EAST WEST BANCORP INC, 10-Q, 2000-11-14

EAST WEST BANCORP INC
10-Q, 2000-11-14
STATE COMMERCIAL BANKS

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549
------------------------

FORM 10-Q

MARK ONE

<TABLE>
<C> <S>
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
OR

<TABLE>
<C> <S>
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>

FOR THE TRANSITION PERIOD FROM ______________ TO ______________

COMMISSION FILE NUMBER 000-24939
------------------------

EAST WEST BANCORP, INC.

(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C>
DELAWARE 95-4703316
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

415 HUNTINGTON DRIVE, SAN MARINO, CALIFORNIA 91108
(Address of principal executive offices) (Zip Code)
</TABLE>

Registrant's telephone number, including area code: (626) 799-5700

Securities registered pursuant to Section 12(b) of the Act:

<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE ON WHICH
TITLE OF EACH CLASS REGISTERED
------------------- ----------
<S> <C>
NONE NONE
</TABLE>

Securities registered pursuant to Section 12(g) of the Act:

COMMON STOCK, $0.001 PAR VALUE
(TITLE OF CLASS)
------------------------

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /

Number of shares of common stock of the registrant outstanding as of
October 31, 2000: 22,812,283 shares

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<PAGE>
TABLE OF CONTENTS

<TABLE>
<S> <C> <C> <C>
PART I--FINANCIAL INFORMATION................................................. 3

Item 1. Interim Consolidated Financial Statements................... 3-7

Notes to Interim Consolidated Financial Statements.......... 8-14

Item 2. Management's Discussion and Analysis of Consolidated
Financial Condition and Results of Operations............... 15-37

Item 3. Quantitative and Qualitative Disclosures of Market Risks.... 37

PART II--OTHER INFORMATION.................................................... 38

Item 1. Legal Proceedings........................................... 38

Item 2. Changes in Securities and Use of Proceeds................... 38

Item 3. Defaults upon Senior Securities............................. 38

Item 4. Submission of Matters to a Vote of Security Holders......... 38

Item 5. Other Information........................................... 38

Item 6. Exhibits and Reports on Form 8-K............................ 38

SIGNATURE..................................................................... 39
</TABLE>

2
<PAGE>
PART I--FINANCIAL INFORMATION

ITEM 1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 51,541 $ 43,497
Investment securities available for sale, at fair value
(with amortized cost of $498,201 in 2000 and $517,320 in
1999)..................................................... 477,697 496,426
Loans receivable, net of allowance for loan losses of
$24,679 in 2000 and $20,844 in 1999....................... 1,704,010 1,486,641
Investment in Federal Home Loan Bank stock, at cost......... 18,854 26,954
Other real estate owned..................................... 929 577
Investments in affordable housing partnerships.............. 20,842 26,485
Premises and equipment, net................................. 26,993 22,646
Premiums on deposits acquired, net.......................... 8,258 3,812
Excess of purchase price over fair value of net assets
acquired, net............................................. 16,712 6,770
Accrued interest receivable and other assets................ 45,079 30,503
Deferred tax asset.......................................... 15,610 8,319
---------- ----------
TOTAL................................................... $2,386,525 $2,152,630
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Customer deposit accounts................................... $1,877,232 $1,500,529
Short-term borrowings....................................... 38,000 600
Federal Home Loan Bank advances............................. 234,000 482,000
Notes payable............................................... -- 1,532
Accrued expenses and other liabilities...................... 36,781 15,861
Junior subordinated debt securities (Note 5)................ 20,750 --
---------- ----------
Total liabilities....................................... 2,206,763 2,000,522
---------- ----------
FAIR VALUE OF NET ASSETS ACQUIRED IN EXCESS OF PURCHASE
PRICE, NET................................................ 1,716 2,028
COMMITMENTS AND CONTINGENCIES (Note 3)
STOCKHOLDER'S EQUITY (Notes 4 and 5)
Common stock (par value of $0.001 per share)
Authorized--50,000,000 shares
Issued--24,286,283 shares and 23,908,731 shares in 2000
and 1999, respectively
Outstanding--22,790,022 shares and 22,422,868 shares in
2000 and 1999, respectively respectively................ 24 24
Additional paid in capital.................................. 115,782 111,306
Retained earnings........................................... 90,837 67,001
Deferred compensation....................................... (1,428) (863)
Treasury stock, at cost: 1,496,261 shares and 1,485,863
shares in 2000 and 1999, respectively..................... (14,770) (14,659)
Accumulated other comprehensive loss, net of tax............ (12,399) (12,729)
---------- ----------
Total stockholders' equity................................ 178,046 150,080
---------- ----------
TOTAL................................................... $2,386,525 $2,152,630
========== ==========
</TABLE>

See accompanying notes to interim consolidated financial statements.

3
<PAGE>
EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(IN THOUSANDS, EXCEPT PER SHARE DATA)

(UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
INTEREST AND DIVIDEND INCOME
Loans receivable, including fees.......................... $38,119 $28,590 $111,163 $ 77,607
Investment securities available for sale.................. 8,202 8,426 24,344 27,470
Investment securities held for trading.................... -- 67 -- 81
Short-term investments.................................... 536 383 743 2,194
Federal Home Loan Bank stock.............................. 432 356 1,400 1,149
------- ------- -------- --------
Total interest and dividend income...................... 47,289 37,822 137,650 108,501
------- ------- -------- --------

INTEREST EXPENSE
Customer deposit accounts................................. 19,301 12,977 52,120 36,298
Short-term borrowings..................................... 639 54 1,410 596
Federal Home Loan Bank advances........................... 4,281 6,180 16,396 19,428
Junior subordinated debt securities....................... 490 -- 811 --
------- ------- -------- --------
Total interest expense.................................. 24,711 19,211 70,737 56,322
------- ------- -------- --------

NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES........ 22,578 18,611 66,913 52,179

PROVISION FOR LOAN LOSSES................................... 1,300 1,320 4,100 4,006
------- ------- -------- --------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES......... 21,278 17,291 62,813 48,173
------- ------- -------- --------

NONINTEREST INCOME
Loan fees................................................. 418 419 1,376 1,545
Branch fees............................................... 1,140 889 3,616 2,500
Letters of credit fees and commissions.................... 1,139 1,062 3,301 3,101
Net gain on sales of investment securities available for
sale.................................................... -- -- 261 685
Net gain (loss) on trading securities..................... (60) 841 (12) 1,266
Net gain on sales of investment in affordable housing
partnerships............................................ 374 -- 1,279 402
Net gain on sale of branch................................ -- -- -- 676
Amortization of fair value of net assets acquired in
excess of purchase price................................ 104 104 312 312
Other operating income.................................... 545 229 1,389 616
------- ------- -------- --------
Total noninterest income................................ 3,660 3,544 11,522 11,103
------- ------- -------- --------

NONINTEREST EXPENSE
Compensation and employee benefits........................ 5,080 4,773 14,751 13,910
Net occupancy............................................. 1,892 1,571 5,598 4,272
Data processing........................................... 459 383 1,380 1,073
Amortization of premiums on deposits acquired and excess
of purchase price over fair value of net assets
acquired................................................ 865 452 2,487 1,120
Amortization of investment in affordable housing
partnerships............................................ 958 866 2,914 2,053
Deposit insurance premiums and regulatory assessments..... 119 223 339 638
Other real estate owned operations, net................... (108) 198 (115) (63)
Other operating expenses.................................. 2,985 2,171 8,807 6,031
------- ------- -------- --------
Total noninterest expense............................... 12,250 10,637 36,161 29,034
------- ------- -------- --------

INCOME BEFORE PROVISION FOR INCOME TAXES.................... 12,688 10,198 38,174 30,242
PROVISION FOR INCOME TAXES.................................. 3,910 3,169 12,319 10,101
------- ------- -------- --------
NET INCOME.................................................. $ 8,778 $ 7,029 $ 25,855 $ 20,141
======= ======= ======== ========

BASIC EARNINGS PER SHARE (Note 4)........................... $ 0.39 $ 0.31 $ 1.16 $ 0.88
DILUTED EARNINGS PER SHARE (Note 4)......................... $ 0.38 $ 0.31 $ 1.12 $ 0.88
AVERAGE NUMBER OF SHARES OUTSTANDING--BASIC................. 22,406 22,392 22,367 22,901
AVERAGE NUMBER OF SHARES OUTSTANDING--DILUTED............... 23,356 22,448 22,991 22,917
</TABLE>

See accompanying notes to interim consolidated financial statements.

4
<PAGE>
EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(UNAUDITED)
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL OTHER
COMMON PAID-IN RETAINED DEFERRED TREASURY COMPREHENSIVE
STOCK CAPITAL EARNINGS COMPENSATION STOCK LOSS, NET OF TAX
-------- ---------- -------- ------------- -------- ----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1999.............. $24 $109,976 $41,718 $ -- $ -- $ (888)
Comprehensive income:
Net income for the year............. 28,027
Net unrealized loss on securities... (11,841)
Comprehensive income..................
Stock compensation costs.............. 249
Issuance of 105,003 shares under
Restricted Stock Plan............... 1,112 (1,112)
Issuance of 28,728 shares under
Employee Stock Purchase Plan........ 218
Purchase of 1,485,863 shares of
treasury stock...................... (14,659)
Dividends paid on common
stock............................... (2,744)
--- -------- ------- ------- -------- --------
BALANCE, DECEMBER 31, 1999............ $24 $111,306 $67,001 $ (863) $(14,659) $(12,729)
Comprehensive income:
Net income for the period........... 25,855
Net unrealized gain on securities... 330
Comprehensive income..................
Stock compensation costs.............. 4 321
Issuance of 9,087 shares under Stock
Incentive Plan...................... 107
Issuance of 1,500 shares under
Restricted Stock Plan............... 18 (18)
Issuance of 31,174 shares under
Employee Stock Purchase Plan........ 285
Issuance of 232,500 shares pursuant to
exercise of stock warrants.......... 2,325
Issuance of 103,291 shares for
acquisition of Risk Services,
Inc................................. 1,737 (868)
Purchase of 10,398 shares of treasury
stock............................... (111)
Dividends paid on common
stock............................... (2,019)
--- -------- ------- ------- -------- --------
BALANCE, SEPTEMBER 30, 2000........... $24 $115,782 $90,837 $(1,428) $(14,770) $(12,399)
=== ======== ======= ======= ======== ========

TOTAL
COMPREHENSIVE STOCKHOLDERS'
INCOME EQUITY
------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
BALANCE, JANUARY 1, 1999.............. $150,830
Comprehensive income:
Net income for the year............. $ 28,027 28,027
Net unrealized loss on securities... (11,841) (11,841)
--------
Comprehensive income.................. $ 16,186
========
Stock compensation costs.............. 249
Issuance of 105,003 shares under
Restricted Stock Plan............... --
Issuance of 28,728 shares under
Employee Stock Purchase Plan........ 218
Purchase of 1,485,863 shares of
treasury stock...................... (14,659)
Dividends paid on common
stock............................... (2,744)
--------
BALANCE, DECEMBER 31, 1999............ $150,080
Comprehensive income:
Net income for the period........... $ 25,855 25,855
Net unrealized gain on securities... 330 330
--------
Comprehensive income.................. $ 26,185
========
Stock compensation costs.............. 325
Issuance of 9,087 shares under Stock
Incentive Plan...................... 107
Issuance of 1,500 shares under
Restricted Stock Plan............... --
Issuance of 31,174 shares under
Employee Stock Purchase Plan........ 285
Issuance of 232,500 shares pursuant to
exercise of stock warrants.......... 2,325
Issuance of 103,291 shares for
acquisition of Risk Services,
Inc................................. 869
Purchase of 10,398 shares of treasury
stock............................... (111)
Dividends paid on common
stock............................... (2,019)
--------
BALANCE, SEPTEMBER 30, 2000........... $178,046
========
</TABLE>

<TABLE>
<CAPTION>
NINE MONTHS YEAR
ENDED ENDED
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
(IN THOUSANDS)
<S> <C> <C>
DISCLOSURE OF RECLASSIFICATION AMOUNTS:
Unrealized holding loss arising during period, net of tax
expense (benefit) of $324 in 2000 and $(7,620) in 1999.... $ 486 $(11,430)
Less: Reclassification adjustment for gain included in net
income, net of tax expense of $104 in 2000 and $274 in
1999...................................................... (156) (411)
----- --------
Net unrealized gain (loss) on securities, net of tax expense
(benefit) of $220 in 2000 and $(7,894) in 1999............ $ 330 $(11,841)
===== ========
</TABLE>

See accompanying notes to interim consolidated financial statements.

5
<PAGE>
EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30,
-------------------------
2000 1999
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income................................................ $ 25,855 $ 20,141
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization........................... 6,427 2,987
Net loan fees deferred.................................. 1,101 1,752
Stock compensation costs................................ 325 --
Deferred tax benefit.................................... (2,497) (2,458)
Provision for loan losses............................... 4,100 4,006
Provision for other real estate owned losses............ -- 102
Net gain on sales of investment securities and other
assets................................................. (1,770) (2,037)
Gain on trading securities.............................. 12 (1,266)
Federal Home Loan Bank stock dividends.................. (1,386) (1,233)
Proceeds from sale of trading securities................ -- 80,206
Purchases of trading securities......................... -- (78,940)
Proceeds from sale of loans held for sale............... 8,284 43,135
Originations of loans held for sale..................... (8,383) (33,972)
Increase in accrued interest receivable and other
assets, net of effects from purchase of American
International Bank and First Central Bank.............. (9,865) (1,570)
Increase in accrued expenses and other liabilities, net
of effects from purchase of American International Bank
and First Central Bank................................. 17,593 4,023
----------- -----------
Total adjustments..................................... 13,941 14,735
----------- -----------
Net cash provided by operating activities............. 39,796 34,876
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Net change in loans....................................... (82,373) (99,554)
Purchases of:
Interest bearing deposits in banks...................... (100) --
Investment securities available for sale................ (98,066) (419,612)
Loans receivable........................................ (140,008) (188,072)
Federal Home Loan Bank stock............................ (1,326) (1,808)
Investment in affordable housing partnerships........... (5,544) (7,975)
Premises and equipment.................................. (7,334) (1,226)
Proceeds from sale of:
Investment securities available for sale................ 64,639 177,758
Other real estate owned................................. 783 2,628
Investment in affordable housing partnerships........... 9,552 3,267
Premises and equipment.................................. -- 2
Proceeds from redemption of interest bearing deposits in
banks................................................... 100 --
Repayments, maturity and redemption of investment
securities available for sale........................... 55,754 382,969
Redemption of Federal Home Loan Bank stock................ 10,812 8,200
Repayments on foreclosed properties....................... 38 100
Investment in nonbank entity.............................. (250) --
Payment for purchase of First Central Bank, net of cash
received................................................ (380) (5,295)
Payment for purchase of American International Bank, net
of cash received........................................ (24,514) --
Payment for purchase of Risk Services, Inc., net of cash
received................................................ (311) --
----------- -----------
Net cash used in investing activities................. (218,528) (148,618)
----------- -----------
</TABLE>

6
<PAGE>
EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(UNAUDITED)

<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30,
-------------------------
2000 1999
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposits.................................... 376,702 172,812
Net increase in short-term borrowings..................... 37,400 3,000
Proceeds from Federal Home Loan Bank advances............. 13,250,000 13,043,000
Repayment of Federal Home Loan Bank advances.............. (13,498,000) (13,208,000)
Proceeds from issuance of junior subordinated debt
securities.............................................. 20,750 --
Repayments of notes payable on affordable housing
investments............................................. (1,532) (2,400)
Proceeds from common stock options and warrants
exercised............................................... 2,432 --
Proceeds from issuance of common stock under Employee
Stock Purchase Plan..................................... 285 --
Net proceeds from issuance of common stock related to
acquisition of Risk Services Inc.......................... 869 --
Repurchases of common stock............................... (111) (13,493)
Dividends paid on common stock............................ (2,019) (2,070)
----------- -----------
Net cash provided by (used in) financing activities... 186,776 (7,151)
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ 8,044 (120,893)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.............. 43,497 161,131
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD.................... $ 51,541 $ 40,238
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid............................................. $ 68,712 $ 55,640
Income tax payments, net.................................. 14,232 14,050
Noncash investing and financing activities:
Other real estate acquired through foreclosure.......... 1,025 1,320
Loans made to facilitate sales of other real estate
owned.................................................. -- 650
Investment in affordable housing partnerships acquired
through notes payable.................................. -- 3,033
</TABLE>

See accompanying notes to interim consolidated financial statements.

7
<PAGE>
EAST WEST BANCORP, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999

(UNAUDITED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements include the accounts of East West
Bancorp, Inc. (the "Company") and its wholly-owned subsidiary bank, East West
Bank and subsidiaries (the "Bank"). Intercompany transactions and accounts have
been eliminated.

The interim consolidated financial statements, presented in accordance with
accounting principles generally accepted in the United States of America
("GAAP"), are unaudited and reflect all adjustments which, in the opinion of
management, are necessary for a fair statement of financial condition and
results of operations for the interim periods. All adjustments are of a normal
and recurring nature. Results for the period ended September 30, 2000 are not
necessarily indicative of results which may be expected for any other interim
period or for the year as a whole. Certain information and note disclosures
normally included in annual financial statements prepared in accordance with
GAAP have been condensed or omitted. The unaudited consolidated financial
statements should be read in conjunction with the audited consolidated financial
statements and notes included in the Company's annual report on Form 10K for the
year ended December 31, 1999.

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

2. ACQUISITIONS

AMERICAN INTERNATIONAL BANK--On January 18, 2000, the Company completed its
$33.1 million acquisition of American International Bank ("AIB") in an all-cash
transaction. American International Bank, with assets of $202 million, was a
state-chartered bank with eight branches in Southern California. AIB specialized
in servicing small-to-medium sized companies involved in international trade and
other areas, as well as offering a full range of personal banking products and
services to a predominantly Chinese-American customer base.

The acquisition of AIB was accounted for under the purchase method of
accounting, and accordingly, all assets and liabilities were adjusted to and
recorded at their estimated fair values as of the acquisition date. The
estimated tax effect of differences between tax bases and market values has been
reflected in deferred income taxes. The Company recorded total goodwill of
approximately $10.2 million, which is being amortized using the straight-line
method over 15 years.

RISK SERVICES, INC. (DBA EAST WEST INSURANCE AGENCY)--On August 22, 2000,
the Company completed the acquisition of Risk Services, Inc. (the "Agency") in a
stock swap transaction. Risk Services, Inc., with assets of $819 thousand as of
September 30, 2000, is an unrelated agent providing business and consumer
insurance services to the Southern California market. The Agency will continue
to run autonomously as a wholly owned subsidiary of East West Bancorp, Inc.

In exchange for all of the outstanding stock of Risk Services, Inc., the
Company issued a total of 103,291 new shares of East West Bancorp, Inc. common
stock, par value of $.001. The total cash value of the shares issued was
approximately $1.7 million. Approximately half of the shares issued for the
acquisition of the Agency, or 51,645 shares, are held in escrow by the Company
and are subject to a three-and-a-half year earn-out period pursuant to the
provisions of the Agreement and Plan of Merger dated August 8, 2000. The
acquisition of the Agency was accounted for under the purchase method of
accounting, and accordingly, all assets and liabilities were adjusted to and
recorded at their estimated

8
<PAGE>
EAST WEST BANCORP, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999

(UNAUDITED)

fair values as of the acquisition date. The Company recorded total goodwill of
approximately $311 thousand, which is being amortized using the straight-line
method over 15 years.

PRIME BANK--On November 2, 2000, the Company announced that it has signed a
definitive agreement to acquire Prime Bank for a combination of shares and cash
valued at approximately $14.5 million. Prime Bank, with assets of $110 million,
is a one-branch commercial bank located in the Century City area of Los Angeles.
Prime Bank focuses on providing a wide range of services to commercial, real
estate and professional firms located in the West Los Angeles market based upon
a committed relationship approach to business banking. In addition to commercial
real estate loans and business term loans and lines of credit, Prime provides
specialty depository services to entertainment, title and escrow and other
sectors. The acquisition is anticipated to be completed in the first quarter of
2001 subject to regulatory and Prime Bank shareholder approval.

3. COMMITMENTS AND CONTINGENCIES

CREDIT EXTENSIONS--In the normal course of business, there are various
outstanding commitments to extend credit which are not reflected in the
accompanying interim consolidated financial statements. Commitments are included
in determining the appropriate level of the allowance for loan losses. As of
September 30, 2000, undisbursed loan commitments, commercial and standby letters
of credit, and commitments to fund mortgage loan applications in process
amounted to $272.9 million, $156.7 million, and $35.4 million, respectively.

LITIGATION--The Company is a party to various legal proceedings arising in
the normal course of business. While it is difficult to predict the outcome of
such litigation, the Company does not expect that such litigation will have a
material adverse effect on its financial position and results of operations.

4. STOCKHOLDERS' EQUITY

EARNINGS PER SHARE--The actual number of shares outstanding at
September 30, 2000, was 22,790,022. Basic earnings per share are calculated on
the basis of the weighted average number of shares outstanding during the
period. Diluted earnings per share are calculated on the basis of the weighted
average number of shares outstanding during the period plus shares issuable upon
the assumed exercise of outstanding common stock options, warrants and
restricted stock.

9
<PAGE>
EAST WEST BANCORP, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999

(UNAUDITED)

The following tables set forth the Company's earnings per share calculations
for the three and nine months ended September 30, 2000 and 1999:

<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
-------------------------------------------------------------------
2000 1999
-------------------------------- --------------------------------
NET NUMBER PER SHARE NET NUMBER PER SHARE
INCOME OF SHARES AMOUNTS INCOME OF SHARES AMOUNTS
-------- --------- --------- -------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Basic earnings per share.................... $8,778 22,406 $0.39 $7,029 22,392 $0.31
Effect of dilutive securities:
Stock options............................. -- 718 -- 2
Restricted stock.......................... -- 40 -- 49
Stock warrants............................ -- 192 -- 5
------ ------ ----- ------ ------ -----
Dilutive earnings per share................. $8,778 23,356 $0.38 $7,029 22,448 $0.31
====== ====== ===== ====== ====== =====
</TABLE>

<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------------------------------------------
2000 1999
-------------------------------- --------------------------------
NET NUMBER PER SHARE NET NUMBER PER SHARE
INCOME OF SHARES AMOUNTS INCOME OF SHARES AMOUNTS
-------- --------- --------- -------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Basic earnings per share................... $25,855 22,367 $1.16 $20,141 22,901 $0.88
Effect of dilutive securities:
Stock options............................ -- 467 -- --
Restricted stock......................... -- 29 -- 16
Stock warrants........................... -- 128 -- --
------- ------ ----- ------- ------ -----
Dilutive earnings per share................ $25,855 22,991 $1.12 $20,141 22,917 $0.88
======= ====== ===== ======= ====== =====
</TABLE>

QUARTERLY DIVIDENDS--During 2000, the Company's Board of Directors declared
regular quarterly common stock cash dividends of $0.03 per share. Quarterly cash
dividends were paid on or about February 16, 2000, May 17, 2000 and August 25,
2000 to shareholders of record on February 2, 2000, May 3, 2000, and August 8,
2000, respectively. For the nine months ended September 30, 2000, cash dividends
totaling $2.0 million have been paid to the Company's shareholders.

5. SIGNIFICANT TRANSACTIONS

SHELF REGISTRATION--During the first quarter of 2000, the Company filed a
$50 million universal shelf registration statement with the Securities and
Exchange Commission ("SEC") which became effective on February 22, 2000.
Pursuant to the filing, the Company may, from time to time, offer new common
stock, trust preferred, preferred stock and/or other debentures. The timing and
amount of offerings will depend on market and general business conditions. The
Company will utilize the net proceeds from the sale of securities for general
business purposes, including supporting the growth of its commercial banking
activities and possible future acquisitions.

JUNIOR SUBORDINATED DEBENTURES--Additionally, on March 23, 2000, the Company
issued $10.8 million of junior subordinated deferrable interest debentures.
These securities have a scheduled maturity date of March 8, 2030 and bear an
interest rate of 10.875% per annum. Interest payments are due on March 8 and
September 8 of each year. On July 26, 2000, the Company issued another
$10.0 million in junior subordinated deferrable interest debentures. The
scheduled maturity date of

10
<PAGE>
EAST WEST BANCORP, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999

(UNAUDITED)

these securities is July 19, 2030. These securities bear an interest rate of
10.945% per annum and interest payments are due on January 19 and July 19 of
each year. Interest payments on these securities are deductible for tax
purposes. These securities, which are not registered with the SEC, are recorded
in the liability section of the consolidated balance sheet in accordance with
GAAP. For regulatory reporting purposes, these securities qualify for Tier 1
capital treatment.

REGULATED INVESTMENT COMPANY--On July 26, 2000, the Bank formed a
closed-end, non-diversified regulated company subsidiary, East West Securities
Company, Inc. (the "Fund"), registered under the Investment Company Act of 1940.
The holdings of the Fund will consist of cash, investments and loans. The
formation of the Fund provides the Bank with the flexibility to raise additional
capital in a tax efficient manner for future business opportunities if deemed
necessary. There can be no assurance as to the timing or ability of the Bank to
raise capital through this subsidiary.

6. BUSINESS SEGMENTS

Management utilizes an internal reporting system to measure the performance
of various operating segments within the Company and the Company overall. Four
principal operating segments have been identified by the Company for purposes of
management reporting: retail banking, commercial lending, treasury, and
residential lending. Information related to the Company's remaining centralized
functions have been aggregated and included in "Other." 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 Company's branch
network, certain designated branches have responsibility for generating
commercial deposits and loans. The commercial lending segment primarily
generates commercial loans and deposits through the efforts of commercial
lending officers located in the Company's northern and southern California
production offices. The treasury department's primary focus is managing the
Company's investments, liquidity, and interest rate risk; the residential
lending segment is mainly responsible for the Company's portfolio of single
family and multifamily residential loans.

Operating segment results are based on the Company's internal management
reporting process, which reflects assignments and allocations of capital,
certain operating and administrative costs and the provision for loan losses.
Net interest income is based on the Company's internal funds transfer pricing
system which assigns a cost of funds or a credit for funds to assets or
liabilities based on their type, maturity or repricing characteristics.
Noninterest income and noninterest expense, including depreciation and
amortization, directly attributable to a segment are assigned to that business.
Indirect costs, including overhead expense, are allocated to the segments based
on several factors, including, but not limited to, full-time equivalent
employees, loan volume and deposit volume. The provision for credit losses is
allocated based on new loan originations for the period. The Company evaluates
overall performance based on profit or loss from operations before income taxes,
not including nonrecurring gains and losses.

Future changes in the Company's management structure or reporting
methodologies may result in changes in the measurement of operating segment
results. Results for prior periods have been restated for comparability for
changes in management structure and reporting methodologies.

11
<PAGE>
EAST WEST BANCORP, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999

(UNAUDITED)

The following tables present the operating results and other key financial
measures for the individual operating segments for the three and nine months
ended September 30, 2000 and 1999:

<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, 2000
----------------------------------------------------------------------
RETAIL COMMERCIAL RESIDENTIAL
BANKING LENDING TREASURY LENDING OTHER TOTAL
-------- ---------- -------- ----------- -------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Interest income............................. $ 12,485 $ 14,832 $ 9,211 $ 9,912 $ 849 $ 47,289
Charges for funds used...................... (8,661) (10,658) (9,063) (8,570) (277) (37,229)
-------- -------- -------- -------- -------- ----------
Interest spread on funds used............. 3,824 4,174 148 1,342 572 10,060
-------- -------- -------- -------- -------- ----------
Interest expense............................ (14,028) (1,426) (9,257) -- -- (24,711)
Credit on funds provided.................... 23,564 2,688 10,977 -- -- 37,229
-------- -------- -------- -------- -------- ----------
Interest spread on funds provided......... 9,536 1,262 1,720 -- -- 12,518
-------- -------- -------- -------- -------- ----------
Net interest income..................... $ 13,360 $ 5,436 $ 1,868 $ 1,342 $ 572 $ 22,578
======== ======== ======== ======== ======== ==========
Depreciation and amortization............... $ 1,085 $ 148 $ 59 $ 140 $ 732 $ 2,164
Segment pretax profit....................... 6,274 2,836 1,997 1,021 560 12,688
Segment assets as of September 30, 2000..... 516,372 695,106 507,559 541,640 125,848 2,386,525
</TABLE>

<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, 1999
----------------------------------------------------------------------
RETAIL COMMERCIAL RESIDENTIAL
BANKING LENDING TREASURY LENDING OTHER TOTAL
-------- ---------- -------- ----------- -------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Interest income............................... $ 8,203 $ 11,955 $ 9,061 $ 8,022 $ 581 $ 37,822
Charges for funds used........................ (4,904) (7,385) (7,925) (5,743) (11) (25,968)
-------- -------- -------- -------- ------- ----------
Interest spread on funds used............... 3,299 4,570 1,136 2,279 570 11,854
-------- -------- -------- -------- ------- ----------
Interest expense.............................. (10,454) (804) (7,953) -- -- (19,211)
Credit on funds provided...................... 15,390 1,468 9,110 -- -- 25,968
-------- -------- -------- -------- ------- ----------
Interest spread on funds provided........... 4,936 664 1,157 -- -- 6,757
-------- -------- -------- -------- ------- ----------
Net interest income....................... $ 8,235 $ 5,234 $ 2,293 $ 2,279 $ 570 $ 18,611
======== ======== ======== ======== ======= ==========
Depreciation and amortization................. $ 701 $ 62 $ (102) $ -- $ 439 $ 1,100
Segment pretax profit......................... 2,226 3,752 2,564 1,673 (17) 10,198
Segment assets as of September 30, 1999....... 366,609 448,175 564,410 599,216 89,207 2,067,617
</TABLE>

12
<PAGE>
EAST WEST BANCORP, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999

(UNAUDITED)

<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 2000
----------------------------------------------------------------------
RETAIL COMMERCIAL RESIDENTIAL
BANKING LENDING TREASURY LENDING OTHER TOTAL
-------- ---------- -------- ----------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Interest income.............................. $ 35,053 $ 45,487 $ 26,415 $ 28,506 $ 2,189 $ 137,650
Charges for funds used....................... (23,829) (32,343) (25,510) (24,112) (393) (106,187)
-------- -------- -------- -------- -------- ----------
Interest spread on funds used.............. 11,224 13,144 905 4,394 1,796 31,463
-------- -------- -------- -------- -------- ----------
Interest expense............................. (38,167) (3,972) (28,598) -- -- (70,737)
Credit on funds provided..................... 65,279 7,614 33,294 -- -- 106,187
-------- -------- -------- -------- -------- ----------
Interest spread on funds provided.......... 27,112 3,642 4,696 -- -- 35,450
-------- -------- -------- -------- -------- ----------
Net interest income...................... $ 38,336 $ 16,786 $ 5,601 $ 4,394 $ 1,796 $ 66,913
======== ======== ======== ======== ======== ==========
Depreciation and amortization................ $ 3,119 $ 336 $ 294 $ 502 $ 2,176 $ 6,427
Segment pretax profit........................ 17,779 10,668 5,145 3,468 1,114 38,174
Segment assets as of September 30, 2000...... 516,372 695,106 507,559 541,640 125,848 2,386,525
</TABLE>

<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1999
----------------------------------------------------------------------
RETAIL COMMERCIAL RESIDENTIAL
BANKING LENDING TREASURY LENDING OTHER TOTAL
-------- ---------- -------- ----------- -------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Interest income.............................. $ 20,253 $ 31,872 $ 30,557 $ 23,809 $ 2,010 $ 108,501
Charges for funds used....................... (11,917) (18,905) (26,199) (16,366) (139) (73,526)
-------- -------- -------- -------- ------- ----------
Interest spread on funds used.............. 8,336 12,967 4,358 7,443 1,871 34,975
-------- -------- -------- -------- ------- ----------
Interest expense............................. (29,818) (2,167) (24,337) -- -- (56,322)
Credit on funds provided..................... 42,427 3,803 27,296 -- -- 73,526
-------- -------- -------- -------- ------- ----------
Interest spread on funds provided.......... 12,609 1,636 2,959 -- -- 17,204
-------- -------- -------- -------- ------- ----------
Net interest income...................... $ 20,945 $ 14,603 $ 7,317 $ 7,443 $ 1,871 $ 52,179
======== ======== ======== ======== ======= ==========
Depreciation and amortization................ $ 1,881 $ 192 $ 293 $ -- $ 621 $ 2,987
Segment pretax profit........................ 4,808 12,027 7,733 5,648 26 30,242
Segment assets as of September 30, 1999...... 366,609 448,175 564,410 599,216 89,207 2,067,617
</TABLE>

7. RECENT ACCOUNTING PRONOUNCEMENTS

ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES--In June 1998,
the Financial Accounting Standards Board (the "FASB") issued Statement of
Financial Accounting Standards ("SFAS") No. 133, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES. SFAS No. 133, as amended by SFAS No. 138,
ACCOUNTING FOR CERTAIN DERIVATIVE INSTRUMENTS AND CERTAIN HEDGING ACTIVITIES--AN
AMENDMENT OF FASB STATEMENT NO. 133, establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. It requires that an
entity recognize all derivatives as either assets or liabilities in the
statement of financial condition and measure those instruments at fair value.
Gains or losses resulting from changes in the values of those derivatives would
be accounted for depending on the use of the derivative and whether it qualifies
for hedge accounting. The key criterion for hedge accounting is that the hedging
relationship must be highly effective in achieving offsetting changes in fair
value or cash flows. Implementation of SFAS No. 133 has been postponed to fiscal
periods beginning after June 15, 2000, and will be effective for the Company on
January 1, 2001. Management of the Company

13
<PAGE>
EAST WEST BANCORP, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999

(UNAUDITED)

does not believe that the adoption of this standard will have a material impact
on the Company's results of operations or financial position.

REVENUE RECOGNITION IN FINANCIAL STATEMENTS--On December 3, 1999, the
Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin
("SAB") No. 101, REVENUE RECOGNITION IN FINANCIAL STATEMENTS, which summarizes
the SEC's views in applying generally accepted accounting principles to revenue
recognition in financial statements. Under the provisions of SAB No. 101, if a
transaction is within the scope of existing specific authoritative literature
that provides revenue recognition guidance, such literature should be applied.
SAB No. 101 is intended to provide additional or more consistent guidance only
in the absence of authoritative literature addressing a specific arrangement or
a specific industry as it relates to revenue recognition. It is the view of the
SEC that revenue is generally realized or realizable and earned when all of the
following criteria are met: (1) persuasive evidence of an arrangement exists,
(2) delivery has occurred or services have been rendered, (3) the seller's price
to the buyer is fixed or determinable, and (4) collectibility is reasonably
assured. Management does not believe that the bulletin has a material impact on
the Company's results of operations or financial position.

ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND
EXTINGUISHMENTS OF LIABILITIES--In September 2000, the FASB issued SFAS
No. 140, ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND
EXTINGUISHMENTS OF LIABILITIES--A REPLACEMENT TO FASB STATEMENT NO. 125. SFAS
No. 140 revises the standards for accounting for securitizations and other
transfers of financial assets and collateral and requires certain disclosures,
but carries over most of SFAS 125's provisions without reconsideration. SFAS
No. 140 provides accounting and reporting standards for transfers and servicing
of financial assets and extinguishments of liabilities. These standards are
based on consistent application of a "financial-components approach" that
focuses on control. Under this approach, after a transfer of financial assets,
an entity recognizes the financial and servicing assets it controls and the
liabilities it has incurred, derecognizes financial assets when control has been
surrendered, and derecognizes liabilities when extinguished. This Statement also
provides consistent standards for distinguishing transfers of financial assets
that are sales from transfers that are secured borrowings. SFAS No. 140 is
effective for transfers and servicing of financial assets and extinguishments of
liabilities occurring after March 31, 2001. This Statement is also effective for
recognition and reclassification of collateral and for disclosures relating to
securitization transactions and collateral for fiscal years ending after
December 15, 2000. Management does not believe that the adoption of this
standard will have a material impact on the Company's results of operations or
financial position when adopted.

14
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

The following discussion provides information about the results of
operations, financial condition, liquidity, and capital resources of East West
Bancorp, Inc. and its subsidiaries (the "Company"). This information is intended
to facilitate the understanding and assessment of significant changes and trends
related to the financial condition of the Company and the results of its
operations. This discussion and analysis should be read in conjunction with the
Company's 1999 annual report on Form 10-K for the year ended December 31, 1999,
and the accompanying interim unaudited consolidated financial statements and
notes thereto.

In addition to historical information, this discussion includes certain
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 which involve inherent risks and uncertainties. A
number of important factors could cause the Company's actual results and
performance in future periods to differ materially from those discussed in such
forward-looking statements. These factors include, but are not limited to, the
effect of interest rate and currency exchange fluctuations; competition in the
financial services market for both deposits and loans; the Company's ability to
efficiently incorporate acquisitions into its operations; the ability of the
Company to increase its customer base; and regional and general economic
conditions. Given these uncertainties, the reader is cautioned not to place
undue reliance on such forward-looking statements. The Company expressly
disclaims any obligation to update or revise any forward-looking statements
contained herein to reflect any changes in the Company's expectations of results
or any change in events.

RESULTS OF OPERATIONS

The Company reported third quarter 2000 net income of $8.8 million, or $0.39
per basic share and $0.38 per diluted share, compared with $7.0 million, or
$0.31 per basic and diluted share, reported during the third quarter of 1999.
The 25% increase in third quarter net earnings is primarily attributable to
continued growth in the loan portfolio, a higher net interest margin and a
moderate increase in noninterest-related revenues partially offset by higher
operating expenses. The Company's annualized return on average total assets
increased to 1.50% for the quarter ended September 30, 2000, from 1.34% for the
same period in 1999. The annualized return on average stockholders' equity
increased to 20.97% for the third quarter of 2000, compared with 19.37% for the
third quarter of 1999.

Net income for the nine months ended September 30, 2000 increased to
$25.9 million, or $1.16 per basic share and $1.12 per diluted share, from
$20.1 million, or $0.88 per basic and diluted share, for the first nine months
of 1999. The annualized return on average total assets increased to 1.48% for
the first three quarters of 2000, compared with 1.30% for the same period in
1999. The annualized return on average stockholders' equity increased to 21.70%
for the first three quarters of 2000, compared with 18.19% for the same period
in 1999.

15
<PAGE>
COMPONENTS OF NET INCOME

Return on average total assets.............................. 1.50% 1.34% 1.48% 1.30%
====== ====== ====== ======
</TABLE>

NET INTEREST INCOME

The Bank's primary source of revenue is net interest income, which is the
difference between interest income on earning assets and interest expense on
interest-bearing liabilities. Net interest income for the third quarter of 2000
totaled $22.6 million, a 21% increase over net interest income of $18.6 million
for the same period in 1999.

Total interest and dividend income during the quarter ended September 30,
2000 increased 25% to $47.3 million compared with $37.8 million during the same
period in 1999. Similarly, year-to-date interest and dividend income increased
27% to $137.7 million, from $108.5 million during the first three quarters of
1999. The increase in interest and dividend income during both the third quarter
and the first nine months of 2000 is derived primarily from the growth in
average earning assets and higher yields on all categories of earning assets.
Growth in the Bank's average loan portfolio, partially offset by decreases in
the other categories of earning assets, triggered the increase in average
earning assets. The net growth in average earning assets was funded largely by
increases in time deposits, money market accounts, and noninterest-bearing
demand deposits.

Total interest expense during the third quarter of 2000 increased 29% to
$24.7 million compared with $19.2 million for the same period a year ago. For
the first nine months of 2000, total interest expense increased 26% to
$70.7 million, from $56.3 million for the first nine months of 1999. The
increase in third quarter and year-to-date 2000 interest expense is primarily
attributable to higher rates paid on interest-bearing liabilities and growth in
average money market accounts and time deposits, partially offset by a decrease
in average FHLB advances.

Net interest margin, defined as taxable equivalent net interest income
divided by average earning assets, increased 37 basis points to 4.09% for the
third quarter of 2000, compared with 3.72% for the third quarter of 1999. For
the first nine months of 2000, the Company's net interest margin increased 52
basis points to 4.04%, from 3.52% for the same period a year ago. The increase
in net interest margin for both periods is due to higher overall yields on
earning assets primarily resulting from an average loan growth of 20% during the
third quarter of 2000 and 31% for the first three quarters of 2000, most notably
in the multifamily residential, commercial real estate, construction and
commercial business segments of the portfolio. Additionally, marked increases in
the average prime rate of 131 basis points and 125 basis points during the third
quarter and first nine months of 2000, respectively, further contributed to
higher yields on earning assets.

The Company's overall cost of funds increased 84 basis points and 59 basis
points, respectively, to 5.08% for the third quarter of 2000 and 4.80% for the
first nine months of 2000. For the third quarter

16
<PAGE>
of 2000, the increase in the Company's cost of funds was primarily due to the
increase in rates on all categories of interest-bearing deposits, with the
exception of short-term borrowings, partially offset by a decrease in the volume
of FHLB advances. The increase in rates paid is due to a rise in overall
interest rates. For the nine months ended September 30, 2000, the increase in
the overall cost of funds is primarily due to higher rates on all categories of
interest-bearing liabilities, also resulting from the increase in overall
interest rates. Growth in the average volume of time deposits and money markets
accounts, partially offset by a decrease in average FHLB advances, further
contributed to the increase in the Company's cost of funds for the nine months
ended September 30, 2000.

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 three months ended September 30, 2000
and 1999:

<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
----------------------------------------------------------------------
2000 1999
-------------------------------- --------------------------------
AVERAGE AVERAGE
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST RATE(1) BALANCE INTEREST RATE(1)
---------- -------- -------- ---------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Short-term investments................................ $ 28,747 $ 536 7.44% $ 25,074 $ 383 6.11%
Taxable investment securities(2)(3)................... 508,412 8,202 6.45 570,422 8,493 5.96
Loans receivable(2)(4)................................ 1,653,432 38,119 9.22 1,379,199 28,590 8.29
FHLB stock............................................ 19,663 432 8.79 27,606 356 5.16
---------- ------- ---------- -------
Total interest-earning assets....................... 2,210,254 47,289 8.56 2,002,301 37,822 7.56
------- ----- ------- ----
Noninterest-earning assets:
Cash and due from banks............................... 44,217 38,870
Allowance for loan losses............................. (25,040) (20,477)
Other assets.......................................... 107,889 72,545
---------- ----------
Total assets........................................ $2,337,320 $2,093,239
========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Checking accounts..................................... $ 108,417 355 1.31 $ 93,914 295 1.26
Money market accounts................................. 116,800 1,097 3.76 62,926 503 3.20
Savings deposits...................................... 219,986 1,089 1.98 213,544 945 1.77
Time deposits......................................... 1,195,534 16,760 5.61 965,306 11,234 4.66
Short-term borrowings................................. 37,712 639 6.79 2,873 54 7.52
FHLB advances......................................... 254,064 4,281 6.74 472,910 6,180 5.23
Junior subordinated debt securities................... 18,033 490 10.85 -- -- --
---------- ------- ---------- -------
Total interest-bearing liabilities.................. 1,950,546 24,711 5.08 1,811,473 19,211 4.24
------- ----- ------- ----
Noninterest-bearing liabilities:
Demand deposits....................................... 190,077 121,176
Other liabilities..................................... 29,249 15,457
Stockholders' equity.................................. 167,448 145,133
---------- ----------
Total liabilities and stockholders' equity.......... $2,337,320 $2,093,239
========== ==========
Interest rate spread.................................... 3.48% 3.32%
===== ====
Net interest income and net interest margin............. $22,578 4.09% $18,611 3.72%
======= ===== ======= ====
</TABLE>

------------------------------

(1) Annualized

(2) Includes amortization of premiums and accretion of discounts on investment
securities and loans receivable. Also includes the amortization of deferred
loan fees.

(3) Average balances exclude unrealized gains or losses on available for sale
securities.

(4) Average balances include nonperforming loans.

17
<PAGE>
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 nine months ended September 30, 2000
and 1999:

<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
----------------------------------------------------------------------
2000 1999
-------------------------------- --------------------------------
AVERAGE AVERAGE
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST RATE(1) BALANCE INTEREST RATE(1)
---------- -------- -------- ---------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Short-term investments.............................. $ 13,247 $ 743 7.47% $ 49,921 $ 2,194 5.86%
Taxable investment securities(2)(3)................. 517,371 24,344 6.27 636,918 27,551 5.77
Loans receivable(2)(4).............................. 1,653,777 111,163 8.96 1,257,768 77,607 8.23
FHLB stock.......................................... 23,699 1,400 7.88 29,878 1,149 5.13
---------- -------- ---------- --------
Total interest-earning assets..................... 2,208,094 137,650 8.31 1,974,485 108,501 7.33
-------- ----- -------- ----
Noninterest-earning assets:
Cash and due from banks............................. 47,949 32,352
Allowance for loan losses........................... (24,147) (18,598)
Other assets........................................ 98,940 69,717
---------- ----------
Total assets...................................... $2,330,836 $2,057,956
---------- ----------

LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Checking accounts................................... $ 107,270 1,013 1.26 $ 85,981 765 1.19
Money market accounts............................... 106,366 2,831 3.55 49,046 1,128 3.07
Savings deposits.................................... 219,548 3,171 1.93 218,524 3,024 1.85
Time deposits....................................... 1,142,216 45,105 5.27 903,495 31,381 4.63
Short-term borrowings............................... 28,629 1,410 6.57 14,786 596 5.37
FHLB advances....................................... 352,716 16,396 6.20 510,345 19,428 5.08
Junior subordinated debt securities................. 9,978 811 10.84 -- -- --
---------- -------- ---------- --------
Total interest-bearing liabilities................ 1,966,723 70,737 4.80 1,782,177 56,322 4.21
-------- ----- -------- ----
Noninterest-bearing liabilities:
Demand deposits..................................... 181,970 110,237
Other liabilities................................... 23,294 17,880
Stockholders' equity.................................. 158,849 147,662
---------- ----------
Total liabilities and stockholders' equity.......... $2,330,836 $2,057,956
========== ==========
Interest rate spread.................................. 3.51% 3.12%
===== ====
Net interest income and net interest margin........... $ 66,913 4.04% $ 52,179 3.52%
======== ===== ======== ====
</TABLE>

------------------------------

(1) Annualized

(2) Includes amortization of premiums and accretion of discounts on investment
securities and loans receivable. Also includes the amortization of deferred
loan fees.

(3) Average balances exclude unrealized gains or losses on available for sale
securities.

(4) Average balances include nonperforming loans.

ANALYSIS OF CHANGES IN NET INTEREST MARGIN

Changes in the Bank's net interest income are a function of changes in rates
and volumes of both interest-earning assets and interest-bearing liabilities.
The following table sets forth information regarding changes in interest income
and interest expense for the years indicated. The total change for each category
of interest-earning asset and interest-bearing liability is segmented into the
change

18
<PAGE>
attributable to variations in volume (changes in volume multiplied by old rate)
and the change attributable to variations in interest rates (changes in rates
multiplied by old volume). Nonaccrual loans are included in average loans used
to compute this table.

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 2000 VS 1999 SEPTEMBER 30, 2000 VS 1999
------------------------------- -------------------------------
CHANGES DUE TO CHANGES DUE TO
TOTAL -------------------- TOTAL --------------------
CHANGE VOLUME(1) RATES(1) CHANGE VOLUME(1) RATES(1)
-------- --------- -------- -------- --------- --------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS
Short-term investments........................ $ 152 $ 61 $ 91 $(1,452) $(1,689) $ 237
Taxable investment securities................. (292) (1,255) 963 (3,206) (3,888) 682
Loans receivable, net......................... 9,531 6,092 3,439 33,556 30,327 3,229
FHLB stock.................................... 76 (53) 129 251 9,017 (8,766)
------ ------- ------- ------- ------- -------
Total interest and dividend income.......... $9,467 $ 4,845 $ 4,622 $29,149 $33,767 $(4,618)
------ ------- ------- ------- ------- -------

INTEREST-BEARING LIABILITIES
Checking accounts............................. $ 60 $ 47 $ 13 $ 248 $ 227 $ 21
Money market accounts......................... 594 493 101 1,703 1,621 82
Savings deposits.............................. 144 29 115 147 33 114
Time deposits................................. 5,527 2,974 2,553 13,724 11,491 2,233
Short-term borrowings......................... 586 591 (5) 814 748 66
FHLB advances................................. (1,900) (5,063) 3,163 (3,032) (4,145) 1,113
Junior subordinated debt securities........... 489 489 -- 811 811 --
------ ------- ------- ------- ------- -------
Total interest expense...................... $5,500 $ (440) $ 5,940 $14,415 $10,786 $ 3,629
------ ------- ------- ------- ------- -------
CHANGE IN NET INTEREST INCOME................. $3,967 $ 5,285 $(1,318) $14,734 $22,981 $(8,247)
====== ======= ======= ======= ======= =======
</TABLE>

------------------------

(1) Changes in interest income/expense not arising from volume or rate variances
are allocated proportionately to rate and volume.

PROVISION FOR LOAN LOSSES

The provision for loan losses amounted to $1.3 million for the third quarter
of 2000 similar to the amount recorded for the third quarter of 1999. For the
first nine months of 2000, the provision for loan losses totaled $4.1 million,
compared to $4.0 million for the same period in 1999. Provisions for loan losses
are charged to income to bring the allowance for credit losses to a level deemed
appropriate by management based on the factors discussed under the "Allowance
for Loan Losses" section of this report.

19
<PAGE>
NONINTEREST INCOME

COMPONENTS OF NONINTEREST INCOME

<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
2000 1999 2000 1999
-------- -------- -------- --------
(IN MILLIONS) (IN MILLIONS)
<S> <C> <C> <C> <C>
Loan ancillary fees......................................... $0.42 $0.42 $ 1.38 $ 1.55
Branch fees................................................. 1.14 0.89 3.61 2.50
Letters of credit fees and commissions...................... 1.14 1.06 3.30 3.10
Net gain on sales of securities available for sale.......... -- -- 0.26 0.68
Net gain (loss) on trading securities....................... (0.06) 0.84 (0.01) 1.27
Net gain on sale of affordable housing investments.......... 0.37 -- 1.28 0.40
Net gain on sale of branch.................................. -- -- -- 0.68
Amortization of negative intangibles........................ 0.10 0.10 0.31 0.31
Other....................................................... 0.55 0.23 1.39 0.61
----- ----- ------ ------
Total..................................................... $3.66 $3.54 $11.52 $11.10
===== ===== ====== ======
</TABLE>

Noninterest income includes revenues earned from sources other than interest
income. These sources include: ancillary fees on loans, service charges and fees
on deposit accounts, fees and commissions generated from trade finance
activities and the issuance of letters of credit, net gains on trading
securities, and net gains on sales of investment securities available for sale
and affordable housing investments.

Noninterest income increased 3% to $3.7 million during the quarter ended
September 30, 2000, compared to $3.5 million for the same period in 1999
primarily due to higher branch fees, gains on sale of affordable housing
investments, and other income, partially offset by lower gains on sales of
trading securities. Noninterest income for the first nine months of 2000
increased 4% to $11.5 million, from $11.1 million for the first nine months of
1999, primarily due to higher branch fees, gains on sales of affordable housing
investments and other income, partially offset by lower gains from trading
securities and the sale of investment securities available for sale. Included in
noninterest income for the nine months ended September 30, 1999 is a one-time
gain on sale of the Company's Irvine branch amounting to $676 thousand. There
were no such gains recorded during the same period in 2000.

Ancillary fees on loans include fees and service charges related to
appraisal services, loan documentation, processing and underwriting, and
secondary market-related activities. Ancillary loan fees amounting to
$418 thousand for the third quarter of 2000 is comparable to the $419 thousand
recorded for the same period in 1999. For the first three quarters of 2000,
ancillary loan fee income decreased 11% to $1.4 million, from $1.5 million for
the first three quarters of 1999. The decrease in ancillary loan fees is
primarily due to the Company's deliberate efforts to reduce its secondary
marketing activities.

Branch fees, which represent revenues derived from branch operations,
amounted to $1.1 million for the third quarter of 2000, a 28% increase from the
$889 thousand earned during the same period in 1999. For the nine months ended
September 30, 2000, branch fees increased 45% to $3.6 million, compared with
$2.5 million for the same period in 1999. The rise in branch fees is primarily
due to higher service-related fee income on transaction accounts resulting from
the acquisition of American International Bank in mid-January 2000. Further,
sustained growth in revenues from analysis charges on commercial deposit
accounts also contributed to the increase in branch fee income.

20
<PAGE>
Letters of credit fees and commissions increased 7% to $1.1 million for the
third quarter of 2000 due to a combined growth in trade finance revenues and
fees received from the issuance and maintenance of standby letters of credit.
For the nine months ended September 30, 2000, letters of credit fees and
commissions increased 6% to $3.3 million, compared with $3.1 million for the
same period in 1999. This increase is attributed primarily to continued growth
in trade finance activities, partially offset by a slight decrease in standby
letters of credit fees.

NONINTEREST EXPENSE

COMPONENTS OF NONINTEREST EXPENSE

<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
2000 1999 2000 1999
-------- -------- -------- --------
(IN MILLIONS) (IN MILLIONS)
<S> <C> <C> <C> <C>
Compensation and other employee benefits.................... $ 5.08 $ 4.77 $14.75 $13.91
Net occupancy............................................... 1.89 1.57 5.60 4.27
Amortization of affordable housing investments.............. 0.96 0.87 2.91 2.05
Amortization of positive intangibles........................ 0.87 0.45 2.49 1.12
Data processing............................................. 0.46 0.38 1.38 1.07
Deposit insurance premiums and regulatory assessments....... 0.12 0.22 0.34 0.64
Other real estate owned operations, net..................... (0.11) 0.20 (0.12) (0.06)
Other....................................................... 2.98 2.18 8.81 6.03
------ ------ ------ ------
Total..................................................... $12.25 $10.64 $36.16 $29.03
====== ====== ====== ======
Efficiency Ratio(1)....................................... 40% 42% 39% 41%
====== ====== ====== ======
</TABLE>

------------------------

(1) Excludes the amortization of intangibles and investments in affordable
housing partnerships.

Noninterest expense, which is comprised primarily of compensation and
employee benefits, occupancy and other operating expenses increased 15% to
$12.3 million during the third quarter of 2000, from $10.6 million for the same
period in 1999. Noninterest expense for the nine months ended September 30, 2000
increased 25% to $36.2 million, from $29.0 million for the first three quarters
of 1999. The increase in noninterest expense is primarily due to higher expenses
related to compensation and other employee benefits, occupancy, amortization of
intangibles and other operating expenses.

Compensation and employee benefits increased 6% to $5.1 million during the
third quarter of 2000, compared to $4.8 million for the same period last year.
For the first nine months of 2000, compensation and employee benefits increased
6% to $14.8 million, compared to $13.9 million for the same period in 1999. The
rise in compensation and employee benefits is primarily related to the
acquisition of American International Bank and also to the addition of several
new loan officers with specialized lending experience.

Occupancy expenses increased 20% to $1.9 million during the third quarter of
2000, compared to $1.6 million for the same period in 1999. For the first nine
months of 2000, occupancy expenses increased 31% to $5.6 million, from
$4.3 million for the same period in 1999. The increase in occupancy expenses
reflects the operations for the eight branch offices of American International
Bank, an overhead factor which was not present during 1999. Additionally, the
impact of normal rent adjustments in existing leases, and increased expenses
related to the enhancement and maintenance of the Company's computer network
system further contributed to the rise in occupancy expenses.

The amortization of investments in affordable housing partnerships increased
11% to $958 thousand during the 2000 third quarter, compared with $866 thousand
for the same period in

21
<PAGE>
1999. For the nine months ended September 30, 2000, the amortization of
investments in affordable housing partnerships increased 42% to $2.9 million,
from $2.1 million for the first three quarters of 1999. The increase in
amortization reflects the impact of $8.6 million in additional affordable
housing investment purchases made since the third quarter of 1999, partially
offset by two sale transactions totaling $9.3 million in February 2000 and
September 2000.

The amortization of positive intangibles, which include premiums on deposits
acquired and excess of purchase price over fair value of net assets acquired
("goodwill"), increased 91% to $865 thousand during the third quarter of 2000,
compared to $452 thousand for the third quarter of 1999. For the nine months
ended September 30, 2000, the amortization of positive intangibles increased
122% to $2.5 million, from $1.1 million for the same period a year ago. The
increase in the amortization of positive intangibles is due to the acquisitions
of First Central Bank, American International Bank and East West Insurance
Agency. Combined goodwill of $14.3 million and deposit premiums of $8.6 million
were recorded by the Company for these transactions which are being amortized
straight line over 15 years and 7 years, respectively.

Data processing expenses increased 20% to $459 thousand for the third
quarter of 2000, compared to $383 thousand for the third quarter of 1999. For
the nine months ended September 30, 2000, data processing expenses increased 29%
to $1.4 million, from $1.1 million for the same period in 1999. The increase in
data processing expenses for both periods is primarily related to the
acquisition of American International Bank.

Deposit insurance premiums and regulatory assessments decreased 47% to
$119 thousand for the quarter ended September 30, 2000, compared with
$223 thousand for the same period in 1999. For the first nine months of 2000,
deposit insurance premiums decreased 47% to $339 thousand, from $638 thousand
for the first nine months of 1999. This is primarily due to a significant
decrease in the Savings Association Insurance Fund ("SAIF") Financing
Corporation ("FICO") assessment rate effective in 2000.

Net income related to OREO operations, which include net rental income
collected from OREO properties and net gains or losses on subsequent sales,
totaled $108 thousand for the third quarter of 2000, compared with net expenses
of $198 thousand for the prior year period. For the nine months ended
September 30, 2000, net income related to OREO operations increased 83% to
$115 thousand, from $63 thousand for the same period in 1999.

Other operating expenses include advertising and public relations, telephone
and postage, stationery and supplies, bank and item processing charges,
insurance, legal and other professional fees. Other operating expenses increased
37% to $3.0 million during the quarter ended September 30, 2000, compared with
$2.2 million for the same period in 1999. For the first nine months of 2000,
other operating expenses increased 46% to $8.8 million, from $6.0 million for
the first nine months of 1999. The increase in other operating expenses is due
primarily to the Company's continued expansion, which includes the recent
acquisitions of First Central Bank, American International Bank and East West
Insurance Agency, as well as internal growth.

Despite the Company's growth trend over the past several years, ongoing
efforts to closely manage operational expenses continue to favorably impact the
Company's 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 (excluding the amortization of intangibles). The
Company's efficiency ratio improved to 40% for the quarter ended September 30,
2000, compared to 42% for the corresponding quarter in 1999. For the first nine
months of 2000, the Company's efficiency ratio improved to 39%, compared to 41%
for the same period a year ago.

22
<PAGE>
PROVISION FOR INCOME TAXES

The provision for income taxes increased 23% to $3.9 million for the third
quarter of 2000, compared with $3.2 million for the same period in 1999. This is
primarily due to higher pretax income partially offset by tax credits from
qualified affordable housing investments. Tax credits utilized during the third
quarter of 2000 totaled $987 thousand, compared to $743 thousand for the third
quarter of 1999. The third quarter 2000 provision reflects an effective tax rate
of 30.8%, compared with 31.1% for the third quarter of 1999.

For the nine months ended September 30, 2000, the provision for income taxes
totaled $12.3 million, a 22% increase from the $10.1 million income tax expense
recorded for the same period a year ago. The effective tax rate of 32.3% for the
first nine months of 2000 reflects tax credits of $3.0 million, compared with an
effective tax rate of 33.4% for the first three quarters of 1999 reflecting tax
credits of $2.2 million.

BALANCE SHEET ANALYSIS

The Company's total assets increased $233.9 million, or 11%, to
$2.39 billion as of September 30, 2000, primarily due to loan growth. The
increase in total assets was funded by increases of $376.7 million in deposits,
$37.4 million in short-term borrowings and $20.8 million in junior subordinated
debt securities, partially offset by decreases in FHLB advances of
$248.0 million.

INVESTMENT SECURITIES AVAILABLE FOR SALE

Total investment securities available for sale decreased 4% to
$477.7 million as of September 30, 2000. Investment securities with a net
carrying value of $64.9 million were acquired from American International Bank
during the first quarter of 2000, substantially all of which were sold during
the same period. Total repayments and proceeds from sales of available for sale
securities amounted to $55.8 million and $64.6 million, respectively, during the
nine months ended September 30, 2000. Proceeds from repayments and sales were
applied toward additional investment securities purchases, repayment of FHLB
advances, and funding a portion of the loan originations made during the first
three quarters of 2000. The Bank recorded net gains totaling $261 thousand on
sales of available for sale securities during the nine months ended
September 30, 2000.

23
<PAGE>
The following table sets forth the amortized cost and the estimated fair
values of investment securities available for sale as of September 30, 2000 and
December 31, 1999:

<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
--------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
AT SEPTEMBER 30, 2000
U.S. Treasury securities............................ $ 8,308 $ 43 $ -- $ 8,351
U.S. Government agency securities................... 73,499 -- (8,074) 65,425
Obligations of states and political subdivisions.... 200 1 -- 201
Mortgage-backed securities.......................... 388,831 73 (12,104) 376,800
Trust preferred securities.......................... 27,363 -- (443) 26,920
-------- ---- -------- --------
Total investment securities available for sale.... $498,201 $117 $(20,621) $477,697
======== ==== ======== ========
AT DECEMBER 31, 1999
U.S. Treasury securities............................ $ 985 $ -- $ (10) $ 975
U.S. Government agency securities................... 75,610 -- (6,739) 68,871
Obligations of states and political subdivisions.... 200 2 -- 202
Mortgage-backed securities.......................... 440,525 51 (14,198) 426,378
-------- ---- -------- --------
Total investment securities available for sale.... $517,320 $ 53 $(20,947) $496,426
======== ==== ======== ========
</TABLE>

LOANS

Net loans receivable increased $217.4 million, or 15% to $1.7 billion at
September 30, 2000. Excluding the $105.2 million of net loans acquired from
American International Bank, loan growth during the first nine months of 2000
amounted to $109.8 million, or 7%, compared to year-end 1999 levels. The
increase in loans was funded primarily through deposit growth and through
repayments and sales of investment securities available for sale.

The growth in loans, excluding loans acquired from American International
Bank, is comprised primarily of increases in single family loans of
$43.3 million or 16%, multifamily loans of $23.6 million or 8%, commercial
business loans, including trade finance products, of $76.1 million or 31%, and
consumer loans, including home equity lines of credit, of $11.9 million or 50%.
Partially offsetting the growth in these loan categories was a reduction in
commercial real estate loans of $30.6 million or 6% and construction loans of
$11.7 million or 10%, primarily as a result of the Company's increased loan
participation activity during 2000.

24
<PAGE>
The following table sets forth the composition of the loan portfolio as of
the dates indicated:

<TABLE>
<CAPTION>
SEPTEMBER 30, 2000 DECEMBER 31, 1999 SEPTEMBER 30, 1999
--------------------- --------------------- ---------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
---------- -------- ---------- -------- ---------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Real estate loans:
Residential, one to four units....... $ 321,732 18.6% $ 278,161 18.4% $ 264,645 19.0%
Residential, multifamily............. 334,833 19.4 311,193 20.6 302,197 21.6
Commercial and industrial real
estate............................. 567,803 32.8 518,074 34.4 467,067 33.5
Construction......................... 118,005 6.8 122,363 8.1 99,525 7.1
---------- ----- ---------- ----- ---------- -----
Total real estate loans............ 1,342,373 77.6 1,229,791 81.5 1,133,434 81.2
---------- ----- ---------- ----- ---------- -----
Other loans:
Business, commercial................. 344,075 19.9 248,865 16.5 236,629 16.9
Automobile........................... 6,260 0.4 5,284 0.4 5,142 0.4
Other consumer....................... 36,236 2.1 23,834 1.6 20,587 1.5
---------- ----- ---------- ----- ---------- -----
Total other loans.................. 386,571 22.4 277,983 18.5 262,358 18.8
---------- ----- ---------- ----- ---------- -----
Total gross loans................ 1,728,944 100.0% 1,507,774 100.0% 1,395,792 100.0%
---------- ===== ---------- ===== ---------- =====
Unearned fees, premiums and discounts,
net.................................. (255) (289) (186)
Allowance for loan losses.............. (24,679) (20,844) (20,533)
---------- ---------- ----------
Loans receivable, net.............. $1,704,010 $1,486,641 $1,375,073
========== ========== ==========
</TABLE>

NONPERFORMING ASSETS

Nonaccrual loans, which include loans 90 days or more past due, totaled
$5.8 million at September 30, 2000, compared with $10.9 million at year-end
1999. Nonaccrual loans as a percentage of total loans outstanding were 0.34% and
0.73% at September 30, 2000 and December 31,1999, respectively. Loans totaling
$2.6 million were placed on nonaccrual status during the third quarter of 2000.
These additions to nonaccrual loans were offset by $1.2 million in payoffs,
$1.3 million in chargeoffs, $1.2 million in loans brought current, and a
$714 thousand loan transferred to other real estate owned. Additions to
nonaccrual loans during the third quarter of 2000 were comprised of
$1.2 million in residential single family loans, $1.3 million in commercial
business loans, $43 thousand in trade finance loans, and $17 thousand in
consumer loans. For the nine months ended September 30, 2000, nonaccrual loans
decreased by $7.9 million due to payoffs totaling $3.2 million, gross chargeoffs
totaling $3.3 million, loans brought current totaling $650 thousand, and two
loans transferred to other real estate owned totaling $767 thousand. These were
offset by $2.8 million of loans placed on nonaccrual status during the nine
months ended September 30, 2000.

Restructured loans or loans that have had their original terms modified
totaled $4.1 million at September 30, 2000, compared with $4.7 million at
year-end 1999. The decrease in restructured loans is primarily due to payments
received during the first nine months of 2000.

Other real estate owned ("OREO") includes properties acquired through
foreclosure or through full or partial satisfaction of loans. Other real estate
owned totaled $929 thousand and $577 thousand at September 30, 2000 and
December 31, 1999, respectively. During the first nine months of 2000, additions
to OREO totaling $1.0 million were comprised of a parcel of commercial land
acquired from American International Bank and three single family residential
properties. Four properties with a combined book value of $634 thousand were
sold during the nine months ended September 30, 2000. Net gains amounting to
$148 thousand were recognized on these OREO sales.

25
<PAGE>
The following table sets forth information regarding nonaccrual loans,
restructured loans and other real estate owned as of the dates indicated:

<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30, MARCH 31, DECEMBER 31, SEPTEMBER 30,
2000 2000 2000 1999 1999
------------- -------- --------- ------------ -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Nonaccrual loans......................... $ 5,827 $ 7,664 $10,426 $10,933 $ 5,843
Accruing loans past due 90 days or
more................................... -- -- -- -- --
------- ------- ------- ------- -------
Total nonperforming loans.............. 5,827 7,664 10,426 10,933 5,843
------- ------- ------- ------- -------
Restructured loans....................... 4,119 4,142 4,113 4,700 6,060
Other real estate owned, net............. 929 830 888 577 2,823
------- ------- ------- ------- -------
Total nonperforming assets............. $10,875 $12,636 $15,427 $16,210 $14,726
======= ======= ======= ======= =======
Total nonperforming assets to total
assets................................. 0.46% 0.54% 0.66% 0.75% 0.71%
Allowance for loan losses to
nonperforming loans.................... 423.53% 320.72% 230.31% 190.65% 351.41%
Nonperforming loans to total gross
loans.................................. 0.34% 0.46% 0.63% 0.73% 0.42%
</TABLE>

At September 30, 2000, the Bank had classified $15.0 million of its loans as
impaired, compared to $20.9 million at December 31, 1999. Specific reserves on
impaired loans totaled $1.5 million at September 30, 2000 and $1.3 million at
December 31, 1999. The Bank's average recorded investment in impaired loans for
the nine months ended September 30, 2000 and 1999 was $16.8 million and
$23.5 million, respectively. During the nine months ended September 30, 2000 and
1999, gross interest income that would have been recorded on impaired loans, had
they performed in accordance with their original terms, totaled $1.5 million and
$1.7 million, respectively. Of this amount, actual interest recognized on
impaired loans, on a cash basis, was $915 thousand and $1.2 million,
respectively.

ALLOWANCE FOR LOAN LOSSES

Management of the Bank is committed to maintaining the allowance for loan
losses at a level that is considered to be commensurate with estimated and
known, as well as inherent, risks in the portfolio. Although the adequacy of the
allowance is reviewed quarterly, management performs an ongoing assessment of
the risks inherent in the portfolio. While management believes that the
allowance for loan losses is adequate at September 30, 2000, future additions to
the allowance will be subject to continuing evaluation of estimated and known,
as well as inherent, risks in the loan portfolio.

The allowance for loan losses is increased by the provision for loan losses
which is charged against current period operating results, and is decreased by
the amount of net chargeoffs during the period. At September 30, 2000, the
allowance for loan losses amounted to $24.7 million, or 1.43% of total loans,
compared with $20.8 million, or 1.38% of total loans, at December 31, 1999, and
$20.5 million, or 1.47% of total loans, at September 30, 1999. The $3.9 million
increase in the allowance for loan losses at September 30, 2000, from year-end
1999, is primarily due to $2.3 million in allowance for losses acquired from
American International Bank. The remaining $1.5 million increase in the
allowance during the first nine months of 2000 is comprised of $4.1 million in
additional loss provisions less $2.5 million in net chargeoffs recorded during
the period.

The provision for loan losses of $1.3 million for the third quarter of 2000
is approximately equal to the loss provisions recorded during the third quarter
of 1999. Third quarter 2000 net chargeoffs totaling $1.2 million represent 0.07%
of average loans outstanding for the three months ended September 30, 2000. This
compares to net chargeoffs of $806 thousand, or 0.06% of average loans
outstanding for the same period in 1999. For the nine months ended
September 30, 2000, the provision for loan losses totaled $4.1 million, a 2%
increase over the $4.0 million provision recorded during the same period in
1999. Net chargeoffs for the first three quarters of 2000 totaling $2.5 million
represent 0.15% of

26
<PAGE>
average loans outstanding for the nine months ended September 30, 2000. This
compares to net chargeoffs of $1.1 million for the first three quarters of 1999,
or 0.09% of average loans outstanding. The Bank continues to record loss
provisions to compensate for both the growth and the changing composition of the
overall loan portfolio, reflecting a shift towards commercial real estate and
commercial business loans.

The following table summarizes activity in the allowance for loan losses for
the three and nine months ended September 30, 2000 and 1999:

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- -----------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Allowance balance, beginning of period........ $ 24,580 $ 20,019 $ 20,844 $ 16,506
Allowance from acquisition.................... -- -- 2,256 1,150
Provision for loan losses..................... 1,300 1,320 4,100 4,006
Charge-offs:
1-4 family residential real estate.......... -- 2 -- 24
Multifamily real estate..................... -- -- -- 39
Commercial and industrial real estate....... -- -- 3 --
Business, commercial........................ 1,379 1,025 3,408 1,626
Automobile.................................. -- 10 7 10
Other....................................... -- 2 -- 2
---------- ---------- ---------- ----------
Total charge-offs......................... 1,379 1,039 3,418 1,701
---------- ---------- ---------- ----------
Recoveries:
1-4 family residential real estate.......... -- 16 227 16
Multifamily real estate..................... -- 119 9 190
Commercial and industrial real estate....... -- -- 8 26
Business, commercial........................ 174 97 616 326
Automobile.................................. 2 -- 34 14
Other....................................... 2 1 3 --
---------- ---------- ---------- ----------
Total recoveries.......................... 178 233 897 572
---------- ---------- ---------- ----------
Net charge-offs......................... 1,201 806 2,521 1,129
---------- ---------- ---------- ----------
Allowance balance, end of period.............. $ 24,679 $ 20,533 $ 24,679 $ 20,533
Average loans outstanding..................... $1,653,432 $1,379,199 $1,653,777 $1,257,768
Total gross loans outstanding, end of
period...................................... $1,728,944 $1,395,792 $1,728,944 $1,395,792
Net charge-offs to average loans.............. 0.07% 0.06% 0.15% 0.09%
Allowance for loan losses to total gross
loans....................................... 1.43% 1.47% 1.43% 1.47%
</TABLE>

The Bank's total allowance for loan losses is comprised of two
components--allocated and unallocated. The Bank utilizes several methodologies
to determine the allocated portion of the allowance and to test overall
adequacy. The two primary methodologies, the classification migration model and
the individual loan review analysis methodology, provide the basis for
determining allocations between the various loan categories as well as the
overall adequacy of the allowance. These methodologies are augmented by
ancillary analyses, which include historical loss analyses, peer group
comparisons, and analyses based on the federal regulatory interagency policy for
loan and lease losses.

27
<PAGE>
The classification migration model utilizes net losses incurred by the Bank
during the preceding five years in conjunction with current internal asset
classifications. The model calculates loss factors for every classification
category (i.e. pass, special mention, substandard and doubtful) for each loan
type, except consumer loans which are analyzed as a homogeneous pool. These
calculated loss factors are applied to outstanding loan balances, unused
commitments and off-balance sheet exposures, such as letters of credit. While
the amount of losses actually observed can vary significantly from estimated
amounts derived from the model, the loss migration model is designed to be
self-correcting by taking into account the Bank's recent loss experience. In
addition, minimum loss rates are also utilized by management as a
self-correcting mechanism to compensate for the lack of historical loss
information on certain loan types and to reduce differences between estimated
and actual observed losses. Specific allowances are established for loans where
management believes that the probability of loss is in excess of the amount
determined by the application of the migration model. These specific allowances
for individual loans are incorporated into the migration model to determine the
overall allowance requirement.

The individual loan review analysis method provides a more contemporaneous
assessment of the portfolio by incorporating individual asset evaluations
prepared by both the Bank's credit administration department and an independent
external credit review group. Specific monitoring policies and procedures are
applied in analyzing the existing loan portfolios which vary according to
relative risk profile. Residential single family and consumer loans are
relatively homogeneous and no single loan is individually significant in terms
of size or potential risk of loss. Therefore, residential and consumer
portfolios are analyzed as a pool of loans, and individual loans are criticized
or classified based solely on performance. In contrast, the monitoring process
for multifamily, commercial real estate, construction, and commercial business
loans include a periodic review of individual loans. Loans are reviewed at least
annually and more frequently, if warranted by circumstances. For instance, loans
that are performing but have shown some signs of weakness are subjected to more
stringent reporting and oversight. Real estate loans and commercial business
loans which are subject to individual loan review, and out-of-cycle individually
reviewed loans, are monitored based on problem loan indicators such as loan
payment, delinquencies, loan covenant or reporting violations, and property tax
status. The estimated exposure and subsequent charge-offs that result from these
individual loan reviews provide the basis for loss factors assigned to the
various loan categories.

The results from the classification migration model and the individual loan
review analysis are then compared to various analyses, including historical
losses, peer group comparisons and the federal regulatory interagency policy for
loan and lease losses, to determine an overall allowance requirement amount.
Factors that are considered in determining the final allowance requirement
amount are scope and volume of completed individual loan reviews during the
period, trends and applicability of historical loss migration analysis compared
to current loan portfolio concentrations, and comparison of allowance levels to
actual historical losses.

28
<PAGE>
The following table reflects management's allocation of the allowance for
loan losses by loan category and the ratio of each loan category to total loans
as of the dates indicated:

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
2000 1999 1999
------------------- ------------------- -------------------
AMOUNT % AMOUNT % AMOUNT %
-------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
1-4 family residential real estate................... $ 178 18.6% $ 345 18.4% $ 427 19.0%
Multifamily real estate.............................. 1,297 19.4 2,735 20.6 2,046 21.6
Commercial and industrial real estate................ 3,576 32.8 3,110 34.4 2,601 33.5
Construction......................................... 2,113 6.8 2,597 8.1 1,623 7.1
Business, commercial................................. 12,260 19.9 9,244 16.5 10,191 16.9
Automobile........................................... 25 0.4 30 0.4 26 0.4
Consumer and other................................... 20 2.1 9 1.6 28 1.5
Year 2000 exposure................................... -- -- 900
Unallocated.......................................... 5,210 2,774 2,691
------- ----- ------- ----- ------- -----
Total.............................................. $24,679 100.0% $20,844 100.0% $20,533 100.0%
======= ===== ======= ===== ======= =====
</TABLE>

Despite a 16% increase in the volume of single family loans at
September 30, 2000 from year-end 1999 levels, allocated reserves on single
family loans decreased $167 thousand, or 48%, to $178 thousand. This is directly
correlated to a 50% decrease in the loss factor for single family loans that are
not classified (i.e. rated "pass"). The loss factor for pass single family loans
as of September 30, 2000 was 3 basis points compared to 6 basis points at
December 31, 1999. At September 30, 2000, approximately 99% of the loans within
this category are rated "pass."

Allocated reserves on multifamily loans decreased $1.4 million, or 53%, to
$1.3 million as of September 30, 2000 despite an 8% increase in the volume of
loans within this category since December 31, 1999. This is primarily due to a
significantly lower level of criticized (i.e. rated "special mention") assets
within this loan category when compared to year-end 1999 levels. Furthermore,
the loss factor for multifamily loans rated "pass" declined 38% to 20 basis
points as of September 30, 2000, from 32 basis points as of December 31, 1999.
Over 99% of loans within this category are rated "pass" as of September 30,
2000.

Allocated reserves on commercial real estate loans increased $466 thousand,
or 15%, to $3.6 million primarily due to a 10% increase in the volume of loans
in this category since December 31, 1999.

The $484 thousand, or 19%, decrease in allocated reserves on construction
loans to $2.1 million is primarily due to a significantly lower level of
classified (i.e. rated "substandard" or "doubtful") assets within this loan
category relative to December 31, 1999 levels. Additionally, a 4% decrease in
the volume of construction loans at September 30, 2000, in comparison to
year-end 1999 levels, further contributed to the decrease in allocated reserves
on this pool of loans.

Allocated reserves on commercial business loans increased $3.0 million, or
33%, to $12.3 million as of September 30, 2000 for two reasons: a 38% increase
in loan volume since year-end 1999 and significantly higher levels of criticized
and classified assets within this loan category relative to December 31, 1999
classifications.

The allowance for loan losses of $24.7 million at September 30, 2000
exceeded the Bank's allocated allowance by $5.2 million, or 21% of the total
allowance. This compares to an unallocated allowance of $2.8 million, or 13%, as
of December 31, 1999. The $5.2 million unallocated allowance at September 30,
2000 is essentially comprised of two elements. First, the Bank has set aside
approximately $1.9 million, or 10% of the allocated allowance amount of
$19.5 million at September 30, 2000, to compensate for the estimation risk
associated with the classification migration and individual loan review analysis
methodologies. The second element, which accounts for

29
<PAGE>
approximately $1.4 million of the unallocated allowance, has been established
for the foreign transaction risk associated with credit lines totaling
$86.5 million extended to financial institutions in foreign countries. Loss
factors, ranging from 0.50% to 2.50% of the total credit facility, have been
assigned to absorb the loss exposure on this type of credit offering. These loss
factors are internally determined based on the sovereign risk ratings of the
various countries which range from BBB to AA.

DEPOSITS

Deposits increased $376.7 million, or 25%, to $1.88 billion at
September 30, 2000. The increase in deposits reflects $170.8 million in deposits
acquired from American International Bank in January 2000. Excluding this
transaction, internal deposit growth amounted to $205.9 million, or 14%, over
December 31, 1999. This internal growth was primarily due to a 15% increase in
time deposits of $146.1 million, resulting from the growth in brokered deposits
and various promotions associated with the Chinese New Year holiday. Although
the Company occasionally promotes certain time deposit products, its efforts are
largely concentrated in increasing the volume of low-cost transaction accounts
which generate higher fee income and are a less costly source of funds in
comparison to time deposits. Excluding deposits acquired from American
International Bank, noninterest-bearing demand deposits increased
$24.1 million, or 19%, and money market accounts increased $22.5 million, or
32%, primarily due to new and existing commercial account relationships.

Included in time deposits at September 30, 2000 are $160.6 million of
brokered deposits, compared with $82.7 million as of December 31, 1999. The
increase of $77.9 million essentially reflects the continued replacement of
Federal Home Loan Bank advances with brokered deposits as an alternate source of
funding. The transition to brokered deposits as an alternate source of funding
has enabled the Bank to release some investment securities which were previously
pledged as collateral against FHLB advances.

BORROWINGS

The Bank regularly uses short-term borrowings and FHLB advances to manage
its liquidity position. Short-term borrowings, which consist of federal funds
purchased and securities sold under agreements to repurchase increased to
$38.0 million at September 30, 2000, compared to $600 thousand at December 31,
1999. The increase in short-term borrowings during the first three quarters of
2000 was primarily due to partial repayments of FHLB advances. FHLB advances
decreased 51% to $234.0 million as of September 30, 2000, a decrease of
$248.0 million from December 31, 1999. The decrease in FHLB advances resulted
primarily from the growth in brokered deposits and short-term borrowings as
alternate sources of funding. Cash acquired from American International Bank and
runoffs on investment securities available for sale also contributed to the
decrease in FHLB advances during the first nine months of 2000.

CAPITAL RESOURCES

The primary source of capital for the Company is the retention of net after
tax earnings. At September 30, 2000, stockholders' equity totaled
$178.0 million, a 19% increase from $150.1 million as of December 31, 1999. The
increase is due primarily to: (i) net income of $25.9 million during the first
nine months of 2000; (ii) net issuance of common stock totaling $2.4 million
from the exercise of stock options and stock warrants; (iii) net issuance of
common stock totaling $285 thousand in connection with the Company's Employee
Stock Purchase Program; (iv) stock compensation costs amounting to
$325 thousand related to the Company's Restricted Stock Award Program; (v) net
issuance of common stock totaling $869 thousand in connection with the
acquisition of Risk Services, Inc.; and (vi) a net decrease of $330 thousand in
unrealized losses on available-for-sale securities. These transactions were
offset by (i) payment of quarterly 2000 cash dividends totaling $2.0 million and
(ii) forfeitures of restricted stock awards totaling $111 thousand.

30
<PAGE>
Management is committed to maintaining capital at a level sufficient to
assure shareholders, customers and regulators that the Company and its bank
subsidiary are financially sound. The Company and its bank subsidiary are
subject to risk-based capital regulations adopted by the federal banking
regulators in January 1990. These guidelines are used to evaluate capital
adequacy and are based on an institution's asset risk profile and off-balance
sheet exposures. According to the regulations, institutions whose Tier 1 and
total capital ratios meet or exceed 6% and 10%, respectively, are deemed to be
"well-capitalized." At September 30, 2000, the Bank's Tier 1 and total capital
ratios were 10.0% and 11.2%, respectively, compared to 9.3% and 10.6%,
respectively, at December 31, 1999.

During the first quarter of 2000, the Company filed a $50 million universal
shelf registration statement with the Securities and Exchange Commission.
Pursuant to this filing, the Company may offer new common stock, trust
preferred, preferred stock and/or other debentures to augment its capital
resources. The timing and amount of offerings will depend on market and general
business conditions. The Company intends to utilize the net proceeds from the
sale of securities for general business purposes, which include supporting the
growth of its commercial banking activities and possible future acquisitions.
Additionally, the Company has issued a total of $20.8 million of junior
subordinated deferrable interest debentures in two separate transactions. These
securities qualify as Tier 1 capital for regulatory reporting purposes.

The following table compares the Company's and the Bank's actual capital
ratios at September 30, 2000, to those required by regulatory agencies for
capital adequacy and well-capitalized classification purposes:

<TABLE>
<CAPTION>
MINIMUM WELL
EAST WEST EAST WEST REGULATORY CAPITALIZED
BANCORP BANK REQUIREMENTS REQUIREMENTS
--------- --------- ------------ ------------
<S> <C> <C> <C> <C>
Total Capital (to Risk-Weighted Assets).......... 11.4% 11.2% 8.0% 10.0%
Tier 1 Capital (to Risk-Weighted Assets)......... 10.1 10.0 4.0 6.0
Tier 1 Capital (to Average Assets)............... 8.1 8.2 4.0 5.0
</TABLE>

31
<PAGE>
ASSET LIABILITY AND MARKET RISK MANAGEMENT

LIQUIDITY

Liquidity management involves the Bank's ability to meet cash flow
requirements arising from fluctuations in deposit levels and demands of daily
operations, which include funding of securities purchases, providing for
customers' credit needs and ongoing repayment of borrowings. The Bank's
liquidity is actively managed on a daily basis and reviewed periodically by the
Asset/Liability Committee and the Board of Directors. This process is intended
to ensure the maintenance of sufficient funds to meet the needs of the Bank,
including adequate cash flow for off-balance sheet instruments.

The Bank's primary sources of liquidity are derived from financing
activities which include the acceptance of customer and broker deposits, federal
funds facilities, repurchase agreement facilities and advances from the Federal
Home Loan Bank of San Francisco. These funding sources are augmented by payments
of principal and interest on loans, the routine liquidation of securities from
the available-for-sale portfolio and securitizations of eligible loans. Primary
uses of funds include withdrawal of and interest payments on deposits,
originations and purchases of loans, purchases of investment securities, and
payment of operating expenses.

During the nine months ended September 30, 2000 and 1999, the Company
experienced net cash inflows of $39.8 million and $34.9 million, respectively,
from operating activities. The increase in net cash inflows from operating
activities for both periods was due primarily to the growth in interest income
on loans and investment securities. For the nine months ended September 30,
1999, net proceeds from sales of loans held for sale also contributed to
operating cash inflows for the period. Net cash outflows from investing
activities totaled $218.5 million and $148.6 million, respectively, for the nine
months ended September 30, 2000 and 1999, primarily due to the growth of the
Bank's loan portfolio. Financing activities provided a net cash inflow of
$186.8 million for the nine months ended September 30, 2000 primarily due to
deposit growth. For the nine months ended September 30, 1999, the Company
experienced a net cash outflow of $7.2 million from its financing activities
primarily due to a net repayment of FHLB advances.

As a means of augmenting its liquidity, the Bank has established federal
funds lines with four correspondent banks and several master repurchase
agreements with major brokerage companies. At September 30, 2000, the Bank's
available borrowing capacity includes approximately $33.1 million in repurchase
arrangements, $47.0 million in federal funds line facilities, and
$239.3 million in unused FHLB advances. Management believes its liquidity
sources to be stable and adequate. At September 30, 2000, management was not
aware of any information that was reasonably likely to have a material effect on
the Bank's liquidity position.

The liquidity of the parent company, East West Bancorp, Inc. is primarily
dependent on the payment of cash dividends by its subsidiary, East West Bank,
subject to limitations imposed by the Financial Code of the State of California.
For the third quarter of 2000, total dividends paid by the Bank to East West
Bancorp, Inc. totaled $1.6 million, compared with $1.5 million for the third
quarter of 1999. For the nine months ended September 30, 2000, total dividends
paid by the Bank to East West Bancorp, Inc. totaled $2.8 million compared to
$16.2 million for the same period in 1999. As of September 30, 2000,
approximately $36.7 million of undivided profits of the Bank were available for
dividends to the Company.

INTEREST RATE SENSITIVITY MANAGEMENT

The Bank's success is largely dependent upon its ability to manage interest
rate risk, which is the impact of adverse fluctuations in interest rates on the
Bank's net interest income and net portfolio value. Although in the normal
course of business the Bank manages other risks, such as credit and

32
<PAGE>
liquidity risk, management considers interest rate risk to be its most
significant market risk and could potentially have the largest material effect
on the Bank's financial condition and results of operations.

The fundamental objective of the asset liability management process is to
manage the Bank's exposure to interest rate fluctuations while maintaining
adequate levels of liquidity and capital. The Bank's strategy is formulated by
the Asset/Liability Committee, which coordinates with the Board of Directors to
monitor the Bank's overall asset and liability composition. The Committee meets
regularly to evaluate, among other things, the sensitivity of the Bank's assets
and liabilities to interest rate changes, the book and market values of assets
and liabilities, unrealized gains and losses on its available-for-sale portfolio
(including those attributable to hedging transactions), purchase and
securitization activity, and maturities of investments and borrowings.

The Bank's overall strategy is to minimize the adverse impact of immediate
incremental changes in market interest rates (rate shock) on net interest income
and net portfolio value. Net portfolio value is defined as the present value of
assets, minus the present value of liabilities and off-balance sheet
instruments. The attainment of this goal requires a balance between
profitability, liquidity and interest rate risk exposure. The table below shows
the estimated impact of changes in interest rates on net interest income and
market value of equity as of September 30, 2000 and December 31, 1999, assuming
a parallel shift of 100 to 200 basis points in both directions:

<TABLE>
<CAPTION>
NET INTEREST INCOME NET PORTFOLIO VALUE
VOLATILITY(1) VOLATILITY(2)
---------------------------- ----------------------------
CHANGE IN INTEREST RATES SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
(BASIS POINTS) 2000 1999 2000 1999
------------------------ ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
+200....................... 6.3% 2.6% (11.0)% (13.0)%
+100....................... 4.3% 2.1% (3.2)% (5.3)%
-100....................... (4.2)% (2.7)% 5.5% 8.5%
-200....................... (8.4)% (5.9)% 4.0% 8.5%
</TABLE>

------------------------

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

(2) The percentage change represents net portfolio value of the Bank in a stable
rate environment versus net portfolio value in the various rate scenarios.

All interest-earning assets, interest-bearing liabilities and related
derivative contracts are included in the interest rate sensitivity analysis at
September 30, 2000 and December 31, 1999. At September 30, 2000 and
December 31, 1999, the Bank's estimated changes in net interest income and net
portfolio value were within the ranges established by the Board of Directors.

33
<PAGE>
The primary analytical tool used by the Bank to gauge interest rate
sensitivity is a simulation model used by many major banks and bank regulators,
and is based on the actual maturity and repricing characteristics of
interest-rate sensitive assets and liabilities. The model attempts to predict
changes in the yields earned on assets and the rates paid on liabilities in
relation to changes in market interest rates. The model also incorporates
prepayment assumptions and market rates of interest provided by independent
broker/dealer quotations, an independent pricing model and other available
public sources. Adjustments are made to reflect the shift in the Treasury and
other appropriate yield curves. The model factors in projections of anticipated
activity levels by Bank product line and takes into account the Bank's increased
ability to control rates offered on deposit products in comparison to its
ability to control rates on adjustable-rate loans tied to published indices.

The following tables provide the outstanding principal balances and the
weighted average interest rates of the Bank's non-derivative financial
instruments as of September 30, 2000 and December 31, 1999. The Bank does not
consider these financial instruments to be materially sensitive to interest rate
fluctuations. Historically, the balances of these financial instruments have
remained fairly constant over various economic conditions. The information
presented below is based on the repricing date for variable rate instruments and
the expected maturity date for fixed rate instruments.

<TABLE>
<CAPTION>
EXPECTED MATURITY OR REPRICING DATE BY YEAR
-----------------------------------------------------------------
AFTER FAIR VALUE AT
2000 2001 2002 2003 2004 2004 TOTAL SEPT. 30, 2000
---------- -------- -------- -------- -------- -------- ---------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AT SEPTEMBER 30, 2000
ASSETS:
Short-term investments..... $ 11,000 $ -- $ -- $ -- $ -- $ -- $ 11,000 $ 11,000
Weighted average rate.... 6.95% --% --% --% --% --% 6.95%
Investment securities
available-for-sale (fixed
rate).................... $ 45,490 $ 48,011 $ 34,114 $ 26,543 $ 21,480 $105,204 $ 280,842 $ 265,714
Weighted average rate.... 6.13% 6.17% 6.12% 6.14% 6.15% 6.19% 6.16%
Investment securities
available-for-sale
(variable rate).......... $ 217,359 $ -- $ -- $ -- $ -- $ -- $ 217,359 $ 211,983
Weighted average rate.... 6.97% --% --% --% --% --% 6.97%
Total gross loans.......... $1,423,367 $ 88,272 $ 75,851 $ 58,007 $ 33,618 $ 49,829 $1,728,944 $ 1,721,322
Weighted average rate.... 9.18% 8.15% 8.00% 8.03% 8.15% 8.16% 8.95%

LIABILITIES:
Checking accounts.......... $ 110,947 $ -- $ -- $ -- $ -- $ -- $ 110,947 $ 110,947
Weighted average rate.... 1.36% --% --% --% --% --% 1.36%
Money market accounts...... $ 116,667 $ -- $ -- $ -- $ -- $ -- $ 116,667 $ 116,667
Weighted average rate.... 4.12% --% --% --% --% --% 4.12%
Savings deposits........... $ 223,192 $ -- $ -- $ -- $ -- $ -- $ 223,192 $ 223,192
Weighted average rate.... 1.99% --% --% --% --% --% 1.99%
Time deposits.............. $1,164,591 $ 26,062 $ 7,119 $ 1,662 $ 2,019 $ 29,923 $1,231,376 $ 1,226,514
Weighted average rate.... 5.61% 5.57% 5.92% 5.17% 5.96% 7.00% 5.64%
Short-term borrowings...... $ 38,000 $ -- $ -- $ -- $ -- $ -- $ 38,000 $ 38,006
Weighted average rate.... 6.54% --% --% --% --% --% 6.54%
FHLB advances.............. $ 210,000 $ 10,000 $ 14,000 $ -- $ -- $ -- $ 234,000 $ 234,100
Weighted average rate.... 6.59% 6.33% 5.94% --% --% --% 6.54%
Junior subordinated debt
securities............... $ -- $ -- $ -- $ -- $ -- $ 20,750 $ 20,750 $ 21,327
Weighted average rate.... --% --% --% --% --% 10.91% 10.91%
</TABLE>

34
<PAGE>

<TABLE>
<CAPTION>
EXPECTED MATURITY OR REPRICING DATE BY YEAR
-----------------------------------------------------------------
AFTER FAIR VALUE AT
2000 2001 2002 2003 2004 2004 TOTAL DEC. 31, 1999
---------- -------- -------- -------- -------- -------- ---------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AT DECEMBER 31, 1999
ASSETS:
Short-term investments..... $ 10,000 $ -- $ -- $ -- $ -- $ -- $ 10,000 $ 10,000
Weighted average rate.... 4.00% --% --% --% --% --% 4.00%
Investment securities
available-for-sale (fixed
rate).................... $ 49,783 $ 41,527 $ 35,429 $ 30,313 $ 24,322 $110,906 $ 292,280 $ 275,783
Weighted average rate.... 6.13% 6.14% 6.14% 6.14% 6.15% 6.16% 6.15%
Investment securities
available-for-sale
(variable rate).......... $ 225,040 $ -- $ -- $ -- $ -- $ -- $ 225,040 $ 220,643
Weighted average rate.... 6.43% --% --% --% --% --% 6.43%
Total gross loans.......... $1,299,273 $ 78,110 $ 44,223 $ 32,686 $ 27,286 $ 26,196 $1,507,774 $ 1,511,241
Weighted average rate.... 8.42% 8.10% 8.02% 8.16% 8.21% 7.65% 8.37%

LIABILITIES:
Checking accounts.......... $ 89,545 $ -- $ -- $ -- $ -- $ -- $ 89,545 $ 89,545
Weighted average rate.... 1.22% --% --% --% --% --% 1.22%
Money market accounts...... $ 69,434 $ -- $ -- $ -- $ -- $ -- $ 69,434 $ 69,434
Weighted average rate.... 3.38% --% --% --% --% --% 3.38%
Savings deposits........... $ 211,818 $ -- $ -- $ -- $ -- $ -- $ 211,818 $ 211,818
Weighted average rate.... 1.85% --% --% --% --% --% 1.85%
Time deposits.............. $ 930,167 $ 36,894 $ 1,250 $ 667 $ 2,202 $ 30,000 $1,001,180 $ 1,002,176
Weighted average rate.... 4.70% 5.03% 5.06% 5.09% 5.50% 7.00% 4.79%
Short-term borrowings...... $ 600 $ -- $ -- $ -- $ -- $ -- $ 600 $ 600
Weighted average rate.... 5.75% --% --% --% --% --% 5.75%
FHLB advances.............. $ 468,000 $ -- $ -- $ 14,000 $ -- $ -- $ 482,000 $ 482,507
Weighted average rate.... 5.86% --% --% 5.94% --% --% 5.87%
</TABLE>

Expected maturities of assets are contractual maturities adjusted for
projected payment based on contractual amortization and unscheduled prepayments
of principal as well as repricing frequency. Expected maturities for deposits
are based on contractual maturities adjusted for projected rollover rates and
changes in pricing for deposits with no stated maturity dates. The Bank utilizes
assumptions supported by documented analyses for the expected maturities of its
loans and repricing of its deposits. It also relies on third party data
providers for prepayment projections for amortizing securities. The actual
maturities of these instruments could vary significantly if future prepayments
and repricing differ from the Bank's expectations based on historical
experience.

The fair values of short-term investments approximate their book values due
to their short maturities. The fair values of available for sale securities are
based on bid quotations from third party data providers. The fair values of
loans are estimated for portfolios with similar financial characteristics and
takes into consideration discounted cash flows based on expected maturities or
repricing dates utilizing estimated market discount rates as projected by third
party data providers.

Transaction deposit accounts, which include checking, money market and
savings accounts, are presumed to have equal book and fair values because the
interest rates paid on these accounts are based on prevailing market rates. The
fair value of time deposits is based upon the discounted value of contractual
cash flows, which is estimated using current rates offered for deposits of
similar remaining terms. The fair value of short-term borrowings approximates
book value due to their short maturities. The fair value of FHLB advances is
estimated by discounting the cash flows through maturity or the next repricing
date based on current rates offered by the FHLB for borrowings with similar
maturities. The fair value of junior subordinated debt securities is estimated
by discounting the cash flows through maturity based on current rates offered on
the 30-year Treasury bond.

35
<PAGE>
The Asset/Liability Committee is authorized to utilize a wide variety of
off-balance sheet financial techniques to assist in the management of interest
rate risk. Derivative positions are integral components of the Bank's
asset/liability management strategy. Therefore, the Bank does not believe it is
meaningful to separately analyze the derivatives components of its risk
management activities in isolation from their related positions. The Bank uses
derivative instruments, primarily interest rate swap and cap agreements, as part
of its management of asset and liability positions in connection with its
overall goal of minimizing the impact of interest rate fluctuations on the
Bank's net interest margin or its stockholders' equity. These contracts are
entered into for purposes of reducing the Bank's interest rate risk and not for
trading purposes.

The Bank enters into interest rate swap agreements for the purposes of
converting fixed rate loans and deposits to floating rate assets and
liabilities. The total gross notional amount of interest rate swaps was
$58.5 million as of September 30, 2000 and December 31, 1999. At September 30,
2000, the net unrealized loss on the entire swap agreement portfolio was
$678 thousand compared to a net unrealized loss of $1.4 million at December 31,
1999.

The Bank has also entered into interest rate cap agreements which are
primarily linked to the three-month LIBOR. Prior to October 1, 1999, the Bank
used interest rate caps for purposes of hedging against market fluctuations in
the Bank's available-for-sale securities portfolio. Due to the volatility of the
correlation between the Treasury yield curve and fixed rate mortgage-backed
securities, the Bank ceased using interest rate caps to hedge against
fluctuations in the investment securities available for sale portfolio,
effective October 1, 1999. The Bank continues to record interest rate caps at
their estimated fair values, with resulting gains or losses recorded in current
earnings. The unrealized gains and losses reflected in accumulated other
comprehensive income (loss) in stockholders' equity as of September 30, 1999 are
amortized into interest income or expense over the expected remaining lives of
the interest rate cap agreements.

The following table summarizes the expected maturities, weighted average pay
and receive rates, and the unrealized gains and losses of the Bank's interest
rate contracts as of September 30, 2000 and

36
<PAGE>
December 31, 1999. The fair values reflected in the table are based on quoted
market prices from broker dealers making a market for these derivatives.

<TABLE>
<CAPTION>
EXPECTED MATURITY
---------------------------------------------------- AVERAGE
AFTER UNREALIZED EXPECTED
2000 2001 2002 2003 2003 TOTAL GAIN (LOSS) MATURITY
-------- -------- -------- -------- -------- -------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AT SEPTEMBER 30, 2000
Interest rate swap agreements:
Notional amount....................... $ -- $ 10,000 $ 18,500 $ -- $ 30,000 $ 58,500 $ (678) 5.4 Years
Weighted average receive rate......... --% 6.15% 6.32% --% 7.00% 6.64%
Weighted average pay rate............. --% 6.46% 6.45% --% 6.65% 6.55%

Interest rate cap agreements:
Notional amount....................... $ -- $ 18,000 $ 18,000 $ -- $ -- $ 36,000 $ -- 1.3 Years
LIBOR cap rate........................ --% 6.50% 7.00% --% --% 6.75%
</TABLE>

<TABLE>
<CAPTION>
EXPECTED MATURITY
---------------------------------------------------- AVERAGE
AFTER UNREALIZED EXPECTED
2000 2001 2002 2003 2003 TOTAL GAIN (LOSS) MATURITY
-------- -------- -------- -------- -------- -------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AT DECEMBER 31, 1999
Interest rate swap agreements:
Notional amount...................... $ -- $ -- $ 10,000 $ 18,500 $ 30,000 $ 58,500 $ (1,408) 6.1 Years
Weighted average receive rate........ --% --% 5.24% 5.29% 7.00% 6.16%
Weighted average pay rate............ --% --% 6.46% 6.45% 6.10% 6.27%

Interest rate cap agreements:
Notional amount...................... $ -- $ -- $ 18,000 $ 18,000 $ -- $ 36,000 $ -- 2.1 Years
LIBOR cap rate....................... --% --% 6.50% 7.00% --% 6.75%
</TABLE>

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES OF MARKET RISKS

For quantitative and qualitative disclosures regarding market risks in the
Bank's portfolio, see, "Management's Discussion and Analysis of Consolidated
Financial Condition and Results of Operations--Asset Liability and Market Risk
Management."

37
<PAGE>
PART II--OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Neither the Bank nor the Company is involved in any material legal
proceedings. The Bank, from time to time is party to litigation which arises in
the ordinary course of business, such as claims to enforce liens, claims
involving the origination and servicing of loans, and other issues related to
the business of the Bank. In the opinion of management, based upon the advice of
legal counsel, the resolution of any such issues would not have a material
adverse impact on the financial position, results of operations, or liquidity of
the Bank or the Company.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

No events have transpired which would make response to this item
appropriate.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

No events have transpired which would make response to this item
appropriate.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No events have transpired which would make response to this item
appropriate.

ITEM 5. OTHER INFORMATION

No events have transpired which would make response to this item
appropriate.

ITEM 6. ITEM EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits Index

<TABLE>
<CAPTION>
EXHIBIT NUMBER EXHIBIT DESCRIPTION
-------------- -------------------
<C> <S>
27 Financial Data Schedule
</TABLE>

All other material referenced in this report which is required to be filed
as an exhibit hereto has previously been submitted.

(b) Reports on Form 8-K

The Company filed no reports on Form 8-K during the third quarter of 2000.

38
<PAGE>
SIGNATURE

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

<TABLE>
<S> <C> <C>
EAST WEST BANCORP, INC.
Dated: November 14, 2000 (Registrant)

By: /s/ JULIA GOUW
-----------------------------------------
Julia Gouw
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
</TABLE>