EAST WEST BANCORP, INC.
(Exact name of registrant as specified in its charter)

Title of each class		Name of each exchange on which registered
NONE		NONE

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 ý No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 or Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of the Form 10-K or any amendment to this Form 10-K. ý

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes ý No o

As of February 29, 2004, the aggregate market value of the common stock held by non-affiliates of the registrant was approximately $1,284,737,548.

Number of shares of common stock of the registrant outstanding as of March 5, 2004: 25,084,334 shares

Document Incorporated		Part of Form 10-K Into Which Incorporated
Definitive Proxy Statement for the Annual Meeting of Stockholders which will be filed within 120 days of the fiscal year ended December 31, 2003		Part III

Certain matters discussed in this Annual Report may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "1933 Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and as such, may involve risks and uncertainties. These forward-looking statements relate to, among other things, expectations of the environment in which the Company operates and projections of future performance. The Company's actual results, performance, or achievements may differ significantly from the results, performance, or achievements expected or implied in such forward-looking statements. For discussion of some of the factors that might cause such differences, see "Item 1. BUSINESS—Risk Factors That May Affect Future Results."

East West Bancorp, Inc. East West Bancorp, Inc. (referred to herein on an unconsolidated basis as "East West" and on a consolidated basis as the "Company") is a bank holding company incorporated in Delaware on August 26, 1998 and registered under the Bank Holding Company Act of 1956, as amended. The Company commenced business on December 30, 1998 when, pursuant to a reorganization, it acquired all of the voting stock of East West Bank (the "Bank"). The Bank is the Company's principal asset.

The Company has four other operating subsidiaries, East West Capital Trust I, East West Capital Trust II, East West Capital Statutory Trust III, and East West Insurance Services, Inc. In March 2000 and July 2000, respectively, East West established East West Capital Trust I and East West Capital Trust II. East West Capital Statutory Trust III was established in December 2003. East West Capital Trust I, East West Capital Trust II, and East West Capital Statutory Trust III (the "Trusts"), as wholly owned subsidiaries, are statutory business trusts. In three separate private placement transactions, the Trusts issued $10.8 million of 10.875% fixed rate, $10.0 million of 10.945% fixed rate, and $10.0 million of variable rate capital securities representing undivided preferred beneficial interests in the assets of the Trusts. East West is the owner of all the beneficial interests represented by the common securities of the Trusts. The main purpose of issuing the capital securities was to provide the Company with a cost-effective means of obtaining Tier 1 capital for regulatory purposes. Effective December 31, 2003, as a consequence of adopting the provisions of Financial Accounting Standards Interpretation No. 46, Consolidation of Variable Interest Entities ("FIN No. 46"), the Trusts are no longer being consolidated into the accounts of East West Bancorp, Inc.

On August 22, 2000, East West completed the acquisition of its other wholly-owned subsidiary, East West Insurance Services, Inc. (the "Agency"), in a stock exchange transaction. In exchange for all of the outstanding stock of the Agency, East West issued a total of 103,291 new shares of East West Bancorp, Inc. common stock, par value of $.001. The total value of the shares issued was approximately $1.7 million. East West Insurance Services, Inc., with assets of approximately $789 thousand as of the acquisition date, provides business and consumer insurance services to the Southern California market. The Agency runs its operations autonomously from the operations of the Company.

East West's principal business is to serve as a holding company for the Bank and other banking or banking-related subsidiaries which East West may establish or acquire. East West has not engaged in any other activities to date. As a legal entity separate and distinct from its subsidiaries, East West's principal source of funds is, and will continue to be, dividends that may be paid by its subsidiaries. East West's other sources of funds include proceeds from the issuance of its common stock in connection with stock option and warrant exercises and employee stock purchase plans. At December 31, 2003, the Company had $4.06 billion in total consolidated assets, $3.23 billion in net consolidated loans, and $3.31 billion in total consolidated deposits.

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

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

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

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

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

On August 30, 2001, the Bank entered into an exclusive ten-year agreement with 99 Ranch Market to provide retail banking services in their stores throughout California. 99 Ranch Market is the largest Asian-focused chain of supermarkets on the West Coast, with twenty full service stores in California, one in Washington, and affiliated licensee stores in Hawaii, Nevada, Georgia and Arizona. Tawa Supermarket Companies ("Tawa") is the parent company of 99 Ranch Market. Tawa's property development division owns and operates many of the shopping centers where 99 Ranch Market stores are located. We are currently providing in-store banking services in the Arcadia, San Gabriel, Irvine, Anaheim, Van Nuys and Milpitas, California locations of 99 Ranch Market. All of our in-store branches are located in Southern California, except for the Milpitas branch, which is located in Northern California.

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

On March 14, 2003, the Bank completed its acquisition of Pacific Business Bank for an aggregate cash price of $25.0 million. Pacific Business Bank operated four branches in Southern California

located in Santa Fe Springs, Carson, El Monte, and South El Monte. The Bank acquired approximately $110.1 million in loans and $134.9 million in deposits.

At December 31, 2003, the Bank had three wholly owned subsidiaries. The first subsidiary, E-W Services, Inc., is a California corporation organized by the Bank in 1977. E-W Services, Inc. holds property used by the Bank in its operations. At December 31, 2003, the Bank's total investment in E-W Services, Inc. was $9.2 million. The second subsidiary, East-West Investments, Inc., is a California corporation organized by the Bank in 1972. East-West Investments, Inc. primarily acts as a trustee in connection with real estate secured loans. At December 31, 2003, the Bank's total investment in East-West Investments, Inc. was $98 thousand. The third subsidiary, East West Mortgage Securities, LLC, is a California limited liability company organized by the Bank in September 2002. East West Mortgage Securities, LLC acts primarily as a special purpose entity in connection with private label securitization activities. At December 31, 2003 the Bank's total investment in East West Mortgage Securities, LLC, was $1.7 million.

The Bank was the fourth largest commercial bank headquartered in Los Angeles County, California as of December 31, 2003, and one of the largest banks in the United States that focuses on the Chinese-American community. Through its network of 39 retail branches, the Bank provides a wide range of personal and commercial banking services to small and medium-sized businesses, business executives, professionals, and other individuals. The Bank offers multilingual services to its customers in English, Cantonese, Mandarin, Vietnamese, and Spanish. The Bank also offers a variety of deposit products which includes the traditional range of personal and business checking and savings accounts, time deposits and individual retirement accounts, travelers' checks, safe deposit boxes, and Master Card and Visa merchant deposit services.

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

The Company's management has identified four principal operating segments within the organization: retail banking, commercial lending, treasury, and residential lending. Although all four operating segments offer financial products and services, they are managed separately based on each segment's strategic focus. While the retail banking segment focuses primarily on retail operations through the Bank's branch network, certain designated branches have responsibility for generating commercial deposits and loans. The commercial lending segment primarily generates commercial loans and deposits through the efforts of commercial lending officers located in the northern and southern California production offices. The treasury department's primary focus is managing the Bank's investments, liquidity, and interest rate risk; while the residential lending segment is mainly responsible for the Bank's portfolio of single family and multifamily loans.

The Bank concentrates on marketing its services in the Los Angeles metropolitan area, Orange County, the San Francisco Bay area, San Mateo County, the Silicon Valley area in Santa Clara County and Alameda County, with a particular focus on regions with a high concentration of ethnic Chinese. The ethnic Chinese markets within the Bank's primary market area have experienced rapid growth in recent years. Based on information provided by the California State Department of Finance, there were

an estimated 4.2 million Asians and Pacific Islanders residing in California as of March 2002. As California continues to gain momentum as the hub of the Pacific Rim, the Bank provides important competitive advantages to its customers participating in the Asia Pacific marketplace. We believe that our customers benefit from our understanding of Asian markets and cultures, our corporate and organizational ties throughout Asia, as well as our international banking products and services. We believe that this approach, combined with the extensive ties of our management and Board of Directors to the growing Asian and ethnic Chinese communities, provide us with an advantage in competing for customers in our market area.

The banking and financial services industry in California generally, and in our market areas specifically, are highly competitive. The increasingly competitive environment is a result primarily of changes in regulation, changes in technology and product delivery systems, and the accelerating pace of consolidation among financial services providers. In addition, recent federal legislation may have the effect of further increasing the pace of consolidation within the financial services industry. See "Item 1. Business—Economic Conditions, Government Policies, Legislation and Regulation."

The Bank competes for loans, deposits, and customers with other commercial banks, savings and loan associations, securities and brokerage companies, mortgage companies, insurance companies, finance companies, money market funds, credit unions, and other nonbank financial service providers. Some of these competitors are larger in total assets and capitalization, have greater access to capital markets and offer a broader range of financial services than the Bank. The Bank has 39 offices located in the following counties: Los Angeles, Orange, San Francisco, San Mateo, Santa Clara and Alameda. Neither the deposits nor loans of the offices of the Bank exceed 1% of the deposits or loans of all financial services companies located in the counties in which it operates.

For information regarding the recently issued accounting standards, see Note 1, entitled "Summary of Significant Accounting Policies," to the Company's consolidated financial statements presented elsewhere herein.

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

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

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

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

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

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

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

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

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

proper incident thereto. The Company may also engage in such activities pursuant to its election to become a financial holding company.

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

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

The Company's securities are registered with the Securities and Exchange Commission ("SEC") under the Securities Exchange Act of 1934, as amended. As such, the Company is subject to the information, proxy solicitation, insider trading, corporate governance, and other requirements and restrictions of the Exchange Act.

Bank holding companies that elect to become a financial holding company may affiliate with securities firms and insurance companies and engage in other activities that are financial in nature or are incidental or complementary to activities that are financial in nature. "Financial in nature" activities include:

Prior to filing a declaration of its election to become a financial holding company, all of the bank holding company's depository institution subsidiaries must be well capitalized, well managed, and, except in limited circumstances, be in satisfactory compliance with the Community Reinvestment Act ("CRA").

Failure to sustain compliance with the financial holding company election requirements or correct any non-compliance within a fixed time period could lead to divestiture of subsidiary banks or require all activities of such company to conform to those permissible for a bank holding company. No FRB approval is required for a financial holding company to acquire a company (other than a bank holding company, bank or savings association) engaged in those activities determined by the FRB that are financial in nature or incidental to activities that are financial in nature, including but not limited to:

A bank holding company that is not also a financial holding company can only engage in banking and such other activities determined by the FRB to be so closely related to banking or managing or controlling banks as to be a proper incident thereto.

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

As a California-chartered bank, the Bank is subject to primary supervision, periodic examination, and regulation by the California Commissioner of Financial Institutions ("Commissioner") and the Federal Deposit Insurance Corporation (the "FDIC"). The Bank is also subject to certain regulations promulgated by the FRB. If, as a result of an examination of the Bank, the FDIC or the Commissioner should determine that the financial condition, capital resources, asset quality, earnings prospects, management, liquidity, or other aspects of the Bank's operations are unsatisfactory or that the Bank or its management is violating or has violated any law or regulation, various remedies are available to the FDIC or the Commissioner. Such remedies include the power to enjoin "unsafe or unsound" practices, to require affirmative action to correct any conditions resulting from any violation or practice, to issue an administrative order that can be judicially enforced, to direct an increase in capital, to restrict the growth of the Bank, to assess civil monetary penalties, to remove officers and directors, and ultimately to terminate the Bank's deposit insurance, which for a California-chartered bank would result in a revocation of the Bank's charter. The Commissioner separately has many of the same remedial powers.

On July 30, 2002, President Bush signed into law The Sarbanes-Oxley Act of 2002. This new legislation addresses accounting oversight and corporate governance matters, including:

We do not expect this legislation or its implementing regulations to have a material impact on our operations.

The USA Patriot Act of 2001 and its implementing regulations significantly expanded the anti-money laundering and financial transparency laws, including:

In December 2003, President Bush signed into law the Fair and Accurate Credit Transactions Act ("FACT Act") which sets new obligations for financial firms to help deter identity theft and give consumers more control of their credit data. It also reauthorizes a federal ban on state laws that interfere with corporate credit granting and marketing practices. The FRB and the Federal Trade Commission ("FTC") are required to draft regulations to implement the FACT Act. It is not possible at this time to determine the impact of such regulations that are to be drafted; however, the FRB and FTC recently announced that businesses will have until December 1, 2004 to comply with the new initiatives.

Privacy. Federal banking rules limit the ability of banks and other financial institutions to disclose non-public information about consumers to nonaffiliated third parties. Pursuant to these rules, effective July 1, 2001, financial institutions must provide:

These privacy provisions affect how consumer information is transmitted through diversified financial companies and conveyed to outside vendors. Since the GLBA's enactment, a number of states have implemented their own versions of privacy laws. The Company has implemented its privacy policies in accordance with the law.

On December 22, 2003, the SEC issued the advance notice of proposed rulemaking along with the federal banking agencies and other government agencies seeking comment on whether they should consider amending current regulations "to allow or require financial institutions to provide alternative types of privacy notices, such as a short privacy notice, that would be easier for consumers to understand." The concept release lists more than 40 questions regarding which the agencies seek comment from the public, organized in the following categories: goals of a privacy notice, elements of a privacy notice, language of a privacy notice, format of a privacy notice, mandatory and permissible aspects of a privacy notice, costs and benefits of a short notice, and other categories.

In recent years, a number of states have implemented their own versions of privacy laws. For example, in 2003, California adopted standards that are tougher than federal law, allowing bank customers the opportunity to bar financial companies from sharing information with their affiliates.

On August 12, 2003, the Federal bank and thrift regulatory agencies requested public comment on proposed guidance that would require financial institutions to develop programs to respond to incidents

of unauthorized access to customer information, including procedures for notifying customers under certain circumstances. The proposed guidance:

We are not able at this time to determine the impact of any such proposed guidance on our financial condition or results of operation.

Dividends from the Bank constitute the principal source of income to the Company. The Company is a legal entity separate and distinct from the Bank. The Bank is subject to various statutory and regulatory restrictions on its ability to pay dividends to the Company. Under such restrictions, the amount available for payment of dividends to the Company by the Bank totaled $130.8 million at December 31, 2003. In addition, the Bank's regulators have the authority to prohibit the Bank from paying dividends, depending upon the Bank's financial condition, if such payment is deemed to constitute an unsafe or unsound practice.

The Bank is subject to certain restrictions imposed by federal law on any extensions of credit to, or the issuance of a guarantee or letter of credit on behalf of, the Company or other affiliates, the purchase of, or investments in, stock or other securities thereof, the taking of such securities as collateral for loans, and the purchase of assets of the Company or other affiliates. Such restrictions prevent the Company and such other affiliates from borrowing from the Bank unless the loans are secured by marketable obligations of designated amounts. Further, such secured loans and investments by the Bank to or in the Company or to or in any other affiliate are limited, individually, to 10.0% of the Bank's capital and surplus (as defined by federal regulations), and such secured loans and investments are limited, in the aggregate, to 20.0% of the Bank's capital and surplus (as defined by federal regulations). California law also imposes certain restrictions with respect to transactions involving the Company and other controlling persons of the Bank. Additional restrictions on transactions with affiliates may be imposed on the Bank under the prompt corrective action provisions of federal law. See "Item 1. BUSINESS—Supervision and Regulation—Prompt Corrective Action and Other Enforcement Mechanisms."

The federal banking agencies have adopted risk-based minimum capital guidelines intended to provide a measure of capital that reflects the degree of risk associated with a banking organization's operations for both transactions reported on the balance sheet as assets and transactions, such as letters of credit and recourse arrangements, which are recorded as off balance sheet items. Under these guidelines, nominal dollar amounts of assets and credit equivalent amounts of off balance sheet items are multiplied by one of several risk adjustment percentages, which range from 0% for assets with low credit risk, such as certain U.S. Treasury securities, to 100% for assets with relatively high credit risk, such as commercial loans.

These guidelines require a minimum ratio of qualifying total capital to risk-adjusted assets of 8% and a minimum ratio of Tier 1 capital to risk-adjusted assets of 4%. In addition to the risked-based guidelines, federal banking regulators require banking organizations to maintain a minimum amount of Tier 1 capital to total assets, referred to as the leverage ratio. For a banking organization rated in the highest of the five categories used by regulators to rate banking organizations, the minimum leverage ratio of Tier 1 capital to total assets must be 4%. In addition to these uniform risk-based capital guidelines and leverage ratios that apply across the industry, the regulators have the discretion to set individual minimum capital requirements for specific institutions at rates significantly above the minimum guidelines and ratios. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Capital" for information regarding the Company's regulatory capital ratios at December 31, 2003.

Proposed accounting rules regarding special purpose entities (Fin 46) could disqualify trust-preferred securities from Tier 1 capital status. In the event these capital instruments are no longer allowed to be included as Tier 1 capital, the capital position of the bank could be adversely affected. Trust-preferred securities currently make up 9% of the bank's Tier 1 capital.

In addition, federal banking regulators may set capital requirements higher than the minimums described above for financial institutions whose circumstances warrant it. For example, a financial institution experiencing or anticipating significant growth may be expected to maintain capital positions substantially above the minimum supervisory levels without significant reliance on intangible assets.

The term "predatory lending," much like the terms "safety and soundness" and "unfair and deceptive practices," is far-reaching and covers a potentially broad range of behavior. As such, it does not lend itself to a concise or a comprehensive definition. The term is generally thought to be limited to the field of consumer lending. Typically, predatory lending involves at least one, and perhaps all three, of the following elements:

As indicated above, one area of concern is the affordability of credit. On October 1, 2002, amendments to FRB regulations aimed at one type of "high cost" mortgage lending became effective. The rule significantly widens the pool of high-cost home-secured loans covered by the Home Ownership and Equity Protection Act of 1994 ("HOEPA"), a federal law that requires extra disclosures and consumer protections to borrowers. The following triggers coverage under the HOEPA regulations:

Most home purchase loans are excluded from the coverage of the HOEPA regulations. Thus, the regulations mainly apply to refinancing and equity loans.

In addition to requiring additional disclosures, the HOEPA regulation bars most balloon payments, negative amortization, default interest rates, prepayment penalties, demand clauses and loan flipping by the same lender or loan servicer within a year. Lenders also will be presumed to have violated the regulation—which prohibits lenders from a pattern or practice of making loans to people unable to repay them—unless they document that the borrower has the ability to repay. Lenders that violate the rules face cancellation of loans and penalties equal to the finance charges paid.

In addition to the FRB regulations, California enacted a new high-cost loan lending law in 2001, effective July 1, 2002, that curtails certain abusive practices. The new state bills (AB 344 and AB 489) apply to specific "covered loans" applied for on and after July 1, 2002 in amounts of $250,000 or less which meet either a "points and fees" test of 6 percentage points or an Annual Percentage Rate test of 8 percentage points, regardless of lien position. The California covered loan law imposes civil liability for violations on any person who arranges, negotiates or makes a covered loan. Lenders will also be liable for violations by mortgage brokers if the lender knew of and showed a "reckless disregard" for the violations. The following triggers coverage under the California high-cost loan law:

There is no exclusion for purchase-money loans. The California high-cost loan law covers a broader range of possible loans than the FRB's HOEPA regulations but otherwise imposes a statutory scheme similar to the HOEPA regulations discussed above. The California law also prohibits "steering" consumers to less desirable credit terms, imposes a substantive cap of 6 percent on the amount of points and fees that can be financed by a covered loan and prohibits the financing of credit insurance premiums by a covered loan.

We do not expect these rule changes and potential state action in this area to have a material impact on our financial condition or results of operation.

Federal banking agencies possess broad powers to take corrective and other supervisory action to resolve the problems of insured depository institutions, including but not limited to those institutions that fall below one or more prescribed minimum capital ratios. Each federal banking agency has promulgated regulations defining the following five categories in which an insured depository institution will be placed, based on its capital ratios: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized. At December 31, 2003, the Company and the Bank exceeded the required ratios for classification as "well capitalized."

An institution that, based upon its capital levels, is classified as well capitalized, adequately capitalized, or undercapitalized may be treated as though it were in the next lower capital category if the appropriate federal banking agency, after notice and opportunity for hearing, determines that an unsafe or unsound condition or an unsafe or unsound practice warrants such treatment. At each successive lower capital category, an insured depository institution is subject to more restrictions. The federal banking agencies, however, may not treat a significantly undercapitalized institution as critically undercapitalized unless its capital ratio actually warrants such treatment.

In addition to measures taken under the prompt corrective action provisions, commercial banking organizations may be subject to potential enforcement actions by the federal regulators for unsafe or

unsound practices in conducting their businesses or for violations of any law, rule, regulation, or any condition imposed in writing by the agency or any written agreement with the agency. Finally, pursuant to an interagency agreement, the FDIC can examine any institution that has a substandard regulatory examination score or is considered undercapitalized—without the express permission of the institution's primary regulator.

The federal banking agencies have adopted guidelines designed to assist the federal banking agencies in identifying and addressing potential safety and soundness concerns before capital becomes impaired. The guidelines set forth operational and managerial standards relating to: (i) internal controls, information systems and internal audit systems, (ii) loan documentation, (iii) credit underwriting, (iv) asset growth, (v) earnings, and (vi) compensation, fees and benefits. In addition, the federal banking agencies have also adopted safety and soundness guidelines with respect to asset quality and earnings standards. These guidelines provide six standards for establishing and maintaining a system to identify problem assets and prevent those assets from deteriorating. Under these standards, an insured depository institution should: (i) conduct periodic asset quality reviews to identify problem assets, (ii) estimate the inherent losses in problem assets and establish reserves that are sufficient to absorb estimated losses, (iii) compare problem asset totals to capital, (iv) take appropriate corrective action to resolve problem assets, (v) consider the size and potential risks of material asset concentrations, and (vi) provide periodic asset quality reports with adequate information for management and the board of directors to assess the level of asset risk. These guidelines also set forth standards for evaluating and monitoring earnings and for ensuring that earnings are sufficient for the maintenance of adequate capital and reserves.

Through the Bank Insurance Fund ("BIF") and the Savings Association Insurance Fund ("SAIF"), the FDIC insures the deposits of the Bank up to prescribed limits for each depositor. The amount of FDIC assessments paid by each BIF member institution is based on its relative risk of default as measured by regulatory capital ratios and other factors. Specifically, the assessment rate is based on the institution's capitalization risk category and supervisory subgroup category. An institution's capitalization risk category is based on the FDIC's determination of whether the institution is well capitalized, adequately capitalized or less than adequately capitalized. An institution's supervisory subgroup category is based on the FDIC's assessment of the financial condition of the institution and the probability that FDIC intervention or other corrective action will be required.

FDIC-insured depository institutions pay an assessment rate equal to the rate assessed on deposits insured by the Savings Association Insurance Fund ("SAIF"). The assessment rates currently range from zero to 27 basis points per $100 of domestic deposits. The FDIC may increase or decrease the assessment rate schedule on a semi-annual basis. Due to continued growth in deposits and some recent bank failures, the BIF is nearing its minimum ratio of 1.25% of insured deposits as mandated by law. If the ratio drops below 1.25%, it is likely the FDIC will be required to assess premiums on all banks for the first time since 1996. Any increase in assessments or the assessment rate could have a material adverse effect on the Company's earnings, depending on the amount of the increase.

The FDIC is authorized to terminate a depository institution's deposit insurance upon a finding by the FDIC that the institution's financial condition is unsafe or unsound or that the institution has engaged in unsafe or unsound practices or has violated any applicable rule, regulation, order or condition enacted or imposed by the institution's regulatory agency. The termination of deposit insurance for one or more of the Company's subsidiary depository institutions could have a material adverse effect on the Company's earnings, depending on the collective size of the particular institutions involved.

All FDIC-insured depository institutions must pay an annual assessment to provide funds for the payment of interest on bonds issued by the Financing Corporation, a federal corporation chartered under the authority of the Federal Housing Finance Board. The bonds, commonly referred to as FICO bonds, were issued to capitalize the Federal Savings and Loan Insurance Corporation. The FDIC established the FICO assessment rates effective for the first quarter of 2004 at $0.0154 per $100 of assessable deposits. The FICO assessments are adjusted quarterly to reflect changes in the assessment bases of the FDIC's insurance funds and do not vary depending on a depository institution's capitalization or supervisory evaluations.

The BHCA permits bank holding companies from any state to acquire banks and bank holding companies located in any other state, subject to certain conditions, including certain nationwide- and state-imposed concentration limits. The Bank has the ability, subject to certain state restrictions, to acquire by acquisition or merger branches outside its home state. The establishment of new interstate branches is also possible in those states with laws that expressly permit it. Interstate branches are subject to certain laws of the states in which they are located. Competition may increase further as banks branch across state lines and enter new markets.

The Bank is subject to certain fair lending requirements and reporting obligations involving home mortgage lending operations and Community Reinvestment Act activities. The CRA generally requires the federal banking agencies to evaluate the record of a financial institution in meeting the credit needs of its local communities, including low- and moderate-income neighborhoods. A bank may be subject to substantial penalties and corrective measures for a violation of certain fair lending laws. The federal banking agencies may take compliance with such laws and CRA obligations into account when regulating and supervising other activities. Furthermore, financial institutions are subject to annual reporting and public disclosure requirements for certain written agreements that are entered into between insured depository institutions or their affiliates and nongovernmental entities or persons that are made pursuant to, or in connection with, the fulfillment of the CRA.

On February 6, 2004, the federal banking agencies proposed amendments to the CRA regulations that would:

A bank's compliance with its CRA obligations is based on a performance-based evaluation system which bases CRA ratings on an institution's lending service and investment performance. When a bank holding company applies for approval to acquire a bank or other bank holding company, the FRB will review the assessment of each subsidiary bank of the applicant bank holding company, and such records may be the basis for denying the application. Based on an examination conducted in May 2001, the Bank received a "Satisfactory" rating.

The Bank is a member of the Federal Home Loan Bank of San Francisco. Among other benefits, each FHLB serves as a reserve or central bank for its members within its assigned region. Each FHLB is financed primarily from the sale of consolidated obligations of the FHLB system. Each FHLB makes available loans or advances to its members in compliance with the policies and procedures established

by the Board of Directors of the individual FHLB. As an FHLB member, we would be required to own capital stock in an FHLB in an amount equal to the greater of:

A new capital plan of the FHLB-SF was approved by the Federal Housing Finance Board and will be implemented on April 1, 2004. The new capital plan incorporates a single class of stock with a par value of $100 per share, and may be issued, exchanged, redeemed, and repurchased only at par value. Each member to own stock in amount equal to the greater of:

The new capital stock is redeemable on five years' written notice, subject to certain conditions.

We do not believe that the initial implementation of the FHLB-SF new capital plan as approved will have a material impact upon our financial condition, cash flows, or results of operations. However, the bank could be required to purchase as much as 50% additional capital stock or sell as much as 50% of its proposed capital stock requirement at the discretion of the FHLB-SF.

The Federal Reserve Board requires all depository institutions to maintain non-interest bearing reserves at specified levels against their transaction accounts (primarily checking and non-personal time deposits). At December 31, 2003, the Bank was in compliance with these requirements.

East West does not have any employees other than officers who are also officers of the Bank. Such employees are not separately compensated for their employment with the Company. As of December 31, 2003, the Bank had a total of 692 full-time employees and 38 part-time employees and the Agency had a total of 15 full-time employees. None of the employees are represented by a union or collective bargaining group. The managements of the Bank and Agency believe that their employee relations are satisfactory.

The Company also maintains an internet website at eastwestbank.com. The Company makes its website content available for information purposes only. It should not be relied upon for investment purposes.

We make available free of charge through our website our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and proxy statements for its annual shareholder meetings, as well as any amendments to those reports, as soon as reasonably practicable after the Company files such reports with the Securities and Exchange Commission. The Company's SEC reports can be accessed through the investor information page of its website. None of the information contained in or hyperlinked from our website is incorporated into this Form 10-K. The SEC also maintains a website at www.sec.gov that contains reports, proxy statements and other information regarding SEC registrants, including the Company.

In addition to other information contained in this report, the following discusses certain factors which may affect the Company's financial results and operations and should be considered in evaluating the Company:

Our California business focus and economic conditions in California could adversely affect our operations. The Company's operations are located primarily in California. As a result of this geographic concentration, the Company's results depend largely upon economic conditions in this area. A deterioration in economic conditions or a natural or manmade disaster in the Company's market area could have a material adverse impact on the quality of the Company's loan portfolio, the demand for its products and services, and its financial condition and results of operations.

Changes in market interest rates could adversely affect our earnings. The Company's earnings are impacted by changing interest rates. Changes in interest rates impact the level of loans, deposits and investments, the credit profile of existing loans and the rates received on loans and investment securities and the rates paid on deposits and borrowings. Significant fluctuations in interest rates may have a material adverse affect on the Company's financial condition and results of operations.

We are subject to government regulations that could limit or restrict our activities, which in turn could adversely impact our operations. The financial services industry is subject to extensive federal and state supervision and regulation. Significant new laws or changes in existing laws, or repeals of existing laws may cause the Company's results to differ materially. Further, federal monetary policy, particularly as implemented through the Federal Reserve System, significantly affects credit conditions for the Company and a material change in these conditions could have a material adverse impact on the Company's financial condition and results of operations.

Failure to manage our growth may adversely affect our performance. The Company's financial performance and profitability depends on our ability to manage our recent growth and possible future growth. In addition, any future acquisitions and our continued growth may present operating and other problems that could have an adverse effect on our financial condition and results of operations.

Competition may adversely affect our performance. The banking and financial services businesses in the Company's market areas are highly competitive. The Company faces competition in attracting deposits and in making loans. The increasingly competitive environment is a result of changes in regulation, changes in technology and product delivery systems, and the accelerating pace of consolidation among financial service providers. The results of the Company in the future may differ depending on the nature or level of competition.

If a significant number of borrowers, guarantors and related parties fail to perform as required by the terms of their loans, we will sustain losses. A significant source of risk arises from the possibility that losses will be sustained because borrowers, guarantors and related parties may fail to perform in accordance with the terms of their loans. The Company has adopted underwriting and credit monitoring procedures and credit policies, including the establishment and review of the allowance for credit losses, that management believes are appropriate to minimize this risk by assessing the likelihood of nonperformance, tracking loan performance, and diversifying the Company's credit portfolio. These policies and procedures, however, may not prevent unexpected losses that could have a material adverse effect on the Company's results of operations.

The following table sets forth the executive officers of the Company, their positions, and their ages. Each officer is appointed by the Board of Directors of the Company or the Bank and serves at their pleasure.

Name	Age(1)	Position with Company or Bank
Dominic Ng	45	Chairman of the Board, President, and Chief Executive Officer of the Company and the Bank
Julia Gouw	44	Executive Vice President and Chief Financial Officer of the Company and the Bank
Douglas Krause	47	Executive Vice President, General Counsel, and Secretary of the Company and the Bank
Donald Chow	53	Executive Vice President and Director of Commercial Lending of the Bank
Kwok-Yin Cheng	51	Executive Vice President and Director of International Banking of the Bank
Michael Lai	53	Executive Vice President, Northern California
William Lewis	60	Executive Vice President and Chief Credit Officer of the Bank
Robert Bulseco	58	Executive Vice President
Wellington Chen	44	Executive Vice President and Director of Corporate Banking Division

Dominic Ng has served as a director of the Bank since 1991, as President and Chief Executive Officer of the Bank since 1992, and was elected Chairman of the Board in 1998. Mr. Ng has held the same positions with the Company since its formation. Prior to joining the Bank, he was President and CEO of Seyen Investment Inc. He also spent over a decade as a CPA at Deloitte & Touche LLP. Mr. Ng serves on the Board of ESS Technology, Inc. and of PacifiCare Health Systems, Inc. He also serves on the boards of the California Bankers' Association and the Anderson School at UCLA.

Julia Gouw has served as Executive Vice President and Chief Financial Officer of the Bank since 1994 and as a director of the Bank since 1997, and has held these same positions with the Company since its formation. Prior to joining the Bank in 1989 as Vice President and Controller, Ms. Gouw was a Senior Audit Manager with KPMG LLP. She is on the Board of Visitors of UCLA School of Medicine, the Board of Directors of Huntington Memorial Hospital, and is a member of the Financial Executives' Institute and the California Society of CPAs.

Douglas Krause serves as Executive Vice President, General Counsel, and Secretary of the Bank and has held these same positions with the Company since its formation. Prior to joining the Bank in 1996 as Senior Vice President, Mr. Krause was Corporate Senior Vice President and General Counsel of Metrobank since 1991. Prior to that, Mr. Krause was with the law firms of Dewey Ballantine and Jones, Day, Reavis and Pogue specializing in financial services.

Donald Chow serves as Executive Vice President and Director of Commercial Lending of the Bank. Mr. Chow joined the Bank in April 1993 as First Vice President and Commercial Lending Manager. Mr. Chow was promoted to Senior Vice President in April 1994. Mr. Chow has over 25 years of experience in commercial lending. Before joining the Bank, Mr. Chow was First Vice President and Senior Credit Officer for Mitsui Manufacturers Bank. Mr. Chow was also employed for over 10 years

with Security Pacific National Bank where he held a number of positions, including Vice President and unit leader of commercial real estate lending.

Kwok-Yin Cheng serves as Executive Vice President and Director of International Banking of the Bank. Prior to joining the Bank in June 1999, Mr. Cheng was the general manager of the Pacific Rim Business Division at Union Bank of California. Mr. Cheng has over 25 years of experience in international banking, including 13 years at Wells Fargo Bank, 2 years at First Interstate Bank and 6 years at Mitsui Manufacturing Bank. He currently serves as director of the Los Angeles-Long Beach World Trade Center Association, where he will assume a one-year chairmanship commencing in April 2004, and the National Association of Chinese American Bankers. He also serves as an executive director and chairperson of the Los Angeles Economic Development Corporation.

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

William Lewis joined the Bank in January 2002 as Executive Vice President and Chief Credit Officer. Prior to joining the Bank, Mr. Lewis was Executive Vice President and Chief Credit Officer of PriVest Bank since 1998. He held the same positions with Eldorado Bank from 1994 to 1998. Prior to that, Mr. Lewis was employed for 12 years with Sanwa Bank where he administered a 35 branch region and 13 years with First Interstate Bank where he held a variety of branch and credit management positions.

Robert Bulseco joined the Bank in January 2001 as Executive Vice President through our acquisition of Prime Bank. Before joining the Bank, Mr. Bulseco served as President, Chief Financial Officer and Director for Prime Bank since 1998. Prior to that, Mr. Bulseco served as President, Chief Operating Officer, and Director at Metrobank from 1979 to 1996 and as Vice President and Chief Administrative Officer at Union Bank from 1970 to 1979.

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

The Company currently neither owns nor leases any real or personal property. The Company uses the premises, equipment, and furniture of the Bank. The Agency also currently conducts its operations in one of the administrative offices of the Bank. The Company is currently reimbursing the Bank for the Agency's use of this facility.

The Bank owns the land and buildings at 9 of its 39 retail branch offices and all of its administrative locations, with the exception of the space occupied by the Mortgage Division and the Northern California administrative office. These two locations, along with the remaining banking offices, are leased by the Bank. Total annual rental payments (exclusive of operating charges and real

property taxes) are approximately $4.1 million, with lease expiration dates ranging from 2004 to 2013, exclusive of renewal options.

At December 31, 2003, the Bank's investment in premises and equipment, net of accumulated depreciation and amortization, totaled $25.0 million. Total occupancy expense, inclusive of rental payments and furniture and equipment expense, for the year ended December 31, 2003, was $10.3 million. The Company believes that its existing facilities are adequate for its present purposes. The Company believes that, if necessary, it could secure alternative facilities on similar terms without adversely affecting its operations.

Neither the Company nor the Bank 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. After taking into consideration information furnished by counsel to the Company and the Bank, management believes that the resolution of such issues would not have a material adverse impact on the financial position, results of operations, or liquidity of the Company or the Bank.

There was no submission of matters to a vote of security holders during the fourth quarter of the year ended December 31, 2003.

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

East West Bancorp, Inc. commenced trading on the Nasdaq National Market on February 8, 1999 under the symbol "EWBC." The following table sets forth the range of sales prices for the Company's common stock for each of the quarters in the two years ended December 31, 2003:

	Years Ended December 31,
	2003				2002
	High		Low		High		Low
First quarter	$	38.47	$	29.25	$	29.70	$	24.85
Second quarter		37.50		30.44		38.00		28.95
Third quarter		45.58		34.48		38.06		30.26
Fourth quarter		55.02		42.61		37.00		28.00

The foregoing reflects information available to the Company and does not necessarily include all trades in the Company's stock during the periods indicated. The closing price of our common stock on February 27, 2004 was $53.15 per share, as reported by the Nasdaq National Market.

As of February 26, 2004, there were 1,072 holders of record of the Company's common stock.

We declared and paid cash dividends of $0.10 and $0.0675 per share during each of the four quarters of 2003 and 2002, respectively. We declared a dividend of $0.10 per share in the first quarter of 2004. Refer to "Item 1. BUSINESS—Regulation and Supervision—Restrictions on Transfer of Funds to the Company by the Bank" for information regarding dividend payment restrictions.

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

ITEM 7. 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 our financial condition and the results of our operations. This discussion and analysis should be read in conjunction with the Company's consolidated financial statements and the accompanying notes presented elsewhere herein.

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

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

The classification and accounting for investment securities are discussed in detail in Note 1 of the consolidated financial statements. Under SFAS No. 115, investment securities generally must be classified as held-to-maturity, available-for-sale or trading. The appropriate classification is based partially on our ability to hold the securities to maturity and largely on management's intentions with respect to either holding or selling the securities. The classification of investment securities is significant since it directly impacts the accounting for unrealized gains and losses on securities. Unrealized gains and losses on trading securities flow directly through earnings during the periods in which they arise, whereas for available-for-sale securities, they are recorded as a separate component of stockholders' equity (accumulated comprehensive other income or loss) and do not affect earnings until realized. The fair values of our investment securities are generally determined by reference to quoted market prices and reliable independent sources. We are obligated to assess, at each reporting date, whether there is an "other-than-temporary" impairment to its investment securities. Such impairment must be recognized in current earnings rather than in other comprehensive income. We did not have any impaired investment securities during 2003.

Our allowance for loan loss methodologies incorporate a variety of risk considerations, both quantitative and qualitative, in establishing an allowance for loan loss that management believes is appropriate at each reporting date. Quantitative factors include our historical loss experience, delinquency and charge-off trends, collateral values, changes in nonperforming loans, and other factors. Quantitative factors also incorporate known information about individual loans, including borrowers' sensitivity to interest rate movements and borrowers' sensitivity to quantifiable external factors including commodity and finished good prices as well as acts of nature (earthquakes, floods, fires, etc.)

that occur in a particular period. Qualitative factors include the general economic environment in our markets and, in particular, the state of certain industries. Size and complexity of individual credits in relation to lending officers' background and experience levels, loan structure, extent and nature of waivers of existing loan policies and pace of portfolio growth are other qualitative factors that are considered in our methodologies. As we add new products, increase the complexity of our loan portfolio, and expand our geographic coverage, we will enhance our methodologies to keep pace with the size and complexity of the loan portfolio. Changes in any of the above factors could have significant impact to the loan loss calculation. We believe that our methodologies continue to be appropriate given our size and level of complexity. This discussion and analysis should be read in conjunction with the Company's Consolidated Financial Statements and the accompanying notes presented elsewhere herein including the section "Loans and Allowance for Loan Losses."

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

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

We estimate tax expense based on the amount we expect to owe various tax authorities. Taxes are discussed in more detail in Note 15 of the consolidated financial statements. Accrued taxes represent the net estimated amount due or to be received from taxing authorities. In estimating accrued taxes, we assess the relative merits and risks of the appropriate tax treatment of transactions taking into account statutory, judicial and regulatory guidance in the context of our tax position.

During 2003, we generated our seventh consecutive year of record earnings totaling $59.0 million, or $2.38 on a per diluted share basis, compared to the $49.5 million, or $2.01 per diluted share, earned during 2002. Strong loan growth, higher net interest margins, robust fee income growth, continued operating efficiencies and solid asset quality contributed to our earnings performance in 2003. The return on average assets in 2003 was 1.64%, compared with 1.63% in 2002. The return on average equity decreased to 18.12% in 2003, compared to 18.29% during 2002. Management expects net income per diluted common share for 2004 to be in the range of approximately 16% to 17% higher than the net income per diluted common share for 2003 based on a stable interest rate environment and efficiency ratio, projected loan growth of 18% to 20% and deposit growth of approximately 15% to 18%.

One of the major highlights of 2003 was the opening of our first overseas office in Beijing, China in January 2003. The Beijing representative office was focused primarily on generating letters of credit business through correspondent banking relationships. Despite a slow start as a result of the SARS outbreak during the early part of the year, the Beijing office made a notable contribution to the growth in letters of credit fees and commissions, which grew 26% during 2003 in comparison to 2002.

Total noninterest income increased 34% to $32.8 million during 2003, compared to the $24.4 million earned during 2003. In addition to the increase in letters of credit fees and commissions, other contributors to noninterest income growth during 2003 include increases in income from secondary marketing activities of 140% predominantly due to the historically low interest rate environment, ancillary loan fees of 28% and branch-related fee income of 17%. Gains on sales of available-for-sale securities also contributed to this growth during 2003. We anticipate noninterest income to remain stable during 2004 based on an expected decline in secondary marketing income resulting from more normalized residential mortgage activities, offset by growth in loan and deposit fees and increased trade finance activities.

Another major highlight during the year was the completion of the Pacific Business Bank acquisition in March 2003 for an aggregate cash price of $25.0 million. The transaction was accounted for under the purchase method. Pacific Business Bank had total assets, loans, and deposits of $155.4 million, $110.1 million, and $134.9 million, respectively, at the date of acquisition. The acquisition resulted in total goodwill of $9.7 million and core deposit premiums amounting to $2.1 million. The successful integration of their operations into our infrastructure shortly after the closing of the transaction allowed us to bring expanded lending and deposit capacity and products to their existing and new customer base.

As a result of our continued expansion during 2003, as highlighted above, total noninterest expense increased 22% to $77.6 million in 2003, compared with $63.7 million for the prior year. In addition to the opening of the Beijing office and the acquisition of Pacific Business Bank, we also opened two new Ranch 99 in-store locations in Milpitas and Van Nuys, California and added a new administration location during the year. Further, we also hired additional relationship and operational personnel to enhance and support the growth in our loans and deposits, with a significant portion of the new hires occurring during the last quarter of the year. All of these factors, among others, contributed to the increase in noninterest expense during 2003. Despite the increase in overall expenses, however, our efficiency ratio, which represents noninterest expense (excluding the amortization of intangibles and investments in affordable housing partnerships) divided by the aggregate of net interest income before provision for loan losses and noninterest income (excluding the amortization of intangibles), decreased to 39% during 2003, compared to 40% during 2002. We believe this to be a reflection of our ability to efficiently utilize our resources and operating platform to support our continuing growth. We anticipate noninterest expenses for 2004 to increase in the range of 17% to 19%, due to the additional staffing and the general growth of the Bank. We also expect our efficiency ratio for 2004 to remain in the 38% to 40% range.

Total consolidated assets at December 31, 2003 increased 22% to $4.06 billion, compared with $3.32 billion at December 31, 2002. A 40% growth in loans was the primary driver of this increase. Excluding the impact of the Pacific Business Bank acquisition, organic loan growth was 35% during 2003. We attribute overall loan growth to the expansion of relationships throughout California, the addition of seasoned and skilled banking professionals, the attractiveness of a number of selected loan programs and increased loan origination volume from our branch network. Our estimated loan growth of 18% to 20% in 2004 reflects the core rate of growth in the Bank's lending markets, the addition of new client relationships, and the utilization of additional lending programs and products.

Total average assets increased 19% to $3.60 billion in 2003, compared to $3.03 billion in 2002, primarily due to growth in average loans and, to a much lesser extent, growth in average investment securities. Total average loans grew to $2.75 billion during 2003, an increase of 19% over the prior year.

Year-over-year average loan growth was driven primarily by increases in residential multifamily and commercial real estate loans. Total average deposits rose 17% during 2003 to $3.06 billion, compared to $2.62 billion in 2002. All deposit categories experienced double-digit gains during 2003, with the most significant contributions coming from noninterest-bearing demand deposits and money market accounts. The growth in core deposits can be attributed to the number and size of commercial relationships, as well as programs and products in the retail branches that better align with the needs of both smaller businesses and retail customers.

Partly because of our continued focus on core deposit growth, combined with the significant growth in the loan portfolio, we were able to increase our net interest margin to 4.26% during 2003, compared to 4.14% during 2002, despite the historically low interest rate environment which proved to be very challenging for many banks during 2003. The average cost of deposits during 2003 fell to 0.98%, compared to 1.66% during 2002. We believe that the cost for all deposit categories has reached a natural floor. A retail time deposit program that we recently initiated could increase time deposits as a percentage of overall deposits and result in a slight increase in our cost of deposits for 2004. We anticipate a net interest margin for 2004, assuming a stable interest rate environment, to be in the range of 4.30% to 4.45%, primarily as a result of earning assets growth.

Total nonperforming assets amounted to $6.6 million, or 0.16% of total assets at December 31, 2003, compared with $12.2 million, or 0.37%, at December 31, 2002. The significant reduction in nonperforming assets resulted primarily from the resolution of certain multifamily and commercial business loans during 2003, as well as the payoff of several restructured loans. The allowance for loan losses totaled $39.2 million at December 31, 2003, or 1.20% of outstanding total loans. Net loan chargeoffs totaled $1.5 million, or 0.06% of average loans, during 2003, compared with $2.5 million, or 0.11% of average loans, during 2002. We anticipate our overall asset quality to remain sound throughout 2004. We project that nonperforming assets will continue to be below 0.50% of total assets and that net chargeoffs will remain below 0.35% of average loans in 2004.

We continue to be well-capitalized under all regulatory guidelines with a Tier 1 risk-based capital ratio of 9.7%, a total risk-based capital ratio of 10.9%, and a Tier 1 leverage ratio of 9.1% at December 31, 2003. We raised $10.0 million in additional regulatory capital in December 2003 through the issuance of trust preferred securities in a pooled trust preferred offering. Trust preferred securities qualify as Tier 1 capital for regulatory purposes. On March 1, 2004, we completed a private placement of common stock with two institutional investors amounting to approximately $30 million. We intend to use the net proceeds from the placement for general corporate purposes, including support for the continued growth of the Bank.

Consolidated net income for 2003 totaled $59.0 million, compared with $49.5 million for 2002 and $38.8 million for 2001, representing an increase of 19% for 2003 and 28% for 2002. On a per diluted share basis, net income was $2.38, $2.01 and $1.61 for 2003, 2002 and 2001, respectively. During 2003, the increase in net earnings is primarily attributable to higher net interest income, noninterest-related revenues and a lower provision for loan losses, partially offset by higher operating expenses and provision for income taxes. Earnings in 2002 improved over 2001 primarily due to higher net interest income and higher noninterest-related revenues, partially offset by higher provision for loan losses, operating expenses and provision for income taxes.

Our return on average total assets increased to 1.64% in 2003, compared to 1.63% in 2002 and 1.47% in 2001, while the return on average stockholders' equity declined to 18.12% in 2003, compared with 18.29% in 2002 and 17.73% in 2001. The lower return on average stockholders' equity in 2003, in comparison to the prior year, was due primarily to a higher level stockholders' equity from increased retained earnings and additional issuances of shares pursuant to the employee stock purchase plan as well as stock option and warrant exercises.

Our 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 in 2003 totaled $143.3 million, a 21% increase over net interest income of $118.3 million in 2002.

Total interest and dividend income during 2003 increased 7% to $178.5 million compared with $167.3 million during 2002 primarily due to an 18% growth in average earning assets, partially offset by lower yields on all categories of earning assets. Growth in average loans and investment securities accounted primarily for the growth in average earning assets in 2003. The net growth in average earning assets was funded primarily by increases in noninterest-bearing demand deposits, all categories of interest-bearing deposits and FHLB advances.

Total interest expense during 2003 decreased 28% to $35.2 million compared with $49.0 million a year ago. The decrease in interest expense is primarily attributable to lower rates paid on all categories of interest-bearing liabilities. A lower volume of time deposits further contributed to the decrease in interest expense during 2003.

Net interest margin, defined as taxable equivalent net interest income divided by average earning assets, increased 12 basis points to 4.26% in 2003, compared with 4.14% in 2002. The overall yield on earning assets decreased 55 basis points to 5.31% in 2003, compared to 5.86% in 2002. The decrease in overall yields during 2003 is primarily due to Fed interest rate cuts, 50 basis points during the fourth quarter of 2002 compounded by a 25 basis point rate cut which took effect at the beginning of the third quarter of 2003. Similarly, our overall cost of funds in 2003 decreased 79 basis points to 1.45% in response to the declining interest rate environment, compared to 2.24% for 2002. The continued downward repricing of our time deposit portfolio accounted for the majority of the reduction in our cost of funds during 2003. We also continue to rely heavily on noninterest-bearing demand deposits as a significant funding source, with average noninterest-bearing demand deposits increasing 46% to $796.8 million during 2003, compared with $546.3 million during 2002. During 2003, noninterest-bearing demand deposits accounted for 26% of average total deposits, compared to only 21% during 2002.

Comparing 2002 to 2001, our net interest margin increased 12 basis points to 4.14% in 2002, compared to 4.02% in 2001. Similar to 2003, the 183 basis point reduction in our overall cost of funds during 2002 exceeded the 151 basis point decrease in the overall yield on earning assets for the same period. The reduction in our cost of funds and yield on earning assets can be directly attributed to the carryover effects of several interest rate cuts since the beginning of 2001. Furthermore, a 56% increase in noninterest-bearing demand deposits during 2002, compared to 2001, also contributed to the increase in the net interest margin during 2002.

The following table presents the net interest spread, net interest margin, average balances, interest income and expense, and the average yields and rates by asset and liability component for the years ended December 31, 2003, 2002 and 2001:

Changes in our 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 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.

The provision for loan losses amounted to $8.8 million for 2003 compared to $10.2 million for 2002 and $6.2 million for 2001. 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.

Noninterest income includes revenues earned from sources other than interest income. These sources include: service charges and fees on deposit accounts, fees and commissions generated from trade finance activities and the issuance of letters of credit, ancillary fees on loans, net gains on sales of loans and investment securities available-for-sale, net gains on trading securities, disposals of fixed assets, income from secondary market activities, and other miscellaneous noninterest-related revenues.

Noninterest income increased 34% to $32.8 million during 2003 from $24.4 million in the prior year due to higher branch service-related fees, higher ancillary loan fees, higher letters of credit fees and commissions, higher net gains on sales of investments available-for-sale, higher income from secondary market activities and other miscellaneous income. Partially offsetting these increases to noninterest income during 2003 was the reduction in net gain on sales of loans and disposal of fixed assets. Net gain on sales of loans totaled $401 thousand in 2003, compared to $1.5 million in 2002. During 2003, we recorded a net loss from the disposal of fixed assets totaling $167 thousand, compared to a net gain of $43 thousand during 2002.

Branch fees, which represent revenues derived from branch operations, amounted to $7.2 million in 2003, a 17% increase from the $6.2 million earned in 2002. The increase in branch fees is primarily due to continued growth in revenues from analysis charges on commercial deposit accounts, increased fee-based income from checking accounts, and higher revenues from wire transfer transactions due to increased volume and the introduction of a new wire remittance product during the fourth quarter of 2002.

Ancillary fees on loans include fees and service charges related to appraisal services, loan documentation, processing and underwriting. Ancillary loan fees increased 28% to $4.2 million in 2003, compared to $3.3 million in 2002, primarily attributable to the increase in residential single family, multifamily, and commercial real estate loan originations. A significant portion of loan originations during 2003, particularly in residential single family mortgages, represent refinances of existing loans. The sustained lower interest rate environment continued to be a catalyst for refinance activity during 2003.

Letters of credit fees and commissions, which represent revenues from trade finance operations as well as fees related to the issuance and maintenance of standby letters of credit, increased 26% to $7.1 million in 2003, from $5.6 million in 2002. The increase in letters of credit fees and commissions is

due to a 25% increase in the volume of trade finance transactions during 2003 as well as higher maintenance fees related to additional issuances of standby letters of credit during 2003.

Net gain on sales of investment securities available-for-sale totaled $2.0 million in 2003, compared to $13 thousand in 2002. During 2003, we sold available-for-sale securities with a net carrying value of $74.9 million compared to only $707 thousand in investment securities sold during 2002. Sales of available-for-sale securities during 2003 provided additional liquidity to sustain the increase in loan production activity during the year, and served to replace the lower yields on investment securities with higher yields on loans.

Income from secondary market activities increased 140% to $5.7 million in 2003, compared to $2.4 million in 2002. Our secondary market activities continue to be driven by the current interest rate environment which favors the origination of fixed-rate mortgages over adjustable-rate mortgages. We anticipate our secondary market activities to decrease in a rising interest rate environment.

Income earned on life insurance policies increased 69% to $3.3 million in 2003, compared to $1.9 million in 2002. The increase is due to new life insurance policies purchased by the Company during 2003 as well as the full-year impact of $28.6 million in new insurance contracts purchased during September 2002 to fund the Supplemental Executive Retirement Plan ("SERP") adopted by the Company in 2002. The SERP is a defined benefit plan pursuant to which the Company will pay supplemental pension benefit obligations to certain executive officers designated by the Board of Directors. At December 31, 2003, the aggregate cash surrender value of the Company's life insurance policies amounted to $64.8 million compared to $57.8 million at December 31, 2002.

Other noninterest income, which includes insurance commissions and insurance-related service fees, branch rental income, and income from operating leases decreased 9% to $3.1 million in 2003, from $3.4 million in 2002. The decrease in other noninterest income is primarily due a reduction in revenues from leased equipment totaling $681 thousand in 2003, compared to $1.0 million recorded in 2002. These revenues represent income from equipment leased to third parties in connection with operating leases entered into by the Company. Operating leases, net of accumulated depreciation, totaled $589 thousand and $1.3 million at December 31, 2003 and 2002, respectively. Revenues generated from insurance commissions and insurance-related services fees remained at $1.5 million during 2002 and 2003.

Comparing 2002 to 2001, noninterest income increased 18% to $24.4 million. Contributing to the increase in noninterest income in 2002 were the following: (1) an increase in branch service-related fee income of $833 thousand, or 16%, stemming from continued growth in revenues from analysis charges on commercial deposit accounts, increased commissions from sales of mutual funds and annuities, and higher revenues from wire transfer transactions due to increased volume; (2) an increase in ancillary loan fees of $691 thousand, or 27%, due primarily to a significant increase in residential mortgage originations during 2002; (3) an increase in letters of credit fees and commissions of $1.3 million, or 30%, attributable to higher maintenance fees related to additional issuances of standby letters of credit during 2002; (4) an increase in net gain on sales of loans amounting to $611 thousand, or 68%; (5) an increase in revenues from secondary market activities of $1.6 million, or 214%, prompted by the low interest rate environment in 2002; (6) an increase in income earned on officer life insurance policies of $648 thousand, or 50%, attributed primarily to additional purchases of life insurance contracts used to fund the SERP adopted by the Company during 2002; and (7) an increase in other noninterest income of $892 thousand, or 35%, attributable primarily to insurance related fees and commissions and income from operating leases. Partially offsetting these increases was the absence of amortization of negative intangibles during 2002 due to the adoption of SFAS No. 142. Moreover, there were no trading securities gains recognized during 2002 compared to $413 thousand in such gains recorded in 2001.

Noninterest expense, which is comprised primarily of compensation and employee benefits, occupancy and other operating expenses increased 22% to $77.6 million during 2003, compared to $63.7 million during 2002.

Compensation and employee benefits increased 26% to $31.8 million in 2003, compared to $25.3 million in 2002, due primarily to increased staffing levels related to the opening of six 99 Ranch Market in-store branches, four of which were opened during 2002 and another two locations opened during 2003. Additionally, compensation expense related to the acquisition of PBB in mid-March 2003 as well as the impact of annual salary adjustments and related cost increases for existing employees further contributed to the rise in compensation expense during 2003. We anticipate a notable increase in compensation and employee benefits during 2004 due to the addition of several relationship and operational personnel hired during the last quarter of 2003 to enhance and support the growth in our loan and deposit portfolio.

Occupancy expenses increased 10% to $10.3 million during 2003, compared with $9.4 million during 2002. The increase in occupancy expenses can be attributed to additional rent expense associated with the new 99 Ranch Market in-store locations as well as the four branches acquired from PBB, compounded by the impact of normal rent adjustments in existing leases.

The amortization of investments in affordable housing partnerships increased 42% to $6.7 million in 2003, from $4.7 million in 2002. The increase in amortization expense reflects the $11.7 million in additional affordable housing investment purchases made since year-end 2002. Total investments in affordable housing partnerships amounted to $28.8 million as of December 31, 2003, compared to $23.8 million as of December 31, 2002.

The amortization of positive intangibles increased 10% to $2.0 million during 2003, compared with $1.8 million in 2002. The increase in amortization expense is primarily due to additional deposit premiums recorded during the first quarter of 2003 in connection with the acquisition of PBB. Premiums on acquired deposits are amortized straightline over a period of 7 to 10 years.

Deposit insurance premiums and regulatory assessments increased 16% to $722 thousand in 2003, compared with $621 thousand in 2002. Although there was a decrease in the Savings Association Insurance Fund ("SAIF") annualized Financing Corporation ("FICO") average assessment rate to 1.61

basis points during 2003, compared with 1.75 basis points during 2002, deposit insurance premiums increased during 2003 as a result of the significant growth in the Bank's assessable deposit base.

Deposit-related expenses increased 18% to $3.9 million during 2003, compared with $3.3 million during 2002. Deposit-related expenses, which represent various business-related expenses paid by the Bank on behalf of its commercial account customers, are eventually recouped by the Bank through account analysis charges to individual customer accounts. The increase in deposit-related expenses is directly correlated to the growth in the volume of commercial deposit accounts during 2003.

Other operating expenses include advertising and public relations, telephone and postage, stationery and supplies, bank and item processing charges, insurance expenses, legal and other professional fees, and charitable contributions. Other operating expenses increased 21% to $20.3 million in 2003, compared with $16.8 million in 2002. The increase in other operating expenses is due primarily to our continued organic expansion through the 99 Ranch Market in-store branches and our new Beijing representative office as well as through our acquisition of PBB.

Comparing 2002 to 2001, noninterest expense slightly increased $1.6 million, or 3%, to $63.7 million. The increase is comprised primarily of the following: (1) an increase in compensation and employee benefits of $577 thousand, or 2%, primarily due to the opening of four 99 Ranch Market in-store branches as well as an increase in performance-based bonus accruals; (2) an increase in occupancy expenses of $215 thousand, or 2%, primarily reflecting adjusted monthly lease payments for a location to coincide with current market terms as well as increased occupancy expense related to the opening of four in-store branch locations; (3) an increase in amortization of real estate investments of $916 thousand, or 24%, reflecting $7.5 million in additional affordable housing investment purchases made since year-end 2001; (4) an increase in deposit insurance premiums and regulatory assessments of $69 thousand, or 13%, due primarily to the significant growth in the Bank's assessable deposit base; (5) an increase in deposit-related expenses of $312 thousand, or 10%, attributable to the growth in commercial deposit accounts; and (6) an increase in other operating expenses of $1.5 million, or 10%, due primarily to our continued organic growth. Partially offsetting these increases in noninterest expense during 2002, as compared to 2001, was a decrease of $2.0 million, or 52%, in amortization expense of positive intangibles due primarily to the absence of amortization expense related to positive goodwill as a consequence of adopting SFAS No. 142 effective January 1, 2002.

The Company's efficiency ratio decreased to 39% in 2003, compared to 40% in 2002. Despite our continued expansion and growth, we have managed to capitalize on operational efficiencies from infrastructure investments made in the past few years compounded by a general company-wide effort to monitor overall operating expenses.

The provision for income taxes increased 52% to $30.7 million in 2003, compared with $20.1 million in 2002. The increase in the provision for income taxes is primarily attributable to a 30% increase in pretax earnings during 2003 and the absence of state tax benefits previously realized through the East West Securities Company, Inc. (the "Fund"), a regulated investment company ("RIC") formed and funded in July 2000. The Fund was dissolved on December 30, 2002 and we have received notification from the Securities and Exchange Commission that the Fund has been officially deregistered. The realization of state tax benefits through this regulated investment company ceased effective December 30, 2002. The provision for income taxes in 2003 also reflects the utilization of affordable housing tax credits totaling $4.9 million, compared to $5.3 million utilized in 2002. The 2003 provision reflects an effective tax rate of 34.2%, compared with 29.2% for 2002. The increase in the effective tax rate during 2003 reflects the decrease in state tax benefits realized during 2003, in comparison to 2002.

Comparing 2002 to 2001, the provision for income taxes increased 47% to $20.1 million in 2002, compared with $13.7 million in 2001. The income tax provisions for 2002 and 2001 reflect state tax benefits achieved through East West Securities Company, Inc. The 2002 provision also reflects the utilization of affordable housing tax credits totaling $5.3 million, compared to $4.3 million utilized in 2001.

On December 31, 2003, the California Franchise Tax Board (the "FTB") announced that it is taking the position that certain tax deductions relating to regulated investment companies will be disallowed pursuant to California Senate Bill 614 and California Assembly Bill 1601, which were signed into law in the fourth quarter of 2003. As previously disclosed, the Fund was created for the principal purpose of raising capital for East West Bank in an efficient and economical manner. The Fund provided state tax benefits beginning in 2000 through the end of 2002, when it was officially dissolved. We did not have any tax benefits relating to the Fund in 2003. It is our opinion, based on the advice of counsel, that the tax benefits realized in previous years, totaling $8.4 million, were appropriate and fully defensible under the existing tax codes at that time. As such, we have not deemed it necessary at the present time to establish any reserves for such benefits. If, however, the FTB position were to be upheld, we would be obligated to repay these tax benefits, along with interest and penalties. We will continue to follow the latest developments with regards to this matter.

Our total assets increased $733.9 million, or 22%, to $4.06 billion, as of December 31, 2003, relative to total assets at year-end 2002. The increase in total assets was due primarily to a $920.9 million growth in net loans receivable partially offset by a $153.7 million decrease in cash and cash equivalents and an $86.5 million decrease in investment securities available-for-sale. The increase in total assets was funded by increases of $386.3 million in deposits, $12.0 million in short-term borrowings and $247.3 million in FHLB advances.

Investment securities held for trading are typically investment grade securities which are generally held by the Bank for a period of seven days or less. There were no outstanding trading account securities at December 31, 2003 and 2002.

Income from investing activities provides a significant portion of our total income. We generally maintain an investment portfolio with an adequate mix of fixed-rate and adjustable-rate securities with relatively short maturities to minimize overall interest rate risk. Our investment securities portfolio consists primarily of U.S. Treasury securities, U.S. Government agency securities, mortgage-backed securities, and corporate debt and equity securities. We currently classify our entire investment portfolio as available-for-sale, and accordingly, these securities are carried at their estimated fair values.

Total investment securities available-for-sale decreased 16% to $445.1 million as of December 31, 2003. In addition to repayments, maturities and sales of investment securities, $140.6 million of U.S. government agency securities were called during 2003. Total repayments/maturities and proceeds from sales of available-for-sale securities amounted to $78.9 million and $78.5 million, respectively, during 2003. Proceeds from repayments, maturities, sales, and redemptions were applied towards additional investment securities purchases totaling $213.7 million as well as funding a portion of loan originations made during 2003. We also added $4.0 million in investment securities available-for-sale to our existing portfolio through our acquisition of PBB in March 2003. We recorded net gains totaling $2.0 million and $13 thousand on sales of available-for-sale securities during 2003 and 2002, respectively. At

December 31, 2003, $356.2 million of investment securities available-for-sale was pledged as collateral for public funds on deposit.

The following table sets forth the carrying values of investment securities available-for-sale at December 31, 2003, 2002 and 2001:

		At December 31,
		2003		2002		2001
		(In thousands)
Mutual funds		$	—	$	—	$	10,714
U.S. Treasury securities			26,228		28,769		78,112
U.S. Government Agency securities			273,105		281,491		8,443
Mortgage-backed securities			67,761		159,410		191,331
Corporate securities			76,103		57,190		34,499
Residual interest in securitized loans			1,945		4,747		—

	Total investment securities available-for-sale	$	445,142	$	531,607	$	323,099

The following table sets forth certain information regarding the carrying values, weighted average yields, and contractual maturity distribution, excluding periodic principal payments, of our investment securities available-for-sale portfolio at December 31, 2003:

		Within One Year		After One but within Five Years		After Five but within Ten Years		After Ten Years		Total
		Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield
		(Dollars in thousands)
U.S. Treasury securities		$	26,228		2.86	%	$	—		—	%	$	—		—	%	$	—		—	%	$	26,228		2.86	%
U.S. Government Agency securities			119,123		3.61	%		133,742		3.08	%		20,240		4.63	%		—		—	%		273,105		3.43	%
Mortgage-backed securities			—		—	%		1		8.75	%		4,112		5.82	%		63,648		2.89	%		67,761		3.07	%
Corporate securities			46,053		3.80	%		—		—	%		—		—	%		30,050		2.84	%		76,103		3.42	%
Residual interest on securitized loans			1,945		—	%		—		—	%		—		—	%		—		—	%		1,945		—	%

	Total		$	193,349		3.52	%	$	133,743		3.08	%	$	24,352		4.83	%	$	93,698		2.87	%	$	445,142		3.33	%

We offer a broad range of products designed to meet the credit needs of our borrowers. Our lending activities consist of residential mortgage loans, multifamily residential real estate loans, commercial real estate loans, construction loans, commercial business loans which include trade finance products, and consumer loans. Net loans receivable increased $920.9 million, or 40% to $3.23 billion at December 31, 2003. The increase in loans during 2003 was funded primarily through the growth in deposits and FHLB advances, as well as through repayments and sales of investment securities available-for-sale.

We experienced strong loan demand throughout 2003. All categories of loans contributed to the growth in the loan portfolio, with commercial real estate, multifamily, commercial business and trade finance loans making the most significant contributions. Excluding the $110.1 million of net loans acquired from PBB in the first quarter of 2003, organic net loan growth during 2003 amounted to $810.8 million, or 35%, compared to year-end 2002.

The growth in loans, excluding loans acquired from PBB, is comprised of increases in single family residential mortgage loans of $37.3 million or 34%, multifamily loans of $170.9 million or 27%, commercial real estate loans of $506.7 million or 52%, commercial business loans of $37.4 million or 42%, trade finance products of $31.2 million or 35% and consumer loans, including home equity lines of credit, of $35.8 million or 37%. Approximately 10%, or $81.1 million, of the organic growth in loans

can be attributed to whole loan purchases from various financial institutions. Whole loan purchases during 2003 were comprised of $2.0 million from single family, $66.1 million from multifamily loans and $12.9 million from commercial real estate loans. Partially offsetting the growth in the aforementioned loan categories were decreases in construction loans of $3.2 million or 2% and automobile loans of $2.2 million or 14%.

The following table sets forth the composition of the loan portfolio as of the dates indicated:

Residential Mortgage Loans. We offer first mortgage loans secured by one-to-four unit residential properties located in our primary lending area. At December 31, 2003, $146.7 million or 5% of the loan portfolio was secured by one-to-four family residential real estate mortgages, compared to $108.5 million or 5% at December 31, 2002. Residential single family loan origination activity continued to robustly benefit from low interest rates during 2003, resulting in a high volume of refinances during the year. Moreover, the low interest rate environment that prevailed throughout 2003 also continued to favor the origination of fixed-rate loans over adjustable-rate loans again providing an added boost to our secondary marketing activities. Substantially all new fixed-rate single family residential loans originated in 2003 were sold into the secondary market. We sold approximately $280.4 million in conforming and non-conforming residential single family loans through our secondary marketing efforts during 2003. In a rising interest rate environment, we anticipate a contraction in our secondary marketing activities.

Multifamily and Commercial Real Estate Loans. We continue to place emphasis in the origination of multifamily and commercial real estate loans. Although real estate lending activities are collateralized by real property, these transactions are subject to similar credit evaluation, underwriting and monitoring standards as those applied to commercial business loans. Multifamily and commercial real estate loans accounted for $809.3 million or 25% and $1.56 billion or 48%, respectively, of our loan portfolio at December 31, 2003. At year-end 2002, multifamily and commercial real estate loans amounted to $628.3 million or 27% and $983.5 million or 42%, respectively.

Construction Loans. We offer loans to finance the construction of income-producing or owner-occupied buildings. At December 31, 2003, construction loans accounted for $179.5 million or 6% of our loan portfolio. This compares with $176.2 million or 8% of the loan portfolio at December 31, 2002. Total unfunded commitments related to construction loans increased 56% to $189.3 million at December 31, 2003, compared to $121.4 million at December 31, 2002.

Commercial Business Loans. We finance small and middle-market businesses in a wide spectrum of industries throughout California. We offer commercial loans for working capital, accounts receivable and inventory lines. At December 31, 2003, commercial business loans accounted for $311.1 million or 10% of our loan portfolio compared to $246.8 million or 11% at December 31, 2002. Total unfunded commitments related to commercial business loans increased 28% to $171.4 million at December 31, 2003, compared to $133.7 million at year-end 2002.

We also offer a variety of international finance and trade services and products, including letters of credit, revolving lines of credit, import loans, bankers' acceptances, working capital lines, domestic purchase financing, and pre-export financing. A substantial portion of this business involves California-based customers engaged in import activities. In addition, we also offer Ex-Im financing to various exporters. These loans are guaranteed by the Export-Import Bank of the United States. At December 31, 2003, loans to finance international trade totaled $120.8 million or 4% of our loan portfolio. Of this amount, a significant portion represents loans made to borrowers on the import side of international trade. At December 31, 2003, such loans amounted to $107.4 million or 3% of our loan portfolio, compared with $86.8 million or 4% at December 31, 2002. These financings are generally made through letters of credit ranging from $100 thousand to $1 million. All trade finance transactions are U.S. dollar denominated. At December 31, 2003, total unfunded commitments related to trade finance loans increased 24% to $100.4 million, compared to $81.1 million at December 31, 2002.

Affordable Housing. We are engaged in a variety of lending and credit enhancement programs to finance the development of affordable housing projects, which generally are eligible for federal low income housing tax credits. As of December 31, 2003, we had outstanding $326.9 million of letters of credit, which were issued to enhance the ratings of revenue bonds used to finance affordable housing projects. This compares to $284.6 million as of year-end 2002. Credit facilities for individual projects generally range in size from $1 million to $10 million. Proposed legislative changes in 2004 could potentially affect the feasibility and attractiveness of affordable housing projects which may curtail or reduce future issuances of standby letters of credit supporting these activities.

Contractual Maturity of Loan Portfolio. The following table presents the maturity schedule of our loan portfolio at December 31, 2003. All loans are shown maturing based upon contractual maturities, and include scheduled repayments but not potential prepayments. Demand loans, loans having no stated schedule of repayments and no stated maturity, and overdrafts are reported as due within one

year. Loan balances have not been reduced for undisbursed loan proceeds, unearned discounts, and the allowance for loan losses. Nonaccrual loans of $5.3 million are included in the within one year category.

As of December 31, 2003, outstanding loans scheduled to be repriced within one year, after one but within five years, and in more than five years, excluding nonaccrual loans, are as follows:

Loans are continually monitored by management and the Board of Directors. Our policy is to place a loan on nonaccrual status if either (i) principal or interest payments are past due in excess of 90 days; or (ii) the full collection of principal or interest becomes uncertain, regardless of the length of past due status. When a loan reaches nonaccrual status, any interest accrued on the loan is reversed and charged against current income. In general, subsequent payments received are applied to the outstanding principal balance of the loan. Nonaccrual loans that demonstrate a satisfactory payment trend for several months are returned to full accrual status subject to management's assessment of the full collectibility of the account.

Nonperforming assets are comprised of nonaccrual loans, loans past due 90 days or more but not on nonaccrual, restructured loans and other real estate owned, net. Nonperforming assets as a percentage of total assets were 0.16% and 0.37% at December 31, 2003 and 2002, respectively. Nonaccrual loans totaled $5.3 million and $8.9 million at December 31, 2003 and 2002, respectively. Loans totaling $5.2 million were placed on nonaccrual status during 2003. These additions to nonaccrual loans were offset by $1.7 million in gross chargeoffs, $6.7 million in payoffs and principal paydowns and $328 thousand in loans that were brought current. Additions to nonaccrual loans during 2003 were comprised of $1.2 million in commercial real estate loans, $1.2 million in commercial business loans, and $2.8 million in trade finance loans.

Loan past due 90 days or more but not on nonaccrual totaled $636 thousand at December 31, 2003. These are comprised of two trade finance loans that are fully insured by the Ex-Im Bank. There were no loans past due 90 days or more but not on nonaccrual at December 31, 2002.

Restructured loans and loans that have had their original terms modified totaled $638 thousand at December 31, 2003, compared with $3.3 million at year-end 2002. The decrease in restructured loans is primarily due to principal paydowns and the payoff of two commercial real estate loans totaling

$2.0 million and one multifamily loan amounting to $610 thousand. There were no new restructured loans during 2003.

Other real estate owned ("OREO") includes properties acquired through foreclosure or through full or partial satisfaction of loans. We had no OREO properties at December 31, 2003 and 2002.

The following table sets forth information regarding nonaccrual loans, loans past due 90 days or more but not on nonaccrual, restructured loans and other real estate owned as of the dates indicated:

We evaluate loan impairment according to the provisions of SFAS No. 114, Accounting by Creditors for Impairment of a Loan, as amended. Under SFAS No. 114, loans are considered impaired when it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement, including scheduled interest payments. Impaired loans are measured based on the present value of expected future cash flows discounted at the loan's effective interest rate or, as an expedient, at the loan's observable market price or the fair value of the collateral if the loan is collateral dependent, less costs to sell. If the measure of the impaired loan is less than the recorded investment in the loan, the deficiency will be charged off against the allowance for loan losses.

At December 31, 2003, we classified $5.9 million of our loans as impaired, compared with $12.2 million at December 31, 2002. There were no specific reserves on impaired loans at December 31, 2003 and 2002. Our average recorded investment in impaired loans during 2003 and 2002 were $6.1 million and $13.1 million, respectively. During 2003 and 2002, gross interest income that would have been recorded on impaired loans, had they performed in accordance with their original terms, totaled $317 thousand and $995 thousand, respectively. Of this amount, actual interest recognized on impaired loans, on a cash basis, was $257 thousand and $783 thousand, respectively.

We are committed to maintaining the allowance for loan losses at a level that is considered to be commensurate with estimated and known risks in the portfolio. Although the adequacy of the allowance is reviewed quarterly, management performs an ongoing assessment of the risks inherent in the portfolio. While we believe that the allowance for loan losses is adequate at December 31, 2003, future additions to the allowance will be subject to a 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 year. At December 31, 2003, the allowance for loan losses amounted to $39.2 million, or 1.20% of total loans, compared with $35.3 million, or 1.50% of total loans, at December 31, 2002. The $4.0 million increase

in the allowance for loan losses at December 31, 2003, from year-end 2002, reflects $2.8 million in loss reserves acquired from PBB and $8.8 million in additional loss provisions reduced by $1.5 million in net chargeoffs during the year. Additionally, since September 30, 2003, we have reclassified approximately $6.1 million from the allowance for loan losses to other liabilities. This amount represents previously allocated loss allowances for unfunded loan commitments and off-balance sheet credit exposures related primarily to our trade finance and affordable housing activities.

The provision for loan losses of $8.8 million recorded in 2003 represents a 28% decrease from the $10.2 million in loss provisions recorded during 2002. Net chargeoffs amounting to $1.5 million represent 0.06% of average loans outstanding during 2003. This compares to net chargeoffs of $2.5 million, or 0.11% of average loans outstanding, during 2002. We continue to record loss provisions to compensate for both the continued growth of our loan portfolio, which grew 40% during 2003, and our continued lending focus on increasing our portfolio of commercial real estate, commercial business and construction loans.

The following table summarizes activity in the allowance for loan losses for the periods indicated:

Our total allowance for loan losses is comprised of two components: allocated and unallocated. We utilize 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.

The classification migration model looks at pools of loans having similar characteristics and analyzes their loss rates over a historical period. For each quarter during the period analyzed, each loan pool, except for consumer loans which are analyzed as a homogeneous pool, is further segregated into various risk-rating categories based on current internal asset classifications. The internal asset classification categories we utilize are "pass," "watch I," "watch II," "special mention," "substandard," "doubtful" and "loss." The risk-rating categories are then evaluated through the present to determine the amount and timing of losses that are probable of occurring. In performing our quarterly migration analysis, we analyze net losses, or gross loan chargeoffs reduced by loan recoveries, for each quarter during the preceding five years to create a series of loss ratios. The numerators of these ratios are the net losses during the quarter in which the applicable losses and recoveries occurred and the denominators are the outstanding balances of each risk-rating category at each quarter-end. These ratios determine the historical loss rates to be applied to each risk-rating category in the current period. The loss factors represent the probability of a loan in any given risk-rating category migrating to loss.

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 our recent loss experience. The migration model allows us to make adjustments to the calculated results, some of which affect the historical loss factor calculated by the model and others that affect the model's estimated reserve amount. These qualitative adjustments may be used to simulate positive or negative trends, economic conditions or internal control strengths and weaknesses. Furthermore, we also utilize minimum loss factors as a self-correcting mechanism to better reflect the loss potential associated with the various portfolios and to preclude the application of loss factors derived from migration analysis, which may be correct from a historical perspective, but in reality do not appropriately measure the risk of a portfolio given current loan origination activity, volume and size of loan, industry concentrations, and/or the economy. And finally, another mechanism that we may utilize involves the establishment of specific allowances for certain loans for which management believes the probability of loss to be 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 loan portfolio by incorporating individual asset evaluations prepared by both our 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 probable 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. Depending on loan size and type, 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 delinquencies, loan covenant or reporting violations, and property tax status. The estimated exposure and subsequent chargeoffs 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.

The following table reflects our 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:

		At December 31,
		2003		2002		2001		2000		1999
		Amount		%		Amount		%		Amount		%		Amount		%		Amount		%
		(Dollars in thousands)
1-4 family residential real estate		$	259		4.5	%	$	386		4.6	%	$	184		14.7	%	$	142		18.5	%	$	345		18.4	%
Multifamily real estate			2,487		24.7	%		3,142		26.8	%		1,914		17.5	%		1,768		17.8	%		2,735		20.6	%
Commercial and industrial real estate			12,958		47.6	%		7,748		42.0	%		8,221		40.2	%		4,472		35.3	%		3,110		34.4	%
Construction			3,781		5.5	%		4,410		7.5	%		3,024		7.5	%		2,370		6.5	%		2,597		8.1	%
Business, commercial			13,761		13.2	%		14,494		14.3	%		10,248		16.8	%		10,461		19.3	%		9,244		16.5	%
Automobile			486		0.4	%		40		0.7	%		39		0.6	%		23		0.4	%		30		0.4	%
Consumer and other			321		4.1	%		115		4.1	%		8		2.7	%		21		2.2	%		9		1.6	%
Other risks			5,193		—			4,957		—			3,919		—			4,591		—			2,774		—

	Total		$	39,246		100.0	%	$	35,292		100.0	%	$	27,557		100.0	%	$	23,848		100.0	%	$	20,844		100.0	%

Despite a 35% increase in the volume of loans in this category from year-end 2002 level, allocated reserves on single family loans decreased $127 thousand, or 33%, to $259 thousand as of December 31, 2003. This is due primarily to the reclassification of $79 thousand in previously allocated reserves related to single family loans sold with recourse to other liabilities during 2003. Further contributing to the decrease in allocated reserves on single family loans is a reduction in both classified (i.e. rated "substandard" and "doubtful") and criticized (i.e. rated "special mention") loans relative to December 31, 2002. Single family loans rated "substandard" totaled $78 thousand at December 31, 2003, compared to $223 thousand at December 31, 2002. At December 31, 2003, we had no single family loans rated "special mention," compared with $309 thousand at December 31, 2002.

Allocated reserves on multifamily loans decreased $655 thousand, or 21%, to $2.5 million as of December 31, 2003 due primarily to the reclassification of $817 thousand in loss reserves related to standby letters of credit issued for affordable housing projects to other liabilities during 2003. Furthermore, a decrease in "special mention" and "substandard" multifamily loans also contributed to the decrease in allocated reserves for this loan category from year-end 2002. At December 31, 2003, we had $1.0 million and $990 thousand in multifamily loans rated "special mention" and "substandard," compared with $1.2 million and $5.3 million, respectively, at December 31, 2002. Partially offsetting these decreases are additional reserves required on multifamily loans to compensate for the following: (1) a 29% increase in the volume of loans in this loan category from year-end 2002 levels; and (2) commencing in the first quarter of 2003, the establishment of reserves on "pass" loans placed on the watchlist. As of December 31, 2003, we had $11.5 million in multifamily loans on the watchlist for which additional reserves were established.

Allocated reserves on commercial real estate loans increased $5.2 million, or 67%, to $13.0 million at December 31, 2003 primarily due to four factors. First, there was a 58% increase in the volume of loans in this loan category relative to year-end 2002 due in part to the acquisition of PBB. Second, the concentration risk allocation ratio for hotels and motels was increased to 2.5% as of March 31, 2003, from 1.5% as of December 31, 2002 in response to the continued weakened state of the travel and tourism industry. A sustained disinterest in business and consumer travel has resulted in airline

bankruptcies and financial difficulties for travel agencies and tour operators in general. This condition continues to weigh heavily on an already beleaguered travel and tourism industry that has not fully recovered from the crippling effects of the September 11^th tragedy. Although the hotel industry concentration risk allocation was initially established in response to the anticipated fallout from the events of September 11^th, management has deemed it prudent to maintain this hotel risk allocation to compensate for these prevailing conditions. Third, additional reserves were established for the $15.7 million in commercial real estate loans that were on the watchlist as of December 31, 2003. And finally, further warranting additional loss reserves is an increase of $4.7 million in commercial real estate loans rated "special mention" at December 31, 2003. There were no "special mention" commercial real estate loans at December 31, 2002. Partially offsetting these increases is a reduction in commercial real estate loans rated "substandard" to $4.3 million at December 31, 2003, compared to $4.9 million at year-end 2002.

Allocated reserves on construction loans decreased $629 thousand, or 14%, to $3.8 million at December 31, 2003 primarily due to the reclassification of $1.2 million in loss reserves related to unfunded construction loan commitments to other liabilities during 2003. Further contributing to the decrease in allocated reserves on construction loans is a reduction in construction loans rated "special mention." There were no construction loans rated "special mention" at December 31, 2003, compared to $5.0 million At December 31, 2002.

Allocated loss reserves on commercial business loans decreased $560 thousand, or 4%, to $13.8 million at December 31, 2003 due primarily to the reclassification of $2.9 million in loss reserves related to commercial letters of credit and unfunded commercial business loan commitments to other liabilities during 2003. Further contributing to the decrease is a reduction in commercial business loans rated "special mention" to $372 thousand at December 31, 2003, from $7.9 million at year-end 2002. Partially offsetting these decreases is a 28% increase in the volume of loans in this loan category during 2003.

Despite a 14% decrease in the volume of automobile loans at December 31, 2003 from year-end 2002 levels, allocated reserves on automobile loans increased $446 thousand, or 1,115%, to $486 thousand as of December 31, 2003 as a result of minimum loss rates established for this loan category. Due to a rise in chargeoff losses experienced in this loan category during 2003, a minimum loss rate of 3% for automobile loans rated "pass" was established commencing in the third quarter of 2003. Prior to the quarter ended September 30, 2003, allocated reserves on automobile loans were based solely on historical loss rates and, while they may be correct from a historical perspective, they do not appropriately reflect the current risk of the portfolio. Also contributing to the increase in allocated reserves on automobile loans are increases of $19 thousand and $60 thousand in automobile loans rated "special mention" and "substandard," respectively, as of December 31, 2003. There were no criticized or classified automobile loans at December 31, 2002.

Allocated reserves on consumer loans increased $33 thousand, or 11%, to $321 thousand at December 31, 2003 from year-end 2002 due primarily to a 38% increase in the volume of loans in this category during 2003. Partially offsetting this increase in allocated reserves on consumer loans is the reclassification of $93 thousand in loss reserves related to unfunded consumer loan commitments to other liabilities during 2003. Consumer loans are comprised predominantly of home equity loans and home equity lines of credit, and to a lesser extent, credit card and overdraft protection lines.

The allowance for loan losses of $39.2 million at December 31, 2003 exceeded the allocated allowance by $5.2 million, or 13% of the total allowance. This compares to an unallocated allowance of $5.0 million, or 14%, as of December 31, 2002. The $5.2 million unallocated allowance at December 31, 2003 is comprised of two elements. The first element, which accounts for approximately $1.7 million of the unallocated allowance, represents a 5% economic risk factor that takes into consideration the sustained recessionary state of the national economy. This condition has been

exacerbated by corporate scandals linked to various large companies, and more recently, by the continuing geopolitical instability in the Middle East. While recent economic reports show some positive indications, the economic forecast in the foreseeable future is, to a large extent, still tenuous at best. In consideration of this uncertain economic outlook, our management has deemed it prudent to continue to set aside an additional 5% of the required allowance amount to compensate for this current economic risk. The second element, which accounts for approximately $3.5 million, or approximately 10% of the allocated allowance amount of $34.1 million at December 31, 2003, was established to compensate for the modeling risk associated with the classification migration and individual loan review analysis methodologies. These risk factors are consistent with allocations set aside in prior years.

We offer a wide variety of retail deposit account products to both consumer and commercial deposit customers. Time deposits, consisting primarily of retail fixed-rate certificates of deposit, comprised 46% and 52% of the deposit portfolio at December 31, 2003 and 2002, respectively. Non-time deposits, which include noninterest bearing demand accounts, interest-bearing checking accounts, savings deposits and money market accounts, accounted for the remaining 54% and 48% of the deposit portfolio at December 31, 2003 and 2002, respectively.

Deposits increased $386.3 million, or 13%, to $3.31 billion at December 31, 2003. The increase in deposits reflects $134.9 million in deposits acquired from PBB in mid-March 2003. Excluding this transaction, internal deposit growth amounted to $251.4 million, or 9%, over December 31, 2002. This organic deposit growth was comprised primarily of increases in non-interest bearing demand accounts of $143.6 million, or 19%, interest-bearing checking accounts of $34.2 million, or 15%, money market accounts of $92.8 million, or 56%, and savings deposits of $36.6 million, or 14%. The increase can be attributed to our expansion in the number and size of commercial relationships, as well as various promotional programs within the branch network targeted towards smaller businesses and retail customers.

Partially offsetting the increases in these deposit categories is a decrease of $55.8 million, or 4% in time deposits. A sizeable portion of the reduction in time deposits represents brokered deposits totaling $23.1 million. The decrease in brokered deposits reflects the replacement of such deposits with the increasing volume of commercial and retail deposit accounts as well as low cost FHLB advances. Included in time deposits at December 31, 2003 are $69.6 million of brokered deposits, compared with $92.7 million as of December 31, 2002.

Public deposits remained stable at $159.5 million as of December 31, 2003 and 2002. The balance of public funds is comprised almost entirely of deposits from the State of California. Notwithstanding our portfolio of public deposits, our principal market strategy continues to be based on our role as a community bank that provides quality products and personal customer service.

Time deposits greater than $100 thousand totaled $875.1 million, accounting for 26% of the deposit portfolio at December 31, 2003. These accounts, consisting primarily of deposits by consumers and public funds, had a weighted average interest rate of 1.68% at December 31, 2003. The following

table provides the remaining maturities at December 31, 2003 of time deposits greater than $100 thousand (in thousands):

3 months or less		$	302,643
Over 3 months through 6 months			251,070
Over 6 months through 12 months			225,529
Over 12 months			95,878

	Total	$	875,120

We utilize both FHLB advances and short-term borrowings, which consist of federal funds purchased and securities sold under agreements to repurchase, to manage our liquidity position. At December 31, 2003, total short-term borrowings consisted entirely of federal funds purchased amounting to $12.0 million. There were no outstanding short-term borrowings at December 31, 2002.

FHLB advances increased 727% to $281.3 million as of December 31, 2003, an increase of $247.3 million from December 31, 2002. The increase is primarily due to $140.0 million in FHLB advances obtained during 2003 to capitalize on the favorable rates resulting from the prevailing low interest rate environment. FHLB advances had a weighted average interest rate of 1.44% and 5.45% at December 31, 2003 and 2002, respectively. Only $20.0 million, or 7% of outstanding FHLB advances at December 31, 2003, had remaining maturities greater than one year.

We have, from time to time, securitized certain real estate loans, a portion of which are sold to investors. Securitization provides us with a source of liquidity and also reduces our credit exposure to borrowers. Securitization involves the sale of loans to a qualifying special-purpose entity ("QSPE"), typically a trust. Generally, in a securitization, we transfer financial assets to a QSPE that is legally isolated from the Company. The QSPE, in turn, issues interest-bearing securities, commonly called asset-backed securities, that are secured by future collections on the sold loans. The QSPE sells securities to investors, which entitle them to receive specified cash flows during the term of the securities. The QSPE uses proceeds from the sale of these securities to pay the purchase price for the sold loans. The proceeds from the issuance of the securities are then distributed to the Company as consideration for the loans transferred.

When we sell or securitize loans, we generally retain the right to service the loans and we may retain residual and other interests, which are considered retained interests in the securitized assets. Retained interests may provide credit enhancement to the investors and represent the Company's maximum risk exposure associated with these transactions. Investors in the securities issued by the QSPE have no further recourse against the Company if cash flows generated by the securitized assets are inadequate to service the obligations of the QSPE. Additional information pertaining to our securitization transactions and related retained interests is included in Note 4—"Residual Interest in Securitization" to the Consolidated Financial Statements.

The following table presents, as of December 31, 2003, the Company's significant fixed and determinable contractual obligations, within the categories described below, by payment date. These

contractual obligations, except for the operating lease obligations, are included in the Consolidated Balance Sheets. The payment amounts represent those amounts contractually due to the recipient.

The Company may also have liabilities under certain contractual agreements contingent upon the occurrence of certain events. A discussion of significant contractual arrangements under which the Company may be held contingently liable, including guarantee arrangements, is included in Note 16—"Commitments and Contingencies" to the Consolidated Financial Statements. In addition, the Company has commitments and obligations under postretirement benefit plans as described in Note 18—"Employee Benefit Plans" to the Consolidated Financial Statements.

Our primary source of capital is the retention of net after tax earnings. At December 31, 2003, stockholders' equity totaled $362.0 million, a 20% increase from $302.1 million as of December 31, 2002. The increase is due primarily to: (1) net income of $59.0 million recorded during 2003; (2) stock compensation costs amounting to $442 thousand related to our Restricted Stock Award Program; (3) tax benefits of $4.1 million resulting from the exercise of nonqualified stock options; (4) net issuance of common stock totaling $6.5 million, representing 411,001 shares, from the exercise of stock options and stock warrants; and (5) net issuance of common stock totaling $1.4 million, or 53,135 shares, in connection with the Employee Stock Purchase Plan and shares issued in lieu of Board of Director retainer fees. These transactions were offset by (1) payments of quarterly cash dividends totaling $9.6 million; (2) repurchases of $5 thousand, or 645 shares of common stock, resulting primarily from forfeitures of restricted stock awards; and (3) a decrease of $1.9 million in unrealized gains on available-for-sale securities.

We are committed to maintaining capital at a level sufficient to assure our shareholders, our customers and our regulators that our company and our bank subsidiary are financially sound. We 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 December 31, 2003, the Bank's Tier 1 and total capital ratios were 9.1% and 10.4%, respectively, compared to 10.2% and 11.5%, respectively, at December 31, 2002.

The following table compares East West Bancorp, Inc.'s and East West Bank's actual capital ratios at December 31, 2003, to those required by regulatory agencies for capital adequacy and well-capitalized classification purposes:

	East West Bancorp		East West Bank		Minimum Regulatory Requirements		Well Capitalized Requirements
Total Capital (to Risk-Weighted Assets)	10.9	%	10.4	%	8.0	%	10.0	%
Tier 1 Capital (to Risk-Weighted Assets)	9.7	%	9.1	%	4.0	%	6.0	%
Tier 1 Capital (to Average Assets)	9.1	%	8.6	%	4.0	%	5.0	%

On August 30, 2001, we entered into a ten-year agreement with 99 Ranch Market to provide in-store retail banking services to their stores throughout California. 99 Ranch Market is the largest Asian-focused chain of supermarkets on the West Coast, with twenty full service stores in California, one in Washington, and affiliated licensee stores in Hawaii, Nevada, Georgia and Arizona. In conjunction with this agreement, we issued 300,000 warrants to senior executives of 99 Ranch Market to purchase common stock of the Company at a price of $26.67 per share. These warrants will vest over six years and are intended to provide direct benefit to 99 Ranch Market executives that make a significant contribution to the success of the in-store banking operations. The estimated total fair value of the issued warrants was $2.7 million. We have not experienced nor do we anticipate any material increases in overhead expenses or capital investments as a result of this agreement with 99 Ranch Market.

In order to further align the interests of both parties, senior executives of 99 Ranch Market have also made a significant investment in the Company, including the purchase of 400,000 newly issued shares of East West Bancorp, Inc. common stock totaling $7.9 million. The shares were sold for cash at a price of $19.71 per share. No underwriting discounts or commissions were paid in connection with this transaction. The shares were restricted. Upon the two-year anniversary of the closing on August 30, 2001, 40% of the shares became available for sale. After each of the next three anniversaries, 20% of the total shares will become available for sale. All shares can be freely traded on the fifth year anniversary. The total estimated fair value of the purchased shares was $6.9 million.

On March 1, 2004, we completed a private placement of common stock with two institutional investors amounting to approximately $30 million. The transaction involved the sale of 608,566 shares of common stock at a purchase price of approximately $49.30 per share. In addition, we granted the investors a right to purchase up to an additional 202,856 shares of common stock at approximately $49.30 per share, or up to an additional $10.0 million. We intend to use the net proceeds from the placement for general corporate purposes, including support for the continued growth of the Bank.

Neither the shares of common stock sold to the investors, the investors' options, nor the additional shares covered by the investors' options, have been registered under the Securities Act of 1933. Accordingly, these securities may not be offered or sold in the United States, except pursuant to an effective registration statement or an applicable exemption from the registration requirements of the Securities Act. We expect to file a registration statement in March 2004 which will cover the resale of these securities by the investors.

Liquidity management involves our 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. Our 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.

Our 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 years ended December 31, 2003 and 2002, we experienced net cash inflows of $73.8 million and $32.0 million, respectively, from operating activities. Net cash inflows from operating activities during 2003 and 2002 were primarily due to net income earned during the year and net proceeds from the sale of loans held for sale. Partially offsetting operating cash inflows for 2002 is the purchase of additional officer life insurance contracts totaling $30.8 million. Interest received on these policies is used to fund the liability associated with the Company's SERP Plan related to certain of our executive officers.

Net cash outflows from investing activities totaled $742.7 million and $397.6 million during 2003 and 2002, respectively. Net cash outflows from investing activities for both periods can be attributed primarily to the growth in our loan portfolio and purchases of available-for-sale securities. These activities were partially offset by repayments, maturities, redemptions and net sales proceeds from investment securities available-for-sale. Proceeds from the sale of loans receivable also partially offset net cash outflows from investing activities during 2002.

We experienced net cash inflows from financing activities of $515.2 million during 2003 primarily due to deposit growth, a net increase in short-term borrowings and FLLB advances, and proceeds from the issuance of junior subordinated debt partially offset by dividends paid on the Company's common stock. During 2002, the growth in deposits partially offset by net repayments on FHLB advances and dividends paid on the Company's common stock, largely accounted for net cash inflows from financing activities of $436.6 million.

As a means of augmenting our liquidity, we have established federal funds lines with four correspondent banks and several master repurchase agreements with major brokerage companies. At December 31, 2003, our available borrowing capacity includes approximately $10.9 million in repurchase arrangements, $95.0 million in federal funds line facilities, and $810.6 million in unused FHLB advances. We believe our liquidity sources to be stable and adequate to meet our operating needs and other cash commitments. At December 31, 2003, we were not aware of any information that was reasonably likely to have a material effect on our liquidity position.

The liquidity of 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 year ended December 31, 2003 and 2002, total dividends paid by the Bank to East West Bancorp, Inc. amounted to $9.8 million and $6.8 million, respectively. As of December 31, 2003, approximately $130.8 million of undivided profits of the Bank were available for dividends to the Company.

Our success is largely dependent upon our ability to manage interest rate risk, which is the impact of adverse fluctuations in interest rates on our net interest income and net portfolio value. Although in the normal course of business we manage other risks, such as credit and liquidity risk, we consider interest rate risk to be our most significant market risk and could potentially have the largest material effect on our financial condition and results of operations.

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

Our 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. To minimize the adverse impact of changes in market interest rates, we simulate the effect of instantaneous interest rate changes on net interest income and net portfolio value on a monthly basis. The table below shows the estimated impact of changes in interest rates on net interest income and market value of equity as of December 31, 2003 and 2002, assuming a parallel shift of 100 to 200 basis points in both directions:

	Net Interest Income Volatility(1)				Net Portfolio Value Volatility(2)
Change in Interest Rates (Basis Points)	December 31, 2003		December 31, 2002		December 31, 2003		December 31, 2002
+200	12.0	%	12.8	%	(6.6	)%	0.7	%
+100	6.9	%	7.3	%	(2.4	)%	1.4	%
-100	(6.0	)%	(6.2	)%	1.1	%	(0.6	)%
-200	(13.9	)%	(12.7	)%	0.6	%	(2.0	)%

All interest-earning assets and interest-bearing liabilities are included in the interest rate sensitivity analysis at December 31, 2003 and 2002. At December 31, 2003 and 2002, our estimated changes in net interest income and net portfolio value were within the ranges established by the Board of Directors.

Our primary analytical tool 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. As an enhancement to the primary simulation model, prepayment assumptions and market rates of interest provided by independent broker/dealer quotations, an independent pricing model and other available public sources are incorporated into the model. Adjustments are made to reflect the shift in the Treasury and other appropriate yield curves. The model also factors in projections of anticipated

activity levels by product line and takes into account our 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 our financial instruments as of December 31, 2003. We do 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.

Mark One
ý		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2003
or
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission file number 000-24939

Delaware (State or other jurisdiction of incorporation or organization)		95-4703316 (I.R.S. Employer Identification No.)
415 Huntington Drive, San Marino, California (Address of principal executive offices)		91108 (Zip Code)

PART I			3
	Item 1.	Business	3
	Item 2.	Properties	19
	Item 3.	Legal Proceedings	20
	Item 4.	Submission of Matters to a Vote of Security Holders	20
PART II			21
	Item 5.	Market for Registrant's Common Equity and Related Stockholder Matters	21
	Item 6.	Selected Financial Data	22
	Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	23
	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	51
	Item 8.	Financial Statements and Supplementary Data	51
	Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	51
	Item 9A.	Controls and Procedures	51
PART III			52
	Item 10.	Directors and Executive Officers of the Registrant	52
	Item 11.	Executive Compensation	52
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	52
	Item 13.	Certain Relationships and Related Transactions	52
	Item 14.	Principal Accountant Fees and Services	53
PART IV			54
	Item 15.	Exhibits, Financial Statement Schedules, and Reports on Form 8-K	54
SIGNATURES			97

	2003			2002			2001			2000			1999
	(In Thousands, Except Per Share Data)
Summary of Operations:
Interest and dividend income	$	178,543		$	167,288		$	183,695		$	186,594		$	148,732
Interest expense		35,232			48,979			83,348			96,593			76,142

Net interest income		143,311			118,309			100,347			90,001			72,590
Provision for loan losses		8,800			10,200			6,217			4,400			5,439

Net interest income after provision for loan losses		134,511			108,109			94,130			85,601			67,151
Noninterest income		32,779			24,387			20,594			14,454			13,988
Noninterest expense		77,630			63,680			62,124			49,960			39,509

Income before provision for income taxes		89,660			68,816			52,600			50,095			41,630
Provision for income taxes		30,668			20,115			13,730			14,628			13,603

Income before cumulative effect of change in accounting principle		58,992			48,701			38,870			35,467			28,027

Cumulative effect of change in accounting principle, net of tax		—			788			(87	)		—			—

Net income	$	58,992		$	49,489		$	38,783		$	35,467		$	28,027

Basic earnings per share	$	2.45		$	2.10		$	1.68		$	1.58		$	1.23
Diluted earnings per share	$	2.38		$	2.01		$	1.61		$	1.53		$	1.22
Dividends per share	$	0.40		$	0.27		$	0.12		$	0.12		$	0.12
Average number of shares outstanding, basic		24,056			23,596			23,033			22,448			22,757
Average number of shares outstanding, diluted		24,743			24,630			24,054			23,168			22,895
At Year End:
Total assets	$	4,055,433		$	3,321,489		$	2,825,303		$	2,485,971		$	2,152,630
Loans receivable, net		3,234,133			2,313,199			2,132,838			1,789,988			1,486,641
Investment securities		445,736			531,607			323,099			488,290			496,426
Deposits		3,312,667			2,926,352			2,417,974			1,948,562			1,500,529
Federal Home Loan Bank advances		281,300			34,000			104,000			268,000			482,000
Stockholders' equity		361,983			302,117			244,415			186,149			150,080
Shares outstanding		24,429			23,882			23,376			22,661			22,423
Book value per share	$	14.82		$	12.65		$	10.46		$	8.21		$	6.69
Financial Ratios:
Return on average assets		1.64	%		1.63	%		1.47	%		1.51	%		1.35	%
Return on average equity		18.12			18.29			17.73			21.57			18.96
Dividend payout ratio		16.31			12.87			7.13			7.60			9.74
Average stockholders' equity to average assets		9.04			8.92			8.26			7.02			7.12
Net interest margin		4.26			4.14			4.02			4.06			3.66
Efficiency ratio(1)		39.16			40.07			45.22			40.91			40.56
Asset Quality Ratios:
Net chargeoffs to average loans		0.06	%		0.11	%		0.21	%		0.22	%		0.17	%
Nonperforming assets to year end total assets		0.16			0.37			0.20			0.30			0.75
Allowance for loan losses to year end total gross loans		1.20			1.50			1.28			1.31			1.38

			Year Ended December 31,
			2003							2002							2001
			Average Balance			Interest		Average Yield Rate		Average Balance			Interest		Average Yield Rate		Average Balance			Interest		Average Yield Rate
			(Dollars in thousands)
ASSETS
Interest-earning assets:
	Short-term investments		$	139,985		$	1,830	1.31	%	$	156,739		$	2,806	1.79	%	$	77,820		$	3,158	4.06	%
	Investment securities(1)(2)(3)			457,234			16,309	3.57	%		379,668			13,916	3.67	%		429,790			23,410	5.45	%
	Loans receivable(1)(4)			2,754,620			159,910	5.81	%		2,309,909			150,053	6.50	%		1,974,857			156,477	7.92	%
	FHLB stock			11,025			494	4.48	%		9,110			513	5.63	%		10,861			650	5.98	%

		Total interest-earning assets		3,362,864			178,543	5.31	%		2,855,426			167,288	5.86	%		2,493,328			183,695	7.37	%

Noninterest-earning assets:
	Cash and due from banks			80,643							66,081							55,280
	Allowance for loan losses			(39,135	)						(31,579	)						(25,971	)
	Other assets			196,093							144,138							124,288

		Total assets	$	3,600,465						$	3,034,066						$	2,646,925

LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
	Checking accounts		$	267,981		$	776	0.29	%	$	212,281		$	1,409	0.66	%	$	159,679		$	1,968	1.23	%
	Money market accounts			224,951			1,710	0.76	%		163,789			2,237	1.37	%		170,090			4,848	2.85	%
	Savings deposits			290,251			362	0.12	%		241,894			930	0.38	%		213,098			2,442	1.15	%
	Time deposits			1,476,099			27,098	1.84	%		1,453,295			38,999	2.68	%		1,352,342			64,688	4.78	%
	Short-term borrowings			3,044			47	1.54	%		3,393			76	2.24	%		20,096			1,056	5.25	%
	FHLB advances			146,822			2,959	2.02	%		87,040			3,064	3.52	%		109,630			6,076	5.54	%
	Junior subordinated debt			21,161			2,280	10.77	%		20,750			2,264	10.91	%		20,750			2,270	10.94	%

		Total interest-bearing liabilities		2,430,309			35,232	1.45	%		2,182,442			48,979	2.24	%		2,045,685			83,348	4.07	%

Noninterest-bearing liabilities:
	Demand deposits			796,800							546,332							349,330
	Other liabilities			47,711							34,666							33,165
Stockholders' equity				325,645							270,626							218,745

		Total liabilities and stockholders' equity	$	3,600,465						$	3,034,066						$	2,646,925

Interest rate spread								3.86	%						3.62	%						3.30	%

Net interest income and net interest margin						$	143,311	4.26	%				$	118,309	4.14	%				$	100,347	4.02	%

		2003			2002			2001
		(In millions)
Net interest income		$	143.3		$	118.3		$	100.3
Provision for loan losses			(8.8	)		(10.2	)		(6.2	)
Noninterest income			32.8			24.4			20.6
Noninterest expense			(77.6	)		(63.7	)		(62.1	)
Provision for income taxes			(30.7	)		(20.1	)		(13.7	)
Cumulative effect of change in accounting principle			—			0.8			(0.1	)

	Net income	$	59.0		$	49.5		$	38.8

Return on average total assets			1.64	%		1.63	%		1.47	%

Return on average stockholders' equity			18.12	%		18.29	%		17.73	%

		Year Ended December 31,
		2003 vs. 2002									2002 vs. 2001
		Total Change			Changes Due to						Total Change			Changes Due to
		Total Change			Volume(1)			Rates(1)			Total Change			Volume(1)			Rates(1)
		(In thousands)
INTEREST-EARNING ASSETS:
Short-term investments		$	(976	)	$	(277	)	$	(699	)	$	(352	)	$	2,049		$	(2,401	)
Investment securities			2,393			2,776			(383	)		(9,494	)		(2,495	)		(6,999	)
Loans receivable, net			9,857			26,910			(17,053	)		(6,424	)		24,228			(30,652	)
FHLB stock			(19	)		97			(116	)		(137	)		(100	)		(37	)

	Total interest and dividend income	$	11,255		$	29,506		$	(18,251	)	$	(16,407	)	$	23,682		$	(40,089	)

INTEREST-BEARING LIABILITIES:
Checking accounts		$	(633	)	$	304		$	(937	)	$	(559	)	$	524		$	(1,083	)
Money market accounts			(527	)		666			(1,193	)		(2,611	)		(173	)		(2,438	)
Savings deposits			(568	)		157			(725	)		(1,512	)		293			(1,805	)
Time deposits			(11,901	)		603			(12,504	)		(25,689	)		4,521			(30,210	)
Short-term borrowings			(29	)		(7	)		(22	)		(980	)		(580	)		(400	)
FHLB advances			(105	)		1,550			(1,655	)		(3,012	)		(1,087	)		(1,925	)
Junior subordinated debt			16			45			(29	)		(6	)		—			(6	)

	Total interest expense	$	(13,747	)	$	3,318		$	(17,065	)	$	(34,369	)	$	3,498		$	(37,867	)

CHANGE IN NET INTEREST INCOME		$	25,002		$	26,188		$	(1,186	)	$	17,962		$	20,184		$	(2,222	)

		2003			2002		2001
		(In millions)
Branch fees		$	7.23		$	6.19	$	5.35
Ancillary loan fees			4.18			3.25		2.56
Letters of credit fees and commissions			7.12			5.64		4.32
Net gain on sales of loans			0.40			1.52		0.91
Net gain on sales of securities available-for-sale			1.95			0.01		2.05
Net gain on trading securities			—			—		0.41
Net (loss) gain on disposal of fixed assets			(0.17	)		0.04		0.15
Income from secondary market activities			5.66			2.36		0.75
Amortization of negative intangibles			—			—		0.26
Income from life insurance policies			3.29			1.94		1.29
Other			3.12			3.44		2.54

	Total	$	32.78		$	24.39	$	20.59

		2003			2002			2001
		(In millions)
Compensation and other employee benefits		$	31.84		$	25.33		$	24.75
Net occupancy			10.31			9.40			9.19
Amortization of affordable housing investments			6.68			4.70			3.78
Amortization of positive intangibles			1.99			1.81			3.77
Data processing			1.87			1.71			1.78
Deposit insurance premiums and regulatory assessments			0.72			0.62			0.55
Deposit-related expenses			3.89			3.29			2.98
Other			20.33			16.82			15.32

	Total	$	77.63		$	63.68		$	62.12

	Efficiency Ratio(1)		39	%		40	%		45	%

		Within One Year		After One but within Five Years		More than Five Years		Total
		(In thousands)
Residential, one to four units		$	5,268	$	17,164	$	124,254	$	146,686
Residential, multifamily			24,304		131,587		653,420		809,311
Commercial and industrial real estate			189,346		669,921		699,327		1,558,594
Construction			139,810		39,734		—		179,544
Business, commercial			304,563		93,467		33,912		431,942
Other consumer			17,162		13,697		116,291		147,150

	Total	$	680,453	$	965,570	$	1,627,204	$	3,273,227

		Within One Year		After One but within Five Years		More than Five Years		Total
		(In thousands)
Total fixed rate		$	115,699	$	264,919	$	141,948	$	522,566
Total variable rate			2,327,653		415,647		2,050		2,745,350

	Total	$	2,443,352	$	680,566	$	143,998	$	3,267,916

		Payments Due by Period (in thousands)
Contractual Obligations		Less than 1 year		1 - 3 years		3 - 5 years		After 5 years		Total
Debt obligations		$	22,192	$	—	$	—	$	31,702	$	53,894
Operating lease obligations			4,088		6,614		3,461		2,512		16,675
Purchase obligations:
	Loan rate lock commitments		108,742		—		—		—		108,742

Total contractual obligations		$	135,022	$	6,614	$	3,461	$	34,214	$	179,311

		Expected Maturity or Repricing Date by Year
		2004			2005			2006			2007			2008			After 2008			Total			Fair Value at December 31, 2003
		(Dollars in thousands)
Assets:
Short-term investments		$	60,594		$	—		$	—		$	—		$	—		$	—		$	60,594		$	60,594
	Weighted average rate		1.15	%		—	%		—	%		—	%		—	%		—	%		1.15	%
Investment securities available-for-sale (fixed rate)		$	175,319		$	38,262		$	39,726		$	39,982		$	29,895		$	27,675		$	350,859		$	352,877
	Weighted average rate		3.59	%		2.76	%		2.91	%		3.10	%		3.57	%		4.99	%		3.48	%
Investment securities available-for-sale (variable rate)		$	92,016		$	—		$	—		$	—		$	—		$	—		$	92,016		$	92,265
	Weighted average rate		2.30	%		—	%		—	%		—	%		—	%		—	%		2.30	%
Total gross loans		$	2,463,897		$	367,686		$	153,113		$	76,592		$	67,494		$	144,445		$	3,273,227		$	3,313,149
	Weighted average rate		5.10	%		6.32	%		6.56	%		6.67	%		6.45	%		6.36	%		5.43	%
Liabilities:
Checking accounts		$	276,390		$	—		$	—		$	—		$	—		$	—		$	276,390		$	276,390
	Weighted average rate		0.24	%		—	%		—	%		—	%