e10vk

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K


(Mark One)
þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
		For the fiscal year ended December 31, 2006.
OR
o		TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
		For the transition period from to .

Commission File Number: 000-24947

UCBH Holdings, Inc.

(Exact name of registrant as specified in its charter)


Delaware		94-3072450
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
555 Montgomery Street, San Francisco, California (Address of principal executive offices)		94111 (Zip Code)

Registrant’s telephone number, including area code:

(415) 315-2800

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

None

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

Common Stock, Par Value $0.01 Per Share

Preferred Stock Purchase Rights

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ

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 þ No o

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

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


Large accelerated filer þ	Accelerated filer o	Non-accelerated filer o

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

The aggregate market value of the common stock held by non-affiliates of the registrant is $978,366,472 and is based upon the last sales price as quoted on the NASDAQ Global Select Market as of June 30, 2006.

As of January 31, 2007, the Registrant had 99,614,995 shares of common stock, par value $0.01 per share, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE:

Proxy Statement for the May 17, 2007, Annual Meeting of Stockholders is incorporated by reference into Part III.

PART I

Forward Looking Statements

This document, including information included or incorporated by reference in this document, contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements provide current expectations or forecasts of future events and include, among other things:


	•	statements with respect to UCBH Holdings, Inc. and its consolidated subsidiaries’ (collectively, the “Company”) beliefs, plans, objectives, goals, guidelines, expectations, anticipations, and future financial condition, results of operations and performance; and

	•	statements preceded or identified by words, such as “expects”, “anticipates”, “intends”, “plans”, “believes”, “seeks”, “estimates”, “will”, “should”, “could”, “projects” and “may”, “might” or words of similar import.

These forward-looking statements are based upon management’s current beliefs and expectations and are not guarantees of future performance, nor should they be relied upon as representing management’s views as of any subsequent date. These forward-looking statements are also inherently subject to significant business, economic and competitive uncertainties, risks and contingencies, many of which are difficult to predict and generally beyond management’s control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change and actual results, performance or achievements may be materially different from the anticipated results, performance or achievements discussed, expressed or implied by these forward-looking statements. Factors that might cause such differences include, but are not limited to the following:


	•	the Company’s ability to successfully execute its business plans and achieve its objectives;

	•	changes in political and economic conditions, including the economic effects of terrorist attacks against the United States and related events;

	•	changes in financial market conditions, either nationally, internationally or locally in areas in which the Company conducts its operations;

	•	expansion into new market areas;

	•	fluctuations in the equity and fixed-income markets;

	•	changes in interest rates;

	•	asset and liability sensitivity of our balance sheet;

	•	acquisitions and integration of acquired businesses;

	•	deterioration in asset or credit quality;

	•	increases in the levels of losses, customer bankruptcies, claims and assessments;

	•	deposit renewals and ability to attract and retain core deposits;

	•	changes in the availability of capital;

	•	continuing consolidation in the financial services industry;

	•	new litigation or changes in existing litigation;

	•	success in gaining regulatory approvals, when required;

	•	changes in consumer spending and savings habits;

	•	increased competitive challenges and expanding product and pricing pressures among financial institutions, whether banks, investment banks, insurance companies or others, in the Company’s markets;

	•	technological changes;


	•	demographic changes;

	•	legislation or regulatory changes which adversely affect the Company’s operations and businesses;

	•	the Company’s ability to meet regulatory requirements; and

	•	changes in accounting principles generally accepted in the United States of America.

You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this document or the date of any document incorporated by reference in this document. All subsequent written and oral forward-looking statements concerning matters addressed in this document and attributable to the Company or any person acting on the Company’s behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Except to the extent required by applicable law or regulation, the Company undertakes no obligation to update these forward-looking statements to reflect events, developments or circumstances after the date of this document or to reflect the occurrence of future events.


Item 1.	*Business*

Company Background

UCBH Holdings, Inc. (“UCBH”) is a Delaware corporation incorporated in 1998, and registered with the Board of Governors of the Federal Reserve System as a bank holding company. UCBH conducts its principal business through its wholly owned banking subsidiary, United Commercial Bank (“UCB”; UCBH, UCB and UCB’s wholly owned subsidiaries are collectively referred to as the “Company”, “we”, “us” or “our”), which makes up substantially all of our consolidated assets and revenues. UCB is a California state-chartered commercial bank.

UCB was founded as United Federal Savings and Loan Association in 1974 to serve the financial needs of the San Francisco Chinese community. As the Chinese population grew significantly and expanded into new communities throughout California, we became United Savings Bank, F.S.B. to provide statewide banking services. In 1998, reflecting a rapidly growing focus on our commercial banking capabilities, we converted our charter to become UCB. The Company went public on November 5, 1998, and currently trades on the NASDAQ Global Select Market (“NASDAQ”) under the symbol “UCBH”.

In 2002, we acquired all of the outstanding shares of Bank of Canton of California (“BCC”), a $1.45 billion Chinese-focused California banking corporation. Also in 2002, UCB also purchased selected assets and assumed selected liabilities of a branch of Broadway National Bank, a national banking association located in Brooklyn, New York.

In 2003, the Company completed its acquisition of privately held First Continental Bank (“FCB”), a $356.7 million full-service commercial bank focused on serving the ethnic Chinese market, headquartered in Rosemead, California. Also during 2003, the Company was granted a full banking license by the Hong Kong Monetary Authority, enabling the Company to open a full-service branch in Hong Kong. This license has allowed us to engage in a wide range of banking activities in Hong Kong, including deposit generation and international trade finance lending activities. The Hong Kong branch has enhanced our capability to expand our international banking business across the Pacific Rim, which we expect will continue in the future.

During 2004, UCB established UCB Investment Services, Inc. (“UCBIS”) as a wholly owned subsidiary. UCBIS is a registered broker-dealer with the Securities and Exchange Commission (the “SEC”) and is a member of the National Association of Securities Dealers and the Securities Investor Protection Corporation. UCBIS acts as an introducing broker in sales of shares of mutual funds, listed and over-the-counter equities, and corporate, municipal and United States government debt. In addition, UCBIS sells fixed and variable annuities, life insurance and covered options and is registered with the Municipal Securities Rulemaking Board. UCBIS does not have custody or possession of customer funds or securities. Instead, customer accounts are carried on a fully disclosed basis at National Financial Services, LLC, which is UCBIS’ clearing firm.

During 2005, the Company completed two acquisitions; Pacifica Bancorp, Inc. (“Pacifica”), headquartered in Seattle, Washington, and Asian American Bank & Trust Company (“AABT”), headquartered in Boston, Massachusetts. As of the acquisition date, Pacifica’s total assets were $178.8 million and total deposits were $148.8 million. Two branches in the Seattle area were included in the acquisition. As of the acquisition date,

AABT’s total assets were $133.0 million and total deposits were $112.1 million. The acquisition included three branches in the Boston area.

In 2006, the Company completed its acquisition of Summit Bank Corporation (“Summit”), headquartered in Atlanta, Georgia. As of the acquisition date, Summit’s assets were $887.9 million and total deposits were $547.6 million. The acquisition included five branches/offices in Atlanta, Georgia, one branch in Houston, Texas, two branches/offices in California and a representative office in Shanghai, China. Additionally in 2006, UCB established a wholly owned subsidiary, UCB Asset Management, Inc. (“UCBAM”), which was created to provide professional investment management services to high-net-worth clients.

We intend to continue to expand within our existing markets and move into new markets by developing new product offerings, opening new branches and/or acquiring financial institutions in existing markets, and entering into and/or acquiring financial institutions in other markets with high concentrations of Asians in keeping with our capital requirements and management abilities.

Market Area

We have been expanding to develop both a nationwide presence to provide services to companies doing business in China and our local presence in areas with Asian communities. These areas include the San Francisco Bay Area and the Sacramento/Stockton, Los Angeles, Atlanta, Boston, Houston, New York and Seattle metropolitan areas. We currently have fifty branches/offices in the State of California, five in Atlanta metropolitan area, three in the Boston metropolitan area, a branch in Houston, five in the New York metropolitan area, two in the Seattle metropolitan area and a branch in Hong Kong, China. We also have representative offices in Shanghai and Shenzhen, China and Taipei, Taiwan. Our Northern and Southern California locations encompass twenty-eight and twenty-two branches/offices, respectively.

We have tailored our products and services to meet the financial needs of the growing Asian communities in our market areas. We believe that this approach, together with the relationships of our management and the Company’s Board of Directors with the Asian communities, provides us with an advantage in competing for customers in these areas.

Current Banking Services

Through our branch network, we provide a wide range of personal and commercial banking services to small- and medium-sized businesses, business executives, professionals and other individuals. We offer multilingual services to all of our customers in English, Cantonese and Mandarin.

We offer the following deposit products:


	•	business and personal checking, savings and money market accounts;

	•	time deposits (certificates of deposit); and

	•	Individual Retirement Accounts (“IRAs”).

We offer a full complement of loan products, including the following types of loans:


	•	commercial real estate loans;

	•	multifamily real estate loans;

	•	construction loans, primarily to small- and medium-sized developers for construction of single-family homes, multifamily and commercial properties;

	•	commercial, accounts receivable and inventory loans to small- and medium-sized businesses with annual revenues generally ranging from $500,000 to $20.0 million;

	•	short-term trade finance facilities for terms of less than one year to United States importers, exporters and manufacturers;

	•	loans guaranteed by the United States Small Business Administration (“SBA”);


	•	residential mortgage loans; and

	•	home equity lines of credit.

We also provide a wide range of specialized services, including merchant bankcard services, cash management services, private client services, brokerage investment products and services, and online banking services. In addition, we provide trade finance facilities for customers involved in the import and/or export of goods principally between Asia and the United States.

UCB maintains an Internet banking website at www.ibankUNITED.com. This website, which is available in both English and Chinese character versions, provides information about UCB as well as easy access to business and personal online banking services, a web-based trade finance management system and an online information services for home loans. We believe our website serves as a strong platform to promote UCB, to cross-sell the products and services that UCB offers and to deliver advanced online banking services.

Subsidiaries of the Company and UCB

UCBH has eleven wholly owned subsidiaries, including UCB. Other than UCB, the subsidiaries are special purpose trusts that were either formed by UCBH to issue guaranteed preferred beneficial interests in UCBH’s junior subordinated debentures or acquired by UCBH in the Summit acquisition.

UCB has ten wholly owned subsidiaries. Two of the ten subsidiaries, United Commercial Bank Building Corporation and California Canton International Bank (Cayman) Ltd., were acquired in the BCC transaction and another two subsidiaries, SBGA California Investments, Inc. and Newston Investments, Inc., were acquired in the Summit transaction. United Commercial Bank Building Corporation owns the building that houses the Company’s principal offices in San Francisco, California. California Canton International Bank (Cayman) Ltd. provides banking services and has deposits of $346.5 million as of December 31, 2006, and assets consisting of cash and investment securities. SBGA California Investments, Inc. is the holding company of SBGA Investments, Inc., which is a real estate investment trust. Newston Investments, Inc. owns the office building that houses UCB’s branch in Houston, Texas. UCBIS is a registered broker-dealer. UCBAM provides professional investment management services to high-net-worth clients. UCBSC manages the investment securities portfolio of UCB. Of the remaining three subsidiaries of UCB, two are inactive and the third acts as a trustee under deeds of trust securing promissory notes held by UCB.

Segment Disclosures

The disclosure regarding the Company’s segments are included in Note 27 to the Consolidated Financial Statement as set forth herein under Item 8.

Competition

The banking and financial services industry in California, and particularly in our market areas, is highly competitive. This is due in part to changes in regulation, changes in technology and product delivery systems, and the consolidation of the industry. We compete for loans, deposits and customers with the following types of institutions:


	•	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 services providers.

Many of our competitors are much larger in terms of total assets and capitalization, have greater access to capital markets and may offer a broader array of financial services. To compete with these financial service providers, we rely on local promotional activities, personal relationships established by our officers, bilingual employees to effectively interact with customers and specialized services tailored to meet our customers’ needs.

We also have several major competitors targeting the Asian markets in California. These competitors have branch locations in many of the same neighborhoods, provide similar services and market their services in similar Asian publications and media in California. Additionally, we compete with numerous financial institutions that do not target the Asian markets in California.

Supervision and Regulation

Introduction

Both the Company and UCB are extensively regulated under both federal and state laws. The following is a summary of selected laws and regulations that govern the activities of the Company and UCB. These laws and regulations are intended to protect depositors, the Federal Deposit Insurance Corporation (the “FDIC”) Bank Insurance Fund and the banking system as a whole, and are not intended to protect security holders.

Regulation of the Company

UCBH is a bank holding company registered with the Board of Governors of the Federal Reserve System and is subject to the Bank Holding Company Act of 1956, as amended (the “Bank Holding Company Act”), and the regulations of the Board of Governors of the Federal Reserve System (“Federal Reserve Board”). UCBH files quarterly and annual reports with the Federal Reserve Bank of San Francisco, Banking Supervision & Regulation Division (“Federal Reserve”), as well as any other information that the Federal Reserve may require under the Bank Holding Company Act. The Federal Reserve examines UCBH and its non-bank subsidiaries. UCBH is also a bank holding company under Delaware law and, together with UCB, is subject to examination by the California Department of Financial Institutions (the “DFI”).

The Federal Reserve has the authority to require that UCBH stop an activity, whether conducted directly or through a subsidiary or affiliate, if the Federal Reserve believes that the activity poses a significant risk to the financial safety, soundness or stability of UCB. The Federal Reserve can also regulate provisions of certain debt instruments issued by bank holding companies, including imposing ceilings on interest rates and requiring reserves on such debt. In certain cases, UCBH will be required to file written notice and obtain approval from the Federal Reserve before repurchasing or redeeming its equity securities. Additionally, the Federal Reserve imposes capital requirements on UCBH as a bank holding company.

As a registered bank holding company, UCBH is required to obtain the approval of the Federal Reserve before it may acquire all or substantially all of the assets of any bank, or ownership or control of the voting shares of any bank if, after giving effect to such acquisition of shares, UCBH would own or control more than 5% of the voting shares of such bank. The Bank Holding Company Act allows UCBH to acquire voting shares of, or interest in, all or substantially all of the assets of a bank located outside the State of California, subject to the provisions of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994.

UCBH and any subsidiaries, which it may acquire or organize, are deemed “affiliates” of UCB within the meaning of that term as defined in the Federal Reserve Act and Federal Reserve Regulation W. This means, for example, that there are limitations on loans by UCB to affiliates and on investments by UCB in affiliates’ stock.

UCBH and any subsidiaries are also subject to certain restrictions with respect to engaging in non-banking activities, including the underwriting, public sale and distribution of securities and many insurance activities. Under the Gramm-Leach-Bliley Financial Modernization Act of 1999, qualifying bank holding companies may make an appropriate election to the Federal Reserve to become a “financial holding company” and may then engage in a full range of financial activities, including insurance, securities and merchant banking. See “Gramm-Leach-Bliley Financial Modernization Act of 1999” following this discussion. Although the Company currently qualifies to make

the election, UCBH has not elected to become a financial holding company. UCBH continues to review its business plan to determine whether it would benefit from the expanded powers of a financial holding company status.

As a company with securities registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and listed on NASDAQ, UCBH is also subject to the Sarbanes-Oxley Act of 2002 and regulation by the SEC and NASDAQ. See the “Sarbanes-Oxley Act of 2002” section, which follows this discussion.

Regulation of UCB

Bank Regulators. UCB is a California state-chartered commercial bank and its deposits are insured by the FDIC up to the applicable legal limits. UCB is supervised, examined and regulated by the Commissioner of the DFI, as well as by the FDIC. Either of these regulators may take formal enforcement action if they determine that the financial condition, capital resources, asset quality, earnings prospects, management or liquidity aspects of UCB’s operations are unsatisfactory. These agencies may also take action if UCB or its management is violating or has violated any law or regulation. No regulator has ever taken any such action against UCB in the past.

Safety and Soundness Standards. The FDIC has adopted guidelines that establish standards for safety and soundness of banks. The Federal Reserve Board has established the safety and soundness guidelines for bank holding companies. These guidelines are designed to identify potential safety and soundness problems and ensure that banks address those concerns before they pose a risk to the deposit insurance fund. If the FDIC determines that an institution fails to meet any of these standards, the agency can require the institution to prepare and submit a plan to come into compliance. If the agency determines that the plan is unacceptable or not implemented, the agency must, by order, require the institution to correct the deficiency.

The FDIC also has safety and soundness regulations and accompanying guidelines on asset quality and earnings standards. The guidelines provide standards for establishing and maintaining a system to identify problem assets and prevent those assets from deteriorating. The guidelines also provide standards for evaluating and monitoring earnings and for ensuring that earnings are sufficient to maintain adequate capital and reserves. If an institution fails to comply with a safety and soundness standard, the agency may require the institution to submit and implement an acceptable compliance plan or face enforcement action.

Other Regulations. The activities of UCB as a consumer lender are also subject to regulations under various federal laws, including the Truth in Lending Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act as well as the Electronic Fund Transfer Act, the Fair Debt Collection Practices Act, the Community Reinvestment Act, etc., in addition to various state laws. These statutes impose requirements for providing timely disclosures to customers primarily in connection with the making, enforcement and collection of loans.

Deposit Insurance Assessments

On February 8, 2006, President Bush signed into law the Federal Deposit Reform Act of 2005, which reforms the deposit insurance system. The law merges the Bank Insurance Fund with the Savings Association Insurance Fund into a new fund, the Deposit Insurance Fund. The law also grants the FDIC Board broad authority in managing the adequacy of the Deposit Insurance Fund, including the discretion to price deposit insurance according to risk for all insured institutions regardless of the level of reserve ratio.

Prior to the enactment of the new law, the FDIC charged annual assessments to insure a bank’s deposits that ranged from zero to $0.27 per $100 of domestic deposits, depending on the risk that a particular institution poses to the Deposit Insurance Fund. The new law, however, establishes a risk-based assessment system, which will result in changes to this assessment as the FDIC manages the level of the Deposit Insurance Fund. Beginning January 1, 2007, the FDIC has set the following assessment rates: $0.05 to $0.07 per $100 of domestic deposits for Risk I institutions (most favorable category); $0.10 per $100 for Risk II institutions; $0.28 per $100 for Risk III institutions; and, $0.43 per $100 for Risk IV institutions. Currently, UCB is a Risk I institution.

Capital Requirements

UCB (on a consolidated basis) is subject to the capital requirements of Part 325 of the FDIC’s Rules and Regulations — Capital Maintenance. Part 325 includes a framework that is sensitive to differences in risk between banking institutions. The amount of regulatory capital that a financial institution is required to have is dependent on

its overall risk profile. The ratio of its regulatory capital to its risk-weighted assets is called the “risk-based capital ratio”. Assets and certain off-balance-sheet items are allocated into four categories based on the risk inherent of the asset and are weighted from 0% to 100%. The higher the risk-weighted asset category, the more risk UCB is subject to and thus more capital that is required. As of December 31, 2006, UCB’s total risk-based capital ratio was 10.53%.

The guidelines divide a bank’s capital into two tiers. Tier 1 core capital is the sum common stockholder’s equity, non-cumulative perpetual preferred stock (including any related surplus), and minority interests in consolidated subsidiaries, minus all intangible assets (except for mortgage and nonmortgage servicing assets and eligible purchased credit card relationships) and minus certain other items specifically defined by Part 325. Tier 2 capital includes, among other items, cumulative perpetual and long-term, limited-life preferred stock, mandatory convertible securities, certain hybrid capital instruments, term subordinated debt and the allowance for loan losses (subject to certain limitations). In addition, certain items are required to be deducted from Tier 2 capital as specified in Part 325.

Banks must maintain a total risk-based capital ratio of 8%, of which at least 4% must be Tier 1 capital, to maintain a status as “adequately capitalized” as set forth by the prompt corrective action rules adopted by the FDIC. The “well capitalized” levels established by the FDIC are 10% and 6% for total risk-based capital ratio and Tier 1 risk-based capital ratio, respectively.

In addition, the FDIC has regulations prescribing a minimum Tier 1 leverage ratio (Tier 1 capital to total adjusted assets, as specified in the regulations). The required minimum Tier 1 leverage ratio is 3% if the FDIC determines that the institution is not anticipating or experiencing significant growth and has well diversified risk, including no undue interest rate risk exposure, excellent asset quality, high liquidity, good earnings and in general is considered a strong banking organization. Banks that do not meet the conditions for a 3% minimum must have a minimum Tier 1 leverage ratio of 4%. The FDIC may impose higher limits on individual institutions when particular circumstances exist, including if a bank is experiencing or anticipating significant growth. At December 31, 2006, UCB’s Tier 1 leverage ratio was 9.30%.

UCB was in compliance with the FDIC’s capital maintenance rules as of December 31, 2006 and 2005. For further discussion of UCB’s capital, refer to the Capital Management section under “Management’s Discussion and Analysis” incorporated in Part II, Item 7 in this Annual Report on Form 10-K.

Prompt Corrective Action

The Federal Deposit Insurance Corporation Improvement Act of 1991 requires the federal banking regulators to take “prompt corrective action” against undercapitalized institutions. The FDIC and the other bank regulatory agencies have established a framework of supervisory actions for insured depository institutions that are not adequately capitalized. The following capital categories have been created to define capital adequacy:


	•	“Well capitalized” has a total risk-based capital ratio of 10% or greater, a Tier 1 risk-based capital ratio of 6% or greater, a Tier 1 leverage ratio of 5% or greater, and is not subject to any written agreement, order, capital directive, or prompt corrective action directive.

	•	“Adequately capitalized” has a total risk-based capital ratio of 8% or greater, a Tier 1 risk-based capital ratio of 4% or greater, and a Tier 1 leverage ratio of 4% or greater (3% or greater if rated Composite 1 under the “CAMELS” rating system).

	•	“Undercapitalized” has a total risk-based capital ratio of less than 8%, a Tier 1 risk-based capital ratio of less than 4%, or a Tier 1 leverage ratio of less than 4% (3% if rated Composite 1 under the “CAMELS” rating system).

	•	“Significantly undercapitalized” has a total risk-based capital ratio of less than 6%, a Tier 1 risk-based capital ratio of less than 3%, or a leverage capital ratio of less than 3%.

	•	“Critically undercapitalized” has a ratio of tangible equity to total assets that is equal to less than 2%.

Federal banking regulators are required to take prompt corrective action to resolve the problems of those institutions that fail to satisfy their minimum capital requirements. As an institution’s capital level falls, the level of

restrictions that can be imposed by the FDIC becomes increasingly severe and the institution is allowed less flexibility in its activities.

As of December 31, 2006 and 2005, the most recent notification from the FDIC categorized UCB as “well capitalized” under the regulatory framework for prompt corrective action.

Community Reinvestment Act

Under the Community Reinvestment Act (the “CRA”), as implemented by Part 345 of the FDIC’s regulations, a bank has an obligation, consistent with safe and sound operation, to help meet the credit needs of its entire community in which an institution is chartered, including low- and moderate-income neighborhoods. The CRA does not establish specific lending requirements or programs, nor does it limit a bank’s discretion to develop the types of products and services that it believes are best suited to its community. It does require that federal banking regulators, when examining an institution, assess the institution’s record of meeting the credit needs of its community and to take such record into account in evaluating certain applications. As a state-chartered non-member bank, UCB is subject to the fair lending requirements and reporting obligations involving home mortgage and small business lending operations of the CRA. Federal banking regulators are required to provide a written examination report of an institution’s CRA performance using a four-tiered descriptive rating system and these ratings are available to the public. UCB has received an “outstanding” rating for the past four CRA examinations.

Gramm-Leach-Bliley Financial Modernization Act of 1999

The Gramm-Leach-Bliley Financial Modernization Act of 1999 (the “Gramm-Leach-Bliley Act”) eliminated most of the depression-era “firewalls” between banks, securities firms and insurance companies, which were established by The Banking Act of 1933, also known as the Glass-Steagall Act. The Glass-Steagall Act sought to insulate banks as depository institutions from the perceived risks of securities dealing and underwriting, and related activities.

Bank holding companies, which qualify as “financial holding companies”, can now, among other things, acquire securities firms or create them as subsidiaries, and securities firms can now acquire banks or start banking activities through a financial holding company. This liberalization of United States banking and financial services regulation applies both to domestic and foreign institutions conducting business in the United States. Consequently, the common ownership of banks, securities firms and insurance firms is now possible, as is the conduct of commercial banking, merchant banking, investment management, securities underwriting and insurance within a single financial institution using a “financial holding company” structure authorized by the Act. As noted earlier, the Company has not elected to become a financial holding company.

The Gramm-Leach-Bliley Act also requires that federal financial institutions and securities regulatory agencies respect the privacy of their customers and protect the security and confidentiality of customers’ non-public personal information. These regulations generally require that financial institutions:


	(i)	not disclose non-public personal information of customers to non-affiliated third parties without notice to their customers, who must have an opportunity to direct that such information not be disclosed;


	(ii)	not disclose customer account numbers except to consumer reporting agencies; and

	(iii)	give prior disclosure of their privacy policies before establishing new customer relationships.

Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001

Under Title III of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act (the “USA PATRIOT Act”) adopted by the United States Congress on October 26, 2001, which strengthened the then existing anti-money laundering provisions of the Bank Secrecy Act, FDIC insured banks are required to increase their due diligence efforts for correspondent deposit accounts and private banking customers. The USA PATRIOT Act requires banks to perform additional record keeping and reporting, require identification of owners of deposit accounts and the customers of foreign banks with correspondent deposit accounts, and restrict or prohibit certain correspondent deposit accounts. The Financial

Crimes Enforcement Network, a bureau of the Department of Treasury, has also issued regulations to implement the provisions of the USA PATRIOT Act. UCB’s regulatory compliance in this important area has been found satisfactory.

Sarbanes-Oxley Act of 2002

The Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) represents a comprehensive revision of laws affecting corporate governance, accounting obligations and corporate reporting. The Sarbanes-Oxley Act is applicable to all companies with equity or debt securities registered under Section 12 of the Exchange Act. In particular, the Sarbanes-Oxley Act establishes:


	(i)	requirements for audit committees, including independence, expertise, and responsibilities;

	(ii)	additional responsibilities regarding certification of the financial statements by the chief executive officer and chief financial officer of the reporting company;

	(iii)	standards for auditors and regulation of audits;

	(iv)	increased disclosure and reporting obligations for the reporting company and their directors and executive officers; and

	(v)	increased civil and criminal penalties for violation of the securities laws.

In addition, the Sarbanes-Oxley Act generally prohibits loans by the Company to its executive officers and directors. However, the Sarbanes-Oxley Act contains a specific exception from such prohibitions for loans by a bank to its executive officers and directors in compliance with federal banking regulations restrictions on such loans. UCB’s authority to extend credit to affiliates is also governed by federal law. Such loans are required to be made on terms substantially the same as those offered to unaffiliated individuals and that do not involve more than the normal risk of repayment. An exception exists for loans made pursuant to a benefit or compensation program that is widely available to all employees of the institution and does not give preference to affiliates over other employees. The law limits both the individual and aggregate amount of loans that UCB may make to affiliates based, in part, on UCB’s capital position and requires certain board approval procedures to be followed. For the years presented in this Annual Report on Form 10-K, UCB’s policy was to make no loans to the Company’s and its executive officers or directors.

Although we have incurred additional accounting and other expense in complying with the requirements under the Sarbanes-Oxley Act and the regulations promulgated thereunder, such compliance has not had a material impact on our results of operations or financial condition.

American Jobs Creation Act of 2004

The American Jobs Creation Act of 2004 (the “AJCA”) allows the Company, upon satisfaction of certain conditions, to repatriate permanently reinvested foreign earnings, as defined by new Section 965 of the Internal Revenue Code of 1986, as amended, at an effective tax rate of 5.25%. During the three months ended June 30, 2005, the Company elected to repatriate approximately $26.0 million in previously unremitted foreign earnings. As a result, the Company recorded a current tax payable on such previously unremitted foreign earnings of approximately $703,000 during the three months ended June 30, 2005. In addition, the Company recorded a reduction to deferred tax liabilities of approximately $4.6 million as a result of the reversal of the deferred tax liability related to unremitted earnings of its foreign subsidiary. This resulted in a net tax benefit of approximately $3.9 million.

Basel Committee on Banking Supervision

The United States federal bank regulatory agencies’ risk-based capital guidelines are based upon the 1988 Capital Accord of the Basel Committee on Banking Supervision (the “Basel Committee”). The Basel Committee is a committee of central banks and bank supervisors/regulators from the major industrialized countries that develops broad policy guidelines that each country’s supervisors can use to set the supervisory policies they apply. In January 2001, the Basel Committee released a proposal to replace the 1988 Capital Accord with a new capital framework (the “Basel II Framework”) that would set capital requirements for operational risk and would also materially

change the existing capital requirements for credit risk and market risk exposures. Operational risk is defined by the proposal to mean the risk of direct or indirect loss resulting from inadequate or failed internal processes, people and systems or from external events. The 1988 Capital Accord does not include separate capital requirements for operational risk. The Basel II Framework standard is intended to strengthen the regulation of large, complex banking companies by making their capital requirements more sensitive to changes in risk. In June 2004, the Basel Committee issued a new capital accord (the “Basel II Accord”) to replace the 1988 Capital Accord. Institutions can elect not to use the Basel II Framework; however, the prospect of reductions in risk-based capital requirements under the Basel II Accord has given rise to competitive equity concerns among smaller banks and thrifts.

On December 26, 2006, the United States banking regulators issued proposed rulemaking that revises the existing risk-based capital framework for those institutions that elect not to use the Basel II Framework. This new framework is sometimes referred to as Basel 1-A as it is anticipated to apply to banks that do not adopt the international Basel II Accord. The proposed rule would allow an institution that elected not to adopt the Basel II Accord to continue using the existing risk-based capital rules or adopt the new Basel 1-A rules. The new rules would:


	•	expand the number of risk weight categories;

	•	allow the use of external credit ratings to risk weight certain exposures;

	•	expand the range of recognized collateral and guarantors;

	•	use loan-to-value ratios to risk weight most residential mortgages;

	•	increase the credit conversion factor for certain credit commitments with an original maturity of one year or less;

	•	assess a charge for early amortizations in securitizations of revolving exposures; and

	•	remove the 50 percent on the risk weight for certain derivative transactions.

The proposed rule changes are still subject to revision and UCBH has not yet determined which rules it will adopt when they become final.

Employees

At December 31, 2006, we had 1,318 employees. None of the employees are covered by a collective bargaining agreement.

Website Access to Company Reports

Our corporate Internet address is www.ucbh.com. We make available free of charge through our Internet website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

The public may read and copy any materials that the Company files with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. The Internet address of the SEC website is www.sec.gov.

Executive Officers of the Registrant

The following table sets forth the names, ages and positions of the executive officers of UCBH and UCB as of December 31, 2006. There are no family relationships between any director or executive officer and any other director or executive officer of UCBH or UCB.


Name	Age		Position with UCBH and UCB

Thomas S. Wu		48	Chairman, President and Chief Executive Officer
Jonathan H. Downing		55	Executive Vice President and Director of Corporate Development and Investor Relations
Daniel M. Gautsch		59	Executive Vice President and Chief Risk and Compliance Officer
William J. Laraia		71	Executive Vice President and Director of the New York Region
Sylvia Loh		51	Executive Vice President and Chief Lending Officer
Ebrahim Shabudin		58	Executive Vice President and Chief Operating Officer
Alan Thian		54	Executive Vice President and Regional Director of Southern California
Ka Wah Tsui		53	Executive Vice President and General Manager, Greater China Region
Dennis Wu		64	Director, Executive Vice President and Chief Financial Officer
David Yu		55	Executive Vice President and Director of the Southeast Region
Cynthia C. Blackford		42	Senior Vice President and Chief Audit Executive
John M. Cinderey		59	Senior Vice President and Director of Real Estate Lending
John M. Kerr		60	Senior Vice President and Chief Credit Officer
Dennis A. Lee		64	Senior Vice President, Corporate Counsel and Assistant Corporate Secretary
Jonas B. Miller		35	Senior Vice President and Treasurer
Craig S. On		54	Senior Vice President and Corporate Controller

The Chief Executive Officer updates UCBH’s and UCB’s Management Succession Plan on an annual basis for review by the Compensation Committee and the Board of Directors.

Mr. Thomas S. Wu has been Chairman, President, and Chief Executive Officer of UCBH and UCB since October 10, 2001. Prior to this appointment, Mr. Wu served as President and Chief Executive Officer of UCB effective January 1, 1998. Prior to that appointment, Mr. Wu was an Executive Vice President and Director of UCB as of September 25, 1997. Mr. Wu was elected President and Chief Executive Officer of UCBH effective March 26, 1998, and as a director of UCBH on April 17, 1998. Previously, Mr. Wu was the Director of Customer Care for Pacific Link Communications Limited in Hong Kong where he was responsible for formulating and implementing customer care, customer retention and customer communications strategies. Mr. Wu served as a director of UCB from 1995 to 1996 and was a Senior Vice President, Head of Retail Banking of UCB from 1992 to 1996, when in addition to heading up the retail banking division, he directed marketing, public relations, loan originations, branch administration and operations control functions. Mr. Wu also served as Vice President and Regional Manager of UCB’s Southern California Retail Banking Division from 1991 to 1992. Prior to joining UCBH, Mr. Wu held various banking positions with First Pacific Bank in Hong Kong, Chase Manhattan Bank, Banque Nationale De Paris and Standard Chartered Bank.

Mr. Jonathan H. Downing has been Executive Vice President and Director of Corporate Development and Investor Relations of UCBH and UCB since June 9, 2005. Prior to this appointment, Mr. Downing was Executive Vice President and Chief Financial Officer of UCBH and UCB since January 9, 2003. Prior to that appointment, he served as Executive Vice President, Chief Financial Officer and Treasurer of UCBH and UCB since January 1, 2002. Prior to that appointment, he served as Senior Vice President and Chief Financial Officer of UCBH and UCB since 1989. Mr. Downing served as director of UCB from January 1991 to June 2005, and as director of UCBH from November 1993 to June 2005. Mr. Downing joined UCB in 1986 in conjunction with the acquisition of FPM Mortgage, of which Mr. Downing was a co-founder.

Mr. Daniel M. Gautsch was appointed Executive Vice President and Chief Risk and Compliance Officer of UCBH and UCB effective August 23, 2006. Prior to this appointment, Mr. Gautsch was Executive Vice President and Director of Enterprise Risk Management of UCBH and UCB since February 7, 2005. Prior to joining UCB,

Mr. Gautsch was the Assistant Regional Director, San Francisco Region of the FDIC responsible for overseeing over 270 insured institutions in Alaska, Hawaii, Northern California, Oregon, Washington and the Pacific Rim. His career at the FDIC spanned more than 30 years during which he served in various management and other positions.

Mr. William J. Laraia was appointed Executive Vice President and Director of the New York Region of UCBH and UCB effective January 1, 2007. Prior to this appointment, Mr. Laraia was formerly the Chairman, President and Chief Executive Officer of Great Eastern Bank (“GEB”). Prior to serving at GEB, Mr. Laraia served as Chairman and Chief Executive Officer of Apple Bank for Savings in New York City from 1991 to 1996 and as Executive Vice President and Group Head of National Westminster Bancorp’s Community Banking Group, where he managed the activities of the retail bank, from 1984 to 1991. Prior to joining National Westminster Bancorp, Mr. Laraia ran the Long Island Commercial Lending Division for Chemical Bank.

Ms. Sylvia Loh has been Executive Vice President and Chief Lending Officer of UCBH and UCB since August 1, 2005. Prior to this appointment, Ms. Loh served as Executive Vice President and Director of Commercial Banking of UCBH and UCB from July 1, 2002 to August 1, 2005, and joined UCB as Vice President and Head of Commercial Banking in January 1996. From 1992 to 1996, Ms. Loh held the position of Vice President, Relationship Manager at Bank of America, International Trade Division.

Mr. Ebrahim Shabudin has been Executive Vice President and Chief Operating Officer of UCBH and UCB since August 1, 2005. Prior to this appointment, Mr. Shabudin served as Executive Vice President and Chief Credit Officer of UCBH and UCB since January 1, 2004. Prior to joining UCBH, Mr. Shabudin was the Managing Director of Credit Risk Management with Deloitte & Touche LLP. Prior to that, Mr. Shabudin worked for Bank of America in various management positions for over 25 years with the most recent experience as a Senior Vice President and Credit Policy Executive.

Mr. Alan Thian has been Executive Vice President and Regional Director of Southern California of UCBH and UCB since July 11, 2003. Prior to this appointment, Mr. Thian was formerly the Chairman, President and Chief Executive Officer of FCB and joined UCB following UCB’s acquisition of FCB on July 11, 2003. Prior to FCB, Mr. Thian served as President and Chief Executive Officer of American International Bank in Los Angeles and was previously a Senior Vice President of General Bank.

Mr. Ka Wah Tsui has been Executive Vice President and General Manager, Greater China Region of UCBH and UCB since January 1, 2005. Prior to this appointment, he served as Senior Vice President and General Manager of our Hong Kong Branch since September 2003. Previously, Mr. Tsui held various management positions at Citibank, First Pacific Bank and International Bank of Asia in Hong Kong.

Mr. Dennis Wu has been Executive Vice President and Chief Financial Officer of UCBH and UCB since June 9, 2005. Mr. Wu was elected as a director of UCBH and UCB at the May 19, 2005, Annual Meeting of Stockholders. Mr. Wu joined UCBH after a thirty-seven year career with the public accounting firm of Deloitte & Touche LLP, where he served as National Managing Partner of the firm’s Chinese Services Group since June 2000. Mr. Wu served as a partner at Deloitte & Touche LLP from 1979 to 2004, including the partner-in-charge of the firm’s Enterprise Group of Northern California, which includes its banking, savings and loan, securities brokerage, insurance, real estate, healthcare, and not-for-profit clients.

Mr. David Yu was appointed Executive Vice President and Director of the Southeast Region of UCBH and UCB effective December 30, 2006. Prior to joining UCB, Mr. Yu was the President of Summit Bank Corporation and Chairman of The Summit National Bank. Mr. Yu served as President and CEO of the Company until December 1989, at which time he was elected Chairman of the Board of Directors of The Summit National Bank. Mr. Wu was the founder and organizer of the Summit Bank Corporation and The Summit National Bank. Before organizing the Summit Bank Corporation and The Summit National Bank, Mr. Yu worked for The Citizens and Southern National Bank and First National Bank of Atlanta. From 1976 to 1980, Mr. Yu was employed as an Assistant National Bank Examiner by the Office of the Comptroller of the Currency in Atlanta.

Ms. Cynthia C. Blackford was appointed as Senior Vice President and Chief Audit Executive of UCBH and UCB effective March 16, 2006. Prior to joining UCB, Ms. Blackford spent 11 years at PricewaterhouseCoopers LLP working in the Banking and Capital Markets practice in the United States and abroad. Ms. Blackford served in various positions with PricewaterhouseCoopers LLP including Director in Transaction Services, advising foreign

banks on accessing the United States capital markets, and as a Senior Manager in the audit practice overseeing financial statement audits of domestic and foreign banks.

Mr. John M. Cinderey was appointed Senior Vice President and Director of Real Estate Lending of UCBH and UCB effective November 1, 2006. Prior to this appointment, he served as Senior Vice President and Senior Credit Approval Officer of the Commercial Banking Division of UCB since May 2004. Prior to joining UCB, Mr. Cinderey spent over 20 years with Bank of America and over 10 years at other financial institutions, including Mount Diablo National Bank, GMAC Commercial Finance and Union Bank of California in various management functions.

Mr. John M. Kerr has been Senior Vice President and Chief Credit Officer of UCBH and UCB since October 13, 2005. Prior to joining UCB, Mr. Kerr served as Senior Portfolio Manager for Primus Financial Products, an AAA-rated credit insurer in New York and a company in which he played a key role in building the business from a start-up in 2002 to its going public in 2004. Prior to that, Mr. Kerr was with Bank of America for 18 years, where he held senior positions in credit approval, corporate and commercial banking, private banking, and international banking. He also spent 11 years with Royal Bank of Canada in business development and credit in corporate and commercial banking, in strategic planning, and in international banking.

Mr. Dennis A. Lee has been Senior Vice President and Corporate Counsel of UCBH and UCB since January 1, 2001. Prior to that appointment, he served as Vice President and Corporate Counsel of UCBH and UCB since 1993.

Mr. Jonas B. Miller was appointed Senior Vice President and Treasurer of UCBH and UCB effective July 27, 2006. Prior to this appointment, he served as Senior Vice President and Treasurer of UCB from July 27, 2004 to July 27, 2006 and First Vice President and Treasurer of UCB from January 1, 2003 to July 27, 2004.

Mr. Craig S. On has been Senior Vice President and Corporate Controller of UCBH and UCB since June 27, 2005. Mr. On joined UCB after a twenty-one year career with the public accounting firm of Deloitte & Touche LLP, where he served in the capacity of Audit Director and oversaw the audits of commercial and community banks, investment management and hedge fund companies, as well as multi-lateral development banks and mortgage banking organizations.


Item 1A.	*Risk Factors*

The following describes some of the risk factors associated with UCBH Holdings, Inc. and subsidiaries (collectively referred to as the “Company”, “we”, “us” and “our”):

Our business strategy includes the execution of growth plans, and our financial condition and results of operations could be negatively affected if we fail to grow or fail to manage our growth effectively.

We expect to experience growth in both loans and deposits as well as in our level of operations. Achieving our growth targets will require us to attract customers that currently do business at other financial institutions in our existing and future markets. Our ability to successfully grow will depend on a variety of factors, including our ability to attract and retain experienced management staff, the continued availability of desirable business opportunities, the competitive responses from other financial institutions in our markets and our ability to effectively manage our growth. While we believe we have the management resources and internal systems in place to successfully manage our future growth, there can be no assurance that we will be able to achieve our growth goals.

Fluctuations in interest rates may negatively affect our consolidated financial condition and results of operations.

Banking companies’ earnings depend largely on the relationship between the cost of funds, primarily deposits and borrowings, and the yield on earning assets, primarily loans and investments. This relationship, known as the interest rate margin, is subject to fluctuation and is affected by economic and competitive factors, which influence interest rates, the volume and mix of interest-earning assets and interest-bearing liabilities, and the level of nonperforming assets. Fluctuations in interest rates will also affect the customer’s demand for the products and services that we offer.

The Company operations are subject to fluctuations in interest rates, to the degree that its interest-bearing liabilities may reprice or mature more slowly or more rapidly or on a different basis than their interest-earning assets. Given our current volume and mix of interest-bearing liabilities and interest-earning assets, the Company’s net interest margin would be expected to increase during times of rising interest rates and, conversely, to decline during times of falling interest rates. As a result, significant fluctuations in interest rates may have an adverse effect on the Company’s consolidated financial condition and results of operations.

Our business is subject to the success of the national and international economies in which we operate.

Because the majority of our borrowers and depositors are individuals and businesses located and doing business in the states of California, Georgia, Massachusetts, New York, Texas and Washington, our success depends on the strength of these economies. In addition, as we expand into other areas in the United States and into China, we will become increasingly dependent on the local economies in those markets, as well. Adverse economic conditions in these markets could reduce our growth rate, affect the ability of our customers to repay their loans and generally affect our financial condition and results of operations. Conditions, such as inflation, recession, unemployment, high interest rates, short money supply, scarce natural resources, international disorders, terrorism and other factors beyond our control, may adversely affect our profitability. In addition, any sustained period of increased payment delinquencies, foreclosures or losses caused by adverse market or economic conditions in our markets could adversely affect the value of our assets, revenues, results of operations and financial condition.

Our continued pace of growth may require us to raise additional capital in the future, but that capital may not be available when it is needed.

We are required by federal regulatory authorities to maintain adequate levels of capital to support our operations. We believe that our capital resources will satisfy these capital requirements for the foreseeable future. However, we may at some point need to raise additional capital to support our continued growth. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets at that time, which are outside our control. Accordingly, we cannot be assured of our ability to raise additional capital, if needed, on terms acceptable to us. If we cannot raise additional capital when needed, our ability to further expand our operations through internal growth and acquisitions could be materially impaired.

If we cannot attract deposits, our growth may be inhibited.

We plan to increase significantly the level of our assets, including our loan portfolio. Our ability to increase our assets depends in large part on our ability to attract additional deposits at competitive rates. We intend to seek additional deposits by continuing to establish and strengthening our personal relationships with our existing customers and by offering deposit products that are competitive with those offered by other financial institutions in our markets. We cannot provide assurance that these efforts will be successful. Our inability to attract additional deposits at competitive rates could have a material effect on our business, consolidated financial position, results of operations and cash flows.

Our wholesale funding sources may prove insufficient to replace deposits at their maturity and support our future growth.

We must maintain sufficient funds to respond to the needs of our depositors and borrowers. As a part of our liquidity management, we use a number of funding sources in addition to core deposits. As we continue to grow, we are likely to become more dependent on these sources, which include Federal Home Loan Bank advances, proceeds from the sale of loans, brokered certificates of deposit and a line of credit from another financial institution. Our financial flexibility could be severely constrained if we are unable to maintain our access to funding or if adequate financing is not available to accommodate future growth at acceptable interest rates. Finally, if we are required to rely more heavily on more expensive funding sources to support future growth, our revenues may not increase proportionately to cover our costs. In this case, our operating margins and profitability would be adversely affected.

Intense competition exists for loans and deposits.

The banking and financial services business is highly competitive. Competitive pressure is increasing as a result of changes in regulation, changes in technology and product delivery systems, and the accelerating pace of consolidation among financial service providers. The Company must compete 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. Many of these competitors are much larger in total assets and capitalization, have greater access to capital markets and offer a broader array of financial services than we do. There can be no assurance that the Company will be able to compete effectively in its markets and the Company’s consolidated financial condition and results of operations could be adversely affected if circumstances affecting the nature or level of competition change.

Our allowance for loan losses may prove to be insufficient to absorb losses in our loan portfolio.

Like all financial institutions, we maintain an allowance for loan losses to provide for loans in our portfolio that may not be repaid in their entirety. We believe that our allowance for loan losses is maintained at a level that is adequate to absorb probable losses inherent in our loan portfolio as of the respective balance sheet date. However, our allowance for loan losses may not be sufficient to cover actual loan losses, and future provisions for loan losses could materially adversely affect our operating results.

If the value of real estate in our primary market areas were to decline materially, a significant portion of our loan portfolio could become under-collateralized, which could have a material adverse effect on us.

With most of our loans currently concentrated in the state of California, a decline in local economic conditions could adversely affect the value of the real estate collateral securing our loans. A decline in property values would diminish our ability to recover on defaulted loans by selling the real estate collateral, making it more likely that we would suffer losses on defaulted loans. Additionally, a decrease in asset quality could require additions to our allowance for loan losses through increased provisions for loan losses, which would reduce our future profits. Real estate values are affected by various factors in addition to local economic conditions, including, among other things, changes in general or regional economic conditions, governmental rules or policies and natural disasters.

The loan portfolio may not perform as expected.

The Company’s performance and prospects will depend to a significant extent on the performance of its loan portfolio. There are a number of factors that could negatively impact the performance of the loan portfolio including, among others, the general political and economic conditions in the Company’s markets, significant changes in the interest rate environment, pressures from products and services from competitors and on any negative changes in the financial condition of the individual borrowers. In addition, to the extent that the Company does not retain the customers that it acquires in its acquisitions or incurs additional expenses in retaining them, there could be adverse effects on the Company’s future consolidated financial condition and results of operations.

Changes in government regulation and monetary policy may have an unfavorable impact on the Company.

The banking industry is subject to extensive federal and state supervision and regulation. Such regulations limit the manner in which the Company conducts its business, undertakes new investments and activities, and obtains financing. These regulations have been designed primarily for the protection of the deposit insurance funds and consumers, and not to benefit holders of the Company’s common stock. Financial institution regulation has also been the subject of considerable legislation in recent years, and may be the subject of further significant legislation in the future, none of which is within our control. New legislation or changes in, or repeal of, existing laws may cause the Company’s consolidated results to differ materially from its historical performance. Further, federal monetary policy, particularly as implemented through the Federal Reserve System, significantly affects credit conditions for financial institutions, primarily through open market operations in United States government securities, the discount rate for bank borrowings, and bank reserve requirements. Any material change in these conditions would likely have a material impact on the Company’s consolidated financial condition and results of operations.

If we are unable to successfully integrate the operations of future acquisitions, the Company’s consolidated financial condition and results of operations could be negatively affected.

We have announced that our future growth strategy could include acquiring other financial service companies. While we have just completed the Summit Bank Corporation acquisition, we could encounter unplanned difficulties associated with integration of the operations of this acquisition or any new acquisitions. These difficulties could include retaining customers, successful conversion of systems and processes, combining different corporate cultures, and retaining key employees. Any problems with integration would negatively impact the Company’s day-to-day operations and increase the costs associated with the acquisition, which, in turn, could negatively affect the Company’s consolidated financial condition and results of operations.

Unanticipated costs relating to the Company’s recent acquisitions could reduce its future earnings per share.

We believe that we have reasonably estimated the likely costs of integrating the operations of our recent acquisition into the Company’s operations and the incremental operating costs that will impact its operations subsequent to the acquisition. However, it is possible that unexpected transition costs or future operating expenses, as well as other types of unanticipated developments, could have a material adverse effect on the Company’s future results of operations and financial condition. If costs and expenses of this type are incurred, the Company’s earnings per share could be reduced as a result.

The Company may engage in further expansion through new branch openings or acquisitions, which could adversely affect net income.

The Company has disclosed its intention to take advantage of future expansion opportunities. There are risks associated with such expansion and, in particular, expansion through acquisitions. These risks include, among others, incorrectly assessing the asset quality of a bank acquired in a particular acquisition, encountering greater than anticipated costs of opening new branches or integrating acquired businesses, facing resistance from customers or employees, and being unable to profitably deploy assets acquired through expansion or in acquisitions. Additional country- and region-specific risks are associated with any expansion and acquisitions that take


Item 1B.	*Unresolved Staff Comments*

None.


Item 2.	*Properties*

UCBH Holdings, Inc.’s and United Commercial Bank’s (“UCB”) principal office and headquarters is located at 555 Montgomery Street in San Francisco, California. UCB owns this office building through its subsidiary, United Commercial Bank Building Corporation. UCB also owns an office building located at 711 Van Ness Avenue in San Francisco, California. With the acquisition of Summit Bank Corporation, UCB acquired two buildings. One building is Atlanta, Georgia, which serves as an administrative facility for the Atlanta banking operations. The other serves as a branch and administrative facility for the Houston operations, which UCB owns through its subsidiary, Newston Investments, Inc. UCB also owns two buildings in the Boston, Massachusetts area, which serve as branch and administrative facilities for the Boston banking operations. In addition, UCB owns five branch facilities and leases all of its remaining branch and office facilities under noncancelable operating leases. Some of these branch leases contain renewal options and some include rent escalation clauses.


Item 3.	*Legal Proceedings*

United Commercial Bank has been a party to litigation incidental to various aspects of its operations, in the ordinary course of business. Management is not currently aware of any litigation that in management’s opinion will have a material adverse impact on UCBH Holdings, Inc.’s consolidated financial condition or the results of operations.


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

No matters were submitted to a vote of security holders or otherwise for the three months ended December 31, 2006.

PART II


Item 5.	*Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities*

Market Information

UCBH Holdings, Inc.’s (“UCBH”) common stock is traded on the NASDAQ Global Select Market (“NASDAQ”) under the symbol “UCBH”. At December 31, 2006, there were approximately 29,900 stockholders of UCBH’s common stock. The last reported sale price of the common stock on NASDAQ on January 31, 2007, was $18.75 per share.

The high and low sales prices of UCBH’s common stock, as quoted on NASDAQ, during the years ended December 31, 2006 and 2005, were as follows:


	2006				2005(1)
	High		Low		High		Low

Three months ended March 31,	$	19.28	$	16.74	$	23.03	$	19.74
Three months ended June 30,		19.60		16.06		20.45		15.07
Three months ended September 30,		18.41		15.55		19.70		16.20
Three months ended December 31,		18.14		16.35		18.80		16.31


(1)		Reflects the effects of a two-for-one stock split that was completed on April 12, 2005.

Dividends

The frequency and amount of dividends paid during the years ended December 31, 2006 and 2005, were as follows:


	Three Months Ended
	March 31		June 30		September 30		December 31

Year ended December 31, 2006	$	0.030	$	0.030	$	0.030	$	0.030
Year ended December 31, 2005(1)	$	0.025	$	0.025	$	0.025	$	0.025


(1)		Reflects the effects of a two-for-one stock split that was completed on April 12, 2005.

On January 25, 2007, UCBH’s Board of Directors declared a dividend of $0.03 per share payable on April 12, 2007, to the stockholders of record as of March 31, 2007.

Unregistered Sales of Equity Securities

On May 23, 2005, UCBH entered into an Agreement and Plan of Merger with Pacifica Bancorp, Inc. (“Pacifica”), the holding company of Pacifica Bank, a Washington state-chartered bank. As part of the consideration for the purchase of all outstanding stock of Pacifica, UCBH issued 1,241,194 shares of common stock to Pacifica shareholders pursuant to the terms and conditions of the merger agreement. The California Commissioner of Corporations approved the fairness of the terms and conditions of the offer and sale of these shares. Upon completion of the merger on October 31, 2005, UCBH issued these shares in a transaction exempt from registration requirements under Section 3(a)(10) of the Securities Act of 1933, as amended (the “Securities Act”).

On August 2, 2005, UCBH entered into an Agreement and Plan of Merger with Asian American Bank & Trust Company (“AABT”), a Massachusetts state-chartered banking corporation. As part of the consideration for the purchase of all outstanding stock of AABT, UCBH issued 878,246 shares of common stock to AABT shareholders pursuant to the terms and conditions of the merger agreement. The California Commissioner of Corporations approved the fairness of the terms and conditions of the offer and sale of these shares. Upon completion of the merger on November 28, 2005, UCBH issued these shares in a transaction exempt from registration requirements under Section 3(a)(10) of the Securities Act.


Item 6.	*Selected Financial Data*

The following selected financial data should be read in conjunction with the UCBH Holdings, Inc. and subsidiaries’ consolidated financial statements and the accompanying notes presented elsewhere in this Annual Report on Form 10-K (dollars in thousands, except per share amounts):


	December 31,
	2006			2005			2004			2003			2002

Financial Condition and Other Data:
Loans held in portfolio, net	$	6,573,645		$	5,774,118		$	3,994,269		$	3,713,255		$	2,978,945
Securities purchased under agreements to resell		175,000			—			—			—			—
Securities available for sale		2,149,456			1,117,724			1,169,140			1,221,070			1,469,387
Securities held to maturity		290,673			308,608			325,202			284,712			111,994
Total assets		10,346,414			7,965,637			6,319,891			5,592,137			4,857,846
Deposits		7,202,845			6,264,169			5,215,862			4,483,521			4,006,818
Securities sold under agreements to repurchase		401,600			—			—			—			—
Subordinated debentures		240,549			150,520			140,210			140,210			140,210
Short-term borrowings		654,636			279,425			72,310			234,134			77,500
Long-term borrowings		906,651			562,033			334,952			271,408			275,874
Total liabilities		9,560,343			7,362,123			5,835,879			5,177,671			4,575,479
Stockholders’ equity (1)		786,071			603,514			484,012			414,466			282,367
Nonperforming assets		15,198			19,133			12,574			5,857			4,654
Ratio of stockholders’ equity to total assets		7.60	%		7.58	%		7.66	%		7.41	%		5.81	%
Asset Quality Data:
Loan delinquency ratio		0.84	%		0.48	%		0.90	%		0.87	%		0.88	%
Nonperforming assets to total assets		0.15			0.24			0.20			0.10			0.10
Nonperforming loans to loans held in portfolio		0.19			0.33			0.31			0.16			0.15
Allowance for loan losses to loans held in portfolio		0.93			1.11			1.39			1.54			1.61
Allowance for loan losses to nonperforming loans		503.73			337.33			449.12			992.42			1,049.96
Total loan to deposit ratio		94.11			95.71			83.91			84.57			75.57
Regulatory Capital Ratios:
United Commercial Bank and subsidiaries:
Tier 1 risk-based capital		9.67	%		9.91	%		11.42	%		10.92	%		10.26	%
Total risk-based capital		10.53			10.98			12.67			12.18			11.52
Tier 1 leverage		9.30			8.26			8.49			7.86			7.57
UCBH Holdings, Inc. and subsidiaries:
Tier 1 risk-based capital		9.86			10.26			11.98			11.69			9.70
Total risk-based capital		10.72			11.33			13.23			12.94			10.95
Tier 1 leverage ratio		9.50			8.56			8.92			8.42			7.15


	Year Ended December 31,
	2006			2005			2004			2003			2002

Operating Data:
Interest and dividend income	$	535,013		$	402,400		$	300,064		$	260,262		$	205,178
Interest expense		(271,080	)		(161,910	)		(92,583	)		(91,714	)		(80,232	)

Net interest income		263,933			240,490			207,481			168,548			124,946
Provision for loan losses		(3,842	)		(6,091	)		(4,201	)		(9,967	)		(9,673	)

Net interest income after provision for loan losses		260,091			234,399			203,280			158,581			115,273
Noninterest income		47,143			26,684			30,877			23,203			12,145
Noninterest expense (2)		(155,420	)		(116,913	)		(99,153	)		(80,208	)		(64,352	)

Income before income tax expense		151,814			144,170			135,004			101,576			63,066
Income tax expense		(50,937	)		(46,344	)		(49,401	)		(36,938	)		(24,138	)

Net income	$	100,877		$	97,826		$	85,603		$	64,638		$	38,928

Per Share Data:
Basic earnings per share (1)(3)	$	1.07		$	1.06		$	0.95		$	0.74		$	0.49
Diluted earnings per share (1)(3)		1.03			1.02			0.90			0.71			0.47
Dividends declared per share (3)		0.12			0.10			0.08			0.06			0.05
Operating Ratios and Other Data:
Return on average assets		1.23	%		1.40	%		1.44	%		1.26	%		1.14	%
Return on average equity		15.59			18.42			18.92			18.84			18.42
Efficiency ratio (4)		49.96			43.76			41.60			41.83			46.94
Noninterest expense to average assets		1.89			1.68			1.67			1.56			1.88
Average equity to average assets		7.88			7.61			7.62			6.66			6.18
Dividend payout ratio (5)		11.65			9.80			8.89			8.51			10.64
Net loan charge-offs to average loans held in portfolio		0.17			0.03			0.11			0.06			0.23
Interest rate spread (6)		2.91			3.25			3.42			3.21			3.46
Net interest margin (6)		3.37			3.58			3.63			3.41			3.73


(1)		In conjunction with the acquisitions of Summit Bank Corporation on December 29, 2006, Asian American Bank & Trust Company on November 28, 2005, Pacifica Bancorp, Inc. on October 31, 2005, First Continental Bank on July 11, 2003, and Bank of Canton of California on October 28, 2002, UCBH issued 4.8 million, 878,000, 1.2 million, 2.3 million and 2.7 million shares of common stock, respectively.

(2)		Amounts reflect $6.75 million of expense representing litigation settlement in 2002.

(3)		UCBH completed a two-for-one stock split during the years ended December 31, 2005 and 2003. Accordingly, for the years ended December 31, 2004, 2003 and 2002, basic earnings per share, diluted earnings per share and dividends per share have been adjusted to reflect the effect of the stock splits.

(4)		Represents noninterest expense divided by the total of our net interest income before provision for loan losses and our noninterest income.

(5)		Dividends declared per share as a percentage of diluted earnings per share.

(6)		Calculated on a nontax equivalent basis.


Item 7.	*Management’s Discussion and Analysis of Financial Condition and Results of Operation*

EXECUTIVE SUMMARY

UCBH Holdings, Inc. (“UCBH”) and its consolidated subsidiaries (collectively referred to as the “Company”, “we”, “us” or “our”) is a $10.35 billion bank holding company with headquarters in San Francisco, California. The Company’s operations are conducted primarily through its banking subsidiary, United Commercial Bank (“UCB”). UCB operates through seventy-two offices and branches in the United States and Asia and is a leader in providing financial services to Asians in the United States. At December 31, 2006, we had sixty-six domestic branches and offices; twenty-eight in Northern California, twenty-two in Southern California, five in the Atlanta metropolitan area, three in the Boston metropolitan area, five in the New York metropolitan area, two in the Seattle metropolitan area and a branch in Houston. UCB also has a branch in Hong Kong and representative offices in Shanghai and Shenzhen, China and Taipei, Taiwan.

In providing its services, UCB has two primary goals:


	•	To be the best performing commercial bank primarily serving Asian communities in the United States by continuing to expand our franchise in areas of high growth opportunities.

	•	To further differentiate ourselves from our competitors by providing seamless service to customers doing business across the Pacific Rim by establishing offices in strategic locations in Asia.

Services to Asians

UCB has established and intends to continue establishing branches in areas of high Asian population concentration to attract retail deposits through new branch openings as well as through acquisitions. During 2006, UCB expanded its franchise in areas with high concentrations of Asians by adding two additional branches in California, and a branch in the New York metropolitan area. We also completed the acquisition of Summit Bank Corporation (“Summit”), an $887.8 million bank holding company with four branches in the Atlanta metropolitan area, two branches in California, a branch in the Houston metropolitan area and a representative office in Shanghai, China.

Asia Locations

Currently, UCB has a fully operational branch in Hong Kong and representative offices in Shanghai and Shenzhen, China and Taipei, Taiwan. Our fully operational Hong Kong branch is authorized to conduct a complete range of banking operations, including offering deposit, foreign exchange and remittance services, issuing cashier orders, and providing trade finance, commercial banking and lending services. Our representative offices on the other hand, cannot conduct any profit generating banking business and are restricted to the specific activities that have been approved by the local banking authorities of their respective country, such as providing market research and acting in the capacity of a liaison to existing bank customers. As of December 31, 2006, UCB’s Hong Kong branch had total deposits of $918.2 million, a 65.3% increase over December 31, 2005. This office has expanded its trade finance services since its opening and the fees associated with those services have also increased over last year.

UCB intends to establish additional overseas offices and branches to facilitate international trade across the Pacific Rim. In this regard, UCB has focused much of its growth strategies toward the expanding opportunities that have been emerging from China. Trade between China and the United States has increased steadily over the past several years and the trade finance business has followed. We anticipate that the opportunities for growth presented by the expansion of the Chinese economy will continue for some time.

Keys to Success

Success in attaining our goals will be dependent on our adherence to the fundamentals that we believe are vital to our ongoing successful growth. These fundamentals include:


	•	continued enhancement of UCB’s business development capabilities, in terms of both diversification in the development of products and services and in developing new ways to differentiate UCB in the marketplace;


	•	continued development of a strong trade finance platform, which will enable UCB to take advantage of the opportunities as they continue to develop in the Pacific Rim;

	•	continued maintenance of credit quality at the highest level;

	•	continued focus on attracting and retaining core deposits;

	•	continued focus on maintaining and enhancing our risk and compliance management infrastructures;

	•	continued attention to the design and development of our existing unique delivery networks to ensure that UCB products and services are easily available to its customers;

	•	continued concentration on maintaining a senior management team with the financial services expertise required by our operations and goals; and

	•	continued development of UCB’s information systems infrastructure to support our planned growth.

In addition, we believe that we have a unique set of capabilities that provide us with an in-depth understanding of the Asian population, our targeted market. These capabilities help to differentiate us and enable us to enhance the service that we provide. These capabilities include:


	•	trilingual branch staff, lending/relationship officers, marketing team and phone banking service;

	•	automated teller machines in both Chinese and English;

	•	product brochures in both Chinese and English;

	•	seven-days a week banking in selected locations;

	•	e-business services in both Chinese and English; and

	•	products other than just loans and deposits, including investment management products and services.

MANAGEMENT’S OVERVIEW OF 2006 PERFORMANCE

We are providing you with an overview of what we believe are the most significant factors and developments that impacted the Company’s results for 2006 and that could impact future results. We encourage you to carefully read this full document for more detailed information with regard to the trends, events and uncertainties that have impacted us.

The Company’s primary or “core” business consists of providing commercial and retail banking services to both individuals and companies in markets with high concentration of Asians. We believe that this core banking business performed well in 2006 as the general economic environment both in these markets and generally throughout the United States improved. However, the challenges presented by the general interest rate environment that we must work within did impact the Company’s performance in 2006.

The Company reported earnings for 2006 of $100.9 million or diluted earnings per share of $1.03. This compares with $97.8 million or diluted earnings per share of $1.02 for 2005 and $85.6 million or diluted earnings per share of $0.90 for 2004. The diluted earnings per share amounts for 2004 have been adjusted to reflect a two-for-one stock split that took effect in 2005. Return on average equity (“ROE”) was 15.59% and return on average assets (“ROA”) was 1.23% in 2006, compared with 18.42% and 1.40% in 2005 and 18.92% and 1.44% in 2004, respectively.

When we evaluate the Company’s performance, we focus on five primary areas: (1) loan and deposit growth, (2) credit quality, (3) net interest margin, (4) expense control and (5) capital adequacy.

Loan and Deposit Growth

Since 2002, UCB has experienced steady and strong growth in loans and deposits. This was accomplished in light of a challenging economic and competitive environment that was present during a large portion of this time

period. The net loans held in portfolio and total deposits at December 31, 2006, 2005, 2004, 2003 and 2002, were as follows (dollars in thousands):


	2006		2005		2004		2003		2002

Loans held in portfolio, net	$	6,573,645	$	5,774,118	$	3,994,269	$	3,713,255	$	2,978,945
Deposits		7,202,845		6,264,169		5,215,862		4,483,521		4,006,818

The growth that was experienced in net loans held in portfolio and in deposits was achieved both organically and from acquisitions. Over the past five years, the Company acquired five banking companies, which added an aggregate of $1.44 billion in net loans held in portfolio and $2.37 billion in deposits as of the dates of the acquisitions.

Assuming that the current economic momentum continues, we expect continued growth in both net loans held in portfolio and in deposits, especially in the areas of commercial business and international trade finance loans. In addition, as part of its balance sheet management UCB enters into loan sales, which are discussed in later sections of this document.

Credit Quality

While loan growth has been substantial over the past several years, UCB has maintained strong credit quality levels. We believe that this has been accomplished through UCB’s conservative credit underwriting criteria and credit risk management processes, which are discussed in more detail in “Credit Risk Management” that follows later in this document. Even with these strong credit management processes, we would expect that if UCB’s loan portfolio continues to increase, the related allowance for loan losses would also increase accordingly.

The average loans held in portfolio, total loan charge-offs and the ratios of nonperforming loans to loans held in portfolio, allowance for loan losses to loans held in portfolio and net charge-offs to average loans held in portfolio as of and for the years ended December 31, 2006, 2005, 2004, 2003 and 2002, were as follows (dollars in thousands):


	2006			2005			2004			2003			2002

Average loans held in portfolio	$	5,889,301		$	4,823,671		$	4,070,168		$	3,380,121		$	2,442,790
Total loan charge-offs		10,694			1,614			4,798			3,349			5,563
Nonperforming loans to loans held in portfolio		0.19	%		0.33	%		0.31	%		0.16	%		0.15	%
Allowance for loan losses to loans held in portfolio		0.93			1.11			1.39			1.54			1.61
Net loan charge-offs to average loans held in portfolio		0.17			0.03			0.11			0.06			0.23

The increase in loan charge-offs in 2006 relates primarily to three borrowers whose loans were fully reserved prior to being charged off.

Net Interest Margin

The difficult and challenging interest rate environment that has been affecting financial institutions over the past three years continued to impact our net interest margin. However, we expect to continue our efforts to improve the net interest margin in the future through prudent balance sheet management and emphasis on growth in core deposits. See “Interest Rate and Market Risk Management” later in this document. The Company’s net interest margin on a nontax equivalent basis and average federal funds rate for the years ended December 31, 2006, 2005, 2004, 2003 and 2002, were as follows:


	2006			2005			2004			2003			2002

Net interest margin — nontax equivalent basis		3.37	%		3.58	%		3.63	%		3.41	%		3.73	%
Average federal funds rate		4.96			3.19			1.36			1.12			1.67

Expense Control

We are continuously monitoring our costs and expenses and seeking new ways to maintain them at acceptable levels. For 2006, we experienced an increase in our noninterest expense. Much of this increase was a result of increased personnel expense as we added staff to support the growth in UCB’s commercial banking business, the opening of new branches, the additional staffing resulting from the Pacifica and AABT acquisitions and the expansion of UCB’s infrastructure to support a larger and growing organization. We expect that our noninterest expense may continue to increase as we grow organically and through acquisitions.

Capital Adequacy

As regulated financial institutions, the Company and UCB (on a consolidated basis) are required to maintain adequate levels of capital as measured by several regulatory capital ratios. One of our goals is to maintain a “well capitalized” level of regulatory capital as defined by the banking regulators for both the Company and UCB. The Company’s and UCB’s risk-based capital ratios at December 31, 2006, 2005, 2004, 2003 and 2002, were as follows:


	2006			2005			2004			2003			2002

United Commercial Bank:
Tier 1 leverage		9.30	%		8.26	%		8.49	%		7.86	%		7.57	%
Tier 1 risk-based capital		9.67			9.91			11.42			10.92			10.26
Total risk-based capital		10.53			10.98			12.67			12.18			11.52
UCBH Holdings, Inc. and subsidiaries:
Tier 1 leverage		9.50			8.56			8.92			8.42			7.15
Tier 1 risk-based capital		9.86			10.26			11.98			11.69			9.70
Total risk-based capital		10.72			11.33			13.23			12.94			10.95

The decline in the risk-based capital ratios over the past two years relates primarily to the Company’s acquisitions, which increased risk-weighted assets, off-balance sheet exposures and goodwill at a rate that outpaced the growth in equity.

CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT ESTIMATES

The notes to the consolidated financial statements contain a summary of the Company’s significant accounting policies that are presented elsewhere in this Annual Report on Form 10-K. We believe that an understanding of certain policies, along with the related estimates that we are required to make in recording the financial transactions of the Company, is important to have a complete picture of the Company’s financial condition. In addition, in arriving at these estimates, we are required to make complex and subjective judgments, many of which include a high degree of uncertainty. The following is a discussion of these critical accounting policies and significant estimates related to these policies. We have discussed each of these accounting policies and the related estimates with the Audit Committee of the Company’s Board of Directors.

Allowance for Loan Losses

The allowance for loan losses represents our estimate of the losses that are inherent in the loans held in portfolio. UCB continuously monitors the quality of its loans held in portfolio and maintains an allowance for loan losses sufficient to absorb losses inherent in the loans held in portfolio. At December 31, 2006, UCB’s total allowance for loan losses was $62.0 million, which represented 0.93% of loans held in portfolio.

UCB’s methodology for assessing the adequacy of the allowance for loan losses includes the evaluation of two distinct components: a general allowance applied to loans held in portfolio categories as a whole and a specific reserve for loans deemed impaired. Loans that are determined to be impaired are excluded from the general allowance analysis of the loans held in portfolio and are assessed individually.

In determining the general allowance, UCB applies loss factors, differentiated by an internal credit risk rating system, to its major loan portfolio categories (based primarily on loan type). UCB’s risk rating system is applied at the individual loan level within each of the major loan portfolio categories. The credit quality of the loan portfolio is regularly assessed through ongoing review.

As of June 30, 2006, UCB completed its annual methodology review for establishing its loss factors for pass rated and criticized loans. The loss factors are developed from actual historic losses, and reflect comparative analysis with peer group loss rates and expected losses, which is in turn based on estimated probabilities of default and loss given default. Additionally, loss factors incorporate qualitative adjustments that reflect an assessment of internal and external influences on credit quality that have not yet been reflected in the historical loss or risk-rating data. These influences may include elements such as portfolio credit quality trends and changes in concentrations, growth, or credit underwriting. UCB’s qualitative adjustments also include an economic surcharge factor to adjust loss factors in recognition of the impact various macro-economic factors have on portfolio performance. The quantitative analysis also resulted in establishing a minimum loss factor for each of the major loan portfolio categories to better reflect minimum inherent loss in all portfolios including those with limited historic loss experience.

UCB assesses the loss factors that are applied to loan portfolio categories on a quarterly basis, and as part of the assessment concluded during the year ended December 31, 2006, UCB effected further refinements in the determination of certain loss factors. This refinement focused primarily on the continued development of the expected loss approach, and resulted in a revision and lowering of the loss factors applied to criticized and classified loans for all of the major loan portfolio categories. UCB also refined certain historical, qualitative and economic surcharge pass rate factors during 2006.

The second component of the allowance for loan losses, the specific reserve, applies to loans that are considered impaired. A loan is considered impaired when it is probable that UCB will not be able to collect all amounts due, including interest payments, in accordance with the loan’s contractual terms. Unless the loan is collateral-dependent, loan impairment is measured based on the present value of expected future cash flows that have been discounted at the loan’s effective interest rate. If the loan is collateral-dependent, either the observable market price or the current fair value of the collateral, reduced by estimated disposition costs, is used in place of the discounted cash flow analysis.

The overall allowance level declined $2.5 million from December 31, 2005. This change includes a $19.4 million reduction from changes in loss factors and a $10.2 million reduction from net loan charge-offs. These reductions to the allowance for loan losses were offset by a $7.3 million allowance for loan losses acquired

from Summit, $15.0 million from organic loan growth and $4.5 million from migrations in loan quality and repayments or sale of criticized loans.

UCB also estimates a reserve related to unfunded commitments and other off-balance sheet credit exposure. In assessing the adequacy of this reserve, UCB uses an approach similar to the approach used in the development of the allowance for loan losses. The reserve for unfunded commitments is included in other liabilities on the statement of financial position.

There are numerous components that enter into the evaluation of the allowance for loan losses. Some are quantitative while others required UCB to make qualitative judgments. Although UCB believes that its processes for determining an appropriate level for the allowance for loan losses adequately address all of the components to estimate inherent credit losses, the processes and their elements include features that may be susceptible to significant change. Any unfavorable differences between the actual outcome of credit-related events and UCB’s estimates and projections could require an additional allowance for credit losses, which would negatively impact the Company’s results of operations in future periods. As an example, if classified loans were to increase by 10% in the same proportion as the existing portfolio, the amount of the allowance for loan losses at December 31, 2006, would increase by approximately $377,000. This sensitivity analysis is hypothetical and has been provided only to indicate the potential impact that changes in the level of the criticized and classified loans may have on the allowance estimation process. UCB continually evaluates its allowance for loan losses methodology, seeking to refine and enhance this process as appropriate.

Loan Sales and Mortgage Service Rights

UCB periodically enters into transactions that transfer loans from UCB to third-party purchasers. In most instances, UCB continues to provide the servicing on these loans as a condition of the transfer. In addition, as part of these transactions, UCB may retain a cash reserve account or an interest-only strip, all of which are considered to be retained interests in the sold loans.

Whenever UCB initiates a loan transfer, the first determination that it must make in connection with the transaction is whether the transfer constitutes a sale under accounting principles generally accepted in the United States of America. If it does, the assets are removed from UCB’s consolidated statement of financial condition with a gain or loss recognized. Otherwise, the transfer is considered to be a financing, resulting in no gain or loss being recognized on the transfer and is recorded as a liability on UCB’s consolidated statement of financial condition. Generally, UCB’s loan transfers have been structured to meet the existing criteria for sale treatment.

UCB must also make assumptions to determine the amount of gain or loss resulting from a sale transaction as well as the subsequent carrying amount for the above-discussed servicing rights and retained interests. Initially, the total carrying value of the loans being sold is allocated among the loans themselves, the servicing rights and any retained interests based on their relative fair values. The purchase price is then compared to the amount assigned to the loans, and any difference is recorded as either a gain or a loss on the sale. In determining the fair values of the components of the transaction, UCB uses estimates and assumptions that are based on the facts surrounding each sale. Using different assumptions could affect the amount of gain or loss recognized on the transaction and, in turn, the Company’s results of operations.

UCB uses a third-party service to calculate the ongoing fair values of the servicing rights and retained interests subsequent to the transaction date. In valuing the servicing rights and retained interests, UCB stratifies its mortgage servicing rights based on the risk characteristics of the underlying loan pools. The fair value of mortgage servicing rights is determined by calculating the present value of estimated future net servicing cash flows, using assumptions of prepayments, defaults, ancillary income, servicing costs and discount rates that UCB believes market participants would use for similar assets. These value estimations require a number of assumptions, including:


	•	annualized prepayment speed of the loans;

	•	weighted average life of the loans;

	•	expected annual net credit loss rate; and

	•	discount rate for the residual cash flows.

If the carrying amounts of the servicing assets and residual interests are greater than their fair values, impairment is recognized through a valuation allowance for each type of asset.

Since the valuations are based upon estimates and assumptions, any unfavorable differences between the actual outcome of the future performance of the sold loans and our estimates and assumptions could result in future impairment in excess of that currently recorded. For example, if prepayment speeds were to change adversely in a static environment by 10%, the fair value of our mortgage servicing rights would decrease by $770,000. A 20% adverse change would reduce the fair value by $1.5 million. If the discount rate for the residual cash flows were to change adversely by 100 basis points, the fair value of our mortgage servicing rights would decrease by $442,000. A 200 basis points adverse change would reduce the fair value by $864,000.

The sensitivities discussed above are hypothetical and should be considered with caution. As is shown, changes in fair value based on variations in assumptions are not subject to simple extrapolation, as the relationship of the change in the assumption to the change in the fair value may not be linear. In addition, the effect of a variation in one assumption is in reality likely to cause changes in other assumptions, which could potentially magnify or counteract the sensitivities.

Goodwill

Goodwill arises from business acquisitions and represents the value attributable to the unidentifiable intangible elements in our acquired businesses. Goodwill is initially recorded at fair value and is subsequently evaluated at least annually for impairment in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 142. The Company performs this annual test as of September 30 of each year. Evaluations are also performed on a more frequent basis if events or circumstances indicate that an impairment could have taken place. Such events could include, among others, a significant adverse change in the business climate, an adverse action by a regulator, an unanticipated change in the competitive environment, and a decision to change the operations or dispose of a reporting unit.

The first step in this evaluation process is to determine if a potential impairment exists in any of the Company’s reporting units, and, if required from the results of this step, a second step measures the amount of any impairment loss. The computations required by both steps one and two call for us to make a number of estimates and assumptions.

In completing step one, we determine the fair value of the reporting unit that is being evaluated. There are a number of methods that we can use in completing this step, including market capitalization and the discounted present value of management’s estimates of future cash or income flows.

If step one indicates a potential impairment of a reporting unit, step two requires us to estimate the “implied fair value” of that unit. This process estimates the fair value of the unit’s individual assets and liabilities in the same manner as if a purchase of the reporting unit were taking place. To do this, we must determine the fair value of the assets, liabilities and identifiable intangible assets of the reporting unit based upon the best available information. If the value of goodwill calculated in step two is less than the carrying amount of goodwill for the reporting unit, an impairment is indicated and the carrying value of goodwill is written down to the calculated value.

Since estimates are an integral part of the impairment computations, changes in these estimates could have a significant impact on any calculated impairment amount. Factors that may significantly affect the estimates include, among others, changes in revenue growth trends, changes in stock prices, market values of mergers and acquisitions, and changes in industry or market sector conditions.

As of September 30, 2006, we performed our annual goodwill impairment evaluation for the entire organization. Step one was performed by using a market value approach for the reporting units. In the market value approach, we determined the Company’s market capitalization and compared that to the Company’s stockholders’ equity.

Upon completion of step one of the evaluation process, we concluded that no potential impairment existed for any of the Company’s reporting units. In reaching this conclusion, we determined that the fair value of goodwill exceeded the recorded value of goodwill. Since this evaluation process required us to make estimates and assumptions with regard to the fair value of the Company’s reporting units, actual values may differ significantly from these estimates. Such differences could result in future impairment of goodwill that would,

in turn, negatively impact the Company’s results of operations. However, had our estimated fair value of our reporting units been as much as 20% lower, there would still have been no indication of impairment for our reporting units.

Stock-Based Compensation

Effective January 1, 2006, the Company adopted SFAS No. 123(R), Share-Based Payment. Under SFAS No. 123(R), the total fair value of the stock options awards is expensed ratably over the service period of the employees receiving the awards. In adopting SFAS No. 123(R), the Company used the modified prospective method of adoption. Under this adoption method, compensation expense recognized subsequent to adoption will include: (a) compensation costs for all share-based payments granted prior to but not yet vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS No. 123, Accounting for Stock-Based Compensation, and (b) compensation costs for all share-based payments granted subsequent to January 1, 2006, based on the grant date fair value estimated in accordance with the provisions of SFAS No. 123(R).

Prior to January 1, 2006, the Company accounted for employee stock-based compensation using the intrinsic value method in accordance with Accounting Principles Board (the “APB”) Opinion No. 25, Accounting for Stock Issued to Employees, as allowed by SFAS No. 123, as amended by SFAS No. 148, Accounting for Stock-Based Compensation — Transition and Disclosure. Under the intrinsic value method, no stock-based employee compensation cost is recorded, provided the stock options are granted with an exercise price equal to or greater than the market value of the underlying common stock on the date of grant. No share-based employee compensation cost has been reflected in the Company’s net income prior to the adoption of SFAS No. 123(R).

In estimating the fair value of each stock option award on their respective grant dates, we use the Black-Scholes pricing model. The following are the average assumptions that were incorporated in the model for the years ended December 31, 2006, 2005 and 2004:


	2006			2005			2004

Dividend yield		0.61	%		0.60	%		0.44	%
Volatility		29.88	%		29.03	%		21.99	%
Risk-free interest rate		4.72	%		4.22	%		4.24	%
Expected lives (years)		7.47			7.50			7.56

The expected life of the options is based on historical data of UCBH’s actual experience with the options it has granted and represents the period of time that the options granted are expected to be outstanding. This data includes employees’ expected exercise and post-vesting employment termination behaviors. The expected stock price volatility is estimated using the historical volatility of UCBH’s common stock and other factors. The historical volatility covers a period that corresponds to the expected life of the options. The expected dividend yield is based on the estimated annual dividends that UCBH expects to pay over the expected life of the options as a percentage of the market value of UCBH’s stock as of the grant date. The risk-free interest rate for the expected life of the options granted is based on the U.S. Treasury yield curve in effect as of the grant date. The increase in average volatility rate is a result of UCBH’s stock price being more unstable during the year ended December 31, 2006, as compared to same period in 2005. The increase in the risk free interest rate reflects the higher U.S. Treasury yields for the year ended December 31, 2006, as compared to the same period in 2005.

The fair values assigned to UCBH’s stock options are based upon estimates and assumptions. In accordance with SFAS No. 123(R), once established, the fair value does not change unless the option grant is modified subsequent to its issuance. If actual results are not consistent with our estimates and assumptions, we may be required to record additional stock-based compensation expense or income tax expense, which could affect our results of operations. However, we believe that given the procedures that we have followed in determining the assumptions used in the estimation process, the fair values of the options are appropriate.

Effective December 27, 2005, UCBH’s Board of Directors authorized UCBH to accelerate the vesting of all unvested options associated with grants issued on or prior to October 26, 2005. The decision to accelerate the vesting of the options, which UCBH believes was in the best interests of its stockholders, was made primarily to reduce the impact of recording approximately $16.4 million of noncash compensation expense, net of taxes, over

the period of 2006 through 2008 upon the implementation of SFAS No. 123(R). The options acceleration was treated as a modification of the terms of the existing option grants, thereby requiring a new value measurement as of the acceleration date. Any increase between the newly measured value and the original grant price is viewed as additional intrinsic value and may need to be included in future compensation expense under certain conditions related to prospective employee terminations.

Income Taxes

The provision for income taxes is based on income reported for financial statement purposes and differs from the amount of taxes currently payable, because certain income and expense items are reported for financial statement purposes in different periods than those for tax reporting purposes.

The Company accounts for income taxes using the asset and liability approach, the objective of which is to establish deferred tax assets and liabilities for the temporary differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled. A valuation allowance is established for deferred tax assets if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. A valuation allowance is established, when necessary, to reduce the deferred tax assets to the amount that is more likely than not to be realized.

As part of the computation of the income tax provision, estimates and assumptions must be made regarding the deductibility of certain expenses and the treatment of tax contingencies. There is a possibility that these estimates and assumption may be disallowed as part of an audit by the various taxing authorities that the Company is subject to. Any differences between items taken as deductions in our tax provision computations and those allowed by the taxing authorities could result in additional income tax expense in future periods.

Asset Valuation

Certain assets of the Company are recorded on the consolidated balance sheet at fair value. Included among these assets are goodwill, mortgage servicing rights, which are discussed separately in this “Critical Accounting Policies and Significant Estimates” discussion, securities classified as available for sale, other intangible assets, such as core deposit intangibles and loans that are held-for-sale. In determining the fair values of these assets, market values may not be readily available and we must make estimates to arrive at a value to record. These estimates may change from period to period as they are affected by changes in interest rates or other market conditions. As a result, the values that we have assigned to these assets may not necessarily represent amounts that could be ultimately realized upon their disposal.

Available for Sale Securities. Securities that are held to meet investment objectives, such as interest rate risk and liquidity management, and may be sold to implement management strategies are classified as available for sale. The fair values of most securities classified as available for sale are based on quoted market prices. If quoted market prices are unavailable, fair values are extrapolated from the quoted prices of similar instruments. Any declines in fair value that are determined to be other-than-temporary result in a write-down of the security and a corresponding charge to noninterest expense.

Core Deposit Intangibles. Core deposit intangibles are created as a result of the Company’s acquisition of another financial institution. They represent the value that the acquired deposits have as a source of funding when compared to alternative funding sources, such as borrowings. When acquired, core deposit intangibles are valued by an outside service by computing the present value of the expected cost savings attributable to the core deposit funding relative to an alternative source of funding. Subsequent to the initial recording, core deposit intangibles are amortized based upon the expected runoff rate of the related deposits. In addition, the value of core deposit intangibles is reviewed each quarter for possible impairment by comparing actual deposit runoff to estimated runoff. Should the actual runoff exceed the estimate, the core deposit intangible is written down to the adjusted amount through a charge to noninterest expense. At that point, the runoff estimates are adjusted to reflect the actual runoff and the new estimates are used for subsequent amortization.

Loans Held For Sale. A loan is classified as being held-for-sale when it has been identified as either available to be sold or when it has been included in a pool of loans that are awaiting sale. During 2006, loans held for sale

included SBA loans, commercial real estate loans and multifamily loans. As of December 31, 2006, only commercial real estate loans and SBA loans were included in the portfolio. Loans held for sale are valued at the lower of cost or fair market value. Unless otherwise indicated, loans held for sale are not included in any of the disclosures or discussions that address the loan portfolio, including the allowance for loan losses, outstanding balances and portfolio performance indicators for loans held in portfolio.

Whenever UCB determines that a loan is for sale, the loan is transferred from loans held in portfolio to loans held for sale. At that time, UCB computes the market value of the loan and compares that value with the carrying amount of the loan. If the market value is less than the carrying amount, UCB writes down the carrying amount to the market value through a charge to the income statement.

UCB uses outside service companies to calculate the market value of its held for sale loans. For SBA loans, the service performing the valuation uses market prices for similar loans to determine the value of the non-guaranteed portion of each loan. For commercial loans, the outside service uses a collateralized mortgage-backed securities pricing matrix in which loans are converted to an equivalent investment using various key factors associated with the loan. These factors include the contractual interest rate, maturity date, loan to value ratio, and current credit risk rating of the loan, among others. The equivalent investment is then given a market value rating and an associated premium or discount is assigned to the loan. The related estimated selling costs associated with each loan are also included in the valuation calculation.

Recent Accounting Pronouncements

Fair Value Option for Financial Assets and Financial Liabilities

In February 2007, the Financial Accounting Standards Board (the “FASB”) issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities — Including an Amendment of FASB Statement No. 115. SFAS No. 159 provides entities with an option to report selected financial assets and liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. The Company is currently evaluating the impact that adopting SFAS No. 159 will have on its financial statements.

Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans

In September 2006, the FASB issued SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans — an amendment of FASB Statements No. 87, 88, 106 and 132(R). SFAS No. 158 requires an employer to recognize the overfunded or underfunded status of a defined benefit postretirement plan as an asset or liability in its statement of financial position and recognize changes in the funded status in the year in which the changes occur. SFAS No. 158 is effective for fiscal years ending after December 15, 2006. The Company has no defined benefit pension plan and the adoption of SFAS No. 158 did not have a material effect on the Company’s consolidated financial position, results of operations or cash flows.

Fair Value Measurements

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. SFAS No. 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. SFAS No. 157 clarifies the principle that fair value should be based on the assumptions market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. Under the standard, fair value measurements would be separately disclosed by level within the fair value hierarchy. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact that adopting SFAS No. 157 will have on its financial statements.

Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements

provides interpretive guidance on how the effects of the carryover or reversal of prior year misstatements should be considered in quantifying a current year misstatement. The SEC staff believes that registrants should quantify errors using both a balance sheet and income statement approach and evaluate whether either approach results in quantifying a misstatement that, when all relevant quantitative and qualitative factors considered, is material. SAB No. 108 is effective for fiscal years ending on or after November 15, 2006, with early application encouraged. The adoption of SAB No. 108 did not have a material effect on its consolidated financial position, results of operations or cash flows.

Accounting for Uncertainty in Income Taxes

In July 2006, the FASB issued FASB Interpretation No. (“FIN”) 48, Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109. FIN 48 clarifies the accounting for income tax uncertainties that have been recognized in an enterprise’s financial statements in accordance with SFAS No. 109, Accounting for Income Taxes. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 requires that the Company recognize in the financial statements the impact of a tax position, if that position is more likely than not of being sustained on audit, based on the technical merits of the position. FIN 48 also provides additional guidance on accounting for tax uncertainties, including derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The provisions of FIN 48 are effective for fiscal years beginning after December 15, 2006, with the cumulative effect of the change in accounting principle recorded as an adjustment to opening retained earnings. The Company has performed an assessment of the effects of adopting FIN 48 and has determined that such adoption will result in a decrease in goodwill, with an offsetting increase in current tax receivables, of approximately $2.6 million.

Accounting for Servicing of Financial Assets

In March 2006, the FASB issued SFAS No. 156, Accounting for Servicing of Financial Assets, an amendment of FASB Statement No. 140. SFAS No. 156 permits entities to choose either to measure servicing rights subsequent to initial valuation at fair value and report changes in fair value in earnings or to amortize the servicing rights in proportion to and over the estimated net servicing income or loss and assess the servicing rights for impairment or the need for an increased obligation. SFAS No. 156 also clarifies when a servicer should separately recognize servicing assets and liabilities, requires that all separately recognized assets and liabilities be initially measured at fair value, if practicable, permits a one-time reclassification of available for sales securities to trading securities by an entity with recognized servicing rights and requires additional disclosures for all separately recognized servicing assets and liabilities. SFAS No. 156 is effective as of the beginning of an entity’s fiscal year that begins after September 15, 2006. The Company does not expect the adoption of SFAS No. 156 will have a material impact on its consolidated financial position, results of operations or cash flows.

Accounting for Certain Hybrid Financial Instruments

In February 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments, an amendment of FASB Statements No. 133 and 140. SFAS No. 155 permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation; clarifies which interest-only strips and principal-only strips are not subject to the requirements of SFAS No. 133; establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation; clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives; and amends SFAS No. 140 to eliminate the prohibition on a qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. The new standard is effective for all financial instruments acquired or issued after the beginning of the Company’s first fiscal year that begins after September 15, 2006. The Company does not expect the adoption of SFAS No. 155 will have a material impact on its consolidated financial position, results of operations or cash flows.

RESULTS OF OPERATIONS

Financial Highlights (Dollars in Thousands, Except Per Share Data)


	Year Ended December 31,												Year Ended December 31,
							Increase (Decrease)												Increase (Decrease)
	2006			2005			Amount			%			2005			2004			Amount			%
Operating Data:
Interest & dividend income:
Loans	$	448,650		$	333,159		$	115,491			34.67		$	333,159		$	226,292		$	106,867			47.23
Investment & mortgage-backed securities:
Taxable		62,418			55,369			7,049			12.73			55,369			62,674			(7,305	)		(11.66	)
Tax-exempt		10,717			10,617			100			0.94			10,617			9,477			1,140			12.03
FHLB stock		3,006			1,134			1,872			165.08			1,134			972			162			16.67
Funds sold and due from bank		5,707			2,121			3,586			169.07			2,121			649			1,472			226.81
Securities purchased under agreements to resell		4,515			—			4,515			—			—			—			—			—

Total interest & dividend income		535,013			402,400			132,613			32.96			402,400			300,064			102,336			34.10

Interest expense:
Deposits		210,059			123,317			86,742			70.34			123,317			67,267			56,050			83.32
Securities sold under agreements to repurchase		5,313			—			5,313			—			—			—			—			—
Short-term borrowings and federal funds purchased		10,178			10,605			(427	)		(4.03	)		10,605			2,165			8,440			389.84
Subordinated debentures		12,106			9,353			2,753			29.43			9,353			8,185			1,168			14.27
Long-term borrowings		33,424			18,635			14,789			79.36			18,635			14,966			3,669			24.52

Total interest expense		270,180			161,910			109,170			67.43			161,910			92,583			69,327			74.88

Net interest income		263,933			240,490			23,443			9.75			240,490			207,481			33,009			15.91
Provision for loan losses		3,842			6,091			(2,249	)		(36.92	)		6,091			4,201			1,890			44.99

Net interest income after provision for loan losses		260,091			234,399			25,692			10.96			234,399			203,280			31,119			15.31

Noninterest income:
Commercial banking fees		15,444			10,607			4,837			45.60			10,607			8,254			2,353			28.51
Service charges on deposits		3,722			3,038			684			22.51			3,038			2,654			384			14.47
Gain (loss) on sale of securities, net		206			(5	)		211			(4,220.00	)		(5	)		12,713			(12,718	)		(100.04	)
Gain on sale of SBA loans, net		2,930			3,356			(426	)		(12.69	)		3,356			1,463			1,893			129.39
Gain on sale of commercial & multifamily real estate loans, net		17,812			12,207			5,605			45.92			12,207			7,732			4,475			57.88
Lower of cost or market adjustment on loans held for sale		76			(1,152	)		1,228			(106.60	)		(1,152	)		—			(1,152	)		—
Equity loss in other equity investments		(1,106	)		(2,296	)		1,190			(51.83	)		(2,296	)		(2,210	)		(86	)		3.89
Acquisition termination fee		5,000			—			5,000			—			—			—			—			—
Other fees		3,059			929			2,130			229.28			929			271			658			242.80

Total noninterest income		47,143			26,684			20,459			76.67			26,684			30,877			(4,193	)		(13.58	)

Noninterest expense:
Personnel		88,616			60,152			28,464			47.32			60,152			50,931			9,221			18.10
Occupancy		16,189			12,238			3,951			32.28			12,238			10,164			2,074			20.41
Data processing		9,890			6,847			3,043			44.44			6,847			5,896			951			16.13
Furniture & equipment		7,100			6,534			566			8.66			6,534			6,458			76			1.18
Professional fees & contracted services		9,855			10,763			(908	)		(8.44	)		10,763			7,496			3,267			43.58
Deposit insurance		784			742			42			5.66			742			774			(32	)		(4.13	)
Communication		1,071			955			116			12.15			955			1,287			(332	)		(25.80	)
Core deposit intangible amortization		2,342			1,345			997			74.13			1,345			1,282			63			4.91
Loss (gain) on extinguishment of subordinated debentures & borrowings		(360	)		1,246			(1,606	)		(128.89	)		1,246			—			1,246			—
Other general & administrative		19,933			16,091			3,842			23.88			16,091			14,865			1,226			8.25

Total noninterest expense		155,420			116,913			38,507			32.94			116,913			99,153			17,760			17.91

Income before income tax expense		151,814			144,170			7,644			5.30			144,170			135,004			9,166			6.79
Income tax expense		50,937			46,344			4,593			9.91			46,344			49,401			(3,057	)		(6.19	)

Net income	$	100,877		$	97,826		$	3,051			3.12		$	97,826		$	85,603		$	12,223			14.28

Per Share Data:
Basic earnings per share(1)	$	1.07		$	1.06		$	0.01			0.94		$	1.06		$	0.95		$	0.11			11.58
Diluted earnings per share(1)		1.03			1.02			0.01			0.98			1.02			0.90			0.12			13.33
Dividends declared per share(1)		0.120			0.100			0.020			20.00			0.100			0.080			0.020			25.00
Operating Ratios and Other Data:
Return on average assets		1.23	%		1.40	%		(17	)bp*		(12.14	)		1.40	%		1.44	%		(4	)bp*		(2.78	)
Return on average equity		15.59			18.42			(283	)		(15.36	)		18.42			18.92			(50	)		(2.64	)
Efficiency ratio(2)		49.96			43.76			620			14.17			43.76			41.60			216			5.19
Noninterest expense to average assets		1.89			1.68			21			12.50			1.68			1.67			1			0.60
Average equity to average assets		7.88			7.61			27			3.55			7.61			7.62			(1	)		(0.13	)
Dividend payout ratio(3)		11.65			9.80			185			18.88			9.80			8.89			91			10.24
Net loan charge-offs to average loans held in portfolio		0.17			0.03			14			466.67			0.03			0.11			(8	)		(72.73	)
Interest rate spread(4)		2.98			3.33			(35	)		(10.51	)		3.33			3.51			(18	)		(5.13	)
Net interest margin(4)		3.45			3.66			(21	)		(5.74	)		3.66			3.72			(6	)		(1.61	)


(1)		The Company completed a two-for-one stock split during the year ended December 31, 2005. Accordingly, for the year ended December 31, 2004, basic earnings per share, diluted earnings per share and dividends per share have been restated to reflect the effect of the stock split.

(2)		Represents noninterest expense divided by the total of our net interest income before provision for loan losses and our noninterest income.

(3)		Dividends declared per share as a percentage of diluted earnings per share.

(4)		Calculated on a tax equivalent basis. Interest income from tax-exempt investment securities calculated on a tax equivalent basis was $16.5 million, $15.8 million and $14.8 million for the years ended December 31, 2006, 2005 and 2004, respectively.

*		Basis point

Year Ended December 31, 2006, Compared to Year Ended December 31, 2005

The consolidated net income of the Company for the year ended December 31, 2006, increased by $3.1 million, or 3.1%, to $100.9 million, compared to $97.8 million for the same period in 2005. The ROE and ROA ratios for the year ended December 31, 2006, were 15.59% and 1.23%, respectively. These amounts compare with the ROE ratio of 18.42% and the ROA ratio of 1.40% for the year ended December 31, 2005. The declines in the ratios are reflective of the growth rates of assets and equity that exceeded the growth in net income, primarily as a result of the Company’s expansion and acquisitions that were consummated in the latter part of 2006. Additionally, a tax benefit of $3.9 million associated with the repatriation of earnings from a foreign subsidiary contributed to a higher ROE and ROA for 2005. The efficiency ratio was 49.96% for the year ended December 31, 2006, compared with 43.76% for the same period in 2005. The higher efficiency ratio increase is reflective of the growth in noninterest expense that exceeded the growth in net interest income and noninterest income, resulting from the Company’s expansion and acquisitions. Diluted earnings per share were $1.03 and $1.02 for the years ended December 31, 2006 and 2005, respectively.

Net Interest Income and Net Interest Margin. The increase in net interest income for the year ended December 31, 2006, compared to the same period in 2005 was principally due to a $1.1 billion increase in average interest-earning assets, which resulted primarily from organic loan growth along with the Pacifica Bancorp, Inc. (“Pacifica”) and Asian American Bank & Trust Company (“AABT”) acquisitions. The average cost of deposits increased 115 basis points from 2.22% for the year ended December 31, 2005, to 3.37% for the year ended December 31, 2006, as a result of an increase in market interest rates during the past twelve months, the change in the composition of deposits and the procurement of certificates of deposit from brokers. These factors were partially offset by a 91 basis point increase in average loan yields reflecting the repricing of adjustable-rate loans as market interest rate indices continued to rise. The yield on taxable securities also increased for the year ended December 31, 2006, compared to the same period in 2005 as a result of purchases of higher-yielding securities during 2006.

The following table reflects the distribution of average assets, liabilities and stockholders’ equity, as well as the amounts of interest income and resultant yields earned from average interest-earning assets, and the amounts of interest expense and resultant rates paid on average interest-bearing liabilities for the year ended December 31, 2006 and 2005 (dollars in thousands):


	2006								2005
						Average								Average
				Interest		Yields						Interest		Yields
	Average			Income/		Earned/			Average			Income/		Earned/
	Balance			Expense		Rates Paid			Balance			Expense		Rates Paid

Nontaxable equivalent basis:
Interest-earning assets
Loans(1)(2)	$	6,079,574		$	448,650		7.38	%	$	5,148,952		$	333,159		6.47	%
Taxable securities(3)		1,296,231			62,418		4.82			1,220,897			55,369		4.54
Tax-exempt securities(3)		224,295			10,717		4.78			222,196			10,617		4.78
FHLB Stock		48,645			3,006		6.18			67,611			1,134		1.68
Securities purchased under agreements to resell		60,822			4,515		7.42			—			—		—
Other		117,096			5,707		4.87			56,179			2,121		3.78

Total interest-earning assets		7,826,663			535,013		6.84			6,715,835			402,400		5.99
Noninterest-earning assets		382,187			—					259,142			—

Total assets	$	8,208,850		$	535,013				$	6,974,977		$	402,400

Interest-bearing liabilities:
Deposits:
NOW, checking and money market accounts	$	1,300,150		$	41,282		3.18		$	1,095,964		$	20,572		1.88
Savings accounts		713,068			9,527		1.34			841,271			9,336		1.11
Time deposits		3,677,491			159,250		4.33			3,169,956			93,409		2.95

Total interest-bearing deposits		5,690,709			210,059		3.69			5,107,191			123,317		2.41
Securities sold under agreements to repurchase		152,059			5,313		3.49			—			—		—
Short-term borrowings and federal funds purchased		224,883			10,178		4.53			304,251			10,605		3.49
Long- term borrowings		683,978			33,424		4.89			361,411			18,635		5.16
Subordinated debentures		152,136			12,106		7.96			131,901			9,353		7.09

Total interest-bearing liabilities		6,903,765			271,080		3.93			5,904,754			161,910		2.74
Noninterest-bearing deposits		544,910			—					448,301			—
Other noninterest-bearing liabilities		113,089			—					90,800			—
Stockholders’ equity		647,086			—					531,122			—

Total liabilities and stockholders’ equity	$	8,208,850		$	271,080				$	6,974,977		$	161,910

Net interest-earning assets/net interest income/net interest rate spread(4)	$	922,898		$	263,933		2.91	%	$	811,081		$	240,490		3.25	%

Net interest margin(5)							3.37	%							3.58	%

Ratio of interest-earning assets to interest-bearing liabilities		1.13	x							1.14	x

Tax equivalent basis:
Total interest-earning assets(6)	$	7,826,663		$	540,784		6.91	%	$	6,715,835		$	407,562		6.07	%
Total interest-bearing liabilities		6,903,765			271,080		3.93			5,904,754			161,910		2.74

Net interest-earning assets/net interest income/net interest rate spread(4)	$	922,898		$	269,704		2.98	%	$	811,081		$	245,652		3.33	%

Net interest margin(5)							3.45	%							3.66	%

Average cost of deposits:
Total interest-bearing deposits	$	5,690,709		$	210,059		3.69	%	$	5,107,191		$	123,317		2.41	%
Noninterest-bearing deposits		544,910			—					448,301			—

Total deposits	$	6,235,619		$	210,059		3.37	%	$	5,555,492		$	123,317		2.22	%


(1)		Nonaccrual loans are included in the table for computation purposes; however, interest for such loans is recognized on a cash basis.

(2)		Average loans include loans held for sale.


(3)		Average yield on investment securities is computed using historical cost balances; the yield information does not give effect to changes in fair value that are reflected as a component of stockholders’ equity.

(4)		Interest rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.

(5)		Net interest margin represents net interest income divided by average interest-earning assets.

(6)		Interest income from tax-exempt securities has been adjusted to a tax equivalent basis using a statutory federal income tax rate of 35.0%. Interest income from tax-exempt investment securities calculated on a tax equivalent basis was $16.5 million and $15.8 million for the years ended December 31, 2006 and 2005, respectively.

The decline in the net interest margin for the year ended December 31, 2006, compared to same period in 2005 reflects the impact of increased costs of money market accounts and certificates of deposit resulting from higher market interest rates, the runoff of savings accounts due to the current market interest rates, the change in the composition of deposits and the procurement of costlier certificates of deposit from brokers, all of which were partially offset by higher loan yields.

The net interest margin, calculated on a tax equivalent basis, was 3.45% for the year ended December 31, 2006, as compared to 3.66% for 2005. Certain interest-earning assets of the Company qualify for federal tax exemptions or credits. The net interest margin, calculated on a tax equivalent basis, considers the tax benefit derived from these assets. The net interest margin decline reflects the impact of increased costs of money market accounts and certificates of deposit resulting from higher market interest rates, the change in the composition of deposits and the procurement of costlier certificates of deposit from brokers partially offset by higher loan yields.

Average interest-earning assets for the year ended December 31, 2006, increased 16.5% compared to the year ended December 31, 2005, primarily as a result of organic construction and business loan growth and the assets acquired from the Pacifica and AABT acquisitions. Average outstanding loans increased by $930.6 million for the year ended December 31, 2006, from the year ended December 31, 2005, principally as a result of UCB’s continued focus on commercial lending activities. Average commercial loan balances increased 19.2% compared to the corresponding period of 2005, primarily due to UCB’s past emphasis on commercial real estate, continued emphasis on commercial business loans and expansion of its Hong Kong branch. Average consumer loans for the year ended December 31, 2006, increased $48.9 million, or 8.7%, compared to the same period in 2005. As of December 31, 2006, total loans represented 65.5% of total assets. New loan commitments of $3.51 billion for the year ended December 31, 2006, were comprised of $3.38 billion in commercial loan commitments and $128.6 million in consumer loan commitments.

Average investment and mortgage-backed securities for the year ended December 31, 2006, increased $77.4 million, or 5.4%, from the year ended December 31, 2005. In preparation for the closing of the acquisitions of Summit and The Chinese American Bank, the Company increased its securities portfolio in the fourth quarter of 2006. The Company anticipates a reduction in the securities portfolio during the first and early second quarter of 2007 as Summit is integrated into UCB and as The Chinese American Bank acquisition closes. One of the Company’s long-term goals is to reduce the investment and mortgage-backed securities portfolio to a range of 10% to 15% of total assets.

Average total deposits increased $680.1 million, or 12.2%, for the year ended December 31, 2006, from the year ended December 31, 2005, reflecting UCB’s ongoing focus on the generation of commercial and consumer demand deposits. In addition, UCB also had $179.3 million in brokered deposits at December 31, 2006. Average interest-bearing deposits increased to $5.69 billion for the year ended December 31, 2006, up 11.4% from the year ended December 31, 2005, and average noninterest-bearing deposits increased to $544.9 million, or 21.6%, for the year ended December 31, 2006, compared to the year ended December 31, 2005.

The changes in interest income and interest expense for the major categories of interest-earning assets and interest-bearing liabilities, and the amount of change that is attributable to volume and rate changes by comparing the years ended December 31, 2006 to 2005, are as follows (dollars in thousands):


	Year Ended December 31, 2006 Compared to 2005
	Changes due to
	Volume			Rate			Total

Interest income:
Loans	$	60,215		$	55,276		$	115,491
Taxable securities		3,416			3,633			7,049
Tax-exempt securities		100			—			100
FHLB stock		(318	)		2,190			1,872
Securities purchased under agreements to resell		—			4,515			4,515
Other		2,300			1,286			3,586

Total interest income on interest-earning assets		65,713			66,900			132,613

Interest expense:
Deposits:
NOW, checking, and money market accounts		3,833			16,877			20,710
Savings accounts		(1,423	)		1,614			191
Time deposits		14,956			50,885			65,841
Securities sold under agreements to repurchase		—			5,313			5,313
Short-term borrowings and federal funds purchased		(2,766	)		2,339			(427	)
Long-term borrowings		16,632			(1,843	)		14,789
Subordinated debentures		1,435			1,318			2,753

Total interest expense on interest-bearing liabilities		32,667			76,503			109,170

Increase (decrease) in net interest income	$	33,046		$	(9,603	)	$	23,443

Provision for Loan Losses. The provision for loan losses for 2006 is reflective of the general improvements in credit quality, loan growth, changes in the mix of the loan portfolio, reductions in classified loans, and charge-offs, all of which combined resulted in a net reduction in the provision compared with 2005. See “Credit Risk Management” for more information on how we determine the appropriate level for the allowances for loan losses and unfunded lending commitments.

Noninterest Income. Noninterest income increased by $20.5 million, or 76.7%, for the year ended December 31, 2006, compared to the same period in 2005. The increase included a $5.0 million acquisition termination fee from Great Eastern Bank and $1.6 million of interest income related to refunds from amended income tax returns. Commercial banking fees increased to $15.4 million for the year ended December 31, 2006, compared to $10.6 million for the same period in 2005. The increase reflects the growth in trade finance activity, merchant card activity, other commercial banking fees and fees from UCB Investment Services, Inc. Gain on sale of multifamily and commercial real estate loans increased to $17.8 million for the year ended December 31, 2006, from $12.2 million for the same period in 2005 as a result of increased sales volume and higher pricing spreads. The lower of cost or market adjustment related to loans held for sale reflects a $76,000 recovery related to previously recognized write down of loans held for sale to market for the year ended December 31, 2006, compared to a $1.2 million loss related to multifamily real estate loans transferred from held for sale to held in portfolio for the same period in 2005. Additionally, UCB had a reduction of equity losses in other equity investments to $1.1 million for the year ended December 31, 2006, from $2.3 million for the same period in 2005 primarily attributable to $998,000 of equity income from CRA qualified investments.

Noninterest Expense. Noninterest expense increased $38.5 million, or 32.9%, for the year ended December 31, 2006, compared to the same period in 2005. For the year ended December 31, 2006, personnel expenses increased $28.5 million, or 47.3%, from the same period in 2005 due to additional staffing required to

support the growth of UCB’s commercial banking business, the opening of new branches, the additional staffing resulting from the Pacifica and AABT acquisitions and the expansion of UCB’s infrastructure to support a larger and growing organization. Additionally, severance and retention bonuses related to the Pacifica and AABT acquisitions and other incentive bonuses totaling $5.5 million were recognized during the year ended December 31, 2006. Personnel expenses also included $2.2 million in stock compensation expense related to the January 1, 2006, adoption of SFAS No. 123(R). Occupancy expenses increased $4.0 million, or 32.3%, for the year ended December 31, 2006, compared to the same period in 2005 as a result of the opening of new branches and the operations of Pacifica and AABT. Data processing expenses increased $3.0 million, or 44.4%, for the year ended December 31, 2006, compared to same period in 2005 primarily as a result of $714,000 related to the conversion of the loan and deposit systems at Pacifica and AABT. Core deposit intangible amortization increased $997,000, or 74.1%, for the year ended December 31, 2006, compared to the same period in 2005 as a result of the additional amortization of the core deposit intangibles associated with the Pacifica and AABT acquisitions. Other general and administrative expenses increased by $3.8 million, or 23.9%, for the year ended December 31, 2006, compared to the same period in 2005 primarily as a result of increased advertising expenses related to UCB’s expansion, market promotions, merchant card expenses and foreign exchange losses. All of these increases were partially offset by a gain on extinguishment of borrowings of $360,000 for the year ended December 31, 2006, as compared to a loss on extinguishment of subordinated debentures and borrowings of $1.2 million for the year ended December 31, 2005, which was primarily from the write-off of unamortized subordinated debenture issuance costs.

Income Tax Expense. The effective tax rate for the year ended December 31, 2006, was 33.6%, compared with 32.1% for the year ended December 31, 2005. The effective tax rate for the year ended December 31, 2006, reflects an income tax benefit of $4.0 million related to additional Enterprise Zone tax benefit for the years ending prior to December 31, 2006. The effective tax rate for the year ended December 31, 2005, reflects an income tax benefit of $3.9 million related to UCB’s decision to repatriate earnings from a foreign subsidiary. The effective tax rates are generally lower than the combined federal and state statutory rate of 42.0%, primarily due to federal and state tax credits and incentives, and tax-exempt income.

Year Ended December 31, 2005, Compared to Year Ended December 31, 2004

The consolidated net income of the Company for the year ended December 31, 2005, increased by $12.2 million, or 14.3%, to $97.8 million, compared to $85.6 million for the year ended December 31, 2004. The ROE and ROA ratios for the year ended December 31, 2005, were 18.42% and 1.40%, respectively. These amounts compare with the ROE and ROA ratios of 18.92% and 1.44%, respectively, for the year ended December 31, 2004. These lower ratios are reflective of the increases in the growth rates of assets and equity that exceeded the growth in net income. The efficiency ratio was 43.76% for the year ended December 31, 2005, compared with 41.60% for the same period in 2004. The efficiency ratio increased primarily due to higher personnel costs, occupancy costs, professional fees and contracted services, and the loss on extinguishment of subordinated debentures for the year ended December 31, 2005, compared with the year ended December 31, 2004. Diluted earnings per share were $1.02 for the year ended December 31, 2005, compared with $0.90 on a post-split basis for the year ended December 31, 2004.

Net Interest Income and Net Interest Margin. The increase in net interest income was principally due to a $998.2 million increase in average interest-earning assets, which resulted primarily from organic loan growth. The average cost of deposits increased 83 basis points from 1.39% for the year ended December 31, 2004, to 2.22% for the year ended December 31, 2005, as a result of an increase in market interest rates during the past twelve months, the change in the composition of deposits and the procurement of certificates of deposit from brokers. These factors were partially offset by a 92 basis point increase in average loan yields from 5.55% for the year ended December 31, 2004, to 6.47% for the year ended December 31, 2005. The increase in loan yield reflects repricing of adjustable-rate loans resulting from higher market interest rate indices. The taxable securities yield decreased from 4.58% for the year ended December 31, 2004, to 4.54% for the year ended December 31, 2005. The tax-exempt securities yields decreased from 4.79% for the year ended December 31, 2004, to 4.78% for the year ended December 31, 2005. The decrease in the taxable securities yields is attributable to lower-yielding securities.

The following table reflects the distribution of average assets and liabilities, and stockholders’ equity, as well as the total dollar amounts of interest income from average interest-earning assets, and the resultant yields and dollar amounts of interest expense of average interest-bearing liabilities, expressed both in dollars and rates for the years ended December 31, 2005 and 2004 (dollars in thousands):


	2005								2004
						Average							Average
				Interest		Yields					Interest		Yields
	Average			Income/		Earned/			Average		Income/		Earned/
	Balance			Expense		Rates Paid			Balance		Expense		Rates Paid

Interest-earning assets
Loans(1)(2)	$	5,148,952		$	333,159		6.47	%	$	4,077,799	$	226,292		5.55	%
Taxable securities(3)		1,220,897			55,369		4.54			1,367,512		62,674		4.58
Tax-exempt securities(3)		222,196			10,617		4.78			197,885		9,477		4.79
FHLB stock		67,611			1,134		1.68			43,643		972		2.23
Other		56,179			2,121		3.78			30,770		649		2.11

Total interest-earning assets		6,715,835			402,400		5.99			5,717,609		300,064		5.25
Noninterest-earning assets		259,142			—					222,289		—

Total assets	$	6,974,977		$	402,400				$	5,939,898	$	300,064

Interest-bearing liabilities:
Deposits:
NOW, checking and money market accounts	$	1,095,964		$	20,572		1.88	%	$	827,861	$	9,295		1.12	%
Savings accounts		841,271			9,336		1.11			921,106		8,451		0.92
Time deposits		3,169,956			93,409		2.95			2,699,287		49,521		1.83

Total interest-bearing deposits		5,107,191			123,317		2.41			4,448,254		67,267		1.51
Short-term borrowings and federal funds purchased		304,251			10,605		3.49			172,225		2,165		1.26
Long- term borrowings		361,411			18,635		5.16			299,252		14,966		5.00
Subordinated debentures		131,901			9,353		7.09			136,000		8,185		6.02

Total interest-bearing liabilities		5,904,754			161,910		2.74			5,055,731		92,583		1.83
Noninterest-bearing deposits		448,301			—					374,269		—
Other noninterest-bearing liabilities		90,800			—					57,445		—
Stockholders’ equity		531,122			—					452,453		—

Total liabilities and stockholders’ equity	$	6,974,977		$	161,910				$	5,939,898	$	92,583

Net interest-earning assets/net interest income/net interest rate spread(4)	$	811,081		$	240,490		3.25	%	$	661,878	$	207,481		3.42	%

Net interest margin(5)							3.58	%						3.63	%

Ratio of interest-earning assets to interest-bearing liabilities		1.14	x							1.13x

Tax equivalent basis:
Total interest-earning assets(6)	$	6,715,835		$	407,562		6.07	%	$	5,717,609	$	305,415		5.34	%
Total interest-bearing liabilities		5,904,754			161,910		2.74			5,055,731		92,583		1.83

Net interest-earning assets/net interest income/net interest rate spread(4)	$	811,081		$	245,652		3.33	%	$	661,878	$	212,832		3.51	%

Net interest margin(5)							3.66	%						3.72	%

Average cost of deposits:
Total interest-bearing deposits	$	5,107,191		$	123,317		2.41	%	$	4,448,254	$	67,267		1.51	%
Noninterest-bearing deposits		448,301			—					374,269		—

Total deposits	$	5,555,492		$	123,317		2.22	%	$	4,822,523	$	67,267		1.39	%


(1)		Nonaccrual loans are included in the table for computation purposes; however, interest for such loans is recognized on a cash basis.

(2)		Average loans include loans held for sale.

(3)		Average yield on investment securities is computed using historical cost balances; the yield information does not give effect to changes in fair value that are reflected as a component of stockholders’ equity.

(4)		Interest rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.

(5)		Net interest margin represents net interest income divided by average interest-earning assets.

(6)		Interest income from tax-exempt securities has been adjusted to a tax equivalent basis using a statutory federal income tax rate of 35.0%. Interest income from tax-exempt investment securities calculated on a tax equivalent basis was $15.8 million and $14.8 million for the years ended December 31, 2005 and 2004, respectively.

The net interest margin, calculated on a tax equivalent basis, was 3.66% for the year ended December 31, 2005, as compared to 3.72% for 2004. Certain interest-earning assets of the Company qualify for federal tax exemptions or credits. The net interest margin, calculated on a tax equivalent basis, considers the tax benefit derived from these assets. The net interest margin decline reflects the impact of increased costs of money market accounts and certificates of deposit resulting from higher market interest rates, the change in the composition of deposits and the procurement of costlier certificates of deposit from brokers partially offset by higher loan yields.

Average interest-earning assets for the year ended December 31, 2005, increased 17.5% compared to the year ended December 31, 2004, primarily as a result of organic commercial loan growth. Average outstanding loans increased by $1.07 billion for the year ended December 31, 2005, from the year ended December 31, 2004, principally as a result of UCB’s continued focus on commercial lending activities. Average commercial loan balances increased 24.9% compared to the corresponding period of 2004, primarily due to UCB’s past emphasis on commercial real estate and continued emphasis on commercial business loans, and expansion of its Hong Kong branch. Average consumer loans for the year ended December 31, 2005, increased $157.1 million, or 38.9%, compared to the same period in 2004. As of December 31, 2005, total loans represented 75.3% of total assets. New loan commitments of $3.91 billion for the year ended December 31, 2005, were comprised of $3.68 billion in commercial loan commitments and $229.0 million in consumer loan commitments.

Average investment and mortgage-backed securities for the year ended December 31, 2005, were down $122.3 million, or 7.8%, from the year ended December 31, 2004. At December 31, 2005, the investment and mortgage-backed securities portfolio represented 17.9% of total assets.

Average total deposits increased $733.0 million, or 15.2%, for the year ended December 31, 2005, from the year ended December 31, 2004, reflecting UCB’s ongoing focus on the generation of commercial and consumer demand deposits. Also, for the first time, UCB accepted $156.8 million in brokered deposits. Average interest-bearing deposits increased to $5.11 billion for the year ended December 31, 2005, up 14.8% from the year ended December 31, 2004, and average noninterest-bearing deposits increased to $448.3 million, or 19.8%, for the year ended December 31, 2005, compared to the year ended December 31, 2004.


	Year Ended December 31, 2005 Compared to 2004
	Changes due to
	Volume			Rate			Total

Interest income:
Loans	$	59,442		$	47,425		$	106,867
Taxable securities		(6,719	)		(586	)		(7,305	)
Tax-exempt securities		1,164			(24	)		1,140
FHLB stock		534			(372	)		162
Other		536			936			1,472

Total interest income on interest-earning assets		54,957			47,379			102,336

Interest expense:
Deposits:
NOW, checking, and money market accounts		3,010			8,267			11,277
Savings accounts		(732	)		1,617			885
Time deposits		8,635			35,253			43,888
Short-term borrowings and federal funds purchased		1,660			6,780			8,440
Long-term borrowings		3,109			560			3,669
Subordinated debentures		(247	)		1,415			1,168

Total interest expense on interest-bearing liabilities		15,435			53,892			69,327

Increase (decrease) in net interest income	$	39,522		$	(6,513	)	$	33,009

Changes not solely attributable to rate or volume have been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of the changes in each.

Provision for Loan Losses. For the year ended December 31, 2005, the provision for loan losses was $6.1 million, compared to $4.2 million for 2004. The higher provision for 2005 reflects the growth in the loan portfolio partially offset by reductions in certain loss factors used in determining the appropriate level of the allowance for loan losses.

Noninterest Income. Noninterest income decreased by $4.2 million, or 13.6%, for the year ended December 31, 2005, compared to the year ended December 31, 2004. The decrease was primarily attributable to a decrease in gains from the sale of securities. UCB incurred a $5,000 loss on sale of securities for the year ended December 31, 2005, as compared to a $12.7 million gain on sale of securities for 2004. In addition, UCB incurred $1.2 million in unrealized losses resulting from lower of cost or market adjustments on multifamily and commercial real estate loans in the loans held for sale portfolio during the year ended December 31, 2005. These factors were partially offset by an increase in gains on sale of multifamily real estate and other loans of $12.2 million for the year ended December 31, 2005, compared to $7.7 million for the same period in 2004. In addition, there was an increase in commercial banking fees to $10.6 million for the year ended December 31, 2005, compared to $8.3 million for the same period in 2004. Included in the loss on sale of securities for the year ended December 31, 2005, was a gain of $614,000 resulting from the sale of $29.7 million of securities classified as available for sale to provide funding for executing the Company’s plan required by the American Jobs Creation Act of 2004 (“AJCA”).

Noninterest Expense. Noninterest expense increased $17.8 million, or 17.91%, for the year ended December 31, 2005, compared to the year ended December 31, 2004. For the year ended December 31, 2005, personnel expenses increased 18.1%, from the year ended December 31, 2004, due to additional staffing required to support the growth of UCB’s commercial banking business, the expansion of the Hong Kong branch, the opening of new branches in California and New York, and the expansion of UCB’s infrastructure to support a larger and growing organization. These increases were partially offset by a reduction in discretionary and incentive bonuses.

Occupancy expenses increased by 20.41% for the year ended December 31, 2005, compared to the year ended December 31, 2004, as a result of a write-off of leasehold improvements, the opening of new branches in California and New York, completion of the relocation of the San Francisco headquarters and the expansion of the Hong Kong branch. Also, for the year ended December 31, 2005, occupancy expenses reflect a full year of occupancy expenses related to branches and representative offices, which had been opened during the latter part of 2004. Professional fees and contracted services increased by 43.6% for the year ended December 31, 2005, compared to the year ended December 31, 2004, as a result of higher consulting fees resulting from continued self-assessment and compliance related to the requirements of the Sarbanes-Oxley Act of 2002. The Company also incurred a loss on the extinguishment of its 9.375% junior subordinated debentures due May 1, 2028, of $1.2 million from the write-off of the unamortized subordinated debenture issuance costs for the year ended December 31, 2005.

Income Tax Expense. Income tax expense was $46.3 million on income before taxes of $144.2 million for the year ended December 31, 2005, compared to $49.4 million on income before taxes of $135.0 million for the same period in 2004. The effective tax rate for the year ended December 31, 2005, was 32.1%, compared with 36.6% for the year ended December 31, 2004. These rates are generally lower than the combined federal and state statutory rate of 42.0%, primarily due to federal and state tax credits and incentives, tax-exempt income, increased enterprise zone tax benefits and the reversal of the deferred tax liability related to unremitted earnings of its foreign subsidiary more fully described below.

During the three months ended June 30, 2005, the Company elected to repatriate approximately $26.7 million in previously unremitted foreign earnings. During the three months ended December 31, 2005, the Company repatriated $26.7 million in previously unremitted foreign earnings. As a result, the Company has recorded current taxes payable on such previously unremitted foreign earnings of approximately $703,000. In addition, the Company has recorded a reduction to deferred tax liabilities of approximately $4.6 million as a result of the reversal of the deferred tax liability related to unremitted earnings of its foreign subsidiary. This resulted in a net tax benefit of approximately $3.9 million.

BUSINESS SEGMENT RESULTS

Currently, UCB comprises substantially all of the Company’s operations. In addition, no portion of UCB meets the thresholds designated by generally accepted accounting principles for separate segment disclosures. As a result, the previous discussion of the results of operations and the subsequent balance sheet analyses are applicable to UCB as well as to the Company. See Note 27 to the Consolidated Financial Statements for additional information on the Company’s segments.

BALANCE SHEET ANALYSIS

Investment Securities

UCB maintains an investment and mortgage-backed securities portfolio (“Investment Securities Portfolio”) to provide both liquidity and to enhance the income of the organization. The Investment Securities Portfolio is comprised of two segments: Available for Sale (“AFS”) and Held to Maturity (“HTM”). UCB’s AFS Investment Securities Portfolio is recorded at fair value, with unrealized changes in the fair value of the securities reflected as accumulated other comprehensive income (loss). At the end of each month, UCB adjusts the carrying value of its AFS Investment Securities Portfolio to reflect the current fair value of each security. The HTM Investment Securities Portfolio is carried at amortized cost. At the time a security is purchased, UCB classifies the security as either AFS or HTM. The securities are classified as HTM if UCB has the positive intent and ability to hold such securities to maturity.

UCB’s Investment Securities Portfolio investments are governed by an Asset/Liability Policy (“A/L Policy”), which was approved by UCB’s Board of Directors. The A/L Policy sets exposure limits for selected investments, as a function of total assets, total securities and Tier 1 capital, as well as the maximum maturity and duration limits. The A/L Policy also limits the concentration in a particular investment as a function of the total issue. Finally, the A/L Policy sets goals for each type of investment with respect to ROA, ROE and total risk-based capital ratio and also sets limits for interest rate sensitivity for each type of investment.

Investments permitted by the A/L Policy include United States Government obligations, United States Government sponsored enterprises securities, municipal obligations, investment grade securities, commercial paper, corporate debt, money market mutual funds and guaranteed preferred beneficial interests in junior subordinated debentures. UCB’s Board of Directors has directed management to invest in securities with the objective of optimizing the yield on investments that appropriately balances the risk-based capital utilization and interest rate sensitivity. The A/L Policy requires that all securities be of investment grade at the time of purchase.

The amortized cost and market value of the Investment Securities Portfolio at December 31, 2006, 2005 and 2004, were as follows (dollars in thousands):


	2006				2005				2004
	Amortized		Market		Amortized		Market		Amortized		Market
	Cost		Value		Cost		Value		Cost		Value

Investment securities available for sale:
Collateralized debt obligations	$	38,445	$	38,134	$	—	$	—	$	—	$	—
Trust preferred securities		—		—		33,443		32,946		18,441		18,219
U.S. Government sponsored enterprises notes		588,621		583,040		159,655		155,185		232,594		230,046
U.S. Government sponsored enterprises discount notes		249,024		249,085		—		—		—		—
U.S. Treasury Bill		73,183		73,200		—		—		—		—
Municipals		58,325		58,325		—		—		—		—
Commercial paper		49,952		49,952		—		—		—		—
Other		10,000		9,875		11,012		10,911		—		—

Total investment securities available for sale		1,067,550		1,061,611		204,110		199,042		251,035		248,265

Mortgage-backed securities available for sale:
FNMA		515,711		502,697		355,135		344,190		366,307		363,097
GNMA		87,866		84,605		88,184		85,033		106,501		105,072
FHLMC		313,991		304,284		302,540		292,316		288,789		285,965
Other		200,832		196,259		202,264		197,143		167,719		166,741

Total mortgage-backed securities available for sale		1,118,400		1,087,845		948,123		918,682		929,316		920,875

Total investment and mortgage-backed securities available for sale		2,185,950		2,149,456		1,152,233		1,117,724		1,180,351		1,169,140

Investment securities held to maturity:
Municipals		222,638		229,358		225,573		232,279		215,594		222,297

Mortgage-backed securities held to maturity:
FNMA		4,372		4,200		5,112		4,923		5,765		5,689
GNMA		63,122		61,367		77,261		76,133		102,439		102,595
FHLMC		541		521		662		639		1,404		1,388

Total mortgage-backed securities held to maturity		68,035		66,088		83,035		81,695		109,608		109,672

Total investment and mortgage-backed securities held to maturity		290,673		295,446		308,608		313,974		325,202		331,969

Total investment and mortgage-backed securities	$	2,476,623	$	2,444,902	$	1,460,841	$	1,431,698	$	1,505,553	$	1,501,109

The increase in the Investment Securities Portfolio for 2006 compared to 2005 is primarily due to $1.43 billion purchases of investment and mortgage-backed securities, $258.3 million of investment and mortgage-backed securities from the Summit acquisition and UCB’s securitization of residential mortgage loans with mortgage

servicing rights retained through the Federal National Mortgage Association (“FNMA”) for $174.7 million of mortgage-backed securities on September 1, 2006. UCB securitized these loans to improve the Company’s and UCB’s risk-based capital.

As of December 31, 2006, the amortized cost and the market value of the AFS Investment Securities Portfolio were $2.19 billion and $2.15 billion, respectively. The total net of tax unrealized loss on these securities was $36.5 million and is reflected as accumulated other comprehensive loss in stockholders’ equity. The difference between the carrying value and market value of securities that are held to maturity, aggregating a gain of $4.8 million, has not been recognized in the financial statements as of December 31, 2006. Additionally, certain securities that UCB holds have unrealized losses that extend for periods in excess of twelve months. These securities are comprised primarily of U.S. Government sponsored enterprise notes, mortgage-backed securities and municipal securities. The U.S. Government sponsored enterprise notes are issued by one of the several government sponsored enterprises, such as FNMA, Government National Mortgage Association (“GNMA”) or Federal Home Loan Bank. The unrealized losses associated with these securities resulted from rising interest rates subsequent to purchase. The unrealized losses will decline as interest rates fall to the purchased yield and as the securities approach maturity.

Mortgage-backed securities consist primarily of securities guaranteed by FNMA, GNMA and Federal Home Loan Mortgage Corporation (“FHLMC”), as well as certain collateralized mortgage obligations. These securities are collateralized by residential mortgage loans and may be prepaid at par prior to maturity. The unrealized losses on our mortgage-backed securities resulted from rising interest rates subsequent to purchase. The unrealized losses will decline as interest rates fall to the purchased yield and as the securities approach contractual or expected maturity.

The municipal securities are issued by states and their political subdivisions in the U.S. These securities either have bond insurance or guarantees that provide investment grade ratings of AAA or AA. There have been no deteriorations of credit quality that would contribute to impairment. The unrealized losses on our municipal securities resulted from rising interest rates subsequent to purchase. The unrealized losses will decline as interest rates fall to the purchased yield and as the securities approach contractual or expected maturity.

Since UCB has the intent and ability to hold its available-for-sale securities until recovery of the par amount, which could be maturity, UCB has concluded that the decline in value on these securities is temporary.

The carrying value, weighted average yields and contractual maturities of the Investment Securities Portfolio at December 31, 2006, were as follows (dollars in thousands):


						After One Year					After Five Years
	Within One Year					Through Five Years					Through Ten Years					After Ten Years					Total
			Weighted					Weighted					Weighted					Weighted					Weighted
	Carrying		Average			Carrying		Average			Carrying		Average			Carrying		Average			Carrying		Average
	Value		Yield			Value		Yield			Value		Yield			Value		Yield			Value		Yield

Investment securities available for sale:
Collateralized debt obligations	$	—		—	%	$	—		—	%	$	—		—	%	$	38,134		5.75	%	$	38,134		5.75	%
U.S. Government sponsored enterprises notes		21,956		5.32			419,171		5.25			141,913		5.36			—		—			583,040		5.28
U.S. Government sponsored enterprises discount notes		249,085		5.21			—		—			—		—			—		—			249,085		5.21
U.S. Treasury Bill		73,200		5.09			—		—			—		—			—		—			73,200		5.09
Municipals		—		—			4,255		5.72			2,947		5.67			51,123		6.24			58,325		6.17
Commercial paper		49,952		5.32			—		—			—		—			—		—			49,952		5.32
Other		—		—			—		—			—		—			9,875		5.98			9,875		5.98

Total investment securities available for sale		394,193		5.21			423,426		5.25			144,860		5.37			99,132		6.02			1,061,611		5.32

Mortgage-backed securities available for sale:
FNMA		5		5.50			9,021		4.64			41,460		4.68			452,211		4.91			502,697		4.88
GNMA		—		—			—		—			1,710		5.71			82,895		4.60			84,605		4.62
FHLMC		—		—			15,491		4.84			33,177		4.75			255,616		4.75			304,284		4.76
Other		—		—			—		—			—		—			196,259		5.95			196,259		5.95

Total mortgage-backed securities available for sale		5		5.50			24,512		4.77			76,347		4.73			986,981		5.05			1,087,845		5.02

Total investment and mortgage-backed securities available for sale		394,198		5.21			447,938		5.23			221,207		5.15			1,086,113		5.13			2,149,456		5.17

Investment securities held to maturity:
Municipals(1)		—		—			—		—			2,501		4.88			220,137		4.76			222,638		4.76

Mortgage-backed securities held to maturity:
FNMA		—		—			—		—			—		—			4,372		4.65			4,372		4.65
GNMA		—		—			—		—			—		—			63,122		4.93			63,122		4.93
FHLMC		—		—			—		—			—		—			541		4.28			541		4.28

Total mortgage-backed securities held to maturity		—		—			—		—			—		—			68,035		4.91			68,035		4.91

Total investment and mortgage-backed securities held to maturity		—		—			—		—			2,501		4.88			288,172		4.79			290,673		4.79

Total investment and mortgage-backed securities	$	394,198		5.21	%	$	447,938		5.23	%	$	223,708		5.14	%	$	1,374,285		5.06	%	$	2,440,129		5.12	%


(1)		Weighted average yield is calculated on a nontax equivalent basis.

Loans

The components of UCB’s loans held in portfolio by amount and percentage of gross loans held in portfolio for each major loan category at December 31, 2006, 2005, 2004, 2003 and 2002, were as follows (dollars in thousands):


	2006					2005					2004					2003					2002
	Amount			%		Amount			%		Amount			%		Amount			%		Amount			%

Commercial:
Secured by real estate — nonresidential	$	2,341,572			35.29	$	2,307,381			39.52	$	1,943,868			47.99	$	1,704,138			45.18	$	1,276,862			42.17
Secured by real estate — multifamily		1,275,594			19.22		1,506,848			25.81		866,079			21.38		1,161,512			30.80		913,882			30.18
Construction		1,054,302			15.89		494,841			8.47		289,936			7.16		292,563			7.76		214,788			7.09
Business		1,461,322			22.02		863,935			14.80		468,128			11.56		296,026			7.85		261,775			8.65

Total commercial		6,132,790			92.42		5,173,005			88.60		3,568,011			88.09		3,454,239			91.59		2,667,307			88.09

Consumer:
Residential mortgage (one-to-four family)		448,895			6.76		613,988			10.52		434,423			10.72		273,431			7.25		309,653			10.23
Other		53,975			0.82		51,667			0.88		48,307			1.19		43,711			1.16		50,850			1.68

Total consumer		502,870			7.58		665,655			11.40		482,730			11.91		317,142			8.41		360,503			11.91

Loans held in portfolio(1)		6,635,660			100.00		5,838,660			100.00		4,050,741			100.00		3,771,381			100.00		3,027,810			100.00

Allowance for loan losses		(62,015	)				(64,542	)				(56,472	)				(58,126	)				(48,865	)

Net loans held in portfolio	$	6,573,645				$	5,774,118				$	3,994,269				$	3,713,255				$	2,978,945


(1)		Amounts reflect net unamortized deferred loan fees, purchase premiums and discounts of $25.8 million, $7.4 million, $7.3 million, $8.6 million and $5.1 million at December 31, 2006, 2005, 2004, 2003 and 2002, respectively.

During the year ended December 31, 2006, loans held in portfolio increased by $797.0 million. This increase resulted primarily from organic growth in commercial construction and business loans and $473.4 million of loans from the Summit acquisition, which was offset by a transfer of commercial real estate loans of $432.9 million from held in portfolio to held for sale. Commercial loans at December 31, 2006, increased 18.6% from the December 31, 2005, balance. Consumer loans decreased 24.5% at December 31, 2006, from the December 31, 2005, balance. The decrease is primarily due to the UCB’s securitization of $176.1 million of residential mortgage loans with servicing rights retained through FNMA on September 1, 2006.

At December 31, 2006 and 2005, UCB had cash secured loans of $292.0 million and $183.4 million, respectively, which were primarily commercial business loans.

In connection with its credit risk management efforts, UCB will periodically sell commercial real estate loans to help manage its loan concentrations. As a result, UCB periodically identifies certain loans that it intends to sell. When such a determination is made, these loans are classified as held for sale. During the year ended December 31, 2006, UCB transferred $434.3 million of loans from held in portfolio to held for sale. UCB also transferred at market value, $87.5 million of loans that did not attract a potential buyer or meet our pricing requirements from held for sale to held in portfolio during the year ended December 31, 2006. The components of the loans held for sale by

amount and percentage of gross loans held for sale for each major loan category at December 31, 2006, 2005, 2004 and 2003, are as follows (dollars in thousands):


	2006				2005				2004				2003
	Amount		%		Amount		%		Amount		%		Amount		%

Commercial:
Secured by real estate — nonresidential	$	141,348		98.94	$	154,087		98.31	$	26,882		8.25	$	14,203		70.10
Secured by real estate — multifamily		—		—		—		—		295,788		90.73		—		—
Business		1,203		0.84		2,653		1.69		3,337		1.02		6,059		29.90

Total commercial		142,551		99.78		156,740		100.00		326,007		100.00		20,262		100.00

Consumer:
Residential mortgage (one-to-four family)		310		0.22		—		—		—		—		—		—

Loans held for sale(1)	$	142,861		100.00	$	156,740		100.00	$	326,007		100.00	$	20,262		100.00


(1)		Amounts reflect net unamortized deferred loan fees, purchase premiums and discounts of $213,000 and $372,000 at December 31, 2006 and 2005, respectively, and net unamortized deferred loan costs of $535,000 at December 31, 2004.

Consistent with UCB’s stated long-term objectives for the next five years, UCB intends to continue to systematically reduce its concentration in commercial real estate loans while increasing its concentration in commercial business loans.

As a result of changing the loan origination focus to commercial business loans, UCB is originating more loans that reprice in shorter periods. Construction loans, commercial business loans and SBA loans generally have monthly repricing terms. Commercial real estate loans generally reprice monthly or are intermediate fixed, meaning that the loans have interest rates that are fixed for a period, typically five years, after which the loans generally reprice monthly or become due and payable. Multifamily real estate loans are generally intermediate fixed. Residential mortgage (one-to-four family) loans may be adjustable rate that reprice semiannually or annually; fixed rate, meaning that the loans have interest rates that are fixed over the term of the loans, typically 15 or 30 years; or have interest rates that are fixed for a period, typically five years, and then generally reprice semiannually or annually, thereafter. The components of gross loans held in portfolio by interest rate type and percentage of gross loans held in portfolio at December 31, 2006, 2005, 2004, 2003 and 2002, were as follows (dollars in thousands):


	2006				2005				2004				2003				2002
	Amount		%		Amount		%		Amount		%		Amount		%		Amount		%

Adjustable-rate loans	$	3,749,132		56.28	$	2,951,945		50.50	$	2,603,889		64.17	$	2,679,428		70.88	$	2,304,837		75.99
Intermediate fixed-rate loans		1,444,072		21.68		1,711,915		29.28		881,744		21.73		563,570		14.91		205,587		6.78
Fixed-rate loans		1,468,275		22.04		1,182,198		20.22		572,419		14.10		537,027		14.21		522,459		17.23

Gross loans held in portfolio(1)	$	6,661,479		100.00	$	5,846,058		100.00	$	4,058,052		100.00	$	3,780,025		100.00	$	3,032,883		100.00


(1)		Amounts do not reflect net deferred loan fees, purchase premiums and discounts of $25.8 million, $7.4 million, $7.3 million, $8.6 million and $5.1 million at December 31, 2006, 2005, 2004, 2003 and 2002, respectively.

The components of gross loans held in portfolio by interest type for each major loan category at December 31, 2006, were as follows (dollars in thousands):


			Intermediate
	Adjustable		Fixed		Fixed		Total

Commercial:
Secured by real estate — nonresidential	$	965,195	$	443,883	$	955,000	$	2,364,078
Secured by real estate — multifamily		352,814		790,979		128,758		1,272,551
Construction		975,273		—		84,946		1,060,219
Business		1,334,890		2,327		124,483		1,461,700

Total commercial		3,628,172		1,237,189		1,293,187		6,158,548

Consumer:
Residential mortgage (one-to-four family)		70,596		206,883		171,477		448,956
Other		50,364		—		3,611		53,975

Total consumer		120,960		206,883		175,088		502,931

Gross loans held in portfolio(1)	$	3,749,132	$	1,444,072	$	1,468,275	$	6,661,479


(1)		Amounts do not reflect net deferred loan fees, purchase premiums and discounts of $25.8 million at December 31, 2006.

Adjustable-rate loans increased $797.2 million from December 31, 2005, to December 31, 2006. The decrease of $267.8 million in intermediate fixed-rate loans from December 31, 2005, to December 31, 2006, is a result of decreased market demand for that loan product. Fixed-rate loans increased $286.1 million from December 31, 2005, to December 31, 2006.

The estimated impact of repricing of loans held in portfolio at December 31, 2006, is as follows (dollars in thousands):


									After Ten
			After One		After Three		After Five		Years
			Year		Years		Years		Through		After
	Within		Through		Through		Through		Twenty		Twenty
	One Year		Three Years		Five Years		Ten Years		Years		Years		Total

Commercial:
Secured by real estate — nonresidential	$	1,024,760	$	213,205	$	501,610	$	602,567	$	21,417	$	519	$	2,364,078
Secured by real estate — multifamily		352,114		419,336		338,595		120,448		42,058		—		1,272,551
Construction		1,029,465		27,290		3,464		—		—		—		1,060,219
Business		1,406,913		17,937		24,206		12,644		—		—		1,461,700

Total commercial		3,813,252		677,768		867,875		735,659		63,475		519		6,158,548

Consumer:
Residential mortgage (one-to-four family)		71,542		95,903		61,021		62,334		89,567		68,589		448,956
Other		52,144		275		136		—		—		1,420		53,975

Total consumer		123,686		96,178		61,157		62,334		89,567		70,009		502,931

Gross loans held in portfolio	$	3,936,938	$	773,946	$	929,032	$	797,993	$	153,042	$	70,528	$	6,661,479

Net deferred loan fees, purchase premiums and discounts														(25,819	)

Loans held in portfolio														6,635,660
Allowance for loan losses														(62,015	)

Net loans held in portfolio													$	6,573,645

Adjustable-rate mortgages are shown in the period in which they reprice, rather than when they become due, with the exception of adjustable-rate loans that have reached a contractual floor. Loans that are at the floor level are shown in the period they become due. The table does not include

the effects of possible prepayments. The rate of loan prepayment varies from time to time, depending upon various factors, including market interest rates.

The contractual maturity of loans held in portfolio at December 31, 2006, is as follows (dollars in thousands):


									After Ten
			After One		After Three		After Five		Years
			Year		Years		Years		Through		After
	Within		Through		Through		Through		Twenty		Twenty
	One Year		Three Years		Five Years		Ten Years		Years		Years		Total

Commercial:
Secured by real estate — nonresidential	$	284,630	$	323,529	$	554,430	$	1,095,677	$	73,771	$	32,041	$	2,364,078
Secured by real estate — multifamily		663		23,876		3,686		1,014,181		166,681		63,464		1,272,551
Construction		726,832		319,290		14,097		—		—		—		1,060,219
Business		1,168,566		145,473		80,906		59,329		5,539		1,887		1,461,700

Total commercial		2,180,691		812,168		653,119		2,169,187		245,991		97,392		6,158,548

Consumer:
Residential mortgage (one-to-four family)		5,086		2,830		3,742		14,010		107,940		315,348		448,956
Other		5,246		439		136		—		5,891		42,263		53,975

Total consumer		10,332		3,269		3,878		14,010		113,831		357,611		502,931

Gross loans held in portfolio	$	2,191,023	$	815,437	$	656,997	$	2,183,197	$	359,822	$	455,003	$	6,661,479

Net deferred loan fees, purchase premium and discounts														(25,819	)

Loans held in portfolio														6,635,660
Allowance for loan losses														(62,015	)

Net loans held in portfolio													$	6,573,645

The table does not include the effects of possible prepayments. The rate of loan prepayment varies from time to time, depending upon various factors, including market interest rates.

The contractual maturity of loans held in portfolio by interest type at December 31, 2006, is as follows (dollars in thousands):


									After Ten
			After One		After Three		After Five		Years
			Year		Years		Years		Through		After
	Within		Through		Through		Through		Twenty		Twenty
	One Year		Three Years		Five Years		Ten Years		Years		Years		Total

Adjustable-rate loans	$	2,028,646	$	612,301	$	284,466	$	494,522	$	170,433	$	158,764	$	3,749,132
Intermediate fixed-rate loans		—		2,274		47,347		1,128,833		39,907		225,711		1,444,072
Fixed-rate loans		162,377		200,862		325,184		559,842		149,482		70,528		1,468,275

Gross loans held in portfolio	$	2,191,023	$	815,437	$	656,997	$	2,183,197	$	359,822	$	455,003	$	6,661,479

Net deferred loan fees, purchase premium and discounts														(25,819	)

Loans held in portfolio														6,635,660
Allowance for loan losses														(62,015	)

Net loans held in portfolio													$	6,573,645

The table does not include the effects of possible prepayments. The rate of loan prepayment varies from time to time, depending upon various factors, including market interest rates.

Loan commitments related to loans held for sale and held in portfolio for years ended December 31, 2006, 2005 and 2004, were as follows (dollars in thousands):


	2006		2005		2004

Loans held for sale:
Commercial:
Secured by real estate — nonresidential	$	45,602	$	62,027	$	17,399
Secured by real estate — multifamily		—		489,968		169,645

Total commercial loans		45,602		551,995		187,044

Consumer:
Residential mortgage (one-to-four family)		3,904		325		—

Total loans held for sale commitments(1)		49,506		552,320		187,044

Loans held in portfolio:
Commercial:
Secured by real estate — nonresidential		857,735		1,080,502		748,506
Secured by real estate — multifamily		241,067		591,449		575,421
Construction		1,064,113		694,472		421,924
Business		1,176,155		763,701		460,290

Total commercial loans		3,339,070		3,130,124		2,206,141

Consumer:
Residential mortgage (one-to-four family)		90,914		188,309		234,522
Other		33,768		40,376		39,677

Total consumer loans		124,682		228,685		274,199

Total loans held in portfolio commitments(1)		3,463,752		3,358,809		2,480,340

Total loan commitments(1)	$	3,513,258	$	3,911,129	$	2,667,384


(1)		Amounts do not reflect commitments related to loan participations.

Foreign Outstandings

Foreign outstandings include loans, acceptances, interest bearing deposits with other banks, other interest bearing investments and related accrued interest receivable. Country distributions are based on the location of the obligor. Foreign assets are subject to the general risks of conducting business in each foreign country, including economic uncertainty and government regulations. In addition, foreign assets may be impacted by changes in demand or pricing resulting from movements in exchange rates or other factors. Other than China, there was no other foreign country with cross-border exposure greater than 0.75%. The cross-border exposure exceeding 1.00% of our total assets as of December 31, 2006, 2005 and 2004, were as follows (dollars in thousands):


			Banks and
	Governments		Other		Commercial						% of
	and Official		Financial		and		Other				Total
	Institutions		Institutions		Industrial		Loans		Total		Assets

China (Hong Kong):
December 31, 2006	$	6,510	$	16,111	$	470,847	$	19,052	$	512,520		4.95
December 31, 2005		14,446		15,304		277,698		12,822		320,270		4.02
December 31, 2004		1,021		392		107,977		4,589		113,979		1.80

Deposits

The balances and rates paid for categories of deposits at December 31, 2006, 2005 and 2004, were as follows (dollars in thousands):


	2006					2005					2004
			Weighted					Weighted					Weighted
			Average					Average					Average
	Amount		Rate			Amount		Rate			Amount		Rate

NOW, checking and money market accounts	$	2,194,176		2.18	%	$	1,784,065		1.65	%	$	1,427,366		0.96	%
Savings accounts		942,672		2.14			946,714		1.85			1,000,489		1.03
Time deposits:
Less than $100,000		1,410,162		4.60			1,203,001		2.69			918,650		1.79
$100,000 or greater		2,655,835		4.91			2,330,389		3.98			1,869,357		2.26

Total time deposits		4,065,997		4.80			3,533,390		3.54			2,788,007		2.11

Total deposits	$	7,202,845		3.66	%	$	6,264,169		2.75	%	$	5,215,862		1.59	%

Deposits have traditionally been UCB’s primary source of funding to use in its lending and investment activities. At December 31, 2006, 56.4% of UCB’s deposits were time deposits, 30.5% were negotiable order of withdrawal (“NOW”) accounts, demand deposits and money market accounts, and 13.1% were savings accounts. By comparison, at December 31, 2005, 56.4% of UCB’s deposits were time deposits, 28.5% were NOW accounts, demand deposits and money market accounts, and 15.1% were savings accounts. With the exception of state and federal government entities contributing 6.4% to total deposits, no other material portion of UCB’s deposits were from or were dependent upon any one customer, source or industry.

Included in time deposits at December 31, 2006, are $2.66 billion of deposits of $100,000 or greater, compared to $2.33 billion at December 31, 2005. Such deposits made up 36.9% of total deposits at December 31, 2006, compared to 37.2% at December 31, 2005. Also included in time deposits are $179.3 million and $156.8 million of brokered deposits at December 31, 2006 and 2005, respectively.

Our average cost of deposits for the year ended December 31, 2006, was 3.37% as compared to 2.22% for 2005 and 1.39% for 2004. Our average interest rate paid on deposits was 3.66%, 2.75% and 1.59% at December 31, 2006, 2005 and 2004, respectively.

Core deposits increased 14.9% to $3.14 billion at December 31, 2006, compared to $2.73 billion at December 31, 2005. Core deposits include NOW accounts, demand deposit and money market accounts, and savings accounts. This growth in core deposits resulted primarily from the acquisition of Summit, which added a total of $217.7 million in core deposits, and also from UCB’s continued focus on developing new commercial customer relationships and further expansion into UCB’s niche market, which are areas with high concentrations of Asians. Time deposits increased 15.1% to $4.07 billion at December 31, 2006, from $3.53 billion at December 31, 2005, primarily as a result of the Summit acquisition, which added a total of $327.2 million, and further expansion that UCB has made in its niche markets.

The remaining maturities on time deposits of $100,000 or greater as of December 31, 2006, are as follows (dollars in thousands):


Three months or less	$	1,305,747
Over three months through six months		884,634
Over six months through twelve months		435,973
Over twelve months		29,481

Total	$	2,655,835

The average balances and rates paid for categories of deposits in U.S. banking offices for the years ended December 31, 2006, 2005 and 2004, were as follows (dollars in thousands):


	2006					2005					2004
			Average					Average					Average
	Average		Rates			Average		Rates			Average		Rates
	Balance		Paid			Balance		Paid			Balance		Paid

NOW, checking and money market accounts	$	1,290,636		3.18	%	$	1,085,608		1.88	%	$	821,390		1.13	%
Savings accounts		626,058		1.19			806,315		1.15			909,134		0.93
Time deposits		3,110,865		4.23			2,805,296		2.85			2,555,164		1.84
Noninterest-bearing demand deposits		545,092		—			448,409		—			374,331		—

Total deposits	$	5,572,651		3.23	%	$	5,145,628		2.13	%	$	4,660,019		1.39	%

The average balances and rates paid for categories of deposits in foreign banking offices for the years ended December 31, 2006, 2005 and 2004, were as follows (dollars in thousands):


	2006					2005					2004
			Average					Average					Average
	Average		Rates			Average		Rates			Average		Rates
	Balance		Paid			Balance		Paid			Balance		Paid

NOW, checking and money market accounts	$	9,332		2.61	%	$	10,248		1.20	%	$	6,409		0.44	%
Time deposits and savings accounts		653,636		4.56			399,616		3.40			156,095		1.70

Total deposits	$	662,968		4.54	%	$	409,864		3.34	%	$	162,504		1.65	%

Time deposits of $100,000 or greater at foreign banking offices were $551.6 million, $365.1 million and $259.1 million at December 31, 2006, 2005 and 2004, respectively. Additionally, domestic banking offices had $433.9 million, $334.7 million and $316.1 million of deposits from foreign depositors at December 31, 2006, 2005 and 2004, respectively.

Borrowings

Borrowings for the years ended December 31, 2006, 2005 and 2004, were as follows (dollars in thousands):


	2006			2005			2004

Securities sold under agreements to repurchase:
Average balance outstanding	$	162,124			—			—
Maximum amount outstanding at any month end period		401,600			—			—
Balance outstanding at end of period		401,600			—			—
Weighted average interest rate during the period		3.56	%		—	%		—	%
Weighted average interest rate at end of period		3.71	%		—	%		—	%
Weighted average remaining term to maturity at end of period (in years)		6.1			—			—
Short-term borrowings:
FHLB advances and other short-term borrowings:
Average balance outstanding	$	224,234		$	301,400		$	164,964
Maximum amount outstanding at any month end period		654,636			566,169			300,695
Balance outstanding at end of period		654,636			279,425			72,310
Weighted average interest rate during the period		4.52	%		3.51	%		1.30	%
Weighted average interest rate at end of period		5.21	%		4.09	%		1.22	%
Weighted average remaining term to maturity at end of period (in years)		—			—			—
Long-term borrowings:
FHLB advances:
Average balance outstanding	$	683,978		$	361,677		$	299,253
Maximum amount outstanding at any month end period		906,651			562,033			335,104
Balance outstanding at end of period		906,651			562,033			334,952
Weighted average interest rate during the period		4.89	%		5.15	%		5.00	%
Weighted average interest rate at end of period		4.72	%		4.76	%		4.89	%
Weighted average remaining term to maturity at end of period (in years)		5.4			5.0			2.9

UCB maintains borrowing lines with certain correspondent banks and brokers and with the Federal Home Loan Banks of San Francisco, Atlanta, Boston and Seattle (collectively referred to as the “FHLB”) to supplement its supply of lendable funds and to help manage liquidity. Such borrowings are generally secured with mortgage loans and/or securities with a market value at least equal to outstanding borrowings. In addition to loans and securities, advances from the FHLB are typically secured by a pledge of FHLB stock owned by UCB. UCB had $1.43 billion and $788.0 million of FHLB advances outstanding at December 31, 2006 and 2005, respectively. At December 31, 2006, UCB had $606.0 million of additional FHLB borrowings available for future borrowing capacity.

UCB recorded certain loan sale transactions as secured borrowings as of December 31, 2006, since these transactions did not qualify for sales treatment under SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities. The secured borrowings amounted to $6.1 million and $19.1 million at December 31, 2006 and 2005, respectively. During the year ended December 31, 2006, $7.2 million of the loans related to the December 31, 2005, secured borrowings qualified for sales treatment, resulting in a gain on sale of loans of $222,000. Additionally during the year ended December 31, 2006, UCB repaid $11.9 million as a result of the purchaser electing to remove the loans from the sale transaction.

Subordinated Debentures

UCBH formed or acquired special purpose trusts in 1997, 2001, 2002, 2005 and 2006 for the purpose of issuing guaranteed preferred beneficial interests in its junior subordinated debentures (the “Capital Securities”) and investing the proceeds thereof in the junior subordinated debentures issued by UCBH. Payment of distributions out

of the monies held by the trusts and payments on liquidation of the trusts or the redemption of the Capital Securities are guaranteed by UCBH to the extent the trusts have funds available. The obligations of UCBH under the guarantees and the junior subordinated debentures are subordinate and junior in right of payment to all indebtedness of UCBH and will be structurally subordinated to all liabilities and obligations of UCBH’s subsidiaries. UCBH had $240.5 million and $150.5 million of subordinated debentures outstanding at December 31, 2006 and 2005, respectively.

On December 15, 2006, UCBH issued $51.5 million in junior subordinated debentures to a newly formed Delaware trust subsidiary, UCBH Capital Trust VII. The junior subordinated debentures bear interest at a fixed rate of 6.51% until December 15, 2011, after which date the rate will automatically convert to a floating rate equal to the three month London Interbank Offered Rate (“LIBOR”) plus 1.67% and will adjust quarterly until maturity. The junior subordinated debentures will mature on December 15, 2036, but may be redeemed by UCBH at its option in whole or in part at anytime on or after December 15, 2011. Additionally, UCBH may redeem the junior subordinated debentures at its option in whole at anytime upon certain events.

On December 28, 2006, UCBH issued $25.8 million in junior subordinated debentures to a newly formed Delaware trust subsidiary, UCBH Capital Trust VI. The junior subordinated debentures bear interest at a fixed rate of 6.73% until January 30, 2012, after which date the rate will automatically convert to a floating rate equal to the three month LIBOR plus 1.65% and will adjust quarterly until maturity. The junior subordinated debentures will mature on January 30, 2037, but may be redeemed by UCBH at its option in whole or in part at anytime on or after January 30, 2012. Additionally, UCBH may redeem the junior subordinated debentures at its option in whole at anytime upon certain events.

With the acquisition of Summit, UCBH assumed $12.7 million in junior subordinated debentures of Summit Bank Corporation Trust I. The junior subordinated debentures bear interest of three-month LIBOR plus 3.10% and will adjust quarterly until maturity. The junior subordinated debentures will mature on September 30, 2033, but may be redeemed by UCBH at its option in whole or in part at anytime on or after September 30, 2008. Additionally, UCBH may redeem the junior subordinated debentures at its option in whole at anytime upon certain events. UCBH has the ability to defer interest and redemption date.

OFF-BALANCE SHEET ARRANGEMENTS

As previously discussed, the Company has established or acquired special purpose trusts for the sole purpose of issuing guaranteed preferred beneficial interests and investing in the junior subordinated debentures issued by the Company. The Company’s consolidated results exclude these special purpose trusts pursuant to FIN 46R, Consolidation of Variable Interest Entities, an interpretation of ARB No. 51, since UCBH is not deemed to be the primary beneficiary of these trusts.

RISK ELEMENTS

Since risk is inherent in substantially all of the Company’s operations, management of risk is integral to its successful operations and is also a key determinant of its overall performance. We manage all major aspects of our business through an integrated risk infrastructure that includes planning and review processes. We evaluate our risk and returns to produce sustainable revenue, to reduce earnings volatility and increase shareholder value. As part of this evaluation, we apply various strategies to identify, manage and reduce the risks to which the Company’s operations are exposed, namely credit, operational, interest rate and market, and liquidity risks.

We evaluate risk through various management committees with the oversight of the Board of Directors. The key risk management committees of the Company are:


	•	Enterprise Risk Management Committee, which reviews credit, operational, market and liquidity risk;

	•	Credit Risk Management Committee, which reviews credit policies, products and problem assets risk;

	•	Market Risk Management Committee, which reviews securities, loans and borrowings to assess yield, and interest rate and market risk; and

	•	Operational Risk Management Committee, which reviews those risks not covered by the Credit Risk Management and Market Risk Management Committees.

Management has established control processes and procedures to align risk-taking and risk management throughout our organization. Each of our business groups is responsible for identifying, quantifying, mitigating and managing all risks associated with their operations. In addition, each business unit prepares and executes business plans, which must address the changing nature of these risks making them best able to take actions to manage and mitigate those risks.

Credit Risk Management

Credit risk is the possibility of loss from the failure of a borrower or contractual counterparty to fully perform under the terms of a credit-related contract. Credit risk arises primarily from UCB’s lending activities, as well as from other on- and off-balance-sheet credit instruments.

Effective management of credit risk is essential in maintaining a safe and sound financial institution. We have in place a set of formal loan policies and procedures, which provide UCB with a framework for consistent loan underwriting and a basis for sound credit decisions. In addition, UCB has a well-defined set of standards for evaluating its loan portfolio and management utilizes a comprehensive loan grading system to identify the risk potential in the portfolio. Loans are periodically reviewed with regard to the borrower’s ability to repay the loan during which a risk grade is assigned to the loan. The reviews include evaluations of various factors including, the borrower’s debt capacity and financial flexibility, the borrower’s earnings, the sources of repayment, the level and nature of any contingencies, the quality of any collateral, and the industry in which the borrower operates. The reviews also address an evaluation of historical information as well as subjective assessments and interpretations. Further, an independent internal credit review function periodically conducts reviews of UCB’s lending operations and loan portfolios. These reviews are designed to place an emphasis on the early detection of problem credits so that action plans can be developed and implemented on a timely basis to mitigate any potential losses.

UCB also assigns a loss rating to each credit facility. These loss ratings are determined by borrower and by type of collateral, based principally upon our own historical loss experience or on independent verifiable data that help to estimate these ratings. The ratings are used as a tool to monitor a loan’s performance and also in estimating any potential loss associated with it.

Another aspect of UCB’s credit risk management strategy is to maintain diversification in loans held in portfolio. The components of UCB’s loans held in portfolio by amount and percentage of gross loans held in portfolio for each major loan category at December 31, 2006 and 2005, were as follows (dollars in thousands):


	2006				2005
	Amount		%		Amount		%

Commercial:
Secured by real estate — nonresidential	$	2,341,572		35.29	$	2,307,381		39.52
Secured by real estate — multifamily		1,275,594		19.22		1,506,848		25.81
Construction		1,054,302		15.89		494,841		8.47
Business		1,461,322		22.02		863,935		14.80

Total commercial		6,132,790		92.42		5,173,005		88.60

Consumer:
Residential mortgage (one-to-four family)		448,895		6.76		613,988		10.52
Other		53,975		0.82		51,667		0.88

Total consumer		502,870		7.58		665,655		11.40

Loans held in portfolio(1)	$	6,635,660		100.00	$	5,838,660		100.00


(1)		Amounts reflect net unamortized deferred loan fees, purchase premiums and discounts of $25.8 million and $7.4 million at December 31, 2006 and 2005, respectively.

UCB actively monitors the levels of loans as a percentage of its loans held in portfolio and of its risk-based capital. Consistent with our planned long-term objectives, UCB will continue to systematically reduce the concentration in commercial and multifamily real estate loans, while increasing the portfolio of commercial

business loans. During the year ended December 31, 2006, $622.3 million in commercial real estate loans were sold. Additionally, $432.9 million of commercial real estate loans were transferred from held in portfolio to held for sale, in an effort to further reduce UCB’s concentration of commercial real estate loans.

UCB also manages its loans held in portfolio to avoid the risk of undue concentration of credits in a particular industry, trade group or property type. UCB has no significant exposure to highly leveraged transactions or to any individual customer or counterparty.

Internal Loan Securitizations. UCB may also use internal loan securitizations to reduce its exposure to credit risk. In such securitizations, UCB has exchanged either multifamily or residential (one-to-four family) mortgage loans for securities issued by FNMA, thus transferring the credit risk on the loans to FNMA. The average yield that UCB earns on the securities is lower than the yield on the underlying loans. This difference is the guarantee fee that is retained by FNMA as compensation for assuming the credit risk. Since we retain all of the securities that FNMA issues in the exchange, no gain or loss is recognized on the transaction. UCB continues to service the securitized loans. Residential mortgage (one-to-four family) loans are generally included in the 50% risk weight for risk-based capital purposes, whereas multifamily real estate loans may fall either into the 50% or 100% risk weight depending on the specific criteria of each individual loan. FNMA securities are classified as a 20% risk weight.

These internal securitizations do not have a cash impact to UCB, since selected loans from its loans held in portfolio are exchanged for FNMA securities. Such securities are represented by exactly the same loans previously held in UCB’s loans held in portfolio. The FNMA securities are generally held as AFS in UCB’s Investment Securities Portfolio.

UCB internally securitized $176.1 million of residential mortgage (one-to four-family) loans for the year ended December 31, 2006, and $147.1 million of multifamily real estate loans for the year ended December 31, 2004. There were no securitizations for the year ended December 31, 2005.

Nonperforming Assets

Nonperforming assets include nonaccrual and restructured loans from loans held in portfolio and other real estate owned (“OREO”), but exclude any loans held for sale. Loans are generally placed on nonaccrual status when a loan becomes 90 days past due as to principal and interest, unless the loan is both well secured and in the process of collection. Loans may be placed on nonaccrual earlier if, in management’s opinion, the full and timely collection of principal or interest becomes uncertain. When a loan is placed on nonaccrual status, any accrued but unpaid interest is reversed and charged against interest income. UCB charges off loans when it determines that collection becomes unlikely. OREO is acquired primarily through or in lieu of foreclosure on loans secured by real estate. UCB’s

nonperforming assets from loans held in portfolio and OREO as of December 31, 2006, 2005, 2004, 2003 and 2002, were as follows (dollars in thousands):


	2006			2005			2004			2003			2002

Commercial loans:
Secured by real estate — nonresidential	$	5,604		$	12,792		$	8,085		$	—		$	—
Secured by real estate — multifamily		—			—			—			—			—
Construction		—			—			4,353			5,102			4,533
Business		6,339			5,903			136			631			68

Total commercial loans		11,943			18,695			12,574			5,733			4,601

Consumer loans:
Residential mortgage (one-to-four family)		368			388			—			124			—
Other		—			50			—			—			53

Total consumer loans		368			438			—			124			53

Total nonaccrual loans from loans held in portfolio		12,311			19,133			12,574			5,857			4,654
Other real estate owned		2,887			—			—			—			—

Total nonperforming assets	$	15,198		$	19,133		$	12,574		$	5,857		$	4,654

Nonperforming assets to total assets		0.15	%		0.24	%		0.20	%		0.10	%		0.10	%
Nonaccrual loans to loans held in portfolio		0.19			0.33			0.31			0.16			0.15
Nonperforming assets to loans held in portfolio and other real estate owned		0.23			0.33			0.31			0.16			0.15
Loans held in portfolio	$	6,635,660		$	5,838,660		$	4,050,741		$	3,771,381		$	3,027,810
Gross interest income recognized on impaired loans		80			183			—			—			—
Gross interest income not recognized on nonaccrual loans		676			790			699			363			211
Accruing loans contractually past due 90 days or more		4,339			5,374			3,101			1,469			4,302
Loans classified as troubled debt restructurings and not included above		8,614			10,827			11,329			9,094			—

The level of UCB’s nonperforming assets decreased as of December 31, 2006, compared to December 31, 2005. The decrease was a result of the payoff of one nonaccrual commercial real estate loan and various loan payments and loan charge-offs. Partially offsetting those decreases were four additional commercial business loans being moved to nonaccrual status and two OREO properties from the Summit acquisition.

Loans classified as troubled debt restructurings reflected in the table above at December 31, 2006, represents one commercial real estate loan, which is a nonresidential loan secured by real estate. This loan has been classified as a performing restructured loan as a result of UCB making interest rate concessions on a separate loan for $1.2 million to the same obligor and is secured by the same property. The separate loan is included in the nonaccrual commercial real estate in the table above.

Included in nonaccrual loans are loans that we have determined to be impaired. Loans, other than those included in large groups of smaller-balance homogeneous loans, are considered to be impaired when, based on current information and events, it is probable that UCB will be unable to collect all amounts due in accordance with the contractual terms of the loan agreement, including scheduled interest payments. The amount of a loan’s impairment is measured based on either the present value of expected cash flows, the observable market price of the loan, or the fair value of the collateral securing the loan.

At December 31, 2006 and 2005, UCB’s investment in loans that were considered to be impaired was $12.0 million and $24.5 million, respectively. Estimated losses on impaired loans are added to the allowance for

loan losses through the provision for loan losses. At December 31, 2006, the allowance for loan losses included $1.4 million for impaired loans with a $6.9 million recorded investment. At December 31, 2005, the allowance included $3.2 million for impaired loans with a recorded investment of $16.3 million. See Notes 1 and 9 to the Consolidated Financial Statements for additional information on impaired loans.

Management cannot predict the extent to which economic conditions in UCB’s market areas may change or the full impact that such changes may have on UCB’s loan portfolio. Accordingly, there can be no assurance that additional loans will not become 90 days or more past due, be placed on nonaccrual status, or become impaired or restructured loans or OREO in the future.

The increase in OREO resulted primarily from the Summit acquisition. These properties have been listed for sale and UCB intends to dispose of them as quickly as possible.

Allowances for Credit Losses

Allowance for Loan Losses. The allowance for loan losses represents our estimate of the losses that are inherent in the loan portfolio, exclusive of loans held for sale. UCB continuously monitors the quality of its loan portfolio and maintains an allowance for loan losses sufficient to absorb losses inherent in the portfolio.

UCB’s methodology for assessing the adequacy of the allowance for loan losses includes the evaluation of two distinct components: a general allowance applied to loan portfolio categories as a whole and a specific reserve for loans deemed impaired. Loans that are determined to be impaired are excluded from the general allowance analysis of the loan portfolio and are assessed individually.

In determining the general allowance, UCB applies loss factors, differentiated by an internal credit risk rating system, to its major loan portfolio categories (based primarily on loan type). UCB’s risk rating system is applied at the individual loan level within each of the major loan portfolio categories. The credit quality of the loan portfolio is regularly assessed through ongoing review.

As of June 30, 2006, UCB completed its annual methodology review for establishing its loss factors for pass rated and criticized loans. The loss factors are developed from actual historic losses and reflect comparative analysis with peer group loss rates and expected losses, which is in turn based on estimated probabilities of default and loss given default. Additionally, loss factors incorporate qualitative adjustments that reflect an assessment of internal and external influences on credit quality that have not yet been reflected in the historical loss or risk-rating data. These influences may include elements such as portfolio credit quality trends and changes in concentrations, growth, or credit underwriting. UCB’s qualitative adjustments also include an economic surcharge factor to adjust loss factors in recognition of the impact various macro-economic factors have on portfolio performance. The quantitative analysis also resulted in establishing a minimum loss factor for each of the major loan portfolio categories to better reflect minimum inherent loss in all portfolios including those with limited historic loss experience.

UCB regularly assesses the loss factors that are applied to loan portfolio categories on a quarterly basis, and as part of the assessment concluded during the year ended December 31, 2006, UCB effected further refinements in the determination of certain loss factors. This refinement focused primarily on the continued development of the expected loss approach and resulted in a revision and lowering of the loss factors applied to criticized and classified loans, which was applicable to all of the major loan portfolio categories. UCB also refined certain historical, qualitative and economic surcharge pass rate factors during 2006.

The components of the allowance for loan losses and allowance for losses related to unfunded commitments for the years ended December 31, 2006, 2005, 2004, 2003 and 2002, were as follows (dollars in thousands):


	2006			2005			2004			2003			2002

Balance at beginning of year:
Allowance for loan losses	$	64,542		$	56,472		$	58,126		$	48,865		$	34,550
Allowance for losses — unfunded commitments		3,402			3,940			2,737			—			—

Total allowance for losses at beginning of year		67,944			60,412			60,863			48,865			34,550
Acquired allowance for loan losses		7,279			2,932			—			4,028			10,162
Provision for loan losses		3,842			6,091			4,202			9,967			9,673
Charge-offs:
Commercial:
Secured by real estate — nonresidential		(791	)		(838	)		(1,577	)		(87	)		—
Secured by real estate — multifamily		—			—			(127	)		—			—
Construction		—			—			—			(170	)		(2,172	)
Business		(9,765	)		(750	)		(2,985	)		(2,713	)		(3,337	)

Total commercial		(10,556	)		(1,588	)		(4,689	)		(2,970	)		(5,509	)

Consumer:
Residential mortgage (one-to-four family)		(74	)		—			—			—			—
Other		(64	)		(26	)		(109	)		(379	)		(54	)

Total consumer		(138	)		(26	)		(109	)		(379	)		(54	)

Total charge-offs		(10,694	)		(1,614	)		(4,798	)		(3,349	)		(5,563	)

Recoveries:
Commercial:
Secured by real estate — nonresidential		128			—			—			30			—
Secured by real estate — multifamily		—			—			—			—			—
Construction		—			—			—			300			—
Business		313			63			119			952			13

Total commercial		441			63			119			1,282			13

Consumer:
Residential mortgage (one-to-four family)		—			34			—			—			—
Other		36			26			26			70			30

Total consumer		36			60			26			70			30

Total recoveries		477			123			145			1,352			43

Total allowance for losses at end of year	$	68,848		$	67,944		$	60,412		$	60,863		$	48,865

Allowance for loan losses	$	62,015		$	64,542		$	56,472		$	58,126		$	48,865
Allowance for losses — unfunded commitments		6,833			3,402			3,940			2,737			—

Total allowance for losses at end of year	$	68,848		$	67,944		$	60,412		$	60,863		$	48,865

Allowance for loan losses to loans held in portfolio		0.93	%		1.11	%		1.39	%		1.54	%		1.61	%
Net charge-offs to average loans held in portfolio		0.17			0.03			0.11			0.06			0.23

The increase in loan charge-offs in 2006 relates primarily to three borrowers whose loans were fully reserved prior to being charged off.

The allocation of the allowance for loan losses analysis and the percentage of gross loans held in portfolio at December 31, 2006, 2005, 2004, 2003 and 2002, were as follows (dollars in thousands):


	2006				2005				2004				2003				2002
	Amount		%		Amount		%		Amount		%		Amount		%		Amount		%

Allocated:
Commercial:
Secured by real estate — nonresidential	$	21,408		35.29	$	30,778		39.52	$	30,885		47.99	$	26,702		45.18	$	18,647		42.17
Secured by real estate — multifamily		2,187		19.22		1,075		25.81		629		21.38		5,263		30.80		8,977		30.18
Construction		12,623		15.89		9,412		8.47		8,929		7.16		9,274		7.76		9,275		7.09
Business		24,468		22.02		22,406		14.80		14,971		11.56		6,011		7.85		7,017		8.65

Total commercial		60,686		92.42		63,671		88.60		55,414		88.09		47,250		91.59		43,916		88.09

Consumer:
Residential mortgage (one-to-four family)		918		6.76		697		10.52		728		10.72		292		7.25		1,555		10.23
Other		141		0.82		174		0.88		330		1.19		465		1.16		635		1.68

Total consumer		1,059		7.58		871		11.40		1,058		11.91		757		8.41		2,190		11.91

Total allocated		61,745		100.00		64,542		100.00		56,472		100.00		48,007		100.00		46,106		100.00

Non-loan category specific(2)		270				—				—				10,122				2,759

Allowance for loan losses	$	62,015			$	64,542			$	56,472			$	58,129			$	48,865

Allowance for losses — unfunded commitments(1)	$	6,832			$	3,402			$	3,940			$	2,737			$	—


(1)		Included in allowance for loan losses in 2002.

(2)		During 2004 the portion of the allowance previously presented as “non loan category specific” was allocated to specific loan portfolios, to align the potential imprecision arising from the accuracy of the risk rating process and general economic and business conditions affecting our key lending areas with the underlying loan portfolio.

The allocation of the allowance to each category is not necessarily indicative of future loss in any particular category and does not restrict our use of the allowance to absorb losses in other categories.

The overall allowance level declined $2.5 million from December 31, 2005. This change includes a $19.4 million reduction from changes in loss factors and $10.2 million reduction from net loan charge-offs. These reductions to the allowance for loan losses were offset by $7.3 million allowance for losses acquired from Summit, $15.0 million from organic loan growth and $4.5 million from migrations in loan quality and repayments or sale of criticized loans.

The Federal Reserve has consistently raised interest rates through June 29, 2006, and has not yet communicated its intention regarding interest rates for 2007. If interest rates rise, additional pressure may be placed on our borrowers’ abilities to meet their contractual loan obligations, which may result in future increases to the allowance for loan losses and, in turn, higher provisions for loan losses. In addition, it is probable that the allowance for loan losses may increase in future quarters if we are successful in implementing our strategies for loan growth and for changing the mix of the commercial loan portfolio to reduce multifamily and commercial real estate loans and increase construction and commercial business loans. These latter two loan types generally contain higher credit risk attributes.

Allowance for Unfunded Commitments. UCB also estimates a reserve related to unfunded commitments and other off-balance sheet credit exposure. In assessing the adequacy of this reserve, UCB uses an approach similar to the approach used in the development of the allowance for loan losses. The reserve for unfunded commitments is included in other liabilities on the statement of financial position. Commitments to extend credit at December 31, 2006 and 2005, were $2.12 billion and $1.30 billion, respectively.

Operational Risk Management

Operational risk is the potential for unexpected losses attributable to human error, systems failures, fraud, or inadequate internal controls and procedures. Successful operational risk management is particularly important to a diversified financial services company like ours because of the nature, volume and complexity of our various businesses.

We classify operational risk into two major categories: business specific and corporate-wide affecting all business lines. Management of operational risk requires a different strategy for each category. For business-specific risks, the Operational Risk Management Committee works with the divisions to ensure consistency in policies, processes and assessments. With respect to corporate-wide risks, such as information security, business recovery, legal and compliance, the Operational Risk Management Committee assesses the risks, develops a consolidated corporate view and communicates that view to the business groups.

In addition, to help manage company-wide risks, we have specialized support groups, such as the Legal Department, Information Security, Business Recovery, Corporate Finance, Corporate Compliance, Information Technology and Operations. These groups assist the lines of business in the development and implementation of risk management practices specific to the needs of the business groups.

Interest Rate and Market Risk Management

Interest rate risk is the potential for loss resulting from adverse changes in the level of interest rates on UCB’s net interest income. Market risk is the potential for loss arising from adverse changes in the prices of UCB’s financial instruments as a result of changes in interest rates or other factors. As a financial institution that engages in transactions involving an array of financial products, UCB is constantly exposed to both interest rate risk and market risk.

Interest rate risk is one of the most significant risks to which UCB is regularly exposed and is managed centrally in the Corporate Treasury function. It is the primary driver behind our market risk exposure and affects both the values of our financial assets and the interest we earn and pay out. A sudden and substantial change in interest rates could negatively affect our earnings if the rates of interest UCB earns on its loans and investments do not change at the same speed, to the same extent, or on the same basis as the interest rates UCB pays on its deposits and borrowings.

One of UCB’s highest priorities is to actively monitor and manage its exposure to interest rate risk. UCB accomplishes this by first evaluating the interest rate risk and, in turn, market risk that is inherent in the makeup of its assets and liabilities. UCB then determines an appropriate level of risk that it is willing to assume considering its business strategy, current operating environment, capital and liquidity requirements, as well as our current performance objectives.

Interest rate risk is managed in a number of ways. UCB actively manages the rates on the various types of loans and deposits that it offers its customers. These offering rates are a primary tool for encouraging or discouraging the production of loans with specific characteristics such as repricing frequency, amortization term and maturity; certificates of deposits with longer or shorter terms; and the mix of deposits. Nevertheless, banking is a competitive industry and although we endeavor to influence the types of loans and deposits that we produce, market conditions ultimately govern the outcome of those efforts.

UCB also manages market risk through changing the composition of its assets by selling loans with specific repricing characteristics, adjusting the relative size of its investment securities portfolio, which are predominately fixed-rate, and replenishing the investment securities portfolio with securities of specific durations and final maturities. UCB also manages the composition of its liabilities by choosing borrowings with longer or shorter expected maturities.

UCB monitors its interest rate and market sensitivities through the use of a model, which estimates the change in our net portfolio value (“NPV”) and net interest income in the event of a range of assumed changes in market interest rates. NPV is defined as the current market value of our assets, less the current market value of our liabilities, plus or minus the current value of off-balance-sheet items. As market interest rates decline, the average expected lives of our fixed-rate loans and investment securities shorten due to quicker prepayments, causing a

relatively moderate increase in their value. The value of our deposit portfolio exhibits only relatively minor movements in a declining interest rate environment, since they are primarily short term in nature. This results in the value of deposits decreasing more quickly than the value of assets increasing. As market interest rates rise, the average expected life of our fixed-rate loans and securities lengthens as prepayments decrease, causing a decline in value. The value of our deposits decreases slowly in a rising rate environment, due to the concentration of time deposits in our deposit base, which have terms of one year or less.

UCB may use certain derivative financial instruments for hedging purposes, such as interest rate swaps, caps and floors as part of our hedging program, to help mitigate our interest rate risk. Such instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount that is presented on our balance sheet. See the “Contractual Obligation and Off-Balance-Sheet Arrangements” section for additional information.

The percentage change in UCB’s NPV and net interest income, assuming an immediate change in interest rates of plus or minus 100 and 200 basis points, from the levels at December 31, 2006 and 2005, and sustained through the projected forward rates are as follows (dollars in thousands):


Change in Interest Rates	Net Portfolio Value								Net Interest Income
in Basis Points:	Amount		Change			% Change			Amount		Change			% Change

December 31, 2006:
200	$	1,074,052	$	(127,162	)		(10.59	)	$	326,194	$	(503	)		(0.15	)
100		1,136,260		(64,955	)		(5.41	)		327,998		1,301			0.40
0		1,201,215		—			—			326,697		—			—
(100)		1,222,214		20,999			1.75			321,829		(4,867	)		(1.49	)
(200)		1,215,494		14,279			1.19			311,995		(14,702	)		(4.50	)
December 31, 2005:
200	$	738,174	$	(178,904	)		(19.51	)	$	267,431	$	(5,840	)		(2.14	)
100		832,947		(84,131	)		(9.17	)		271,580		(1,691	)		(0.62	)
0		917,078		—			—			273,271		—			—
(100)		955,972		38,893			4.24			273,605		334			0.12
(200)		945,275		28,197			3.07			262,226		(11,045	)		(4.04	)

All loans and investments presented in the above table are classified as held to maturity or available for sale. We had no trading securities at those dates.

Like all models that are dependent upon future interest rate movements and other variables, the interest rate risk model that we use has certain shortcomings. We are required to make certain assumptions, such as estimated prepayment rates, which may or may not actually reflect how actual yields and costs will react to market interest rates. For example, the interest rate risk model assumes that the makeup of our interest rate-sensitive assets and liabilities will remain constant over the period being measured. Thus, although using such a model can be instructive in providing an indication of UCB’s exposure to interest rate risk, we cannot precisely forecast the effects of a change in market interest rates and the results indicated by the model are likely to differ from actual results.

Liquidity Risk

Overview. Liquidity risk is the possibility that UCB’s cash flows may not be adequate to fund its ongoing operations and meet its commitments in a timely cost-effective manner. Since liquidity risk is closely tied to both credit risk and market risk, many of the previously discussed risk control mechanisms also apply to the monitoring and management of liquidity risk. UCB manages its liquidity to provide adequate funds to meet its anticipated financial and contractual obligations, including withdrawals by depositors, debt service requirements and lease obligations, as well as to fund customers’ needs for credit. In addition, UCB’s liquidity may be adversely affected by unexpected withdrawals of deposits, excessive interest rates paid by our competitors and other factors. However, UCB continuously reviews its liquidity positions in light of its actual and expected growth in loans and deposits to ensure that its liquidity needs are met.

Maintaining liquidity is the responsibility of the Market Risk Management Committee, which has established corporate liquidity guidelines by which liquidity and funding are managed. These guidelines address maintaining liquidity needs, diversifying funding positions, monitoring liquidity needs at both the Company and UCB levels, and anticipating future funding needs. Liquidity and funding are managed by UCB’s Treasury Department under the direction of the Treasurer.

Contractual Obligations. The Company’s contractual obligations at December 31, 2006, were as follows (dollars in thousands):


				After One Year		After Three
	Within			Through		Years Through		More Than
	One Year			Three Years		Five Years		Five Years		Total

Deposits:
Demand and savings accounts(1)	$	3,136,848		$	—	$	—	$	—	$	3,136,848
Time deposits		3,961,085			70,541		34,305		66		4,065,997
Securities sold under agreements to repurchase		101,600			—		50,000		250,000		401,600
Borrowings		731,146			258,670		65,589		505,882		1,561,287
Subordinated debentures		—			—		—		240,549		240,549
Unfunded CRA investment commitments		7,128			—		—		—		7,128

Total balance sheet arrangements		7,937,807			329,211		149,894		996,497		9,413,409

Off-balance-sheet arrangements:
Commitments to extend credit:
Consumer (including residential mortgage)		83,648			—		—		—		83,648
Commercial (excluding construction)		1,150,599			—		—		—		1,150,599
Construction		889,294			—		—		—		889,294
Letters of credit
Commercial		47,306			—		—		—		47,306
Standby		67,920			602		21,802		3,054		93,378
Derivative financial instruments:
Foreign exchange contracts receivable		(385,301	)		—		—		—		(385,301	)
Foreign exchange contracts payable		220,515			—		—		—		220,515
Interest rate swap contract		—			25,000		—		—		25,000
Interest rate floor contract		—			25,000		—		—		25,000
Put option to sell		(5,329	)		—		—		—		(5,329	)
Put option to buy		5,329			—		—		—		5,329
Unfunded CRA investment commitments		3,623			—		—		—		3,623
Noncancelable operating lease obligations		10,120			15,287		10,413		14,504		50,324

Total off-balance sheet arrangements		2,087,724			65,889		32,215		17,558		2,203,386

Total contractual obligations	$	10,025,531		$	395,100	$	182,109	$	1,014,055	$	11,616,795


(1)		Accounts with indeterminate maturities, such as savings and checking, are included in one year or less category.

With the acquisition of Summit, UCB acquired a five-year interest rate swap with a fair value of $802,000 and a five-year interest rate floor contract with a fair value of $93,000. The notional value of both the interest rate swap and floor were $25.0 million. Both the interest rate swap and the interest rate floor were not designated as hedges.

Also, with the acquisition of Summit, the Company assumed a liability of $233,000 related to a post-retirement compensation agreement with Summit’s former Chief Executive Officer. The post-retirement agreement provides for fifteen annual payments of $24,000, beginning six months after her retirement but no earlier than February 27, 2007.

In addition to the commitments specifically noted in the previous table, the Company enters into a number of contractual commitments in the ordinary course of business. These include systems licensing and maintenance, telecommunications services, facilities maintenance and management, equipment servicing, supplies purchasing, and other goods and services used in the operation of our business. Generally, these contracts are renewable or cancelable at least annually, although in some cases to secure favorable pricing concessions, the Company has committed to contracts that may extend to several years. The Company has no pension or other post-employment benefit obligations.

Liquidity Management. Liquidity is managed centrally for both UCBH and UCB. UCBH’s cash requirements consist primarily of debt service, operating expenses, income taxes and dividends to stockholders. UCBH’s cash needs are routinely met through dividends from UCB, investment income and debt issuances. UCB’s cash requirements consist primarily of funding loans and deposit maintenance such as interest payments and deposit withdrawals. UCB’s primary source of funding is its core deposits.

Operational cash flows, while constituting a potential funding source for the Company, are typically not large enough to provide funding in the amounts that fulfill the needs of UCBH and UCB. As a result, the Company utilizes other sources at its disposal to manage its liquidity needs.

For the year ended December 31, 2006, UCBH received $7.5 million in dividends from UCB. At December 31, 2006, $275.9 million of dividend capacity was available for UCB to pay UCBH without obtaining regulatory approval. The dividend capacity is dependent upon the continued profitability of UCB and on no significant changes taking place in the current regulatory environment. While we have no current expectation that these two conditions will change, should a change take place in the future, the source of funding to UCBH may become more limited or even unavailable. See Note 17 to the Consolidated Financial Statements for the details related to dividend capacities and limitations.

As mentioned earlier, UCB’s primary source of funding is its deposits. For the year ended December 31, 2006, deposit increases resulted in net cash inflows of $393.6 million. Our liquidity may be adversely affected by unexpected withdrawals of deposits, which would require us to seek alternative funding sources, such as federal funds and other borrowings.

UCB maintains borrowing lines with numerous correspondent banks and brokers, and several agreements to repurchase securities sold with major brokerage houses to supplement its supply of lendable funds and to manage liquidity. In addition, the FHLB allows member banks to borrow against their eligible loans to help meet liquidity requirements. These borrowings are generally secured with mortgage loans and/or securities with a market value at least equal to outstanding balances. In addition to loans and securities, advances from the FHLB are typically secured by a pledge of FHLB stock that UCB holds. UCB had $1.43 billion and $788.0 million of FHLB advances outstanding at December 31, 2006 and 2005, respectively. At December 31, 2006, UCB had $606.0 million of additional FHLB borrowings available for future borrowing capacity. At December 31, 2006, UCB had $401.6 million of securities sold under agreements to repurchase. The Company also has a $20.0 million unsecured borrowing line with Wells Fargo Bank. As of December 31, 2006, no advances had been drawn against this line.

At December 31, 2006, the Company had $534.2 million of FHLB short-term, fixed-rate advances that mature within one year. The $900.6 million in long-term advances mature between January 16, 2007, and November 30, 2020. As of December 31, 2006, $716.5 million of these advances may be terminated at the option of the FHLB. For the year ended December 31, 2006, the activity in short-term FHLB borrowings resulted in a net cash inflow of $502.4 million, and activity in long-term borrowings resulted in net cash inflows of $205.9 million. Borrowings

from the FHLB may increase in the future depending on availability of funds from other sources. However, UCB must maintain its FHLB membership to continue to access this source of funding. In addition, the FHLB may terminate the advances at quarterly intervals at specified periods ranging from three to five years beyond the original advance dates. In the event the FHLB decides to exercise this option, UCB would need to repay the advances using other funding sources.

UCB periodically sells loans that it has originated, which sales may provide an alternative source of funding. During the year ended December 31, 2006, loan sales provided $940.7 million in cash inflows. We expect that loan sales will continue to be a tool that we use for liquidity management purposes, as well as to manage our geographical loan concentrations.

While not considered a primary source of funding, the Company’s investment securities activities can also provide or use cash, depending on the investment strategy being used for the portfolio. During the year ended December 31, 2006, investment securities activities resulted in an increase in investment securities holdings and a net cash outflow of $581.7 million. Our current strategy is to continue reducing our investment securities portfolio, which will result in continued cash inflows.

Maturing balances in the various loan portfolios also provide additional flexibility in managing cash flows. In most situations, however, loan growth has resulted in cash outflows from a funding standpoint. For the year ended December 31, 2006, loan growth resulted in a net cash outflow of $3.75 billion. With the loan growth that we have experienced over the past year, we expect that our lending operations will continue to be a use of funds rather than a source.

CAPITAL MANAGEMENT

The Company’s Board of Directors is ultimately responsible for approving the policies associated with capital management. The primary goal of our capital management program is to maintain UCB (on a consolidated basis) and the Company at the “well capitalized” level under the regulatory framework for prompt corrective action. As of December 31, 2006, both UCB and the Company exceeded the minimum total risk-based, Tier 1 risked-based and Tier 1 leverage ratios to be considered “well capitalized”.

UCB’s also manages its risk-based capital levels through internal loan securitizations. In such securitizations, UCB will exchange either multifamily or residential (one-to-four family) mortgage loans for securities issued by FNMA. Residential (one-to-four family) mortgages are generally included in the 50% risk weighted category for risk-based capital purposes. Multifamily loans may receive either a 50% or 100% risk weighting depending on specific loan criteria. FNMA securities, however, are classified at a 20% risk weight.

These internal securitizations do not have a cash flow impact on UCB, since selected loans from its loan portfolio are exchanged for FNMA securities. Such securities are supported by exactly the same loans that were held in UCB’s portfolio. The securities are generally included in the available for sale investment securities portfolio.

Total stockholders’ equity at December 31, 2006, was $786.1 million, an increase of 30.3% over the $603.5 million at December 31, 2005. The increase reflects the retention of earnings and the issuances of new shares of stock in connection with the Company’s recent acquisitions. UCB’s and the Company’s total risk-based, Tier 1 risk-based and Tier 1 leverage ratios at December 31, 2006, 2005, 2004, 2003 and 2002, were as follows:


	2006			2005			2004			2003			2002

United Commercial Bank:
Tier 1 leverage		9.30	%		8.26	%		8.49	%		7.86	%		7.57	%
Tier 1 risk-based capital		9.67			9.91			11.42			10.92			10.26
Total risk-based capital		10.53			10.98			12.67			12.18			11.52
UCBH Holdings, Inc. and subsidiaries:
Tier 1 leverage		9.50	%		8.56	%		8.92	%		8.42	%		7.15	%
Tier 1 risk-based capital		9.86			10.26			11.98			11.69			9.70
Total risk-based capital		10.72			11.33			13.23			12.94			10.95

UCBH has continuously paid quarterly dividends on its common stock since 2000. UCBH paid out dividends of $0.12 per share for a total payment of $10.8 million in 2006, compared to $0.10 per share or $8.7 million in 2005. The payment of dividends during 2006 had the effect of reducing the Company’s Tier 1 leverage ratio by 14 basis points and the total risk-based capital ratio by 15 basis points.


Item 7A.	*Quantitative and Qualitative Disclosures About Market Risk*

For quantitative and qualitative disclosures regarding market risks in our portfolio, see the discussion under “Market Risk Management” included in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Annual Report on Form 10-K.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of UCBH Holdings, Inc.:

We have completed integrated audits of UCBH Holdings, Inc.’s consolidated financial statements and of its internal control over financial reporting as of December 31, 2006, in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our opinions, based on our audits, are presented below.

Consolidated financial statements

In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of UCBH Holdings, Inc. and its subsidiaries at December 31, 2006 and 2005, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2006, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Notes 1 and 19 to the consolidated financial statements, the Company changed the manner in which it accounts for share-based compensation in 2006.

Internal control over financial reporting

Also, in our opinion, management’s assessment, included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A, that the Company maintained effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), is fairly stated, in all material respects, based on those criteria. Furthermore, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control — Integrated Framework issued by the COSO. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on management’s assessment and on the effectiveness of the Company’s internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As described in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A, management has excluded Summit Bank Corporation from its assessment of internal control over financial reporting as of December 31, 2006, because it was acquired by the Company in a purchase business combination during the fourth quarter of 2006. We have also excluded Summit Bank Corporation from our audit of internal control over financial reporting. Summit Bank Corporation’s total assets and total revenues represent 9.0% and 0.0%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2006.

/s/ PricewaterhouseCoopers LLP

San Francisco, California

February 28, 2007

UCBH HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands, Except Share and Par Value Amounts)


	December 31,
	2006			2005

ASSETS
Noninterest bearing cash	$	112,343		$	101,002
Interest bearing cash		92,049			99,070
Federal funds sold		150,027			2,993

Cash and cash equivalents		354,419			203,065

Securities purchased under agreements to resell		175,000			—
Investment and mortgage-backed securities available for sale, at fair value		2,149,456			1,117,724
Investment and mortgage-backed securities held to maturity, at cost (fair value of $295,446 and $313,974 at December 31, 2006 and 2005, respectively)		290,673			308,608
Federal Home Loan Bank stock, Federal Reserve Bank stock and other equity investments		110,775			75,445
Loans held for sale, net of valuation allowance		142,861			156,740
Loans held in portfolio		6,635,660			5,838,660
Allowance for loan losses		(62,015	)		(64,542	)

Loans held in portfolio, net		6,573,645			5,774,118

Accrued interest receivable		50,803			37,750
Premises and equipment, net		115,610			98,289
Goodwill		226,780			106,648
Core deposit intangibles, net		28,325			14,981
Mortgage servicing rights, net		13,273			10,642
Other assets		114,794			61,627

Total assets	$	10,346,414		$	7,965,637


LIABILITIES AND STOCKHOLDERS’ EQUITY
Noninterest bearing deposits	$	767,714		$	558,649
Interest bearing deposits		6,435,131			5,705,520

Total deposits		7,202,845			6,264,169

Securities sold under agreements to repurchase		401,600			—
Short-term borrowings		654,636			279,425
Subordinated debentures		240,549			150,520
Accrued interest payable		21,018			12,582
Long-term borrowings		906,651			562,033
Other liabilities		133,044			93,394

Total liabilities		9,560,343			7,362,123

Commitments and contingencies (Notes 23 and 24)
Preferred stock, $0.01 par value, 10,000,000 shares authorized, none issued and outstanding		—			—
Common stock, $0.01 par value, 180,000,000 shares authorized at December 31, 2006 and 2005; 99,448,181 and 94,037,878 shares issued and outstanding at December 31, 2006 and 2005, respectively		994			940
Additional paid-in capital		341,616			247,340
Retained earnings		464,616			375,220
Accumulated other comprehensive loss		(21,155	)		(19,986	)

Total stockholders’ equity		786,071			603,514

Total liabilities and stockholders’ equity	$	10,346,414		$	7,965,637

See accompanying notes to consolidated financial statements.

UCBH HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in Thousands, Except Per Share Amounts)


	Year Ended December 31,
	2006			2005			2004

Interest and dividend income:
Loans	$	448,650		$	333,159		$	226,292
Investment and mortgage-backed securities:
Taxable		62,418			55,369			62,674
Tax-exempt		10,717			10,617			9,477
FHLB stock		3,006			1,134			972
Federal funds sold and deposits with banks		5,707			2,121			649
Securities purchased under agreements to resell		4,515			—			—

Total interest and dividend income		535,013			402,400			300,064

Interest expense:
Deposits		210,059			123,317			67,267
Securities sold under agreements to repurchase		5,313			—			—
Short-term borrowings and federal funds purchased		10,178			10,605			2,165
Subordinated debentures		12,106			9,353			8,185
Long-term borrowings		33,424			18,635			14,966

Total interest expense		271,080			161,910			92,583

Net interest income		263,933			240,490			207,481
Provision for loan losses		3,842			6,091			4,201

Net interest income after provision for loan losses		260,091			234,399			203,280

Noninterest income:
Commercial banking fees		15,444			10,607			8,254
Service charges on deposits		3,722			3,038			2,654
Gain (loss) on sale of securities, net		206			(5	)		12,713
Gain on sale of SBA loans, net		2,930			3,356			1,463
Gain on sale of commercial and multifamily real estate loans, net		17,812			12,207			7,732
Lower of cost or market adjustment on loans held for sale		76			(1,152	)		—
Equity loss in other equity investments		(1,106	)		(2,296	)		(2,210	)
Acquisition termination fee		5,000			—			—
Other fees		3,059			929			271

Total noninterest income		47,143			26,684			30,877

Noninterest expense:
Personnel		88,616			60,152			50,931
Occupancy		16,189			12,238			10,164
Data processing		9,890			6,847			5,896
Furniture and equipment		7,100			6,534			6,458
Professional fees and contracted services		9,855			10,763			7,496
Deposit insurance		784			742			774
Communication		1,071			955			1,287
Core deposit intangible amortization		2,342			1,345			1,282
Loss (gain) on extinguishment of subordinated debentures and borrowings		(360	)		1,246			—
Other general and administrative		19,933			16,091			14,865

Total noninterest expense		155,420			116,913			99,153

Income before income tax expense		151,814			144,170			135,004
Income tax expense		50,937			46,344			49,401

Net income	$	100,877		$	97,826		$	85,603

Earnings per share:
Basic	$	1.07		$	1.06		$	0.95
Diluted	$	1.03		$	1.02		$	0.90
Dividends declared per share	$	0.12		$	0.10		$	0.08

See accompanying notes to consolidated financial statements.

UCBH HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME

(Dollars in Thousands, Except Share and Per Share Amounts)


											Accumulated
					Additional						Other			Total
	Common Stock				Paid-In			Retained			Comprehensive			Stockholders’			Comprehensive
	Shares		Amount		Capital			Earnings			Loss(1)			Equity			Income

Balance at December 31, 2003		90,076,756	$	450	$	208,990		$	208,271		$	(3,245	)	$	414,466
Net income		—		—		—			85,603			—			85,603		$	85,603
Other comprehensive loss, net of tax benefit of $2,364		—		—		—			—			(3,253	)		(3,253	)		(3,253	)

Comprehensive income		—		—		—			—			—			—		$	82,350

Stock options exercised, including related tax benefit		1,055,068		6		11,233			—			—			11,239
Cash dividend of $0.08 per share		—		—		—			(7,252	)		—			(7,252	)
Adjustment to purchase consideration in connection with acquisition of First Continental Bank (Note 11)		—		—		(16,791	)		—			—			(16,791	)

Balance at December 31, 2004		91,131,824		456		203,432			286,622			(6,498	)		484,012
Net income		—		—		—			97,826			—			97,826		$	97,826
Other comprehensive income, net of tax benefit of $9,899		—		—		—			—			(13,488	)		(13,488	)		(13,488	)

Comprehensive income		—		—		—			—			—			—		$	84,338

Stock options exercised, including related tax benefit		786,614		6		7,670			—			—			7,676
Cash dividend of $0.10 per share		—		—		—			(9,228	)		—			(9,228	)
Shares issued in connection with acquisition of:
Pacifica Bancorp, Inc.		1,241,194		12		21,080			—			—			21,092
Asian American Bank & Trust Company		878,246		9		15,615			—			—			15,624
Stock split		—		457		(457	)		—			—			—

Balance at December 31, 2005		94,037,878		940		247,340			375,220			(19,986	)		603,514
Net income		—		—		—			100,877			—			100,877		$	100,877
Other comprehensive income, net of tax benefit of $813		—		—		—			—			(1,169	)		(1,169	)		(1,169	)

Comprehensive income		—		—		—			—			—			—		$	99,708

Stock options exercised, including related tax benefit		585,442		6		6,375			—			—			6,381
Stock compensation charge		—		—		2,163			—			—			2,163
Cash dividend of $0.12 per share		—		—		—			(11,481	)		—			(11,481	)
Shares issued in connection with acquisition of Summit Bank Corporation		4,824,861		48		85,738			—			—			85,786

Balance at December 31, 2006		99,448,181	$	994	$	341,616		$	464,616		$	(21,155	)	$	786,071




(1)		Accumulated Other Comprehensive Loss arises solely from net unrealized losses on investment and mortgage-backed securities available for sale, presented net of tax.

See accompanying notes to consolidated financial statements.

UCBH HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)


	Year Ended December 31,
	2006			2005			2004

Cash flows from operating activities:
Net income	$	100,877		$	97,826		$	85,603
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		3,842			6,091			4,201
Amortization of net deferred loan fees, purchase premiums and discounts		(9,061	)		(6,262	)		(5,285	)
Amortization of net securities premiums and discounts		(847	)		103			1,688
Federal Home Loan Bank stock dividend		(2,348	)		(1,351	)		(1,009	)
First Continental Bank acquisition purchase price adjustment		—			—			2,345
Amortization of intangibles		5,341			3,642			2,670
Depreciation and amortization of premises and equipment		8,995			8,543			6,851
Gain on sale of loans originated in held in portfolio, securities, and other assets, net		(17,888	)		(9,987	)		(21,519	)
Lower of cost or market adjustment on loans held for sale		(76	)		1,152			—
Equity loss in other equity investments		1,106			2,296			2,210
Stock compensation expense, net of tax benefit related to nonqualified stock option grants		1,876			—			—
Excess tax benefit from stock option exercises		(2,007	)		—			—
Loss (gain) on extinguishment of subordinated debentures and borrowings		(360	)		1,246			—
Other, net		1,185			(2,037	)		(203	)
Changes in operating assets and liabilities:
Decrease (increase) in loans originated in held for sale		27,113			(240,721	)		—
Decrease (increase) in accrued interest receivable		(9,459	)		(11,971	)		(2,751	)
Decrease (increase) in other assets		13,037			4,283			(5,650	)
Increase (decrease) in accrued interest payable		4,450			5,065			(2,236	)
Increase (decrease) in other liabilities		(10,143	)		14,472			14,055

Net cash provided by (used in) operating activities		115,633			(127,610	)		80,970

Cash flows from investing activities:
Payment for purchase of Summit Bank Corporation, net of cash acquired		(137,119	)		—			—
Payment for purchase of Pacifica Bancorp, Inc., net of cash acquired		(116	)		(2,312	)		—
Payment for purchase of Asian American Bank & Trust Company, net of cash acquired		(322	)		(4,993	)		—
Purchase of securities purchased under agreements to resell		(175,000	)		—			—
Investment and mortgage-backed securities, available for sale:
Principal payments and maturities		708,525			418,294			756,762
Purchases		(1,424,927	)		(486,062	)		(1,442,128	)
Sales		96,777			114,991			821,821
Called		20,000			22,000			68,136
Investment and mortgage-backed securities, held to maturity:
Principal payments and maturities		14,859			26,296			28,278
Purchases		(1,600	)		(9,892	)		(69,074	)
Called		4,625			—			—
Proceeds from redemption of Federal Home Loan Bank stock		19,098			9,725			—
Purchase of Federal Home Loan Bank stock		(44,607	)		(20,623	)		—
Funding of other equity investments		(3,303	)		(12,529	)		(6,388	)
Proceeds from sale of other equity investment		2,000			—			—
Proceeds from the sale of loans originated in held in portfolio		851,597			442,776			474,451
Loans originated in held in portfolio funded and purchased, net of principal collections		(1,360,561	)		(1,566,134	)		(1,202,029	)
Purchases of premises and other equipment		(9,502	)		(6,915	)		(12,444	)
Other investing activities, net		495			201			(74	)

Net cash used in investing activities		(1,439,081	)		(1,075,177	)		(582,689	)

Cash flows from financing activities:
Net increase in demand deposits, NOW, money market and savings accounts		188,410			155,806			517,744
Net increase (decrease) in time deposits		205,200			631,701			214,597
Net increase (decrease) in short-term borrowings		502,439			156,214			(167,824	)
Proceeds from securities sold under agreements to repurchase		300,000			—			—
Proceeds from issuance of subordinated debentures		77,321			40,000			—
Redemption of subordinated debentures		—			(30,000	)		—
Proceeds from long-term borrowings		256,072			266,520			70,000
Principal payments of long-term borrowings		(50,172	)		(17,916	)		—
Proceeds from stock option exercises		4,374			3,863			5,560
Excess tax benefit from stock option exercises		2,007			—			—
Payment of cash dividend on common stock		(10,849	)		(8,700	)		(6,780	)

Net cash provided by financing activities		1,474,802			1,197,488			633,297

Net increase (decrease) in cash and cash equivalents		151,354			(5,299	)		131,578
Cash and cash equivalents at beginning of year		203,065			208,364			76,786

Cash and cash equivalents at end of year	$	354,419		$	203,065		$	208,364

See accompanying notes to consolidated financial statements.

UCBH HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.	Basis of Presentation and Summary of Significant Accounting and Reporting Policies

Organization

UCBH Holdings, Inc. (“UCBH”) is a bank holding company organized under the laws of Delaware that conducts its business through its principal subsidiary, United Commercial Bank (“UCB”; UCBH, UCB and UCB’s wholly owned subsidiaries are collectively referred to as the “Company”, “we”, “us” and “our”), a California state-chartered commercial bank. Additionally, UCBH owns all of the common stock of ten special purpose trusts, which were created for issuing guaranteed preferred beneficial interests in UCBH’s junior subordinated debentures.

UCB offers a full range of commercial and consumer banking products through its retail branches and other banking offices in the states of California, Georgia, Massachusetts, New York, Texas and Washington, and internationally through its full-service branch in Hong Kong. UCB also has representative offices in Shanghai and Shenzhen, China, and Taipei, Taiwan. UCB through its wholly owned subsidiary, California Canton International Bank (Cayman) Ltd., is licensed to conduct banking business under a Category “B” Bank & Trust license granted by the Government of the Cayman Islands. UCB also engages in the offer and sale of variable life and annuity insurance products, mutual funds and certain equity securities to the clients of its registered representatives through its wholly owned subsidiary, UCB Investment Services, Inc. (“UCBIS”). UCBIS is a registered broker-dealer with the Securities and Exchange Commission and a member of the National Association of Securities Dealers (“NASD”) and the Securities Investor Protection Corporation (“SIPC”). Two additional subsidiaries, Newston Investments, Inc. and SBGA California Investments, Inc. were acquired in the Summit transaction. Newston Investments, Inc. owns the office building that houses UCB’s branch in Houston, Texas. SBGA California Investments, Inc. is the holding company of SBGA Investments, Inc., which is a real estate investment trust and is immaterial to UCB.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company. The consolidated results exclude the ten special purpose trusts referred to above that are owned by UCBH. In accordance with Financial Accounting Standards Board (the “FASB”) Interpretation No. (“FIN”) 46R, Consolidation of Variable Interest Entities, an interpretation of ARB No. 51, these special purpose trusts are excluded from the consolidated results as UCBH is not considered to be the primary beneficiary of these trusts.

Reclassifications

Certain reclassifications have been made to prior years’ consolidated financial statements to conform to the December 31, 2006, presentation.

On January 27, 2005, UCBH declared a two-for-one stock split in the form of a stock dividend payable to the stockholders of record as of March 31, 2005, and distributed the stock dividend on April 12, 2005. Accordingly, basic and diluted earnings per share on the consolidated statement of operations for the year ended December 31, 2004, was adjusted to reflect the impact of the stock split. Additionally, the number of issued and outstanding shares of UCBH’s common stock on the consolidated statement of changes in stockholders’ equity and comprehensive income at and for the years ended December 31, 2004, and at December 31, 2003, was also adjusted to take into account the stock split.

Use of Estimates in Preparation of Financial Statements

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimated results.

UCBH HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


1.	Basis of Presentation and Summary of Significant Accounting and Reporting Policies — (Continued)

Cash and Cash Equivalents

Cash and cash equivalents consist of cash and noninterest-bearing deposits, federal funds sold and securities purchased under agreements to resell. For purposes of the statements of cash flows, the Company considers all highly liquid debt instruments with original maturities of three months or less when purchased to be cash equivalents.

Securities Purchased Under Agreements to Resell

UCB periodically purchases securities under agreements to resell (repurchase agreements). The amounts advanced under such agreements represent short-term loans. During the agreement period, the securities are maintained by a dealer under a written custodial agreement that explicitly recognizes UCB’s interest in the securities.

Investment and Mortgage-Backed Securities

UCB classifies its investment and mortgage-backed securities according to their purpose and holding period. Gains and losses on the sale of securities are recognized on a trade-date basis using the specific identification method and recorded in noninterest income. UCB does not maintain a trading account for securities.

Investment and mortgage-backed securities that have been classified as held to maturity are carried at cost, adjusted for the amortization of premiums and accretion of discounts. Cost is determined on a specific identification basis. Upon purchase, UCB has the ability and intent to hold the held to maturity securities in its portfolio until maturity.

Securities that are held to meet investment objectives, such as interest rate risk and liquidity management, and may be sold to implement management strategies are classified as available for sale. Investment and mortgage-backed securities that might be sold prior to maturity are classified as available for sale and are carried at fair value. Fair value is generally determined by the quoted market price of the market security, but if a quoted market price is not available, the fair value is extrapolated from the quoted prices of similar instruments. Unrealized holding gains or losses, net of applicable taxes, are recorded as a component of comprehensive income. Declines in fair values that are deemed other-than-temporary impairment, if any, are reported in noninterest income.

Premiums and discounts on investment and mortgage-backed securities are amortized against interest income, using the interest method, with the amortization period based on the expected lives of the underlying securities.

Loans Held for Sale

Loans that are originated with the intent to sell, as well as loans that were originated with the intent and ability to hold for the foreseeable future (loans held in portfolio) but which have been subsequently designated as being held for sale for risk management or liquidity needs are carried at the lower of cost or fair market value.

Loans Held in Portfolio

Loans held in portfolio are carried at their principal balance outstanding, net of premiums and discounts and unearned income. Premiums and discounts are recognized generally as an adjustment of loan yield by the interest method based on the contractual term of the loans. Unearned income, which includes deferred fees net of deferred direct incremental loan origination costs, is amortized to interest income generally over the expected life of the loan using the interest method. Amortization of net deferred loan fees is discontinued on nonperforming loans. Interest is accrued as earned.

UCBH HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


1.	Basis of Presentation and Summary of Significant Accounting and Reporting Policies — (Continued)

Nonaccrual Loans

Loans are generally placed on nonaccrual status when the payments of principal and interest become 90 days past due, or earlier if, in management’s opinion, the full and timely collection of principal or interest becomes uncertain. Any accrued and unpaid interest on such loans is reversed and charged against current interest income. A loan may be returned to accrual status when all delinquent interest and principal becomes current in accordance with the terms of the loan agreement or when the loan becomes both well secured and in the process of collection.

UCB generally recognizes interest income on nonaccrual loans to the extent received in cash. However, where there is doubt regarding the ultimate collectibility of the loan principal, cash receipts, whether designated as principal or interest, are applied to reduce the carrying value of the loan.

Allowance for Loan Losses

The allowance for loan losses represents our estimate of the losses that are inherent in the loans held in portfolio. Similarly, loans held for sale are excluded from any of the information included in Note 9, “Loans Held in Portfolio and Allowance for Loan Losses”. UCB continuously monitors the quality of its loan portfolio and maintains an allowance for loan losses sufficient to absorb losses inherent in the portfolio.

In determining the general allowance, UCB applies loss factors, differentiated by an internal credit risk rating system, to its major loan portfolio categories (based primarily on loan type). The loss factors are developed from actual historic losses, and reflect comparative analysis with peer group loss rates and expected losses, which is in turn based on estimated probabilities of default and loss given default. Additionally, loss factors incorporate qualitative adjustments that reflect an assessment of internal and external influences on credit quality that have not yet been reflected in the historical loss or risk-rating data. These influences may include elements such as portfolio credit quality trends and changes in concentrations, growth, or credit underwriting. UCB’s qualitative adjustments also include an economic surcharge factor to adjust loss factors in recognition of the impact various macro-economic factors have on portfolio performance. The quantitative analysis also resulted in establishing a minimum loss factor for each of the major loan portfolio categories to better reflect minimum inherent loss in all portfolios including those with limited historic loss experience.

Impaired and Restructured Loans

UCB considers a loan to be impaired when, based on current information and events, it is probable that UCB will be unable to collect all amounts due according to the contractual terms of the loan agreement, including scheduled interest payments. In evaluating whether a restructured loan has been impaired, the contractual terms used in the evaluation are the contractual terms specified by the original loan agreement, not the contractual terms specified by the restructuring agreement. Performing restructured loans are not placed on nonaccrual status.

When evaluating loans for possible impairment, UCB makes a loan-by-loan assessment for impairment when and while such loans are on nonaccrual status or whether the loan has been restructured. When a loan has been identified as being impaired, the amount of impairment is measured by using the loan’s discounted cash flows, except in situations where it is determined that the primary remaining source of repayment is the operation or liquidation of the underlying collateral. In such cases, the current fair value of the collateral, reduced by estimated costs to sell, is used in place of discounted cash flows. UCB does not apply the loan-by-loan evaluation process described above to large groups of smaller balance homogeneous loans that are evaluated collectively for impairment, such as residential mortgage (one-to-four family) loans, home equity loans, and other consumer loans.

UCBH HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


1.	Basis of Presentation and Summary of Significant Accounting and Reporting Policies — (Continued)

If the measurement of an impaired loan is less than the recorded investment in the loan (including accrued interest, net deferred loan fees or costs and unamortized premium or discount), an impairment is recognized by creating or adjusting an existing allocation of the allowance for loan losses. UCB’s charge-off policy with respect to impaired loans is similar to its charge-off policy for all loans. Specifically, loans are charged off at the point where they are considered uncollectible.

Premises and Equipment

Premises and equipment are carried at cost, less accumulated depreciation and amortization. Depreciation and amortization of premises and equipment are determined on a straight-line basis over the estimated useful lives. Terms range from three to ten years for furniture, equipment and computer software, and from forty to fifty years for premises. Leasehold improvements are amortized over the terms of the respective leases or the estimated useful lives of the improvements, whichever is shorter. The cost of assets retired or otherwise disposed of and the related accumulated depreciation and amortization are removed from the accounts with any resulting gain or loss recorded to the statement of operations.

Other Real Estate Owned

Other real estate owned (“OREO”) consists of properties acquired through, or in lieu of, foreclosure and is carried at the lower of cost or fair value less estimated selling costs. Cost includes the unpaid loan balance adjusted for applicable accrued interest, unamortized deferred loan fees and acquisition costs. In the event that the fair value less estimated selling costs is less than cost at the time of foreclosure, the shortfall is charged to the allowance for loan losses. Subsequent write-downs, if any, and disposition gains and losses are reflected as charges to current operations.

Investments in Federal Home Loan Bank Stock and Federal Reserve Bank Stock

Federal Home Loan Bank (“FHLB”) stock and Federal Reserve Bank (“FRB”) are carried at cost and may be sold back to the FHLB and FRB, respectively, at its carrying value. Both cash and stock dividends received are reported as dividend income.

Other Equity Investments

Affordable housing investments are accounted for using the equity method of accounting. Similarly, other limited partnership and limited liability investments in which UCB’s ownership is 5% or greater are accounted for under the equity method of accounting; minor interests less than 5% are accounted for under the cost basis of accounting. Under the equity method of accounting, UCB adjusts its cost basis by recognizing its share of the earnings or losses of the underlying investment. Under cost basis accounting, UCB’s cost basis in each investment is reduced by dividends or other distributions received until the cost of the individual investment is fully recovered. None of these investments meet the criteria of FIN 46 as referred to above and, therefore, are not consolidated.

Acquisitions of Certain Financial Institutions

Acquisitions are accounted for using the purchase method of accounting. Under the purchase method, net assets of the acquired business are recorded at their estimated fair values as of the date of the acquisition. Any excess of cost over the fair value of the net assets and other identifiable intangible assets acquired is recorded as goodwill. Results of operations of the acquired business are included in the consolidated statement of operations from the date of acquisition forward.

UCBH HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


1.	Basis of Presentation and Summary of Significant Accounting and Reporting Policies — (Continued)

Goodwill and Core Deposit Intangibles

Goodwill resulting from the Company’s acquisitions is tested annually for impairment or more frequently if conditions arise that might indicate that an impairment has taken place. Identifiable intangible assets, namely core deposit intangibles, are amortized over their estimated period of benefit. Core deposit intangibles are also tested for impairment on a quarterly basis.

Transfers of Financial Assets and Mortgage Servicing Rights

UCB primarily sells loans on a whole loan basis with UCB either releasing or retaining the right to service the loans. When UCB does not retain the servicing rights to the loans, the gain or loss on the sale is equal to the difference between the proceeds received and the carrying value of the loans sold. If the loans are sold with UCB retaining the servicing rights, the gain or loss depends in part on the fair value attributed to the servicing rights. In calculating the gain or loss on such a sale, UCB allocates the cost basis of the loans sold between the assets sold and servicing rights and retained interests based on their relative fair values at the date of sale. A gain or loss is recognized as the difference between the cash proceeds from the sale and the allocated cost basis of the loans sold. Since market quotes are generally not available for servicing assets, UCB estimates fair value based upon modeling techniques, which are based on the assumptions that UCB believes market participants would use for similar assets and liabilities.

Additionally, UCB exchanges either multifamily or residential mortgage (one-to-four family) loans for Federal National Mortgage Association (“FNMA”) securities. These internal securitizations do not have a cash impact to UCB, since selected loans from UCB’s loan portfolio are exchanged for FNMA securities. Such securities are represented by exactly the same loans previously held in UCB’s loan portfolio. The FNMA securities are generally held as available for sale (“AFS”) securities in UCB’s investment and mortgage-backed securities portfolio. Since UCB retains all of the securities issued by FNMA in the securitization, no gain or loss is recognized on the exchange transaction. UCB continues to service the loans included in these securitizations. Servicing rights related to these internal securitizations are not material.

Mortgage servicing rights are carried at the lower of cost or fair value and are amortized in proportion to and over the period of the estimated net servicing revenue. Mortgage servicing rights are tested for impairment on a quarterly basis.

In determining fair value, UCB stratifies its mortgage servicing rights based on the risk characteristics of the underlying loan pools. The fair value of mortgage servicing rights is determined by calculating the present value of estimated future net servicing cash flows, using assumptions of prepayments, defaults, ancillary income, servicing costs and discount rates that UCB believes market participants would use for similar assets.

UCB evaluates other-than-temporary impairment of mortgage servicing rights by considering both historical and projected trends in interest rates, pay off activity and whether the impairment could be recovered through interest rate increases. If UCB determines that an impairment for a stratum is other-than-temporary, the value of the mortgage servicing rights and any related valuation allowance is written down.

Securities Sold Under Agreements to Repurchase

UCB periodically enters into sales of securities under agreements to repurchase (reverse repurchase agreements). Fixed-coupon reverse repurchase agreements are treated as financings. Accordingly, the securities underlying the agreements remain in the asset accounts, and the obligations to repurchase securities sold are reflected as a liability in the consolidated balance sheets. The securities underlying the agreements are delivered to the dealers who arrange the transactions. Under some agreements, the dealers may sell, lend, or otherwise dispose of the securities to other parties and agree to resell to UCB substantially identical securities at the maturities of the agreements.

UCBH HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


1.	Basis of Presentation and Summary of Significant Accounting and Reporting Policies — (Continued)

Derivative Instruments and Hedging Activities

Financial derivatives are instruments where a notional principal amount is tied to an underlying interest rate, currency exchange rate or other financial asset, index or pricing measure. Examples of derivative financial instrument are foreign exchange contracts (swaps and forwards), interest rate swaps, options, caps, floors, forwards and similar instruments. In addition, certain financial instruments may contain embedded derivatives that must be evaluated to determine whether the derivative should be accounted for separately from the host instrument.

UCB does not speculate on the future direction of interest or exchange rates. Nonetheless, UCB may from time to time enter into financial derivative transactions to mitigate interest rate exposures inherent in its assets, liabilities, or its net interest position and/or to hedge various market or foreign exchange risks. UCB may also engage in financial derivative transactions on behalf of customers and to facilitate their transactions.

UCB’s derivatives not accounted for as hedges, including embedded derivatives that must be accounted for separately from the host instrument, are carried at fair value in the financial statements with any gains or losses reflected in noninterest expense and included in other general and administrative.

Income Taxes

The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 109, Accounting for Income Taxes. SFAS No. 109 requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company’s financial statements or tax returns. The Company provides a valuation allowance against net deferred tax assets to the extent that realization of the assets is not considered more likely than not. The Company and UCB file a consolidated federal income tax return, a combined California state income tax return, a combined New York state and New York City income tax return and a separate Massachusetts state income tax return for UCB only.

Stock-Based Compensation

Prior to January 1, 2006, the Company accounts for employee stock-based compensation using the intrinsic value method in accordance with Accounting Principles Board (the “APB”) Opinion No. 25, Accounting for Stock Issued to Employees, as allowed by SFAS No. 123, Accounting for Stock-Based Compensation, as amended by SFAS No. 148, Accounting for Stock-Based Compensation-Transition and Disclosure. Under the intrinsic value method, no stock-based employee compensation cost is recorded, provided the stock options are granted with an

UCBH HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


1.	Basis of Presentation and Summary of Significant Accounting and Reporting Policies — (Continued)

exercise price equal to or greater than the market value of the underlying common stock on the date of grant. As of December 31, 2006, the Company had one stock-based employee compensation plan, which is described more fully in Note 19. No share-based employee compensation cost has been reflected in the Company’s net income prior to the adoption of SFAS No. 123(R). In addition, the adoption of SFAS No. 123(R) had no effect on the Company as substantially all of the Company’s options were fully vested as of the adoption date.

In estimating the fair value of each stock option award on their respective grant dates, we use the Black-Scholes pricing model. The Black-Scholes pricing model requires us to make assumptions with regard to the options granted during a reporting period namely, expected life, stock price volatility, expected dividend yield and risk-free interest rate.

The expected life of the options is based on historical data of UCBH’s actual experience with the options it has granted and represents the period of time that the options granted are expected to be outstanding. This data includes employees’ expected exercise and post-vesting employment termination behaviors. The expected stock price volatility is estimated using the historical volatility of UCBH’s common stock and other factors. The historical volatility covers a period that corresponds to the expected life of the options. The expected dividend yield is based on the estimated annual dividends that we expect UCBH to pay over the expected life of the options as a percentage of the market value of UCBH’s stock as of the grant date. The risk-free interest rate for the expected life of the options granted is based on the U.S. Treasury yield curve in effect as of the grant date. See Note 19 for further information on share-based compensation.

Earnings per Share

The Company computes basic earnings per share by dividing net income by the weighted average number of shares outstanding during the period. Diluted earnings per share is computed based upon the weighted average number of common and common equivalent shares outstanding during the period, which is calculated using the treasury stock method for stock options. Common equivalent shares are excluded from the computation in periods in which they have an anti-dilutive effect on earnings per share.

Translation of Foreign Currencies

UCB considers the functional currency of its foreign operations to be the United States dollar. Accordingly, UCB remeasures monetary assets and liabilities at year-end exchange rates, while nonmonetary items are remeasured at historical rates. Income and expense accounts are remeasured at the average rates in effect during the year, except for depreciation, which is remeasured at historical rates. Foreign currency transaction gains and losses are recognized in income in the period of occurrence. The gross foreign currency gains were $559,000, $1.2 million and $5.3 million for the years ended December 31, 2006, 2005 and 2004, respectively. The gross foreign currency losses were $1.1 million, $964,000 and $5.0 million for the years ended December 31, 2006, 2005 and 2004, respectively.


2.	Recent Accounting Pronouncements

Fair Value Option for Financial Assets and Financial Liabilities

UCBH HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


2.	Recent Accounting Pronouncements — (Continued)

Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans

Fair Value Measurements

Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements

In September 2006, the SEC issued Staff Accounting Bulletin (“SAB”) No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements. SAB No. 108 provides interpretive guidance on how the effects of the carryover or reversal of prior year misstatements should be considered in quantifying a current year misstatement. The SEC staff believes that registrants should quantify errors using both a balance sheet and income statement approach and evaluate whether either approach results in quantifying a misstatement that, when all relevant quantitative and qualitative factors considered, is material. SAB No. 108 is effective for fiscal years ending on or after November 15, 2006, with early application encouraged. The adoption of SAB No. 108 did not have a material effect on its consolidated financial position, results of operations or cash flows.

Accounting for Uncertainty in Income Taxes

In July 2006, the FASB issued FIN 48, Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109. FIN 48 clarifies the accounting for income tax uncertainties that have been recognized in an enterprise’s financial statements in accordance with SFAS No. 109, Accounting for Income Taxes. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 requires that the Company recognize in the financial statements the impact of a tax position, if that position is more likely than not of being sustained on audit, based on the technical merits of the position. FIN 48 also provides additional guidance on accounting for tax uncertainties, including derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The provisions of FIN 48 are effective for fiscal years beginning after December 15, 2006, with the cumulative effect of the change in accounting principle recorded as an adjustment to opening retained earnings. The Company has performed an assessment of the effects of adopting FIN 48 and has determined that such adoption will result in a decrease in goodwill, with an offsetting increase in current tax receivables, of approximately $2.6 million.

UCBH HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


2.	Recent Accounting Pronouncements — (Continued)

Accounting for Servicing of Financial Assets

Accounting for Certain Hybrid Financial Instruments


3.	Business Combinations

Summit Bank Corporation

UCBH and Summit Bank Corporation (“Summit”), a Georgia corporation registered under the Bank Holding Company Act of 1956, as amended, entered into an Agreement and Plan of Merger dated as of September 18, 2006. On December 29, 2006, UCBH completed its acquisition of Summit for a total consideration of approximately $174.7 million consisting of 4,824,861 shares of UCBH’s common stock valued at $85.8 million and $88.9 million in cash, which includes costs related to the cash-out of the outstanding stock options of Summit and direct acquisition costs. The results of Summit’s operations have been included in the consolidated financial statements since that date.

The purchase price, including direct acquisition costs, has been allocated to the assets acquired and liabilities assumed based on fair values at the acquisition date. The allocation of purchase price includes goodwill, which will

UCBH HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


3.	Business Combinations — (Continued)

be tested for impairment at least annually. Additionally, goodwill is not expected to be deductible for income tax purposes. The allocation of purchase price at the date of acquisition was as follows (dollars in thousands):


Cash and due from banks	$	18,595
Investment and mortgage-backed securities available for sale		258,264
Federal Home Loan Bank stock, Federal Reserve Bank stock and other equity investments		5,851
Loans held in portfolio, net		466,104
Accrued interest receivable		3,594
Premises and equipment		16,875
Goodwill		126,199
Core deposit intangibles		16,900
Other assets		22,100

Total assets acquired		934,482

Deposits		544,846
Securities sold under agreements to repurchase		101,600
Short-term borrowings		85,805
Subordinated debentures		12,708
Accrued interest payable		3,986
Other liabilities		10,842

Total liabilities assumed		759,787

Total allocation of purchase price	$	174,695

The Company’s purchase price allocations for the assets it acquired from Summit are preliminary. The Company is awaiting the results of final valuation studies that are being performed by independent valuation consultants. We expect to finalize these valuations during the first quarter of 2007.

Pacifica Bancorp, Inc.

UCBH and Pacifica Bancorp, Inc. (“Pacifica”), the holding company of Pacifica Bank, a Washington state-chartered bank, entered into an Agreement and Plan of Merger dated as of May 23, 2005. On October 31, 2005, UCBH completed its acquisition of Pacifica for a total consideration of approximately $41.6 million consisting of 1,241,194 shares of UCBH’s common stock valued at $21.1 million and $19.4 million in cash, which includes the cash-out of the outstanding stock options of Pacifica and direct acquisition costs. The results of Pacifica’s operations have been included in the consolidated financial statements since that date.

UCBH HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


3.	Business Combinations — (Continued)


Cash and due from banks	$	17,949
Investment and mortgage-backed securities available for sale		13,522
Investment and mortgage-backed securities held to maturity		256
FHLB stock		635
Loans held in portfolio, net		136,968
Accrued interest receivable		691
Premises and equipment		1,093
Goodwill		23,277
Core deposit intangibles		3,800
Other assets		3,854

Total assets acquired		202,045

Deposits		148,733
Short-term borrowings		163
Long-term borrowings		8,698
Accrued interest payable		836
Other liabilities		2,006

Total liabilities assumed		160,436

Total allocation of purchase price	$	41,609

Asian American Bank & Trust Company

UCBH and Asian American Bank & Trust Company (“AABT”), a Massachusetts state-chartered banking corporation, entered into an Agreement and Plan of Merger dated as of August 2, 2005. On November 28, 2005, UCBH completed its acquisition of AABT for a total consideration of approximately $34.6 million consisting of 878,246 shares of UCBH’s common stock valued at $15.6 million, $18.2 million in cash and also direct acquisition costs. The results of AABT’s operations have been included in the consolidated financial statements since that date.

UCBH HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


3.	Business Combinations — (Continued)


Cash and due from banks	$	13,982
Investment and mortgage-backed securities available for sale		27,590
FHLB stock		346
Loans held in portfolio, net		86,010
Accrued interest receivable		581
Premises and equipment		6,307
Goodwill		15,070
Core deposit intangibles		2,900
Other assets		766

Total assets acquired		153,552

Deposits		112,067
Long-term borrowings		2,441
Accrued interest payable		571
Other liabilities		3,874

Total liabilities assumed		118,953

Total allocation of purchase price	$	34,599

Great Eastern Bank

UCBH and Great Eastern Bank (“GEB”), a New York state-chartered banking corporation, entered into an Agreement and Plan of Merger dated as of October 13, 2005 (“GEB Agreement”). On February 17, 2006, GEB notified UCBH that it had decided to accept a superior third party proposal, as defined in the GEB Agreement. UCBH notified GEB on February 21, 2006, that it had elected not to exercise the right of further negotiation as permitted under the GEB Agreement. This resulted in the termination of the GEB Agreement and the payment of a breakup fee of $5.0 million from GEB to UCBH, which was received on February 21, 2006.


4.	Cash and Due from Banks

UCB is required to maintain cash reserves in a noninterest-bearing account at the FRB of San Francisco. Through the FRB, the cash in this account in excess of UCB’s reserve requirement (“Federal Funds”) is available for overnight and one day period sales to other institutions with accounts at the FRB. UCB received interest on these sales at the prevailing federal funds rate. At December 31, 2006 and 2005, the reserve requirement was $7.6 million and $13.1 million, respectively.

UCBH HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


5.	Securities Purchased Under Agreements to Resell

Information regarding outstanding securities purchased under agreements to resell (the “Resell Agreements”) as of and for the year ended December 31, 2006, was as follows (dollars in thousands):


Average balance outstanding	$	62,740
Maximum amount outstanding at any month end period		175,000
Balance outstanding at end of period		175,000
Weighted average interest rate during the period		7.41	%
Weighted average interest rate at end of period		7.37	%
Weighted average remaining term to maturity at end of period (in years)		9.6

UCB entered into two long-term transactions involving the purchases of Resell Agreements with Citigroup Global Markets, Inc. The first Resell Agreement is for $100.0 million and matures on August 4, 2016. Under the terms of this Resell Agreement, interest payments are due from the seller quarterly. The interest rate for this Resell Agreement is 7.40% for the first six months adjustable quarterly to the three-month London Interbank Offered Rate (“LIBOR”) subject to a maximum interest rate of 7.50%. The initial interest rate and at December 31, 2006, was 7.40%. Additionally, the seller has the right to terminate this Resell Agreement at the six-month anniversary date and quarterly thereafter. The second Resell Agreement is for $75.0 million and matures on September 27, 2016. Under the terms of this Resell Agreement, interest payments are due from the seller quarterly. The interest rate for this Resell Agreement is adjustable monthly and is calculated as 8.40% plus the residual of ten multiplied by 65% of the average weekly one-month LIBOR less the average Bond Market Association Index for short-term municipal bonds subject to a maximum rate of 9.89%. The initial interest rate was 5.61% and the December 31, 2006, interest rate was 3.89%. Accrued interest receivable related to the Resell Agreements were $1.2 million at December 31, 2006. The underlying collateral pledged for the Resell Agreements consists of FNMA and Federal Home Loan Mortgage Corporation (“FHLMC”) mortgage-backed securities with an aggregate fair value of $178.1 million as of December 31, 2006. Of the $178.1 million of the underlying collateral for the Resell Agreements, $103.2 million was repledged as underlying collateral for a securities sold under agreement to repurchase with Citigroup Global Markets, Inc. at December 31, 2006. The collateral is held by a custodian and maintained under seller’s control.

UCBH HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


6.	Investment and Mortgage-Backed Securities

The amortized cost and approximate market value of investment and mortgage-backed securities classified as available for sale and held to maturity, along with the portions of the portfolio with unrealized loss positions at December 31, 2006, were as follows (dollars in thousands):


			Gross		Gross					Less Than 12 Months					12 Months or More					Total
	Amortized		Unrealized		Unrealized			Market		Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
Description	Cost		Gains		Losses			Value		Value		Losses			Value		Losses			Value		Losses

Investment securities available for sale:

Collateralized debt obligations	$	38,445	$	5	$	(316	)	$	38,134	$	14,888	$	(113	)	$	8,296	$	(203	)	$	23,184	$	(316	)

U.S. Government sponsored enterprises notes		588,621		120		(5,701	)		583,040		263,885		(1,566	)		125,194		(4,135	)		389,079		(5,701	)

U.S. Government sponsored enterprises discount notes		249,024		61		—			249,085		—		—			—		—			—		—

U.S. Treasury Bills		73,183		17		—			73,200		—		—			—		—			—		—

Municipals		58,325		—		—			58,325		—		—			—		—			—		—

Commercial paper		49,952		—		—			49,952		—		—			—		—			—		—

Other		10,000		—		(125	)		9,875		9,875		(125	)		—		—			9,875		(125	)


Total investment securities available for sale		1,067,550		203		(6,142	)		1,061,611		288,648		(1,804	)		133,490		(4,338	)		422,138		(6,142	)


Mortgage-backed securities available for sale:

FNMA		515,711		391		(13,405	)		502,697		148,236		(3,025	)		284,506		(10,380	)		432,742		(13,405	)

GNMA		87,866		—		(3,261	)		84,605		—		—			78,742		(3,261	)		78,742		(3,261	)

FHLMC		313,991		140		(9,847	)		304,284		7,424		(32	)		255,779		(9,815	)		263,203		(9,847	)

Other		200,832		16		(4,589	)		196,259		—		—			171,423		(4,589	)		171,423		(4,589	)


Total mortgage-backed securities available for sale		1,118,400		547		(31,102	)		1,087,845		155,660		(3,057	)		790,450		(28,045	)		946,110		(31,102	)


Total investment and mortgage-backed securities available for sale		2,185,950		750		(37,244	)		2,149,456		444,308		(4,861	)		923,940		(32,383	)		1,368,248		(37,244	)


Investment securities held to maturity:

Municipal securities		222,638		6,750		(30	)		229,358		4,531		(24	)		416		(6	)		4,947		(30	)


Mortgage-backed securities held to maturity:

FNMA		4,372		—		(172	)		4,200		—		—			4,200		(172	)		4,200		(172	)

GNMA		63,122		—		(1,755	)		61,367		—		—			61,367		(1,755	)		61,367		(1,755	)

FHLMC		541		—		(20	)		521		—		—			521		(20	)		521		(20	)


Total mortgage-backed securities held to maturity		68,035		—		(1,947	)		66,088		—		—			66,088		(1,947	)		66,088		(1,947	)


Total investment and mortgage-backed securities held to maturity		290,673		6,750		(1,977	)		295,446		4,531		(24	)		66,504		(1,953	)		71,035		(1,977	)


Total securities	$	2,476,623	$	7,500	$	(39,221	)	$	2,444,902	$	448,839	$	(4,885	)	$	990,444	$	(34,336	)	$	1,439,283	$	(39,221	)

As of December 31, 2006, the net unrealized loss on securities was $31.7 million. The net unrealized loss on securities that are available for sale was $36.5 million. Net of a tax benefit of $15.3 million, the unrealized $21.2 million loss is included in other comprehensive loss as a reduction to stockholders’ equity. The $4.8 million net gain between the carrying value and market value of securities that are held to maturity has not been recognized in the consolidated financial statements for the year ended December 31, 2006. Additionally, certain securities that UCB holds have unrealized losses that extend for periods in excess of twelve months. These securities are comprised primarily of U.S. Government sponsored enterprise notes, mortgage-backed securities and municipal securities. The U.S. Government sponsored enterprise notes are issued by one of the several government sponsored enterprises, such as FNMA, Government National Mortgage Association (“GNMA”) or FHLB. The unrealized losses associated with these securities resulted from rising interest rates subsequent to purchase. The unrealized losses will decline as interest rates fall to the purchased yield and as the securities approach maturity.

UCBH HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


6.	Investment and Mortgage-Backed Securities — (Continued)

Mortgage-backed securities consist primarily of securities guaranteed by FNMA, GNMA and FHLMC, as well as certain collateralized mortgage obligations. These securities are collateralized by residential mortgage loans and may be prepaid at par prior to maturity. The unrealized losses on our mortgage-backed securities resulted from rising interest rates subsequent to purchase. The unrealized losses will decline as interest rates fall to the purchased yield and as the securities approach contractual or expected maturity.


			Gross		Gross					Less Than 12 Months					12 Months or More					Total
	Amortized		Unrealized		Unrealized			Market		Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
Description	Cost		Gains		Losses			Value		Value		Losses			Value		Losses			Value		Losses

Investment securities available for sale:

Trust preferred securities	$	33,443	$	—	$	(497	)	$	32,946	$	18,671	$	(272	)	$	4,275	$	(225	)	$	22,946	$	(497	)

U.S. Government sponsored enterprises notes		159,655		2		(4,472	)		155,185		55,428		(381	)		96,850		(4,091	)		152,278		(4,472	)

Other		11,012		—		(101	)		10,911		10,911		(101	)		—		—			10,911		(101	)


Total investment securities available for sale		204,110		2		(5,070	)		199,042		85,010		(754	)		101,125		(4,316	)		186,135		(5,070	)


Mortgage-backed securities available for sale:

FNMA		355,135		2		(10,947	)		344,190		162,309		(3,373	)		180,746		(7,574	)		343,055		(10,947	)

GNMA		88,184		—		(3,151	)		85,033		17,553		(487	)		67,480		(2,664	)		85,033		(3,151	)

FHLMC		302,540		5		(10,229	)		292,316		157,234		(4,007	)		133,184		(6,222	)		290,418		(10,229	)

Other		202,264		—		(5,121	)		197,143		76,747		(1,253	)		120,396		(3,868	)		197,143		(5,121	)


Total mortgage-backed securities available for sale		948,123		7		(29,448	)		918,682		413,843		(9,120	)		501,806		(20,328	)		915,649		(29,448	)


Total investment and mortgage-backed securities available for sale		1,152,233		9		(34,518	)		1,117,724		498,853		(9,874	)		602,931		(24,644	)		1,101,784		(34,518	)


Investment securities held to maturity:

Municipal securities		225,573		6,943		(237	)		232,279		18,379		(144	)		3,342		(93	)		21,721		(237	)


Mortgage-backed securities held to maturity:

FNMA		5,112		—		(189	)		4,923		—		—			4,923		(189	)		4,923		(189	)

GNMA		77,261		—		(1,128	)		76,133		66,867		(729	)		9,266		(399	)		76,133		(1,128	)

FHLMC		662		—		(23	)		639		—		—			639		(23	)		639		(23	)


Total mortgage-backed securities held to maturity		83,035		—		(1,340	)		81,695		66,867		(729	)		14,828		(611	)		81,695		(1,340	)


Total investment and mortgage-backed securities held to maturity		308,608		6,943		(1,577	)		313,974		85,246		(873	)		18,170		(704	)		103,416		(1,577	)


Total securities	$	1,460,841	$	6,952	$	(36,095	)	$	1,431,698	$	584,099	$	(10,747	)	$	621,101	$	(25,348	)	$	1,205,200	$	(36,095	)

As of December 31, 2005, the net unrealized loss on securities was $29.1 million. The net unrealized loss on securities that are available for sale was $34.5 million. Net of a tax benefit of $14.5 million, the unrealized $20.0 million unrealized loss is included in other comprehensive income as a reduction to stockholders’ equity. The

UCBH HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


6.	Investment and Mortgage-Backed Securities — (Continued)

$5.4 million net gain between the carrying value and market value of securities that are held to maturity has not been recognized in the financial statements for the year ended December 31, 2005.

The scheduled contractual maturities on investment and mortgage-backed securities classified as available for sale and held to maturity at December 31, 2006, were as follows (dollars in thousands):


	Amortized Cost										Market Value
			After 1		After 5								After 1		After 5
			Year		Years								Year		Years
	Within		Through		Through		After				Within		Through		Through		After
Description	1 Year		5 Years		10 Years		10 Years		Total		1 Year		5 Years		10 Years		10 Years		Total

Investment securities available for sale:

Collateralized debt obligations	$	—	$	—	$	—	$	38,445	$	38,445	$	—	$	—	$	—	$	38,134	$	38,134

U.S. Government sponsored enterprises notes		21,959		422,309		144,353		—		588,621		21,956		419,171		141,913		—		583,040

U.S. Government sponsored enterprises discount notes		249,024		—		—		—		249,024		249,085		—		—		—		249,085

U.S. Treasury Bills		73,183		—		—		—		73,183		73,200		—		—		—		73,200

Municipals		—		4,255		2,947		51,123		58,325		—		4,255		2,947		51,123		58,325

Commercial paper		49,952		—		—		—		49,952		49,952		—		—		—		49,952

Other		—		—		—		10,000		10,000		—		—		—		9,875		9,875


Total investment securities available for sale		394,118		426,564		147,300		99,568		1,067,550		394,193		423,426		144,860		99,132		1,061,611


Mortgage-backed securities available for sale:

FNMA		5		9,174		42,204		464,328		515,711		5		9,021		41,460		452,211		502,697

GNMA		—		—		1,709		86,157		87,866		—		—		1,710		82,895		84,605

FHLMC		—		15,740		33,945		264,306		313,991		—		15,491		33,177		255,616		304,284

Other		—		—		—		200,832		200,832		—		—		—		196,259		196,259


Total mortgage-backed securities available for sale		5		24,914		77,858		1,015,623		1,118,400		5		24,512		76,347		986,981		1,087,845


Total investment and mortgage-backed securities available for sale		394,123		451,478		225,158		1,115,191		2,185,950		394,198		447,938		221,207		1,086,113		2,149,456


Investment securities held to maturity:

Municipal securities		—		—		2,501		220,137		222,638		—		—		2,598		226,760		229,358


Mortgage-backed securities held to maturity:

FNMA		—		—		—		4,372		4,372		—		—		—		4,200		4,200

GNMA		—		—		—		63,122		63,122		—		—		—		61,367		61,367

FHLMC		—		—		—		541		541		—		—		—		521		521


Total mortgage-backed securities held to maturity		—		—		—		68,035		68,035		—		—		—		66,088		66,088


Total investment and mortgage-backed securities held to maturity		—		—		2,501		288,172		290,673		—		—		2,598		292,848		295,446


Total securities	$	394,123	$	451,478	$	227,659	$	1,403,363	$	2,476,623	$	394,198	$	447,938	$	223,805	$	1,378,961	$	2,444,902

The remaining contractual maturities for mortgage-backed securities were allocated assuming no prepayments. Remaining maturities will differ from contractual maturities since borrowers may have the right to prepay obligations before underlying mortgages mature.

Approximately $66.3 million and $320.9 million of investment and mortgage-backed securities have been pledged to secure borrowings entered into by UCB at December 31, 2006 and 2005, respectively, as more fully described in Note 15. UCB has also pledged $479.6 million and $460.0 million of its investment securities as collateral for public deposits as of December 31, 2006 and 2005, respectively.

For the year ended December 31, 2006, proceeds from the sale of available for sale securities totaled $96.8 million, with gross realized gains of $276,000 and gross realized losses of $70,000. For the year ended December 31, 2005, proceeds from the sale of available for sale securities totaled $115.0 million, with gross realized gains of $1.8 million and gross realized losses of $1.8 million. Proceeds from the sale of available for sale

UCBH HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


6.	Investment and Mortgage-Backed Securities — (Continued)

securities for the year ended December 31, 2004, totaled $821.8 million, with gross realized gains of $14.8 million and gross realized losses of $2.1 million

There were no mortgage-backed securities sold under agreements to repurchase for the years ended December 31, 2005 and 2004. When UCB enters into these transactions, the obligations generally mature within one year and generally represent agreements to repurchase the same securities.


7.	Federal Home Loan Bank Stock, Federal Reserve Bank Stock and Other Equity Investments

The components of FHLB stock, FRB stock and other equity investments as of December 31, 2006 and 2005, were as follows (dollars in thousands):


	2006		2005

Federal Home Loan Bank stock	$	68,834	$	39,070
Federal Reserve Bank stock		1,267		—
Other equity investments		40,674		36,375

FHLB stock, Federal Reserve Bank stock and other equity investments	$	110,775	$	75,445

The investments in the above table above are reflected at cost. Such investments’ fair value is estimated quarterly based on the underlying organization’s business model, current and projected financial performance and overall economic and market conditions. If fair value is estimated to be below cost, an evaluation for other-than-temporary impairment is performed. At December 31, 2006, there were no investments where the estimated fair value was below the respective cost.

UCB, along with all other financial institutions, must own stock in the FHLB to have access to FHLB’s products and services. The stock does not trade on a stock market, but may be issued, exchanged, redeemed and repurchased by the FHLB at its stated par value. The stock is redeemable by a shareholder on five years’ written notice, subject to certain conditions. The FHLB can redeem its stock with 15 days written notice and at quarterly intervals if the member has stock in excess of 115% of its calculated requirement.

Summit as a member of the FRB of Atlanta was required to maintain stock in the FRB of Atlanta based on a specified ratio relative to Summit’s capital. The stock does not trade on a stock market, but may be issued, exchanged, redeemed and repurchased by the FHLB at its stated par value.

UCB is subject to certain requirements of the Community Reinvestment Act (the “CRA”). The CRA generally requires the federal banking agencies to evaluate a financial institution in meeting the credit needs of its local communities, including low-income and moderate-income neighborhoods. UCB invests in CRA-qualified investments, such as affordable housing partnerships and small business investment companies. Additional funding commitments related to these CRA investments at December 31, 2006, were $10.8 million.

UCBH HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


8.	Loans Held for Sale

The components of loans held for sale as of December 31, 2006 and 2005, were as follows (dollars in thousands):


	2006		2005

Commercial:
Secured by real estate — nonresidential	$	141,348	$	154,087
Business		1,203		2,653

Total commercial loans		142,551		156,740

Consumer:
Residential mortgage (one to four family)		310		—

Loans held for sale(1)	$	142,861	$	156,740


(1)		Amounts reflect net unamortized deferred loan fees, purchase premiums and discounts of $213,000 and $372,000 at December 31, 2006 and 2005, respectively.

During the year ended December 31, 2006, UCB transferred $434.3 million of loans from held in portfolio to held for sale and $87.5 million of loans from held for sale to held in portfolio. UCB also transferred $235.9 million of multifamily real estate loans from held for sale to held in portfolio in September 2005.


9.	Loans Held in Portfolio and Allowance for Loan Losses

The components of loans held in portfolio as of December 31, 2006 and 2005, were as follows (dollars in thousands):


	2006			2005

Commercial:
Secured by real estate — nonresidential	$	2,341,572		$	2,307,381
Secured by real estate — multifamily		1,275,594			1,506,848
Construction		1,054,302			494,841
Business		1,461,322			863,935

Total commercial loans		6,132,790			5,173,005

Consumer:
Residential mortgage (one-to-four family)		448,895			613,988
Other(1)		53,975			51,667

Total consumer loans		502,870			665,655

Loans held in portfolio(2)		6,635,660			5,838,660
Allowance for loan losses		(62,015	)		(64,542	)

Net loans held in portfolio	$	6,573,645		$	5,774,118


(1)		Amount includes deposit overdrafts of $999,000 and $2.5 million at December 31, 2006 and 2005, respectively.

(2)		Amounts reflect net unamortized deferred loan fees, purchase premiums and discounts of $25.8 million and $7.4 million at December 31, 2006 and 2005, respectively.

On September 1, 2006, UCB securitized $176.1 million of residential mortgage loans with servicing rights retained through FNMA. The mortgage-backed securities created from this guaranteed mortgage securitization are

UCBH HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


9.	Loans Held in Portfolio and Allowance for Loan Losses — (Continued)

classified as available for sale investments. As part of this transaction, UCB recognized mortgage servicing rights of $1.4 million.

The components of loans held in portfolio by interest rate type as of December 31, 2006 and 2005, were as follows (dollars in thousands):


	2006		2005

Adjustable-rate loans	$	3,749,132	$	2,951,945
Intermediate fixed-rated loans		1,444,072		1,711,915
Fixed-rate loans		1,468,275		1,182,198

Loans held in portfolio(1)	$	6,661,479	$	5,846,058


(1)		Amounts do not reflect net unamortized deferred loan fees, purchase premiums and discounts of $25.8 million and $7.4 million at December 31, 2006 and 2005, respectively.

As of December 31, 2006 and 2005, residential mortgage (one-to-four family) and multifamily loans with a book value and market value of $3.34 billion and $3.95 billion were pledged to secure FHLB advances, respectively (see Note 15).

Nonperforming assets from loans held in portfolio and OREO as of December 31, 2006 and 2005, were as follows (dollars in thousands):


	2006		2005

Total nonaccrual loans from loans held in portfolio	$	12,311	$	19,133
Other real estate owned		2,887		—

Total nonperforming loans	$	15,198	$	19,133

Accruing loans contractually past due 90 days or more	$	4,339	$	5,374

Additionally, UCB had no commitments to lend additional funds to debtors whose loans are nonperforming at December 31, 2006.

Impaired loans as of December 31, 2006, 2005 and 2004, were as follows (dollars in thousands):


	2006		2005		2004

Impaired loans with a valuation allowance	$	6,897	$	16,267	$	14,808
Impaired loans without a valuation allowance		5,094		8,273		136

Total impaired loans	$	11,991	$	24,540	$	14,944

Allowance for impaired loans under SFAS No. 114	$	1,383	$	3,221	$	3,592

Gross interest income recognized on impaired loans during the year	$	80	$	183	$	—

Our average recorded investment in impaired loans for the years ended December 31, 2006 and 2005, was $29.9 million and $32.1 million, respectively. Except for one impaired loan at December 31, 2006, and two impaired loans at December 31, 2005, that were well secured and in process of collection, all other impaired loans were included in nonaccrual loans.

UCBH HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


9.	Loans Held in Portfolio and Allowance for Loan Losses — (Continued)

The activity in the allowance for loan losses and allowance for losses related to unfunded commitments for the years ended December 31, 2006, 2005 and 2004, was as follows (dollars in thousands):


	2006			2005			2004

Balance at beginning of year:
Allowance for loan losses	$	64,542		$	56,472		$	58,126
Allowance for losses — unfunded commitments		3,402			3,940			2,737

Total allowance for losses at beginning of the year		67,944			60,412			60,863
Provision for losses		3,842			6,091			4,202
Loans charged off		(10,694	)		(1,614	)		(4,798	)
Recoveries of loans previously charged off		477			123			145
Adjustment — acquired through business combinations		7,279			2,932			—

Total allowance for losses at end of year	$	68,848		$	67,944		$	60,412

Allowance for loan losses	$	62,015		$	64,542		$	56,472
Allowance for losses — unfunded commitments		6,833			3,402			3,940

Total allowance for losses at end of year	$	68,848		$	67,944		$	60,412


10.	Premises and Equipment

The components of premises and equipment as of December 31, 2006 and 2005, were as follows (dollars in thousands):


	2006			2005

Land	$	19,469		$	9,566
Buildings		112,791			103,591
Leasehold improvements		22,487			25,685
Computer software		8,563			8,231
Equipment, furniture and fixtures		34,657			30,968

Gross premises and equipment		197,967			178,041
Accumulated depreciation and amortization		(82,357	)		(79,752	)

Premises and equipment, net	$	115,610		$	98,289

Total depreciation and amortization expense was $9.0 million, $8.5 million and $6.8 million for the years ended December 31, 2006, 2005 and 2004, respectively.

Rental income is included in occupancy expense in the consolidated statements of operations and totaled $6.3 million, $7.8 million and $7.7 million for the years ended December 31, 2006, 2005 and 2004, respectively.

UCBH HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


10.	Premises and Equipment — (Continued)

The future noncancelable minimum lease payment receivables as of December 31, 2006, are as follows (dollars in thousands):


2007	$	3,781
2008		3,286
2009		2,472
2010		1,085
2011		940
2012 and thereafter		668

Total	$	12,232


11.	Goodwill

The activity in goodwill for years ended December 31, 2006, 2005 and 2004, was as follows (dollars in thousands):


	2006			2005		2004

Balance at beginning of year	$	106,648		$	68,301	$	87,437
Summit Bank Corporation acquisition		126,199			—		—
Pacifica Bancorp, Inc. acquisition		—			23,277		—
Pacifica Bancorp, Inc. acquisition purchase price adjustment		(1,913	)		—		—
Asian American Bank & Trust Company acquisition		—			15,070		—
Asian American Bank & Trust Company acquisition purchase price adjustment		(2,098	)		—		—
First Continental Bank acquisition purchase price error correction		—			—		(16,791	)
First Continental Bank acquisition purchase price adjustment		—			—		(2,345	)
Bank of Canton of California acquisition purchase price adjustment		(2,056	)		—		—

Balance at end of year	$	226,780		$	106,648	$	68,301

The Company did not recognize any impairment losses as a result of its annual goodwill impairment reviews as of September 30, 2006 and 2005. During the year ended December 31, 2006, goodwill was adjusted to reflect the final valuations of the net assets acquired from Pacifica and AABT. Additionally, goodwill was adjusted for the income tax benefit related to the buyout of Pacifica stock options at the time of acquisition, the newly identified income tax deduction related to Pacifica and AABT acquisition costs, and the resolution of contingencies associated with the income tax deduction of investment banking fees related to Bank of Canton of California.

During the three months ended December 31, 2004, the Company determined that the initial purchase price calculation related to the acquisition of First Continental Bank was based on the Company’s common stock per share price on the closing date of the acquisition instead of the proper per share average stock price at the announcement date. This resulted in an error in the calculation of the Company’s purchase price for the acquisition. As a result, goodwill and additional paid-in capital were corrected for the $16.8 million overstatement. During the three months ended June 30, 2004, the Company finalized its purchase accounting with respect to the First Continental Bank acquisition, which resulted in a $2.3 million reduction to goodwill.

UCBH HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


12.	Core Deposit Intangibles

The gross carrying amount and the associated accumulated amortization for core deposit intangibles as of December 31, 2006 and 2005, were as follows (dollars in thousands):


	2006			2005

Core deposit intangibles, gross	$	35,283		$	19,597
Accumulated amortization		(6,958	)		(4,616	)

Core deposit intangibles, net	$	28,325		$	14,981

The activity in net core deposit intangibles for the years ended December 31, 2006, 2005 and 2004, was as follows (dollars in thousands):


	2006			2005			2004

Balance at beginning of period	$	14,981		$	9,829		$	11,111
Summit Bank Corporation acquisition		16,900			—			—
Pacifica Bancorp, Inc. acquisition		—			3,800			—
Pacifica Bancorp, Inc. acquisition adjustment		(740	)		—			—
Asian American Bank & Trust Company acquisition		—			2,900			—
Asian American Bank & Trust Company acquisition adjustment		(150	)		—			—
Amortization		(2,342	)		(1,345	)		(1,282	)
Impairment write-downs		(324	)		(203	)		—

Balance at end of period	$	28,325		$	14,981		$	9,829

UCB recognized impairment losses of $324,000 and $203,000 as a result of the core deposit intangible impairment reviews during the years ended December 31, 2006 and 2005, respectively. UCB did not identify any impairment losses as a result of its core deposit intangible impairment reviews during the year ended December 31, 2004. The write-down of core deposit intangibles is included in other general and administrative expenses.

The estimated future amortization expense related to core deposit intangibles as of December 31, 2006, is as follows (dollars in thousands):


2007	$	5,086
2008		5,086
2009		4,320
2010		4,065
2011		3,884
2012 and thereafter		5,884

Total	$	28,325


13.	Mortgage Servicing Rights

The gross carrying amount and the associated accumulated amortization for mortgage servicing rights as of December 31, 2006 and 2005, were as follows (dollars in thousands):


	2006			2005

Mortgage servicing rights, gross	$	19,971		$	14,341
Accumulated amortization		(6,698	)		(3,699	)

Mortgage servicing rights, net	$	13,273		$	10,642

UCBH HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


13.	Mortgage Servicing Rights — (Continued)

The activity in net mortgage servicing rights for the years ended December 31, 2006, 2005 and 2004, was as follows (dollars in thousands):


	2006			2005			2004

Balance at beginning of period	$	10,642		$	7,747		$	4,006
Addition/Capitalization		6,812			5,192			5,209
Amortization		(2,999	)		(2,297	)		(1,388	)
Write-downs		(1,182	)		—			(80	)

Balance at end of period	$	13,273		$	10,642		$	7,747

Amortization expense related to mortgage servicing rights is recorded as a reduction to other fees on the consolidated statements of operations. UCB recognized impairment losses of $1.2 million and $80,000 as a result of the mortgage servicing rights impairment review during the years ended December 31, 2006 and 2004, respectively. UCB did not identify any impairment losses as a result of its mortgage serving rights impairment reviews during the year ended December 31, 2005. Additionally, in 2004 the Company determined that it was not recognizing the gain on sale of loans in accordance with SFAS No. 140. Accordingly, the Company recorded a cumulative adjustment during the year ended December 31, 2004, to reduce gain on loan sales and servicing rights by $1.9 million and the recognition of a tax benefit of $793,000.

Real estate loans being serviced for others totaled $2.15 billion and $1.47 billion at December 31, 2006 and 2005, respectively. These loans are not included in the consolidated balance sheets. In connection with these loans, UCB held trust funds of approximately $20.6 million and $17.4 million at December 31, 2006 and 2005, respectively, all of which were segregated in separate accounts and not included in the accompanying consolidated balance sheets. Some agreements with investors to whom UCB has sold loans have representation and warranty provisions that could require the repurchase of loans under certain circumstances. Management does not believe that any exposure from such repurchases currently exists, and therefore, no provision for any repurchase has been recorded.

The fair value of capitalized mortgage servicing rights along with the sensitivity analysis related to two key factors, prepayment speed and discount rate, as of December 31, 2006 and 2005, was as follows (dollars in thousands):


	2006			2005

Fair value of mortgage servicing rights	$	18,010		$	14,036
Expected weighted-average life (in years)		4.45			4.97
Range of prepayment speed assumptions (annual CPR)		13%-29	%		10%-20	%
Discount rate assumption		12.94	%		12.85	%
Decrease in fair value from 10% adverse CPR change	$	(770	)	$	(617	)
Decrease in fair value from 20% adverse CPR change	$	(1,454	)	$	(1,161	)
Decrease in fair value from 100 basis point adverse discount rate change	$	(442	)	$	(355	)
Decrease in fair value from 200 basis point adverse discount rate change	$	(864	)	$	(693	)

These sensitivity analyses should be used with caution as the calculations were prepared by varying only one factor at a time and holding all others constant for purposes of the analyses. Changes in one factor may result in changes in other factors and such changes might magnify or counteract the sensitivities as presented. Additionally, changes in fair value based on changes in an assumption generally cannot be extrapolated because the relationship of the change in the factor to the change in fair value may not be linear.

UCBH HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


14.	Deposits

The components of deposits as of December 31, 2006 and 2005, were as follows (dollars in thousands):


	2006		2005

NOW, checking and money market accounts	$	2,194,176	$	1,784,065
Savings accounts		942,672		946,714
Time deposits:
Less than $100,000		1,410,162		1,203,001
$100,000 or greater		2,655,835		2,330,389

Total time deposits		4,065,997		3,533,390

Total deposits	$	7,202,845	$	6,264,169

The components of deposits in foreign banking offices as of December 31, 2006 and 2005, were as follows (dollars in thousands):


	2006		2005

Noninterest bearing deposits	$	19,744	$	—
Interest bearing deposits		898,480		555,526

Total deposits	$	918,224	$	555,526

The remaining maturities on time deposits as of December 31, 2006, are as follows (dollars in thousands):


2007	$	3,961,085
2008		51,067
2009		19,474
2010		18,694
2011		15,611
2012 and thereafter		66

Total	$	4,065,997

Interest expense on deposits for the years ended December 31, 2006, 2005 and 2004, was as follows (dollars in thousands):


	2006			2005			2004

NOW, checking and money market accounts	$	41,282		$	20,572		$	9,295
Savings accounts		9,527			9,336			8,451
Time deposits		159,844			93,983			49,979
Less penalties for early withdrawal		(594	)		(574	)		(458	)

Total	$	210,059		$	123,317		$	67,267

UCBH HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

15. Borrowings

Securities Sold Under Agreements to Repurchase

Information regarding outstanding securities sold under agreements to repurchase (the “Repurchase Agreements”) as of and for the year ended December 31, 2006, was as follows (dollars in thousands):


Average balance outstanding	$	162,124
Maximum amount outstanding at any month end period		401,600
Balance outstanding at end of period		401,600
Weighted average interest rate during the period		3.56	%
Weighted average interest rate at end of period		3.71	%
Weighted average remaining term to maturity at end of period (in years)		6.1

UCB has entered into five Repurchase Agreements aggregating $300.0 million, which mature between May 11, 2011, and September 29, 2016. Under the terms of the Repurchase Agreements, payments are due quarterly. The interest rates for the respective first years of the Repurchase Agreements range from a 3-month LIBOR less 82 basis points to a 3-month LIBOR less 384 basis points, which adjust quarterly. Thereafter, the interest rates are fixed for the remainder of the term with interest rates ranging from 4.50% to 5.00%. The initial interest rates ranged from 1.63% to 4.14%. The current interest rates at December 31, 2006, ranged from 1.58% to 4.47%. Additionally, the lender has the right to terminate the applicable Repurchase Agreement either at the first anniversary date of the Repurchase Agreement or at the first anniversary date and quarterly thereafter. As of December 31, 2006, $200.0 million of the Repurchase Agreements are with Citigroup Global Markets Inc. with an average weighted maturity of 8.2 years and accrued interest payable amounted to $610,000. The underlying collateral pledged for the Repurchase Agreements consists of FNMA, FHLMC and GNMA mortgage-backed securities, AAA rated or better private label collateralized mortgage obligations and FHLB investment securities with an aggregate fair value of $215.9 million as of December 31, 2006. The collateral is held by a custodian and maintained under UCB’s control. At December 31, 2006, the underlying collateral pledged for the Repurchase Agreements mature between 2009 to 2035.

With the acquisition of Summit, UCB assumed five Repurchase Agreements aggregating $101.6 million, which mature between January 2, 2007, and January 11, 2007. The current interest rates at December 31, 2006, ranged from 4.25% to 5.42%. The underlying collateral pledged for the Repurchase agreements consist of FHLB, FNMA and FHLMC agency bonds with an aggregate fair value of $111.2 million as of December 31, 2006. The collateral is held by a custodian and maintained under UCB’s control.

UCBH HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


15.	Borrowings — (Continued)

Long-Term and Short-Term Borrowings

Short-term and long-term borrowings outstanding information for the years ended December 31, 2006, 2005 and 2004, was as follows (dollars in thousands):


	2006			2005			2004

Short-term borrowings:
Federal Home Loan Bank advances and other short-term borrowings:
Average balance outstanding	$	224,234		$	301,400		$	164,964
Maximum amount outstanding at any month end period		654,636			566,169			300,695
Balance outstanding at end of period		654,636			279,425			72,310
Weighted average interest rate during the period		4.52	%		3.51	%		1.30	%
Weighted average interest rate at end of period		5.21	%		4.09	%		1.22	%
Weighted average remaining term to maturity at end of period (in years)		—			—			—
Long-term borrowings:
Federal Home Loan Bank advances:
Average balance outstanding	$	683,978		$	361,677		$	299,253
Maximum amount outstanding at any month end period		906,651			562,033			335,104
Balance outstanding at end of period		906,651			562,033			334,952
Weighted average interest rate during the period		4.89	%		5.15	%		5.00	%
Weighted average interest rate at end of period		4.72	%		4.76	%		4.89	%
Weighted average remaining term to maturity at end of period (in years)		5.4			5.0			2.9

UCB maintains a secured credit facility with the FHLB against which UCB may take advances. The terms of this credit facility requires UCB to maintain in safekeeping with the FHLB eligible collateral of at least 100% of outstanding advances. Short-term borrowings with the FHLB totaled $534.2 million at December 31, 2006. At December 31, 2006, the advances were secured with $41.6 million of mortgage-backed securities and $3.34 billion of loans, and at December 31, 2005, $287.5 million of mortgage-backed securities and $3.95 billion of loans secured the advances. At December 31, 2006, credit availability under this facility was approximately $606.0 million.

Included in long-term borrowings are advances with provisions that allow the FHLB, at their option, to terminate the advances at quarterly intervals for specified periods ranging from three to five years beyond the advance dates. Advances that may be terminated by the FHLB with corresponding early termination date, are as follows (dollars in thousands):


2007	$	291,500
2008		—
2009		175,000
2010		200,000
2011		50,000

Total	$	716,500

UCB also has recorded secured borrowings as of December 31, 2006 and 2005, related to loan transactions that did not qualify for sales treatment under SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets

100

UCBH HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


15.	Borrowings — (Continued)

and Extinguishment of Liabilities. The short-term secured borrowings amounted to $6.1 million and $19.1 million at December 31, 2006 and 2005, respectively.

The future payments due on borrowings as of December 31, 2006, are as follows (dollars in thousands):


2007	$	731,146
2008		233,425
2009		25,245
2010		40,135
2011		25,454
2012 and thereafter		505,882

Total	$	1,561,287

On December 2, 2006, UCBH entered its fourth amendment to the unsecured revolving line of credit agreement with Wells Fargo Bank, N.A. for $20.0 million. Borrowings under the agreement bear interest at prime rate less 1.80% with outstanding borrowings and interest due on November 30, 2007. The Company has not taken an advance under the agreement. UCBH maintains the unsecured line of credit for contingency liquidity.


16.	Subordinated Debentures

UCBH formed or acquired special purpose trusts in 1997, 2001, 2002, 2005 and 2006 for the sole purpose of issuing guaranteed preferred beneficial interests in its junior subordinated debentures (“Capital Securities”) and investing the proceeds thereof in junior subordinated debentures issued by UCBH. Payment of distributions out of the monies held by the trusts and payments on liquidation of the trusts or the redemption of the Capital Securities are guaranteed by UCBH to the extent the trusts have funds available. The obligations of UCBH under the guarantees and the junior subordinated debentures are subordinate and junior in right of payment to all indebtedness of UCBH and will be structurally subordinated to all liabilities and obligations of UCBH’s subsidiaries.

Pursuant to an Indenture dated as of April 17, 1998, (the “Indenture”), between UCBH and Wilmington Trust Company (“Wilmington”), as Trustee, UCBH on June 27, 2005, redeemed the entire $30,928,000 aggregate principal amount of the 9.375% junior subordinated debentures due May 1, 2028 (the “Debentures”), issued by UCBH under the Indenture. The redemption price consisted of the $30,928,000 aggregate principal amount plus aggregate unpaid interest of $451,000. The redemption of the Debentures resulted in a loss of $1.2 million in 2005 from the write-off of the unamortized Debenture issuance costs and other legal costs.

On September 22, 2005, UCBH issued $41.2 million in junior subordinated debentures to a newly formed Delaware trust subsidiary, UCBH Capital Trust V. The junior subordinated debentures bear interest at a fixed rate of 5.82% until November 23, 2010, after which date the rate will automatically convert to a floating rate equal to the three month London Interbank Offered Rate (“LIBOR”) plus 1.38% and will adjust quarterly until maturity. The junior subordinated debentures will mature on November 23, 2035, but may be redeemed by UCBH at its option in whole or in part at anytime on or after November 23, 2010. Additionally, UCBH may redeem the junior subordinated debentures at its option in whole at anytime upon certain events.

On December 15, 2006, UCBH issued $51.5 million in junior subordinated debentures to a newly formed Delaware trust subsidiary, UCBH Capital Trust VII. The junior subordinated debentures bear interest at a fixed rate of 6.51% until December 15, 2011, after which date the rate will automatically convert to a floating rate equal to the three month LIBOR plus 1.67% and will adjust quarterly until maturity. The junior subordinated debentures will mature on December 15, 2036, but may be redeemed by UCBH at its option in whole or in part at anytime on or after December 15, 2011. Additionally, UCBH may redeem the junior subordinated debentures at its option in whole at anytime upon certain events.

101

UCBH HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


16.	Subordinated Debentures — (Continued)

With the acquisition of Summit, UCBH assumed $12.7 million in junior subordinated debentures of Summit Bank Corporation Capital Trust I. The junior subordinated debentures bear interest of three-month LIBOR plus 3.10% and will adjust quarterly until maturity. The junior subordinated debentures will mature on September 30, 2033, but may be redeemed by UCBH at its option in whole or in part at anytime on or after September 30, 2008. Additionally, UCBH may redeem the junior subordinated debentures at its option in whole at anytime upon certain events. UCBH has the ability to defer interest and redemption date.

Interest expense related to the Capital Securities was $11.7 million, $9.6 million and $8.4 million for the years ended December 31, 2006, 2005 and 2004, respectively.

102

UCBH HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


16.	Subordinated Debentures — (Continued)

The outstanding Capital Securities issued by each special purpose trust and the junior subordinated debentures issued by UCBH to each trust as of December 31, 2006 and 2005, were as follows (dollars in thousands):

2006

2005

Capital

Debenture

Capital

Debenture

Earliest

Stated

Annualized

Current

Rate

Payable

Issuance

Securities

Principal

Securities

Principal

Redemption

Maturity

Coupon

Interest

Change

Distribution

Trust Name

Date

Amount

Balance

Amount

Balance

Date

Rate

Date

Dates

UCBH Capital Trust I

11/28/01

6,000

6,186

6,000

6,186

12/8/06

12/8/31

6-month
LIBOR +
3.80%

8.42

12/8/06

6/8, 12/8

UCBH Holdings Statutory Trust I

3/26/02

10,000

10,310

10,000

10,310

3/26/07

3/26/32

3-month
LIBOR +
3.60%

8.12

12/26/06

3/26, 6/26,
9/26, 12/26

UCBH Holdings Statutory Trust II

9/26/02

25,000

25,774

25,000

25,774

9/26/07

9/26/32

3-month
LIBOR +
3.40%

7.92

12/26/06

3/26, 6/26,
9/26, 12/26

UCBH Capital
Trust II

10/15/02

20,000

20,619

20,000

20,619

11/7/07

11/7/32

3-month
LIBOR +
3.45%

7.74

11/7/06

2/7, 5/7,
8/7, 11/7

UCBH Capital
Trust III

10/15/02

18,000

18,557

18,000

18,557

11/7/07

11/7/32

3-month
LIBOR +
3.66%

7.95

11/7/06

2/7, 5/7,
8/7, 11/7

UCBH Capital
Trust IV

10/29/02

27,000

27,836

27,000

27,836

11/7/07

11/7/32

3-month
LIBOR +
3.45%

7.74

11/7/06

2/7, 5/7,
8/7, 11/7

UCBH Capital
Trust V

9/22/05

40,000

41,238

40,000

41,238

11/23/10

11/23/35

5.82% until
11/23/10,
3-month
LIBOR +
1.38%
thereafter

5.82

N/A

2/23, 5/23,
8/23, 11/23

UCBH Capital
Trust VI

12/28/06

25,000

25,774

—

1/30/12

1/30/37

6.73% until
1/28/12,
3-month
LIBOR +
1.65%
thereafter

6.73

N/A

1/30, 4/30,
7/30, 10/30

UCBH Capital
Trust VII

12/15/06

50,000

51,547

—

12/15/11

12/15/36

6.51% until
12/15/11,
3-month
LIBOR +
1.67%
thereafter

6.51

N/A

3/15, 6/15,
9/15, 12/15

Summit Bank Corporation Capital Trust I

9/30/03

12,318

12,708

—

9/30/08

9/30/33

8.46% until
9/30/08,
3-month
LIBOR +
3.10%
thereafter

8.46

N/A

3/30, 6/30,
9/30, 12/30

Total Balance

233,318

240,549

146,000

150,520

103

UCBH HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The combined balance sheets of the special purpose trusts at December 31, 2006 and 2005, were as follows (dollars in thousands):

COMBINED BALANCE SHEETS


	2006		2005

ASSETS
Investment in subordinated debentures of UCBH Holdings, Inc., at cost (fair value of $240,549 and $150,520 at December 31, 2006 and 2005, respectively)	$	240,549	$	150,520
Accrued interest receivable		1,641		1,148
Other assets		765		595

Total assets	$	242,955	$	152,263


LIABILITIES AND STOCKHOLDER’S EQUITY
Trust preferred securities	$	233,318	$	146,000
Accrued interest payable		1,413		1,114

Total liabilities		234,731		147,114

Common stock		7,231		4,520
Retained earnings		993		629

Total stockholder’s equity		8,224		5,149

Total liabilities and stockholder’s equity	$	242,955	$	152,263

The combined statements of operations of the special purpose trusts for the years ended December 31, 2006, 2005 and 2004, were as follows (dollars in thousands):

COMBINED STATEMENTS OF OPERATIONS


	2006		2005		2004

Interest income from subordinated debentures of UCBH Holdings, Inc.	$	12,106	$	9,643	$	8,439
Interest expense from trust preferred securities		11,742		9,353		8,185

Net income	$	364	$	290	$	254


17.	Minimum Regulatory Capital Requirements

The Company and UCB (on a consolidated basis) are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory- and possibly additional discretionary-actions by regulators that, if undertaken, could have a direct material effect on the Company’s and UCB’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and UCB must meet specific capital guidelines that involve quantitative measures of their assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Company’s and UCB’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Prompt corrective action provisions are not applicable to bank holding companies.

Quantitative measures established by regulation to ensure capital adequacy require the Company and UCB to maintain minimum amounts and ratios (set forth in the table below) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier 1 capital (as defined) to average assets (as defined). Management believes, as of December 31, 2006 and 2005, that the Company and UCB meet all capital adequacy requirements to which they are subject.

104

UCBH HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


17.	Minimum Regulatory Capital Requirements — (Continued)

As of December 31, 2006 and 2005, the most recent notification from the Federal Deposit Insurance Corporation categorized UCB as “well capitalized” under the regulatory framework for prompt corrective action. To be categorized as “well capitalized”, UCB must maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following table. There are no conditions or events since that notification that management believes have changed UCB’s category. The Company’s and UCB’s actual capital amounts and ratios as of December 31, 2006 and 2005, are also presented in the following table (dollars in thousands):


											To Be Well Capitalized
						For Capital					Under Prompt Corrective
	Actual					Adequacy Purposes					Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio

As of December 31, 2006
Total capital to risk-weighted assets:
UCBH Holdings, Inc. and subsidiaries	$	854,287		10.72	%	$	637,338		8.00	%		N/A		N/A
United Commercial Bank		837,698		10.53			636,184		8.00		$	795,229		10.00	%
Tier 1 capital to risk-weighted assets:
UCBH Holdings, Inc. and subsidiaries	$	785,439		9.86	%	$	318,669		4.00	%		N/A		N/A
United Commercial Bank		768,850		9.67			318,092		4.00		$	477,138		6.00	%
Tier 1 capital to average assets:
UCBH Holdings, Inc. and subsidiaries	$	785,439		9.50	%	$	330,771		4.00	%		N/A		N/A
United Commercial Bank		768,850		9.30			330,717		4.00		$	413,396		5.00	%

As of December 31, 2005 (1)
Total capital to risk-weighted assets:
UCBH Holdings, Inc. and subsidiaries	$	715,666		11.33	%	$	505,223		8.00	%		N/A		N/A
United Commercial Bank		692,770		10.98			504,717		8.00		$	630,897		10.00	%
Tier 1 capital to risk-weighted assets:
UCBH Holdings, Inc. and subsidiaries	$	647,871		10.26	%	$	252,612		4.00	%		N/A		N/A
United Commercial Bank		624,975		9.91			252,359		4.00		$	378,538		6.00	%
Tier 1 capital to average assets:
UCBH Holdings, Inc. and subsidiaries	$	647,871		8.56	%	$	302,825		4.00	%		N/A		N/A
United Commercial Bank		624,975		8.26			302,643		4.00		$	378,304		5.00	%


(1)		Amounts reflect the effects of the acquisitions of Summit Bank Corporation at December 29, 2006, and Pacifica Bancorp, Inc. and Asian American Bank & Trust Company at December 31, 2005.

105

UCBH HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


17.	Minimum Regulatory Capital Requirements — (Continued)

The reconciliation of capital under GAAP with regulatory capital at December 31, 2006 and 2005, was as follows (dollars in thousands):


	Tier 1 Capital						Risk-Based Capital
	UCBH						UCBH
	Holdings, Inc.			United			Holdings, Inc.			United
	and			Commercial			and			Commercial
	Subsidiaries			Bank			Subsidiaries			Bank

As of December 31, 2006:
GAAP capital	$	786,071		$	1,002,800		$	786,071		$	1,002,800
Nonallowable components:
Unrealized losses on securities available for sale		21,155			21,155			21,155			21,155
Goodwill and other disallowed intangibles		(255,105	)		(255,105	)		(255,105	)		(255,105	)
Mortgage servicing rights — excess		—			—			—			—
Additional capital components:
Qualifying trust preferred securities		233,318			—			233,318			—
Allowance for loan losses — limited to 1.25% of risk-based assets		—			—			68,848			68,848

Regulatory capital	$	785,439		$	768,850		$	854,287		$	837,698

As of December 31, 2005:
GAAP capital	$	603,514		$	726,618		$	603,514		$	726,618
Nonallowable components:
Unrealized losses on securities available for sale		19,986			19,986			19,986			19,986
Goodwill and other disallowed intangibles		(121,629	)		(121,629	)		(121,629	)		(121,629	)
Mortgage servicing rights — excess		—			—			—			—
Additional capital components:
Qualifying trust preferred securities		146,000			—			146,000			—
Allowance for loan losses — limited to 1.25% of risk-based assets		—			—			67,795			67,795

Regulatory capital	$	647,871		$	624,975		$	715,666		$	692,770

Dividends declared by UCB in any calendar year may not, without the approval of the appropriate regulator, exceed its net earnings for that year combined with its net earnings less dividends paid for the preceding two years. At December 31, 2006, UCB had approximately $275.9 million available for the payment of dividends under the foregoing restrictions. Following its initial public offering in 1998, UCBH commenced paying dividends in 2000. For the years ended December 31, 2006, 2005 and 2004, UCBH declared cash dividends totaling $0.12 per share, $0.10 per share and $0.08 per share, respectively.


18.	Earnings Per Share

On January 27, 2005, UCBH declared a two-for-one stock split in the form of a stock dividend to the stockholders of record as of March 31, 2005, and distributed the stock dividend on April 12, 2005. Accordingly, basic and diluted earnings per share on the consolidated statement of operations for the year ended December 31, 2004, was adjusted to reflect the impact of the stock split. Additionally, the number of issued and outstanding shares of UCBH’s common stock on the consolidated statement of changes in stockholders’ equity and comprehensive

106

UCBH HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

18. Earnings Per Share — (Continued)

income at and for the years ended December 31, 2004, and at December 31, 2003, was also adjusted to take into account the stock split.

The reconciliation of the numerators and denominators of basic and diluted earnings per share for the years ended December 31, 2006, 2005 and 2004, was as follows (dollars in thousands, except shares and per share amounts):


	Income		Shares		Per Share
	(Numerator)		(Denominator)		Amount

Year ended December 31, 2006:
Net income — basic	$	100,877		94,457,063	$	1.07
Effect of stock options		—		3,571,914

Net income — diluted	$	100,877		98,028,977	$	1.03

Year ended December 31, 2005:
Net income — basic	$	97,826		91,934,570	$	1.06
Effect of stock options		—		3,765,241

Net income — diluted	$	97,826		95,699,811	$	1.02

Year ended December 31, 2004:
Net income — basic	$	85,603		90,522,594	$	0.95
Effect of stock options		—		4,720,028

Net income — diluted	$	85,603		95,242,622	$	0.90

The antidilutive outstanding stock options for 6,679,700, 2,729,467 and 25,574 shares of UCBH common stock for the years ended December 31, 2006, 2005 and 2004, respectively, were excluded from the computation of diluted earnings per share as a result of the stock options’ exercise price being greater than the average market price of UCBH common stock for the period. The stock options of UCBH common stock are considered antidilutive if assumed proceeds per share exceed the average market price of UCBH’s common stock during the relevant periods. Assumed proceeds include proceeds from the exercise of stock options of UCBH common stock, as well as unrecognized compensation and certain deferred tax benefits related to stock options.


19.	Employee Benefit Plans

Stock Option Plan

On May 18, 2006, UCBH adopted the UCBH Holdings, Inc. 2006 Equity Incentive Plan (the “Plan”), which was formerly known as the UCBH Holdings, Inc. 1998 Stock Option Plan, as amended. The Plan was approved by its stockholders and provides for the granting of stock-based compensation awards, including options, to eligible officers, employees and directors of the Company. Stock option awards are approved by UCBH’s Board of Directors and are granted at the fair market value of UCBH’s common stock on the date of the grant. The options vest over a period determined at the time the options are granted, generally three years of continuous service, and have a maximum term of ten years. Certain options awards provide for accelerated vesting if there is a change in control, as defined in the Plan. As of December 31, 2006, the Company had 869,419 shares of common stock reserved for the issuance of options under the Plan.

Prior to January 1, 2006, the Company accounted for employee stock-based compensation using the intrinsic value method in accordance with APB Opinion No. 25, Accounting for Stock Issued to Employees, as allowed by SFAS No. 123, Accounting for Stock-Based Compensation, as amended by SFAS No. 148, Accounting for Stock-Based Compensation — Transition and Disclosure. Under the intrinsic value method, no stock-based employee

107

UCBH HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


19.	Employee Benefit Plans — (Continued)

compensation cost is recorded, provided the stock options are granted with an exercise price equal to or greater than the market value of the underlying common stock on the date of grant.

Effective January 1, 2006, the Company adopted SFAS No. 123(R), Share-Based Payment. SFAS No. 123(R) eliminates the ability for companies to account for share-based compensation transactions using the intrinsic value method and requires that companies measure and recognize compensation expense for all share-based payments at fair value. Under SFAS No. 123(R), the total fair value of the stock options awards is expensed ratably over the service period of the employees receiving the awards. In adopting SFAS No. 123(R), the Company used the modified prospective method of adoption. Under this adoption method, compensation expense recognized subsequent to adoption will include: (a) compensation costs for all share-based payments granted prior to but not yet vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS No. 123, and (b) compensation costs for all share-based payments granted subsequent to January 1, 2006, based on the grant date fair value estimated in accordance with the provisions of SFAS No. 123(R). No share-based employee compensation cost has been reflected in the Company’s net income prior to the adoption of SFAS No. 123(R) and results for prior periods have not been restated.

The adoption of SFAS No. 123(R) reduced income before income tax expense for the year ended December 31, 2006, by approximately $2.2 million, and reduced net income for the same period by approximately $1.9 million. Basic and diluted earnings per share were reduced by $0.02 for the year ended December 31, 2006, as a result of the amounts expensed. In addition, as of December 31, 2006, total unrecognized compensation cost related to nonvested stock option awards was approximately $8.5 million and the related weighted-average period over which it is expected to be recognized was approximately 2.24 years. Further, for the year ended December 31, 2006, the total income tax benefit related to nonqualified stock option grants recognized in the statement of operations was $287,000.

Prior to the adoption of SFAS No. 123(R), the Company presented all tax benefits for deductions resulting from the exercise of stock options as operating cash flows in the consolidated statements of cash flows. SFAS No. 123(R) requires that the cash flows from the tax benefits resulting from tax deductions in excess of the compensation cost recognized for those options (excess tax benefits) be classified as financing cash flows. However, for the year ended December 31, 2006, there were no such excess tax benefits.


	2006			2005			2004

Dividend yield		0.61	%		0.60	%		0.44	%
Volatility		29.88	%		29.03	%		21.99	%
Risk-free interest rate		4.72	%		4.22	%		4.24	%
Expected lives (years)		7.47			7.50			7.56

108

UCBH HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


19.	Employee Benefit Plans — (Continued)

The stock option activity for the years ended December 31, 2006, 2005 and 2004, was as follows (dollars in thousands, except weighted average exercise price):


						Weighted
						Average
				Weighted		Remaining		Aggregate
	Number of			Average		Contractual		Intrinsic
	Shares			Exercise Price		Term		Value

Options outstanding at December 31, 2003		9,910,372		$	6.54		6.46	$	128,173
Granted		5,504,100			18.93
Exercised		(1,055,068	)		5.57
Canceled		(317,086	)		17.35
Expired		—			—

Options outstanding at December 31, 2004		14,042,318		$	11.23		6.84	$	164,081
Granted		1,552,300			19.09
Exercised		(786,614	)		4.91
Canceled		(347,878	)		18.31
Expired		(24,106	)		17.94

Options outstanding at December 31, 2005		14,436,020		$	12.23		6.67	$	81,522
Granted		1,153,000			17.77
Exercised		(585,442	)		7.48
Canceled		(121,500	)		18.16
Expired		(47,683	)		18.66

Options outstanding at December 31, 2006		14,834,395		$	12.78		5.82	$	70,878

Shares exercisable:
December 31, 2006		13,691,898		$	12.37		5.53	$	71,049
December 31, 2005		14,284,020			12.18		6.64		81,476
December 31, 2004		7,549,084			5.68		5.50		130,255

Cash received from option exercises for the years ended December 31, 2006, 2005 and 2004, was $4.4 million, $3.9 million and $5.6 million, respectively. The annual tax benefit realized for the tax deductions from option exercises totaled $2.0 million, $3.8 million and $5.7 million, respectively for the years ended December 31, 2006, 2005 and 2004.

The Company has a policy of issuing new shares from the pool of unissued shares allocated to the Plan to satisfy share option exercises. As of December 31, 2006, there were 869,419 unissued shares allocated to the Plan.

The weighted-average grant date fair value of options granted, total intrinsic value of options exercised and total fair value of vested, were as follows (dollars in thousands, except weighted average exercise price):


	Weighted
	Average Fair		Total Intrinsic
	Value of		Value of		Total Fair
	Options		Options		Value of
	Granted		Exercised		Vested Options

Year Ended December 31, 2006	$	7.21	$	6,204	$	290
Year Ended December 31, 2005		7.59		10,774		49,457
Year Ended December 31, 2004		6.63		15,393		8,496

109

UCBH HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


19.	Employee Benefit Plans — (Continued)

The range of exercise prices for options outstanding at December 31, 2006, is as follows:


	Options		Weighted Average		Weighted Average		Options		Weighted Average
Exercise Price	Outstanding		Exercise Price		Remaining Life		Exercisable		Exercise Price

$1.88-$2.25		1,497,216	$	1.88		1.99		1,497,216	$	1.88
$2.26-$4.51		136,956		2.91		3.23		136,956		2.91
$4.52-$6.77		3,849,804		6.15		4.30		3,849,804		6.15
$6.78-$9.03		266,324		7.21		4.99		266,324		7.21
$9.04-$11.29		675,466		10.01		4.97		675,466		10.01
$11.30-$13.55		299,765		12.38		6.29		299,765		12.38
$13.56-$15.81		498,664		15.00		7.10		404,164		14.82
$15.82-$18.07		1,472,000		17.30		8.54		652,669		16.97
$18.08-$20.33		5,398,400		18.83		7.24		5,169,734		18.82
$20.33-$22.59		739,800		21.25		6.14		739,800		21.25

Total/Average		14,834,395	$	12.78		5.82		13,691,898	$	12.37

The effect on net income and net income per share as if the Company had applied the fair value recognition provisions of SFAS No. 123 to all outstanding stock option awards for the years ended December 31, 2005 and 2004, prior to the adoption of SFAS No. 123(R), were as follows (dollars in thousands, except per share amounts):


	2005			2004

Net income:
As reported	$	97,826		$	85,603
Deduct: Total stock-based employee compensation expense determined under fair value based method of all awards, net of related tax effects		(25,917	)		(6,367	)

Pro forma net income	$	71,909		$	79,236

Basic earnings per share:
As reported	$	1.06		$	0.95
Pro forma	$	0.78		$	0.88
Diluted earnings per share:
As reported	$	1.02		$	0.90
Pro forma	$	0.75		$	0.83

On December 27, 2005, UCBH’s Board of Directors approved the accelerated vesting of all outstanding unvested stock options awarded to employees, officers and directors on or before October 26, 2005, under its stock option plan. The decision to accelerate the vesting was made primarily to reduce the impact of recording noncash compensation expense upon the implementation of SFAS No. 123(R). Stock options covering approximately 5.1 million shares of UCBH’s common stock were affected by this action, including approximately 1.9 million shares that are held by the Company’s executive officers and directors. The number of shares, exercise prices and all of the other relevant terms and conditions applicable to the accelerated options remained unchanged. By accelerating the vesting of the options, the Company estimated that approximately $16.4 million of future compensation expense, net of taxes, has been eliminated.

United Commercial Bank Savings Plus Plan

UCB has a 401(k) tax deferred savings plus plan (the “401(k) Plan”) under which eligible employees may elect to defer a portion of their salary (up to 15%) as a contribution to the 401(k) Plan. UCB matches the employees’

110

UCBH HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


19.	Employee Benefit Plans — (Continued)

contributions at a rate set by UCB’s Board of Directors. The 401(k) Plan provides for employer contributions of 50% of employee contributions for all employees for the years ended December 31, 2006, 2005 and 2004, with a maximum contribution limit of $2,000 per participant. The matching contribution vests ratably over the first five years of service. For the years ended December 31, 2006, 2005 and 2004, UCB contributed $1.6 million, $1.3 million and $1.0 million, respectively, to the 401(k) Plan.

In connection with the Pacifica and AABT acquisitions, former Pacifica and AABT employees, who were eligible to participate, were able to enroll in the 401(k) Plan on July 1, 2006.

Summit Bank Corporation Savings Plan

With the acquisition of Summit, the Company assumed the Summit 401(k) savings plan (the “Summit Plan”). Under the Summit Plan, eligible employees may elect to defer a portion of their salary as a contribution to the Summit Plan. Under the Summit Plan, the Company will match 100% of employee contributions up to first 3% of the employee’s compensation and 50% of employee contributions for the next 2% of the employee’s compensation. The Summit Plan will be merged into the 401(k) Plan on July 1, 2007.


20.	Federal and State Taxes on Income

The components of income tax expense by jurisdiction for the years ended December 31, 2006, 2005 and 2004, were as follows (dollars in thousands):


	2006			2005			2004

Current tax expense:
Federal	$	47,814		$	40,227		$	38,115
State		4,188			10,817			8,001

Total current tax expense		52,002			51,044			46,116

Deferred tax (benefit) expense:
Federal		(981	)		(4,374	)		2,806
State		(84	)		(326	)		479

Total deferred tax (benefit) expense		(1,065	)		(4,700	)		3,285

Income tax expense	$	50,937		$	46,344		$	49,401

111

UCBH HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


20.	Federal and State Taxes on Income — (Continued)

The components of deferred tax assets (liabilities) at December 31, 2006 and 2005, were as follows (dollars in thousands):


	2006			2005

Deferred tax assets:
Loan and OREO loss allowances	$	21,111		$	21,909
Market value adjustments on certain securities		907			904
Unrealized losses on available for sale securities		12,034			10,846
State taxes		7,319			3,705
Compensation and benefits		4,000			2,398
Net operating loss carryforwards		2,435			—
Other		2,017			486
Valuation allowance		(1,694	)		—

Total deferred tax assets		48,129			40,248

Deferred tax liabilities:
Fixed asset basis differences		1,509			(1,731	)
Deferred loan fees		(8,157	)		(8,246	)
FHLB dividends		(4,362	)		(3,554	)
Purchase accounting adjustments		(24,532	)		(27,378	)
Other		(5,067	)		(3,733	)

Total deferred tax liabilities		(40,609	)		(44,642	)

Net deferred tax assets (liabilities)	$	7,520		$	(4,394	)

The components for deferred tax assets (liabilities) by jurisdiction at December 31, 2006 and 2005, were as follows (dollars in thousands):


	2006		2005

Net deferred assets (liabilities):
Federal income tax	$	6,510	$	(4,159	)
State franchise tax		1,010		(235	)

Net deferred tax assets (liabilities)	$	7,520	$	(4,394	)

The income tax benefit related to federal and state net operating loss carryforwards by year of expiration as of December 31, 2006, are as follows (dollars in thousands):


2007	$	539
2008		878
2009		161
2010		645
2011		94
2012		—
2013		118

Total	$	2,435

Internal Revenue Code Section 382 places a limitation (the “Section 382 Limitation”) on the amount of taxable income that can be offset by net operating loss carryforwards after a change in control (generally greater than 50%

112

UCBH HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


20.	Federal and State Taxes on Income — (Continued)

change in ownership) of a loss corporation. California has similar rules. Generally, after a control change, a loss corporation cannot deduct net operating loss carryforwards in excess of the Section 382 Limitation. Due to these “change in ownership” provisions, utilization of the net operating loss and tax credit carryforwards may be subject to an annual limitation regarding their utilization against taxable income in future periods. The valuation allowance, included in the deferred tax asset, was established based upon the application of the Section 382 Limitation to the net operating loss carryforwards acquired in the Summit acquisition.

The reconciliation of the statutory income tax rate to the consolidated effective income tax rate for the years ended December 31, 2006, 2005 and 2004, was as follows:


	2006			2005			2004

Federal income tax rate		35.0	%		35.0	%		35.0	%
State franchise tax rate, net of federal income tax effects		7.0			7.0			7.0

Statutory income tax rate		42.0			42.0			42.0

Increase (reduction) in tax rate resulting from:
California and federal tax credits and incentives		(5.9	)		(3.2	)		(3.2	)
Tax-exempt income		(2.2	)		(2.3	)		(2.3	)
Section 965 repatriation		—			(2.7	)		—
Other, net		(0.3	)		(1.7	)		0.1

Effective income tax rate		33.6	%		32.1	%		36.6	%

On October 22, 2004, the President of the United States of America signed into law AJCA. The AJCA allows companies to repatriate foreign earnings at an effective tax rate of 5.25% upon satisfaction of certain conditions. Such repatriations must occur in either an enterprise’s last year that began before the enactment date, or the first tax year that begins during the one-year period beginning on the date of enactment.

During the three months ended June 30, 2005, the Company elected to repatriate approximately $26.7 million in previously unremitted foreign earnings. During the three months ended December 31, 2005, the Company repatriated $26.7 million in previously unremitted foreign earnings. As a result, the Company recorded a current taxes payable on such previously unremitted foreign earnings of approximately $703,000. In addition, the Company has recorded a reduction to deferred tax liabilities of approximately $4.6 million as a result of the reversal of the deferred tax liability related to unremitted earnings of its foreign subsidiary. This results in a net tax benefit of approximately $3.9 million.

The years 2003 through 2005 remain open for Internal Revenue Service audit purposes, the years 2002 through 2005 remain open for California Franchise Tax Board purposes and the years 2003 through 2005 remain open for New York State, New York City and Massachusetts purposes. The 2006 federal and state income tax returns have not yet been filed.

The Company believes it has adequately provided for income tax issues not yet resolved with federal, foreign, state and local tax authorities. Although not probable, the most adverse resolution of these federal, foreign, state and local issues could result in additional charges to earnings in future periods in addition to the amount currently provided. Based upon a consideration of all relevant facts and circumstances, the Company does not believe the ultimate resolution of tax issues for all open periods will have a material effect upon results of operations or financial condition.


21.	Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of loans, investments and certain other derivative and off balance sheet contracts. At December 31, 2006, UCB had

113

UCBH HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


21.	Concentration of Credit Risk — (Continued)

82.5% of its loans held in portfolio located in California. Additionally, UCB had 54.5% of its loans held in portfolio in commercial nonresidential and multifamily real estate loans. No borrower or obligor accounted for more than 2.0% of loans. At December 31, 2006, mortgage-backed securities were 47.4% of UCB’s investment portfolio. At December 31, 2006, UCB had 46.2% and 29.6% of its customer deposits located in Northern and Southern California, respectively. One state government entity contributed 6.4% and two other customers contributed 5.0% of total deposits at December 31, 2006. No other customer accounted for more than 2.0% of deposits.


22.	Related Party Transactions

Several members of the Board of Directors and executive officers of the Company have deposits with UCB that are made in the ordinary course of business with the same terms and conditions, including interest rates, as those prevailing at the same time for comparable transactions with other customers. The total deposits for these related parties were $6.7 million and $7.2 million at December 31, 2006 and 2005, respectively. Additionally, UCB has adopted a policy that prohibits loans or extensions of credit to members of the Board of Directors and affiliated persons of the Company, and their related interests.


23.	Derivative Financial Instruments and Financial Instruments with Off-Balance-Sheet Risk

UCB is a party to derivative financial instruments and financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers and to reduce its own exposure to fluctuations in interest rates. UCB does not hold or issue financial instruments for trading purposes. Financial instruments in the normal course of business include commitments to extend and purchase credit, forward commitments to sell loans, letters of credit, foreign exchange contracts and interest-rate caps. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the statement of financial position. The contract or notional amounts of those instruments reflect the extent of involvement UCB has in particular classes of financial instruments.

UCB’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual or notional amount of those instruments. UCB uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments. For interest-rate swap and cap transactions and forward commitments to sell loans, the contract or notional amounts do not represent exposure to credit loss. UCB manages the credit risk of its interest-rate swap and cap agreements, foreign exchange contracts, and forward commitments to sell loans through credit approvals, limits and monitoring procedures. UCB does not require collateral or other security to support interest-rate swap transactions with credit risk.

114

UCBH HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


23.	Derivative Financial Instruments and Financial Instruments with Off-Balance-Sheet Risk — (Continued)

The contractual or notional amounts of derivative financial instruments and financial instruments with off-balance-sheet credit risk as of December 31, 2006 and 2005, were as follows (dollars in thousands):


	2006			2005

Commitments to extend credit:
Consumer (including residential mortgage)	$	88,648		$	88,407
Commercial (excluding construction)		1,150,599			672,662
Construction		889,294			539,955
Letters of credit		140,684			90,595
Foreign exchange contracts receivable		(385,301	)		(159,957	)
Foreign exchange contracts payable		220,515			57,825
Put options to buy		5,329			11,269
Put options to sell		(5,329	)		(11,269	)
Interest rate swap contract		25,000			—
Interest rate floor contract		25,000			—
Unfunded CRA investment commitments		3,623			4,760

Total	$	2,158,062		$	1,294,247

Commitments

Commitments to extend credit are agreements to lend to a customer provided there are no violations of any conditions established in the contract. Commitments generally have fixed expiration dates or other termination clauses. UCB evaluates each customer’s credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by UCB upon extension of credit, is based on management’s credit evaluation of the customer. Collateral held generally includes residential or commercial real estate, accounts receivable, or other assets.

Letters of credit are conditional commitments issued by UCB to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. These letters of credit are usually secured by the customer’s inventories or by deposits held at UCB.

Foreign exchange contracts are contracts to purchase or sell currencies in the over-the-counter market. Such contracts can be either for immediate or forward delivery. Entering into foreign exchange contract agreements involves the risk of dealing with counterparties and their ability to meet the terms of the contracts. UCB purchases or sells foreign exchange contracts in order to hedge a balance sheet or off-balance-sheet foreign exchange position. Additionally, UCB purchases and sells foreign exchange contracts for customers, as long as the foreign exchange risk is fully hedged with an offsetting position.

Interest-rate caps are interest rate protection instruments that involve the payment from the seller to the buyer of an interest differential. This differential represents the difference between current interest rates and an agreed upon rate applied to a notional principal amount. Entering into interest-rate cap agreements involves the risk of dealing with counterparties and their ability to meet the terms of the contracts. Notional principal amounts often are used to express the volume of these transactions, but the amounts potentially subject to credit risk are much smaller. UCB may be a purchaser of interest-rate caps and swaps. With the acquisition of Summit, UCB acquired a five-year interest rate swap with a fair value of $802,000 and a five-year interest rate floor contract with a fair value of $93,000. The notional value of both the interest rate swap and floor were $25.0 million. UCB had no other derivative

115

UCBH HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


23.	Derivative Financial Instruments and Financial Instruments with Off-Balance-Sheet Risk — (Continued)

transactions designated as a hedge according to the relevant accounting criteria as of December 31, 2006 and 2005. Both the interest rate swap and the interest rate floor were not designated as hedges.

Put options to buy are part of currency-linked deposits with other financial institutions. At the option of these third parties, UCB is required to buy a currency at a predefined exchange rate with another currency. Put options to sell are part of currency-linked deposits that customers have placed with UCB. At the option of UCB, the customer is obligated to buy a currency at a predefined exchange rate with another currency. The put options to buy and put options to sell, along with the related currency-linked deposits, offset each other.

UCB has CRA investments that may have unfunded commitments that UCB is obligated to make. Fundings are made upon request by the underlying investee companies based on original contractual commitment amounts.


24.	Commitments and Contingent Liabilities

Lease Commitments

The Company leases various premises and equipment under noncancelable operating leases, many of which contain renewal options and some of which contain escalation clauses. Future minimum rental payments due each year under operating leases that have initial or remaining noncancelable lease terms in excess of one year as of December 31, 2006, are as follows (dollars in thousands):


2007	$	10,120
2008		8,506
2009		6,781
2010		5,965
2011		4,448
2012 and thereafter		14,504

Total	$	50,324

The Company determined that recognition of rent expense for leases with rent holidays or leases with rent escalation clauses was not recognized on a straight-line basis. Accordingly, during the three months ended December 31, 2004, the Company recorded a cumulative adjustment to increase occupancy expense and deferred rent by $1.2 million and the recognition of a tax benefit of $490,000. Rent expense was approximately $11.9 million, $10.4 million and $9.1 million for the years ended December 31, 2006, 2005 and 2004, respectively.

Contingent Liabilities

The Company is subject to pending or threatened actions and proceedings arising in the normal course of business. In the opinion of management, the ultimate disposition of all pending or threatened actions and proceedings will not have a material adverse effect on the Company’s results of operations or financial condition.


25.	Fair Value of Financial Instruments

SFAS No. 107, Disclosures about Fair Value of Financial Instrument, requires all entities to estimate the fair value of all financial instrument assets, liabilities and off-balance-sheet transactions. Fair values are point-in-time estimates that can change significantly based on numerous factors. Accordingly, management cannot provide any assurance that the estimated fair values presented below could actually be realized. The fair value estimates for financial instruments were determined as of December 31, 2006 and 2005, by application of the described methods and significant assumptions.

116

UCBH HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


25.	Fair Value of Financial Instruments — (Continued)

The carrying value and estimated fair value of principal financial instruments at December 31, 2006 and 2005, were as follows (dollars in thousands):


	2006						2005
	Carrying			Estimated			Carrying			Estimated
	Amount			Fair Value			Amount			Fair Value

Financial assets:
Cash and due from banks	$	204,392		$	204,392		$	200,072		$	200,072
Federal funds sold		150,027			150,027			2,993			2,993
Securities purchased under agreements to resell		175,000			194,304			—			—
Investments and mortgage-backed securities available for sale		2,149,456			2,149,456			1,117,724			1,117,724
Investments and mortgage-backed securities held to maturity		290,673			295,446			308,608			313,974
Federal Home Loan Bank stock, Federal Reserve Board stock and other equity investments		110,775			110,775			75,445			75,445
Loans held for sale		142,861			152,094			156,740			156,948
Loans held in portfolio		6,635,660			6,679,375			5,838,660			5,814,038
Accrued interest receivable		50,803			50,803			37,750			37,750
Mortgage servicing rights, net		13,273			18,010			10,642			14,036
Customers’ liability on acceptances		61,013			61,013			27,133			27,133
Financial liabilities:
Noninterest bearing deposits		767,714			767,714			558,649			558,649
Interest bearing deposits		6,435,131			6,466,690			5,705,520			5,721,494
Securities sold under agreements to repurchase		401,600			407,134			—			—
Short-term borrowings		654,636			657,774			279,425			279,780
Subordinated debentures		240,549			242,967			150,520			150,520
Long-term borrowings		906,651			907,981			562,033			570,644
Accrued interest payable		21,018			21,018			12,582			12,582
Acceptances outstanding		61,013			61,013			27,133			27,133
Derivatives:
Foreign exchange contracts receivable		1,263			1,263			408			408
Foreign exchange contracts payable		(803	)		(803	)		(241	)		(241	)
Put option to buy		8			8			64			64
Put option to sell		(8	)		(8	)		(21	)		(21	)
Interest rate swap contract		(802	)		(802	)		—			—
Interest rate floor contract		93			93			—			—

117

UCBH HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


25.	Fair Value of Financial Instruments — (Continued)

Cash and Due from Banks and Federal Funds Sold

The fair value of cash and due from banks and federal funds sold approximates the carrying value.

Securities Purchased Under Agreements to Resell

The fair value of securities purchased under agreements to resell with original maturities of 90 days or less approximates the carrying value due to the short-term nature of these instruments. The fair value of securities purchased under agreements to resell with original maturities of greater than 90 days is estimated by discounting future cash flows using current market rates and takes into consideration the expected maturity or repricing dates and any call features.

Investment and Mortgage-Backed Securities

The fair value of investments and mortgage-backed securities equals quoted market price, if available. If a quoted market price is not available, the fair value is estimated using quoted market prices for similar securities.

Federal Home Loan Bank Stock, Federal Reserve Bank Stock and Other Equity Investments

The fair value of Federal Home Loan Bank stock approximates the carrying value, which is based on the redemption provisions of the Federal Home Loan Bank. The fair value of Federal Reserve Bank stock approximates the carrying value, which is based on the redemption provisions of the Federal Reserve Bank. The fair value of other equity investments is carrying value or reported value.

Loans Held for Sale

The fair value of commercial real estate loans and multifamily loans held for sale is estimated based on recent market loan sale pricing of like sales, prevailing market interest rates, as well as weighted average maturity, weighted average life, and conditional prepayment rates. SBA loans held for sale fair value is estimated based on recent historical loan sales.

Loans Held in Portfolio

The fair value of loans held in portfolio is estimated by discounting future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings at the same remaining maturities. In addition, the allowance for loan losses was considered a reasonable adjustment for credit risk for the entire portfolio.

Accrued Interest Receivable

The fair value of accrued interest receivable approximates the carrying value.

Mortgage Servicing Rights

The fair value of mortgage servicing rights is determined by calculating the present value of estimated future net servicing cash flows, using assumptions of prepayments, defaults, ancillary income, servicing costs and discount rates that UCB believes market participants would use for similar assets.

Deposits

The fair value of demand deposits, savings accounts, and certain money market deposits is the amount payable on demand at the reporting date. The fair value of fixed maturity certificates of deposit is estimated using the rates currently offered for deposits of similar remaining maturities.

118

UCBH HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


25.	Fair Value of Financial Instruments — (Continued)

Securities Sold Under Agreements to Repurchase

The fair value of securities sold under agreements to repurchase with original maturities of 90 days or less approximates the carrying value due to the short-term nature of these instruments. The fair value of securities sold under agreements to repurchase with original maturities greater than 90 days is estimated by discounting future cash flows using estimated market discount rates and takes into consideration the expected maturity or repricing dates and any call features.

Federal Home Loan Bank Advances and Other Borrowings

The fair value of Federal Home Loan Bank advances and other borrowings is estimated using the rates currently being offered for advances with similar remaining maturities.

Subordinated Debentures

The fair value of UCBH’s junior subordinated debentures is estimated using market interest rates currently being offered for similar unrated debt instruments.

Accrued Interest Payable

The fair value of accrued interest payable approximates the carrying value.

Other Assets and Liabilities

The fair value of customer liabilities on acceptances and acceptances outstanding approximates the carrying value.

Derivative Instruments

The fair value of derivative instruments are based on quoted market prices of similar instruments.

Commitments to Extend Credit, Letters of Credit, Commitments to Purchase Loans, Securities Sold but not Owned, and Options on Interest Rate Futures

The fair value of commitments to extend credit and letters of credit are deemed to be at or near zero due to contractual terms being equated to market terms. The fair values for securities sold but not owned and options on interest rate futures are based on quoted market prices or dealer quotes. The carrying amounts of such investments are considered to be substantially equivalent to fair value.

119

UCBH HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


26.	Supplemental Cash Flow Information

The supplemental cash flow information for the years ended December 31, 2006, 2005 and 2004, was as follows (dollars in thousands):


	2006			2005			2004

Cash paid during the period for:
Interest	$	262,645		$	155,439		$	94,602
Income taxes		56,618			35,234			36,372
Noncash investing and financing activities:
Stock warrants acquired with issuance of commercial loans	$	(129	)	$	(129	)	$	—
Income tax benefit from stock options exercised		—			3,813			5,679
Common stock issued for:
Acquisition of Summit Bank Corporation		85,786			—			—
Acquisition of Pacifica Bancorp, Inc.		—			21,092			—
Acquisition of Asian American Bank & Trust Company		—			15,624			—
Acquisition of Summit Bank Corporation:
Fair value of assets acquired		934,482			—			—
Fair value of liabilities assumed		759,787			—			—
Acquisition of Pacifica Bancorp, Inc.
Fair value of assets acquired		—			202,045			—
Fair value of liabilities assumed		—			160,436			—
Acquisition of Asian American Bank & Trust Company
Fair value of assets acquired		—			153,552			—
Fair value of liabilities assumed		—			118,953			—
Transfer of loans from held for sale to held in portfolio		(87,479	)		(252,569	)		—
Transfer of loans to held for sale from held in portfolio		434,285			264,819			—
Transfer of other real estate owned to other assets from loans held in portfolio		244			—			—
Loan securitization:
Loans originated in held in portfolio sold		176,143			—			147,468
Mortgage-backed securities acquired		(174,721	)		—			(146,947	)
Mortgage servicing rights acquired		(1,422	)		—			(521	)


27.	Segment Information

The Company designates the internal organization that is used by management for making operating decisions and assessing performance as the source of its reportable segments. The Company has determined that its reportable segments are those that are based on the Company’s method of internal reporting. The Company has determined that it has two reportable segments, “Domestic Banking” and “Other”. “Other” segment consists of the Company’s Hong Kong operations, UCBIS and UCB Asset Management, Inc. The “UCBH Holdings, Inc.” column consists of UCBH, which reflects the holding company activities. The intersegment column consists of the UCBH and UCB elimination units, which reflects the elimination of intersegment transactions. Substantially all interest income was earned in the United States and in Hong Kong, China. The determination of interest income earned by country is impracticable and is not disclosed.

120

UCBH HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


27.	Segment Information — (Continued)

The segment information as of December 31, 2006 and 2005, and for the years ended December 31, 2006, 2005 and 2004, were as follows (dollars in thousands):


										UCBH
	Domestic						Total			Holdings,
	Banking			Other			Segments			Inc.			Intersegment			Consolidated

Year ended December 31, 2006:
Total interest and dividend income	$	519,171		$	25,456		$	544,627		$	—		$	(9,614	)	$	535,013
Total interest expense		(250,756	)		(17,739	)		(268,495	)		(12,199	)		9,614			(271,080	)
Net interest income (expense)		268,415			7,717			276,132			(12,199	)		—			263,933
Core deposit intangible impairment loss		(324	)		—			(324	)		—			—			(324	)
Income tax benefit (expense)		(55,212	)		(465	)		(55,677	)		4,740			—			(50,937	)
Net income (loss)		111,393			257			111,650			100,877			(111,650	)		100,877
As of December 31, 2006:
Loans held in portfolio		6,134,231			501,429			6,635,660			—			—			6,635,660
Goodwill		226,780			—			226,780			—			—			226,780
Core deposit intangible, net		28,325			—			28,235			—			—			28,235
Total assets		10,104,907			797,588			10,902,495			1,035,495			(1,591,576	)		10,346,414
Total deposits		6,306,789			918,224			7,225,013			—			(22,168	)		7,202,845
Year ended December 31, 2005:
Total interest and dividend income		397,771			7,311			405,082			—			(2,682	)		402,400
Total interest expense		(152,976	)		(2,237	)		(155,213	)		(9,379	)		2,682			(161,910	)
Net interest income (expense)		244,795			5,074			249,869			(9,379	)		—			240,490
Core deposit intangible impairment loss		(203	)		—			(203	)		—			—			(203	)
Income tax benefit (expense)		(52,099	)		182			(51,917	)		5,573			—			(46,344	)
Net income (loss)		110,881			1,321			112,202			97,826			(112,202	)		97,826
As of December 31, 2005:
Loans held in portfolio		5,554,069			284,591			5,838,660			—			—			5,838,660
Goodwill		106,648			—			106,648			—			—			106,648
Core deposit intangible, net		14,981			—			14,981			—			—			14,981
Total assets		7,819,458			378,792			8,198,250			750,918			(983,531	)		7,965,637
Total deposits		5,727,843			555,526			6,283,369			—			(19,200	)		6,264,169
Year ended December 31, 2004:
Total interest and dividend income		297,222			3,034			300,256			—			(192	)		300,064
Total interest expense		(83,019	)		(1,540	)		(84,559	)		(8,216	)		192			(92,583	)
Net interest income (expense)		214,203			1,494			215,697			(8,216	)		—			207,481
Income tax benefit (expense)		(54,626	)		271			(54,355	)		4,954			—			(49,401	)
Net income (loss)		100,706			(3,820	)		96,886			85,603			(96,886	)		85,603

121

UCBH HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

28. Parent Company

The unconsolidated balance sheets of UCBH Holdings, Inc. at December 31, 2006 and 2005, were as follows (dollars in thousands):

BALANCE SHEETS


	2006			2005

ASSETS
Cash and due from banks	$	11,496		$	12,542
Other equity investments		3,182			2,753
Equipment, net		178			111
Investment in subsidiary		1,013,437			731,408
Other assets		7,202			12,065

Total assets	$	1,035,495		$	758,879


LIABILITIES AND STOCKHOLDERS’ EQUITY
Accrued interest payable	$	2,375		$	1,113
Subordinated debentures		240,549			150,520
Other liabilities		6,500			3,732

Total liabilities		249,424			155,365

Common stock		994			940
Additional paid-in capital		341,616			247,340
Retained earnings		464,616			375,220
Accumulated other comprehensive loss		(21,155	)		(19,986	)

Total stockholders’ equity		786,071			603,514

Total liabilities and stockholders’ equity	$	1,035,495		$	758,879

122

UCBH HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


28.	Parent Company — (Continued)

The unconsolidated statements of operations of UCBH Holdings, Inc. for the years ended December 31, 2006, 2005 and 2004, were as follows (dollars in thousands):

STATEMENTS OF OPERATIONS


	2006			2005		2004

Income:
Dividends from subsidiary	$	7,500		$	30,000	$	—
Acquisition termination fee		5,000			—		—
Other income		15			—		—

Total income		12,515			30,000		—

Expense:
Interest expense on junior subordinated debentures		12,106			9,353		8,185
Loss on extinguishment of subordinated debentures		—			1,196		—
Other general and administrative		7,099			6,788		4,985

Total expense		19,205			17,337		13,170

Income (loss) before income tax benefit and equity in undistributed net income of subsidiary		(6,690	)		12,663		(13,170	)
Income tax benefit		4,740			5,573		4,954
Equity in undistributed net income of subsidiary		102,827			79,590		93,819

Net income	$	100,877		$	97,826	$	85,603

123

UCBH HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


28.	Parent Company — (Continued)

The unconsolidated statements of cash flows of UCBH Holdings, Inc. for the years ended December 31, 2006, 2005 and 2004, were as follows (dollars in thousands):

STATEMENTS OF CASH FLOWS


	2006			2005			2004

Cash flows from operating activities:
Net income	$	100,877		$	97,826		$	85,603
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Equity in undistributed net income of subsidiary		(102,827	)		(79,590	)		(93,819	)
Loss on extinguishment of subordinated debenture		—			1,196			—
Depreciation expense		67			70			45
Amortization of subordinated debenture fees		122			165			173
Loss on sale of equipment		14			—			—
Excess tax benefit from stock option exercises		(2,007	)		—			—
Changes in operating assets and liabilities:
Decrease in other assets		6,754			13,935			9,789
Increase in accrued interest payable		1,262			12			121
Increase (decrease) in other liabilities		(320	)		(246	)		1,214

Net cash provided by operating activities		3,942			33,368			3,126

Cash flows from investing activities:
Cash acquired from Summit Bank Corporation acquisition		39			—			—
Capital contribution to subsidiaries		(77,326	)		(30,200	)		(71	)
Equity investment purchase		(406	)		(2,753	)		—
Purchases of equipment		(162	)		(111	)		(46	)
Proceeds from sale of equipment		14			—			—

Net cash used in investing activities		(77,841	)		(33,064	)		(117	)

Cash flows from financing activities:
Proceeds from stock option exercises		4,374			3,863			5,824
Proceeds from issuance of subordinated debentures		77,321			40,000			—
Redemption of subordinated debenture		—			(30,000	)		—
Excess tax benefit from stock option exercises		2,007			—			—
Payment of cash dividend on common stock		(10,849	)		(8,700	)		(6,779	)

Net cash provided by (used in) financing activities		72,853			5,163			(955	)

Net (decrease) increase in cash and cash equivalents		(1,046	)		5,467			2,054
Cash and cash equivalents beginning of year		12,542			7,075			5,021

Cash and cash equivalents end of year	$	11,496		$	12,542		$	7,075

124

UCBH HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

29. Unaudited Quarterly Condensed Consolidated Financial Information

The summarized unaudited quarterly supplemental consolidated financial information for the years ended December 31, 2006 and 2005, was as follows (dollars in thousands, except for earnings per share data):


	Three Months Ended
	December 31,			September 30,			June 30,			March 31,

2006:
Total interest and dividend income	$	142,663		$	137,892		$	131,006		$	123,452
Total interest expense		(76,484	)		(71,768	)		(64,956	)		(57,872	)

Net interest income		66,179			66,124			66,050			65,580
Recovery of (provision for) loan losses		(1,350	)		(936	)		(1,249	)		(307	)
Noninterest income		11,969			10,968			10,129			14,077
Noninterest expense		(38,122	)		(37,419	)		(37,131	)		(42,748	)

Income before income tax expense		38,676			38,737			37,799			36,602
Income tax expense		(12,194	)		(13,167	)		(12,393	)		(13,183	)

Net income	$	26,482		$	25,570		$	25,406		$	23,419

Earnings per share
Basic	$	0.28		$	0.27		$	0.27		$	0.25
Diluted	$	0.27		$	0.26		$	0.26		$	0.24

2005:
Total interest and dividend income	$	117,459		$	104,046		$	96,873		$	84,022
Total interest expense		(52,097	)		(43,930	)		(37,227	)		(28,656	)

Net interest income		65,362			60,116			59,646			55,366
Recovery of (provision for) loan losses		(3,231	)		105			(1,775	)		(1,190	)
Noninterest income		8,407			4,563			5,668			8,046
Noninterest expense		(33,301	)		(25,971	)		(30,428	)		(27,213	)

Income before income tax expense		37,237			38,813			33,111			35,009
Income tax expense		(12,104	)		(13,290	)		(7,747	)		(13,203	)

Net income	$	25,133		$	25,523		$	25,364		$	21,806

Earnings per share:
Basic	$	0.27		$	0.28		$	0.28		$	0.24
Diluted	$	0.26		$	0.27		$	0.27		$	0.23


30.	Subsequent Events

On January 10, 2007, UCBH and CAB Holding, LLC (“CAB”), a Delaware limited liability company registered under the Bank Holding Company Act of 1956, as amended, and the holding company of The Chinese American Bank, entered into an Agreement and Plan of Merger. The value of the transaction is approximately $131.2 million, which is comprised of $65.1 million in cash and the issuance of 3,711,580 shares of UCBH common stock valued at $66.1 million (based on the average closing price for UCBH’s common stock around the announcement date of January 11, 2007). CAB may terminate the transaction for various reasons prior to the consummation of the merger, including but not limited to a substantial change in the market value of UCBH common stock in relation to the NASDAQ Bank Index, unless UCBH agrees to increase the Exchange Ratio (as defined in the agreement). Similarly, UCBH may terminate the transaction for various reasons prior to the

125


Item 9.	*Changes in and Disagreements with Accountants on Accounting and Financial Disclosure*

None.


Item 9A.	*Controls and Procedures*

Disclosure Controls and Procedures

UCBH Holdings, Inc. (the “Company”) has carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of December 31, 2006. As defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), disclosure controls and procedures are controls and procedures designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported on a timely basis. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2006.

Management’s Report on Internal Control over Financial Reporting

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. As defined in Rule 13a-15(f) under the Exchange Act, internal control over financial reporting is a process designed by or under the supervision of a company’s principal executive and principal financial officers, and effected by a company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. It includes those policies and procedures that:


	•	pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of a company;

	•	provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of a company are being made only in accordance with authorizations of management and board of directors of a company; and

	•	provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of a company’s assets that could have a material effect on its financial statements.

Management of the Company has assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2006. In making its assessment of internal control, management used the criteria described in “Internal Control — Integrated Framework” issued by the Committee of Sponsoring Organizations (“COSO”) of the Treadway Commission.

As a result of its assessment, management has concluded that the Company’s internal control over financial reporting was effective as of December 31, 2006.

In conducting an assessment of the effectiveness of the Company’s internal control over financial reporting, the Company has excluded the acquisition of Summit Bank Corporation from management’s report on internal control over financial reporting. The Summit Bank Corporation acquisition was completed on December 29, 2006, and constituted 9.0% of the total assets of the Company as of December 31, 2006.

Management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2006 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report incorporated by reference into Item 8 of this Annual Report on Form 10-K.

127

PART III


Item 10.	*Directors and Executive Officers of the Registrant*

The information required by this item with respect to our executive officers, directors, the audit committee financial expert and the Audit Committee is incorporated by reference from the information contained in the section captioned “Election of Directors”, “Executive Officers” and “Board Meeting and Committees — Section 16(a) Beneficial Ownership Reporting Compliance” in the Company’s definitive Proxy Statement for the May 17, 2007, Annual Meeting of Stockholders.

The information required by this item with respect to the Company’s Code of Conduct is incorporated by reference from the information contained in the section captioned “Corporate Governance — Code of Conduct” in the Proxy Statement. The Code of Conduct is publicly available on our website at www.ucbh.com. If we make any substantive amendments to the Code of Conduct or grant any waiver, including any implicit waiver, from a provision of the code to our Chief Executive Officer, Chief Financial Officer or Corporate Controller, we will disclose the nature of such amendment or waiver on that website.


Item 11.	*Executive Compensation*

The information required by this item with respect to our named executive officers is incorporated by reference from the information contained in the sections captioned “Board Meetings and Committees — Executive Compensation, Summary Compensation Table, Employment and Change in Control Agreements, Option Grants and Executive Deferred Compensation” in the Company’s definitive Proxy Statement for the May 17, 2007, Annual Meeting of Stockholders.

The information required by this item with respect to the compensation of our directors is incorporated by reference from the information contained in the sections captioned “Board Meetings and Committees — Director Compensation and Director Deferred Compensation Plan” in the Company’s definitive Proxy Statement for the May 17, 2007, Annual Meeting of Stockholders.


Item 12.	*Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters*

The information required by this item is incorporated by reference from the information contained in the sections captioned “Board Meetings and Committees — Security Ownership of Certain Beneficial Owners” and “Election of Directors” in the Company’s definitive Proxy Statement for the May 17, 2007, Annual Meeting of Stockholders.


Item 13.	*Certain Relationships and Related Transactions, and Director Independence*

The information required by this item is incorporated by reference from the information contained in the section captioned “Related Party Transactions” in the Company’s definitive Proxy Statement for the May 17, 2007, Annual Meeting of Shareholders.


Item 14.	*Principal Accounting Fees and Services*

The information required by this item is incorporated by reference from the information contained in the sections captioned “Ratification of Selection of Independent Auditors — Independent Auditor Fees” in the Company’s definitive Proxy Statement for the May 17, 2007, Annual Meeting of Shareholders.

129

PART IV


Item 15.	*Exhibits, Financial Statement Schedules*

(a) The following documents are filed as part of this report.

1. The following consolidated financial statements of UCBH Holdings, Inc. and subsidiaries are filed as part of this report under Item 8 — Financial Statements and Supplementary Data:


	Page

Report of Independent Registered Public Accounting Firm		69
Consolidated Balance Sheets as of December 31, 2006 and 2005		71
Consolidated Statements of Operations for the years ended December 31, 2006, 2005 and 2004		72
Consolidated Statements of Changes in Stockholders’ Equity and Comprehensive Income (Loss) for the years ended December 31, 2006, 2005 and 2004		73
Consolidated Statements of Cash Flows for the years ended December 31, 2006, 2005 and 2004		74
Notes to Consolidated Financial Statements		75

2. All other financial schedules are omitted due to the required information is not applicable, or contained in the Consolidated Financial Statements or the notes thereto.

3. Exhibits:

Index to Exhibits


Exhibit				Incorporated by Reference					Filed
Number			Exhibit Description	Form	File No.	Exhibit		Filing Date	Herewith

	2	.1	Agreement and Plan of Merger by and among UCBH Holdings, Inc. (“Buyer”), UCBH Merger Sub, Inc., a wholly owned subsidiary of Buyer, and Pacifica Bancorp, Inc. dated May 23, 2005	10-Q	000-24947		2.1	August 9, 2005
	2	.2	Agreement and Plan of Merger by and among UCBH Holdings, Inc. (“Buyer”), United Commercial Bank, a wholly owned subsidiary of Buyer, and Asian American Bank & Trust Company dated August 2, 2005	10-Q	000-24947		2.2	November 9, 2005
	2	.3	Agreement and Plan of Merger by and among UCBH Holdings, Inc. (“Buyer”), United Commercial Bank, a wholly owned subsidiary of Buyer, and Great Eastern Bank dated October 13, 2005	S-4	000-24947		2.1	December 12, 2005
	2	.4	Agreement and Plan of Merger by and among UCBH Holdings, Inc. (“Buyer”), UCB Merger, LLC, a wholly owned subsidiary of Buyer, and Summit Bank Corporation dated September 18, 2006	10-Q	000-24947		2.4	November 14, 2006
	3	.1	Second Amended and Restated Certificate of Incorporation of UCBH Holdings, Inc.	10-Q	000-24947		3.1	May 10, 2004
	3	.2	Amended and Restated Bylaws of UCBH Holdings, Inc., as amended and restated	10-Q	000-24947		3.2	May 10, 2004
	3	.3	Certificate of Designation, Preferences and Rights of Series A Participating Preferred Stock (filed as Exhibit A to Exhibit 4.7 hereto)	8-K	000-24947		1	January 29, 2003

130


Exhibit				Incorporated by Reference					Filed
Number			Exhibit Description	Form	File No.	Exhibit		Filing Date	Herewith

	4	.0	Form of Stock Certificate of UCBH Holdings, Inc.	S-1	333-58325		4.0	July 1, 1998
	4	.1	Indenture of UCBH Holdings, Inc., dated April 17, 1998, between UCBH Holdings, Inc. and Wilmington Trust Company, as trustee	S-4	333-58335		4.1	July 1, 1998
	4	.2	Form of Certificate of Series B Junior Subordinated Debenture	S-4	333-58335		4.2	July 1, 1998
	4	.3	Certificate of Trust of UCBH Trust Co.	S-4	333-58335		4.3	July 1, 1998
	4	.4	Amended and Restated Declaration of Trust of UCBH Trust Co.	S-4	333-58335		4.4	July 1, 1998
	4	.5	Form of Series B Capital Security Certificate for UCBH Trust Co.	S-4	333-58335		4.5	July 1, 1998
	4	.6	Form of Series B Guarantee of the Company relating to the Series B Capital Securities	S-4	333-58335		4.6	July 1, 1998
	4	.7	Rights Agreement dated as of January 28, 2003	8-K	000-24947		1	January 29, 2003
	4	.8	Indenture of UCBH Holdings, Inc., dated September 22, 2005, between UCBH Holdings, Inc. and Wilmington Trust Company, as trustee	10-Q	000-24947		2.2	November 9, 2005
	4	.9	Indenture between UCBH Holdings, Inc. and Wilmington Trust Company, as trustee, dated December 15, 2006							ü
	4	.10	Junior subordinated indenture between UCBH Holdings, Inc. and Wilmington Trust Company, as trustee, dated December 28, 2006							ü
	4	.11	Junior Subordinated Indenture between Summit Bank Corporation and The Bank of New York, as trustee, dated September 30, 2003							ü
	10	.1	Employment Agreement between UCBH Holdings, Inc., United Commercial Bank and Thomas S. Wu	10-Q	000-24947		10.1	November 9, 2004
	10	.2	Form of Change in Control Agreement among UCBH Holdings, Inc., United Commercial Bank and Jonathan H. Downing	8-K	000-24947		10.2	June 13, 2005
	10	.3	Form of Change in Control Agreement among UCBH Holdings, Inc., United Commercial Bank and Sylvia Loh as well as certain other Executive Vice Presidents of UCBH Holdings, Inc. or United Commercial Bank	10-Q	000-24947		10.3	November 9, 2004
	10	.4	Form of Change in Control Agreement among UCBH Holdings, Inc., United Commercial Bank and Ka Wah (Tony) Tsui as well as certain other Senior Vice Presidents of UCBH Holdings, Inc. or United Commercial Bank	10-Q	000-24947		10.4	November 9, 2004
	10	.5	Form of Change in Control Agreement among UCBH Holdings, Inc., United Commercial Bank and Daniel Gautsch	8-K	000-24947		10.1	June 8, 2005
	10	.6	Form of Change in Control Agreement among UCBH Holdings, Inc., United Commercial Bank and Dennis Wu	8-K	000-24947		10.1	June 13, 2005

131


Exhibit				Incorporated by Reference					Filed
Number			Exhibit Description	Form	File No.	Exhibit		Filing Date	Herewith

	10	.7	Form of Change in Control Agreement among UCBH Holdings, Inc., United Commercial Bank and certain Senior Vice Presidents of UCBH Holdings, Inc. or United Commercial Bank	10-Q	000-24947		10.1	April 27, 2006
	10	.8	UCBH Holdings, Inc. 2006 Equity Incentive Plan, (formerly known as UCBH Holdings, Inc. 1998 Stock Option Plan)	10-Q	000-24947		10.8	August 9, 2006
	10	.9	UCBH Holdings, Inc. Senior Executive Annual Incentive Plan	10-Q	000-24947		10.9	August 9, 2006
	10	.10	Form of Indemnification Agreement of UCBH Holdings, Inc.	8-K	000-24947		10.1	May 18, 2006
	10	.11	Form of Indemnification Agreement of United Commercial Bank	8-K	000-24947		10.2	May 18, 2006
	10	.12	Post Retirement Compensation Agreement between Pin Pin Chau, Chief Executive Officer of Summit Bank Corporation, and Summit Bank Corporation dated December 20, 2004							ü
	14	.1	Code of Conduct, as amended on August 14, 2004	8-K	000-24947		14.1	September 1, 2004
	21	.0	Subsidiaries of UCBH Holdings, Inc.							ü
	23	.1	Consent of Independent Registered Public Accounting Firm PricewaterhouseCoopers LLP							ü
	31	.1	Certificate pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, signed and dated by Thomas S. Wu							ü
	31	.2	Certificate pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, signed and dated by Dennis Wu							ü
	32	.0	Certificate pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed and dated by Thomas S. Wu and Dennis Wu							(1	)


(1)		Furnished herewith

132

SIGNATURES

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

Date: March 1, 2007

UCBH HOLDINGS, INC.


		/s/ Thomas S. Wu

Thomas S. Wu

Chairman, President and Chief Executive Officer

(Principal Executive Officer)

Date: March 1, 2007

/s/ Dennis Wu

Dennis Wu

Director, Executive Vice President and Chief

Financial Officer

(Principal Financial and Accounting Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.


Name	Title	Date

/s/ Thomas S. Wu Thomas S. Wu	Chairman, President and Chief Executive Officer (Principal Executive Officer)	March 1, 2007

/s/ Dennis Wu Dennis Wu	Director, Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)	March 1, 2007

/s/ Anthony Y. Chan Anthony Y. Chan	Director	March 1, 2007

/s/ Joseph J. Jou Joseph J. Jou	Lead Director	March 1, 2007

/s/ Li-Lin Ko Li-Lin Ko	Director	March 1, 2007

/s/ James Kwok James Kwok	Director	March 1, 2007

/s/ David S. Ng David S. Ng	Director	March 1, 2007

/s/ Richard Li-Chung Wang Richard Li-Chung Wang	Director	March 1, 2007

/s/ Dr. Godwin Wong Dr. Godwin Wong	Director	March 1, 2007

133


			Page

PART I
	Item 1	Business		2
	Item 1A	Risk Factors		14
	Item 1B	Unresolved Staff Comments		18
	Item 2	Properties		18
	Item 3	Legal Proceedings		18
	Item 4	Submission of Matters to a Vote of Security Holders		18
PART II
	Item 5	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		19
	Item 6	Selected Financial Data		21
	Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operation		23
	Item 7A	Quantitative and Qualitative Disclosures About Market Risk		67
	Item 8	Financial Statements and Supplementary Data		68
	Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		127
	Item 9A	Controls and Procedures		127
	Item 9B	Other Information		128
PART III
	Item 10	Directors and Executive Officers of the Registrant		129
	Item 11	Executive Compensation		129
	Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		129
	Item 13	Certain Relationships and Related Transactions, and Director Independence		129
	Item 14	Principal Accounting Fees and Services		129
PART IV
	Item 15	Exhibits, Financial Statement Schedules		130
Signatures				133
EXHIBIT 4.9
EXHIBIT 4.10
EXHIBIT 4.11
EXHIBIT 10.12
EXHIBIT 21.0
EXHIBIT 23.1
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.0


29.	Unaudited Quarterly Condensed Consolidated Financial Information