NOTE 8—FDIC LOSS SHARING ASSET

The FDIC loss sharing asset relates to assets covered by the loss sharing agreements between the Bank and the FDIC arising from the acquisitions of Los Padres Bank and Affinity Bank and, through the FCAL acquisition, the assumption of the loss sharing agreements between First California Bank and the FDIC arising from FCB's acquisition of Western Commercial Bank ("Western Commercial") and San Luis Trust Bank ("San Luis"). The FDIC loss sharing asset related to Western Commercial and San Luis was measured at its fair value as of May 31, 2013 in conjunction with the FCAL acquisition. The FDIC loss sharing asset related to Los Padres and Affinity was measured at its estimated fair value at the respective acquisition dates.

An increase in the expected amount of losses on the covered assets will increase the FDIC loss sharing asset; such increase is recognized through a credit to FDIC loss sharing income. Recoveries on previous losses paid to us by the FDIC reduce the FDIC loss sharing asset by a charge to FDIC loss sharing income. In addition, decreases in the expected amount of losses on covered assets will decrease the amount of funds expected to be collected from the FDIC and will therefore reduce the FDIC loss sharing asset through higher prospective amortization expense. The FDIC loss sharing asset is being amortized to its estimated value over the lesser of the term of the loss sharing agreements or the remaining contractual life of the assets covered by the loss sharing agreements.

The following table presents the changes in the FDIC loss sharing asset for the period indicated:

	FDIC Loss Sharing Asset

	(In thousands)
Balance, December 31, 2012	$	57,475
Addition from the FCAL acquisition		18,981
FDIC share of additional losses, net of recoveries		5,392
Cash received from FDIC		(3,108	)
Net amortization		(11,747	)

Balance, June 30, 2013	$	66,993