LOANS AND LEASES

3 Months Ended

Mar. 31, 2013

LOANS AND LEASES

LOANS AND LEASES

NOTE 5—LOANS AND LEASES

• Non-Covered Loans and Leases

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

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

	March 31, 2013						December 31, 2012
	Amount			% of Total			Amount			% of Total
	(Dollars in thousands)
Real estate mortgage	$	1,796,484			61	%	$	1,917,670			63	%
Real estate construction		126,707			4			129,959			4
Commercial		794,419			26			787,775			25
Leases		204,766			7			174,373			6
Consumer		18,677			1			22,487			1
Foreign		17,268			1			17,241			1
Total gross non-covered loans and leases		2,958,321			100	%		3,049,505			100	%
Less:
Unearned income		(1,424	)					(2,535	)
Allowance for loan and lease losses		(65,216	)					(65,899	)
Total net non-covered loans and leases	$	2,891,681					$	2,981,071

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

	Three Months Ended March 31, 2013
	Real Estate Mortgage			Real Estate Construction			Commercial			Leases			Consumer			Foreign		Total
	(In thousands)
Allowance for Loan and Lease Losses on Non-Covered Loans and Leases:
Balance, beginning of period	$	38,700		$	3,221		$	20,661		$	1,493		$	1,726		$	98	$	65,899
Charge-offs		(322	)		—			(708	)		(114	)		(9	)		—		(1,153	)
Recoveries		177			323			407			—			23			—		930
Provision (negative provision)		(1,290	)		(244	)		693			627			(246	)		—		(460	)
Balance, end of period	$	37,265		$	3,300		$	21,053		$	2,006		$	1,494		$	98	$	65,216
Amount of the allowance applicable to loans and leases:
Individually evaluated for impairment	$	7,805		$	122		$	4,467		$	—		$	273		$	—	$	12,667
Collectively evaluated for impairment	$	29,460		$	3,178		$	16,586		$	2,006		$	1,221		$	98	$	52,549
Non-Covered Loan and Lease Balances:
Ending balance	$	1,796,484		$	126,707		$	794,419		$	204,766		$	18,677		$	17,268	$	2,958,321
The ending balance of the non-covered loan and lease portfolio is composed of loans and leases:
Individually evaluated for impairment	$	95,189		$	13,688		$	12,644		$	244		$	629		$	—	$	122,394
Collectively evaluated for impairment	$	1,701,295		$	113,019		$	781,775		$	204,522		$	18,048		$	17,268	$	2,835,927

	Three Months Ended March 31, 2012
	Real Estate Mortgage			Real Estate Construction			Commercial			Leases		Consumer			Foreign			Total
	(In thousands)
Allowance for Loan and Lease Losses on Non-Covered Loans and Leases:
Balance, beginning of period	$	50,205		$	8,697		$	23,308		$	—	$	2,768		$	335		$	85,313
Charge-offs		(2,190	)		—			(871	)		—		(199	)		—			(3,260	)
Recoveries		329			10			824			—		31			20			1,214
Provision (negative provision)		(6,134	)		(2,232	)		295			458		(692	)		(195	)		(8,500	)
Balance, end of period	$	42,210		$	6,475		$	23,556		$	458	$	1,908		$	160		$	74,767
Amount of the allowance applicable to loans and leases:
Individually evaluated for impairment	$	9,369		$	1,312		$	6,897		$	—	$	262		$	—		$	17,840
Collectively evaluated for impairment	$	32,841		$	5,163		$	16,659		$	458	$	1,646		$	160		$	56,927
Non-Covered Loan and Lease Balances:
Ending balance	$	1,896,052		$	118,304		$	665,441		$	153,845	$	15,826		$	18,752		$	2,868,220
The ending balance of the non-covered loan and lease portfolio is composed of loans and leases:
Individually evaluated for impairment	$	104,923		$	30,026		$	22,544		$	233	$	498		$	—		$	158,224
Collectively evaluated for impairment	$	1,791,129		$	88,278		$	642,897		$	153,612	$	15,328		$	18,752		$	2,709,996

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

	March 31, 2013						December 31, 2012
	Nonclassified		Classified		Total		Nonclassified		Classified		Total
	(In thousands)
Real estate mortgage:
Hospitality	$	158,812	$	13,660	$	172,472	$	168,489	$	12,655	$	181,144
SBA 504		49,678		5,725		55,403		48,372		5,786		54,158
Other		1,516,137		52,472		1,568,609		1,633,448		48,920		1,682,368
Total real estate mortgage		1,724,627		71,857		1,796,484		1,850,309		67,361		1,917,670
Real estate construction:
Residential		41,055		2,018		43,073		46,591		2,038		48,629
Commercial		79,852		3,782		83,634		77,503		3,827		81,330
Total real estate construction		120,907		5,800		126,707		124,094		5,865		129,959
Commercial:
Collateralized		418,425		14,227		432,652		440,187		12,989		453,176
Unsecured		75,880		2,548		78,428		66,947		2,897		69,844
Asset-based		254,633		3,631		258,264		235,075		4,355		239,430
SBA 7(a)		19,048		6,027		25,075		18,888		6,437		25,325
Total commercial		767,986		26,433		794,419		761,097		26,678		787,775
Leases		204,522		244		204,766		174,129		244		174,373
Consumer		17,810		867		18,677		21,616		871		22,487
Foreign		17,268		—		17,268		17,241		—		17,241
Total non-covered loans and leases	$	2,853,120	$	105,201	$	2,958,321	$	2,948,486	$	101,019	$	3,049,505

        In addition to our internal risk rating process, 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 allowances for credit losses.

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

	March 31, 2013
	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	$	—	$	—	$	—	$	—	$	172,472	$	172,472
SBA 504		120		946		1,727		2,793		52,610		55,403
Other(1)		27,960		2,772		5,451		36,183		1,532,426		1,568,609
Total real estate mortgage		28,080		3,718		7,178		38,976		1,757,508		1,796,484
Real estate construction:
Residential		—		—		—		—		43,073		43,073
Commercial(1)		7,290		—		562		7,852		75,782		83,634
Total real estate construction		7,290		—		562		7,852		118,855		126,707
Commercial:
Collateralized		610		1,268		840		2,718		429,934		432,652
Unsecured		—		132		1,417		1,549		76,879		78,428
Asset-based		—		—		281		281		257,983		258,264
SBA 7(a)		251		—		1,426		1,677		23,398		25,075
Total commercial		861		1,400		3,964		6,225		788,194		794,419
Leases		44		—		244		288		204,478		204,766
Consumer		32		14		8		54		18,623		18,677
Foreign		—		—		—		—		17,268		17,268
Total non-covered loans and leases	$	36,307	$	5,132	$	11,956	$	53,395	$	2,904,926	$	2,958,321

⁽¹⁾

Included in the 30-59 days past due amount at March 31, 2013, are two loans to the same borrower totaling $32.3 million. These loans, which were 32 days past due at quarter-end, are now current.

        At March 31, 2013 and December 31, 2012, the Company had no non-covered loans and leases 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 the collectability of a loan or lease in the normal course of business. At March 31, 2013, nonaccrual loans and leases totaled $41.9 million. Nonaccrual loans and leases include $6.1 million of loans 30 to 89 days past due and $23.8 million of current loans which have been placed on nonaccrual status based on management's judgment regarding their collectability.

	December 31, 2012
	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	$	—	$	—	$	—	$	—	$	181,144	$	181,144
SBA 504		955		—		1,727		2,682		51,476		54,158
Other		3,822		54		3,134		7,010		1,675,358		1,682,368
Total real estate mortgage		4,777		54		4,861		9,692		1,907,978		1,917,670
Real estate construction:
Residential		—		—		—		—		48,629		48,629
Commercial		—		—		1,245		1,245		80,085		81,330
Total real estate construction		—		—		1,245		1,245		128,714		129,959
Commercial:
Collateralized		902		161		228		1,291		451,885		453,176
Unsecured		3		135		225		363		69,481		69,844
Asset-based		—		—		176		176		239,254		239,430
SBA 7(a)		281		547		1,271		2,099		23,226		25,325
Total commercial		1,186		843		1,900		3,929		783,846		787,775
Leases		225		132		244		601		173,772		174,373
Consumer		23		1		—		24		22,463		22,487
Foreign		—		—		—		—		17,241		17,241
Total non-covered loans and leases	$	6,211	$	1,030	$	8,250	$	15,491	$	3,034,014	$	3,049,505

        Nonaccrual loans totaled $39.3 million at December 31, 2012, including $3.9 million of loans 30 to 89 days past due and $27.1 million of current loans.

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

	March 31, 2013						December 31, 2012
	Nonaccrual		Performing		Total		Nonaccrual		Performing		Total
	(In thousands)
Real estate mortgage:
Hospitality	$	6,823	$	165,649	$	172,472	$	6,908	$	174,236	$	181,144
SBA 504		2,936		52,467		55,403		2,982		51,176		54,158
Other		20,045		1,548,564		1,568,609		15,929		1,666,439		1,682,368
Total real estate mortgage		29,804		1,766,680		1,796,484		25,819		1,891,851		1,917,670
Real estate construction:
Residential		1,046		42,027		43,073		1,057		47,572		48,629
Commercial		1,447		82,187		83,634		2,715		78,615		81,330
Total real estate construction		2,493		124,214		126,707		3,772		126,187		129,959
Commercial:
Collateralized		3,306		429,346		432,652		2,648		450,528		453,176
Unsecured		1,471		76,957		78,428		2,019		67,825		69,844
Asset-based		281		257,983		258,264		176		239,254		239,430
SBA 7(a)		3,867		21,208		25,075		4,181		21,144		25,325
Total commercial		8,925		785,494		794,419		9,024		778,751		787,775
Leases		244		204,522		204,766		244		174,129		174,373
Consumer		427		18,250		18,677		425		22,062		22,487
Foreign		—		17,268		17,268		—		17,241		17,241
Total non-covered loans and leases	$	41,893	$	2,916,428	$	2,958,321	$	39,284	$	3,010,221	$	3,049,505

        Nonaccrual loans and leases and performing restructured loans are considered impaired for reporting purposes. The following table presents the composition of our impaired loans and leases as of the dates indicated:

	March 31, 2013						December 31, 2012
	Nonaccrual Loans/Leases		Performing Restructured Loans		Total Impaired Loans/Leases		Nonaccrual Loans/Leases		Performing Restructured Loans		Total Impaired Loans/Leases
	(In thousands)
Real estate mortgage	$	29,804	$	65,385	$	95,189	$	25,819	$	80,723	$	106,542
Real estate construction		2,493		11,195		13,688		3,772		21,678		25,450
Commercial		8,925		3,719		12,644		9,024		3,684		12,708
Leases		244		—		244		244		—		244
Consumer		427		202		629		425		203		628
Total	$	41,893	$	80,501	$	122,394	$	39,284	$	106,288	$	145,572

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

	March 31, 2013						December 31, 2012
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
	(In thousands)
With An Allowance Recorded:
Real estate mortgage:
Hospitality	$	8,860	$	9,630	$	1,772	$	8,954	$	9,640	$	2,396
SBA 504		1,672		1,672		237		1,676		1,676		324
Other		64,492		67,361		5,796		58,364		60,262		5,107
Real estate construction:
Residential		1,046		1,077		115		1,303		1,330		165
Commercial		8,541		8,540		7		6,723		6,723		206
Commercial:
Collateralized		3,109		3,372		2,344		2,477		2,731		1,865
Unsecured		2,228		3,497		1,677		2,396		3,121		2,234
Asset-based		281		281		151		—		—		—
SBA 7(a)		2,159		2,758		295		2,871		3,616		426
Consumer		458		501		273		466		506		265
With No Related Allowance Recorded:
Real estate mortgage:
SBA 504	$	2,936	$	3,741	$	—	$	2,982	$	3,755	$	—
Other		17,229		20,222		—		34,566		38,447		—
Real estate construction:
Commercial		4,101		7,782		—		17,424		21,085		—
Commercial:
Collateralized		1,589		1,592		—		1,843		2,067		—
Unsecured		143		162		—		148		163		—
Asset-based		—		—		—		176		176		—
SBA 7(a)		3,135		4,608		—		2,797		4,057		—
Leases		244		244		—		244		244		—
Consumer		171		247		—		162		233		—
Total Non-Covered Loans and Leases With and Without An Allowance Recorded:
Real estate mortgage	$	95,189	$	102,626	$	7,805	$	106,542	$	113,780	$	7,827
Real estate construction		13,688		17,399		122		25,450		29,138		371
Commercial		12,644		16,270		4,467		12,708		15,931		4,525
Leases		244		244		—		244		244		—
Consumer		629		748		273		628		739		265
Total	$	122,394	$	137,287	$	12,667	$	145,572	$	159,832	$	12,988

	Three Months Ended March 31,
	2013				2012
	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	$	8,860	$	20	$	16,784	$	132
SBA 504		1,672		22		142		—
Other		48,032		395		51,922		549
Real estate construction:
Residential		1,046		—		689		2
Commercial		3,296		34		9,431		83
Commercial:
Collateralized		2,523		13		4,735		18
Unsecured		2,228		10		2,394		5
Asset-based		19		—		—		—
SBA 7(a)		2,159		15		4,119		23
Consumer		458		2		283		—
With No Related Allowance Recorded:
Real estate mortgage:
SBA 504	$	2,936	$	—	$	2,354	$	—
Other		11,312		93		29,447		568
Real estate construction:
Residential		—		—		1,392		17
Commercial		3,688		25		18,514		149
Commercial:
Collateralized		1,297		—		5,132		8
Unsecured		143		—		654		—
Asset-based		—		—		63		—
SBA 7(a)		3,119		5		4,927		2
Leases		244		—		156		—
Consumer		155		—		215		—
Total Non-Covered Loans and Leases With and Without An Allowance Recorded:
Real estate mortgage	$	72,812	$	530	$	100,649	$	1,249
Real estate construction		8,030		59		30,026		251
Commercial		11,488		43		22,024		56
Leases		244		—		156		—
Consumer		613		2		498		—
Total	$	93,187	$	634	$	153,353	$	1,556

⁽¹⁾

For the loans and leases reported as impaired at March 31, 2013 and March 31, 2012, amounts were calculated based on the period of time such loans and leases 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 March 31,
	2013						2012
	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		—	$	—	$	—		1	$	2,083	$	2,083
SBA 504		—		—		—		1		563		563
Other		5		13,223		13,223		2		10,552		10,552
Real estate construction:
Residential		—		—		—		1		467		467
Commercial		—		—		—		1		4,484		4,484
Commercial:
Collateralized		1		395		395		2		606		606
Unsecured		—		—		—		1		15		15
SBA 7(a)		—		—		—		3		136		136
Total		6	$	13,618	$	13,618		12	$	18,906	$	18,906

	Three Months Ended March 31,
	2013				2012
	Number of Loans		Recorded Investment(1)		Number of Loans		Recorded Investment(2)
	(Dollars in thousands)
Troubled Debt Restructurings
That Subsequently Defaulted(3):
Real estate mortgage—Other		1	$	1,298		1	$	1,725
Real estate construction—Other		1		562		—		—
Total		2	$	1,860		1	$	1,725

⁽¹⁾

Represents the balance at March 31, 2013, for which there were no charge-offs.

⁽²⁾

Represents the balance at March 31, 2012 and is net of charge-offs of $324,000.

⁽³⁾

The population of defaulted restructured loans for the period indicated includes only those loans restructured during the preceding 12-month period. The table excludes defaulted troubled debt restructurings in those classes for which the recorded investment was zero at the end of the period.

• Covered Loans

        We refer to the loans obtained in the Los Padres Bank ("Los Padres") and Affinity Bank ("Affinity") acquisitions that are 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:

	March 31, 2013						December 31, 2012
	Amount			% of Total			Amount			% of Total
	(Dollars in thousands)
Real estate mortgage:
Hospitality	$	1,204			—		$	2,888			—
Other		529,228			95	%		552,333			94	%
Total real estate mortgage		530,432			95	%		555,221			94	%
Real estate construction:
Residential		3,049			1	%		5,662			1	%
Commercial		9,300			2	%		17,558			3	%
Total real estate construction		12,349			3	%		23,220			4	%
Commercial:
Collateralized		11,555			2	%		14,603			2	%
Unsecured		536			—			640			—
Total commercial		12,091			2	%		15,243			2	%
Consumer		544			—			594			—
Total gross covered loans		555,416			100	%		594,278			100	%
Discount		(43,050	)					(50,951	)
Allowance for loan losses		(29,303	)					(26,069	)
Covered loans, net	$	483,063					$	517,258

        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, December 31, 2012	$	493,846		$	(196,022	)
Accretion		10,346			10,346
Payments received		(40,758	)		—
Decrease in expected cash flows, net		—			9,670
Provision for credit losses		(3,137	)		—
Balance, March 31, 2013	$	460,297		$	(176,006	)

        The table above excludes certain covered loans from the Los Padres acquisition which are accounted for as acquired non-impaired loans and totaled $22.8 million and $23.4 million at March 31, 2013 and December 31, 2012, 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.

	March 31, 2013						December 31, 2012
	Nonclassified		Classified		Total		Nonclassified		Classified		Total
	(In thousands)
Real estate mortgage	$	310,690	$	152,864	$	463,554	$	339,520	$	143,598	$	483,118
Real estate construction		4,826		6,090		10,916		4,801		17,590		22,391
Commercial		3,559		4,488		8,047		4,814		6,343		11,157
Consumer		85		461		546		117		475		592
Total covered loans, net	$	319,160	$	163,903	$	483,063	$	349,252	$	168,006	$	517,258

        In addition to our internal risk rating process, 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.