2. CENTER MERGER

On November 30, 2011, the merger of Center and Nara was completed. Pursuant to the merger agreement, holders of Center common stock received 0.7805 of a share of common stock of BBCN for each share of Center common stock held immediately prior to the effective time of the merger, rounded to the nearest whole share, plus cash in lieu of the issuance of fractional shares. Outstanding Center stock options and restricted stock awards were converted into stock options with respect to shares of BBCN common stock or shares of BBCN common stock, respectively, with appropriate adjustments to reflect the exchange ratio. The merger was accounted for by BBCN using the acquisition method of accounting. Accordingly, the assets and liabilities of Center were recorded at their respective fair values and represents management's estimates based on available information.

The results of Center's operations are included in the Consolidated Statements of Income from the date of acquisition. In connection with the merger, the consideration paid, the assets acquired, and the liabilities assumed were recorded at fair value on the date of acquisition, as summarized in the following table:


	(in thousands)
Consideration paid:
BBCN common stock issued	$	291,977
Cash in lieu of fractional shares paid to Center Financial stockholders		1
Fair value of Center Financial employee stock options		1,347
Fair value of Center Financial common stock warrant		(648	)

Total consideration paid	$	292,677

Assets Acquired:
Cash and cash equivalents	$	325,993
Investment securities available for sale		293,065
Term federal funds sold, original maturities more than 90 days		50,000
Loans, net		1,430,465
FRB and FHLB stock		12,591
Premises and equipment		12,463
FDIC loss share receivable		10,852
Deferred tax assets, net		48,870
Core deposit intangible		4,100
Other assets		63,485

Liabilities Assumed:
Certificates of deposits		(1,827,406	)
Borrowings		(148,760	)
Other liabilities		(16,848	)
Preferred stock		(54,158	)

Total identifiable net assets	$	204,712

Excess of consideration paid over fair value of net assets acquired (goodwill)	$	87,965

We estimated the fair value for most loans acquired from Center by utilizing a methodology wherein loans with comparable characteristics were aggregated by type of collateral, remaining maturity, and repricing terms. Cash flows for each pool were determined by estimating future credit losses and the rate of prepayments. Projected monthly cash flows were then discounted to present value using a risk-adjusted market rate for similar loans. To estimate the fair value of the remaining loans, we analyzed the value of the underlying collateral of the loans, assuming the fair values of the loans were derived from the eventual sale of the collateral. The value of the collateral was based on recently completed appraisals adjusted to the valuation date based on recognized industry indices. We discounted those values using market derived rates of return, with consideration given to the period of time and costs associated with the foreclosure and disposition of the collateral. There was no carryover of Center's allowance for loan losses associated with the loans we acquired as the loans were initially recorded at fair value.

Acquired Center Financial loans for which at the acquisition date, it was probable that all contractually required payments would not be received as of November 30, 2011 are as follows:


	(In Thousands)
Contractually required principal and interest at acquisition	$	245,246
Contractual cash flows not expected to be collected (nonaccretable discount)		(28,095	)

Expected cash flows at acquisition		217,151
Interest component of expected cash flows (accretable discount)		(32,872	)

Fair value of acquired loans	$	184,279

The core deposit intangible asset recognized as part of the Center merger is being amortized over its estimated useful life of approximately seven years utilizing an accelerated method. The goodwill of approximately $88.0 million was recorded in conjunction with the transaction. The goodwill arising from the merger is largely the result of the benefit to the Company of acquiring Center Financial, thereby creating a platform for future operations, strengthening the Company's presence in the primary existing markets in Southern California, expanding the national presence through the addition of Center's offices in Chicago and Seattle, as well as Center's offices in Northern California location, and realizing annual cost synergies. The goodwill is not amortized for book purposes and is not deductible for tax purposes.

The fair value of savings and transactional deposit accounts acquired from Center was assumed to approximate the carrying value as these accounts have no stated maturity and are payable on demand. Certificates of deposit were valued by comparing the contractual cost of the the portfolio to an identical portfolio bearing current market rates. The projected cash flows from maturing certificates were calculated based on contractual rates. The fair value of the certificates of deposit was calculated by discounting their contractual cash flows at a market rate for a certificate of deposit with a corresponding maturity.

The fair value of borrowings assumed was determined by estimating projected future cash outflows and discounting them at a market rate of interest.

The fair value of FDIC loss share receivable was determined based on the discounted value of expected future cash flows under the loss sharing agreement.

Direct costs related to the Center merger were expensed as incurred. During the year ended December 31, 2011, we incurred $4.7 million in merger and integration expenses related to Center transaction, including $0.3 million in salaries and benefits, $1.0 million in occupancy and equipment, $2.4 million in professional services, and $1.0 million in other noninterest expense. During the year ended December 31, 2010, we incurred $1.0 million in merger related expenses related to Center.

The following table presents financial information regarding the Center Financial operations included in our Consolidated Statement of Income from the date of acquisition through December 31, 2011. The following table also presents unaudited pro forma information as if the merger had occurred on January 1, 2010. This pro forma information gives effect to certain adjustments, including purchase accounting fair value adjustments, amortization of core deposit and related income tax effects. Merger and integration expenses incurred by the Company and Center of $7.8 million and $1.7 million for the years ended December 31, 2011 and 2010, respectively, were excluded. The pro forma information does not necessarily reflect the results of operations that would have occurred had the Company merged with Center at the beginning of 2010. We assumed no adjustments to the historical deferred tax asset valuations in the amount of $6.4 million and $6.0 million, respectively, recorded by Center during the eleven months ended November 30, 2011 and the year ended December 31, 2010. Had Nara acquired Center as of January 1, 2010, the reversal of all or a portion of the deferred tax asset valuation allowance of the combined entity could have differed materially from the amount presented in the unaudited pro forma combined condensed consolidated income statements. In addition, the pro forma combined condensed consolidated financial statements do not take into account the impact, if any, of an ownership change under Section 382 of the Code that would have occurred with respect to BBCN as of January 1, 2010. The merger is expected to result in annual cost savings to be achieved following the consummation of the merger. These expected savings have not been included in the pro forma combined amounts. In addition, the pro forma results for the year ended December 31, 2010 does not reflect any adjustment to eliminate Center's historical preferred stock dividend of $29 million for the beneficial conversion feature of its Series B Preferred Stock issued in December 2009.


	Actual from acquisition date through December 31, 2011			Pro forma Year ended December 31,
	Actual from acquisition date through December 31, 2011			2011			2010
	(In Thousands)
Net interest income	$	7,727		$	170,401		$	89,599
Non-interest income		1,268			45,082			50,569
Non-interest expense		(1,705	)		(123,885	)		(109,667	)
Income tax provision		(1	)		(26,769	)		(2,326	)

Net income	$	7,289		$	64,829		$	28,175

Preferred stock dividends and accretion of preferred stock discount					(7,838	)		(36,287	)

Net income (loss) available to common stockholders				$	56,991		$	(8,112	)


Pro forma earnings (loss) per share:
Basic				$	0.73		$	(0.10	)
Diluted				$	0.73		$	(0.10	)