SEGMENT INFORMATION

12 Months Ended

Dec. 31, 2013

SEGMENT INFORMATION

SEGMENT INFORMATION

NOTE 24—SEGMENT INFORMATION

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, as well as originating consumer loans. 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 inter-segment 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 provide a reasonable and consistent basis for the measurement of the Company’s business segments and product net interest margins. Changes to the Company’s transfer pricing and methodologies are approved by the Asset Liability Committee.

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 as of and for the years ended December 31, 2013, 2012, and 2011.

	Year Ended December 31, 2013
	Retail		Commercial
	Banking		Banking		Other		Total
	(In thousands)
Interest income	$	374,818	$	627,118	$	66,749	$	1,068,685
Charge for funds used	(86,552)		(116,161)		(18,244)		(220,957)
Interest spread on funds used	288,266		510,957		48,505		847,728
Interest expense	(47,287)		(15,185)		(50,020)		(112,492)
Credit on funds provided	173,194		29,262		18,501		220,957
Interest spread on funds provided	125,907		14,077		(31,519)		108,465
Net interest income	$	414,173	$	525,034	$	16,986	$	956,193
Provision for loan losses	$	10,911	$	11,453	$	—	$	22,364
Depreciation, amortization and accretion (1)	19,865		8,120		69,125		97,110
Goodwill	320,566		16,872		—		337,438
Segment pre-tax profit	123,876		272,369		29,605		425,850
Segment assets	7,820,191		11,545,405		5,364,472		24,730,068

	Year Ended December 31, 2012
	Retail		Commercial
	Banking		Banking		Other		Total
	(In thousands)
Interest income	$	356,244	$	617,041	$	77,810	$	1,051,095
Charge for funds used	(85,811)		(118,688)		44,407		(160,092)
Interest spread on funds used	270,433		498,353		122,217		891,003
Interest expense	(57,401)		(23,226)		(51,541)		(132,168)
Credit on funds provided	130,713		13,138		16,241		160,092
Interest spread on funds provided	73,312		(10,088)		(35,300)		27,924
Net interest income	$	343,745	$	488,265	$	86,917	$	918,927
Provision for loan losses	$	28,729	$	36,455	$	—	$	65,184
Depreciation, amortization and accretion (1)	12,869		(13,277)		44,159		43,751
Goodwill	320,566		16,872		—		337,438
Segment pre-tax profit	74,836		266,168		84,588		425,592
Segment assets	6,552,217		10,421,160		5,562,733		22,536,110

	Year Ended December 31, 2011
	Retail		Commercial
	Banking		Banking		Other		Total
	(In thousands)
Interest income	$	358,853	$	619,766	$	101,829	$	1,080,448
Charge for funds used	(94,098)		(142,056)		3,690		(232,464)
Interest spread on funds used	264,755		477,710		105,519		847,984
Interest expense	(85,356)		(31,407)		(60,659)		(177,422)
Credit on funds provided	202,080		13,863		16,521		232,464
Interest spread on funds provided	116,724		(17,544)		(44,138)		55,042
Net interest income	$	381,479	$	460,166	$	61,381	$	903,026
Provision for loan losses	$	27,888	$	67,118	$	—	$	95,006
Depreciation, amortization and accretion (1)	43,899		62,803		21,552		128,254
Goodwill	320,566		16,872		—		337,438
Segment pre-tax profit	102,217		227,766		53,351		383,334
Segment assets	6,530,138		10,157,195		5,281,334		21,968,667

(1) Includes amortization and accretion related to the FDIC indemnification asset.