BUSINESS SEGMENTS

3 Months Ended

Mar. 31, 2012

BUSINESS SEGMENTS

BUSINESS SEGMENTS

NOTE 13 — BUSINESS SEGMENTS

The Company utilizes an internal reporting system to measure the performance of various operating segments within the Bank and the Company overall. We have identified three operating segments for purposes of management reporting: 1) Retail Banking; 2) Commercial Banking; and 3) Other. These three business divisions meet the criteria of an operating segment: the segment engages in business activities from which it earns revenues and incurs expenses, and whose operating results are regularly reviewed by the Company’s chief operating decision-maker to make decisions about resources to be allocated to the segment and assess its performance and for which discrete financial information is available.

The Retail Banking segment focuses primarily on retail operations through the Bank’s branch network. The Commercial Banking segment, which includes commercial real estate, primarily generates commercial loans through the efforts of the commercial lending offices located in the Bank’s northern and southern California production offices. Furthermore, the Company’s Commercial Banking segment also offers a wide variety of international finance and trade services and products. The remaining centralized functions, including treasury activities and eliminations of intersegment amounts, have been aggregated and included in the Other segment, which provides broad administrative support to the two core segments.

The Company’s funds transfer pricing assumptions are intended to promote core deposit growth and to reflect the current risk profiles of various loan categories within the credit portfolio. Transfer pricing assumptions and methodologies are reviewed at least annually to ensure that the Company’s process is reflective of current market conditions. The transfer pricing process is formulated with the goal of incenting loan and deposit growth that is consistent with the Company’s overall growth objectives as well as to provide a reasonable and consistent basis for the measurement of the Company’s business segments and product net interest margins. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. Operating segment results are based on the Company’s internal management reporting process, which reflects assignments and allocations of capital, certain operating and administrative costs, and the provision for loan losses. Net interest income is based on the Company’s internal funds transfer pricing system, which assigns a cost of funds or a credit for funds to assets or liabilities based on their type, maturity or repricing characteristics. Noninterest income and noninterest expense, including depreciation and amortization, directly attributable to a segment are assigned to that business. Indirect costs, including overhead expense, are allocated to the segments based on several factors, including, but not limited to, full-time equivalent employees, loan volume, and deposit volume. The provision for credit losses is allocated based on actual charge-offs for the period as well as average loan balances for each segment during the period. The Company evaluates overall performance based on profit or loss from operations before income taxes excluding nonrecurring gains and losses.

Changes in our management structure or reporting methodologies may result in changes in the measurement of operating segment results. Results for prior periods are generally restated for comparability for changes in management structure or reporting methodologies unless it is not deemed practicable to do so.

The following tables present the operating results and other key financial measures for the individual operating segments for the three months ended March 31, 2012 and 2011:

	Three Months Ended March 31, 2012
	Retail			Commercial
	Banking			Lending			Other			Total
	(In thousands)
Interest income	$	86,252		$	142,966		$	24,832		$	254,050
Charge for funds used	(22,260		)	(29,749		)	8,920			(43,089		)
Interest spread on funds used	63,992			113,217			33,752			210,961
Interest expense	(15,548		)	(7,066		)	(12,518		)	(35,132		)
Credit on funds provided	35,040			3,124			4,925			43,089
Interest spread on funds provided	19,492			(3,942		)	(7,593		)	7,957
Net interest income	$	83,484		$	109,275		$	26,159		$	218,918
Provision for loan losses	$	6,914		$	11,186		$	—		$	18,100
Depreciation, amortization and accretion	11,933			17,133			9,603			38,669
Goodwill	320,566			16,872			—			337,438
Segment pre-tax profit	21,759			60,428			25,608			107,795
Segment assets	6,638,241			10,079,411			5,032,130			21,749,782

	Three Months Ended March 31, 2011
	Retail			Commercial
	Banking			Lending			Other			Total
	(In thousands)
Interest income	$	87,790		$	145,335		$	21,210		$	254,335
Charge for funds used	(25,588		)	(40,197		)	760			(65,025		)
Interest spread on funds used	62,202			105,138			21,970			189,310
Interest expense	(22,571		)	(5,985		)	(16,945		)	(45,501		)
Credit on funds provided	57,345			3,478			4,202			65,025
Interest spread on funds provided	34,774			(2,507		)	(12,743		)	19,524
Net interest income	$	96,976		$	102,631		$	9,227		$	208,834
Provision for loan losses	$	7,156		$	19,350		$	—		$	26,506
Depreciation, amortization and accretion	14,700			27,101			3,265			45,066
Goodwill	320,566			16,872			—			337,438
Segment pre-tax (loss) profit	29,533			52,236			4,811			86,580
Segment assets	6,248,628			9,952,048			4,946,350			21,147,026