UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

Mark One

þQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2012

or

¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission file number 000-24939

EAST WEST BANCORP, INC.

(Exact name of registrant as specified in its charter)

Delaware	95-4703316
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

135 N. Los Robles Ave, 7th Floor, Pasadena, California 91101

(Address of principal executive offices) (Zip Code)

(626) 768-6000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ   No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes þ   No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer and accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer
þ Accelerated filer
¨ Non-accelerated filer
¨ Smaller reporting company
¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨   No þ

Number of shares outstanding of the issuer’s common stock on the latest practicable date: 140,317,126 shares of common stock as of October 31, 2012.

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION		4
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	4
	Notes to Condensed Consolidated Financial Statements (Unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	62
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	89
Item 4.	Controls and Procedures	89
PART II - OTHER INFORMATION		90
Item 1.	Legal Proceedings	90
Item 1A.	Risk Factors	90
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	90
Item 3.	Defaults Upon Senior Securities	90
Item 4.	Mine Safety Disclosures	90
Item 5.	Other Information	91
Item 6.	Exhibits	91
SIGNATURE		92

2

Forward-Looking Statements

Certain matters discussed in this Quarterly Report contain or incorporate statements that we believe are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Exchange Act”), and Rule 175 promulgated thereunder, and Section 21E of the Securities Exchange Act of 1934, as amended, and Rule 3b-6 promulgated thereunder. These statements relate to our financial condition, results of operations, plans, objectives, future performance or business. They usually can be identified by the use of forward-looking language, such as “will likely result,” “may,” “are expected to,” “is anticipated,” “estimate,” “forecast,” “projected,” “intends to,” or may include other similar words or phrases, such as “believes,” “plans,” “trend,” “objective,” “continue,” “remain,” or similar expressions, or future or conditional verbs, such as “will,” “would,” “should,” “could,” “might,” “can,” or similar verbs. You should not place undue reliance on these statements, as they are subject to risks and uncertainties, including, but not limited to, those described in the documents incorporated by reference. When considering these forward-looking statements, you should keep in mind these risks and uncertainties, as well as any cautionary statements we make. Moreover, you should treat these statements as speaking only as of the date they are made and based only on information then actually known to us.

There are a number of important factors that could cause future results to differ materially from historical performance and these forward-looking statements. Factors that might cause such a difference include, but are not limited to:

·our ability to manage the loan portfolio acquired from FDIC-assisted acquisitions within the limits of the loss protection provided by the FDIC;

·changes in our borrowers’ performance on loans;

·changes in the commercial and consumer real estate markets;

·changes in our costs of operation, compliance and expansion;

·changes in the economy, including inflation;

·changes in government interest rate policies;

·changes in laws or the regulatory environment;

·changes in critical accounting policies and judgments;

·changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board or other regulatory agencies;

·changes in the equity and debt securities markets;

·changes in competitive pressures on financial institutions;

·effect of additional provision for loan losses;

·fluctuations of our stock price;

·success and timing of our business strategies;

·impact of reputational risk created by these developments on such matters as business generation and retention, funding and liquidity;

·impact of the European debt crisis;

·impact of potential federal tax increases and spending cuts;

·changes in our ability to receive dividends from our subsidiaries; and

·political developments, wars or other hostilities may disrupt or increase volatility in securities or otherwise affect economic conditions.

For a more detailed discussion of some of the factors that might cause such differences, see the Company’s 2011 Form 10-K under the heading “ITEM 1A. RISK FACTORS” and the information set forth under “RISK FACTORS” in this Form 10-Q. The Company does not undertake, and specifically disclaims any obligation to update any forward-looking statements to reflect the occurrence of events or circumstances after the date of such statements except as required by law.

3

PART I – FINANCIAL INFORMATION

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)

	September 30,			December 31,
	2012			2011
ASSETS
Cash and cash equivalents	$	1,816,372		$	1,431,185
Short-term investments	347,001			61,834
Federal funds sold	20,000			—
Securities purchased under resale agreements	1,100,000			786,434
Investment securities available-for-sale, at fair value (with amortized cost of $2,240,496 at September 30, 2012 and $3,132,968 at December 31, 2011)	2,237,848			3,072,578
Loans held for sale	157,869			278,603
Loans receivable, excluding covered loans (net of allowance for loan losses of $223,637 at September 30, 2012 and $209,876 at December 31, 2011)	10,916,386			10,061,788
Covered loans (net of allowance for loan losses of $5,877 at September 30, 2012 and $6,647 at December 31, 2011)	3,178,585			3,923,142
Total loans receivable, net	14,094,971			13,984,930
FDIC indemnification asset	368,473			511,135
Other real estate owned, net	40,007			29,350
Other real estate owned covered, net	27,613			63,624
Total other real estate owned	67,620			92,974
Investment in affordable housing partnerships	178,962			144,445
Premises and equipment, net	114,627			118,926
Accrued interest receivable	88,814			89,686
Due from customers on acceptances	30,365			198,774
Premiums on deposits acquired, net	58,746			67,190
Goodwill	337,438			337,438
Other assets	794,059			792,535
TOTAL	$	21,813,165		$	21,968,667
LIABILITIES AND STOCKHOLDERS’ EQUITY
Customer deposit accounts:
Noninterest-bearing	$	4,118,502		$	3,492,795
Interest-bearing	13,547,925			13,960,207
Total deposits	17,666,427			17,453,002
Federal Home Loan Bank advances	363,119			455,251
Securities sold under repurchase agreements	995,000			1,020,208
Bank acceptances outstanding	30,365			198,774
Long-term debt	137,178			212,178
Accrued expenses and other liabilities	302,867			317,511
Total liabilities	19,494,956			19,656,924
COMMITMENTS AND CONTINGENCIES (Note 12)
STOCKHOLDERS’ EQUITY
Preferred stock, $0.001 par value, 5,000,000 shares authorized; Series A, non-cumulative convertible, 200,000 shares issued and 85,710 shares outstanding in 2012 and 2011.	83,027			83,027
Common stock, $0.001 par value, 200,000,000 shares authorized; 157,124,126 and 156,798,011 shares issued in 2012 and 2011, respectively; 140,300,832 and 149,327,907 shares outstanding in 2012 and 2011, respectively.	157			157
Additional paid in capital	1,462,270			1,443,883
Retained earnings	1,095,743			934,617
Treasury stock, at cost – 16,823,294 shares in 2012 and 7,470,104 shares in 2011	(321,471		)	(116,001		)
Accumulated other comprehensive loss, net of tax	(1,517		)	(33,940		)
Total stockholders’ equity	2,318,209			2,311,743
TOTAL	$	21,813,165		$	21,968,667

See accompanying notes to condensed consolidated financial statements.

4

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2012			2011			2012			2011
INTEREST AND DIVIDEND INCOME
Loans receivable, including fees	$	232,195		$	244,523		$	691,270		$	712,822
Investment securities	10,380			24,503			48,525			66,613
Securities purchased under resale agreements	5,530			5,064			14,602			14,443
Investment in Federal Home Loan Bank stock	127			75			514			432
Investment in Federal Reserve Bank stock	719			710			2,146			2,128
Due from banks and short-term investments	5,211			7,866			17,517			15,106
Total interest and dividend income	254,162			282,741			774,574			811,544
INTEREST EXPENSE
Customer deposit accounts	18,202			28,216			57,543			83,328
Federal funds purchased	—			—			2			—
Federal Home Loan Bank advances	1,468			3,013			4,963			12,746
Securities sold under repurchase agreements	11,664			12,218			34,977			36,351
Long-term debt	920			1,424			3,106			4,783
Other borrowings	—			88			—			384
Total interest expense	32,254			44,959			100,591			137,592
Net interest income before provision for loan losses	221,908			237,782			673,983			673,952
Provision for loan losses, excluding covered loans	13,321			22,297			46,395			72,797
Provision (reversal) for loan losses on covered loans	5,179			(297		)	5,705			2,209
Net interest income after provision for loan losses	203,408			215,782			621,883			598,946
NONINTEREST INCOME (LOSS)
Impairment loss on investment securities	—			—			(5,165		)	(5,555		)
Less: Noncredit-related impairment loss recorded in other comprehensive income	—			—			5,066			5,091
Net impairment loss on investment securities recognized in earnings	—			—			(99		)	(464		)
Decrease in FDIC indemnification asset and receivable	(26,757		)	(43,451		)	(72,520		)	(79,700		)
Branch fees	8,347			8,872			25,282			25,704
Net gain on sales of investment securities	93			3,191			647			6,823
Net gain on sale of fixed assets	40			30			113			2,236
Letters of credit fees and commissions	5,001			3,555			13,814			9,989
Foreign exchange income	2,165			2,895			4,524			7,647
Ancillary loan fees	1,817			2,076			6,013			6,122
Income from life insurance policies	982			982			2,931			3,088
Net gain on sales of loans	5,346			5,452			16,900			18,753
Other operating income	5,717			2,853			15,231			9,789
Total noninterest income (loss)	2,751			(13,545		)	12,836			9,987
NONINTEREST EXPENSE
Compensation and employee benefits	40,509			39,885			129,781			119,025
Occupancy and equipment expense	14,162			12,580			40,737			37,353
Amortization of investments in affordable housing partnerships and other investments	3,378			5,287			12,269			14,410
Amortization of premiums on deposits acquired	2,734			3,067			8,445			9,403
Deposit insurance premiums and regulatory assessments	3,461			2,430			10,776			16,454
Loan related expenses	4,011			5,208			12,667			12,591
Other real estate owned expense	2,683			4,489			18,034			29,738
Legal expense	8,213			6,028			19,536			16,920
Prepayment penalty for FHLB advances and other borrowings	42			3,826			3,699			12,281
Data processing	2,313			1,827			6,974			6,530
Deposit related expenses	1,388			1,667			4,472			4,199
Consulting expense	2,692			2,094			5,727			6,098
Other operating expenses	15,370			16,164			44,210			43,936
Total noninterest expense	100,956			104,552			317,327			328,938
INCOME BEFORE PROVISION FOR INCOME TAXES	105,203			97,685			317,392			279,995
PROVISION FOR INCOME TAXES	34,093			35,253			107,642			100,967
NET INCOME	71,110			62,432			209,750			179,028
PREFERRED STOCK DIVIDENDS	1,714			1,714			5,142			5,143
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS	$	69,396		$	60,718		$	204,608		$	173,885
EARNINGS PER SHARE AVAILABLE TO COMMON STOCKHOLDERS
BASIC	$	0.49		$	0.41		$	1.42		$	1.18
DILUTED	$	0.48		$	0.41		$	1.40		$	1.17
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
BASIC	139,621			147,162			142,348			147,013
DILUTED	145,358			153,453			148,051			153,372
DIVIDENDS DECLARED PER COMMON SHARE	$	0.10		$	0.05		$	0.30		$	0.11

See accompanying notes to condensed consolidated financial statements.

5

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2012			2011			2012			2011
Net income	$	71,110		$	62,432		$	209,750		$	179,028
Other comprehensive income, net of tax:
Unrealized gain on investment securities available-for-sale:
Unrealized holding gains/(losses) arising during period	15,355			(24,015		)	36,627			(1,446		)
Reclassification adjustment for net gains included in net income	(54		)	(1,850		)	(375		)	(3,957		)
Noncredit-related impairment loss on securities	—			—			(2,938		)	(2,953		)
Foreign currency translation adjustments	(900		)	57			(900		)	(736		)
Unrealized gain (loss) on other asset investment	5			(217		)	9			(89		)
Other comprehensive income (loss)	14,406			(26,025		)	32,423			(9,181		)
COMPREHENSIVE INCOME	$	85,516		$	36,407		$	242,173		$	169,847

See accompanying notes to condensed consolidated financial statements.

6

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(In thousands, except share data)

(Unaudited)

			Additional					Additional								Accumulated
			Paid In					Paid In								Other
			Capital					Capital								Comprehensive			Total
	Preferred		Preferred			Common		Common		Retained			Treasury			Income (Loss),			Stockholders’
	Stock		Stock			Stock		Stock		Earnings			Stock			Net of Tax			Equity
BALANCE, JANAURY 1, 2011	$	—	$	83,058		$	156	$	1,434,277	$	720,116		$	(111,262	)	$	(12,414	)	$	2,113,931
Net income										179,028									179,028
Other comprehensive income																(9,181		)	(9,181		)
Stock compensation costs								9,330											9,330
Tax benefit from stock compensation plans, net								546											546
Issuance of 597,232 shares of common stock pursuant to various stock compensation plans and agreements								3,663											3,663
Conversion of 31 shares of Series A preferred stock into 2,014 shares of common stock			(31		)			31											—
Issuance of 27,831 shares pursuant to Director retainer fee								520											520
Cancellation of 180,152 shares of common stock due to forfeitures of issued restricted stock								3,073					(3,073)						—
27,938 shares of restricted stock surrendered due to employee tax liability													(619)						(619		)
Preferred stock dividends										(5,143		)							(5,143		)
Common stock dividends										(16,406		)							(16,406		)
Repurchase of 1,517,555 common stock warrants								(14,500)											(14,500		)
BALANCE, SEPTEMBER 30, 2011	$	—	$	83,027		$	156	$	1,436,940	$	877,595		$	(114,954	)	$	(21,595	)	$	2,261,169
BALANCE, JANAURY 1, 2012	$	—	$	83,027		$	157	$	1,443,883	$	934,617		$	(116,001	)	$	(33,940	)	$	2,311,743
Net income										209,750									209,750
Other comprehensive income																32,423			32,423
Stock compensation costs								11,567											11,567
Tax benefit from stock compensation plans, net								461											461
Issuance of 299,964 shares of common stock pursuant to various stock compensation plans and agreements								3,136											3,136
Issuance of 26,151 shares pursuant to Director retainer fee								570											570
Cancellation of 154,508 shares of common stock due to forfeitures of issued restricted stock								2,653					(2,653		)				—
130,577 shares of restricted stock surrendered due to employee tax liability													(2,867		)				(2,867		)
Preferred stock dividends										(5,142		)							(5,142		)
Common stock dividends										(43,482		)							(43,482		)
Purchase of 9,068,105 shares of treasury stock pursuant to the Stock Repurchase Program													(199,950)						(199,950		)
BALANCE, SEPTEMBER 30, 2012	$	—	$	83,027		$	157	$	1,462,270	$	1,095,743		$	(321,471	)	$	(1,517	)	$	2,318,209

See accompanying notes to condensed consolidated financial statements.

7

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Nine Months Ended
	September 30,
	2012			2011
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	209,750		$	179,028
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	58,978			48,823
(Accretion) of discount and amortization of premiums, net	(152,297		)	(162,319		)
Decrease in FDIC indemnification asset and receivable	72,520			79,700
Stock compensation costs	12,137			9,850
Deferred tax expense	12,131			64,398
Provision for loan losses	52,100			75,006
Impairment on other real estate owned	13,342			22,440
Net gain on sales of investment securities, loans and other assets	(22,654		)	(29,586		)
Originations and purchases of loans held for sale	(58,237		)	(40,193		)
Proceeds from sales of loans held for sale	—			30,180
Prepayment penalty for Federal Home Loan Bank advances and other borrowings, net	3,699			12,281
Prepayment penalty on modification of Federal Home Loan Bank advances	(37,678		)	—
Net proceeds from FDIC shared-loss agreements	83,801			147,121
Net change in accrued interest receivable and other assets	(71,753		)	(134,500		)
Net change in accrued expenses and other liabilities	(15,983		)	(100,393		)
Other net operating activities	(3,293		)	(2,383		)
Total adjustments	(53,187		)	20,425
Net cash provided by operating activities	156,563			199,453
CASH FLOWS FROM INVESTING ACTIVITIES
Net decrease (increase) in:
Loans	88,965			(720,348		)
Short-term investments	(285,167		)	77,551
Federal funds sold	(20,000		)	(30,000		)
Purchases of:
Securities purchased under resale agreements	(750,000		)	(1,119,711		)
Investment securities available-for-sale	(1,250,317		)	(2,464,002		)
Loans receivable	(371,352		)	(569,946		)
Premises and equipment	(5,826		)	(7,460		)
Investments in affordable housing partnerships	(45,500		)	(22,756		)
Proceeds from sale of:
Investment securities available-for-sale	1,130,024			602,625
Loans receivable	61,979			151,961
Loans held for sale originated for investment	338,022			607,291
Other real estate owned	76,239			135,461
Premises and equipment	12			9,200
Repayments, maturities and redemptions of investment securities available-for-sale	999,518			1,447,842
Paydowns, maturities and termination of securities purchased under resale agreements	436,434			667,887
Redemption of Federal Home Loan Bank stock	18,943			19,424
Other net investing activities	(360		)	(99		)
Net cash provided by (used in) investing activities	421,614			(1,215,080		)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in:
Deposits	213,425			1,668,073
Short-term borrowings	(25,208		)	(58,596		)
Proceeds from:
Issuance of common stock pursuant to various stock plans and agreements	3,136			3,663
Payment for:
Repayment of FHLB advances	(57,615		)	(760,274		)
Repayment of long-term debt	(75,000		)	(21,918		)
Repayment of notes payable and other borrowings	—			(6,250		)
Repurchase of common stock warrants	—			(14,500		)
Repurchase of shares of treasury stock pursuant to the Stock Repurchase Plan	(199,950		)	—
Cash dividends	(48,472		)	(21,512		)
Other net financing activities	(2,406		)	(73		)
Net cash (used in) provided by financing activities	(192,090		)	788,613
Effect of exchange rate changes on cash and cash equivalents	(900		)	(1,047		)
NET INCREASE IN CASH AND CASH EQUIVALENTS	385,187			(228,061		)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	1,431,185			1,333,949
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	1,816,372		$	1,105,888
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest	$	104,829		$	135,037
Income tax payments, net of refunds	188,739			262,988
Noncash investing and financing activities:
Loans transferred to loans held for sale, net	148,755			631,407
Transfers to other real estate owned	62,862			140,987
Loans to facilitate sales of other real estate owned and short sale	3,060			8,792
Loans to facilitate sales of loans	1,018			21,637
Loans to facilitate sales of premises and equipment	—			11,100
Conversion of preferred stock to common stock	—			31

See accompanying notes to condensed consolidated financial statements.

8

EAST WEST BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 — BASIS OF PRESENTATION

The condensed consolidated financial statements include the accounts of East West Bancorp, Inc. (referred to herein on an unconsolidated basis as “East West” and on a consolidated basis as the “Company”) and its wholly-owned subsidiaries, East West Bank and subsidiaries (“East West Bank” or the “Bank”) and East West Insurance Services, Inc. Intercompany transactions and accounts have been eliminated in consolidation. East West also has seven wholly-owned subsidiaries that are statutory business trusts (the “Trusts”). In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810, the Trusts are not consolidated into the accounts of East West Bancorp, Inc.

The interim condensed consolidated financial statements, presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”), are unaudited and reflect all adjustments that, in the opinion of management, are necessary for a fair statement of financial condition and results of operations for the interim periods. All adjustments are of a normal and recurring nature. Results for the three and nine months ended September 30, 2012 are not necessarily indicative of results that may be expected for any other interim period or for the year as a whole. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted. Events subsequent to the condensed consolidated balance sheet date have been evaluated through the date the financial statements are issued for inclusion in the accompanying financial statements. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.

Certain prior year balances have been reclassified to conform to current year presentation.

NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES

Comprehensive Income—The term “comprehensive income” describes the total of all components of comprehensive income, including net income and other comprehensive income. “Other comprehensive income” refers to revenues, expenses, and gains and losses that are included in comprehensive income but are excluded from net income because they have been recorded directly in equity under the provisions of other Financial Accounting Standards Board statements. In accordance with the adoption of ASU 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income, the Company presents comprehensive income in the condensed consolidated statements of comprehensive income, which was formerly presented in the condensed consolidated statements of changes in stockholders’ equity.

Recent Accounting Standards

In April 2011, the FASB issued ASU 2011-02, Receivables (Topic 310) A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring. ASU 2011-02 clarifies the guidance on the two conditions that must exist in evaluating whether a restructuring constitutes a troubled debt restructuring:  that the restructuring constitutes a concession and that the debtor is experiencing financial difficulties. In addition, ASU 2011-02 clarifies that a creditor is precluded from using the effective interest rate test in the debtor’s guidance on restructuring of payables (paragraph 470-60-55-10) when evaluating whether a restructuring constitutes a troubled debt restructuring. The amendments in ASU 2011-02 were effective for the first interim or annual period beginning on or after June 15, 2011, and should be applied retrospectively to the beginning of the annual period of adoption.

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Additionally, ASU 2011-02 finalizes the effective date for the disclosures required by paragraphs 310-10-50-33 through 50-34, which were deferred by ASU 2011-01, for interim and annual periods beginning on or after June 15, 2011. The adoption of this guidance did not have a material effect on the Company’s condensed consolidated financial statements.

In April 2011, the FASB issued ASU 2011-03, Transfers and Servicing (Topic 860):  Reconsideration of Effective Control for Repurchase Agreements. ASU 2011-03 removes the transferor’s ability criterion from the consideration of effective control for repos and other agreements that both entitle and obligate the transferor to repurchase or redeem financial assets before their maturity. The amendments in ASU 2011-03 remove from the assessment of effective control (1) the criterion requiring the transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed terms, even in the event of default by the transferee, and (2) the collateral maintenance implementation guidance related to that criterion. The FASB indicates that eliminating the transferor’s ability criterion and related implementation guidance from an entity’s assessment of effective control should improve the accounting for repos and other similar transactions. The amendments in ASU 2011-03 were effective for the first interim or annual period beginning on or after December 15, 2011 and are to be applied prospectively to transactions or modifications of existing transactions that occur on or after the effective date. The adoption of this guidance did not have a material effect on the Company’s condensed consolidated financial statements.

In May 2011, the FASB issued ASU 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. ASU 2011-04 addresses convergence between GAAP and International Financial Reporting Standards (“IFRS”) requirements for measurement of and disclosures about fair value. The amendments are not expected to have a significant impact on companies applying GAAP. Key provisions of the amendment include: a prohibition on grouping financial instruments for purposes of determining fair value, except when an entity manages market and credit risks on the basis of the entity’s net exposure to the group; an extension of the prohibition against the use of a blockage factor to all fair value measurements (that prohibition currently applies only to financial instruments with quoted prices in active markets); and a requirement that for recurring Level 3 fair value measurements, entities disclose quantitative information about unobservable inputs, a description of the valuation process used and qualitative details about the sensitivity of the measurements. In addition, for items not carried at fair value but for which fair value is disclosed, entities will be required to disclose the level within the fair value hierarchy that applies to the fair value measurement disclosed. The amendments in ASU 2011-04 were effective during interim and annual periods beginning after December 15, 2011. The adoption of this guidance did not have a material effect on the Company’s condensed consolidated financial statements.

In June 2011, the FASB issued ASU 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income. ASU 2011-05 requires companies to present the components of net income and other comprehensive income either as one continuous statement or as two consecutive statements. It eliminates the option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity. The standard does not change the items which must be reported in other comprehensive income, how such items are measured, or when they must be reclassified to net income. The FASB amended ASU 2011-05 in December 2011, with the issuance of ASU 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05. ASU 2011-12 defers only changes in ASU 2011-05 that relate to the presentation of reclassification adjustments. Both standards were effective for interim and annual periods beginning after December 15, 2011. The adoption of these standards only affected the presentation of the Company’s condensed consolidated financial statements and did not have an impact on the financial amounts presented in the statements.

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In September 2011, the FASB issued ASU 2011-08, Intangibles—Goodwill and Other (Topic 350): Testing Goodwill for Impairment. ASU 2011-08 gives companies the option to qualitatively determine whether they can bypass the two-step goodwill impairment test under ASC 350-20, Intangibles—Goodwill and Other: Goodwill. Under ASU 2011-08, if a company chooses to perform a qualitative assessment and determines that it is more likely than not (a more than 50 percent likelihood) that the fair value of a reporting unit is less than its carrying amount, it would then perform Step 1 of the annual goodwill impairment test in ASC 350-20 and, if necessary, proceed to Step 2. Otherwise, no further evaluation would be necessary. The amended guidance is effective for interim and annual periods beginning after December 15, 2011. The Company has elected to continue to assess the two-step goodwill impairment, quantitatively. As such, this guidance did not have an impact on the Company’s condensed consolidated financial statements.

In December 2011, the FASB issued ASU 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. ASU 2011-11 addresses the differences in offsetting requirements between GAAP and IFRS by enhancing disclosures about financial instruments and derivative instruments that are either offset in accordance with GAAP or are subject to an enforceable master netting arrangement or similar agreement. Entities are required to disclose both gross information and net information about both instruments and transactions eligible for offset in the statement of financial position and instruments and transactions subject to an agreement similar to a master netting arrangement. The guidance is effective for interim and annual reporting periods beginning on or after January 1, 2013, and must be applied retrospectively to all comparative periods presented. Early adoption is permitted. The Company does not expect the adoption of this guidance to have a material effect on its condensed consolidated financial statements.

In October 2012, the FASB issued ASU 2012-06, Business Combinations (Topic 805): Subsequent Accounting for an Indemnification Asset Recognized at the Acquisition Date as a Result of a Government-Assisted Acquisition of a Financial Institution.ASU 2012-06 clarifies the applicable guidance for subsequently measuring an indemnification asset recognized as a result of a government-assisted acquisition of a financial institution. The standard instructs that when a reporting entity recognizes an indemnification asset, it should subsequently account for the change in the measurement of the indemnification asset on the same basis as the change in the assets subject to indemnification. Any amortization of changes in value should be limited to the contractual term of the indemnification agreement. The amended guidance is effective for interim and annual periods beginning on or after December 15, 2012. Early adoption is permitted. The adoption of this guidance did not have a material effect on the Company’s condensed consolidated financial statements, as the Company had applied this methodology prior to the issuance of this ASU.

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NOTE 3 — FAIR VALUE

Fair value is defined as the price that would be received to sell an asset or be paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the Company uses various methods including market and income approaches. Based on these approaches, the Company utilizes certain assumptions that market participants would use in pricing the asset or liability. These inputs can be readily observable, market corroborated, or generally unobservable inputs. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Based on the observability of the inputs used in the valuation techniques, the Company is required to provide the following information according to the fair value hierarchy noted below. The hierarchy is based on the quality and reliability of the information used to determine fair values. The hierarchy gives the highest priority to quoted prices available in active markets and the lowest priority to data lacking transparency. Financial assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:

· Level 1 – Quoted prices for identical instruments that are highly liquid, observable and actively traded in over-the-counter markets. Level 1 financial instruments typically include U.S. Treasury securities.

· Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable and can be corroborated by market data. Level 2 financial instruments typically include U.S. Government debt and agency mortgage-backed securities, municipal securities, corporate debt securities, single issuer trust preferred securities, equity swap agreements, foreign exchange options, interest rate swaps, impaired loans and other real estate owned (“OREO”).

· Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. This category typically includes pooled trust preferred securities and derivatives payable.

The Company records investment securities available-for-sale, equity swap agreements, derivative liabilities, foreign exchange options, interest rate swaps and short-term foreign exchange contracts at fair value on a recurring basis. Certain other assets such as impaired loans, other real estate owned, loans held for sale, goodwill, premiums on acquired deposits and other investments are recorded at fair value on a nonrecurring basis. Nonrecurring fair value measurements typically involve assets that are periodically evaluated for impairment and for which any impairment is recorded in the period in which the remeasurement is performed.

In determining the appropriate hierarchy levels, the Company performs a detailed analysis of assets and liabilities that are subject to fair value disclosure. The following tables present both financial and nonfinancial assets and liabilities that are measured at fair value on a recurring and nonrecurring basis. These assets and liabilities are reported on the condensed consolidated balance sheets at their fair values as of September 30, 2012 and December 31, 2011. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to their fair value measurement. There were no transfers in and out of Levels 1 and 3 or Levels 2 and 3 during the first nine months of 2012 and 2011.

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	Assets (Liabilities) Measured at Fair Value on a Recurring Basis
	as of September 30, 2012
				Quoted Prices in		Significant
	Fair Value			Active Markets		Other			Significant
	Measurements			for Identical		Observable			Unobservable
	September 30,			Assets		Inputs			Inputs
	2012			(Level 1)		(Level 2)			(Level 3)
	(In thousands)
Investment securities available-for-sale:
U.S. Treasury securities	$	400,032		$	400,032	$	—		$	—
U.S. Government agency and U.S. Government sponsored enterprise debt securities	198,045			—		198,045			—
U.S. Government agency and U.S. Government sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities	85,826			—		85,826			—
Residential mortgage-backed securities	1,003,897			—		1,003,897			—
Municipal securities	113,597			—		113,597			—
Corporate debt securities:
Investment grade	412,719			—		412,719			—
Non-investment grade	13,610			—		9,761			3,849
Other securities	10,122			—		10,122			—
Total investment securities available-for-sale	$	2,237,848		$	400,032	$	1,833,967		$	3,849
Equity swap agreements	$	205		$	—	$	205		$	—
Foreign exchange options	4,371			—		4,371			—
Interest rate swaps	34,059			—		34,059			—
Short-term foreign exchange contracts	1,118			—		1,118			—
Derivative liabilities	(38,849		)	—		(35,915		)	(2,934		)

	Assets (Liabilities) Measured at Fair Value on a Recurring Basis
	as of December 31, 2011
				Quoted Prices in		Significant
	Fair Value			Active Markets		Other			Significant
	Measurements			for Identical		Observable			Unobservable
	December 31,			Assets		Inputs			Inputs
	2011			(Level 1)		(Level 2)			(Level 3)
	(In thousands)
Investment securities available-for-sale:
U.S. Treasury securities	$	20,725		$	20,725	$	—		$	—
U.S. Government agency and U.S. Government sponsored enterprise debt securities	576,578			—		576,578			—
U.S. Government agency and U.S. Government sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities	49,315			—		49,315			—
Residential mortgage-backed securities	993,770			—		993,770			—
Municipal securities	79,946			—		79,946			—
Corporate debt securities:
Investment grade	1,322,561			—		1,322,561			—
Non-investment grade	19,615			—		17,380			2,235
Other securities	10,068			—		10,068			—
Total investment securities available-for-sale	$	3,072,578		$	20,725	$	3,049,618		$	2,235
Equity swap agreements	$	202		$	—	$	202		$	—
Foreign exchange options	3,899			—		3,899			—
Interest rate swaps	20,474			—		20,474			—
Short-term foreign exchange contracts	1,403			—		1,403			—
Derivative liabilities	(24,164		)	—		(21,530		)	(2,634		)

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	Assets Measured at Fair Value on a Non-Recurring Basis
	as of and for the Three Months Ended September 30, 2012
			Quoted Prices in		Significant				Total Gains
	Fair Value		Active Markets		Other		Significant		(Losses) for the
	Measurements		for Identical		Observable		Unobservable		Three Months Ended
	September 30,		Assets		Inputs		Inputs		September 30,
	2012		(Level 1)		(Level 2)		(Level 3)		2012
	(In thousands)
Non-covered impaired loans:
Total residential	$	24,978	$	—	$	24,978	$	—	$	(4,509	)
Total commercial real estate	13,671		—		13,671		—		(6,414		)
Total commercial and industrial	9,557		—		1,512		8,045		(1,379		)
Total consumer	—		—		—		—		—
Total non-covered impaired loans	$	48,206	$	—	$	40,161	$	8,045	$	(12,302	)
Non-covered OREO	$	5,528	$	—	$	5,528	$	—	$	(1,470	)
Covered OREO (1)	$	8,688	$	—	$	8,688	$	—	$	(1,597	)
Loans held for sale	$	—	$	—	$	—	$	—	$	—

	Assets Measured at Fair Value on a Non-Recurring Basis
	as of and for the Three Months Ended September 30, 2011
			Quoted Prices in		Significant				Total Gains
	Fair Value		Active Markets		Other		Significant		(Losses) for the
	Measurements		for Identical		Observable		Unobservable		Three Months Ended
	September 30,		Assets		Inputs		Inputs		September 30,
	2011		(Level 1)		(Level 2)		(Level 3)		2011
	(In thousands)
Non-covered impaired loans:
Total residential	$	9,637	$	—	$	9,637	$	—	$	(3,142	)
Total commercial real estate	40,997		—		40,997		—		(16,645		)
Total commercial and industrial	4,405		—		—		4,405		(6,328		)
Total consumer	315		—		315		—		(265		)
Total non-covered impaired loans	$	55,354	$	—	$	50,949	$	4,405	$	(26,380	)
Non-covered OREO	$	36	$	—	$	36	$	—	$	(17	)
Covered OREO (1)	$	18,068	$	—	$	18,068	$	—	$	(3,252	)
Loans held for sale	$	2,714	$	—	$	2,714	$	—	$	(260	)

(1)Covered OREO results from the WFIB and UCB FDIC-assisted acquisitions for which the Company entered into shared-loss agreements with the FDIC whereby the FDIC will reimburse the Company for 80% of eligible losses. As such, the Company’s liability for losses is 20% of the $1.6 million in losses, or $319 thousand, and 20% of the $3.3 million in losses, or $650 thousand, for the three months ended September 30, 2012 and 2011, respectively.

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	Assets Measured at Fair Value on a Non-Recurring Basis
	as of and for the Nine Months Ended September 30, 2012
			Quoted Prices in		Significant				Total Gains
	Fair Value		Active Markets		Other		Significant		(Losses) for the
	Measurements		for Identical		Observable		Unobservable		Nine Months Ended
	September 30,		Assets		Inputs		Inputs		September 30,
	2012		(Level 1)		(Level 2)		(Level 3)		2012
	(In thousands)
Non-covered impaired loans:
Total residential	$	31,090	$	—	$	31,090	$	—	$	(6,660	)
Total commercial real estate	24,730		—		24,730		—		(8,527		)
Total commercial and industrial	9,835		—		2,623		7,212		(9,827		)
Total consumer	379		—		379		—		(321		)
Total non-covered impaired loans	$	66,034	$	—	$	58,822	$	7,212	$	(25,335	)
Non-covered OREO	$	7,286	$	—	$	7,286	$	—	$	(4,145	)
Covered OREO (1)	$	15,919	$	—	$	15,919	$	—	$	(9,286	)
Loans held for sale	$	—	$	—	$	—	$	—	$	(4,730	)

Assets Measured at Fair Value on a Non-Recurring Basis
as of and for the Nine Months Ended September 30, 2011
	Quoted Prices in	Significant		Total Gains
Fair Value	Active Markets	Other	Significant	(Losses) for the
Measurements	for Identical	Observable	Unobservable	Nine Months Ended
September 30,	Assets	Inputs</