NOTE 8 - NON-COVERED LOANS AND ALLOWANCE FOR LOAN LOSSES

The following is a summary of loans receivable, excluding covered loans (“non-covered loans”) for the periods indicated:

	September 30,			December 31,
	2011			2010
	(In thousands)
Residential:
Single-family	$	1,517,954		$	1,119,024
Multifamily		942,428			974,745
Total residential		2,460,382			2,093,769

Commercial Real Estate ("CRE"):
Income producing		3,459,001			3,392,984
Construction		192,988			278,047
Land		179,152			235,707
Total CRE		3,831,141			3,906,738

Commercial and Industrial ("C&I"):
Commercial business		2,542,313			1,674,698
Trade finance		469,839			308,657
Total C&I		3,012,152			1,983,355

Consumer:
Student loans		260,283			490,314
Other consumer		243,292			243,212
Total consumer		503,575			733,526

Total gross loans receivable, excluding covered loans		9,807,250			8,717,388
Unearned fees, premiums, and discounts, net		(16,746	)		(56,781	)
Allowance for loan losses, excluding covered loans		(211,738	)		(230,408	)
Loans receivable, excluding covered loans, net	$	9,578,766		$	8,430,199

Accrued interest on covered and non-covered loans receivable amounted to $66.0 million and $65.6 million at September 30, 2011 and December 31, 2010, respectively.

At September 30, 2011 and December 31, 2010, covered and non-covered loans receivable totaling $8.10 billion and $8.14 billion, respectively, were pledged to secure borrowings from the FHLB and the Federal Reserve Bank.

The Bank offers both fixed and adjustable rate (“ARM”) first mortgage loans secured by one-to-four unit residential properties located in its primary lending areas. The Bank originated $585.0 million and $299.3 million in new residential single-family loans during the nine months ended September 30, 2011 and 2010, respectively.

The Bank also offers both fixed and ARM residential multifamily loan programs. For the nine months ended September 30, 2011 and 2010, the Bank originated $34.1 million and $19.1 million, respectively, in multifamily residential loans. The Bank primarily offers ARM multifamily loan programs that have six-month, three-year, or five-year initial fixed periods. The Bank considers all of the single-family and multifamily loans originated to be prime loans and the underwriting criteria include minimum FICO scores, maximum loan-to-value ratios and minimum debt coverage ratios, as applicable. The Bank does have single-family loans with interest-only features. Single-family loans with interest-only features totaled $5.6 million or less than 1% and $7.8 million or 1% of total single-family loans at September 30, 2011 and December 31, 2010, respectively. Additionally, the Bank owns residential loans that were purchased several years ago that permit different repayment options. For these loans, there is the potential for negative amortization if the borrower so chooses. These residential loans that permit different repayment options totaled $14.1 million, or 1%, and $16.9 million, or 1%, of total residential loans at September 30, 2011 and December 31, 2010, respectively. None of these loans were negatively amortizing as of September 30, 2011 and December 31, 2010.

In addition to residential lending, the Bank's lending activities also include commercial real estate, commercial and industrial, and consumer lending. Our CRE lending activities include loans to finance income producing properties and also construction and land loans. Our C&I lending activities include commercial business financing for small and middle-market businesses in a wide spectrum of industries. Included in commercial business loans are loans for working capital, accounts receivable lines, inventory lines, small business administration loans, and lease financing. We also offer a variety of international trade finance services and products, including letters of credit, revolving lines of credit, import loans, bankers' acceptances, working capital lines, domestic purchase financing, and pre-export financing. Consumer loans are primarily comprised of fully guaranteed student loans, home equity lines of credit, and auto loans.

All of the loans that the Bank originates are subject to its underwriting guidelines and loan origination standards. Management believes that the Bank's underwriting criteria and procedures adequately consider the unique risks which may come from these products. The Bank conducts a variety of quality control procedures and periodic audits to ensure compliance with its origination standards, including criteria for lending and legal requirements.

Credit Risk and Concentrations-The real estate market in California, including the areas of Los Angeles, Riverside, San Bernardino, and Orange counties, where a majority of the Company's loan customers are based, has been negatively impacted over the past few years. As of September 30, 2011, the Company had $3.83 billion in non-covered commercial real estate loans and $2.46 billion in non-covered residential loans, of which approximately 93% are secured by real properties located in California. Potential further deterioration in the real estate market generally and residential building in particular could result in additional loan charge-offs and provisions for loan losses in the future, which could have a material adverse effect on the Company's financial condition, net income and capital. In addition, although most of the Company's trade finance activities are related to trade with Asian countries, the majority of our loans are made to companies domiciled in the United States. A substantial portion of this business involves California based customers engaged in import and export activities. We also offer export-import financing to various domestic and foreign customers; the export loans are guaranteed by the Export-Import Bank of the United States.

Purchased Loans-During the first nine months of 2011, the Company purchased various portfolios with a carrying amount of $603.2 million, including guaranteed student loans with a carrying amount of $513.7 million. These student loans are guaranteed by the U.S. Department of Education and pose limited credit risk.

Loans Held for Sale-Loans held for sale totaled $251.9 million and $220.1 million as of September 30, 2011 and December 31, 2010, respectively. Loans held for sale are recorded at the lower of cost or fair market value. Fair market value, if lower than cost, is determined based on valuations obtained from market participants or the value of the underlying collateral. As of September 30, 2011, approximately 87% of these loans were student loans. These loans were purchased by the Company with the intent to be held for investment; however, subsequent to their purchase, the Company's intent for these loans changed and they were consequently reclassified to loans held for sale. Proceeds from sales of loans held for sale were $637.5 million in the first nine months of 2011, resulting in net gains on sale of $14.5 million. Proceeds from sales of loans held for sale were $167.6 million in September 2010 with $2.8 million net gains on sale, for the nine months ended September 30, 2010.

Credit Quality Indicators-Loans are risk rated based on analysis of the current state of the borrower's credit quality. The analysis of credit quality includes review of all sources of repayment, the borrower's current financial and liquidity status, and all other relevant information. The Company utilizes an eight grade risk rating system, where a higher grade represents a higher level of credit risk. The eight grade risk rating system can be generally classified by the following categories: Pass or Watch, Special Mention, Substandard, Doubtful, and Loss. The risk ratings reflect the relative strength of the sources of repayment.

Pass or Watch loans are generally considered to have sufficient sources of repayment in order to repay the loan in full in accordance with all terms and conditions. These borrowers may have some credit risk that requires monitoring, but full repayment is expected. Special Mention loans are considered to have potential weaknesses that warrant closer attention by management. Special Mention is considered a transitory grade and, generally, the Company does not grade a loan as Special Mention for longer than six months. If any potential weaknesses are resolved, the loan is upgraded to a Pass or Watch grade. If negative trends in the borrower's financial status or other information is presented that indicates the repayment sources may become inadequate, the loan is downgraded to a Substandard grade. Substandard loans are considered to have well-defined weaknesses that jeopardize the full and timely repayment of the loan. Substandard loans have a distinct possibility of loss if the deficiencies are not corrected. Additionally, when management has assessed a potential for loss but a distinct possibility of loss is not recognizable, the loan is still classified as Substandard. Doubtful loans have insufficient sources of repayment and a high probability of loss. Loss loans are considered to be uncollectible and of such little value that they are no longer considered bankable assets. These internal risk ratings are reviewed routinely and adjusted due to changes in borrower status and likelihood of loan repayment. The tables below present the non-covered loan portfolio by credit quality indicator as of September 30, 2011 and December 31, 2010. As of September 30, 2011, non-covered loans graded Substandard and Doubtful have decreased by a net $133.5 million, or 19% from December 31, 2010. There were no Loss grade loans as of September 30, 2011 and December 31, 2010.

			Special
	Pass/Watch		Mention		Substandard		Doubtful		Total
	(In thousands)
September 30, 2011
Residential:
Single-family	$	1,483,509	$	11,780	$	22,665	$	-	$	1,517,954
Multifamily		811,509		20,815		110,104		-		942,428
CRE:
Income producing		3,175,101		81,370		202,530		-		3,459,001
Construction		134,865		-		58,123		-		192,988
Land		117,471		7,998		53,683		-		179,152
C&I:
Commercial business		2,421,858		32,461		87,162		832		2,542,313
Trade finance		447,734		6,210		15,895		-		469,839
Consumer:
Student loans		243,292		-		-		-		243,292
Other consumer		255,864		127		4,292		-		260,283
Total	$	9,091,203	$	160,761	$	554,454	$	832	$	9,807,250

			Special
	Pass/Watch		Mention		Substandard		Doubtful		Total
December 31, 2010
Residential:
Single-family	$	1,076,281	$	12,376	$	30,367	$	-	$	1,119,024
Multifamily		789,631		42,887		142,227		-		974,745
CRE:
Income producing		3,054,197		80,714		258,073		-		3,392,984
Construction		202,385		-		75,662		-		278,047
Land		146,499		4,656		84,552		-		235,707
C&I:
Commercial business		1,553,218		34,449		81,185		5,846		1,674,698
Trade finance		296,430		4,069		8,158		-		308,657
Consumer:
Student loans		490,314		-		-		-		490,314
Other consumer		238,964		1,486		2,762		-		243,212
Total	$	7,847,919	$	180,637	$	682,986	$	5,846	$	8,717,388

Nonaccrual and Past Due Loans-Loans are tracked by the number of days borrower payments are past due. The tables below present an aging analysis of nonaccrual loans, past due non-covered loans and loans held for sale, segregated by class of loans, as of September 30, 2011 and December 31, 2010:

	Accruing Loans 30-59 Days Past Due		Accruing Loans 60-89 Days Past Due		Total Accruing Past Due Loans		Nonaccrual Loans Less Than 90 Days Past Due		Nonaccrual Loans 90 or More Days Past Due		Total Nonaccrual Past Due Loans		Current Loans		Total

	(In thousands)
September 30, 2011
Residential:
Single-family	$	6,196	$	1,201	$	7,397	$	99	$	5,687	$	5,786	$	1,504,771	$	1,517,954
Multifamily		10,797		1,048		11,845		5,468		12,906		18,374		912,209		942,428
CRE:
Income producing		23,833		-		23,833		17,544		27,707		45,251		3,389,917		3,459,001
Construction		472		-		472		1,665		26,648		28,313		164,203		192,988
Land		-		2,197		2,197		1,867		10,113		11,980		164,975		179,152
C&I:
Commercial business		2,211		-		2,211		3,275		10,827		14,102		2,526,000		2,542,313
Trade finance		-		-		-		-		294		294		469,545		469,839
Consumer:
Student loans				-		-		-		-		-		260,283		260,283
Other consumer		259		127		386		-		2,935		2,935		239,971		243,292
Loans held for sale		-		-		-		-		20,674		20,674		231,246		251,920
Total	$	43,768	$	4,573	$	48,341	$	29,918	$	117,791	$	147,709	$	9,863,120		10,059,170
Unearned fees, premiums and discounts, net																(16,746)
Total recorded investment in non-covered loans and loans held for sale															$	10,042,424

	Accruing Loans 30-59 Days Past Due		Accruing Loans 60-89 Days Past Due		Total Accruing Past Due Loans		Nonaccrual Loans Less Than 90 Days Past Due		Nonaccrual Loans 90 or More Days Past Due		Total Nonaccrual Past Due Loans		Current Loans		Total

	(In thousands)
December 31, 2010
Residential:
Single-family	$	5,449	$	5,432	$	10,881	$	355	$	7,058	$	7,413	$	1,100,730	$	1,119,024
Multifamily		18,894		4,368		23,262		7,694		9,687		17,381		934,102		974,745
CRE:
Income producing		27,002		6,034		33,036		7,962		38,454		46,416		3,313,532		3,392,984
Construction		-		1,486		1,486		25,688		9,778		35,466		241,095		278,047
Land		479		-		479		20,761		8,138		28,899		206,329		235,707
C&I:
Commercial business		3,216		1,086		4,302		14,437		8,235		22,672		1,647,724		1,674,698
Trade finance		-		-		-		-		-		-		308,657		308,657
Consumer:
Student loans		-		-		-		-		-		-		490,314		490,314
Other consumer		781		1,485		2,266		-		620		620		240,326		243,212
Loans held for sale		-		-		-		-		14,062		14,062		205,993		220,055
Total	$	55,821	$	19,891	$	75,712	$	76,897	$	96,032	$	172,929	$	8,688,802		8,937,443
Unearned fees, premiums and discounts, net																(56,781)
Total recorded investment in non-covered loans and loans held for sale															$	8,880,662

Generally, loans 90 or more days past due are placed on nonaccrual status, at which point interest accrual is discontinued and all unpaid accrued interest is reversed against interest income. Additionally, loans that are not 90 or more days past due but have identified deficiencies, including delinquent TDR loans, are also placed on nonaccrual status. Nonaccrual loans totaled $147.7 million and $172.9 million at September 30, 2011 and December 31, 2010, respectively. Loans not 90 or more days past due totaled $29.9 million and $76.9 million as of September 30, 2011 and December 31, 2010, respectively, and were included in non-covered nonaccrual loans.

The following is a summary of interest income foregone on nonaccrual loans:

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2011			2010			2011			2010
	(In thousands)


Interest income that would have been recognized had nonaccrual loans performed in accordance with their original terms	$	2,360		$	3,957		$	7,923		$	11,479

Less: Interest income recognized on nonaccrual loans on a cash basis		(756	)		(3,235	)		(2,267	)		(5,437	)

Interest income foregone on nonaccrual loans	$	1,604		$	722		$	5,656		$	6,042

Troubled debt restructurings-A troubled debt restructuring (“TDR”) is a modification of the terms of a loan when the lender, for economic or legal reasons related to the borrower's financial difficulties, grants a concession to the borrower. The concessions may be granted in various forms, including a below-market change in the stated interest rate, reduction in the loan balance or accrued interest, extension of the maturity date with a stated interest rate lower than the current market rate or note splits referred to as A/B notes. In A/B note restructurings, the original note is bifurcated into two notes where the A note represents the portion of the original loan which allows for acceptable loan-to-value and debt coverage on the collateral and is expected to be collected in full and the B note represents the portion of the original loan where there is a shortfall in value and is fully charged-off. The A/B note balance is comprised of the A note balances only. A notes are not disclosed as TDRs in years after the restructuring if the restructuring agreement specifies an interest rate equal to or greater than the rate that the Bank was willing to accept at the time of the restructuring for a new loan with comparable risk and the loan is not impaired based on the terms specified by the restructuring agreement.

TDRs may be designated as performing or nonperforming. A TDR may be designated as performing if the loan has demonstrated sustained performance under the modified terms. The period of sustained performance may include the periods prior to modification if prior performance met or exceeded the modified terms. For nonperforming restructured loans, the loan will remain on nonaccrual status until the borrower demonstrates a sustained period of performance, generally six consecutive months of payments. The Company had $81.0 million and $122.1 million in total performing restructured loans as of September 30, 2011 and December 31, 2010, respectively. Nonperforming restructured loans were $39.0 million and $42.1 million at September 30, 2011 and December 31, 2010, respectively. Included as TDRs were $24.3 million and $57.3 million of performing A/B notes as of September 30, 2011 and December 31, 2010, respectively. All TDRs are included in the balance of impaired loans.

The following table provides information on loans modified as of September 30, 2011 that were modified as TDRs during the three and nine months ended September 30, 2011:

	Loans Modified as TDRs During the
	Three Months Ended September 30, 2011
			Pre-Modification		Post-Modification
	Number		Outstanding		Outstanding
	of		Recorded		Recorded		Financial
	Contracts		Investment		Investment (1)		Impact (2)
	(Dollars in thousands)
Residential:
Single-family		4	$	990	$	987	$	328
Multifamily		4	$	1,722	$	1,040	$	1,220
CRE:
Income producing		2	$	5,116	$	5,097	$	-
Construction		1	$	2,859	$	2,859	$	-
Land		6	$	4,311	$	4,307	$	1,507
C&I:
Commercial business		4	$	548	$	542	$	885
Trade finance		1	$	4,127	$	4,127	$	-
Consumer:
Student loans		-	$	-	$	-	$	-
Other consumer		-	$	-	$	-	$	-

	Loans Modified as TDRs During the
	Nine Months Ended September 30, 2011
			Pre-Modification		Post-Modification
	Number		Outstanding		Outstanding
	of		Recorded		Recorded		Financial
	Contracts		Investment		Investment (1)		Impact (2)
	(Dollars in thousands)
Residential:
Single-family		9	$	2,204	$	2,089	$	430
Multifamily		11	$	5,136	$	4,436	$	1,344
CRE:
Income producing		8	$	22,648	$	19,273	$	3,796
Construction		2	$	3,267	$	3,748	$	-
Land		15	$	40,651	$	36,111	$	1,874
C&I:
Commercial business		16	$	8,916	$	7,233	$	2,053
Trade finance		1	$	4,127	$	4,127	$	-
Consumer:
Student loans		-	$	-	$	-	$	-
Other consumer		-	$	-	$	-	$	-

_______________________

(1)

Includes subsequent payments after modification and reflects the balance as of September 30, 2011.

(2)

The financial impact includes chargeoffs and specific reserves recorded at modification date.

Potential TDRs are individually evaluated and the type of restructuring is selected based on the loan type and the circumstances of the borrower's financial difficulty in order to maximize the bank's recovery. As of September 30, 2011, modifications of residential TDRs, including single and multi-family loans, primarily included non-market interest rate reductions, maturity extensions and A/B note splits. A/B note splits result in a partial chargeoff or loss for the bank at the modification date. For the nine months ended September 30, 2011 residential TDRs modified using non-market interest rate reductions, maturity extensions and/or A/B note splits totaled $6.5 million, as of September 30, 2011. Commercial real estate TDRs, including income producing, construction and land loans, were primarily modified through A/B note splits, maturity extensions, forbearance payments and/or non-market interest rate changes with an impact of a partial chargeoff or loss for the bank and reduction of interest collected over the life of the loan. Commercial real estate TDRs modified through A/B note splits and/or maturity extensions totaled $37.6 million as of September 30, 2011. Commercial real estate TDRs modified through forbearance payments and/or non-market interest changes totaled $21.5 million as of September 30, 2011. Commercial and industrial TDRs, including commercial business and trade finance loans, were restructured in various ways, including A/B note splits, non-market interest rate changes and/or maturity extensions with an impact of both a reduction of interest collected over the life of the loan and/or an extended time period for collection of principal and interest, for a total of $11.4 million as of September 30, 2011. Performing TDRs at September 30, 2011 were comprised of $20.6 million in residential loans, $49.3 million in commercial real estate loans and $11.2 million in commercial and industrial loans. Nonperforming TDRs at September 30, 2011 were comprised of $2.0 million in residential loans, $36.1 million in commercial real estate loans and $0.9 million in commercial and industrial loans.

Subsequent to restructuring, a TDR that becomes delinquent, generally beyond 30 days for commercial and industrial, and commercial real estate and consumer loans, and beyond 90 days for residential loans, becomes nonaccrual and is considered to have defaulted. The following table provides information on TDRs that subsequently defaulted as of September 30, 2011 for the nine months ended September 30, 2011. There were no TDRs that subsequently defaulted during the three months ended September 30, 2011.

	Loans Modified as TDRs that Subsequently
	Defaulted During the
	Nine Months Ended September 30, 2011
	Number of		Recorded
	Contracts		Investment
	(Dollars in thousands)
Residential:
Single-family		-	$	-
Multifamily		-	$	-
CRE:
Income producing		-	$	-
Construction		1	$	890
Land		5	$	13,241
C&I:
Commercial business		1	$	51
Trade finance		-	$	-
Consumer:
Student loans		-	$	-
Other consumer		-	$	-

All TDRs are included in the impaired loan quarterly valuation allowance process. See the sections below Impaired Loans and Allowance for Loan Losses for the complete discussion. All portfolio segments of TDRs are reviewed for necessary specific reserves in the same manner as impaired loans of the same portfolio segment which have not been identified as TDRs. The modification of the terms of each TDR is considered in the current impairment analysis of the respective TDR. For all portfolio segments of delinquent TDRs and when the restructured loan is less than the recorded investment in the loan, the deficiency is charged-off against the allowance for loan losses. If the loan is a performing TDR the deficiency is included in the specific allowance, as appropriate. As of September 30, 2011, the allowance for loan losses associated with TDRs was $3.7 million for performing TDRs and $278 thousand for nonperforming TDRs.

As a result of adopting the amendments in ASU 2011-02, the Company reassessed all restructurings that occurred on or after the beginning of the current fiscal year (January 1, 2011) for identification as TDRs. The Company identified as TDRs certain loan receivables for which the allowance for credit losses had previously been measured under the general allowance for credit losses methodology. Upon identifying those loan receivables as TDRs, the Company identified them as impaired under the guidance in Section 310-10-35. The amendments in ASU 2011-02 require prospective application of the impairment measurement guidance in Section 310-10-35 for those receivables newly identified as impaired. At the end of the first interim period of adoption (September 30, 2011), the recorded investment in receivables for which the allowance for credit losses was previously measured under the general allowance for credit losses methodology and are now impaired under Section 310-10-35 was $17.8 million, and the allowance for credit losses associated with those loan receivables, on the basis of a current evaluation of loss, was $2.2 million.

Impaired Loans-A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all scheduled payments of principal or interest due according to the original contractual terms of the loan agreement. Impaired loans include noncovered loans held for investment on nonaccrual status, regardless of the collateral coverage, and loans modified in a TDR.

The Bank's loans are grouped into heterogeneous and homogeneous (mostly consumer loans) categories. Classified loans (graded Substandard or Doubtful) in the heterogeneous category are selected and evaluated for impairment on an individual basis. The Bank considers loans individually reviewed to be impaired if, based on current information and events, it is probable the Bank will not be able to collect all amounts due according to the original contractual terms of the loan agreement. For loans determined to be impaired, the bank utilizes the most applicable asset valuation method for the loan from the following valuation methods: fair value of collateral less costs to sell, present value of expected future cash flows, or the loan's observable market price. When the value of an impaired loan is less than the recorded investment in the loan and the loan is classified as nonperforming, the deficiency is charged-off against the allowance for loan losses.

At September 30, 2011 and December 31, 2010, impaired loans totaled $208.0 million and $281.0 million, respectively. Impaired non-covered loans as of September 30, 2011 and December 31, 2010 are set forth in the following tables. The interest income recognized on impaired loans, excluding performing TDRs, is recognized on a cash basis when received.

											For the three months				For the nine months
											ended September 30, 2011				ended September 30, 2011
	Unpaid Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment		Interest Income Recognized (1)		Average Recorded Investment		Interest Income Recognized (1)
	(In thousands)
As of and for the three and nine months ended September 30, 2011
Residential:
Single-family	$	11,678	$	10,064	$	1,286	$	11,350	$	487	$	11,502	$	20	$	11,666	$	61
Multifamily		35,400		28,767		4,609		33,376		997		34,764		94		35,074		283
CRE:
Income producing		89,316		54,555		9,969		64,524		2,563		65,496		259		66,745		776
Construction		64,526		35,065		595		35,660		595		47,064		183		51,520		550
Land		44,832		30,816		3,799		34,615		1,648		38,428		92		39,393		276
C&I:
Commercial business		34,074		17,802		3,362		21,164		2,147		26,375		104		27,730		311
Trade finance		4,489		4,421		-		4,421		-		4,466		1		4,472		2
Consumer:
Student loans		-		-		-		-		-		-		-		-		-
Other consumer		3,728		2,852		-		2,852		-		3,029		3		3,099		8
Total	$	288,043	$	184,342	$	23,620	$	207,962	$	8,437	$	231,124	$	756	$	239,699	$	2,267

	Unpaid Principal		Recorded Investment With No		Recorded Investment With		Total Recorded		Related		Average Recorded		Interest Income
	Balance		Allowance		Allowance		Investment		Allowance		Investment		Recognized (1)
	(In thousands)
As of and for the year ended December 31, 2010 (2)
Residential:
Single-family	$	19,769	$	18,521	$	355	$	18,876	$	219	$	21,212	$	209
Multifamily		34,708		32,012		631		32,643		90		39,350		540
CRE:
Income producing		95,899		82,345		6,354		88,699		1,557		100,004		2,174
Construction		88,586		81,789		2,436		84,225		1,366		95,324		1,728
Land		39,937		22,082		6,920		29,002		4,324		32,820		1,326
C&I:
Commercial business		37,668		23,044		3,897		26,941		2,468		27,378		1,199
Trade finance		-				-		-		-		-		-
Consumer:				-
Student loans		-				-		-		-		-		-
Other consumer		1,261		620		-		620		-		1,072		28
Total	$	317,828	$	260,413	$	20,593	$	281,006	$	10,024	$	317,160	$	7,204

______________________

(1)	Excludes interest from performing TDRs.

(2)	The table has been corrected to include performing TDRs in the prior period presentation. Previously, the Company did not include performing TDRs as impaired loans. The amount of performing TDR's as of December 31, 2010 totaled approximately $122 million.

Allowance for Loan Losses

The allowance consists of specific reserves and a general reserve. The Bank's loans fall into heterogeneous and homogeneous (mostly consumer loans) categories. Impaired loans in the heterogeneous category are subject to specific reserves. Loans in the homogeneous category, as well as non-impaired loans in the heterogeneous category, are evaluated as part of the general reserve. The general reserve is calculated by utilizing both quantitative and qualitative factors. There are different qualitative risks for the loans in each portfolio segment. As of September 30, 2011, the Residential and CRE segments' predominant risk characteristic is the collateral and the geographic location of the property collateralizing the loan. The risk is qualitatively assessed based on the change in the real estate market in those geographic areas. The C&I segment's predominant risk characteristics are global cash flows of the guarantors and businesses we lend to and economic and market conditions. Consumer loans, excluding the student loan portfolio guaranteed by the U.S. Department of Education, are largely comprised of home equity lines of credit, for which the predominant risk characteristic is the real estate collateral securing the loan.

Our methodology to determine the overall appropriateness of the allowance is based on a classification migration model and qualitative considerations. The migration analysis examines pools of loans having similar characteristics and analyzes their loss rates over a historical period. We utilize historical loss factors derived from trends and losses associated with each pool over a specified period of time. Based on this process, we assign loss factors to each loan grade within each pool of loans. Loss rates derived by the migration model are based predominantly on historical loss trends that may not be entirely indicative of the actual or inherent loss potential. As such, we utilize qualitative and environmental factors as adjusting mechanisms to supplement the historical results of the classification migration model. Qualitative considerations include, but are not limited to, prevailing economic or market conditions, relative risk profiles of various loan segments, volume concentrations, growth trends, delinquency and nonaccrual status, problem loan trends, and geographic concentrations. Qualitative and environmental factors are reflected as percentage adjustments and are added to the historical loss rates derived from the classified asset migration model to determine the appropriate allowance amount for each loan pool.

Covered Loans-As of the respective acquisition dates, WFIB's and UCB's loan portfolios included unfunded commitments for commercial lines of credit, construction draws and other lending activity. The total commitment outstanding as of the respective acquisition dates is covered under the shared-loss agreements. However, any additional advances on these loans subsequent to acquisition date are not accounted for under ASC 310-30. As additional advances on these commitments have occurred, the Bank has considered these amounts in the allowance for loan losses calculation. As of September 30, 2011 and December 31, 2010, $6.4 million, or 2.9% and $4.2 million, or 1.8%, respectively, of the total allowance is allocated to the allowance for loan losses on covered loans. The covered loans acquired are, and will continue to be, subject to the Bank's internal and external credit review and monitoring. Credit deterioration, if any, beyond the respective acquisition date fair value amounts of the covered loans under ASC 310-30 will be separately measured and accounted for under ASC 310-30. If required, the establishment of an allowance for covered loans accounted for under ASC 310-30 will result in a charge to earnings with a partially offsetting noninterest income item reflected in the increase to the FDIC indemnification asset or receivable. As of September 30, 2011 and December 31, 2010, there is no allowance for the covered loans accounted for under ASC 310-30 due to deterioration of credit quality.

The Company recorded $75.0 million in loan loss provisions for the nine months ended September 30, 2011, as compared to $170.3 million for the nine months ended September 30, 2010. It is the Company's policy to promptly charge-off the amount of impairment on a loan which represents the difference in the outstanding loan balance and the fair value of the collateral or discounted cash flow. Recoveries are recorded when payment is received on loans that were previously charged-off through the allowance for loan losses. For the nine months ended September 30, 2011, the Company recorded $90.2 million in net charge-offs in comparison to $164.2 million for the nine months ended September 30, 2010. The following tables detail activity in the allowance for loan losses, for both non-covered and covered loans, by portfolio segment for the three and nine months ended September 30, 2011 and the year ended December 31, 2010. Allocation of a portion of the allowance to one segment of the loan portfolio does not preclude its availability to absorb losses in other segments.

													Covered Loans
													Subject to
													Allowance for
	Residential			CRE			C&I			Consumer			Loan Losses (1)		Unallocated			Total
	(In thousands)
Nine months ended September 30, 2011
Beginning balance	$	49,491		$	117,752		$	59,737		$	3,428		$	4,225	$	-		$	234,633
Provision for loan losses		7,618			10,861			51,223			1,850			2,209		1,245			75,006
Allowance for unfunded loan commitments and letters of credit		-						-			-			-		(1,245	)		(1,245	)
Charge-offs		(9,388	)		(60,248	)		(29,410	)		(1,659	)		-		-			(100,705	)
Recoveries		449			4,502			5,419			113			-		-			10,483
Net charge-offs		(8,939	)		(55,746	)		(23,991	)		(1,546	)		-		-			(90,222	)
Ending balance	$	48,170		$	72,867		$	86,969		$	3,732		$	6,434	$	-		$	218,172

													Covered Loans
													Subject to
													Allowance for
	Residential			CRE			C&I			Consumer			Loan Losses (1)			Unallocated		Total
	(In thousands)
Three Months Ended September 30, 2011
Beginning balance	$	44,630		$	85,686		$	79,985		$	3,524		$	6,731		$	-	$	220,556
Provision for loan losses		7,172			1,193			13,471			461			(297	)		-		22,000
Allowance for unfunded loan commitments and letters of credit		-			-			-			-			-			-		-
Charge-offs		(3,835	)		(15,863	)		(7,602	)		(275	)		-			-		(27,575	)
Recoveries		203			1,851			1,115			22			-			-		3,191
Net charge-offs		(3,632	)		(14,012	)		(6,487	)		(253	)		-			-		(24,384	)
Ending balance	$	48,170		$	72,867		$	86,969		$	3,732		$	6,434		$	-	$	218,172


Ending balance allocated to:
Loans individually evaluated for impairment	$	1,484		$	4,843		$	2,147		$	-		$	-		$	-	$	8,474
Loans collectively evaluated for impairment		46,686			68,024			84,822			3,732			6,434			-		209,698
Loans acquired with deteriorated credit quality (2)		-			-			-			-			-			-		-
Ending balance	$	48,170		$	72,867		$	86,969		$	3,732		$	6,434		$	-	$	218,172

													Covered Loans
													Subject to
													Allowance for
	Residential			CRE			C&I			Consumer			Loan Losses (1)		Unallocated			Total
	(In thousands)
Year ended December 31, 2010
Beginning balance	$	38,025		$	147,591		$	50,487		$	2,730		$	-	$	-		$	238,833
Provision for loan losses		59,525			97,548			34,613			2,415			4,225		1,833			200,159
Allowance for unfunded loan commitments and letters of credit		-			-			-			-			-		(1,833	)		(1,833	)
Charge-offs		(49,685	)		(137,460	)		(35,479	)		(2,579	)		-		-			(225,203	)
Recoveries		1,626			10,073			10,116			862			-		-			22,677
Net charge-offs		(48,059	)		(127,387	)		(25,363	)		(1,717	)		-		-			(202,526	)
Ending balance	$	49,491		$	117,752		$	59,737		$	3,428		$	4,225	$	-		$	234,633


Ending balance allocated to:
Loans individually evaluated for impairment	$	309		$	7,247		$	2,468		$	-		$	-	$	-		$	10,024
Loans collectively evaluated for impairment		49,182			110,505			57,269			3,428			4,225		-			224,609
Loans acquired with deteriorated credit quality (2)		-			-			-			-			-		-			-
Ending balance	$	49,491		$	117,752		$	59,737		$	3,428		$	4,225	$	-		$	234,633

______________________

(1)

This allowance is related to drawdowns on commitments that were in existence as of the acquisition dates of WFIB and UCB and, therefore, are covered under the shared-loss agreements with the FDIC. Allowance on these subsequent drawdowns is accounted for as part of the allowance for loan losses.

(2)

The Company has elected to account for all covered loans acquired in the FDIC-assisted acquisitions under ASC 310-30.

The Company's recorded investment in total loans receivable as of September 30, 2011 and December 31, 2010 related to each balance in the allowance for loan losses by portfolio segment and disaggregated on the basis of the Company's impairment methodology is as follows:

									Covered Loans
									Subject to
									Allowance for
	Residential		CRE		C&I		Consumer		Loan Losses		Total
	(In thousands)
September 30, 2011
Loans individually evaluated for impairment	$	44,726	$	134,799	$	25,585	$	2,852	$	-	$	207,962
Loans collectively evaluated for impairment		2,415,656		3,696,342		2,986,567		500,723		586,604		10,185,892
Loans acquired with deteriorated credit quality (1)		1,401,215		2,487,186		471,994		71,268		-		4,431,663
Ending balance	$	3,861,597	$	6,318,327	$	3,484,146	$	574,843	$	586,604	$	14,825,517

									Covered Loans
									Subject to
									Allowance for
	Residential		CRE		C&I		Consumer		Loan Losses		Total
	(In thousands)
December 31, 2010
Loans individually evaluated for impairment	$	51,519	$	201,926	$	26,941	$	620	$	-	$	281,006
Loans collectively evaluated for impairment		2,042,250		3,704,812		1,956,415		732,905		561,725		8,998,107
Loans acquired with deteriorated credit quality (1)		1,614,732		3,059,133		634,560		85,623		-		5,394,048
Ending balance	$	3,708,501	$	6,965,871	$	2,617,916	$	819,148	$	561,725	$	14,673,161

______________________

(1)

The Company has elected to account for all covered loans acquired in the FDIC-assisted acquisitions under ASC 310-30. The total principal balance is presented and excludes the purchase discount and any additional advances subsequent to acquisition date.

Allowance for Unfunded Loan Commitments, Off-Balance Sheet Credit Exposures and Recourse Provisions-The allowance for unfunded loan commitments, off-balance sheet credit exposures, and recourse provisions is maintained at a level believed by management to be sufficient to absorb estimated probable losses related to these unfunded credit facilities. The determination of the adequacy of the allowance is based on periodic evaluations of the unfunded credit facilities including an assessment of the probability of commitment usage, credit risk factors for loans outstanding to these same customers, and the terms and expiration dates of the unfunded credit facilities. As of September 30, 2011 and December 31, 2010, the allowance for unfunded loan commitments, off-balance sheet credit exposures, and recourse provisions amounted to $11.2 million and $10.0 million, respectively. Net adjustments to the allowance for unfunded loan commitments, off-balance sheet credit exposures, and recourse provisions are included in the provision for loan losses.

Loans serviced for others amounted to $2.19 billion and $2.51 billion at September 30, 2011 and December 31, 2010, respectively. These represent loans that have either been sold or securitized for which the Bank continues to provide servicing or has limited recourse. The majority of these loans are residential and CRE at September 30, 2011 and December 31, 2010. Of the total allowance for unfunded loan commitments, off-balance sheet credit exposures, and recourse provisions, $4.3 million and $4.7 million pertain to these loans as of September 30, 2011 and December 31, 2010, respectively. These loans are maintained off-balance sheet and are not included in the loans receivable balance.