LOANS

9 Months Ended

Sep. 30, 2011

LOANS

LOANS

NOTE 4—LOANS

• Non-Covered Loans

        When we refer to non-covered loans we are referring to loans not covered by our FDIC loss sharing agreements.

        The following table presents the composition of non-covered loans by portfolio segment as of the dates indicated:

Loan Segment			September 30, 2011			December 31, 2010
			(In thousands)
Real estate mortgage			$	2,031,893		$	2,274,733
Real estate construction				152,411			179,479
Commercial				671,963			663,557
Consumer				20,621			25,058
Foreign				20,932			22,608
	Total gross non-covered loans			2,897,820			3,165,435
Less:
	Unearned income			(4,183	)		(4,380	)
	Allowance for loan losses			(90,110	)		(98,653	)
		Total net non-covered loans	$	2,803,527		$	3,062,402

        The following tables present a summary of the activity in the allowance for loan losses on non-covered loans by portfolio segment for the periods indicated:

		Three Months Ended September 30, 2011
		Real Estate Mortgage			Real Estate Construction			Commercial			Consumer			Foreign			Total
		(In thousands)
Allowance for Loan Losses on Non-Covered Loans:
Balance, beginning of period		$	53,540		$	11,185		$	28,259		$	2,910		$	533		$	96,427
	Charge-offs		(4,293	)		—			(2,237	)		(54	)		—			(6,584	)
	Recoveries		225			33			235			74			—			567
	Provision		2,341			(885	)		(925	)		(642	)		(189	)		(300	)
Balance, end of period		$	51,813		$	10,333		$	25,332		$	2,288		$	344		$	90,110

		Nine Months Ended September 30, 2011
		Real Estate Mortgage			Real Estate Construction			Commercial			Consumer			Foreign			Total
		(In thousands)
Allowance for Loan Losses on Non-Covered Loans:
Balance, beginning of period		$	51,657		$	8,766		$	33,229		$	4,652		$	349		$	98,653
	Charge-offs		(9,859	)		(5,838	)		(7,967	)		(1,379	)		—			(25,043	)
	Recoveries		349			1,021			1,160			1,375			45			3,950
	Provision		9,666			6,384			(1,090	)		(2,360	)		(50	)		12,550
Balance, end of period		$	51,813		$	10,333		$	25,332		$	2,288		$	344		$	90,110
The ending balance of the allowance is composed of amounts applicable to loans:
	Individually evaluated for impairment	$	6,399		$	3,363		$	7,035		$	2		$	—		$	16,799
	Collectively evaluated for impairment	$	45,414		$	6,970		$	18,297		$	2,286		$	344		$	73,311
Non-Covered Loan Balances:
Ending balance		$	2,031,893		$	152,411		$	671,963		$	20,621		$	20,932		$	2,897,820
The ending balance of the non-covered loan portfolio is composed of loans:
	Individually evaluated for impairment	$	91,495		$	32,621		$	21,692		$	565		$	—		$	146,373
	Collectively evaluated for impairment	$	1,940,398		$	119,790		$	650,271		$	20,056		$	20,932		$	2,751,447

		Year Ended December 31, 2010
		Real Estate Mortgage			Real Estate Construction			Commercial			Consumer			Foreign			Total
		(In thousands)
Allowance for Loan Losses on Non-Covered Loans:
Balance, January 1, 2010		$	58,241		$	39,934		$	17,710		$	2,021		$	811		$	118,717
	Charge-offs		(117,029	)		(63,590	)		(18,548	)		(3,749	)		(306	)		(203,222	)
	Recoveries		1,222			708			1,652			565			133			4,280
	Provision		109,223			31,714			32,415			5,815			(289	)		178,878
Balance, December 31, 2010		$	51,657		$	8,766		$	33,229		$	4,652		$	349		$	98,653
The ending balance of the allowance is composed of amounts applicable to loans:
	Individually evaluated for impairment	$	3,893		$	1,125		$	8,911		$	1,049		$	—		$	14,978
	Collectively evaluated for impairment	$	47,764		$	7,641		$	24,318		$	3,603		$	349		$	83,675
Non-Covered Loan Balances:
Ending balance		$	2,274,733		$	179,479		$	663,557		$	25,058		$	22,608		$	3,165,435
The ending balance of the non-covered loan portfolio is composed of loans:
	Individually evaluated for impairment	$	94,171		$	47,350		$	39,820		$	1,951		$	163		$	183,455
	Collectively evaluated for impairment	$	2,180,562		$	132,129		$	623,737		$	23,107		$	22,445		$	2,981,980

        The following table presents the credit risk rating categories for non-covered loans by portfolio segment and class as of the dates indicated. Nonclassified loans are those with a credit risk rating of either pass or special mention, while classified loans are those with a credit risk rating of either substandard or doubtful.

        Our federal and state banking regulators, as an integral part of their examination process, periodically review the Company's loan risk rating classifications. Our regulators may require the Company to recognize rating downgrades based on their judgments related to information available to them at the time of their examinations. Risk rating downgrades generally result in higher provisions for credit losses.

			September 30, 2011						December 31, 2010
			Nonclassified		Classified		Total		Nonclassified		Classified		Total
			(In thousands)
Real estate mortgage:
	Hospitality		$	124,346	$	21,437	$	145,783	$	137,952	$	18,700	$	156,652
	SBA 504			51,838		7,386		59,224		55,774		13,513		69,287
	Other			1,749,840		77,046		1,826,886		1,956,905		91,889		2,048,794
		Total real estate mortgage		1,926,024		105,869		2,031,893		2,150,631		124,102		2,274,733
Real estate construction:
	Residential			16,908		3,398		20,306		39,644		25,399		65,043
	Commercial			98,819		33,286		132,105		82,291		32,145		114,436
		Total real estate construction		115,727		36,684		152,411		121,935		57,544		179,479
Commercial:
	Collateralized			396,393		17,133		413,526		342,607		15,820		358,427
	Unsecured			65,214		5,967		71,181		119,326		10,417		129,743
	Asset-based			157,270		48		157,318		141,813		1,354		143,167
	SBA 7(a)			18,716		11,222		29,938		29,557		2,663		32,220
		Total commercial		637,593		34,370		671,963		633,303		30,254		663,557
Consumer				19,799		822		20,621		22,949		2,109		25,058
Foreign				20,932		—		20,932		22,608		—		22,608
		Total non-covered loans	$	2,720,075	$	177,745	$	2,897,820	$	2,951,426	$	214,009	$	3,165,435

        The following tables present an aging analysis of our non-covered loans by portfolio segment and class as of the dates indicated:

			September 30, 2011
			30 - 59 Days Past Due		60 - 89 Days Past Due		Greater Than 90 Days Past Due		Total Past Due		Current		Total
			(In thousands)
Real estate mortgage:
	Hospitality		$	—	$	—	$	—	$	—	$	145,783	$	145,783
	SBA 504			3,168		896		—		4,064		55,160		59,224
	Other			13,351		1,939		13,652		28,942		1,797,944		1,826,886
		Total real estate mortgage		16,519		2,835		13,652		33,006		1,998,887		2,031,893
Real estate construction:
	Residential			—		—		—		—		20,306		20,306
	Commercial			1,553		—		2,719		4,272		127,833		132,105
		Total real estate construction		1,553		—		2,719		4,272		148,139		152,411
Commercial:
	Collateralized			—		396		2,614		3,010		410,516		413,526
	Unsecured			—		113		2,003		2,116		69,065		71,181
	Asset-based			—		—		—		—		157,318		157,318
	SBA 7(a)			974		591		1,591		3,156		26,782		29,938
		Total commercial		974		1,100		6,208		8,282		663,681		671,963
Consumer				110		19		—		129		20,492		20,621
Foreign				—		—		—		—		20,932		20,932
		Total non-covered loans	$	19,156	$	3,954	$	22,579	$	45,689	$	2,852,131	$	2,897,820

        At September 30, 2011 and December 31, 2010, the Company had no non-covered loans that were greater than 90 days past due and still accruing interest. It is the Company's policy to discontinue accruing interest when principal or interest payments are past due 90 days or when, in the opinion of management, there is a reasonable doubt as to collectibility of a loan in the normal course of business. At September 30, 2011, nonaccrual loans totaled $60.0 million. Nonaccrual loans include $3.5 million of loans 30 to 89 days past due and $33.9 million of current loans which have been placed on nonaccrual status based on management's judgment regarding the collectibility of such loans.

			December 31, 2010
			30 - 59 Days Past Due		60 - 89 Days Past Due		Greater Than 90 Days Past Due		Total Past Due		Current		Total
			(In thousands)
Real estate mortgage:
	Hospitality		$	—	$	—	$	—	$	—	$	156,652	$	156,652
	SBA 504			799		462		6,235		7,496		61,791		69,287
	Other			426		2,566		13,936		16,928		2,031,866		2,048,794
		Total real estate mortgage		1,225		3,028		20,171		24,424		2,250,309		2,274,733
Real estate construction:
	Residential			—		—		24,004		24,004		41,039		65,043
	Commercial			—		667		2,145		2,812		111,624		114,436
		Total real estate construction		—		667		26,149		26,816		152,663		179,479
Commercial:
	Collateralized			725		883		1,457		3,065		355,362		358,427
	Unsecured			—		5,966		600		6,566		123,177		129,743
	Asset-based			—		—		—		—		143,167		143,167
	SBA 7(a)			1,254		494		751		2,499		29,721		32,220
		Total commercial		1,979		7,343		2,808		12,130		651,427		663,557
Consumer				407		1,048		—		1,455		23,603		25,058
Foreign				—		—		163		163		22,445		22,608
		Total non-covered loans	$	3,611	$	12,086	$	49,291	$	64,988	$	3,100,447	$	3,165,435

        Nonaccrual loans totaled $94.2 million at December 31, 2010, of which $12.0 million were 30 to 89 days past due and $32.9 million were current.

        The following table presents our nonaccrual and performing non-covered loans by portfolio segment and class as of the dates indicated:

			September 30, 2011						December 31, 2010
			Nonaccrual		Performing		Total		Nonaccrual		Performing		Total
			(In thousands)
Real estate mortgage:
	Hospitality		$	7,336	$	138,447	$	145,783	$	4,151	$	152,501	$	156,652
	SBA 504			2,895		56,329		59,224		9,346		59,941		69,287
	Other			21,693		1,805,193		1,826,886		27,452		2,021,342		2,048,794
		Total real estate mortgage		31,924		1,999,969		2,031,893		40,949		2,233,784		2,274,733
Real estate construction:
	Residential			1,091		19,215		20,306		24,004		41,039		65,043
	Commercial			9,399		122,706		132,105		5,238		109,198		114,436
		Total real estate construction		10,490		141,921		152,411		29,242		150,237		179,479
Commercial:
	Collateralized			4,769		408,757		413,526		6,241		352,186		358,427
	Unsecured			4,887		66,294		71,181		9,104		120,639		129,743
	Asset-based			15		157,303		157,318		15		143,152		143,167
	SBA 7(a)			7,318		22,620		29,938		6,518		25,702		32,220
		Total commercial		16,989		654,974		671,963		21,878		641,679		663,557
Consumer				565		20,056		20,621		1,951		23,107		25,058
Foreign				—		20,932		20,932		163		22,445		22,608
		Total non-covered loans	$	59,968	$	2,837,852	$	2,897,820	$	94,183	$	3,071,252	$	3,165,435

        Nonaccrual loans and performing restructured loans are considered impaired for reporting purposes. Impaired loans by portfolio segment are as follows as of the dates indicated:

		September 30, 2011						December 31, 2010
Loan Segment		Nonaccrual Loans		Performing Restructured Loans		Total Impaired Loans		Nonaccrual Loans		Performing Restructured Loans		Total Impaired Loans
		(In thousands)
Real estate mortgage		$	31,924	$	59,571	$	91,495	$	40,949	$	53,222	$	94,171
Real estate construction			10,490		22,131		32,621		29,242		18,108		47,350
Commercial			16,989		4,703		21,692		21,878		17,942		39,820
Consumer			565		—		565		1,951		—		1,951
Foreign			—		—		—		163		—		163
	Total	$	59,968	$	86,405	$	146,373	$	94,183	$	89,272	$	183,455

        The decrease in the real estate construction impaired loan segment is due to the foreclosure on undeveloped land located in Ventura County which secured two non-covered loans with an aggregate balance of $23.0 million. The decrease in the commercial impaired loan segment is due to two loans that have performed in accordance with their restructured terms for at least 12 months and have been removed from this category.

        The following tables present information regarding our non-covered impaired loans by portfolio segment and class as of and for the dates indicated:

			September 30, 2011						December 31, 2010
			Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
			(In thousands)
With An Allowance Recorded:
Real estate mortgage:
	Hospitality		$	17,634	$	17,891	$	2,893	$	15,081	$	15,138	$	564
	SBA 504			1,159		1,250		195		4,161		6,180		280
	Other			56,238		60,220		3,311		47,188		47,343		3,049
Real estate construction:
	Residential			2,069		2,077		484		8,301		11,956		673
	Other			24,374		26,391		2,879		5,341		5,701		452
		Total real estate		101,474		107,829		9,762		80,072		86,318		5,018
Commercial:
	Collateralized			4,691		4,780		3,068		2,192		2,363		1,174
	Unsecured			4,748		14,708		3,183		9,361		9,445		7,696
	SBA 7(a)			4,543		4,632		784		1,999		2,123		41
Consumer				69		73		2		1,125		1,127		1,049
	Total other			14,051		24,193		7,037		14,677		15,058		9,960
With No Related Allowance Recorded:
Real estate mortgage:
	Hospitality		$	—	$	—	$	—	$	667	$	667	$	—
	SBA 504			2,348		4,007		—		5,185		6,320		—
	Other			14,116		16,819		—		21,889		29,191		—
Real estate construction:
	Residential			1,329		1,329		—		22,676		23,208		—
	Other			4,849		6,157		—		11,032		12,603		—
		Total real estate		22,642		28,312		—		61,449		71,989		—
Commercial:
	Collateralized			2,201		2,416		—		20,519		20,668		—
	Unsecured			591		656		—		224		236		—
	Asset-based			15		15		—		15		15		—
	SBA 7(a)			4,903		6,427		—		5,510		7,239		—
Consumer				496		563		—		826		876		—
Foreign				—		—		—		163		238		—
	Total other			8,206		10,077		—		27,257		29,272		—
Total:
	Real estate mortgage		$	91,495	$	100,187	$	6,399	$	94,171	$	104,839	$	3,893
	Real estate construction			32,621		35,954		3,363		47,350		53,468		1,125
	Commercial			21,692		33,634		7,035		39,820		42,089		8,911
	Consumer			565		636		2		1,951		2,003		1,049
	Foreign			—		—		—		163		238		—
		Total non-covered loans	$	146,373	$	170,411	$	16,799	$	183,455	$	202,637	$	14,978

			Three Months Ended September 30, 2011				Nine Months Ended September 30, 2011
			Weighted Average Recorded Investment(1)		Interest Income Recognized		Weighted Average Recorded Investment(1)		Interest Income Recognized
			(In thousands)
With An Allowance Recorded:
Real estate mortgage:
	Hospitality		$	17,634	$	162	$	17,435	$	528
	SBA 504			1,159		8		820		29
	Other			55,580		584		43,025		2,051
Real estate construction:
	Residential			2,069		17		2,069		55
	Other			20,969		274		16,293		502
		Total real estate		97,411		1,045		79,642		3,165
Commercial:
	Collateralized			4,568		32		3,644		76
	Unsecured			4,748		6		4,739		16
	SBA 7(a)			3,131		60		2,400		116
Consumer				69		—		69		—
	Total other			12,516		98		10,852		208
With No Related Allowance Recorded:
Real estate mortgage:
	Hospitality		$	—	$	—	$	—	$	—
	SBA 504			2,348		—		2,348		—
	Other			13,900		150		10,992		358
Real estate construction:
	Residential			1,329		48		1,329		48
	Other			4,849		114		4,849		163
		Total real estate		22,426		312		19,518		569
Commercial:
	Collateralized			2,198		—		2,133		—
	Unsecured			574		2		548		4
	Asset-based			15		—		15		—
	SBA 7(a)			4,815		15		4,704		25
Consumer				496		—		462		1
Foreign				—		—		—		—
	Total other			8,098		17		7,862		30
Total:
	Real estate mortgage		$	90,621	$	904	$	74,620	$	2,966
	Real estate construction			29,216		453		24,540		768
	Commercial			20,049		115		18,183		237
	Consumer			565		—		531		1
	Foreign			—		—		—		—
		Total non-covered loans	$	140,451	$	1,472	$	117,874	$	3,972

⁽¹⁾

For the loans reported as impaired as of September 30, 2011, amounts were calculated based on the period of time such loans were impaired during the reporting period.

        The following tables present non-covered new troubled debt restructurings and defaulted troubled debt restructurings for the periods indicated:

				Three Months Ended September 30, 2011						Nine Months Ended September 30, 2011
				Number of Loans		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Number of Loans		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
				(Dollars in thousands)
Troubled Debt Restructurings:
	Real estate mortgage:
		Hospitality			3	$	14,967	$	14,967		4	$	17,053	$	17,053
		SBA 504			—		—		—		5		2,619		2,619
		Other			12		34,244		34,053		25		52,765		52,574
	Real estate construction:
		Residential			—		—		—		1		618		618
		Other			1		2,082		2,082		7		18,605		18,605
	Commercial:
		Collateralized			3		1,158		1,158		12		3,161		3,161
		Unsecured			1		450		450		3		726		726
		SBA 7(a)			7		745		745		18		4,292		4,292
	Consumer				—		—		—		2		271		271
			Total		27	$	53,646	$	53,455		77	$	100,110	$	99,919

			Three Months Ended September 30, 2011				Nine Months Ended September 30, 2011
			Number of Loans		Recorded Investment(1)		Number of Loans		Recorded Investment(1)
			(Dollars in thousands)
Troubled Debt Restructurings That Subsequently
	Defaulted(2):
Real estate mortgage:
	Other			4	$	5,566		4	$	5,566
Commercial:
	SBA 7(a)			1		448		1		448
		Total		5	$	6,014		5	$	6,014

(1)

Represents the balance at September 30, 2011 and is net of charge-offs of $2.1 million and $3.0 million for the three and nine months ended September 30, 2011, respectively.

(2)

The population of defaulted restructured loans for the periods indicated includes only those loans restructured during the preceeding 12-month period. The table excludes defaulted troubled debt restructurings in those classes for which the recorded investment was zero at September 30, 2011.

        As a result of adopting the amendments in Accounting Standards Update No. 2011-02, Receivables (Topic 310): A Creditors Determination of Whether a Restructuring is a Troubled Debt Restructuring, we reassessed all restructurings that occurred on or after January 1, 2011, for identification as troubled debt restructurings. We identified one loan as a troubled debt restructuring (TDR) for which the allowance for credit losses had previously been measured under our general allowance for credit losses methodology. Upon identifying this one loan as a TDR, we recognized it as impaired under the guidance in Section 310-10-35. The amendments in Accounting Standards Update No. 2011-02 require prospective application of the impairment measurement guidance in Section 310-10-35 for those loans newly identified as impaired. At the end of the first interim period of adoption (September 30, 2011), the recorded investment in this loan was $2.1 million and the allowance for credit losses associated with that receivable on the basis of a current evaluation of loss was $163,000.

• Covered Loans

        We refer to the loans acquired in the Los Padres and Affinity acquisitions subject to loss sharing agreements with the FDIC as "covered loans" as we will be reimbursed for a substantial portion of any future losses on them under the terms of the agreements.

        The following table reflects the carrying values of covered loans as of the dates indicated:

Loan Category		September 30, 2011			December 31, 2010
		(In thousands)
Multi-family		$	267,892		$	321,650
Commercial real estate			386,326			444,244
Single family			129,692			157,424
Construction and land			57,601			87,301
Commercial and industrial			22,869			34,828
Home equity lines of credit			6,287			5,916
Consumer			603			1,378
	Total gross covered loans		871,270			1,052,741
Less: discount			(80,920	)		(110,901	)
	Covered loans, net of discount		790,350			941,840
Less: allowance for loan losses			(29,291	)		(33,264	)
	Covered loans, net	$	761,059		$	908,576

        The following table summarizes the changes in the carrying amount of covered acquired impaired loans and accretable yield on those loans for the period indicated:

		Covered Acquired Impaired Loans
		Carrying Amount			Accretable Yield
		(In thousands)
Balance, January 1, 2011		$	879,486		$	(290,665	)
	Accretion		50,875			50,875
	Payments received		(189,826	)		—
	Increase in expected cash flows, net		—			(37,685	)
	Provision for credit losses		(9,148	)		—
Balance, September 30, 2011		$	731,387		$	(277,475	)

        The table above excludes the covered loans from the Los Padres acquisition which are accounted for as non-impaired loans and totaled $29.7 million and $29.1 million at September 30, 2011 and December 31, 2010, respectively.

        The following table presents the credit risk rating categories for covered loans by portfolio segment as of the dates indicated. Nonclassified loans are those with a credit risk rating of either pass or special mention, while classified loans are those with a credit risk rating of either substandard or doubtful. It should be noted, however, that all of these loans are covered by loss sharing agreements with the FDIC.

		September 30, 2011						December 31, 2010
		Nonclassified		Classified		Total		Nonclassified		Classified		Total
		(In thousands)						(In thousands)
Real estate mortgage		$	515,633	$	173,018	$	688,651	$	622,837	$	180,944	$	803,781
Real estate construction			8,369		42,617		50,986		21,370		51,729		73,099
Commercial			11,388		9,215		20,603		14,630		16,219		30,849
Consumer			242		577		819		722		125		847
	Total covered loans	$	535,632	$	225,427	$	761,059	$	659,559	$	249,017	$	908,576

        Our federal and state banking regulators, as an integral part of their examination process, periodically review the Company's loan risk rating classifications. Our regulators may require the Company to recognize rating downgrades based on their judgments related to information available to them at the time of their examinations.