segment pretax profit                       6,413      49,150       9,791      23,997         309      89,660
Segment assets                          1,065,777   1,700,988     523,089     547,442     218,137   4,055,433

                                                              Year Ended December 31, 2002
                                        ----------------------------------------------------------------------
                                          Retail    Commercial              Residential
                                         Banking     Lending     Treasury    Lending      Other       Total
                                        ----------  ----------  ----------  ----------  ----------  ----------
                                                                (In thousands)                                
Interest income                        $   37,401  $   74,030  $   17,214  $   37,135  $    1,508  $  167,288
Charge for funds used                     (15,391)    (32,224)    (14,208)    (20,031)         --     (81,854)
                                        ----------  ----------  ----------  ----------  ----------  ----------
     Interest spread on funds used         22,010      41,806       3,006      17,104       1,508      85,434
                                        ----------  ----------  ----------  ----------  ----------  ----------
Interest expense                          (36,710)     (1,503)    (10,766)         --          --     (48,979)
Credit on funds provided                   58,571       2,989      20,294          --          --      81,854
                                        ----------  ----------  ----------  ----------  ----------  ----------
     Interest spread on funds provided     21,861       1,486       9,528          --          --      32,875
                                        ----------  ----------  ----------  ----------  ----------  ----------
        Net interest income            $   43,871  $   43,292  $   12,534  $   17,104  $    1,508  $  118,309
                                        ==========  ==========  ==========  ==========  ==========  ==========
Depreciation and amortization          $    3,646  $      972  $    1,010  $      681  $    4,141  $   10,450
Segment pretax profit                       6,136      39,715       3,188      15,552       4,225      68,816
Segment assets                            668,721   1,227,472     736,073     474,666     214,556   3,321,489

BALANCE SHEETS                                                                                       
                                                                               December 31, December 31,
                                                                                  2004         2003
                                                                               ----------   ----------
                                                                                   (In thousands)     
ASSETS:                                                                                              
Cash and cash equivalents                                                     $   17,732   $   11,142
Investment securities available-for-sale, at fair value                              920          966
Loans receivable                                                                     450          450
Investments in affordable housing partnerships                                       520          833
Investment in subsidiaries                                                       551,493      372,828
Investment in nonbank entity                                                         250          250
Goodwill                                                                             958          958
Other assets                                                                         875        7,457
                                                                               ----------   ----------
     TOTAL                                                                    $  573,198   $  394,884
                                                                               ==========   ==========

LIABILITIES AND STOCKHOLDERS' EQUITY:
LIABILITIES                                                                                          
Junior subordinated debt                                                      $   57,476   $   31,702
Other liabilities                                                                  1,413        1,199
                                                                               ----------   ----------
     Total liabilities                                                            58,889       32,901
                                                                               ----------   ----------
STOCKHOLDERS' EQUITY
Common stock (par value $0.001 per share)
  Authorized -- 100,000,000 shares
  Issued -- 57,361,807 shares and 53,691,638 shares in 2004 and 2003,
   respectively
  Outstanding -- 52,500,766 shares and 48,857,450 shares in 2004 and 2003,
   respectively                                                                       57           54
Additional paid in capital                                                       260,152      171,491
Retained earnings                                                                296,175      228,242
Deferred compensation                                                             (5,422)      (3,153)
Treasury stock, at cost: 4,861,041 shares in 2004 and 4,834,188 shares in 2003   (36,649)     (35,986)
Accumulated other comprehensive (loss) income, net of tax                             (4)       1,335
                                                                               ----------   ----------
     Total stockholders' equity                                                  514,309      361,983
                                                                               ----------   ----------
     TOTAL                                                                    $  573,198   $  394,884
                                                                               ==========   ==========
106

STATEMENTS OF INCOME

                                                                   Year Ended December 31,
                                                               -------------------------------
                                                                 2004       2003       2002
                                                               ---------  ---------  ---------
                                                                         (In thousands)       
Dividends from subsidiaries                                   $  10,184  $  10,645  $   6,895
Interest income                                                     338        250        112
Other income                                                         21         31        274
                                                               ---------  ---------  ---------
     Total income                                                10,543     10,926      7,281
                                                               ---------  ---------  ---------
Interest expense                                                  3,139      2,280      2,334
Compensation and net occupancy reimbursement to subsidiary        2,290      1,990      1,338
Other expense                                                     1,255      1,090      1,487
                                                               ---------  ---------  ---------
     Total expense                                                6,684      5,360      5,159
                                                               ---------  ---------  ---------
Income before income taxes and equity in undistributed income
 of subsidiaries                                                  3,859      5,566      2,122
Income tax benefit                                                1,658      1,299      2,367
Equity in undistributed income of subsidiaries                   72,505     52,127     45,000
                                                               ---------  ---------  ---------
     Net income                                               $  78,022  $  58,992  $  49,489
                                                               =========  =========  =========

STATEMENTS OF CASH FLOWS

                                                                    Year Ended December 31,
                                                               -------------------------------
                                                                 2004       2003       2002
                                                               ---------  ---------  ---------
                                                                         (In thousands)       
Cash flows from operating activities:                                                         
Net income                                                    $  78,022  $  58,992  $  49,489
Adjustments to reconcile net income to net cash
  provided by operating activities:
     Equity in undistributed income of subsidiaries             (72,505)   (52,127)   (45,000)
     Depreciation and amortization                                  355        360        310
     Stock compensation costs                                     1,460        442        171
     Net change in other assets                                  12,115       (217)       (72)
     Net change in other liabilities                                214       (249)     3,394
                                                               ---------  ---------  ---------
          Net cash provided by operating activities              19,661      7,201      8,292
                                                               ---------  ---------  ---------
                                                                                              
Cash flows from investing activities:                                                         
Net change in loans receivable                                       --         --         50
Purchase of investment securities                                    --     (1,000)        --
Capital contributions to subsidiaries, net                      (73,810)   (10,288)    (4,708)
Purchase of investments in affordable housing partnerships           --         --       (400)
                                                               ---------  ---------  ---------
          Net cash used in investing activities                 (73,810)   (11,288)    (5,058)
                                                               ---------  ---------  ---------
                                                                                              
Cash flows from financing activities:                                                         
Proceeds from issuance of common stock                           38,489         --         --
Proceeds from common stock options exercised                      3,792      4,710      5,055
Proceeds from stock warrants exercised                            1,600      1,775         50
Proceeds from employee stock purchase plan                        1,947      1,342        958
Proceeds from issuance of junior subordinated debt               25,000     10,000         --
Dividends paid on common stock                                  (10,089)    (9,623)    (6,381)
                                                               ---------  ---------  ---------
          Net cash provided by (used in) financing activities    60,739      8,204       (318)
                                                               ---------  ---------  ---------

Net increase in cash and cash equivalents                         6,590      4,117      2,916
Cash and cash equivalents, beginning of year                     11,142      7,025      4,109
                                                               ---------  ---------  ---------
Cash and cash equivalents, end of year                        $  17,732  $  11,142  $   7,025
                                                               =========  =========  =========
                                                                                              
Supplemental Cash Flow Disclosures                                                            
Interest paid                                                 $   5,989  $   2,234  $   2,264
Income tax payments, net of refunds                              52,670     34,247       (451)
Noncash financing activities:
   Issuance of common stock pursuant to Trust Bank acquisition   32,888         --         --
   Issuance of common stock in lieu of Board of Director
     retainer fees                                                  100         82         --

25. QUARTERLY FINANCIAL INFORMATION (unaudited)

                                                                    Quarters Ended
                                                     ----------------------------------------------
                                                     December 31,September 30 June 30,   March 31,
                                                     ----------  ----------  ----------  ----------
                                                          (In thousands, except per share data) 
2004                                                                                               
Interest and dividend income                        $   76,763  $   66,815  $   56,347  $   52,145
Interest expense                                        17,512      13,980      11,343      10,062
                                                     ----------  ----------  ----------  ----------
Net interest income                                     59,251      52,835      45,004      42,083
Provision for loan losses                                5,000       5,000       3,000       3,750
                                                     ----------  ----------  ----------  ----------
Net interest income after provision for loan losses     54,251      47,835      42,004      38,333
Noninterest income                                       8,733       7,613       7,011       8,469
Noninterest expense                                     27,212      23,647      21,289      20,768
                                                     ----------  ----------  ----------  ----------
Income before provision for income taxes                35,772      31,801      27,726      26,034
Provision for income taxes                              13,123      11,402       9,697       9,089
                                                     ----------  ----------  ----------  ----------
Net income                                          $   22,649  $   20,399  $   18,029  $   16,945
                                                     ==========  ==========  ==========  ==========
Basic earnings per share                            $     0.43  $     0.40  $     0.36  $     0.35
Diluted earnings per share                          $     0.42  $     0.39  $     0.35  $     0.33
                                                                                                   
2003                                                                                               
Interest and dividend income                        $   48,191  $   45,427  $   43,873  $   41,052
Interest expense                                         8,381       7,966       8,892       9,993
                                                     ----------  ----------  ----------  ----------
Net interest income                                     39,810      37,461      34,981      31,059
Provision for loan losses                                2,300       2,000       2,010       2,490
                                                     ----------  ----------  ----------  ----------
Net interest income after provision for loan losses     37,510      35,461      32,971      28,569
Noninterest income                                       8,503       9,114       8,419       6,730
Noninterest expense                                     21,463      19,764      19,047      17,343
                                                     ----------  ----------  ----------  ----------
Income before provision for income taxes                24,550      24,811      22,343      17,956
Provision for income taxes                               8,143       8,669       7,658       6,198
                                                     ----------  ----------  ----------  ----------
Net income                                          $   16,407  $   16,142  $   14,685  $   11,758
                                                     ==========  ==========  ==========  ==========
Basic earnings per share                            $     0.34  $     0.33  $     0.31  $     0.25
Diluted earnings per share                          $     0.33  $     0.32  $     0.30  $     0.24

SIGNATURES

112