UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________________________________ 
FORM 10-Q
______________________________________________ 
(Mark One)
xQuarterly report pursuant to section 13 or 15 (d) of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 2013March 31, 2014
or
oTransition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from             to             
Commission File Number: 000-50245
______________________________________________ 
BBCN BANCORP, INC.
(Exact name of registrant as specified in its charter)
______________________________________________ 
Delaware 95-4849715
(State or other jurisdiction of
incorporation or organization)
 
(IRS Employer
Identification Number)
   
3731 Wilshire Boulevard, Suite 1000, Los Angeles, California 90010
(Address of Principal executive offices) (ZIP Code)
(213) 639-1700
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
______________________________________________ 
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  x    No  o
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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filerx Accelerated filero
     
Non-accelerated filero Smaller Reporting Companyo



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o   No  x
As of November 1, 2013,May 5, 2014, there were 79,267,58079,490,899 outstanding shares of the issuer’s Common Stock, $0.001 par value.



Table of Contents
 
  Page
 
   
 
   
Item 1. 
   
 
   
 
   
 
   
 
   
 
   
 
   
Item 2
   
Item 3.
   
Item 4.
  
 
   
Item 1.
   
Item 1A.
   
Item 2.
   
Item 3.
   
Item 4.
   
Item 5.
   
Item 6.
   
 
   
 
   
 Certifications 


32

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Forward-Looking InformationStatements
Certain matters discussed
Some statements in this report mayQuarterly Report on Form 10-Q constitute forward-looking statements underwithin the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934. There can be no assurance1934, as amended. These forward-looking statements relate to, among other things, expectations regarding the business environment in which we operate, projections of future performance, perceived opportunities in the market and statements regarding our business strategies, objectives and vision. Forward-looking statements include, but are not limited to, statements preceded by, followed by or that include the words “will,” “believes,” “expects,” “anticipates,” “intends,” “plans,” “estimates” or similar expressions. With respect to any such forward-looking statements the Company claims the protection provided for in the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties. Our actual results, performance or achievements may differ significantly from the results, describedperformance or achievements expressed or implied in any forward-looking statements. 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 forward-looking statements will, in fact, be achieved and actual results, performance, and achievements could differ materially because our business involves inherent risks and uncertainties. The risks and uncertainties include: possible deterioration in economic conditions in our areas of operation; interest rate risk associated with volatile interest rates and related asset-liability matching risk; liquidity risks; risk of significant non-earning assets, and net credit losses that could occur, particularly in times of weak economic conditions or times of rising interest rates; and regulatory risks associated with current and future regulations. For additional information concerning these and other risk factors, see "Part II, Item 1A. Risk Factors" contained herein and “Part I, Item 1A. Risk Factors” contained in our Annual Report on Form 10-K for the year ended December 31, 2012.except as required by law.



43

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PART I
FINANCIAL INFORMATION

Item 1.Financial Statements


BBCN BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
BBCN BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
BBCN BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)  (Unaudited)  
September 30,
2013
 December 31,
2012
March 31,
2014
 December 31,
2013
ASSETS(In thousands, except share data)(In thousands, except share data)
Cash and cash equivalents:      
Cash and due from banks$172,483
 $88,506
$116,387
 $96,061
Interest earning deposit at the Federal Reserve Bank (the "FRB")172,869
 224,410
Interest bearing deposit at the Federal Reserve Bank ("FRB")286,724
 220,644
Total cash and cash equivalents345,352
 312,916
403,111
 316,705
Securities available for sale, at fair value708,566
 704,403
725,229
 705,751
Loans held for sale, at the lower of cost or fair value49,480
 51,635
38,157
 44,115
Loans receivable, net of allowance for loan losses (September 30, 2013 - $65,715; December 31, 2012 - $66,941)4,833,224
 4,229,311
Loans receivable, net of allowance for loan losses (March 31, 2014 - $65,699; December 31, 2013 - $67,320)5,125,095
 5,006,856
Other real estate owned ("OREO"), net27,582
 2,698
20,001
 24,288
Federal Home Loan Bank ("FHLB") stock, at cost27,958
 22,495
27,902
 27,941
Premises and equipment, net of accumulated depreciation and amortization (September 30, 2013 - $24,925; December 31, 2012 - $22,201)29,747
 22,609
Premises and equipment, net of accumulated depreciation and amortization (March 31, 2014 - $27,153; December 31, 2013 - $25,852)31,290
 30,894
Accrued interest receivable13,108
 12,117
13,410
 13,403
Deferred tax assets, net80,768
 60,240
78,316
 89,297
Customers’ liabilities on acceptances6,126
 10,493
4,473
 5,602
Bank owned life insurance44,593
 43,767
Bank owned life insurance ("BOLI")45,062
 44,770
Investments in affordable housing partnerships11,983
 13,164
10,953
 11,460
Goodwill119,881
 89,878
105,401
 105,401
Other intangible assets, net5,563
 3,033
4,859
 5,184
Prepaid FDIC insurance
 7,574
FDIC loss share receivable2,430
 5,797
253
 1,110
Other assets34,626
 48,531
34,039
 42,422
Total assets$6,340,987
 $5,640,661
$6,667,551
 $6,475,199
      
(Continued)(Continued) (Continued) 

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BBCN BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
BBCN BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
BBCN BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)  (Unaudited)  
September 30,
2013
 December 31,
2012
March 31,
2014
 December 31,
2013
LIABILITIES AND STOCKHOLDERS’ EQUITY(In thousands, except share data)(In thousands, except share data)
LIABILITIES:      
Deposits:      
Noninterest bearing$1,362,675
 $1,184,285
$1,442,348
 $1,399,454
Interest bearing:      
Money market and NOW accounts1,267,113
 1,248,304
1,391,541
 1,376,068
Savings deposits228,073
 180,686
210,973
 222,446
Time deposits of $100,000 or more1,475,321
 1,088,611
1,589,751
 1,498,784
Other time deposits687,920
 682,149
699,947
 651,305
Total deposits5,021,102
 4,384,035
5,334,560
 5,148,057
FHLB advances421,446
 420,722
421,260
 421,352
Subordinated debentures57,303
 41,846
42,037
 57,410
Accrued interest payable4,827
 4,355
5,740
 4,821
Acceptances outstanding6,126
 10,493
4,473
 5,602
Other liabilities28,953
 28,106
27,322
 28,583
Total liabilities5,539,757
 4,889,557
5,835,392
 5,665,825
STOCKHOLDERS’ EQUITY:      
Common stock, $0.001 par value; authorized 150,000,000 shares at September 30, 2013 and December 31, 2012; issued and outstanding, 79,247,719 and 78,041,511 shares at September 30, 2013 and December 31, 2012, respectively79
 78
Common stock, $0.001 par value; authorized 150,000,000 shares at March 31, 2014 and December 31, 2013; issued and outstanding, 79,488,899 and 79,441,525 shares at March 31, 2014 and December 31, 2013, respectively79
 79
Additional paid-in capital538,062
 525,354
540,979
 540,876
Retained earnings266,478
 216,590
294,842
 278,604
Accumulated other comprehensive income, net(3,389) 9,082
Accumulated other comprehensive loss, net(3,741) (10,185)
Total stockholders’ equity801,230
 751,104
832,159
 809,374
Total liabilities and stockholders’ equity$6,340,987
 $5,640,661
$6,667,551
 $6,475,199

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).

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Table of Contents

BBCN BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 Three Months Ended March 31,
 2014 2013
 (In thousands, except per share data)
INTEREST INCOME:   
Interest and fees on loans$68,694
 $63,029
Interest on securities4,095
 3,427
Interest on federal funds sold and other investments565
 287
Total interest income73,354
 66,743
INTEREST EXPENSE:   
Interest on deposits6,690
 5,408
Interest on FHLB advances1,211
 1,224
Interest on other borrowings487
 395
Total interest expense8,388
 7,027
NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES64,966
 59,716
PROVISION FOR LOAN LOSSES3,026
 7,506
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES61,940
 52,210
NONINTEREST INCOME:   
Service fees on deposit accounts3,472
 2,875
International service fees1,004
 1,238
Loan servicing fees, net965
 969
Wire transfer fees905
 816
Other income and fees1,621
 1,249
Net gains on sales of SBA loans2,722
 2,694
Net gains on sales of other loans
 43
Net gains on sales of securities available for sale
 54
Net gains on sales of OREO406
 2
Total noninterest income11,095
 9,940
NONINTEREST EXPENSE:   
Salaries and employee benefits18,938
 16,332
Occupancy4,623
 4,011
Furniture and equipment2,014
 1,573
Advertising and marketing1,088
 1,273
Data processing and communication2,122
 1,644
Professional fees1,313
 1,301
FDIC assessments1,023
 694
Credit related expenses1,421
 1,715
Merger and integration expense173
 1,305
Other3,560
 3,427
Total noninterest expense36,275
 33,275
INCOME BEFORE INCOME TAX PROVISION36,760
 28,875
INCOME TAX PROVISION14,564
 11,414
NET INCOME$22,196
 $17,461
EARNINGS PER COMMON SHARE   
Basic$0.28
 $0.22
Diluted$0.28
 $0.22

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).

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BBCN BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 Three Months Ended September 30, Nine Months Ended September 30,
 2013 2012 2013 2012
 (In thousands, except share data)
INTEREST INCOME:       
Interest and fees on loans$67,747
 $61,553
 $196,249
 $187,476
Interest on securities3,802
 3,782
 10,755
 12,940
Interest on federal funds sold and other investments486
 120
 1,153
 537
Total interest income72,035
 65,455
 208,157
 200,953
INTEREST EXPENSE:       
Interest on deposits5,959
 5,214
 17,014
 15,862
Interest on FHLB advances1,251
 1,603
 3,693
 4,832
Interest on other borrowings465
 407
 1,271
 1,667
Total interest expense7,675
 7,224
 21,978
 22,361
NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES64,360
 58,231
 186,179
 178,592
PROVISION FOR LOAN LOSSES744
 6,900
 9,050
 16,682
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES63,616
 51,331
 177,129
 161,910
NONINTEREST INCOME:       
Service fees on deposit accounts3,321
 3,121
 9,118
 9,550
International service fees1,196
 1,183
 3,700
 3,810
Loan servicing fees, net1,004
 1,031
 3,009
 3,178
Wire transfer fees916
 833
 2,619
 2,349
Other income and fees1,583
 1,364
 4,036
 4,058
Net gains on sales of SBA loans2,827
 
 8,816
 5,426
Net gains on sales of other loans
 
 62
 146
Net gains on sales of securities available for sale
 133
 54
 949
Net valuation gains on interest rate swaps and caps
 11
 
 24
Net (losses) gains on sales of OREO(48) (12) (57) 41
Total noninterest income10,799
 7,664
 31,357
 29,531
NONINTEREST EXPENSE:       
Salaries and employee benefits16,535
 13,611
 49,086
 42,348
Occupancy4,360
 3,910
 13,206
 11,788
Furniture and equipment1,728
 1,495
 4,914
 4,181
Advertising and marketing1,393
 1,159
 3,856
 4,142
Data processing and communications1,983
 1,659
 5,488
 4,843
Professional fees1,440
 876
 4,184
 2,558
FDIC assessments818
 644
 2,370
 1,732
Credit related expenses2,646
 2,613
 6,564

6,967
Merger and integration expense931
 183
 2,621
 3,304
Other3,912
 2,620
 11,161
 8,419
Total noninterest expense35,746
 28,770
 103,450
 90,282
INCOME BEFORE INCOME TAX PROVISION38,669
 30,225
 105,036
 101,159
INCOME TAX PROVISION15,117
 11,827
 41,352
 39,463
NET INCOME$23,552
 $18,398
 63,684
 $61,696
DIVIDENDS AND DISCOUNT ACCRETION ON PREFERRED STOCK$
 $
 $
 $(5,640)
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS$23,552
 $18,398
 $63,684
 $56,056
EARNINGS PER COMMON SHARE       
Basic$0.30
 $0.24
 $0.81
 $0.72
Diluted$0.30
 $0.24
 $0.80
 $0.72
BBCN BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 Three Months Ended March 31,
 2014 2013
 (In thousands)
Net income$22,196
 $17,461
Other comprehensive income (loss):   
Unrealized gains (losses) on securities available for sale and interest only strips11,140
 (3,653)
Reclassification adjustments for gains realized in income
 (54)
Tax expense (benefit)4,696
 (1,581)
Change in unrealized gains (losses) on securities available for sale and interest only strips6,444
 (2,126)
Total comprehensive income$28,640
 $15,335


See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).


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BBCN BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 Three Months Ended September 30, Nine Months Ended September 30,
 2013 2012 2013 2012
 (In thousands)
Net income$23,552
 $18,398
 $63,684
 $61,696
Other comprehensive income (loss):       
Unrealized gains (losses) on securities available for sale and interest only strips2,021
 3,374
 (21,389) 3,867
Reclassification adjustments for gains realized in income (1)

 (133) (54) (949)
Tax expense (benefit)405
 1,261
 (8,972) 1,051
Change in unrealized gains (losses) on securities available for sale and interest only strips1,616
 1,980
 (12,471) 1,867
        
Reclassification adjustment for the deferred gain on early settlement of interest-rate caps (2)

 (11) 
 (33)
Tax benefit
 (5) 
 (13)
Change in unrealized gain on interest-rate caps, net of tax (3)

 (6) 
 (20)
        
Total other comprehensive income (loss)1,616
 1,974
 (12,471) 1,847
Total comprehensive income$25,168
 $20,372
 $51,213
 $63,543
BBCN BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
 Common stock      
 Shares Amount Additional paid-in capital 
Retained
earnings
 Accumulated other comprehensive income (loss), net
 (In thousands, except share data)
          
BALANCE, JANUARY 1, 201378,041,511
 $78
 $525,354
 $216,590
 $9,082
Acquisition of Pacific International Bancorp, Inc.663,843
 1
 8,640
    
Issuance of additional shares pursuant to various stock plans106,786
 
 414
 
 
Tax effect of stock plans
 
 (26) 
 
Stock-based compensation
 
 709
 
 
Cash dividends declared on common stock      (3,902)  
Comprehensive income:
 
 
 
 
Net income
 
 
 17,461
 
Other comprehensive loss
 
 
 
 (2,126)
BALANCE, MARCH 31, 201378,812,140
 $79
 $535,091
 $230,149
 $6,956
          
BALANCE, JANUARY 1, 201479,441,525
 $79
 $540,876
 $278,604
 $(10,185)
Issuance of additional shares pursuant to various stock plans47,374
 
 (1) 

 

Stock-based compensation

 

 104
 

 

Cash dividends declared on common stock

 

 

 (5,958) 

Comprehensive income:

 

 

 

 

Net income

 

 

 22,196
 

Other comprehensive income

 

 

 

 6,444
BALANCE, MARCH 31, 201479,488,899
 $79
 $540,979
 $294,842
 $(3,741)

(1)
Reclassification adjustments were recognized in net gains on sales of securities available for sale in the consolidated statements of income.
(2)
Reclassification adjustments were recognized in accumulated other comprehensive income in the consolidated statements of financial position.
(3)
Reclassification adjustments were recognized in other income in the consolidated statements of income.

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).


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BBCN BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
   Common stock      
 
Preferred
stock
 Shares Amount Additional paid-in capital 
Retained
earnings
 Accumulated other comprehensive income (loss), net
 (In thousands, except share data)
            
BALANCE, JANUARY 1, 2012$119,350
 77,984,252
 $78
 $524,644
 $142,909
 $8,958
Redemption of 122,000 shares of TARP preferred stock(122,000)          
Issuance of additional shares pursuant to various stock plans
 32,008
 
 200
 
 
Tax effect of stock plans
 
 
 (6) 
 
Stock-based compensation
 
 
 1,959
 
 
Redemption of common stock warrant      (2,189)    
Preferred stock cash dividends accrued (5%)
 
 
 
 (2,991) 
Accretion of preferred stock discount2,650
 
 
 
 (2,650) 
Comprehensive income:
 
 
 
 
 
Net income
 
 
 
 61,696
 
Other comprehensive loss
 
 
 
 
 1,847
BALANCE, SEPTEMBER 30, 2012$
 78,016,260
 $78
 $524,608
 $198,964
 $10,805
            
BALANCE, JANUARY 1, 2013$
 78,041,511
 $78
 $525,354
 $216,590
 $9,082
Acquisition of Pacific International Bancorp, Inc.  632,050
 1
 8,640
    
Acquisition of Foster Bankshares, Inc.  49,496
   778
    
Issuance of additional shares pursuant to various stock plans
 524,662
 

 1,954
 

 

Tax effect of stock plans      208
    
Stock-based compensation
 

 

 1,128
 

 

Cash dividends declared on common stock
 

 

 

 (13,796) 

Comprehensive income:
 

 

 

 

 

Net income
 

 

 

 63,684
 

Other comprehensive loss
 

 

 

 

 (12,471)
BALANCE, SEPTEMBER 30, 2013$
 79,247,719
 $79
 $538,062
 $266,478
 $(3,389)
            
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).


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BBCN BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 Nine Months Ended September 30,
 2013 2012
 (In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
 
Net income$63,684
 $61,696
Adjustments to reconcile net income to net cash from operating activities:
 

      Depreciation, amortization, net of discount accretion(13,402) (18,518)
Stock-based compensation expense1,128
 1,959
Provision for loan losses9,050
 16,682
Valuation adjustment of loans held for sale53
 703
Valuation adjustment of OREO1,229
 2,659
Proceeds from sales of loans held for sale107,712
 90,022
Originations of loans held for sale(89,832) (97,968)
Net gains on sales of SBA and other loans(8,878) (6,014)
Net change in bank owned life insurance(826) (902)
Net gains on sales of securities available for sale(54) (949)
Net gains on sales of OREO57
 (41)
Net valuation gains on interest rate swaps and caps
 (24)
Change in accrued interest receivable539
 558
Change in deferred income taxes9,487
 7,625
Change in prepaid FDIC insurance7,771
 1,508
Change in investments in affordable housing partnership1,181
 1,591
Change in FDIC loss share receivable3,367
 3,743
Change in other assets17,517
 (9,532)
Change in accrued interest payable472
 (1,068)
Change in other liabilities(9,486) 11,754
            Net cash provided by operating activities100,769
 65,484
CASH FLOWS FROM INVESTING ACTIVITIES   
Net change in loans receivable(228,758) (326,194)
Proceeds from sales of securities available for sale6,636
 28,446
Proceeds from sales of OREO1,708
 4,341
Proceeds from matured term federal funds
 100,000
Proceeds from sales of equipment
 3
Purchase of premises and equipment(6,524) (5,572)
Purchase of securities available for sale(167,850) (111,696)
Purchase of FHLB stock(1,969) 
Redemption of FHLB stock49
 3,873
Purchase of term federal funds
 (60,000)
Proceeds from matured or paid-down securities available for sale143,627
 135,686
Net cash received from acquisition - Pacific International Bancorp, Inc.25,967
 
Net cash received from acquisition - Foster Bankshares, Inc.41,167
 
Redemption of preferred stock upon the acquisition(7,475) 
          Net cash used in investing activities(193,422) (231,113)
CASH FLOWS FROM FINANCING ACTIVITIES   
Net change in deposits172,800
 114,344
Redemption of preferred stock
 (122,000)
Cash dividends paid on Preferred Stock
 (3,648)
Redemption of subordinated debentures(4,124) (10,400)
Proceeds from FHLB advances155,000
 625,000
Repayment of FHLB advances(186,745) (506,145)
Redemption of common stock warrant
 (2,189)
Cash dividends paid on Common Stock(13,796) 
Issuance of additional stock pursuant to various stock plans1,954
 200
            Net cash provided by financing activities125,089
 95,162
NET CHANGE IN CASH AND CASH EQUIVALENTS32,436
 (70,467)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD312,916
 300,110
CASH AND CASH EQUIVALENTS, END OF PERIOD$345,352
 $229,643
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
 

      Interest paid$21,506
 $23,429
      Income taxes paid$23,650
 $26,663
SUPPLEMENTAL DISCLOSURES OF NON-CASH ACTIVITIES   
Transfer from loans receivable to OREO$7,557
 $3,470

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BBCN BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
BBCN BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
BBCN BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended March 31,
2014 2013
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
 
Net income$22,196
 $17,461
Adjustments to reconcile net income to net cash from operating activities:
 

Depreciation, amortization, net of discount accretion(5,171) (2,717)
Stock-based compensation expense104
 709
Provision for loan losses3,026
 7,506
Valuation adjustment of loans held for sale
 
Valuation adjustment of OREO(314) 115
Proceeds from sales of loans held for sale31,878
 29,144
Originations of loans held for sale(28,414) (23,713)
Net gains on sales of SBA and other loans(2,722) (2,737)
Net change in BOLI(292) (312)
Net gains on sales of securities available for sale
 (54)
Net gains on sales of OREO(406) (2)
Change in accrued interest receivable(7) (730)
Change in deferred income taxes6,284
 1,524
Change in prepaid FDIC insurance
 614
Change in investments in affordable housing partnership507
 523
Change in FDIC loss share receivable857
 1,411
Change in other assets8,392
 675
Change in accrued interest payable919
 (104)
Change in other liabilities(1,261) (9,836)
Net cash provided by operating activities35,576
 19,477
CASH FLOWS FROM INVESTING ACTIVITIES   
Net change in loans receivable(109,295) (69,771)
Proceeds from sales of securities available for sale
 6,636
Proceeds from sales of OREO4,820
 849
Purchase of premises and equipment(1,969) (1,671)
Purchase of securities available for sale(37,444) (69,821)
Redemption of FHLB stock39
 16
Proceeds from matured or paid-down securities available for sale28,235
 52,488
Net cash received from acquisition - Pacific International Bancorp, Inc.
 18,493
Net cash used in investing activities(115,614) (62,781)
CASH FLOWS FROM FINANCING ACTIVITIES   
Net change in deposits187,866
 28,412
Redemption of subordinated debentures(15,464) 
Proceeds from FHLB advances
 90,000
Repayment of FHLB advances
 (103,697)
Cash dividends paid on Common Stock(5,958) (3,902)
Issuance of additional stock pursuant to various stock plans
 388
Net cash provided by financing activities166,444
 11,201
NET CHANGE IN CASH AND CASH EQUIVALENTS86,406
 (32,103)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD316,705
 312,916
CASH AND CASH EQUIVALENTS, END OF PERIOD$403,111
 $280,813
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION   
Interest paid$7,469
 $7,057
Income taxes paid$2,610
 $16,291
SUPPLEMENTAL DISCLOSURES OF NON-CASH ACTIVITIES   
Transfer from loans receivable to OREO$187
 $1,985
Transfer from loans receivable to loans held for sale$6,900
 $2,820
$34
 $
Loans to facilitate sales of loans held for sale$5,250
 $
Pacific International Bancorp, Inc. Acquisition:      
Assets acquired$183,120
 $
$
 $178,732
Liabilities assumed$167,545
 $
$
 $165,828
Foster Bankshares, Inc. Acquisition:   
Assets acquired$333,243
 $
Liabilities assumed$(358,274) $
   
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).

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BBCN BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)




1.BBCN Bancorp, Inc.
BBCN Bancorp, Inc. ("BBCN Bancorp", on a parent-only basis and the "Company" on a consolidated basis), headquartered in Los Angeles, California, is the holding company for BBCN Bank ("BBCN Bank" or the "Bank"). The Bank has branches in California, New Jersey, and the New York New Jersey,City, Chicago, Seattle and Washington, Illinois and Virginia,D.C. metropolitan areas, as well as loan production offices in the Atlanta, Dallas, Denver, Northern California, Seattle and metropolitan Washington, D.C. markets.Annandale. The Company is a corporation organized under the laws of the state of Delaware and a financial holding company and bank holding company registered under the Bank Holding Company Act of 1956, as amended.
         
2.Basis of Presentation
The condensed consolidated financial statements included herein have been prepared without an audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”), except for the Condensed Consolidated Statement of Financial Condition as of December 31, 20122013 which was derived from audited financial statements included in the Company's 20122013 Annual Report on Form 10-K. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such SEC rules and regulations.
The condensed consolidated financial statements include the accounts of BBCN Bancorp and its wholly-owned subsidiaries, principally BBCN Bank. All intercompany transactions and balances have been eliminated in consolidation.
The Company has made all adjustments, consisting solely of normal recurring accruals, that in the opinion of management, are necessary to fairly present the Company's financial position at September 30, 2013March 31, 2014 and the results of operations for the three and nine months then ended. The results of operations for the interim periods are not necessarily indicative of results to be anticipated for the full year.
The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are susceptible to change in the near term relate to the determination of the allowance and provision for loan losses, the evaluation of other than temporary impairment of investment securities, accounting for derivatives and hedging activities, the determination of the carrying value for cash surrender value of life insurance, the determination of the carrying value of goodwill and other intangible assets, accounting for deferred tax assets and related valuation allowances, the determination of the fair values of investment securities and other financial instruments, accounting for lease arrangements, accounting for incentive compensation, profit sharing and bonus payments, the valuation of servicing assets, and the determination of the fair values of acquired assets and liabilities including the fair value of loans acquired with credit deterioration.
These unaudited condensed consolidated financial statements should be read along with the audited consolidated financial statements and accompanying notes included in the Company's 20122013 Annual Report on Form 10-K.
Recent Accounting Pronouncements:
FASB ASU No. 2013-11, "PresentationIncome Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists." The provisions of ASU No. 2013-11 require an entity to present an unrecognized tax benefit, or portion thereof, in the statement of financial position as a reduction to a deferred tax asset for a net operating loss carryforward or a tax credit carryforward, with certain exceptions related to availability. ASU No. 2013-11 is effective for interim and annual reporting periods beginning after December 15, 2013. The adoption of ASU No. 2013-11 did not have a material impact on the Company's consolidated financial statements.
FASB ASU No. 2014-04, Receivables—Troubled Debt Restructuring by Creditors (Subtopic 310-40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans Upon Foreclosure. The amendment intends to clarify the terms defining when an in substance foreclosure occurs, which determines when the receivable should be derecognized and the real estate property recognized. ASU No. 2014-04 will be effective for interim and annual periods beginning after December 31, 2014. ASU No. 2014-04 is not expected to have a material impact on the Company's consolidated financial statements.




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3.Business Combinations

The Company applies the acquisition method of accounting for business combinations under ASC 805 - Business Combinations. Under the acquisition method, the acquiring entity in a business combination recognizes 100 percent of the assets acquired and liabilities assumed at their acquisition date fair values. Management utilizes valuation techniques appropriate for the asset or liability being measured in determining these fair values. Any excess of the purchase price over amounts allocated to assets acquired, including identifiable intangible assets, and liabilities assumed is recorded as goodwill. Where amounts allocated to assets acquired and liabilities assumed is greater than the purchase price, a bargain purchase gain is recognized. Acquisition-related costs are expensed as incurred as merger and integration expense.
Acquisition of Foster Bankshares, Inc.     
On August 13, 2013, the Company completed the acquisition of Foster Bankshares, Inc. ("Foster"), the holding company of Foster Bank. The Company acquired Foster in order to expand its market in Illinois and into Virginia. Foster's primary subsidiary, Foster Bank, operated eight branches in Illinois and one branch in Virginia.
Under the terms of the acquisition agreement, Foster shareholders can elect to receive a cash price of $34.6703 per share or, for shareholders who qualified as accredited investors, 2.62771 shares of Company common stock for each share of Foster common stock. As of September 30, 2013,March 31, 2014, the Company issued 54,620180,300 shares of Company common stock in exchange for 20,790 shares of Foster common stock, paid $1.7 million for 49,49668,619 shares of Foster common stock and paid $1.9 million for 58,906 shares of Foster common stock. As of March 31, 2014, there were 61,7144,475 shares of Foster common stock that had not been redeemed. At September 30, 2013,redeemed, and the accrued liability for the unredeemed shares of Foster common sharesstock was $2.1 million, which was based on the cash conversion price.$155 thousand.
The consideration paid, the assets acquired, and the liabilities assumed are summarized in the following table:

(In thousands)
(In thousands)
Consideration paid:Consideration paid:  
BBCN common stock issued in exchange for Foster common stock$778
Cash paid for the redemption of Foster common stock1,716
Liability for unredeemed Foster common stock2,140
     Total consideration paid$4,634
BBCN common stock issued in exchange for Foster common stock$2,567
Cash paid for the redemption of Foster common stock1,922
Liability for unredeemed Foster common stock155
Total consideration paid$4,644
   
Assets Acquired:Assets Acquired:  
Cash and cash equivalents$42,883
Investment securities available for sale4,844
Loans, net245,558
FRB and FHLB stock1,714
OREO16,630
Premises and equipment4,733
Core deposit intangibles2,763
Deferred tax assets, net11,655
Other assets2,463
Cash and cash equivalents$42,883
Investment securities available for sale4,844
Loans receivable255,297
FRB and FHLB stock1,714
OREO14,251
Premises and equipment4,733
Core deposit intangibles2,763
Deferred tax assets, net21,211
Other assets2,353
Liabilities Assumed:Liabilities Assumed:  
Deposits(321,596)
Borrowings(18,045)
Subordinated debentures(15,309)
Other liabilities(3,324)
Deposits(321,596)
Borrowings(18,045)
Subordinated debentures(15,309)
Other liabilities(5,980)
Total identifiable net assetsTotal identifiable net assets$(25,031)$(10,881)
Excess of consideration paid over fair value of net assets acquired (goodwill)Excess of consideration paid over fair value of net assets acquired (goodwill)$29,665
$15,525

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The assets and liabilities of Foster were recorded on the consolidated balance sheet at estimated fair value on the acquisition date. The purchase price may change as additional information becomes available and when unredeemed Foster shares are redeemed. The fair values of the net deferred tax assets, loans and OREO acquired and certain liabilities assumed from Foster were

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provisional and adjustments to the provisional amounts may occur during the measurement period as the Company obtains additional information about the facts and circumstances that existed as of the acquisition date.

The $15.5 million of goodwill recognized in the Foster acquisition represents the future economic benefit arising from the acquisition including the creation of a platform that can support future operations and strengthening the Company's existing presence in the Chicago metropolitan area and expansion into the Washington, D.C. market. Goodwill is not amortized for book purposes and is not deductible for tax purposes.
Acquisition of Pacific International Bancorp, Inc.     
On February 15, 2013, the Company completed the acquisition of Pacific International Bancorp, Inc. ("PIB"), a Seattle based company, pursuant to an Agreement and Plan of Merger, dated October 22, 2012. The Company acquired PIB in order to increase the Company's presence in terms of branch offices and deposit market share in the Seattle market. PIB's primary subsidiary, Pacific International Bank, a Washington state-chartered bank, operated four bank branches in the Seattle metropolitan area.
In connection with the acquisition, the consideration paid, the assets acquired, and the liabilities assumed are summarized in the following table:
(In thousands)
(In thousands)
Consideration paid:Consideration paid: Consideration paid:
BBCN common stock issued$8,437
Cash in lieu of fractional shares paid to PIB stockholders1
Redemption of Preferred Stock7,475
     Total consideration paid$15,913
BBCN common stock issued$8,437
Cash in lieu of fractional shares paid to PIB stockholders1
Redemption of Preferred Stock7,475
Total consideration paid$15,913
   
Assets Acquired:Assets Acquired: Assets Acquired:
Cash and cash equivalents$25,968
Investment securities available for sale7,810
Loans, net131,589
FRB and FHLB stock1,829
OREO3,418
Deferred tax assets, net9,388
Other assets3,118
Cash and cash equivalents$25,968
Investment securities available for sale7,810
Loans receivable131,589
FRB and FHLB stock1,829
OREO3,418
Deferred tax assets, net9,886
Core deposit intangibles604
Other assets2,514
Liabilities Assumed:Liabilities Assumed: Liabilities Assumed:
Deposits(143,665)
Borrowings(14,698)
Subordinated debentures(4,108)
Other liabilities(5,074)
Deposits(143,665)
Borrowings(14,698)
Subordinated debentures(4,108)
Other liabilities(5,116)
Total identifiable net assetsTotal identifiable net assets$15,575
$16,031
Excess of consideration paid over fair value of net assets acquired (goodwill)$338
Bargain purchase gain$118

The bargain purchase gain of $29.7 million and $338118 thousand of goodwill recognizedfrom the PIB acquisition was recorded in other income in the Foster and PIB acquisitions, respectively, represent the future economic benefit arising from the acquisitions including the creationConsolidated Statements of a platform that can support future operations and strengthening the Company's existing presence in the Chicago metropolitan and Pacific Northwest markets and expansion into the Virginia market. Goodwill is not amortized for book purposes and is not deductible for tax purposes.Income.

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Acquired Loans
The Company estimated the fair value for most loans acquired by utilizing a methodology wherein loans with comparable characteristics were aggregated by type of collateral, remaining maturity and repricing terms. Cash flows for each pool were

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determined by estimating future credit losses and prepayment rates. Projected monthly cash flows were then discounted using a risk-adjusted market rate for similar loans to determine the fair value of each pool. To estimate the fair value of the remaining loans, management analyzed the value of the underlying collateral of the loans, assuming the fair values of the loans were derived from the eventual sale of the collateral. The value of the collateral was based on recently completed appraisals adjusted to the valuation date based on recognized industry indices. The Company discounted those values using market derived rates of return, with consideration given to the period of time and costs associated with the foreclosure and disposition of the collateral. There was no carryover of the allowance for loan losses associated with the loans the Company acquired as the loans were initially recorded at fair value. The following table presents loans acquired with deteriorated credit quality as of the date of acquisition:
 Foster PIB
 (In thousands)
Contractually required principal and interest at acquisition$150,430
 $54,462
Contractual cash flows not expected to be collected (nonaccretable discount)37,447
 9,687
Expected cash flows at acquisition112,983
 44,775
Interest component of expected cash flows (accretable discount)14,928
 4,945
Fair value of acquired impaired loans$98,055
 $39,830

The outstanding principal balances and the related carrying amounts of the acquired loans included in the statement of financial condition are $296.1$249.5 million and $239.0$206.0 million, respectively for Foster and $117.8105.3 million and $112.688.8 million, respectively for PIB, as of September 30, 2013.March 31, 2014.
Pro Forma Information
The operating results of Foster and PIB from the dates of acquisitions through September 30, 2013March 31, 2014 are included in the Condensed Consolidated Statement of Income for 20132014 and are not material to the total consolidated operating results for the three and nine month periods ended September 30, 2013.2013.
The following unaudited combined pro forma information presents the operating results for the three and nine months ended September 30, 2013March 31, 2014 and 20122013, as if the Foster and PIB acquisitions had occurred on January 1, 2012:2013:

Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended March 31,
2013 2012 2013 20122014 2013
(In thousands, except share data)(In thousands, except share data)
Net Interest income$67,498
 $64,769
 $198,315
 $199,562
$64,966
 $69,576
Net income$25,277
 $15,475
 $64,211
 $55,754
$22,196
 $13,847
          
Pro forma earnings per share:          
Basic$0.32
 $0.20
 $0.81
 $0.64
$0.28
 $0.18
Diluted0.32
 0.20
 0.81
 0.64
0.28
 0.18
The above pro forma results are presented for illustrative purposes only and are not intended to represent or be indicative of the actual results of operations of the merged companies that would have been achieved had the acquisitionacquisitions occurred at January 1, 2012,2013, nor are they intended to represent or be indicative of future results of operations. The pro forma results do not include expected operating cost savings as a result of the acquisitions. These pro forma results require significant estimates and judgments particularly as it relates to valuation and accretion of income associated with acquired loans.


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Acquisition-Related Expenses
The Company incurred acquisition-related expenses associated with the Foster and PIB acquisitions which were reflected onin the Company's income statement.Condensed Consolidated Statements of Income. During the three and nine months ended September 30, 2013March 31, 2014, the Company incurred $1.2 million142 thousand and $1.5 million31 thousand, respectively, in expenses related to the Foster acquisition.and PIB acquisitions, respectively. During the three and nine months ended

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September 30, March 31, 2013,, the Company incurred $29 thousand and $1.1$1.3 million, respectively, in expenses related to the PIB acquisition. These expenses are comprised primarily of salaries and benefits, occupancy expenses, professional services and other noninterest expense.


    
4.Stock-Based Compensation
The Company has a stock-based incentive plan, the 2007 BBCN Bancorp Equity Incentive Plan (the “2007 Plan”). The 2007 Plan, approved by our stockholders on May 31, 2007, was amended and restated on July 25, 2007 and again on December 1, 2011. The 2007 Plan provides for grants of stock options, stock appreciation rights (“SARs”), restricted stock, performance shares and performance units (sometimes referred to individually or collectively as “awards”) to non-employee directors, officers, employees and consultants of the Company. Stock options may be either incentive stock options (“ISOs”), as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), or nonqualified stock options (“NQSOs”).
The 2007 Plan gives the Company flexibility to (i) attract and retain qualified non-employee directors, executives and other key employees and consultants with appropriate equity-based awards; (ii) motivate high levels of performance; (iii) recognize employee contributions to the Company’s success; and (iv) align the interests of the 2007 Plan participants with those of the Company’s stockholders. The exercise price for shares under an ISO may not be less than 1%100% of fair market value on the date the award is granted under Code Section 422. Similarly, under the terms of the 2007 Plan the exercise price for SARs and NQSOs may not be less than 1%100% of fair market value on the date of grant. Performance units are awarded to a participant at the market price of the Company’s common stock on the date of award (after the lapse of the restriction period and the attainment of the performance criteria). No minimum exercise price is prescribed for performance shares and restricted stock awarded under the 2007 Plan.
ISOs, SARs and NQSOs have vesting periods of three to five years and have 10-year contractual terms. Restricted stock, performance shares, and performance units will be granted with a restriction period of not less than one year from the grant date for performance-based awards and not more than three years from the grant date for time-based vesting of grants. Compensation expense for awards is recognized over the vesting period. 
The Company has another stock-based incentive plan, the Center Financial Corporation 2006 Stock Incentive Plan, adopted April 12, 2006, as amended and restated June 13, 2007 (the "2006 Plan"), which was assumed by the Company during the merger with Center Bank.
The 2006 Plan provides for the granting of incentive stock options to officers and employees and non-qualified stock options and restricted stock awards to employees (including officers) and non-employee directors. The option prices of all options granted under the 2006 Plan must be not less than 1%100% of the fair market value at the date of grant. All options granted generally vest at the rate of 0.2%20% per year except that the options granted to the non-employee directors vest at the rate of 0%33% per year. All options not exercised generally expire ten years after the date of grant.
Under the 2007 and 2006 Plans, 2,739,7032,752,912 shares were available for future grants as of September 30, 2013March 31, 2014.
The total shares reserved for issuance will serve as the underlying value for all equity awards under the 2007 and 2006 Plans. With the exception of the shares underlying stock options and restricted stock awards, the board of directors may choose to settle the awards by paying the equivalent cash value or by delivering the appropriate number of shares.
The following is a summary of stock option activity under the 2007 and 2006 Plans for the ninethree months ended September 30,March 31, 20132014:
 

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Number of
Shares
 
Weighted-
Average
Exercise
Price Per
Share
 
Weighted-
Average
Remaining
Contractual
Life (Years)
 
Aggregate
Intrinsic
Value
Number of
Shares
 
Weighted-
Average
Exercise
Price Per
Share
 
Weighted-
Average
Remaining
Contractual
Life (Years)
 
Aggregate
Intrinsic
Value
Outstanding - January 1, 2013797,805
 $
  
Outstanding - January 1, 2014420,594
 $20.44
  
Granted
 
  
 
  
Exercised(226,242) 8.64
  
 
  
Expired(29,267) 15.90
  (21,382) 17.57
  
Forfeited(51,702) 24.20
  
 
  
Outstanding - September 30, 2013490,594
 $19.67
 3.14 $
Options exercisable - September 30, 2013490,594
 $19.67
 3.10 $
Outstanding - March 31, 2014399,212
 $20.60
 2.67 $138,215
Options exercisable - March 31, 2014399,212
 $20.60
 2.67 $138,215

The following is a summary of restricted and performance unit activity under the 2007 and 2006 Plans for the ninethree months ended September 30,March 31, 20132014:
 
Number of
Shares
 
Weighted-
Average
Grant
Date Fair
Value
 
Number of
Shares
 
Weighted-
Average
Grant
Date Fair
Value
Outstanding - January 1, 2013512,183
 $9.78
 
Outstanding - January 1, 2014200,165
 $11.57
Granted58,000
 12.86
 24,000
 16.57
Vested(306,541) 10.17
 (53,126) 10.78
Forfeited(83,009) 10.79
 (17,413) 12.13
Outstanding - September 30, 2013180,633
 $10.79
 
Outstanding - March 31, 2014153,626
 $12.62

The total fair value of performance units vested for the ninethree months ended September 30, 2013March 31, 2014 and 20122013 was $3.9 million781 thousand and $100718 thousand, respectively.
The amount charged against income related to stock-based payment arrangements was $119104 thousand and $818709 thousand for the three months ended September 30, 2013March 31, 2014 and 20122013, respectively. For the nine months ended September 30, 2013 and 2012, $1.1 million and $2.0 million, respectively, was charged against income related to stock-based payment arrangements.
The income tax benefit recognized was $5043 thousand and $32867 thousand, for the three months ended September 30, 2013March 31, 2014 and 2012, respectively, and $474 thousand and $805 thousand for the nine months ended September 30, 2013 and 2012, respectively.
At September 30, 2013March 31, 2014, total unrecognized compensation expense related to non-vested stock option grants and restricted and performance units aggregated $1.51.8 million, and is expected to be recognized over a weighted average vesting period of 2.553.10 years.


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5.Earnings Per Share (“EPS”)
Basic EPS does not reflect the possibility of dilution that could result from the issuance of additional shares of common stock upon exercise or conversion of outstanding securities, and is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if stock options or other contracts to issue common stock were exercised or converted to common stock that would then share in our earnings. For the three months ended September 30, 2013March 31, 2014 and 20122013, stock options and restricted shares awards for approximately 126 thousand75,129 shares and 565 thousand shares of common stock, respectively, were excluded in computing diluted earnings per common share because they were antidilutive. For the nine months ended September 30, 2013 and 2012, stock options and restricted shares awards for approximately 172 thousand shares and 564 thousand565,055 shares of common stock, respectively, were excluded in computing diluted earnings per common share because they were antidilutive. Additionally, warrants, issued pursuant to the Company's participation in the U.S. Treasury's TARP Capital Purchase Plan, to purchase 51 thousand18,392 shares and 28 thousand18,044 shares of common stock (related to the TARP Capital Purchase Plan) were antidilutive and excluded for the three and nine months ended September 30, 2013, respectively. Warrants to purchase 337 thousandMarch 31, 2014 shares common stock (related to the TARP Capital Purchase Plan) were antidilutive and excluded for the three and nine months ended September 30, 2012.2013, respectively.
The following table shows the computation of basic and diluted EPS for the three months ended September 30, 2013March 31, 2014 and 20122013.
 
 Three Months Ended September 30,
 2013
2012
 
Net income
available to
common
stockholders
(Numerator)
 
Shares
(Denominator)
 
Per
Share
(Amount)
 
Net income
available to
common
stockholders
(Numerator)
 
Shares
(Denominator)
 
Per
Share
(Amount)
 (In thousands, except share and per share data)
Net income as reported$23,552
     $18,398
    
Less: preferred stock dividends and accretion of preferred stock discount
     
    
Basic EPS - common stock$23,552
 79,223,636
 $0.30
 $18,398
 78,015,960
 $0.24
Effect of Dilutive Securities:           
Stock Options and Performance Units  60,188
     87,835
  
Common stock warrants  51,041
     
  
Diluted EPS - common stock$23,552
 79,334,865
 $0.30
 $18,398
 78,103,795
 $0.24
 Three Months Ended March 31,
 2014
2013
 
Net income
(Numerator)
 
Shares
(Denominator)
 
Per
Share
(Amount)
 
Net income
(Numerator)
 
Shares
(Denominator)
 
Per
Share
(Amount)
 (In thousands, except share and per share data)
Basic EPS - common stock$22,196
 79,489,579
 $0.28
 $17,461
 78,389,434
 $0.22
Effect of dilutive securities:           
Stock options and performance units  58,591
     79,311
  
Common stock warrants  91,669
     11,926
  
Diluted EPS - common stock$22,196
 79,639,839
 $0.28
 $17,461
 78,480,671
 $0.22

 Nine Months Ended September 30,
 2013 2012
 
Net income
available to
common
stockholders
(Numerator)
 
Shares
(Denominator)
 
Per
Share
(Amount)
 
Net income
available to
common
stockholders
(Numerator)
 
Shares
(Denominator)
 
Per
Share
(Amount)
 (In thousands, except share and per share data)
Net income as reported$63,684
     $61,696
    
Less: preferred stock dividends and accretion of preferred stock discount
     (5,640)    
Basic EPS - common stock$63,684
 78,914,360
 $0.81
 $56,056
 78,004,458
 $0.72
Effect of Dilutive Securities:           
Stock Options and Performance Units  179,206
     77,601
  
Common stock warrants  28,494
     
  
Diluted EPS - common stock$63,684
 79,122,060
 $0.80
 $56,056
 78,082,059
 $0.72



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6.    Securities Available for Sale
The following is a summary of securities available for sale as of the dates indicated:
 
At September 30, 2013At March 31, 2014
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair Value
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair Value
(In thousands)(In thousands)
Debt securities:              
U.S. Government agency and U.S. Government sponsored enterprises              
Collateralized mortgage obligations$290,061
 $2,001
 $(7,171) $284,891
$283,963
 $1,509
 $(6,118) $279,354
Mortgage-backed securities396,877
 4,947
 (5,090) 396,734
420,159
 4,352
 (5,550) 418,961
Trust preferred securities4,513
 
 (807) 3,706
4,520
 
 (720) 3,800
Municipal bonds5,692
 368
 (44) 6,016
5,681
 382
 (44) 6,019
Total debt securities697,143
 7,316
 (13,112) 691,347
714,323
 6,243
 (12,432) 708,134
Mutual funds17,425
 
 (206) 17,219
17,425
 
 (330) 17,095
$714,568
 $7,316
 $(13,318) $708,566
$731,748
 $6,243
 $(12,762) $725,229
              
At December 31, 2012At December 31, 2013
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair Value
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair Value
(In thousands)(In thousands)
Debt securities:              
U.S. Government agency and U.S. Government sponsored enterprises              
Collateralized mortgage obligations$249,373
 $5,649
 $(110) $254,912
$286,608
 $1,104
 $(13,611) $274,101
Mortgage-backed securities415,925
 10,277
 (662) 425,540
409,165
 3,620
 (7,789) 404,996
Trust preferred securities4,502
 
 (665) 3,837
4,516
 
 (819) 3,697
Municipal bonds4,506
 612
 
 5,118
5,687
 319
 (70) 5,936
Total debt securities674,306
 16,538
 (1,437) 689,407
705,976
 5,043
 (22,289) 688,730
Mutual funds14,710
 286
 
 14,996
17,425
 
 (404) 17,021
$689,016
 $16,824
 $(1,437) $704,403
$723,401
 $5,043
 $(22,693) $705,751
 
As of September 30, 2013March 31, 2014 and December 31, 20122013, there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of stockholders' equity.
For the three months ended September 30,March 31, 20132014 and 20122013, $2.0 million and $3.411.1 million of gross unrealized gains respectively, were included in accumulated other comprehensive income during the periods. For the nine months ended September 30,2013and 2012, $21.43.7 million of gross unrealized losses, and $3.9 million of gross unrealized gains, respectively, were included in accumulated other comprehensive income during the periods. A total of $0 and $133$54 thousand of net gains on sales of securities were reclassified out of accumulated other comprehensive income into earnings for the three months ended September 30,March 31, 2014 and 2013, and 2012, respectively. A total of $54 thousand and $949 thousand of net gains on sales of securities were reclassified out of accumulated other comprehensive income into earnings for the nine months ended September 30,2013 and 2012, respectively, as a result of securities being sold.





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The proceeds from sales of securities and the associated gross gains and losses recorded in earnings are listed below:
Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended March 31,
2013 2012 2013 20122014 2013
(In thousands)(In thousands)
Proceeds$
 $26,563
 $6,636
 $28,446
$
 $6,636
Gross gains
 132
 54
 948

 54
Gross losses
 
 
 

 


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The amortized cost and estimated fair value of debt securities at September 30, 2013March 31, 2014, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately.
 
Amortized
Cost
 
Estimated
Fair Value
Amortized
Cost
 
Estimated
Fair Value
(In thousands)(In thousands)
Available for sale:      
Due within one year$
 $
$
 $
Due after one year through five years340
 351
340
 349
Due after five years through ten years3,883
 4,213
3,883
 4,230
Due after ten years5,982
 5,158
5,978
 5,241
U.S. Government agency and U.S. Government sponsored enterprises      
Collateralized mortgage obligations290,061
 284,891
283,963
 279,354
Mortgage-backed securities396,877
 396,734
420,159
 418,960
Mutual funds17,425
 17,219
17,425
 17,095
$714,568
 $708,566
$731,748
 $725,229

Securities with carrying values of approximately $362.3349.2 million and $338.6360.6 million at September 30, 2013March 31, 2014 and December 31, 20122013, respectively, were pledged to secure public deposits, various borrowings and for other purposes as required or permitted by law.
















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The following table shows our investments’ gross unrealized losses and estimated fair value, aggregated by investment category and the length of time that the individual securities have been in a continuous unrealized loss position as of the dates indicated.
At September 30, 2013At March 31, 2014
Less than 12 months 12 months or longer TotalLess than 12 months 12 months or longer Total
Description of
Securities
Number of
Securities
 Fair Value 
Gross
Unrealized
Losses
 
Number of
Securities
 Fair Value 
Gross
Unrealized
Losses
 
Number of
Securities
 Fair Value 
Gross
Unrealized
Losses
Number of
Securities
 Fair Value 
Gross
Unrealized
Losses
 
Number of
Securities
 Fair Value 
Gross
Unrealized
Losses
 
Number of
Securities
 Fair Value 
Gross
Unrealized
Losses
 (In thousands) (In thousands)
Collateralized mortgage obligations*17
 $180,322
 $(7,170) 
 $
 $
 17
 $180,322
 $(7,170)10
 $103,382
 $(2,408) 9
 $94,998
 $(3,710) 19
 $198,380
 $(6,118)
Mortgage-backed securities*22
 117,369
 (4,683) 7
 14,647
 (407) 29
 132,016
 (5,090)19
 146,427
 (2,565) 10
 40,681
 (2,985) 29
 187,108
 (5,550)
Trust preferred securities
 
 
 1
 3,706
 (807) 1
 3,706
 (807)
 
 
 1
 3,800
 (720) 1
 3,800
 (720)
Municipal bonds1
 1,143
 (44) 
 
 
 1
 1,143
 (44)1
 1,132
 (44) 
 
 
 1
 1,132
 (44)
Mutual funds1
 13,219
 (207) 
 
 
 1
 13,219
 (207)1
 13,095
 (330) ���
 
 
 1
 13,095
 (330)
41
 $312,053
 $(12,104) 8
 $18,353
 $(1,214) 49
 $330,406
 $(13,318)31
 $264,036
 $(5,347) 20
 $139,479
 $(7,415) 51
 $403,515
 $(12,762)
* Investments in U.S. Government agency and U.S. Government sponsored enterprises


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At December 31, 2012At December 31, 2013
Less than 12 months 12 months or longer TotalLess than 12 months 12 months or longer Total
Description of
Securities
Number of
Securities
 Fair Value 
Gross
Unrealized
Losses
 
Number of
Securities
 Fair Value 
Gross
Unrealized
Losses
 
Number of
Securities
 Fair Value 
Gross
Unrealized
Losses
Number of
Securities
 Fair Value 
Gross
Unrealized
Losses
 
Number of
Securities
 Fair Value 
Gross
Unrealized
Losses
 
Number of
Securities
 Fair Value 
Gross
Unrealized
Losses
 (In thousands) (In thousands)
Collateralized mortgage obligations*3
 $18,009
 $(110) 
 $
 $
 3
 $18,009
 $(110)21
 $198,713
 $(12,460) 3
 $13,381
 $(1,151) 24
 $212,094
 $(13,611)
Mortgage-backed securities*7
 32,406
 (597) 3
 8,251
 (65) 10
 40,657
 (662)29
 203,276
 (7,293) 7
 14,793
 (496) 36
 218,069
 (7,789)
Trust Preferred securities
 
 
 1
 3,837
 (665) 1
 3,837
 (665)1
 1,112
 (70) 1
 3,697
 (819) 2
 4,809
 (889)
Mutual funds1
 13,021
 (404) 
 
 
 1
 13,021
 (404)
10
 $50,415
 $(707) 4
 $12,088
 $(730) 14
 $62,503
 $(1,437)52
 $416,122
 $(20,227) 11
 $31,871
 $(2,466) 63
 $447,993
 $(22,693)
* Investments in U.S. Government agency and U.S. Government sponsored enterprises

The Company evaluates securities for other-than-temporary-impairment ("OTTI") on at least a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to the financial condition and near-term prospects of the issuer, the length of time and the extent to which the fair values of the securities have been less than the cost of the securities, and management's intention to sell, or whether it is more likely than not that management will be required to sell a security in an unrealized loss position before recovery of its amortized cost basis. In analyzing an issuer’s financial condition, the Company considers, among other considerations, whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s financial condition.
The Company has certain trust preferred securities and U.S. Government agency and U.S. Government sponsored enterprise collateralized mortgage obligations that were in a continuous unrealized loss position for twelve months or longer as of September 30, 2013.March 31, 2014. The trust preferred securities at September 30, 2013March 31, 2014 had an amortized cost of $4.5 million and an unrealized loss of $807720 thousand at September 30, 2013March 31, 2014. The trust preferred securities are scheduled to mature in May 2047. These securities are rated investment grade and there are no credit quality concerns with the obligor. Certain of the Company's U.S. Government agency and U.S. Government sponsored enterprise investments were in an unrealized loss position at September 30, 2013.March 31, 2014. All of the Company's U.S. Government agency and U.S. Government sponsored enterprise investments have high credit ratings ("AA"of "AA" grade or better).better. Interest on the trust preferred securities and the U.S. Government agency and

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U.S. Government sponsored enterprise investments have been paid as agreed, and management believes this will continue in the future and that the securities will be repaid in full as scheduled. The market value declines for these securities are deemed to be due to the current market volatility and are not reflective of management’s expectations of its ability to fully recover these investments, which may be at maturity. For these reasons, no OTTI was recognized on the trust preferred securities and the U.S. Government agency and U.S. Government sponsored collateralized mortgage obligations and mortgage-backed securities that are in an unrealized loss position at September 30, 2013March 31, 2014.
The Company considers the losses on the investments in unrealized loss positions at September 30, 2013March 31, 2014 to be temporary based on: 1) the likelihood of recovery; 2) the information relative to the extent and duration of the decline in market value; and 3) the Company’s intention not to sell, and management's determination that it is more likely than not that management will not be required to sell a security in an unrealized loss position before recovery of its amortized cost basis.



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7.Loans Receivable and Allowance for Loan Losses
The following is a summary of loans receivable by major category:
September 30, 2013 December 31, 2012March 31, 2014 December 31, 2013
(In thousands)(In thousands)
Loan portfolio composition      
Real estate loans:      
Residential$10,294
 $9,247
$11,035
 $10,039
Commercial & industrial3,652,815
 3,100,466
3,947,925
 3,821,163
Construction73,116
 65,045
76,038
 72,856
Total real estate loans3,736,225
 3,174,758
4,034,998
 3,904,058
Commercial business932,955
 921,556
923,026
 949,093
Trade finance135,889
 152,070
135,638
 124,685
Consumer and other95,693
 49,954
98,895
 98,507
Total loans outstanding4,900,762
 4,298,338
5,192,557
 5,076,343
Less: deferred loan fees(1,823) (2,086)(1,763) (2,167)
Gross loans receivable4,898,939
 4,296,252
Loans receivable5,190,794
 5,074,176
Less: allowance for loan losses(65,715) (66,941)(65,699) (67,320)
Loans receivable, net$4,833,224
 $4,229,311
Loans receivable, net of allowance for loan losses$5,125,095
 $5,006,856

OurThe loan portfolio is made up of four segments: real estate loans, commercial business, trade finance and consumer and other. These segments are further segregated between loans accounted for under the amortized cost method ("Legacy Loans") and acquired loans that were originally recorded at fair value with no carryover of the related pre-acquisition allowance for loan losses ("Acquired Loans"). The Acquired Loans are further segregated between Acquired Credit Impaired Loans (loans with credit deterioration on the acquisition date and accounted for under ASC 310-30, or "ACILs") and Acquired Performing Loans (loans that were pass graded on the acquisition date and the fair value adjustment is amortized over the contractual life under ASC 310-20, or "APLs").

The following table presents changes in the accretable discount on the ACILs for the three and nine months ended September 30, 2013March 31, 2014 and 20122013:
Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended March 31,
2013 2012 2013 20122014 2013
(In thousands)(In thousands)
Balance at beginning of period$37,090
 $22,966
 $18,651
 $31,999
$47,398
 $18,652
Additions due to acquisitions during the period14,928
 
 19,873
 

 4,945
Accretion(4,250) (3,415) (11,281) (10,866)(4,867) (3,446)
Changes in expected cash flows5,689
 516
 26,214
 (1,066)(9,948) 3,259
Balance at end of period$53,457
 $20,067
 $53,457
 $20,067
$32,583
 $23,410

On the acquisition date, the amount by which the undiscounted expected cash flows exceed the estimated fair value of the ACILs is the “accretable yield”.yield.” The accretable yield is then measured at each financial reporting date and represents the difference between the remaining undiscounted expected cash flows and the current carrying value of the loans. The accretable yield will change from period to period due to the following: 1) estimates of the remaining life of acquired loans will affect the amount of future interest income; 2) indices for variable rates of interest on ACILs may change; and 3) estimates of the amount of the contractual principal and interest that will not be collected (nonaccretable difference) may change.


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The following tables detail the activity in the allowance for loan losses by portfolio segment for the three and nine months ended September 30, 2013March 31, 2014 and 2012:2013:
 
  
Legacy Acquired TotalLegacy Acquired Total
Real Estate Commercial Business Trade Finance Consumer and Other Real Estate Commercial Business Trade Finance Consumer and Other Real Estate Commercial Business Trade Finance Consumer and Other Real Estate Commercial Business Trade Finance Consumer and Other 
(In thousands)(In thousands)
Three Months Ended September 30, 2013
Three Months Ended March 31, 2014Three Months Ended March 31, 2014
Balance, beginning of period$41,932
 $16,520
 $2,335
 $528
 $9,632
 $654
 $
 $74
 $71,675
$40,068
 $16,796
 $2,653
 $461
 $6,482
 $796
 $
 $64
 $67,320
Provision (credit) for loan losses545
 (2,085) 178
 52
 1,221
 830
 
 3
 744
(1,414) 2,547
 348
 7
 451
 1,011
 
 76
 3,026
Loans charged off(528) (774) 
 
 (5,668) (813) 
 (7) (7,790)(87) (3,725) (57) (1) (95) (1,220) 
 (78) (5,263)
Recoveries of charge offs62
 958
 
 50
 5
 10
 
 1
 1,086
19
 590
 
 
 
 6
 
 1
 616
Balance, end of period$42,011
 $14,619
 $2,513
 $630
 $5,190
 $681
 $
 $71
 $65,715
$38,586
 $16,208
 $2,944
 $467
 $6,838
 $593
 $
 $63
 $65,699
Nine Months Ended September 30, 2013
Balance, beginning of period$41,505
 $16,490
 $2,349
 $658
 $4,718
 $1,115
 $3
 $103
 $66,941
Provision (credit) for loan losses2,557
 (1,004) 190
 (96) 6,308
 1,126
 (3) (28) 9,050
Loans charged off(2,209) (2,370) (26) (9) (5,843) (1,621) 
 (41) (12,119)
Recoveries of charge offs158
 1,503
 0
 77
 7
 61
 
 37
 1,843
Balance, end of period$42,011
 $14,619
 $2,513
 $630
 $5,190
 $681
 $
 $71
 $65,715

 
  
Legacy Acquired TotalLegacy Acquired Total
Real Estate Commercial Business Trade Finance Consumer and Other Real Estate Commercial Business Trade Finance Consumer and Other Real Estate Commercial Business Trade Finance Consumer and Other Real Estate Commercial Business Trade Finance Consumer and Other 
(In thousands)(In thousands)
Three Months Ended September 30, 2012
Three Months Ended March 31, 2013Three Months Ended March 31, 2013
Balance, beginning of period$37,237
 $20,880
 $3,164
 $1,115
 $2,283
 $397
 $340
 $89
 $65,505
$41,505
 $16,490
 $2,349
 $658
 $4,718
 $1,115
 $3
 $103
 $66,941
Provision (credit) for loan losses5,499
 988
 (495) (418) 750
 784
 (157) (51) 6,900
3,069
 39
 (625) (129) 5,320
 (189) (3) 24
 7,506
Loans charged off(1,832) (5,574) 
 (2) (242) (118) 
 (1) (7,769)(905) (183) (26) (7) (151) (124) 
 (33) (1,429)
Recoveries of charge offs973
 275
 
 24
 
 15
 
 29
 1,316
40
 176
 
 16
 2
 7
 
 9
 250
Balance, end of period$41,877
 $16,569
 $2,669
 $719
 $2,791
 $1,078
 $183
 $66
 $65,952
$43,709
 $16,522
 $1,698
 $538
 $9,889
 $809
 $
 $103
 $73,268
Nine Months Ended September 30, 2012
Balance, beginning of period$39,040
 $20,681
 $1,786
 $445
 $
 $
 $
 $
 $61,952
Provision (credit) for loan losses6,831
 3,203
 823
 700
 2,899
 1,701
 483
 42
 16,682
Loans charged off(6,095) (8,470) 
 (485) (411) (755) (300) (244) (16,760)
Recoveries of charge offs2,101
 1,155
 60
 59
 303
 132
 
 268
 4,078
Balance, end of period$41,877
 $16,569
 $2,669
 $719
 $2,791
 $1,078
 $183
 $66
 $65,952


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The following tables disaggregate the allowance for loan losses and the loans receivablesoutstanding by impairment methodology at September 30, 2013March 31, 2014 and December 31, 20122013:
 March 31, 2014
 Legacy Acquired Total
 Real Estate Commercial Business Trade Finance Consumer and Other Real Estate Commercial Business Trade Finance Consumer and Other 
 (In thousands)
Allowance for loan losses:
Individually evaluated for impairment$4,248
 $4,121
 $761
 $
 $555
 $509
 $
 $
 $10,194
Collectively evaluated for impairment34,338
 12,087
 2,183
 467
 723
 84
 
 63
 49,945
ACILs
 
 
 
 5,560
 
 
 
 5,560
Total$38,586
 $16,208
 $2,944
 $467
 $6,838
 $593
 $
 $63
 $65,699
                  
Loans outstanding:                 
Individually evaluated for impairment$50,681
 $37,565
 $6,263
 $525
 $23,274
 $2,574
 $
 $952
 $121,834
Collectively evaluated for impairment3,257,964
 769,299
 126,364
 36,112
 563,265
 71,138
 
 29,720
 4,853,862
ACILs
 
 
 
 139,814
 42,450
 3,011
 31,586
 216,861
Total$3,308,645
 $806,864
 $132,627
 $36,637
 $726,353
 $116,162
 $3,011
 $62,258
 $5,192,557

 September 30, 2013
 Legacy Acquired Total
 Real Estate Commercial Business Trade Finance Consumer and Other Real Estate Commercial Business Trade Finance Consumer and Other 
 (In thousands)
Allowance for loan losses:
Individually evaluated for impairment$5,516
 $2,753
 $794
 $90
 $1,202
 $680
 $
 $
 $11,035
Collectively evaluated for impairment36,495
 11,866
 1,719
 540
 10
 1
 
 71
 50,702
Acquired Credit Impaired Loans
 
 
 
 3,978
 
 
 
 3,978
Total$42,011
 $14,619
 $2,513
 $630
 $5,190
 $681
 $
 $71
 $65,715
                  
Loans outstanding:                 
Individually evaluated for impairment$41,343
 $26,683
 $6,938
 $544
 $20,023
 $2,892
 $
 $770
 $99,193
Collectively evaluated for impairment2,873,167
 749,597
 128,951
 30,246
 651,528
 103,674
 
 36,994
 4,574,157
Acquired Credit Impaired Loans
 
 
 
 150,164
 50,109
 
 27,139
 227,412
Total$2,914,510
 $776,280
 $135,889
 $30,790
 $821,715
 $156,675
 $
 $64,903
 $4,900,762

December 31, 2012December 31, 2013
Legacy Acquired TotalLegacy Acquired Total
Real Estate Commercial Business Trade Finance Consumer and Other Real Estate Commercial Business Trade Finance Consumer and Other Real Estate Commercial Business Trade Finance Consumer and Other Real Estate Commercial Business Trade Finance Consumer and Other 
(In thousands)(In thousands)
Allowance for loan losses:
Individually evaluated for impairment$4,723
 $3,084
 $96
 $
 $183
 $1,074
 $
 $
 $9,160
$5,578
 $5,183
 $159
 $32
 $1,092
 $622
 $
 $
 $12,666
Collectively evaluated for impairment36,782
 13,406
 2,253
 658
 
 41
 3
 103
 53,246
34,490
 11,613
 2,494
 429
 612
 174
 
 64
 49,876
Acquired Credit Impaired Loans
 
 
 
 4,535
 
 
 
 4,535
ACILs
 
 
 
 4,778
 
 
 
 4,778
Total$41,505
 $16,490
 $2,349
 $658
 $4,718
 $1,115
 $3
 $103
 $66,941
$40,068
 $16,796
 $2,653
 $461
 $6,482
 $796
 $
 $64
 $67,320
                                  
Loans outstanding:                                  
Individually evaluated for impairment$37,394
 $23,951
 $6,199
 $536
 $17,951
 $3,323
 $
 $802
 $90,156
$49,177
 $37,314
 $5,692
 $535
 $19,992
 $2,792
 $
 $767
 $116,269
Collectively evaluated for impairment2,387,080
 729,904
 144,173
 27,284
 628,449
 114,621
 242
 18,257
 4,050,010
3,076,924
 778,350
 117,249
 32,421
 613,696
 84,325
 
 31,802
 4,734,767
Acquired Credit Impaired Loans
 
 
 
 103,884
 49,757
 1,456
 3,075
 158,172
ACILs
 
 
 
 144,269
 46,312
 1,744
 32,982
 225,307
Total$2,424,474
 $753,855
 $150,372
 $27,820
 $750,284
 $167,701
 $1,698
 $22,134
 $4,298,338
$3,126,101
 $815,664
 $122,941
 $32,956
 $777,957
 $133,429
 $1,744
 $65,551
 $5,076,343
As of September 30, 2013March 31, 2014 and December 31, 20122013, the liability for unfunded commitments was $802926 thousand at both dates. Three Months Ended September 30,2013and $885 thousand, respectively. For the three months ended March 31, 2014 and 20122013, the recognized provision for credit losses related to unfunded commitments was $041 thousand and $0 thousand, respectively. For the nine months ended September 30, 2013 and 2012, the recognized provision for credit losses related to unfunded commitments was $0 and $116 thousand0, respectively.

2522

Table of Contents

The recorded investment in individually impaired loans was as follows:
September 30, 2013 December 31, 2012March 31, 2014 December 31, 2013
(In thousands)(In thousands)
With Allocated Allowance   
With allocated allowance   
Without charge off$71,634
 $65,526
$70,845
 $85,920
With charge off966
 2,599
483
 851
With No Allocated Allowance   
With no allocated allowance   
Without charge off20,451
 17,536
41,383
 23,160
With charge off6,142
 4,495
9,123
 6,338
Allowance on Impaired Loans(11,035) (9,160)
Impaired Loans, net of allowance$88,158
 $80,996
Allowance on impaired loans(10,194) (12,666)
Impaired loans, net of allowance$111,640
 $103,603


2623

Table of Contents

The following tables detail impaired loans (Legacy and Acquired)APLs that became impaired subsequent to being acquired) as of September 30, 2013March 31, 2014 and December 31, 20122013 and for the three and nine months ended September 30, 2013March 31, 2014 and September 30, 2012March 31, 2013 and for the year ended December 31, 20122013. Loans with no related allowance for loan losses are believed by management to have adequate collateral securing their carrying value.
 
  As of September 30, 2013 For the Nine Months Ended September 30, 2013 For the Three Months Ended September 30, 2013
Total Impaired Loans Recorded Investment* Unpaid Contractual Principal Balance 
Related
Allowance
 
Average
Recorded Investment*
 Interest Income Recognized during Impairment Average Recorded Investment* Interest Income Recognized during Impairment
  (In thousands)
With Related Allowance:              
Real Estate—Residential $
 $
 $
 $
 $
 $
 $
Real Estate—Commercial              
Retail 9,011
 9,552
 1,298
 7,900
 172
 9,221
 76
Hotel & Motel 12,009
 12,833
 2,884
 11,310
 413
 12,056
 138
Gas Station & Car Wash 2,171
 2,236
 415
 1,826
 46
 2,017
 15
Mixed Use 938
 959
 224
 1,152
 33
 1,378
 10
Industrial & Warehouse 8,442
 8,442
 883
 8,770
 171
 10,940
 44
Other 5,749
 6,511
 1,014
 9,717
 165
 5,765
 55
Real Estate—Construction 
 
 
 
 
 
 
Commercial Business 26,798
 29,083
 3,433
 25,096
 947
 25,881
 306
Trade Finance 6,938
 6,966
 794
 5,241
 228
 3,939
 80
Consumer and Other 544
 544
 90
 302
 17
 548
 6
  $72,600
 $77,126
 $11,035
 $71,314
 $2,192
 $71,745
 $730
With No Related Allowance:              
Real Estate—Residential $
 $
 $
 $
 $
 $
 $
Real Estate—Commercial              
Retail 3,927
 6,557
 
 3,279
 30
 4,645
 10
Hotel & Motel 6,676
 10,416
 
 6,254
 
 6,340
 

Gas Station & Car Wash 4,918
 7,890
 
 3,543
 104
 4,105
 35
Mixed Use 859
 915
 
 660
 
 430
 

Industrial & Warehouse 1,932
 3,976
 
 3,996
 8
 3,374
 3
Other 3,076
 5,265
 
 3,417
 32
 2,621
 11
Real Estate—Construction 1,658
 1,658
 
 1,682
 67
 1,667
 22
Commercial Business 2,777
 3,850
 
 2,102
 20
 2,748
 4
Trade Finance 
 
 
 
 
 
 

Consumer and Other 770
 831
 
 1,142
 
 1,012
 

  $26,593
 $41,358
 $
 $26,075
 $261
 $26,942
 $85
Total $99,193
 $118,484
 $11,035
 $97,389
 $2,453
 $98,687
 $815
  As of March 31, 2014 For the Three Months Ended March 31, 2014
Total Impaired Loans Recorded Investment* Unpaid Contractual Principal Balance 
Related
Allowance
 Average Recorded Investment* Interest Income Recognized during Impairment
  (In thousands)
With related allowance:          
Real estate—residential $
 $
 $
 $
 $
Real estate—commercial          
Retail 4,334
 4,628
 521
 5,826
 23
Hotel & motel 11,741
 11,741
 2,036
 11,831
 133
Gas station & car wash 3,078
 3,240
 533
 3,112
 19
Mixed use 932
 946
 160
 931
 10
Industrial & warehouse 7,977
 7,977
 413
 10,188
 75
Other 10,012
 10,037
 1,140
 10,137
 94
Real estate—construction 
 
 
 
 
Commercial business 27,874
 28,621
 4,630
 31,269
 297
Trade finance 5,380
 12,567
 761
 5,490
 49
Consumer and other 
 
 
 268
 
  $71,328
 $79,757
 $10,194
 $79,052
 $700
With no related allowance:          
Real estate—residential $
 $
 $
 $
 $
Real estate—commercial          
Retail 8,242
 11,259
 
 6,134
 58
Hotel & motel 6,499
 11,381
 
 6,501
 
Gas station & car wash 4,654
 8,161
 
 4,750
 
Mixed use 1,297
 1,374
 
 1,071
 
Industrial & warehouse 9,444
 13,134
 
 6,625
 3
Other 4,140
 6,284
 
 2,844
 16
Real estate—construction 1,605
 1,605
 
 1,615
 21
Commercial business 12,265
 15,690
 
 8,854
 61
Trade finance 883
 967
 
 488
 
Consumer and other 1,477
 1,548
 
 1,123
 8
  $50,506
 $71,403
 $
 $40,005
 $167
Total $121,834
 $151,160
 $10,194
 $119,057
 $867

*Unpaid contractual principal balance less charge offs, interest applied to principal and purchase discounts.

2724

Table of Contents

  For the Nine Months Ended September 30, 2012 For the Three Months Ended September 30, 2012
Total Impaired Loans Average Recorded Investment* Interest Income Recognized during Impairment Average Recorded Investment* Interest Income Recognized during Impairment
   
With Related Allowance:        
Real Estate—Residential $
 $
 $
 $
Real Estate—Commercial        
Retail 3,021
 124
 3,872
 39
Hotel & Motel 19,673
 327
 19,349
 106
Gas Station & Car Wash 3,162
 69
 2,496
 23
Mixed Use 3,752
 

 3,539
 

Industrial & Warehouse 3,297
 67
 1,845
 22
Other 13,857
 483
 13,960
 160
Real Estate—Construction 32
 
 
 
Commercial Business 24,946
 1,048
 26,858
 341
Trade Finance 2,838
 108
 3,208
 63
Consumer and Other 135
 3
 30
 2
  $74,713
 $2,229
 $75,157
 $756
With No Related Allowance:        
Real Estate—Residential $
 $
 $
 $
Real Estate—Commercial        
Retail 1,374
 

 919
 

Hotel & Motel 154
 

 307
 

Gas Station & Car Wash 1,786
 

 2,689
 

Mixed Use 
 

 
 

Industrial & Warehouse 4,412
 

 3,840
 

Other 2,654
 

 2,133
 

Real Estate—Construction 1,710
 85
 1,710
 28
Commercial Business 9,805
 15
 5,928
 5
Trade Finance 1,182
 

 
 

Consumer and Other 126
 

 105
 

  $23,203
 $100
 $17,631
 $33
Total $97,916
 $2,329
 $92,788
 $789
  For the Three Months Ended March 31, 2013
Total Impaired Loans Average Recorded Investment* Interest Income Recognized during Impairment
  
With related allowance:    
Real estate—residential $
 $
Real estate—commercial    
Retail 6,578
 51
Hotel & motel 10,564
 137
Gas station & car wash 1,635
 11
Mixed use 926
 13
Industrial & warehouse 6,600
 6
Other 13,670
 159
Real estate—construction 
 
Commercial business 24,312
 242
Trade finance 6,543
 73
Consumer and other 55
 1
  $70,883
 $693
With no related allowance:    
Real estate—residential $
 $
Real estate—commercial    
Retail 1,913
 
Hotel & motel 6,168
 
Gas station & car wash 2,981
 15
Mixed Uuse 890
 
Industrial & warehouse 4,618
 3
Other 4,214
 39
Real estate—construction 1,697
 22
Commercial business 1,456
 16
Trade finance 
 
Consumer and other 1,273
 5
  $25,210
 $100
Total $96,093
 $793
*Unpaid contractual principal balance less charge offs, interest applied to principal and purchase discounts.


2825

Table of Contents

  As of September 30, 2013 For the Nine Months Ended September 30, 2013 For the Three Months Ended September 30, 2013
Impaired APLs(1)
 Recorded Investment* 
Unpaid
Contractual Principal
Balance
 
Related
Allowance
 
Average
Recorded Investment*
 Interest Income Recognized during Impairment Average Recorded Investment* Interest Income Recognized during Impairment
  (In thousands)
With Related Allowance:              
Real Estate—Residential $
 $
 $
 $
 $
 $
 $
Real Estate—Commercial              
Retail 390
 834
 53
 1,247
 10
 831
 4
Hotel & Motel 
 
 
 
 

 
 

Gas Station & Car Wash 821
 885
 362
 544
 

 816
 

Mixed Use 
 
 
 
 

 
 

Industrial & Warehouse 5,200
 5,200
 772
 8,551
 

 7,690
 

Other 159
 165
 16
 1,154
 8
 158
 2
Real Estate—Construction 
 
 
 
 

 
 

Commercial Business 2,813
 3,141
 680
 3,058
 5
 3,011
 2
Trade Finance 
 
 
 
 

 
 

Consumer and Other 
 
 
 
 

 
 

  $9,383
 $10,225
 $1,883
 $14,554
 $23
 $12,506
 $8
With No Related Allowance:              
Real Estate—Residential $
 $
 $
 $
 $
 $
 $
Real Estate—Commercial              
Retail 1,788
 2,124
 
 907
 30
 1,330
 10
Hotel & Motel 6,616
 8,595
 
 6,138
 
 6,243
 

Gas Station & Car Wash 1,821
 3,251
 
 1,481
 46
 1,293
 16
Mixed Use 
 
 
 
 
 
 

Industrial & Warehouse 553
 790
 
 2,445
 8
 1,968
 3
Other 2,675
 3,120
 
 2,020
 32
 2,157
 11
Real Estate—Construction 
 
 
 
 
 
 

Commercial Business 79
 79
 
 99
 
 50
 

Trade Finance 
 
 
 
 
 
 

Consumer and Other 770
 831
 
 776
 
 772
 

  $14,302
 $18,790
 $
 $13,866
 $116
 $13,813
 $40
Total $23,685
 $29,015
 $1,883
 $28,420
 $139
 $26,319
 $48
  As of March 31, 2014 For the Three Months Ended March 31, 2014
Impaired APLs Recorded Investment* 
Unpaid
Contractual Principal
Balance
 
Related
Allowance
 Average Recorded Investment* Interest Income Recognized during Impairment
  (In thousands)
With related allowance:          
Real estate—residential $
 $
 $
 $
 $
Real estate—commercial          
Retail 105
 159
 27
 248
 1
Hotel & motel 
 
 
 
 
Gas station & car wash 2,777
 2,939
 503
 1,786
 15
Mixed use 
 
 
 
 
Industrial & warehouse 
 
 
 2,564
 
Other 1,412
 1,431
 25
 1,387
 2
Real estate—construction 
 
 
 
 
Commercial business 952
 1,568
 509
 1,468
 5
Trade finance 
 
 
 
 
Consumer and other 
 
 
 
 
  $5,246
 $6,097
 $1,064
 $7,453
 $23
With no related allowance:          
Real estate—residential $
 $
 $
 $
 $
Real estate—commercial          
Retail 1,834
 3,306
 
 1,539
 7
Hotel & motel 6,378
 8,675
 
 6,410
 
Gas station & car wash 537
 990
 
 1,076
 
Mixed use 465
 465
 
 233
 
Industrial & warehouse 6,543
 6,855
 
 4,213
 3
Other 3,223
 3,686
 
 2,179
 8
Real estate—construction 
 
 
 
 
Commercial business 1,622
 1,803
 
 1,215
 
Trade finance 
 
 
 
 
Consumer and ther 952
 1,023
 
 860
 2
  $21,554
 $26,803
 $
 $17,725
 $20
Total $26,800
 $32,900
 $1,064
 $25,178
 $43

*Unpaid contractual principal balance less charge offs, interest applied to principal and purchase discounts.
(1)

APLs that became impaired subsequent to being acquired.



2926

Table of Contents

  For the Nine Months Ended September 30, 2012 For the Three Months Ended September 30, 2012
Impaired APLs(1)
 
Average
Recorded Investment*
 Interest Income Recognized during Impairment Average Recorded Investment* Interest Income Recognized during Impairment
  
With Related Allowance:        
Real Estate—Residential $
 $
 $
 $
Real Estate—Commercial        
Retail 828
 86
 1,546
 26
Hotel & Motel 4,594
 

 6,081
 

Gas Station & Car Wash 71
 

 
 

Mixed Use 
 

 
 

Industrial & Warehouse 206
 27
 411
 9
Other 1,071
 216
 2,124
 72
Real Estate—Construction 
 
 
  
Commercial Business 1,287
 69
 2,276
 21
Trade Finance 
 

 
 

Consumer and Other 
 

 
 

  $8,057
 $398
 $12,438
 $128
With No Related Allowance:        
Real Estate—Residential $
 $
 $
 $
Real Estate—Commercial        
Retail 1
 
 2
 
Hotel & Motel 
 
 
 
Gas Station & Car Wash 566
 
 805
 
Mixed Use 
 
 
 
Industrial & Warehouse 1,709
 
 1,903
 
Other 1,040
 
 1,249
 
Real Estate—Construction 
 
 
 
Commercial Business 763
 15
 927
 5
Trade Finance 
 
 
 
Consumer and Other 
 
 
 
  $4,079
 $15
 $4,886
 $5
Total $12,136
 $413
 $17,324
 $133
  For the Three Months Ended March 31, 2013
Impaired APLs Average Recorded Investment* Interest Income Recognized during Impairment
  
With related allowance:    
Real estate—residential $
 $
Real estate—commercial    
Retail 1,683
 25
Hotel & motel 
 
Gas station & car wash 
 
Mixed use 
 
Industrial & warehouse 5,552
 
Other 3,709
 62
Real estate—construction 
  
Commercial business 3,063
 8
Trade inance 
 
Consumer and other 
 
  $14,007
 $95
With no related allowance:    
Real estate—residential $
 $
Real estate—commercial    
Retail 430
 
Hotel & motel 5,959
 
Gas station & car wash 1,315
 15
Mixed use 
 
Industrial & warehouse 3,294
 3
Other 1,276
 8
Real estate—construction 
 
Commercial business 273
 
Trade finance 
 
Consumer and other 793
 
  $13,340
 $26
Total $27,347
 $121

*Unpaid contractual principal balance less charge offs, interest applied to principal and purchase discounts.
(1)
APLs that became impaired subsequent to being acquired.







3027

Table of Contents

  As of December 31, 2012 
For the Year Ended
December 31, 2012
Total Impaired Loans Recorded Investment* 
Unpaid
Contractual Principal
Balance
 
Related
Allowance
 
Average
Recorded Investment*
 Interest Income Recognized during Impairment
  (In thousands)
With Related Allowance:          
Real Estate—Residential $
 $
 $
 $
 $
Real Estate—Commercial          
Retail 5,477
 5,610
 1,167
 3,512
 255
Hotel & Motel 8,990
 8,995
 1,860
 17,536
 426
Gas Station & Car Wash 1,892
 2,440
 73
 2,908
 
Mixed Use 900
 976
 250
 3,182
 
Industrial & Warehouse 2,074
 2,153
 567
 3,052
 66
Other 16,184
 16,389
 989
 14,322
 805
Real Estate—Construction 
 
 
 26
 
Commercial Business 26,354
 29,073
 4,158
 25,227
 1,252
Trade Finance 6,199
 7,173
 96
 3,510
 248
Consumer and Other 55
 56
 
 119
 4
  $68,125
 $72,865
 $9,160
 $73,394
 $3,056
With No Related Allowance:          
Real Estate—Residential $
 $
 $
 $
 $
Real Estate—Commercial          
Retail 2,516
 5,404
 
 1,602
 48
Hotel & Motel 6,212
 8,202
 
 1,365
 
Gas Station & Car Wash 1,731
 4,359
 
 1,775
 
Mixed Use 899
 923
 
 180
 
Industrial & Warehouse 4,392
 6,450
 
 4,408
 160
Other 2,371
 6,283
 
 2,598
 
Real Estate—Construction 1,710
 1,710
 
 1,710
 111
Commercial Business 920
 1,368
 
 8,028
 18
Trade Finance 
 
 
 946
 
Consumer and Other 1,280
 1,316
 
 357
 20
  $22,031
 $36,015
 $
 $22,969
 $357
Total $90,156
 $108,880
 $9,160
 $96,363
 $3,413
  As of December 31, 2013 
For the Year Ended
December 31, 2013
Total Impaired Loans Recorded Investment* 
Unpaid
Contractual Principal
Balance
 
Related
Allowance
 
Average
Recorded Investment*
 Interest Income Recognized during Impairment
  (In thousands)
With related allowance:          
Real estate—residential $
 $
 $
 $
 $
Real estate—commercial          
Retail 7,318
 7,451
 827
 7,783
 181
Hotel & motel 11,920
 12,744
 2,841
 11,432
 550
Gas station & car wash 3,145
 3,236
 519
 2,090
 117
Mixed use 930
 953
 212
 1,108
 43
Industrial & warehouse 12,398
 12,470
 810
 9,496
 323
Other 10,262
 10,351
 1,461
 9,826
 405
Real estate—construction 
 
 
 
 
Commercial business 34,663
 36,472
 5,805
 27,010
 1,572
Trade finance 5,600
 5,628
 159
 5,313
 41
Consumer and other 535
 535
 32
 348
 23
  $86,771
 $89,840
 $12,666
 $74,406
 $3,255
With no related allowance:          
Real estate—residential $
 $
 $
 $
 $
Real estate—commercial          
Retail 4,025
 6,591
 
 3,428
 45
Hotel & motel 6,502
 10,498
 
 6,304
 
Gas station & car wash 4,845
 8,273
 
 3,803
 139
Mixed use 845
 912
 
 697
 
Industrial & warehouse 3,806
 7,204
 
 3,958
 10
Other 1,548
 3,647
 
 3,043
 
Real estate—construction 1,625
 1,625
 
 1,670
 89
Commercial business 5,443
 8,437
 
 2,770
 25
Trade finance 92
 7,279
 
 18
 
Consumer and other 767
 831
 
 1,067
 
  $29,498
 $55,297
 $
 $26,758
 $308
Total $116,269
 $145,137
 $12,666
 $101,164
 $3,563

*Unpaid contractual principal balance less charge offs, interest applied to principal and purchase discounts.





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Table of Contents

  As of December 31, 2012 
For the Year Ended
December 31, 2012
Impaired APLs(1)
 Recorded Investment* Unpaid Contractual Principal Balance Related Allowance Average Recorded Investment* Interest Income Recognized during Impairment
  (In thousands)
With Related Allowance:          
Real Estate—Residential $
 $
 $
 $
 $
Real Estate—Commercial          
Retail 1,286
 1,286
 9
 920
 64
Hotel & Motel 
 
 
 3,676
 
Gas Station & Car Wash 
 
 
 57
 
Mixed Use 
 
 
 
 
Industrial & Warehouse 832
 887
 2
 331
 36
Other 4,272
 4,461
 172
 1,711
 288
Real Estate—Construction 
 
 
 
 
Commercial Business 2,974
 3,072
 1,074
 1,625
 26
Trade Finance 
 
 
 
 
Consumer and Other 
 
 
 
 
  $9,364
 $9,706
 $1,257
 $8,320
 $414
With No Related Allowance:          
Real Estate—Residential $
 $
 $
 $
 $
Real Estate—Commercial   
      
Retail 800
 840
 
 161
 48
Hotel & Motel 5,990
 7,375
 
 1,198
 
Gas Station & Car Wash 774
 1,865
 
 608
 
Mixed Use 
 
 
 
 
Industrial & Warehouse 3,190
 3,302
 
 2,005
 160
Other 807
 3,156
 
 993
 
Real Estate—Construction 
 
 
 
 
Commercial Business 349
 681
 
 680
 15
Trade Finance 
 
 
 
 
Consumer and Other 802
 836
 
 160
 
  $12,712
 $18,055
 $
 $5,805
 $223
Total $22,076
 $27,761
 $1,257
 $14,125
 $637
  As of December 31, 2013 
For the Year Ended
December 31, 2013
Impaired APLs Recorded Investment* Unpaid Contractual Principal Balance Related Allowance Average Recorded Investment* Interest Income Recognized during Impairment
  (In thousands)
With related allowance:          
Real estate—residential $
 $
 $
 $
 $
Real estate—commercial          
Retail 391
 397
 15
 1,084
 14
Hotel & motel 
 
 
 
 
Gas station & car wash 794
 885
 341
 485
 
Mixed use 
 
 
 
 
Industrial & warehouse 5,128
 5,200
 612
 6,323
 
Other 1,362
 1,412
 124
 1,819
 43
Real estate—construction 
 
 
 
 
Commercial business 1,984
 3,354
 622
 2,827
 5
Trade finance 
 
 
 
 
Consumer and other 
 
 
 
 
  $9,659
 $11,248
 $1,714
 $12,538
 $62
With no related allowance:          
Real estate—residential $
 $
 $
 $
 $
Real estate—commercial   
      
Retail 1,244
 2,216
 
 953
 14
Hotel & motel 6,441
 8,676
 
 6,169
 
Gas station & car wash 1,614
 2,109
 
 1,366
 62
Mixed use 
 
 
 
 
Industrial & warehouse 1,883
 3,446
 
 2,482
 10
Other 1,135
 1,547
 
 1,600
 
Real estate—construction 
 
 
 
 
Commercial business 808
 948
 
 291
 
Trade finance 
 
 
 
 
Consumer and other 767
 831
 
 779
 
  $13,892
 $19,773
 $
 $13,640
 $86
Total $23,551
 $31,021
 $1,714
 $26,178
 $148
*Unpaid contractual principal balance less charge offs, interest applied to principal and purchase discounts.
(1)
APLs that became impaired subsequent to being acquired.


Generally, loans are placed on nonaccrual status if principal or interest payments become 90 days past due and/or management deems the collectabilitycollectibility of the principal and/or interest to be in question, as well as when required by regulatory requirements. Loans to a customer whose financial condition has deteriorated are considered for nonaccrual status whether or not the loan is 90 days or more past due. Generally, payments received on nonaccrual loans are recorded as principal reductions. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

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The following tables present the aging of past due loans as of September 30, 2013March 31, 2014 and December 31, 20122013 by class of loans:
 As of September 30, 2013
 Past Due and Accruing    
 30-59 Days Past Due 60-89 Days Past Due 90 or More Days Past Due Total 
Nonaccrual Loans (3)
 Total Delinquent Loans
 (In thousands)
Legacy Loans: 
Real estate—Residential$
 $
 $
 $
 $
 $
Real estate—Commercial           
Retail133
 
 
 133
 4,683
 4,816
Hotel & Motel
 
 
 
 121
 121
Gas Station & Car Wash737
 
 
 737
 2,091
 2,828
Mixed Use
 
 
 
 990
 990
Industrial & Warehouse217
 577
 
 794
 1,379
 2,173
Other
 
 
 
 1,162
 1,162
Real estate—Construction
 
 
 
 
 
Commercial business590
 154
 
 744
 4,990
 5,734
Trade finance
 
 
 
 938
 938
Consumer and other28
 1
 
 29
 
 29
     Subtotal$1,705
 $732
 $
 $2,437
 $16,354
 $18,791
Acquired Loans: (1)
           
Real estate—Residential$
 $
 $377
 $377
 $
 $377
Real estate—Commercial           
Retail6,776
 1,667
 11,802
 20,245
 913
 21,158
Hotel & Motel79
 
 4,840
 4,919
 6,616
 11,535
Gas Station & Car Wash955
 2,835
 4,240
 8,030
 1,571
 9,601
Mixed Use292
 
 236
 528
 
 528
Industrial & Warehouse1,023
 1,045
 4,084
 6,152
 5,633
 11,785
Other2,836
 772
 5,856
 9,464
 1,458
 10,922
Real estate—Construction
 
 
 
 
 
Commercial business9,907
 772
 4,043
 14,722
 2,814
 17,536
Trade finance
 
 
 
 
 
Consumer and other436
 275
 4,082
 4,793
 770
 5,563
     Subtotal(2)
$22,304
 $7,366
 $39,560
 $69,230
 $19,775
 $89,005
TOTAL$24,009
 $8,098
 $39,560
 $71,667
 $36,129
 $107,796
 As of March 31, 2014
 Past Due and Accruing    
 30-59 Days Past Due 60-89 Days Past Due 90 or More Days Past Due Total 
Nonaccrual Loans (2)
 Total Delinquent Loans
 (In thousands)
Legacy Loans: 
Real estate—residential$
 $
 $
 $
 $
 $
Real estate—commercial           
Retail48
 121
 
 169
 4,470
 4,639
Hotel & motel365
 
 
 365
 121
 486
Gas station & car wash
 
 
 
 4,117
 4,117
Mixed use
 
 
 
 968
 968
Industrial & warehouse
 214
 
 214
 3,110
 3,324
Other13
 
 
 13
 906
 919
Real estate—construction
 
 
 
 
 
Commercial business1,228
 78
 
 1,306
 8,691
 9,997
Trade finance
 32
 
 32
 1,263
 1,295
Consumer and other47
 
 
 47
 17
 64
     Subtotal$1,701
 $445
 $
 $2,146
 $23,663
 $25,809
Acquired Loans: (1)
           
Real estate—residential$
 $
 $
 $
 $
 $
Real estate—commercial           
Retail597
 
 
 597
 1,336
 1,933
Hotel & motel
 
 
 
 6,378
 6,378
Gas station & car wash1,061
 
 
 1,061
 2,253
 3,314
Mixed use577
 
 
 577
 465
 1,042
Industrial & warehouse
 
 
 
 6,424
 6,424
Other1,800
 
 
 1,800
 3,522
 5,322
Real estate—construction
 
 
 
 
 
Commercial business594
 3
 
 597
 2,262
 2,859
Trade finance
 
 
 
 
 
Consumer and other285
 
 
 285
 1,011
 1,296
     Subtotal$4,914
 $3
 $
 $4,917
 $23,651
 $28,568
TOTAL$6,615
 $448
 $
 $7,063
 $47,314
 $54,377
(1) 
The Acquired Loans include ACILs and APLs.exclude ACILs.
(2)
The past due and accruing Acquired Loans include ACILs of $18.3 million, $5.7 million and $38.6 million that were 30-59 days, 60-89 days and 90 or more days past due, respectively.
(3) 
Nonaccrual loans exclude the guaranteed portion of delinquent SBA loans that are in liquidation totaling $25.231.3 million.


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 As of December 31, 2012
 Past Due and Accruing    
 30-59 Days Past Due 60-89 Days Past Due 90 or More Days Past Due Total 
Nonaccrual Loans (3)
 Total Delinquent Loans
 (In Thousands)
Legacy Loans: 
Real estate—Residential$
 $
 $
 $
 $
 $
Real estate—Commercial           
Retail87
 
 
 87
 3,316
 3,403
Hotel & Motel
 
 
 
 437
 437
Gas Station & Car Wash359
 
 
 359
 2,848
 3,207
Mixed Use34
 
 
 34
 1,799
 1,833
Industrial & Warehouse
 
 
 
 1,950
 1,950
Other
 115
 
 115
 2,379
 2,494
Real estate—Construction
 
 
 
 
 
Commercial business298
 234
 
 532
 4,942
 5,474
Trade finance
 
 
 
 869
 869
Consumer and other190
 
 
 190
 
 190
     Subtotal$968
 $349
 $
 $1,317
 $18,540
 $19,857
Acquired Loans: (1)
           
Real estate—Residential$
 $
 $
 $
 $
 $
Real estate—Commercial           
Retail1,126
 6,604
 1,190
 8,920
 
 8,920
Hotel & Motel1,522
 2,668
 944
 5,134
 5,990
 11,124
Gas Station & Car Wash2,218
 1,109
 875
 4,202
 774
 4,976
Mixed Use985
 1,918
 1,507
 4,410
 
 4,410
Industrial & Warehouse53
 3,320
 61
 3,434
 
 3,434
Other50
 25
 5,542
 5,617
 937
 6,554
Real estate—Construction
 
 5,972
 5,972
 
 5,972
Commercial business1,359
 1,174
 1,236
 3,769
 2,442
 6,211
Trade finance
 
 
 
 
 
Consumer and other98
 17
 415
 530
 970
 1,500
     Subtotal(2)
$7,411
 $16,835
 $17,742
 $41,988
 $11,113
 $53,101
TOTAL$8,379
 $17,184
 $17,742
 $43,305
 $29,653
 $72,958
 As of December 31, 2013
 Past Due and Accruing    
 30-59 Days Past Due 60-89 Days Past Due 90 or More Days Past Due Total 
Nonaccrual Loans (2)
 Total Delinquent Loans
 (In Thousands)
Legacy Loans: 
Real estate—residential$
 $
 $
 $
 $
 $
Real estate—commercial           
Retail122
 
 
 122
 4,363
 4,485
Hotel & motel
 
 
 
 121
 121
Gas station & car wash1,038
 
 
 1,038
 2,228
 3,266
Mixed use
 
 
 
 974
 974
Industrial & warehouse215
 
 
 215
 1,923
 2,138
Other
 
 
 
 1,398
 1,398
Real estate—construction
 
 
 
 
 
Commercial business780
 244
 
 1,024
 6,402
 7,426
Trade finance
 
 
 
 1,031
 1,031
Consumer and other54
 22
 
 76
 
 76
     Subtotal$2,209
 $266
 $
 $2,475
 $18,440
 $20,915
Acquired Loans: (1)
           
Real estate—residential$
 $
 $
 $
 $
 $
Real estate—commercial           
Retail2,024
 
 
 2,024
 1,030
 3,054
Hotel & motel
 
 
 
 6,441
 6,441
Gas station & car wash1,068
 
 
 1,068
 1,339
 2,407
Mixed use576
 
 
 576
 
 576
Industrial & warehouse121
 
 
 121
 6,890
 7,011
Other516
 1,729
 
 2,245
 1,376
 3,621
Real estate—construction
 
 
 
 
 
Commercial business524
 703
 5
 1,232
 2,708
 3,940
Trade finance
 
 
 
 
 
Consumer and other284
 74
 
 358
 930
 1,288
     Subtotal$5,113
 $2,506
 $5
 $7,624
 $20,714
 $28,338
TOTAL$7,322
 $2,772
 $5
 $10,099
 $39,154
 $49,253
(1) 
The Acquired Loans include ACILs and APLs.
(2)
The past due and accruing Acquired Loans include ACILs of $7.0 million, $12.1 million and $17.7 million that were 30-59 days, 60-89 days and 90 or more days past due, respectively.
exclude ACILs.
(3)(2) Nonaccrual loans exclude guaranteed portion of delinquent SBA loans that are in liquidation totaling $17.627.5 million.


Loans accounted for under ASC 310-30 are generally considered accruing and performing loans and the accretable discount is accreted to interest income over the estimated life of the loan when cash flows are reasonably estimable. Accordingly, ACILs that are contractually past due are still considered to be accruing and performing loans. The loans may be classified as nonaccrual if the timing and amount of future cash flows is not reasonably estimable.
We categorize loans into risk categories based on relevant information about the ability of borrowers to service their debt, including, but not limited to, current financial information, historical payment experience, credit documentation, public information, and current economic trends. We analyze loans individually by classifying the loans as to credit risk. This analysis includes all non-homogeneous loans. This analysis is performed at least on a quarterly basis. We use the following definitions for risk ratings:
Pass: Loans that meet a preponderance or more of the Company's underwriting criteria and evidence an acceptable level of risk.

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Table of Contents

Special Mention: Loans classified as special mentionthat have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

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Table of Contents

Substandard: Loans classified as substandardthat are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the repayment of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.
Doubtful/Loss: Loans classified as doubtfulthat have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or repayment in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.
The following tables present the risk rating for Legacy Loans and Acquired Loans as of September 30, 2013March 31, 2014 and December 31, 20122013 by class of loans:
As of September 30, 2013As of March 31, 2014
Pass 
Special
Mention
 Substandard Doubtful/Loss TotalPass 
Special
Mention
 Substandard Doubtful/Loss Total
(In thousands)(In thousands)
Legacy Loans:      
Real estate—Residential$8,125
 $
 $17
 $
 $8,142
Real estate—Commercial         
Real estate—residential$9,004
 $
 $
 $
 $9,004
Real estate—commercial         
Retail765,450
 455
 15,038
 
 780,943
888,454
 2,395
 13,562
 
 904,411
Hotel & Motel508,721
 1,854
 13,770
 
 524,345
Gas Station & Car Wash452,808
 
 9,759
 
 462,567
Mixed Use242,725
 2,090
 3,361
 
 248,176
Industrial & Warehouse222,185
 8,794
 6,835
 
 237,814
Hotel & motel592,932
 117
 7,269
 
 600,318
Gas station & car wash475,483
 
 10,639
 
 486,122
Mixed use281,152
 358
 3,293
 
 284,803
Industrial & warehouse285,848
 5,364
 13,273
 
 304,485
Other566,252
 5,773
 8,261
 
 580,286
624,042
 7,904
 11,159
 359
 643,464
Real estate—Construction70,579
 
 1,658
 
 72,237
Real estate—construction74,433
 
 1,605
 
 76,038
Commercial business718,178
 25,601
 32,493
 8
 776,280
751,270
 12,701
 39,920
 2,973
 806,864
Trade finance110,348
 17,226
 8,315
 
 135,889
99,049
 23,311
 10,267
 
 132,627
Consumer and other29,735
 11
 1,044
 
 30,790
36,086
 9
 542
 
 36,637
Subtotal$3,695,106
 $61,804
 $100,551
 $8
 $3,857,469
$4,117,753
 $52,159
 $111,529
 $3,332
 $4,284,773
Acquired Loans:                  
Real estate—Residential$1,211
 $300
 $641
 $
 $2,152
Real estate—Commercial         
Real estate—residential$1,081
 $578
 $372
 $
 $2,031
Real estate—commercial         
Retail246,793
 9,970
 29,015
 
 285,778
218,682
 9,040
 28,113
 243
 256,078
Hotel & Motel115,022
 8,122
 15,560
 
 138,704
Gas Station & Car Wash36,011
 5,174
 14,910
 253
 56,348
Mixed Use33,078
 2,036
 5,864
 
 40,978
Industrial & Warehouse102,187
 4,357
 18,342
 
 124,886
Hotel & motel105,736
 7,143
 14,141
 
 127,020
Gas station & car wash29,352
 1,634
 14,616
 250
 45,852
Mixed use31,302
 1,418
 5,268
 
 37,988
Industrial & warehouse87,748
 4,195
 19,207
 
 111,150
Other142,221
 6,265
 22,865
 638
 171,989
122,472
 6,376
 16,814
 572
 146,234
Real estate—Construction880
 
 
 
 880
Real estate—construction
 
 
 
 
Commercial business116,800
 11,514
 26,434
 1,927
 156,675
80,706
 8,810
 24,364
 2,282
 116,162
Trade finance
 
 
 
 
3,011
 
 
 
 3,011
Consumer and other53,079
 2,089
 9,518
 217
 64,903
47,817
 2,201
 11,765
 475
 62,258
Subtotal$847,282
 $49,827
 $143,149
 $3,035
 $1,043,293
$727,907
 $41,395
 $134,660
 $3,822
 $907,784
Total$4,542,388
 $111,631
 $243,700
 $3,043
 $4,900,762
$4,845,660
 $93,554
 $246,189
 $7,154
 $5,192,557

 

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As of December 31, 2012As of December 31, 2013
Pass 
Special
Mention
 Substandard Doubtful/Loss TotalPass 
Special
Mention
 Substandard Doubtful/Loss Total
(In thousands)(In thousands)
Legacy Loans:      
Real estate—Residential$9,223
 $
 $24
 $
 $9,247
Real estate—Commercial         
Real estate—residential$8,070
 $
 $
 $
 $8,070
Real estate—commercial         
Retail589,720
 3,584
 12,303
 
 605,607
842,815
 858
 14,365
 
 858,038
Hotel & Motel453,908
 1,894
 16,795
 
 472,597
Gas Station & Car Wash370,803
 1,288
 9,982
 
 382,073
Mixed Use233,687
 2,131
 3,423
 
 239,241
Industrial & Warehouse202,066
 1,010
 4,295
 370
 207,741
Hotel & motel568,263
 1,841
 13,661
 
 583,765
Gas station & car wash455,205
 
 10,854
 
 466,059
Mixed use259,788
 360
 3,324
 
 263,472
Industrial & warehouse251,993
 4,116
 12,056
 
 268,165
Other431,685
 1,219
 17,084
 
 449,988
589,895
 3,928
 11,493
 359
 605,675
Real estate—Construction56,270
 
 1,710
 
 57,980
Real estate—construction71,231
 
 1,626
 
 72,857
Commercial business726,073
 6,164
 21,514
 104
 753,855
759,956
 12,756
 42,952
 
 815,664
Trade finance136,197
 7,976
 6,199
 
 150,372
91,055
 22,589
 9,297
 
 122,941
Consumer and other26,801
 13
 1,006
 
 27,820
32,389
 32
 535
 
 32,956
Subtotal$3,236,433
 $25,279
 $94,335
 $474
 $3,356,521
$3,930,660
 $46,480
 $120,163
 $359
 $4,097,662
Acquired Loans:      
Real estate—Residential$
 $
 $
 $
 $
Real estate—Commercial         
Real estate—residential$1,066
 $284
 $619
 $
 $1,969
Real estate—commercial         
Retail225,982
 6,469
 17,331
 
 249,782
237,325
 9,319
 28,128
 94
 274,866
Hotel & Motel105,032
 16,150
 13,215
 
 134,397
Gas Station & Car Wash33,360
 7,192
 4,119
 
 44,671
Mixed Use34,927
 3,826
 6,526
 
 45,279
Industrial & Warehouse114,616
 1,385
 9,470
 
 125,471
Hotel & motel109,138
 7,134
 14,836
 179
 131,287
Gas station & car wash35,356
 1,621
 14,440
 245
 51,662
Mixed use32,992
 1,467
 5,316
 
 39,775
Industrial & warehouse92,570
 3,525
 19,720
 
 115,815
Other121,667
 4,473
 17,479
 
 143,619
133,752
 6,698
 21,573
 560
 162,583
Real estate—Construction1,093
 
 5,972
 
 7,065
Real estate—construction
 
 
 
 
Commercial business119,026
 14,057
 34,047
 571
 167,701
94,854
 10,266
 26,245
 2,064
 133,429
Trade finance242
 334
 1,122
 
 1,698
1,744
 
 
 
 1,744
Consumer and other17,292
 424
 4,329
 89
 22,134
51,036
 2,695
 7,460
 4,360
 65,551
Subtotal$773,237
 $54,310
 $113,610
 $660
 $941,817
$789,833
 $43,009
 $138,337
 $7,502
 $978,681
Total$4,009,670
 $79,589
 $207,945
 $1,134
 $4,298,338
$4,720,493
 $89,489
 $258,500
 $7,861
 $5,076,343
    
The adequacy of the allowance for loan losses is determined by management based upon an evaluation and review of the credit quality of the loan portfolio, consideration of historical loan loss experience, relevant internal and external factors that affect the collection of a loan, and other pertinent factors.
The Migration Analysisanalysis is a formula methodology based onderived from the Bank's actual historical net charge off experience for each loan class (type) pool and risk grade. The migration analysis is centered on the Bank's internal credit risk rating system. OurManagement's internal loan review and external contracted credit review examinations are used to determine and validate loan risk grades. This credit review system takes into consideration factors such as: borrower's background and experience; historical and current financial condition; credit history and payment performance; economic conditions and their impact on various industries; type, fair value and volatility of the fair value of collateral; lien position; and the financial strength of any guarantors.
A general loan loss allowance is provided on loans not specifically identified as impaired (“non-impaired loans”). The Bank's general loan loss allowance has two components: quantitative and qualitative risk factors. The quantitative risk factors are based on a historical loss migration methodology.analysis methodology described above. The loans are classified by class and risk grade and the historical loss migration is tracked for the various classes. Loss experience is quantified for a specified period and then weighted to place more significance toon the most recent loss history. That loss experience is then applied to the stratified portfolio at each quarter end. For the ACILs, a general loan loss allowance is provided to the extent that there has been credit deterioration since the date of acquisition. 
  

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Additionally, in order to systematically quantify the credit risk impact of other trends and changes within the loan portfolio, the Bank utilizes qualitative adjustments to the Migration Analysis within established parameters. The parameters for making adjustments are established under a Credit Risk Matrix that provides seven possible scenarios for each of the factors below. The matrix allows for up to three positive (Major, Moderate, and Minor), three negative (Major, Moderate, and Minor), and one neutral credit risk scenarios within each factor for each loan type pool. Generally, the factors are considered to have no significant impact (neutral) to our historical migration ratios. However, if information exists to warrant adjustment to the Migration Analysis, changes are made in accordance with the established parameters supported by narrative and/or statistical analysis. The Credit Risk Matrix and the nine possible scenarios enable the Bank to qualitatively adjust the Loss Migration Ratio by as much as 50 basis points in either direction (positive or negative) for each loan type pool. This matrix considers the following nine factors, which are patterned after the guidelines provided under the FFIEC Interagency Policy Statement on the Allowance for Loan and Lease Losses:
Changes in lending policies and procedures, including underwriting standards and collection, charge off, and recovery practices;
Changes in national and local economic and business conditions and developments, including the condition of various market segments;
Changes in the nature and volume of the loan portfolio;
Changes in the experience, ability and depth of lending management and staff;
Changes in the trends of the volume and severity of past due loans, Classified Loans, nonaccrual loans, troubled debt restructurings and other loan modifications;
Changes in the quality of our loan review system and the degree of oversight by the Directors;
Changes in the value of underlying collateral for collateral-dependent loans;
The existence and effect of any concentrations of credit and changes in the level of such concentrations; and
The effect of external factors, such as competition and legal and regulatory requirements, on the level of estimated losses in our loan portfolio.

WeThe Company also establish specific loss allowances for loans where wethat have identified potential credit risk conditions or circumstances related to a specific individual credit. The specific allowance amounts are determined by a method prescribed by FASB ASC 310-10-35-22, Measurement of Impairment. The loans identified as impaired will be accounted for in accordance with one of the three acceptable valuation methods: 1) the present value of future cash flows discounted at the loan's effective interest rate; 2) the loan's observable market price; or 3) the fair value of the collateral, if the loan is collateral dependent. For the collateral dependent impaired loans, we obtainmanagement obtains a new appraisal to determine the amount of impairment as of the date that the loan became impaired. The appraisals are based on an “as is” valuation. To ensure that appraised values remain current, wemanagement either obtainobtains updated appraisals every twelve months from a qualified independent appraiser or an internal evaluation of the collateral is performed by qualified personnel. If the third party market data indicates that the value of ourthe collateral property has declined since the most recent valuation date, we adjustmanagement adjusts the value of the property downward to reflect current market conditions. If the fair value of the collateral, less cost to sell, is less than the recorded amount of the loan, we then recognizemanagement recognizes impairment by creating or adjusting an existing valuation allowance with a corresponding charge to the provision for loan losses. If an impaired loan is expected to be collected through liquidation of the underlying collateral, the loan is deemed to be collateral dependent and the amount of impairment is charged off against the allowance for loan losses.
The Bank considers a loan to be impaired when it is probable that not all amounts due (principal and interest) will be collectible in accordance with the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. The significance of payment delays and payment shortfalls is determined on a case-by-case basis by taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower's prior payment record and the amount of the shortfall in relation to the principal and interest owed.
For commercial business loans, real estate loans and certain consumer loans, we basemanagement bases the measurement of loan impairment on the present value of the expected future cash flows, discounted at the loan's effective interest rate or on the fair value of the loan's collateral, less estimated costs to sell, if the loan is collateral dependent. We evaluateManagement evaluates most consumer loans for impairment on a collective basis because these loans generally have smaller balances and are homogeneous in the underwriting of terms and conditions and in the type of collateral.
For our ACILs, the allowance for loan losses is based upon expected cash flows for these loans. To the extent that a deterioration in borrower credit quality results in a decrease in expected cash flows subsequent to the acquisition of the loans,

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an allowance for loan losses would be established based on ouran estimate of future credit losses over the remaining life of the loans.
The following table presents loans by portfolio segment and impairment method at September 30, 2013March 31, 2014 and December 31, 20122013:
 
As of September 30, 2013As of March 31, 2014
Real estate -
Residential
 
Real estate -
Commercial
 
Real estate -
Construction
 
Commercial
business
 
Trade
finance
 
Consumer
and other
 Total
Real Estate—
Residential
 
Real Estate—
Commercial
 
Real Estate—
Construction
 
Commercial
Business
 
Trade
Finance
 
Consumer
and Other
 Total
(In thousands)(In thousands)
Impaired loans (Gross carrying value)$
 $59,708
 $1,658
 $29,575
 $6,938
 $1,314
 $99,193
Impaired loans (gross carrying value)$
 $72,350
 $1,605
 $40,139
 $6,263
 $1,477
 $121,834
Specific allowance$
 $6,718
 $
 $3,433
 $794
 $90
 $11,035
$
 $4,803
 $
 $4,630
 $761
 $
 $10,194
Loss coverage ratio0.0% 11.3% 0.0% 11.6% 11.4% 6.8% 11.1%0.0% 6.6% 0.0% 11.5% 12.2% % 8.4%
Non-impaired loans$10,294
 $3,593,107
 $71,458
 $903,380
 $128,951
 $94,379
 $4,801,569
$11,035
 $3,875,575
 $74,433
 $882,887
 $129,375
 $97,418
 $5,070,723
General allowance$68
 $39,575
 $840
 $11,867
 $1,719
 $611
 $54,680
$25
 $40,030
 $566
 $12,171
 $2,183
 $530
 $55,505
Loss coverage ratio0.7% 1.1% 1.2% 1.3% 1.3% 0.6% 1.1%0.2% 1.0% 0.8% 1.4% 1.7% 0.5% 1.1%
Total loans$10,294
 $3,652,815
 $73,116
 $932,955
 $135,889
 $95,693
 $4,900,762
$11,035
 $3,947,925
 $76,038
 $923,026
 $135,638
 $98,895
 $5,192,557
Total allowance for loan losses$68
 $46,293
 $840
 $15,300
 $2,513
 $701
 $65,715
$25
 $44,833
 $566
 $16,801
 $2,944
 $530
 $65,699
Loss coverage ratio0.7% 1.3% 1.1% 1.6% 1.8% 0.7% 1.3%0.2% 1.1% 0.7% 1.8% 2.2% 0.5% 1.3%

As of December 31, 2012As of December 31, 2013
Real estate -
Residential
 
Real estate -
Commercial
 
Real estate -
Construction
 
Commercial
business
 
Trade
finance
 
Consumer
and other
 Total
Real Estate—
Residential
 
Real Estate—
Commercial
 
Real Estate—
Construction
 
Commercial
Business
 
Trade
Finance
 
Consumer
and Other
 Total
(In thousands)(In thousands)
Impaired loans (Gross carrying value)$
 $53,634
 $1,710
 $27,274
 $6,199
 $1,338
 $90,155
Impaired loans (gross carrying value)$
 $67,544
 $1,625
 $40,106
 $5,692
 $1,302
 $116,269
Specific allowance$
 $4,906
 $
 $4,158
 $96
 $
 $9,160
$
 $6,670
 $
 $5,805
 $159
 $32
 $12,666
Loss coverage ratio0.0% 9.1% 0.0% 15.2% 1.5% 0.0% 10.2%0.0% 9.9% 0.0% 14.5% 2.8% 2.5% 10.9%
Non-impaired loans$9,247
 $3,046,832
 $63,335
 $894,282
 $145,871
 $48,616
 $4,208,183
$10,039
 $3,753,619
 $71,231
 $908,987
 $118,993
 $97,205
 $4,960,074
General allowance$74
 $40,256
 $986
 $13,448
 $2,256
 $761
 $57,781
$25
 $39,227
 $628
 $11,787
 $2,494
 $493
 $54,654
Loss coverage ratio0.8% 1.3% 1.6% 1.5% 1.5% 1.6% 1.4%0.2% 1.0% 0.9% 1.3% 2.1% 0.5% 1.1%
Total loans$9,247
 $3,100,466
 $65,045
 $921,556
 $152,070
 $49,954
 $4,298,338
$10,039
 $3,821,163
 $72,856
 $949,093
 $124,685
 $98,507
 $5,076,343
Total allowance for loan losses$74
 $45,162
 $986
 $17,606
 $2,352
 $761
 $66,941
$25
 $45,897
 $628
 $17,592
 $2,653
 $525
 $67,320
Loss coverage ratio0.8% 1.5% 1.5% 1.9% 1.5% 1.5% 1.6%0.2% 1.2% 0.9% 1.9% 2.1% 0.5% 1.3%
Under certain circumstances, we providethe Bank provides borrowers relief through loan modifications. These modifications are either temporary in nature (“temporary modifications”) or are more substantive. At September 30, 2013March 31, 2014, total modified loans were $60.763.8 million, compared to $51.558.9 million at December 31, 20122013. The temporary modifications generally consist of interest only payments for a three to six month period, whereby principal payments are deferred. At the end of the modification period, the remaining principal balance is re-amortized based on the original maturity date. Loans subject to temporary modifications are generally downgraded to Special Mention or Substandard. At the end of the modification period, the loan either 1) returns

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to the original contractual terms; 2) is further modified and accounted for as a troubled debt restructuring in accordance with ASC 310-10-35; or 3) is disposed of through foreclosure or liquidation.
 
Troubled Debt Restructurings (“TDRs”) of loans are defined by ASC 310-40, “Troubled Debt Restructurings by Creditors” and ASC 470-60, “Troubled Debt Restructurings by Debtors” and evaluated for impairment in accordance with ASC 310-10-35. The concessions may be granted in various forms, including reduction in the stated interest rate, reduction in the amount of principal amortization, forgiveness of a portion of a loan balance or accrued interest, or extension of the maturity date. In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed on the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under ourthe Bank's internal underwriting policy.
A summary of TDRs on accrual and nonaccrual status by type of concession as of September 30, 2013March 31, 2014 and December 31, 20122013 is presented below:
As of September 30, 2013As of March 31, 2014
TDRs on Accrual TDRs on Nonaccrual TotalTDRs on Accrual TDRs on Nonaccrual Total
Real estate -
Commercial
 
Commercial
Business
 Other Total 
Real estate -
Commercial
 
Commercial
Business
 Other Total 
Real Estate—
Commercial
 
Commercial
Business
 Other Total 
Real Estate—
Commercial
 
Commercial
Business
 Other Total 
(In thousands)(In thousands)
Payment concession$7,218
 $1,758
 $
 $8,976
 $9,918
 $1,279
 $770
 $11,967
 $20,943
$7,896
 $810
 $
 $8,706
 $9,010
 $2,445
 $761
 $12,216
 $20,922
Maturity / Amortization concession771
 6,434
 544
 7,749
 1,701
 3,239
 
 4,940
 12,689
1,811
 9,442
 717
 11,970
 2,382
 2,124
 1,263
 5,769
 17,739
Rate concession14,591
 4,703
 
 19,294
 7,687
 
 
 7,687
 26,981
12,473
 4,378
 
 16,851
 8,229
 28
 
 8,257
 25,108
Principal forgiveness
 
 
 
 
 52
 
 52
 52

 
 
 
 
 46
 
 46
 46
$22,580
 $12,895
 $544
 $36,019
 $19,306
 $4,570
 $770
 $24,646
 $60,665
$22,180
 $14,630
 $717
 $37,527
 $19,621
 $4,643
 $2,024
 $26,288
 $63,815

As of December 31, 2012As of December 31, 2013
TDRs on Accrual TDRs on Nonaccrual TotalTDRs on Accrual TDRs on Nonaccrual Total
Real estate -
Commercial
 
Commercial
Business
 Other Total 
Real estate -
Commercial
 
Commercial
Business
 Other Total 
Real Estate—
Commercial
 
Commercial
Business
 Other Total 
Real Estate—
Commercial
 
Commercial
Business
 Other Total 
(In thousands)(In thousands)
Payment concession$9,608
 $687
 $
 $10,295
 $4,735
 $4,618
 $802
 $10,155
 $20,450
$7,437
 $1,057
 $
 $8,494
 $9,489
 $1,279
 $767
 $11,535
 $20,029
Maturity / Amortization concession348
 3,847
 536
 4,731
 652
 1,941
 869
 3,462
 8,193
765
 6,565
 535
 7,865
 1,653
 3,656
 
 5,309
 13,174
Rate concession13,594
 1,229
 
 14,823
 7,923
 
 
 7,923
 22,746
13,055
 4,490
 
 17,545
 8,107
 
 
 8,107
 25,652
Principal forgiveness
 
 
 
 
 62
 
 62
 62

 
 
 
 
 49
 
 49
 49
$23,550
 $5,763
 $536
 $29,849
 $13,310
 $6,621
 $1,671
 $21,602
 $51,451
$21,257
 $12,112
 $535
 $33,904
 $19,249
 $4,984
 $767
 $25,000
 $58,904
TDRs on accrual status are comprised of loans that were accruing at the time of restructuring and for which the Bank anticipates full repayment of both principal and interest under the restructured terms. TDRs that are on nonaccrual status can be returned to accrual status after a period of sustained performance, generally determined to be six months of timely payments as modified.  Sustained performance includes the periods prior to the modification if the prior performance met or exceeded the modified terms.  TDRs on accrual status at September 30,March 31, 2014 were comprised of 17 commercial real estate loans totaling $22.2 million, 28 commercial business loans totaling $14.6 million, and 3 consumer loans totaling $718 thousand. TDRs on accrual status at December 31, 2013 were comprised of 15 commercial real estate loans totaling $$22.621.3 million, 30 commercial business loans totaling $12.9 million, and 2 consumer loans totaling $544 thousand. TDRs on accrual status at December 31, 2012 were comprised of 12 commercial real estate loans totaling $23.6 million, 2028 commercial business loans totaling $5.812.1 million and 2 consumer loans totaling $536535 thousand.  The Company expects that the TDRs on accrual status as of September 30, 2013March 31, 2014, which were all performing in accordance with their restructured terms, to continue to comply with the restructured terms because of the reduced principal or interest payments on these loans.  TDRs that were restructured at market interest rates and had sustained performance as agreed under the modified loan terms may be reclassified as non-TDRs after each year end but are still monitoredreserved for potential impairment.under ASC 310-10.
 
We haveThe Company has allocated $7.74.4 million and $6.36.6 million of specific reserves to TDRs as of September 30, 2013March 31, 2014 and December 31, 20122013, respectively.  As of September 30, 2013March 31, 2014 and December 31, 20122013, we did not have anythere were no outstanding commitments to extend additional funds to these borrowers.

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The following table presents loans by class modified as TDRs that occurred during the three and nine months ended September 30, 2013March 31, 2014:

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 Three Months Ended September 30, 2013 Nine Months Ended September 30, 2013
 
Number of
Loans 
 
Pre-
Modification
 
Post-
Modification 
 Number of
Loans 
 Pre-
Modification
 Post-
Modification 
 (Dollars in thousand)
Legacy Loans:           
Real estate - Commercial   
  
      
Retail1
 $568
 $568
 5
 $5,443
 $5,521
Hotel & Motel
 
 
 
 
 
Gas Station & Car Wash
 
 
 1
 1,371
 909
Mixed Use
 
 
 
 
 
Industrial & Warehouse
 
 
 1
 370
 346
Other
 
 
 
 
 
Real estate - Construction
 
 
 
 
 
Commercial business3
 569
 258
 12
 7,550
 7,473
Trade Finance
 
 
 
 
 
Consumer and other1
 500
 496
 1
 500
 496
Subtotal5
 $1,637
 $1,322
 20
 $15,234
 $14,745
Acquired Loans:           
Real estate - Commercial   
  
      
Retail1
 $58
 $57
 1
 $59
 $57
Hotel & Motel
 
 
 
 
 
Gas Station & Car Wash
 
 
 1
 165
 170
Mixed Use
 
 
 
 
 
Industrial & Warehouse
 
 
 2
 10,336
 5,282
Other
 
 
 2
 1,137
 1,132
Real estate - Construction
 
 
 
 
 
Commercial business1
 31
 31
 6
 1,089
 390
Trade Finance
 
 
 
 ��
 
Subtotal2
 $89
 $88
 12
 $12,786
 $7,031
Total7
 $1,726
 $1,410
 32
 $28,020
 $21,776
            
 Three Months Ended March 31, 2014
 
Number of
Loans 
 
Pre-
Modification
 
Post-
Modification 
 (Dollars in thousand)
Legacy Loans:     
Real estate—commercial   
  
Retail
 $
 $
Hotel & motel
 
 
Gas station & car wash
 
 
Mixed use
 
 
Industrial & warehouse
 
 
Other1
 1,023
 1,018
Real estate - construction
 
 
Commercial business2
 296
 121
Trade finance
 
 
Consumer and other1
 195
 192
Subtotal4
 $1,514
 $1,331
Acquired Loans:     
Real estate—commercial   
  
Retail
 $
 $
Hotel & motel
 
 
Gas station & car wash
 
 
Mixed use
 
 
Industrial & warehouse1
 756
 812
Other1
 240
 240
Real estate—construction
 
 
Commercial business7
 4,483
 4,639
Trade finance1
 92
 380
Subtotal10
 $5,571
 $6,071
 14
 $7,085
 $7,402
The specific reserves for the TDRs that occurred during the three months and nine months period ended September 30, 2013March 31, 2014 totaled $316535 thousand and $2.4 million, respectively, and there were $0 and $150$18 thousand in charge offs for the three months and nine months ended September 30, 2013, respectively.March 31, 2014.
The following table presents loans by class for TDRs that have been modified within the previous twelve months and have subsequently had a payment default during the three and nine months ended September 30, 2013March 31, 2014:



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Three Months Ended
September 30, 2013
 
Nine Months Ended
September 30, 2013
 Number of Loans Balance 
Number of
Loans
 
 
Balance
 
 (Dollars In thousands)
Legacy Loans:       
Real estate - Commercial       
Retail1
 $709
 2
 $1,220
Gas Station & Car Wash
 
 
 
Industrial & Warehouse
 
 
 
Other
 
 
 
Commercial Business2
 1,822
 4
 1,852
Subtotal3
 $2,531
 6
 $3,072
Acquired Loans:       
Real estate - Commercial 
  
    
Retail1
 $57
 1
 $57
Gas Station & Car Wash1
 170
 1
 170
Hotel & Motel
 
 
 
Industrial & Warehouse1
 5,200
 1
 5,200
Other
 
 
 
Commercial Business3
 33
 4
 182
Subtotal6
 $5,460
 7
 $5,609
 9
 $7,991
 13
 $8,681
 
Three Months Ended
March 31, 2014
 Number of Loans Balance
 (Dollars In thousands)
Legacy Loans:   
Real estate—commercial   
Retail
 $
Gas station & car wash
 
Industrial & warehouse
 
Other
 
Commercial business2
 536
Subtotal2
 $536
Acquired Loans:   
Real estate—commercial 
  
Retail2
 $268
Gas station & car wash
 
Hotel & motel
 
Industrial & warehouse
 
Other
 
Commercial business2
 44
Subtotal4
 $312
 6
 $848
A loan is considered to be in payment default once it is 30 days contractually past due under the modified terms. As of September 30, 2013,March 31, 2014, the specific reserves totaled $85645 thousand and $1.0 million for the TDRs that had payment defaults during the three months and nine months ended September 30, 2013March 31, 2014, respectively.. The total charge offs for the TDRs that had payment defaults during the three and nine months ended September 30, 2013March 31, 2014 were $304 thousand and $1.1 million, respectively.$480 thousand.
There were threetwo Commercial Business Legacy Loans that subsequently defaulted during the three months ended September 30, 2013March 31, 2014. The loans totaled $536 thousand and were modified through a maturity/amortization concession.
There were four Acquired Loans that defaulted during the three months ended March 31, 2014 which were modified as follows: two Commercial Business loans totaling $1.8 million were modified through maturity/amortization concessions and one Real Estate Commercial - Retail loan totaling $709 thousand was modified through a rate concession.
The six Legacy Loans that subsequently defaulted during the nine months ended September 30, 2013 were modified as follows: four Commercial Business loans totaling $1.9 million were modified through maturity/amortization concessions and two Real Estate Commercial - Retail loans totaling $1.2 million were modified through rate concessions.
There were six Acquired Loans that subsequently defaulted during the three months ended September 30, 2013 which were modified as follows: three Commercial Business loans totaling $3344 thousand were modified through payment concessions and threetwo Real Estate Commercial loans totaling $5.4 million were modified through payment concessions
The seven Acquired Loans that subsequently defaulted during the nine months ended September 30, 2013 were modified as follows: three Commercial Business loans totaling $33268 thousand were modified through payment concessions, one Commercial Business loan totaling $149 thousand was modified through a maturity/amortization concession and three Real Estate Commercial loans totaling $5.4 million were modified through payment concessions.

Covered Assets
On April 16, 2010, the Department of Financial Institutions closed Innovative Bank, California, and appointed the FDIC as its receiver. On the same date, the Bank assumed the banking operations of Innovative Bank from the FDIC under a purchase and assumption agreement and two related loss sharing agreements with the FDIC.
Covered nonperforming assets totaled $2.42.0 million and $882826 thousand at September 30, 2013March 31, 2014 and December 31, 20122013, respectively. These covered nonperforming assets are subject to the loss sharing agreements with the FDIC. The covered nonperforming assets at September 30, 2013March 31, 2014 and December 31, 20122013 were as follows:
 March 31, 2014 December 31, 2013
 (In thousands)
Covered loans on nonaccrual status$1,400
 $236
Covered OREO590
 590
     Total covered nonperforming assets$1,990
 $826
    
Acquired covered loans$54,229
 $55,088

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 September 30, 2013 December 31, 2012
 (In thousands)
Covered loans on nonaccrual status$427
 $489
Covered OREO1,963
 393
     Total covered nonperforming assets$2,390
 $882
    
Acquired covered loans$58,637
 $72,528
Related Party Loans
In the ordinary course of business, the Company enteredenters into loan transactions with certain of its directors or associates of such directors (“Related Parties”). The loans to Related Parties are on substantially the same terms and conditions, including interest rates and collateral, as those prevailing at the same time for comparable transactions with unrelated parties. In management’s opinion, these transactions did not involve more than normal credit risk or present other unfavorable features. All loans to Related Parties were current as of September 30, 2013March 31, 2014 and December 31, 2012,2013, and the outstanding principal balance as of September 30, 2013March 31, 2014 and December 31, 20122013 was $7.75.0 million and $11.13.9 million, respectively.

8.Borrowings
We maintainThe Company maintains a secured credit facility with the FHLB against which the Bank may take advances. The borrowing capacity is limited to the lower of 30% of the Bank’s total assets or the Bank’s collateral capacity, which was $1.581.85 billion at September 30, 2013March 31, 2014 and $1.351.78 billion at December 31, 20122013. The terms of this credit facility require the Company to pledge eligible collateral with the FHLB equal to at least 100% of outstanding advances.
At September 30, 2013March 31, 2014 and December 31, 20122013, real estate secured loans with a carrying amount of approximately $2.082.44 billion and $2.042.33 billion, respectively, were pledged as collateral for borrowings from the FHLB. At September 30,March 31, 2014 and December 31, 2013, other than FHLB stock, securities with a carrying value of $13.9$1.3 million were pledged as collateral for borrowings from the FHLB, and at December 31, 2012, no securities$13.2 million, respectively, were pledged as collateral for borrowings from the FHLB.
At September 30, 2013March 31, 2014 and December 31, 20122013, FHLB advances were $421.4421.3 million and $420.7421.4 million, respectively, had a weighted average interest rate of 1.10%1.16% and 1.24%1.16%, respectively, and had various maturities through OctoberNovember 2018. At September 30, 2013March 31, 2014 and December 31, 20122013, $51.451.3 million and $66.751.4 million, respectively, of the advances were putable advances with various putable dates and strike prices. The cost of FHLB advances as of September 30, 2013March 31, 2014 ranged between 0.47% and 3.81%. At September 30, 2013March 31, 2014, the Company had a remaining borrowing capacity of $1.181.44 billion.
At September 30, 2013March 31, 2014, the contractual maturities for FHLB advances were as follows:

Contractual
Maturities

Maturity/
Put Date
Contractual
Maturities

Maturity/
Put Date
(In thousands)(In thousands)
Due within one year$39,000
 $76,446
$30,000
 $51,260
Due after one year through five years382,446
 345,000
391,260
 370,000

$421,446
 $421,446
$421,260
 $421,260

In addition, as a member of the FRB system, wethe Bank may also borrow from the FRB of San Francisco. The maximum amount that wethe Bank may borrow from the FRB’s discount window is up to 95% of the outstanding principal balance of the qualifying loans and the fair value of the securities that we pledge.are pledged. At September 30, 2013March 31, 2014, the outstanding principal balance of the qualifying loans was $465.9656.3 million, and the collateral value of investment securities were $1.9 million. There were no borrowings were outstanding against this line.line as of March 31, 2014 and December 31, 2013.

9.Subordinated Debentures
At September 30, 2013March 31, 2014, four wholly-owned subsidiary grantor trusts established by former Nara Bancorp had issued $28 million of pooled Trust Preferred Securities (“trust preferred securities”) and one wholly-owned subsidiary grantor trust established by former Center Financial Corporation had issued $18 million of trust preferred securities. Upon the acquisition of PIB, the Company assumed one grantor trust established by former PIB which issued $15.0$15 million of trust preferred securities, which the Company redeemed on June 17, 2013. Upon the acquisition of Foster, Bankshares, the Company assumed one grantor trust established by former Foster Bank which issued $15 million of trust preferred securities.securities, which the Company redeemed on March 14, 2014. Trust preferred securities accrue and pay distributions periodically at specified annual rates as provided in the indentures. The trusts used the net proceeds from the offering to purchase a like amount of subordinated debentures (the “Debentures”) of BBCN Bancorp. The Debentures are the sole assets of the trusts. BBCN Bancorp’s obligations under the subordinated debentures and related

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documents, taken together, constitute a full and unconditional guarantee by BBCN Bancorp of the obligations of the trusts. The trust preferred securities are mandatorily redeemable upon the maturity of the Debentures, or upon earlier redemption as provided in the indentures. BBCN Bancorp has the right to redeem the Debentures in whole (but not in part) on or after specific dates, at a redemption price specified in the indentures plus any accrued but unpaid interest to the redemption date. BBCN Bancorp also has a right to defer consecutive payments of interest on the debentures for up to five years.

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Table of Contents

The following table is a summary of trust preferred securities and debenturesDebentures at September 30, 2013March 31, 2014:
Issuance Trust
Issuance
Date

Trust
Preferred
Security
Amount

Subordinated
Debentures
Amount

Rate
Type

Initial
Rate

Coupon Rate at
September 30, 2013

Maturity
Date

Issuance
Date

Trust
Preferred
Security
Amount

Subordinated
Debentures
Amount

Rate
Type

Initial
Rate

Coupon Rate at
March 31, 2014

Maturity
Date
 (Dollars in thousands)      (Dollars in thousands)     
Nara Capital Trust III
6/5/2003
$5,000

$5,155

Variable
4.44%
3.40%
6/15/2033
6/5/2003
$5,000

$5,155

Variable
4.44%
3.38%
6/15/2033
Nara Statutory Trust IV
12/22/2003
5,000

5,155

Variable
4.02%
3.12%
1/7/2034
12/22/2003
5,000

5,155

Variable
4.02%
3.09%
1/7/2034
Nara Statutory Trust V
12/17/2003
10,000

10,310

Variable
4.12%
3.20%
12/17/2033
12/17/2003
10,000

10,310

Variable
4.12%
3.18%
12/17/2033
Nara Statutory Trust VI
3/22/2007
8,000

8,248

Variable
7.00%
1.90%
6/15/2037
3/22/2007
8,000

8,248

Variable
7.00%
1.88%
6/15/2037
Center Capital Trust I
12/30/2003
18,000

13,091

Variable
4.01%
3.12%
(1) 
1/7/2034
12/30/2003
18,000

13,169

Variable
4.01%
3.09%
(1) 
1/7/2034
Foster Capital Trust I 7/8/2005 15,000
 15,344
 Variable 1.70% 1.95%
(2) 
7/8/2035
TOTAL ISSUANCE
$61,000

$57,303








$46,000

$42,037








(1) The Center Capital Trust I trust preferred security was assumed in the merger with Center Financial Corporation. The remaining discount
(1)
The Center Capital Trust I trust preferred security was assumed in the merger with Center Financial Corporation. The remaining discount was $5.5 million at September 30, 2013 and the effective rate of the security, including the effect of the discount accretion, was 6.03% at September 30, 2013
was $5.4 million at March 31, 2014 and the effective rate of the security, including the effect of the discount accretion, was 5.31% at
March 31, 2014.
(2)
The Foster Capital Trust I trust preferred security was assumed in the merger with Foster Bankshares. The remaining discount was $119 thousand at September 30, 2013 and the effective rate of the security, including the effect of the discount accretion, was 3.75% at September 30, 2013.



The Company’s investment in the common trust securities of the issuer trusts of $1.91.6 million and $1.61.9 million at September 30, 2013March 31, 2014 and December 31, 20122013, respectively, is included in other assets. Although the subordinated debt issued by the trusts are not included as a component of stockholders' equity in the consolidated balance sheets, the debt is treated as capital for regulatory purposes. The trust preferred security debt issuances are includable in Tier I capital up to a maximum of 25% of capital on an aggregate basis. Any amount that exceeds 25% qualifies as Tier 2 capital. At September 30, 2013March 31, 2014, $55.440.6 million of the trusts’ securities qualified as Tier 1 capital. In July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) was signed into law which, among other things, limits the ability of bank holding companies with total assets of more than $15 billion to treat trust preferred security debt issuances as Tier 1 capital. Since the Company had less than $15 billion in assets at September 30, 2013March 31, 2014, we will be able to continue to include its existing trust preferred securities in Tier 1 capital under the Dodd-Frank Act.


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10.Goodwill and Other Intangible Assets
Changes in theThe carrying amount of the Company's goodwill for the nine months ended September 30, 2013 are as follows:
 For the Nine Months Ended September 30, 2013
 (In thousands)
Balance, beginning of period$89,878
Acquired goodwill - PIB3,526
Acquired goodwill - Foster29,665
Measurement period adjustment - PIB(3,188)
Impairment
Balance, end of period$119,881
The goodwill arising from the PIB acquisition was reduced by a net $3.2 million to $338 thousand due to adjustments to the deferred tax asset, which was provisional as of March 31, 2014 and December 31, 2013 and other adjustmentswas $105.4 million for both periods. There was no impairment of certain acquisition date fair value asset and liability estimatesGoodwill during the nine monthsthree month periods ended September 30,March 31, 2014 and 2013.
Core deposit intangiblesintangible assets are amortized over their estimated lives, which range from seven to ten years. The Company acquired, through the acquisitions of PIB and Foster during the secondfirst and third quarters of 2013, respectively, core deposit intangibles, which totaled $603 thousand and $2.8 million, respectively. Amortization expense related to core deposit intangible assets totaled $325$324 thousand and $302$228 thousand for the three months ended September 30,March 31, 2014 and 2013, and 2012, respectively, and $837 thousand and $942 thousand for the nine months ended September 30, 2013 and 2012, respectively. The following table provides information regarding the core deposit intangibles at September 30, 2013:March 31, 2014:
  As of September 30, 2013  As of March 31, 2014
  
Gross
Carrying
Amount
 
Accumulated
Amortization
  
Gross
Carrying
Amount
 
Accumulated
Amortization
Intangible assets:
Amortization
period
    
Amortization
period
    
Core deposit—IBKNY acquisition10 years $1,187
 $(1,187)
Core deposit—Asiana Bank acquistion10 years 1,018
 (1,017)
Core deposit—KEB, Broadway acquisition10 years 2,726
 (2,720)
Core deposit—Center Financial Corporation acquisition7 years 4,100
 (1,748)7 years $4,100
 $(2,145)
Core deposit—PIB acquisition7 years $603
 $(101)7 years 603
 (171)
Core deposit—Foster acquisition10 years $2,763
 $(63)10 years 2,763
 (291)
Total $12,397
 $(6,836) $7,466
 $(2,607)

          



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11.Income Taxes
The Company and its subsidiaries are subject to U.S. federal income tax, as well as state income taxes.  The Company had total unrecognized tax benefits of $0.971.3 million and $748 thousand1.3 million at September 30, 2013March 31, 2014 and December 31, 20122013, respectively, that relate primarily to uncertainties related to California enterprise zone loan interest deductions.
We anticipate an increaseManagement does not expect the total amount of approximately $416 thousandunrecognized tax benefits to significantly change in the unrecognized tax benefit related to the California enterprise zone loan interest deduction.next twelve months.
The statute of limitations related to the consolidated Federal income tax return is closed for all tax years up to and including 20082009. The expiration of the statute of limitations related to the various state income and franchise tax returns varies by state. The Company is currently under examination by IRSthe Internal Revenue Service ("IRS") for the 2010 and 2011 tax yearsyear and by the California Franchise Tax Board (FTB) for the 2009 and 2010 tax years. While the outcome of the examinations is unknown, the Company expects no material adjustments. Within the last twelve months, examinations by the City of New York for tax years 2007, 2008, and 2009, and the FTB for tax years 2007 and 2008, were concluded with no material adjustments.
We recognize interestInterest and penalties related to income tax matters are recognized in income tax expense.  We hadThe Company recorded approximately $4465 thousand and $5258 thousand for accrued interest and penalties at September 30, 2013March 31, 2014 and December 31, 20122013, respectively.
Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all, of the deferred tax asset will not be realized. In assessing the realization of deferred tax assets, management evaluates both positive and negative evidence, including the existence of any cumulative losses in the current year and the prior two years, the amount of taxes paid in available carry-back years, the forecasts of future income, applicable tax planning strategies, and assessments of current and future economic and business conditions. This analysis is updated quarterly and adjusted as necessary. Based on the analysis, the Company has determined that a valuation allowance for deferred tax assets was not required as of September 30, 2013March 31, 2014.


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12.Fair Value Measurements
FASB ASC 820, Fair Value Measurements and Disclosures, establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:
Level 1:Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.
Level 2:Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3:Significant unobservable inputs that reflect estimates of assumptions that market participants would use in pricing the asset or liability.
Securities Available for Sale
The fair values of securities available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs) or matrix pricing, which is a technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs).
The fair values of the Company's Level 3 securities available for sale were measured using an income approach valuation technique. The primary inputs and assumptions used in the fair value measurement were derived from the securities' underlying collateral, which included discount rates, prepayment speeds, payment delays, and an assessment of the risk of default of the underlying collateral, among other factors. Significant increases or decreases in any of the inputs or assumptions would result in a significant increase or decrease in the fair value measurement.
Impaired Loans
The fair values of impaired loans are generally measured for impairment using the practical expedients permitted by FASB ASC 310-10-35 including impaired loans measured at an observable market price (if available), or at the fair value of the loan’s collateral (if the loan is collateral dependent). Fair value of the loan’s collateral, when the loan is dependent on collateral, is determined by appraisals or independent valuation, less costs to sell and result in a Level 2.
Derivatives
The fair value of our derivative financial instruments, including interest rate swaps and caps, is based on derivative valuation models using market data inputs as of the valuation date that can generally be verified and do not typically involve significant management judgments (Level 2 inputs).
OREO
OREO is fair valued at the time the loan is foreclosed upon and the asset is transferred to OREO. The value is based primarily on third party appraisals, less costs to sell and result in a Level 2 classification of the inputs for determining fair value. OREO is reviewed and evaluated on at least an annual basis for additional impairment and adjusted to lower of cost or market accordingly, based on the same factors identified above.
Loans held for sale
Loans held for sale are carried at the lower of cost or fair value, as determined by outstanding commitments from investors, or based on recent comparable sales (Level 2 inputs), if available, and if not available, are based on discounted cash flows using current market rates applied to the estimated life and credit risk (Level 3 inputs) or may be assessed based upon the fair value of the collateral, which is obtained from recent real estate appraisals (Level 3 inputs). These appraisals may utilize a single valuation approach or a combination of approaches including the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are typically significant and result in Level 3 classification of the inputs for determining fair value.


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Assets and liabilities measured at fair value on a recurring basis are summarized below:

 
Fair Value Measurements at the End of the Reporting Period Using 
Fair Value Measurements at the End of the Reporting Period Using
September 30, 2013
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)
March 31, 2014
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)
(In thousands)(In thousands)
Assets:













Securities available for sale:













GSE collateralized mortgage obligations$284,891

$

$284,891

$
$279,354

$

$279,354

$
GSE mortgage-backed securities396,734



396,734


418,961



418,961


Trust preferred securities3,706



3,706


3,800



3,800


Municipal bonds6,016



4,874

1,142
6,019



4,887

1,132
Mutual funds17,219

17,219




17,095

17,095




              


 
  Fair Value Measurements at the End of the Reporting Period Using  Fair Value Measurements at the End of the Reporting Period Using
December 31, 2012 
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
December 31, 2013 
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
(In thousands)(In thousands)
Assets:              
Securities available for sale:              
GSE collateralized mortgage obligations$254,912
 $
 $254,912
 $
$274,101
 $
 $274,101
 $
GSE mortgage-backed securities425,540
 
 425,540
 
404,996
 
 404,996
 
Trust preferred securities3,837
 
 3,837
 
3,697
 
 3,697
 
Municipal bonds5,118
 
 5,118
 
5,936
 
 4,824
 1,112
Mutual funds14,996
 14,996
 
 
17,021
 17,021
 
 

There were no transfers between Level 1, 2 and 3 during the period ended September 30, 2013March 31, 2014 and 2012.2013. There were no gains or losses recognized in earnings
The table below presents a reconciliation and income statement classification of gains and losses for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the ninethree months ended September 30, 2013March 31, 2014:
 Nine Months Ended September 30, Three Months Ended March 31,
 2013 2012 2014 2013
 (In thousands) (In thousands)
Beginning Balance, January 1 $
 $
 $1,112
 $
Purchases, issuances and settlements 1,202
 
 
 1,200
Amortization (15) 
 
 
Total gains or (losses) included in earnings 
 
 
 
Total gains or (losses) included in other comprehensive income (45) 
 20
 6
Ending Balance, September 30 $1,142
 $
Ending Balance, March 31 $1,132
 $1,206



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Assets measured at fair value on a non-recurring basis are summarized below:
 
 
Fair Value Measurements at the End of the Reporting Period Using 
Fair Value Measurements at the End of the Reporting Period Using
September 30, 2013
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)
March 31, 2014
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)
(In thousands)(In thousands)
Assets:













Impaired loans at fair value:













Real estate loans$16,822

$

$16,822

$
$34,075

$

$34,075

$
Commercial business2,818



2,818


3,504



3,504


Trade finance385
 
 385
 
Consumer952
 
 952
 
Loans held for sale, net6,900



6,900


34



34


OREO4,003



4,003


5,039



5,039



  Fair Value Measurements at the End of the Reporting Period Using  Fair Value Measurements at the End of the Reporting Period Using
December 31, 2012 
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
December 31, 2013 
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
(In thousands)(In thousands)
Assets:              
Impaired loans at fair value:              
Real estate loans$4,443
 $
 $4,443
 $
$18,746
 $
 $18,746
 $
Commercial business1,164
 
 1,164
 
2,383
 
 2,383
 
Loans held for sale, net803
 
 803
 
6,900
 
 6,900
 
OREO2,636
 
 2,636
 
4,003
 
 4,003
 

For assets measured at fair value on a non-recurring basis, the total net (losses) gains, which include charge offs, recoveries, specific reserves, and gains and losses on sales recognized are summarized below:

For the three months ended September 30, For the nine months ended September 30,For the three months ended March 31,
2013 2012 2013 20122014 2013
(In thousands)(In thousands)
Assets:          
Impaired loans at fair value:          
Real estate loans$(1,759) $(186) $(9,700) $1,234
$1,704
 $(7,584)
Commercial business(509) (1,064) (1,703) (3,472)(10,715) 535
Loans held for sale, net(530) (380) (530) (536)
Trade Finance(659) 
Consumer(46) 
OREO(570) (1,611) (956) (2,433)(11) (114)


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Fair Value of Financial Instruments
Carrying amounts and estimated fair values of financial instruments, not previously presented, at September 30, 2013March 31, 2014 and December 31, 20122013 were as follows:
 
September 30, 2013March 31, 2014
Carrying
Amount

Estimated
Fair Value
 Fair Value Measurement Using
Carrying
Amount

Estimated
Fair Value
 Fair Value Measurement Using
(In thousands)(In thousands)
Financial Assets:


 



 
Cash and cash equivalents$345,352

$345,352
 Level 1$403,111

$403,111
 Level 1
Loans held for sale49,480

54,476
 Level 238,157

40,065
 Level 2
Loans receivable—net4,833,224

5,266,747
 Level 35,125,095

5,569,266
 Level 3
FHLB stock27,958

N/A
 N/A
FDIC loss share receivable2,430

2,430
 Level 3253

253
 Level 3
Customers’ liabilities on acceptances6,126

6,126
 Level 24,473

4,473
 Level 2
Financial Liabilities:


 



 
Noninterest bearing deposits$1,362,675

$1,362,675
 Level 2$1,442,348

$1,442,348
 Level 2
Saving and other interest bearing demand deposits1,495,186

1,495,186
 Level 21,602,514

1,602,514
 Level 2
Time deposits2,163,241

2,167,307
 Level 22,289,698

2,294,381
 Level 2
FHLB advances421,446

422,108
 Level 2421,260

421,059
 Level 2
Subordinated debentures57,303

56,434
 Level 242,037

44,012
 Level 2
Bank’s liabilities on acceptances outstanding6,126

6,126
 Level 24,473

4,473
 Level 2
December 31, 2012December 31, 2013
Carrying
Amount

Estimated
Fair Value
 Fair Value Measurement Using
Carrying
Amount

Estimated
Fair Value
 Fair Value Measurement Using
(In thousands)(In thousands)
Financial Assets:


 


 
Cash and cash equivalents$312,916

$312,916
 Level 1$316,705

$316,705
 Level 1
Loans held for sale51,635

57,856
 Level 244,115

45,975
 Level 2
Loans receivable—net4,229,311

4,591,685
 Level 35,006,856

5,450,008
 Level 3
FHLB stock22,495

N/A
 N/A
FDIC loss share receivable5,797

5,797
 Level 31,110

1,110
 Level 3
Customers’ liabilities on acceptances10,493

10,493
 Level 25,602

5,602
 Level 2
Financial Liabilities:        
Noninterest bearing deposits$1,184,285

$1,184,285
 Level 2$1,399,454

$1,399,454
 Level 2
Saving and other interest bearing demand deposits1,428,990

1,428,990
 Level 21,598,514

1,598,514
 Level 2
Time deposits1,770,760

1,772,778
 Level 22,150,089

2,156,514
 Level 2
FHLB advances420,722

425,107
 Level 2421,352

421,258
 Level 2
Subordinated debentures41,846

32,218
 Level 257,410

56,544
 Level 2
Bank’s liabilities on acceptances outstanding10,493

10,493
 Level 25,602

5,602
 Level 2

The methods and assumptions used to estimate fair value are described as follows:

The carrying amount is the estimated fair value for cash and cash equivalents, savings and other interest bearing demand deposits, accrued interest receivable and payable, customer’s and Bank’s liabilities on acceptances, noninterest bearing deposits, short-term debt, secured borrowings and variable rate loans or deposits that reprice frequently and fully. For fixed rate loans or deposits and for variable rate loans or deposits with infrequent repricing or repricing limits, fair value is based on discounted cash flows using current market rates applied to the estimated life and credit risk. The allowance for loan losses is considered to be a reasonable estimate of discount for credit quality concerns. Fair value of SBA loans held for sale is based on market quotes. For fair value of non-SBA loans held for sale, see the measurement method discussed previously. Fair value of

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Table of Contents

time deposits and debt is based on current rates for similar financing. It was not practicable to determine the fair value of FRB stock or FHLB stock due to restrictions placed on their transferability. The fair value of commitments to fund loans represents

46

Table of Contents

fees currently charged to enter into similar agreements with similar remaining maturities and is not presented herein. The fair value of these financial instruments is not material to the consolidated financial statements.

13.Stockholders’ Equity and Regulatory Matters
In June 2012, the Company redeemed all of the Fixed Rate Cumulative Perpetual Preferred Stock issued under the U.S. Treasury Department's TARP Capital Purchase Program. As of March 31, 2014, a warrant held by the U.S. Treasury Department for the purchase of 342,610 shares of the Company's common stock remains outstanding.
In conjunction with the acquisition of PIB, the Company assumed a warrant (related to the TARP Capital Purchase Plan) to purchase shares of its common stock. At the acquisition date, the warrants were canceled and converted into a warrant to purchase BBCN Bancorp common stock which expires on December 12, 2018. As of March 31, 2014, the U.S. Treasury Department held the warrant for the purchase of 18,392 shares of the Company's common stock.
The Company's Board of Directors declared quarterly dividends of $0.075 per common share for the first quarter of 2014, which was an increase over the quarterly dividends of $0.05 per common share for the first quarter of 2013. The dividends for the first quarter of 2014 will be payable on or about May 16, 2014 to all stockholders of record as of May 2, 2014.
The Company and the Bank are subject to various regulatory capital requirements administered by the federal and state banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material and adverse effect on the Company’s and the Bank’s financial statements, such as restrictions on the growth, expansion or the payment of dividends or other capital distributions or management fees. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum ratios (set forth in the table below) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined). Management believes that, as of September 30, 2013March 31, 2014 and December 31, 20122013, the Company and the Bank met all capital adequacy requirements to which they are subject.
As of September 30, 2013March 31, 2014 and December 31, 20122013, the most recent regulatory notification categorized the Bank as well capitalized"well-capitalized" under the regulatory framework for prompt corrective action. To be categorized as well capitalized,"well-capitalized", the Bank must maintain minimum total risk-based, Tier I risk-based and Tier I leverage ratios as set forth in the table below. There are no conditions or events since the notification that management believes have changed the Bank’s category.
In June 2012, the Company redeemed $55 million of our Fixed Rate Cumulative Perpetual Preferred Stock, Series B, issued by Center Financial under the Treasury Department's TARP Capital Purchase Program. A ten-year warrant to purchase Center Financial common stock issued in connection with Center Financial's sale of preferred stock to the Treasury Department was converted into a warrant to purchase BBCN Bancorp common stock upon our merger with Center. Reflecting the merger exchange ratio of 0.7805, the warrant now entitles the holder of the warrant to purchase, in one or more exercises of the warrant, up to 337,480 shares of BBCN Bancorp common stock at a price of $12.22 per share. The Company has not reached an agreement with the Treasury Department regarding repurchase of this warrant.
In December 2008, PIB granted a ten-year warrant to purchase up to 127,785 shares of its common stock (in relation to the TARP Capital Purchase Plan) which were assumed by the Company upon the acquisition of PIB. On the acquisition date of February 15, 2013, these warrants were canceled and converted into a warrant to purchase BBCN Bancorp common stock. The warrant entitles the holder to purchase, on one or more exercises of the warrant, up to 18,045 shares of BBCN Bancorp common stock at a price of $54.03 per share. The warrant expires on December 12, 2018. The Company has not reached an agreement with the Treasury Department regarding repurchase of this warrant.

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The Company’s and the Bank’s actual capital amounts and ratios are presented in the table below:
 
Actual
Required
For Capital
Adequacy Purposes

Required
To Be Well
Capitalized under
Prompt Corrective
Action Provisions
Actual
Required
For Capital
Adequacy Purposes

Required
To Be Well
Capitalized under
Prompt Corrective
Action Provisions
Amount
Ratio
Amount
Ratio
Amount
RatioAmount
Ratio
Amount
Ratio
Amount
Ratio
(Dollars in thousands)(Dollars in thousands)
As of September 30, 2013 
 
 
 
 
 
As of March 31, 2014 
 
 
 
 
 
Total capital (to risk-weighted assets):





















Company$793,569
 14.89%
$426,401

8.00%
N/A

N/A
$830,822
 14.89%
$446,256

8.00%
N/A

N/A
Bank$784,601
 14.73%
$426,149

8.00%
$532,686

10.00%$815,512
 14.63%
$446,023

8.00%
$557,528

10.00%
Tier I capital (to risk-weighted assets):
 









 








Company$727,053
 13.64%
$213,200

4.00%
N/A

N/A
$764,197
 13.70%
$223,128

4.00%
N/A

N/A
Bank$718,084
 13.48%
$213,074

4.00%
$319,612

6.00%$748,887
 13.43%
$223,011

4.00%
$334,517

6.00%
Tier I capital (to average assets):
 









 








Company$727,053
 12.06%
$241,094

4.00%
N/A

N/A
$764,197
 11.88%
$257,227

4.00%
N/A

N/A
Bank$718,084
 11.90%
$241,392

4.00%
$301,740

5.00%$748,887
 11.66%
$256,934

4.00%
$321,168

5.00%
Actual
Required
For Capital
Adequacy Purposes

Required
To Be Well
Capitalized under
Prompt Corrective
Action Provisions
Actual
Required
For Capital
Adequacy Purposes

Required
To Be Well
Capitalized under
Prompt Corrective
Action Provisions
Amount
Ratio
Amount
Ratio
Amount
RatioAmount
Ratio
Amount
Ratio
Amount
Ratio
(Dollars in thousands)(Dollars in thousands)
As of December 31, 2012 
 
 
 
 
 
As of December 31, 2013 
 
 
 
 
 
Total capital (to risk-weighted assets):





















Company$746,396

16.16%
$369,417

8.00%
N/A

N/A
$819,408

14.90%
$439,687

8.00%
N/A

N/A
Bank$725,655

15.73%
$369,134

8.00%
$461,417

10.00%$807,620

14.70%
$439,437

8.00%
$549,471

10.00%
Tier I capital (to risk-weighted assets):





















Company$688,422

14.91%
$184,708

4.00%
N/A

N/A
$751,204

13.66%
$219,844

4.00%
N/A

N/A
Bank$667,725

14.47%
$184,567

4.00%
$276,850

6.00%$739,416

13.46%
$219,798

4.00%
$329,683

6.00%
Tier I capital (to average assets):





















Company$688,422

12.76%
$215,861

4.00%
N/A

N/A
$751,204

11.97%
$251,049

4.00%
N/A

N/A
Bank$667,725

12.38%
$215,813

4.00%
$269,767

5.00%$739,416

11.79%
$250,954

4.00%
$313,687

5.00%

The following table presents the components of accumulated other comprehensive (loss) incomeloss at September 30, 2013March 31, 2014 and December 31, 2012:

2013:
 
September 30,
2013
 December 31, 2012
 (In thousands)
Net unrealized (loss) gain on securities available for sale$(3,472) $9,004
Net unrealized gain on interest-only strips83
 78
Total accumulated other comprehensive (loss) income$(3,389) $9,082
 March 31, 2014 December 31, 2013
 (In thousands)
Net unrealized loss on securities available for sale$(3,826) $(10,264)
Net unrealized gain on interest-only strips85
 79
Total accumulated other comprehensive loss$(3,741) $(10,185)


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Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 20122013 and the unaudited consolidated financial statements and notes set forth elsewhere in this report.


GENERAL
Selected Financial Data
The following table sets forth certain selected financial data concerning the periods indicated:
 
At or for the Three Months Ended September 30, At or for the Nine Months Ended September 30,At or for the Three Months Ended March 31,
2013 2012 2013 20122014 2013
(Dollars in thousands, except
share and per share data)
(Dollars in thousands, except
share and per share data)
Income Statement Data:          
Interest income$72,035
 $65,455
 $208,157
 $200,953
$73,354
 $66,743
Interest expense7,675
 7,224
 21,978
 22,361
8,388
 7,027
Net interest income64,360
 58,231
 186,179
 178,592
64,966
 59,716
Provision for loan losses744
 6,900
 9,050
 16,682
3,026
 7,506
Net interest income after provision for loan losses63,616
 51,331
 177,129
 161,910
61,940
 52,210
Noninterest income10,799
 7,664
 31,357
 29,531
11,095
 9,940
Noninterest expense35,746
 28,770
 103,450
 90,282
36,275
 33,275
Income before income tax provision38,669
 30,225
 105,036
 101,159
36,760
 28,875
Income tax provision15,117
 11,827
 41,352
 39,463
14,564
 11,414
Net income$23,552
 $18,398
 $63,684
 $61,696
$22,196
 $17,461
Dividends and discount accretion on preferred stock
 
 
 (5,640)
Net income available to common stockholders$23,552
 $18,398
 $63,684
 $56,056
Per Share Data:          
Earnings per common share - basic$0.30
 $0.24
 $0.81
 $0.72
$0.28
 $0.22
Earnings per common share - diluted$0.30
 $0.24
 $0.80
 $0.72
$0.28
 $0.22
Book value per common share (period end, excluding preferred stock and warrants)$10.11
 $9.41
 $10.11
 $9.41
Book value per common share (period end, excluding warrants)$10.46
 $9.79
Cash dividends declared per common share$.05
 $
 $.175
 $
$.075
 $0.05
Tangible book value per common share (period end, excluding preferred stock and warrants) (11)
$8.52
 $8.21
 $8.52
 $8.21
Tangible book value per common share (period end, excluding warrants) (10)
$9.08
 $8.61
Number of common shares outstanding (period end)79,247,719
 78,016,260
 79,247,719
 78,016,260
79,488,899
 78,812,140
Weighted average shares - basic79,223,636
 78,015,960
 78,914,360
 78,004,458
79,489,579
 78,389,434
Weighted average shares - diluted79,334,865
 78,103,795
 79,122,060
 78,082,059
79,639,839
 78,480,671
Tangible common equity ratio (9)
10.87% 12.23% 10.87% 12.23%
Tangible common equity ratio (8)
11.00% 11.77%
Statement of Financial Condition Data - at Period End:          
Assets$6,340,987
 $5,331,979
 $6,340,987
 $5,331,979
$6,667,551
 $5,833,597
Securities available for sale708,566
 687,059
 708,566
 687,059
725,229
 717,441
Gross loans, net of deferred loan fees and costs (excludes loans held for sale)4,898,939
 4,069,494
 4,898,939
 4,069,494
Loans receivable5,190,794
 4,500,046
Deposits5,021,102
 4,052,524
 5,021,102
 4,052,524
5,334,560
 4,555,674
FHLB advances421,446
 460,815
 421,446
 460,815
421,260
 421,632
Subordinated debentures57,303
 41,809
 57,303
 41,809
42,037
 45,996
Stockholders’ equity801,230
 734,455
 801,230
 734,455
832,159
 772,275

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At or for the Three Months Ended September 30, At or for the Nine Months Ended September 30,At or for the Three Months Ended March 31,
2013 2012 2013 20122014 2013
(Dollars in thousands)(Dollars in thousands)
Average Balance Sheet Data:          
Assets$6,160,132
 $5,179,186
 $5,924,397
 $5,140,591
$6,525,548
 $5,727,738
Securities available for sale714,660
 679,764
 704,124
 699,225
698,931
 691,984
Gross loans, including loans held for sale4,771,022
 4,007,402
 4,588,464
 3,878,080
Loans receivable and loans held for sale5,183,801
 4,444,320
Deposits4,845,402
 3,961,484
 4,629,925
 3,906,834
5,188,593
 4,447,970
Stockholders’ equity794,737
 728,038
 781,159
 785,875
819,344
 765,230
Selected Performance Ratios:          
Return on average assets (1) (8)
1.53% 1.42% 1.43% 1.60%
Return on average stockholders’ equity (1) (8)
11.85% 10.11% 10.87% 10.47%
Return on average assets (1)
1.36% 1.22%
Return on average stockholders’ equity (1)
10.84% 9.13%
Average stockholders' equity to average assets12.90% 14.06% 13.19% 15.29%12.56% 13.36%
Return on average tangible equity (1) (8) (10)
13.90% 11.60% 12.52% 11.89%
Return on average tangible equity (1) (9)
12.52% 10.42%
Dividend payout ratio (dividends per share / earnings per share)25.00% 0.0% 21.60% 0.0%26.79% 22.73%
Pre-Tax Pre-Provision income to average assets (1)
2.56% 2.87% 2.57% 3.06%2.44% 2.54%
Efficiency ratio (2)
47.56% 43.66% 47.56% 43.38%47.69% 47.77%
Net interest spread4.19% 4.51% 4.23% 4.68%4.05% 4.26%
Net interest margin (3)
4.42% 4.79% 4.46% 4.97%4.29% 4.49%
Regulatory Capital Ratios (4)
          
Leverage capital ratio (5)
12.06% 13.15% 12.06% 13.15%11.88% 12.64%
Tier 1 risk-based capital ratio13.64% 15.22% 13.64% 15.22%13.70% 14.63%
Total risk-based capital ratio14.89% 16.48% 14.89% 16.48%14.89% 15.88%
Tier 1 common risk-based capital ratio (12)
12.60% 14.30% 12.60% 14.30%
Tier 1 common risk-based capital ratio (11)
12.97% 13.72%
Asset Quality Ratios:          
Allowance for loan losses to gross loans, excluding loans held for sale1.34% 1.62% 1.34% 1.62%
Allowance for loan losses to loans receivable1.27% 1.63%
Allowance for loan losses to nonaccrual loans181.89% 212.06% 181.89% 212.06%138.86% 173.34%
Allowance for loan losses to nonperforming loans (6)
91.08% 123.70% 91.08% 123.70%77.44% 98.32%
Allowance for loan losses to nonperforming assets (7)
47.18% 80.86% 47.18% 80.86%62.66% 88.34%
Nonaccrual loans to gross loans, excluding loans held for sale0.74% 0.76% 0.74% 0.76%
Nonperforming loans to gross loans, excluding loans held for sale (6)
2.28% 1.90% 2.28% 1.90%
Nonperforming assets to gross loans and OREO (7)
2.83% 2.00% 2.83% 2.00%
Nonaccrual loans to loans receivable0.91% 0.94%
Nonperforming loans to loans receivable (6)
1.63% 1.66%
Nonperforming assets to loans receivable and OREO (7)
2.01% 1.84%
Nonperforming assets to total assets (7)
2.20% 1.53% 2.20% 1.53%1.57% 1.42%
(1) 
Annualized.
(2) 
Efficiency ratio is defined as non-interestnoninterest expense divided by the sum of net interest income before provision for loan losses and noninterest income.
(3) 
Net interest margin is calculated by dividing annualized net interest income by average total interest earning assets.
(4) 
The ratios generally required to meet the definition of a “well-capitalized” institution under certain banking regulations are 5% leverage capital, 6% tier I risk-based capital and 10% total risk-based capital.
(5) 
Calculations are based on average quarterly asset balances.
(6) 
Nonperforming loans include nonaccrual loans, loansLegacy Loans and APLs past due 90 days or more and still accruing interest, and accruing restructured loans. Loans 90 days or more past due and still accruing consist of acquired loans that were originally recorded at fair value upon acquisitions. These loans are considered to be accruing as we can reasonably estimate future cash flows on acquired loans and we expect to fully collect the carrying value of these loans.
(7) 
Nonperforming assets include nonaccrualconsist of nonperforming loans loans past due 90 days or more and still accruing interest, OREO, and accruing restructured loans.OREO.
(8) 
Based on net income before effect of dividends and discount accretion on preferred stock.

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Table of Contents

(9)
Excludes TARP preferred stock net of discount, of $0and $0 million andrelated stock warrants of $378 thousand and $378 thousand at September 30, 2013March 31, 2014 and 2012,2013, respectively.
(10)(9) 
Average tangible equity is calculated by subtracting average goodwill and average other intangibles from average stockholders' equity. This is a non-GAAP measure that we believe provides investors with information that is useful in understanding our financial performance and position.

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Table of Contents

 Three Months Ended September 30, Nine Months Ended September 30, Three Months Ended March 31,
 2013 2012 2013 2012 2014 2013
 (Dollars in thousands) (Dollars in thousands)
Net income $23,552
 $18,398
 $63,684
 $61,696
 $22,196
 $17,461
            
Average stockholders' equity $794,737
 $728,038
 $781,159
 $785,875
 $819,344
 $765,230
Less: Average goodwill and other intangible assets, net (116,885) (93,407) (102,935) (93,771) (110,462) (95,021)
Average tangible equity $677,852
 $634,631
 $678,224
 $692,104
 $708,882
 $670,209
            
Net income (annualized) to average tangible equity 13.90% 11.60% 12.52% 11.89% 12.52% 10.42%

(11)(10) 
Tangible book value per common share is calculated by subtracting goodwill and other intangible assets from total stockholders' equity and dividing the difference by the number of shares of common stock outstanding. This is a non-GAAP measure that we believe provides investors with information that is useful in understanding our financial performance and position.
 September 30, 2013 September 30, 2012 March 31, 2014 March 31, 2013
 (In thousands) (In thousands)
Total stockholders' equity $801,230
 $734,455
 $832,159
 $772,275
Less: Preferred stock, net of discount 
 
Common stock warrant (378) (378)
Less: Common stock warrant (378) (378)
Goodwill and other intangible assets, net (125,444) (93,217) (110,260) (93,217)
Tangible common equity $675,408
 $640,860
 $721,521
 $678,680
        
Common shares outstanding 79,247,719
 78,016,260
 79,488,899
 78,812,140
        
Tangible book value per common share $8.52
 $8.21
 $9.08
 $8.61

(12)(11) 
The Tier 1 common risk-based capital ratio is calculated by dividing Tier 1 capital less non-common elements, including perpetual preferred stock and related surplus, minority interest in subsidiaries, trust preferred securities and mandatory convertible preferred securities by total risk-weighted assets less the disallowed allowance for loan losses.
 September 30, 2013 September 30, 2012 March 31, 2014 March 31, 2013
 (In thousands) (In thousands)
Tier 1 capital $727,053
 $668,710
 $764,197
 $711,574
Less: Preferred stock, net of discount 
 
Trust preferred securities less unamortized acquisition discount (55,414) (40,384)
Less: Trust preferred securities less unamortized acquisition discount (40,612) (44,447)
Tier 1 common risk-based capital $671,639
 $628,326
 $723,585
 $667,127
        
Total risk weighted assets less disallowed allowance for loan losses 5,330,009
 4,392,505
 5,578,204
 4,864,169
        
Tier 1 common risk-based capital ratio 12.60% 14.30% 12.97% 13.72%





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Results of Operations
Overview
Total assets increased $700.3$192.4 million from $5.646.48 billion at December 31, 20122013 to $6.346.67 billion at September 30, 2013March 31, 2014. The increase in total assets was primarily due to a $603.9$118.2 million increase in loans receivable, net of allowance for loan losses, from $4.23$5.01 billion at December 31, 20122013 to $4.835.13 billion at September 30, 2013March 31, 2014 and a $32.4an $86.4 million increase in cash and duecash equivalents, from banks, from $312.9$316.7 million at December 31, 20122013 to $345.4$403.1 million at September 30, 2013.March 31, 2014. The increase in total assets was funded by a $637.1$186.5 million increase in deposits from $4.385.15 billion at December 31, 20122013 to $5.025.33 billion at September 30, 2013, a $724 thousand increase in FHLB advances from $420.7 million at DecemberMarch 31, 2012 to $421.4 million at September 30, 2013, a $15.5 million increase in subordinated debentures from $41.8 million at December 31, 2012 to $57.3 at September 30, 20132014 and net income available to common stockholders of $63.7 million.$22.2 million.
The netNet income available to common stockholders for the thirdfirst quarter of 20132014 was $23.6$22.2 million, or $0.30$0.28 per diluted common share, compared to $18.4$17.5 million, or $0.24$0.22 per diluted common share, for the same period of 2012,2013, an increase of $5.2$4.7 million, or 28.0%. The net income available to common stockholders for the nine months ended September 30, 2012 was $63.7 million, or $0.80 per diluted common share, compared to $56.1 million, or $0.72 per diluted common share, for the same period of 2012, an increase of $7.6 million, or 13.6%27.1%. Acquisitions impact the comparability of the operating results for the third quarter and the ninethree months ended September 30 ofMarch 31, 2014 and 2013, and 2012, because the acquired assets and liabilities were recorded at fair value and certain acquisition premiums and discounts are being amortized or accreted into income or expense as adjustments to the yield/cost of the related asset or liability. In addition, the PIBacquisitions of Pacific International Bancorp, Inc. ("PIB") and Foster acquisitionsBankshares, Inc. ("Foster") resulted in increases in interest earning assets, interest bearing liabilities, employees and branch locations in 2013. The operating results for the three months ended September 30,March 31, 2014 and 2013 and 2012 and the nine months ended September 30, 2013 and 2012 include the following major pre-tax acquisition accounting adjustments and expenses related to acquisitions.

 Three Months Ended September 30, Nine Months Ended September 30, Three Months Ended March 31,
 2013 2012 2013 2012 2014 2013
 (Dollars in thousands) (Dollars in thousands)
Accretion of discounts on acquired performing loans $4,074
 $4,890
 $14,787
 $16,983
 $3,202
 $4,076
Accretion of discounts on acquired credit impaired loans 2,806
 1,215
 5,360
 6,462
 2,645
 1,522
Amortization of premiums on assumed FHLB advances 94
 307
 277
 2,442
 92
 91
Accretion of discounts on assumed subordinated debt (81) (37) (172) (108) (91) (43)
Amortization of premiums on assumed time deposits 308
 650
 993
 2,712
 314
 438
Increase to pre-tax income $7,201
 $7,025
 $21,245
 $28,491
 $6,162
 $6,084

The annualized return on average assets before the effect of dividends and discount accretion on preferred stock on average assets, was 1.53%1.36% for the thirdfirst quarter of 2013,2014, compared to 1.42%1.22% for the same period of 2012.2013. The annualized return on average stockholders' equity before the effect of dividends and discount accretion on preferred stock, was 11.85%10.84% for the thirdfirst quarter of 2013,2014, compared to 10.11%9.13% for the same period of 2012.2013. The efficiency ratio was 47.56%47.69% for the thirdfirst quarter of 2013,2014, compared to 43.66%47.77% for the same period of 2012.
The annualized return on average assets, before the effect of dividends and discount accretion on preferred stock on average assets, was 1.43% for the nine months ended September 30, 2013, compared to 1.60% for the same period of 2012. The annualized return on average stockholders' equity, before the effect of dividends and discount accretion on preferred stock, was 10.87% for the nine months ended September 30, 2013, compared to 10.47% for the same period of 2012. The efficiency ratio was 47.56% for the nine months ended September 30, 2013, compared to 43.38% for the same period of 2012.2013.

Net Interest Income and Net Interest Margin
Net Interest Income
A principal component of the Company'sour earnings is net interest income, which is the difference between the interest and fees earned on loans and investments and the interest paid on deposits and borrowed funds. Net interest income expressed as a percentage of average interest earning assets is referred to as the net interest margin. The net interest spread is the yield on average interest earning assets less the cost of average interest bearing liabilities. Net interest income is affected by changes in

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the balances of interest earning assets and interest bearing liabilities and changes in the yields earned on interest earning assets and the rates paid on interest bearing liabilities.
Comparison of Three Months Ended September 30, 2013March 31, 2014 with the Same Period of 20122013
Net interest income before provision for loan losses was $64.465.0 million for the thirdfirst quarter of 2013,2014, an increase of $6.1$5.3 million, or 10.5%8.8%, compared to $58.259.7 million for the same period of 2012.2013. The increase was principally attributable to the increase in interest earnings assets, which was partially offset by the decline in the net interest margin.
Interest income for the thirdfirst quarter of 20132014 was $72.073.4 million, an increase of $6.6 million, or 10.1%9.9%, compared to $65.566.7 million for the same period of 2012.2013. The increase resulted from an $11.610.1 million increase in interest income due to an increase in average interest earning assets, andwhich was partially offset by a $5.03.5 million decrease in interest income due to a decrease in the yield on average interest earnings assets.
Comparison

52

Table of Nine Months Ended September 30, 2013 with the Same Period of 2012Contents
Net interest income before provision for loan losses was $186.2 million for the nine months ended September 30, 2013, an increase of $7.6 million, or 4.2%, compared to $178.6 million for the same period of 2012. The increase was principally attributable to the increase in average interest earning assets, which was partially offset by the decline in the net interest margin.
Interest income for the nine months ended September 30, 2013 was $208.2 million, an increase of $7.2 million, or 3.6%, compared to $201.0million for the same period of 2012. The increase resulted from a $32.0 million increase in interest income due to an increase in average interest earning assets and partially offset by a $24.8 million decrease in interest income due to a decrease in the yield on average interest earnings assets.

Net Interest Margin

The Company'sOur reported net interest margin is impacted by the weighted average rates it earns on interest earning assets and pays on interest earning liabilities and the effect of acquisition accounting adjustments. The net interest margin for the thirdfirst quarter of 20132014 was 4.42%4.29%, a decrease of 3720 basis points from 4.79%4.49% for the same period of 2012.2013. The decrease in the net interest margin was due to a decline in the weighted average yield on the Company's loan portfolio and a decline in the effect of acquisition accounting adjustments. The net interest margin for the first nine months of 2013 was 4.46%, a decrease of 51 basis points from 4.97% for the same period of 2012. The decrease in the net interest margin was principally due to a decline in the weighted average yield on the Company's loan portfolio and a decline in the effect of acquisition accounting adjustments. The change in the Company'sour reported net interest margin for the three and nine months ended September 30,March 31, 2014 and 2013 and 2012 is summarized in the table below.

 Three Months Ended September 30, Nine Months Ended September 30, Three Months Ended March 31,
 2013 2012 2013 2012 2014 2013
Net interest margin, excluding the effect of acquisition accounting adjustments 3.86% 4.14% 3.90% 4.29% 3.82% 3.97%
Acquisition accounting adjustments(1)
 0.56
 0.65
 0.56
 0.68
 0.47
 0.52
Reported net interest margin 4.42% 4.79% 4.46% 4.97% 4.29% 4.49%
(1) Acquisition accounting adjustments are calculated by subtracting net interest margin, excluding effect of acquisition accounting adjustments, from reported net interest margin.
(1) Acquisition accounting adjustments are calculated by subtracting net interest margin, excluding effect of acquisition accounting adjustments, from reported net interest margin.
(1) Acquisition accounting adjustments are calculated by subtracting net interest margin, excluding effect of acquisition accounting adjustments, from reported net interest margin.

Excluding the effect of acquisition accounting adjustments, the net interest margin for the thirdfirst quarter of 20132014 decreased 2815 basis points to 3.86%3.82% from 4.14%3.97% for the same period of 2012. Excluding the effect of acquisition accounting adjustments, the net interest margin for the nine months ended September 30, 2013 decreased 39 basis points to 3.90%, from 4.29% for the same period of 2012.2013.
The weighted average yield on loans decreased to 5.63%5.37% for the thirdfirst quarter of 20132014 from 6.11%5.75% for the thirdfirst quarter of 2012 and decreased to 5.72% for the nine months ended September 30, 2013 from 6.46% for the same period in 2012.2013. The change in the yield was due to continued pricing pressure on loan interest rates and 5a 6 basis point and 25 basis point declinesdecline in the effects of acquisition accounting adjustments for the respective periods, as summarized in the following table.


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 Three Months Ended September 30, Nine Months Ended September 30, Three Months Ended March 31,
 2013 2012 2013 2012 2014 2013
The weighted average yield on loans, excluding the effect of acquisition accounting adjustments 4.96% 5.39% 5.04% 5.53% 4.83% 5.15%
Acquisition accounting adjustments(1)
 0.67
 0.72
 0.68
 0.93
 0.54
 0.60
Reported weighted average yield on loans 5.63% 6.11% 5.72% 6.46% 5.37% 5.75%
(1) Acquisition accounting adjustments are calculated by subtracting the weighted average yield on loans, excluding the effect of acquisition accounting adjustments, from the reported weighted average yield on loans.
(1) Acquisition accounting adjustments are calculated by subtracting the weighted average yield on loans, excluding the effect of acquisition accounting adjustments, from the reported weighted average yield on loans.
(1) Acquisition accounting adjustments are calculated by subtracting the weighted average yield on loans, excluding the effect of acquisition accounting adjustments, from the reported weighted average yield on loans.

Excluding the effects of acquisition accounting adjustments, the weighted average yield on loans for the thirdfirst quarter of 20132014 decreased 4332 basis points to 4.96%4.83% from 5.39%5.15% for the same period of 2012.2013. This decrease was primarily due to the lower yields on acquired loan portfolios and the reduction in market rates compared to a year ago due to continued pricing pressures. At September 30, 2013March 31, 2014, fixed rate loans accounted for 45%49% of the loan portfolio, compared to 38%40% at September 30, 2012March 31, 2013, reflecting a higher mix of fixed rate loans in the acquired loan portfolios and the high demand for fixed rate loans in the current market. The weighted average yield on the variable rate and fixed rate loan portfolios (excluding loan discount accretion) at September 30, 2013March 31, 2014 was 5.16%4.90% and 4.43%4.33%, respectively, compared with 5.97%5.47% and 4.57%4.49% at September 30, 2012March 31, 2013.

The weighted average yield on securities available for sale for the thirdfirst quarter of 20132014 was 2.13%2.34%, compared to 2.23%1.98% for the same period of 2012.2013. The weighted average yield on securities available for sale for the nine months ended September 30, 2013 was 2.04%, compared to 2.47% for the same period of 2012. The decreaseincrease was primarily attributable to the replacementreduction in the amortization of maturingpremiums on collateralized mortgage obligations and mortgage-backed securities with lower yielding investments as market interest rates declined.a result of slowing prepayment speeds.

The weighted average cost of deposits for the thirdfirst quarter of 20132014 was 0.49%0.52%, a decreasean increase of 3 basis points from 0.52%0.49% for the same period of 2012.2013. The amortization of the premium on time deposits assumed in the acquisition positively affected the weighted average cost of deposits, as summarized in the following table.

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 Three Months Ended September 30, Nine Months Ended September 30, Three Months Ended March 31,
 2013 2012 2013 2012 2014 2013
The weighted average cost of deposits, excluding effect of acquisition accounting adjustments 0.51 % 0.59 % 0.52 % 0.64 % 0.55 % 0.53 %
Acquisition accounting adjustments(1)
 (0.02) (0.07) (0.03) (0.09) (0.03) (0.04)
Reported weighted average cost of deposits 0.49 % 0.52 % 0.49 % 0.55 % 0.52 % 0.49 %
(1) Acquisition accounting adjustments are calculated by subtracting the weighted average cost of deposits, excluding the effect of acquisition accounting adjustments, from the reported weighted average cost of deposits.
(1) Acquisition accounting adjustments are calculated by subtracting the weighted average cost of deposits, excluding the effect of acquisition accounting adjustments, from the reported weighted average cost of deposits.
(1) Acquisition accounting adjustments are calculated by subtracting the weighted average cost of deposits, excluding the effect of acquisition accounting adjustments, from the reported weighted average cost of deposits.

Excluding the amortization of premiums on time deposits assumed in acquisitions, the weighted average cost of deposits was 0.51%0.55% for the thirdfirst quarter of 2013,2014, compared to 0.59%0.53% for the same period of 2012 and 0.52% for the nine months ended September 30, 2013, compared to 0.64% for the same period of 2012.2013. The decreaseincrease was due to reductionsan increase in the costretail deposits such as money market and time deposits due to acquisitions and increased deposit campaigns and promotions. The retail deposits had a yield of interest bearing demand deposits with no significant changes in the proportion of noninterest bearing demand deposits to total deposits. Noninterest bearing demand deposits accounted for 27.1% of total deposits0.81% at September 30, 2013March 31, 2014, compared with 27.3%to 0.77% at September 30, 2012.March 31, 2013

The weighted average cost of FHLB advances for the thirdfirst quarter of 20132014 was 1.18%1.17%, a decrease of 38 basis pointsno change from 1.56%1.17% for the same period of 2012. The decrease was attributable to decreases in FHLB advance rates, which was partially offset by the decline in the amortization of premiums on FHLB advances assumed in acquisitions, as summarized in the following table.2013.

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 Three Months Ended September 30, Nine Months Ended September 30, Three Months Ended March 31,
 2013 2012 2013 2012 2014 2013
The weighted average cost on FHLB advances, excluding effect of acquisition accounting adjustments 1.27 % 1.87 % 1.23 % 2.72 % 1.26 % 1.27 %
Acquisition accounting adjustments (0.09) (0.31) (0.06) (0.93) (0.09) (0.10)
Reported weighted average cost on FHLB advances 1.18 % 1.56 % 1.17 % 1.79 % 1.17 % 1.17 %
(1) Acquisition accounting adjustments are calculated by subtracting the weighted average cost on FHLB advances, excluding the effect of acquisition accounting adjustments, from reported weighted average cost on FHLB advances.
(1) Acquisition accounting adjustments are calculated by subtracting the weighted average cost on FHLB advances, excluding the effect of acquisition accounting adjustments, from reported weighted average cost on FHLB advances.
(1) Acquisition accounting adjustments are calculated by subtracting the weighted average cost on FHLB advances, excluding the effect of acquisition accounting adjustments, from reported weighted average cost on FHLB advances.

Excluding amortization of premiums on FHLB advances assumed in acquisitions, the weighted average cost of FHLB advances decreased to 1.27%1.26% for the thirdfirst quarter of 20132014 from 1.87%1.27% for the same period of 2012,2013, reflecting the addition of $255.0$90.0 million in new borrowings and FHLB advances assumed from acquisitionsover the past twelve months at an average rate of 0.70%, which was lower than the weighted average rate paid on matured borrowings.1.18%. The weighted average original maturity of the new borrowings was 2.274.50 years. In addition, a total of $294.0$90.0 million of FHLB advances, with weighted average rates of 1.12%0.98%, matured over the past twelve months.




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The following table presents our condensed consolidated average balance sheet information, together with interest rates earned and paid on the various sources and uses of funds for the periods indicated:

Three Months Ended September 30, 2013 Three Months Ended September 30, 2012Three Months Ended March 31, 2014 Three Months Ended March 31, 2013
Average
Balance
 
Interest
Income/
Expense
 
Average
Yield/
Rate *
 
Average
Balance
 
Interest
Income/
Expense
 
Average
Yield/
Rate *
Average
Balance
 
Interest
Income/
Expense
 
Average
Yield/
Rate *
 
Average
Balance
 
Interest
Income/
Expense
 
Average
Yield/
Rate *
(Dollars in thousands)(Dollars in thousands)
INTEREST EARNINGS ASSETS:                      
Loans(1) (2)
$4,771,022
 $67,747
 5.63% $4,007,402
 $61,553
 6.11%$5,183,801
 $68,694
 5.37% $4,444,313
 $63,029
 5.75%
Securities available for sale(3)
714,660
 3,802
 2.13% 679,764
 3,782
 2.23%698,931
 4,095
 2.34% 691,984
 3,427
 1.98%
FRB and FHLB stock and other investments291,672
 486
 0.65% 155,590
 120
 0.30%259,107
 565
 0.87% 257,526
 287
 0.45%
Federal funds sold
 
 N/A
 
 
 N/A

 
 NA
 
 
 N/A
Total interest earning assets$5,777,354
 $72,035
 4.95% $4,842,756
 $65,455
 5.38%$6,141,839
 $73,354
 4.84% $5,393,823
 $66,743
 5.01%
INTEREST BEARING LIABILITIES:                      
Deposits:                      
Demand, interest bearing$1,276,732
 $1,927
 0.60% $1,156,915
 $1,775
 0.61%$1,392,300
 $2,277
 0.66% $1,265,967
 $1,873
 0.60%
Savings204,049
 668
 1.30% 184,219
 820
 1.77%217,426
 600
 1.12% 186,189
 754
 1.64%
Time deposits:                      
$100,000 or more1,380,962
 2,361
 0.68% 843,388
 1,533
 0.72%1,561,170
 2,679
 0.70% 1,161,322
 1,730
 0.60%
Other677,352
 1,003
 0.59% 672,861
 1,086
 0.64%663,978
 1,134
 0.69% 695,802
 1,051
 0.61%
Total time deposits2,058,314
 3,364
 0.65% 1,516,249
 2,619
 0.69%2,225,148
 3,813
 0.69% 1,857,124
 2,781
 0.61%
Total interest bearing deposits3,539,095
 5,959
 0.67% 2,857,383
 5,214
 0.73%3,834,874
 6,690
 0.71% 3,309,280
 5,408
 0.66%
FHLB advances422,084
 1,251
 1.18% 407,325
 1,603
 1.56%421,318
 1,211
 1.17% 422,944
 1,224
 1.17%
Other borrowings48,273
 465
 3.77% 40,407
 407
 3.95%52,400
 487
 3.72% 42,264
 395
 3.74%
Total interest bearing liabilities4,009,452
 $7,675
 0.76% 3,305,115
 $7,224
 0.87%4,308,592
 $8,388
 0.79% 3,774,488
 $7,027
 0.75%
Noninterest bearing demand deposits1,306,308
     1,104,996
    1,353,719
     1,138,690
    
Total funding liabilities/cost of funds$5,315,760
   0.57% $4,410,111
   0.65%$5,662,311
   0.60% $4,913,178
   0.58%
Net interest income/net interest spread  $64,360
 4.19%   $58,231
 4.51%  $64,966
 4.05%   $59,716
 4.26%
Net interest margin    4.42%     4.79%    4.29%     4.49%
Net interest margin, excluding the effect of nonaccrual loan income (expense)(4)
    4.42%     4.79%    4.30%     4.47%
Net interest margin, excluding the effect of nonaccrual loan income (expense) and prepayment fee income(4) (5)
    4.37%     4.78%    4.26%     4.46%
Cost of deposits:                      
Noninterest bearing demand deposits$1,306,308
 $
   $1,104,996
 $
  $1,353,719
 $
   $1,138,690
 $
  
Interest bearing deposits3,539,095
 5,959
 0.67% 2,857,383
 5,214
 0.73%3,834,874
 6,690
 0.71% 3,309,280
 5,408
 0.66%
Total deposits$4,845,403
 $5,959
 0.49% $3,962,379
 $5,214
 0.52%$5,188,593
 $6,690
 0.52% $4,447,970
 $5,408
 0.49%
*Annualized
(1) 
Interest income on loans includes loan fees.
(2) 
Average balances of loans are netconsist of deferred loan fees and costs and include nonaccrual loans receivable and loans held for sale.
(3) 
Interest income and yields are not presented on a tax-equivalent basis.
(4) 
Nonaccrual interest income reversedrecognized (reversed) was $153$(197) thousand and $44$236 thousand for the three months ended September 30, 2013March 31, 2014 and 2012,2013, respectively.
(5) 
Loan prepayment fee income excluded was $580$309 thousand and $119$63 thousand for the three months ended September 30, 2013March 31, 2014 and 2012,2013, respectively.

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 Nine Months Ended September 30, 2013 Nine Months Ended September 30, 2012
 
Average
Balance
 
Interest
Income/
Expense
 
Average
Yield/
Rate *
 
Average
Balance
 
Interest
Income/
Expense
 
Average
Yield/
Rate *
 (Dollars in thousands)
INTEREST EARNINGS ASSETS:           
Loans(1) (2)
$4,588,464
 $196,249
 5.72% $3,878,080
 $187,476
 6.46%
Securities available for sale(3)
704,124
 10,755
 2.04% 699,225
 12,940
 2.47%
FRB and FHLB stock and other investments282,120
 1,153
 0.54% 205,540
 459
 0.29%
Federal funds sold
 
 N/A
 15,136
 78
 0.68%
Total interest earning assets$5,574,708
 $208,157
 4.99% $4,797,981
 $200,953
 5.59%
INTEREST BEARING LIABILITIES:           
Deposits:           
Demand, interest bearing$1,276,195
 $5,736
 0.60% $1,191,213
 $5,748
 0.64%
Savings192,006
 2,144
 1.49% 189,322
 2,571
 1.81%
Time deposits:           
$100,000 or more1,265,877
 6,066
 0.64% 806,244
 4,428
 0.73%
Other675,239
 3,068
 0.61% 682,903
 3,115
 0.61%
Total time deposits1,941,116
 9,134
 0.63% 1,489,147
 7,543
 0.68%
Total interest bearing deposits3,409,317
 17,014
 0.67% 2,869,682
 15,862
 0.74%
FHLB advances422,205
 3,693
 1.17% 358,962
 4,832
 1.79%
Other borrowings44,721
 1,271
 3.75% 45,981
 1,667
 4.77%
Total interest bearing liabilities3,876,243
 $21,978
 0.76% 3,274,625
 $22,361
 0.91%
Noninterest bearing demand deposits1,220,608
     1,037,152
    
Total funding liabilities/cost of funds$5,096,851
   0.58% $4,311,777
   0.69%
Net interest income/net interest spread  $186,179
 4.23%   $178,592
 4.68%
Net interest margin    4.46%     4.97%
Net interest margin, excluding the effect of nonaccrual loan income (expense)(4)
    4.46%     4.99%
Net interest margin, excluding the effect of nonaccrual loan income (expense) and prepayment fee income(4) (5)
    4.44%     4.98%
Cost of deposits:           
Noninterest bearing demand deposits$1,220,608
 $
   $1,037,152
 $
  
Interest bearing deposits3,409,317
 17,014
 0.67% 2,869,682
 15,862
 0.74%
Total deposits$4,629,925
 $17,014
 0.49% $3,906,834
 $15,862
 0.55%
*Annualized
(1)
Interest income on loans includes loan fees.
(2)
Average balances of loans are net of deferred loan fees and costs and include nonaccrual loans and loans held for sale.
(3)
Interest income and yields are not presented on a tax-equivalent basis.
(4)
Nonaccrual interest income recognized (reversed) was $6 thousand and ($793) thousand for the nine months ended September 30, 2013 and 2012, respectively.
(5)
Loan prepayment fee income excluded was $948 thousand and $433 thousand for the nine months ended September 30, 2013 and 2012, respectively.


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Changes in net interest income are a function of changes in interest rates and volumes of interest earning assets and interest bearing liabilities. The following table sets forth information regarding the changes in interest income and interest expense for the periods indicated. The total change for each category of interest earning assets and interest bearing liabilities is segmented into the change attributable to variations in volume (changes in volume multiplied by the old rate) and the change attributable to variations in interest rates (changes in rates multiplied by the old volume). Nonaccrual loans are included in average loans used to compute this table.

      
 
Three Months Ended
March 31, 2014 over March 31, 2013
 
Net
Increase
(Decrease)
    
 Change due to
 Rate Volume
 (Dollars in thousands)
INTEREST INCOME:     
Interest and fees on loans$5,665
 $(4,388) $10,053
Interest on securities668
 633
 35
Interest on FRB and FHLB stock and other investments278
 276
 2
Total interest income$6,611
 $(3,479) $10,090
INTEREST EXPENSE:     
Interest on demand, interest bearing$405
 $211
 $194
Interest on savings(154) (270) 116
Interest on time deposits1,031
 440
 591
Interest on FHLB advances(13) (9) (4)
Interest on other borrowings92
 (2) 94
Total interest expense$1,361
 $370
 $991
NET INTEREST INCOME$5,250
 $(3,849) $9,099
      
 
Three Months Ended
September 30, 2013 over September 30, 2012
 
Net
Increase
(Decrease)
    
 Change due to
 Rate Volume
 (Dollars in thousands)
INTEREST INCOME:     
Interest and fees on loans$6,194
 $(5,013) $11,207
Interest on securities20
 (168) 188
Interest on FRB and FHLB stock and other investments366
 207
 159
Interest on federal funds sold
 
 
Total interest income$6,580
 $(4,974) $11,554
INTEREST EXPENSE:     
Interest on demand, interest bearing$152
 $(28) $180
Interest on savings(152) (233) 81
Interest on time deposits745
 (155) 900
Interest on FHLB advances(352) (409) 57
Interest on other borrowings58
 (18) 76
Total interest expense$451
 $(843) $1,294
NET INTEREST INCOME$6,129
 $(4,131) $10,260


      
 
Nine Months Ended
September 30, 2013 over September 30, 2012
 
Net
Increase
(Decrease)
    
 Change due to
 Rate Volume
 (Dollars in thousands)
INTEREST INCOME:     
Interest and fees on loans$8,773
 $(23,054) $31,827
Interest on securities694
 479
 215
Interest on FRB and FHLB stock and other investments(2,185) (2,251) 66
Interest on federal funds sold(78) 
 (78)
Total interest income$7,204
 $(24,826) $32,030
INTEREST EXPENSE:     
Interest on demand, interest bearing$(12) $(400) $388
Interest on savings(427) (469) 42
Interest on time deposits1,591
 (589) 2,180
Interest on FHLB advances(1,139) (1,904) 765
Interest on other borrowings(396) (356) (40)
Total interest expense$(383) $(3,718) $3,335
NET INTEREST INCOME$7,587
 $(21,108) $28,695



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Provision for Loan Losses
The provision for loan losses reflects our judgment of the current period cost associated with credit risk inherent in our loan portfolio. The loan loss provision for each period is dependent upon many factors, including loan growth, net charge offs, changes in the composition of the loan portfolio, delinquencies, assessments by management, third parties’ and regulators’ examination of the loan portfolio, the value of the underlying collateral for problem loans and the general economic conditions in our market areas. Specifically, the provision for loan losses represents the amount charged against current period earnings to achieve an allowance for loan losses that, in our judgment, is adequate to absorb probable incurred losses inherent in our loan portfolio. Periodic fluctuations in the provision for loan losses result from management’s assessment of the adequacy of the allowance for loan losses; however, actual loan losses may vary in material respects from current estimates. If the allowance for loan losses is inadequate, it may have a material adverse effect on our financial condition.
The provision for loan losses for the thirdfirst quarter of 20132014 was $744 thousand,$3.0 million, a decrease of $6.2$4.5 million, or 89.2%59.7%, from $6.97.5 million for the same period last year. The decrease was primarily due to decreased historical loss rates and lower additions of specific reserves on impaired loans compared to the thirdfirst quarter of 2012,2013, which waswere partially offset by loan growth.
The provision for loan losses for the nine months ended September 30, 2013 was $9.1 million, a decrease of $7.6 million, or 45.75%, from $16.7 million for the same period last year. The decrease is primarily due an overall reduction in quantitative reserves as a result of decreasing historical loss rates. Net charge offs also decreased to $10.3 million for the nine months ended September 30, 2013 from $12.7 million for the same period last year.
See Note 7 of the Notes to Condensed Consolidated Financial Statements (Unaudited) and Financial Condition - Loans Receivable and Allowance for Loan Losses for further discussion.
Noninterest Income
Noninterest income is primarily comprised of service fees on deposit accounts, fees received on trade finance letters of credit and net gains on sales of loans.
Noninterest income for the thirdfirst quarter of 20132014 was $10.811.1 million, compared to $7.79.9 million for the same quarter of 2012,2013, an increase of $3.11.2 million, or 40.9%11.6%. The increase was principally due to net gains of $2.8 million recorded from the sales of $36.8 million of SBA loans to the secondary market during the third quarter of 2013. No SBA loans were sold to the secondary market during the third quarter of 2012. Noninterest income also increased due to a $200$597 thousand increase in service fees on deposit accounts, and a $219$372 thousand increase from other income and fees.
Noninterest income for the nine months ended 2013 was $31.4 million, compared to $29.5 million for the same period of 2012, anfees and a $404 thousand increase of $1.8 million, or 6.2 %. The increase was primarily due to an increase in the volume of SBA loans sold, resulting in net gains on sales of SBA loansOREO, which were partially offset by a $234 thousand decreased in international service fees. During the first quarter of $8.82014, seven OREO properties with an aggregate carrying value of $4.4 million were sold, compared to the sale of four properties with an aggregate carrying value of $1.5 million during the period, compared to $5.4 million in the previous period. The increase in noninterest income was offset by decreases in net gains on salessame quarter of securities available for sale and a decrease in service fees on deposit accounts. We recorded $54 thousand2013.

56

Table of net gains on sales of securities available for sale during the first nine months of 2013. During the same period in 2012, we recoded a net gain of $816 thousand from the sale of a Trust Preferred security, which had been marked to market in a prior period. Service fees on deposit accounts decreased primarily due to a decrease in non-sufficient funds charges of $497 thousand.Contents


Noninterest income by category is summarized below:

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Three Months Ended September 30, Increase (Decrease)Three Months Ended March 31, Increase (Decrease)
2013 2012 Amount %2014 2013 Amount %
(Dollars in thousands)(Dollars in thousands)
Service fees on deposit accounts$3,321
 $3,121
 $200
 6.4 %$3,472
 $2,875
 $597
 20.8 %
International service fees1,196
 1,183
 13
 1.1 %1,004
 1,238
 (234) (18.9)%
Loan servicing fees, net1,004
 1,031
 (27) (2.6)%965
 969
 (4) (0.4)%
Wire transfer fees916
 833
 83
 10.0 %905
 816
 89
 10.9 %
Other income and fees1,583
 1,364
 219
 16.1 %1,621
 1,249
 372
 29.8 %
Net gains on sales of SBA loans2,827
 
 2,827
 100.0 %2,722
 2,694
 28
 1.0 %
Net losses on sales of other loans
 
 
  %
 43
 (43) (100.0)%
Net gains on sales of securities available for sale
 133
 (133) (100.0)%
 54
 (54) (100.0)%
Net valuation gains on interest rate contracts
 11
 (11) (100.0)%
Net losses on sales of OREO(48) (12) (36) 300.0 %
Net gains on sales of OREO406
 2
 404
 20,200.0 %
Total noninterest income$10,799
 $7,664
 $3,135
 40.9 %$11,095
 $9,940
 $1,155
 11.6 %
              
       
       
Nine Months Ended September 30, Increase (Decrease)
2013 2012 Amount Percent (%)
(Dollars in thousands)
Service fees on deposit accounts$9,118
 $9,550
 $(432) (4.5%)
International service fees3,700
 3,810
 (110) (2.9%)
Loan servicing fees, net3,009
 3,178
 (169) (5.3%)
Wire transfer fees2,619
 2,349
 270
 11.5%
Other income and fees4,036
 4,058
 (22) (0.5%)
Net gains on sales of SBA loans8,816
 5,426
 3,390
 62.5%
Net gains on sales of other loans62
 146
 (84) 57.5%
Net gains on sales of securities available for sale54
 949
 (895) (94.3%)
Net valuation gains on interest rate contracts
 24
 (24) 100.0%
Net (losses) gains on sales of OREO(57) 41
 (98) (239.0%)
Total noninterest income$31,357
 $29,531
 $1,826
 6.2%

Noninterest Expense
Noninterest expense for the thirdfirst quarter of 20132014 was $35.736.3 million, an increase of $7.03.0 million, or 24.2%9.0%, from $28.833.3 million for the same period of 2012.2013. Salaries and employee benefits expense increased $2.92.6 million due to an increase in the number of full-time equivalent employees, which increased to 831860 at September 30, 2013March 31, 2014 from 684762 at September 30, 2012,March 31, 2013, which was partially due to the PI and Foster acquisitions that were completed in 2013. Occupancy expense increased by a total of $450$612 thousand principally due to increased rental commitments of $342 thousand from an increased number of leasesleased facilities and reflects minimal increases in property taxes and utilities related to the leased properties. ProfessionalData processing fees and furniture and equipment expenses also increased by $564$441 thousand dueand $478 thousand, respectively, compared to additional legal services and consulting fees for our information systems during the quarter. Mergersame quarter in 2013. These increases were offset by a decrease of $1.1 million in merger and integration expenses, increased by $748 thousand, as we incurred the majority of the expenses from the Foster acquisition, including salariesmerger and benefits expenses and professional service fees, during the quarter. The majority ofintegrations expenses related to the Center Financial Merger were incurredPI acquisition, in the first and second quarters of 2012, while only $183 thousand was incurred in the third quarter of 2012. Other noninterest expense, which is comprised of directors fees, amortization on intangibles and other miscellaneous expenses, increased by $1.3 million during the quarter.2013.
Noninterest expense for the nine months ended of 2013 was $103.5 million, an increase of $13.2 million, or 14.6%, compared to $90.3 million for the same period of 2012. Salaries and employee benefits expense increased $6.7 million due to one-time costs incurrred as part of a management transition and an increase in the number of full-time equivalent employees. Occupancy expense increased by a total of $1.4 million principally due to increased rental commitments during the period causing an increase in lease expense of $1.2 million and increases in property taxes and utilities for the leased properties. Professional fees increased by $1.6 million due to increased legal fees, fees for accounting services and consulting services for our information systems. Merger and integration expenses decreased by $683 thousand, as the Company incurred greater

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salaries and benefits expenses and professional service fees related to the merger with Center Financial in 2012 than were incurred on the PIB and Foster acquisitions in 2013. Other noninterest expense increased by $2.7 million during the period.
The breakdown of changes in noninterest expense by category is shown below:
Three Months Ended September 30, Increase (Decrease)Three Months Ended March 31, Increase (Decrease)
2013 2012 Amount %2014 2013 Amount %
(Dollars in thousands)(Dollars in thousands)
Salaries and employee benefits$16,535
 $13,611
 $2,924
 21.5 %$18,938
 $16,332
 $2,606
 16.0 %
Occupancy4,360
 3,910
 450
 11.5 %4,623
 4,011
 612
 15.3 %
Furniture and equipment1,728
 1,495
 233
 15.6 %2,014
 1,573
 441
 28.0 %
Advertising and marketing1,393
 1,159
 234
 20.2 %1,088
 1,273
 (185) (14.5)%
Data processing and communications1,983
 1,659
 324
 19.5 %2,122
 1,644
 478
 29.1 %
Professional fees1,440
 876
 564
 64.4 %1,313
 1,301
 12
 0.9 %
FDIC assessment818
 644
 174
 27.0 %1,023
 694
 329
 47.4 %
Credit related expenses2,646
 2,613
 33
 1.3 %1,421
 1,715
 (294) (17.1)%
Merger and integration expenses931
 183
 748
 408.7 %173
 1,305
 (1,132) (86.7)%
Other3,912
 2,620
 1,292
 49.3 %3,560
 3,427
 133
 3.9 %
Total noninterest expense$35,746
 $28,770
 $6,976
 24.2 %$36,275
 $33,275
 $3,000
 9.0 %
              
       
Nine Months Ended September 30, Increase (Decrease)
2013 2012 Amount Percent (%)
(Dollars in thousands)
Salaries and employee benefits$49,086
 $42,348
 $6,738
 15.9 %
Occupancy13,206
 11,788
 1,418
 12.0 %
Furniture and equipment4,914
 4,181
 733
 17.5 %
Advertising and marketing3,856
 4,142
 (286) (6.9)%
Data processing and communications5,488
 4,843
 645
 13.3 %
Professional fees4,184
 2,558
 1,626
 63.6 %
FDIC assessment2,370
 1,732
 638
 36.8 %
Credit related expenses6,564
 6,967
 (403) (5.8)%
Merger and integration expenses2,621
 3,304
 (683) (20.7)%
Other11,161
 8,419
 2,742
 32.6 %
Total noninterest expense$103,450
 $90,282
 $13,168
 14.6 %

Provision for Income Taxes
Income tax expense was $15.114.6 million and $11.811.4 million for the quarters ended September 30, 2013March 31, 2014 and 2012,2013, respectively. The effective income tax rates were 39.1%39.6% and 39.5% for the quarters ended September 30, 2013March 31, 2014 and 2012. Income tax expense was $41.4 million and $39.5 million for the nine months ended September 30, 2013, and 2012, respectively. The effective income tax rates for the nine months ended September 30, 2013 and 2012 were 39.4% and 39.0%, respectively.



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Financial Condition
At September 30, 2013March 31, 2014, our total assets were $6.346.67 billion, an increase of $700.3$192.4 million from $5.646.48 billion at December 31, 2012.2013. The increase was principally due to a $603.9$118.2 million increase in loans receivable, net of allowance for loan losses, a $32.4an $86.4 million increase in cash and due from bankscash equivalents and a $30$19.5 million increase in goodwill.securities available for sale. The increase in total assets was funded by a $637.1$186.5 million increase in deposits a $724 thousand increase in FHLB advances, a $15.5 million increase in subordinated debentures and net income of $63.7$22.2 million. As previously discussed, the increases in assets and liabilities were principally due to the PIB and Foster acquisitions.
Investment Securities Portfolio
As of September 30, 2013March 31, 2014, we had $708.6725.2 million in available for sale securities, compared to $704.4705.8 million at December 31, 2012.2013. The net unrealized loss on the available for sale securities at September 30, 2013March 31, 2014 was $6.0$6.5 million, compared to a net unrealized gainloss on such securities of $15.4$17.7 million at December 31, 2012.2013. During the ninethree months ended September 30, 2013March 31, 2014, $169.9$37.4 million in securities were purchased, $143.6$28.2 million in mortgage related securities were paid down and no securities were sold. During the same period last year, $77.6 million in securities were purchased, $52.5 million in mortgage related securities were paid down and $6.6 million in securities were sold. We recognized net gains of $54 thousand on the securities that were sold. During the same period last year, we sold a corporate trust preferred security and other debt securities and recognized a gain of $949 thousand. The weighted average duration (the weighted average of the times of the present values of all the cash flows) of the available for sale securities was 4.814.37 years and 3.264.42 years at September 30, 2013March 31, 2014 and December 31, 20122013, respectively. The weighted average life (the weighted average of the times of the principal repayments) of the available for sale securities was 5.504.95 years and 3.55.08 years at September 30, 2013March 31, 2014 and December 31, 20122013, respectively.
Loan Portfolio
As of September 30, 2013March 31, 2014, gross loans outstanding, net of deferred loan fees and costs and excluding loans held for sale, wasreceivable totaled $4.905.19 billion, an increase of $602.7$116.7 million from $4.305.07 billion at December 31, 2012.2013. Total loan originations during the three months ended September 30, 2013March 31, 2014 were $387.6$298.4 million, including SBA loan originations of $72.7 million. Of the $72.7$42.3 million, in SBA loan originations, $38.9of which $38.1 million was included as additions to loans held for sale during the period.
The following table summarizes our loan portfolio by amount and percentage of grosstotal loans outstanding in each major loan category at the dates indicated:
 
September 30, 2013 December 31, 2012March 31, 2014 December 31, 2013
Amount % Amount %Amount % Amount %
  (Dollars in thousands)    (Dollars in thousands)  
Loan portfolio composition              
Real estate loans:              
Residential$10,294
 0% $9,247
 0%$11,035
 1% $10,039
 1%
Commercial & industrial3,652,815
 75% 3,100,466
 72%3,947,925
 76% 3,821,163
 75%
Construction73,116
 1% 65,045
 2%76,038
 1% 72,856
 1%
Total real estate loans3,736,225
 76% 3,174,758
 73%4,034,998
 78% 3,904,058
 77%
Commercial business932,955
 19% 921,556
 21%923,026
 18% 949,093
 19%
Trade finance135,889
 3% 152,070
 4%135,638
 3% 124,685
 2%
Consumer and other95,693
 2% 49,954
 1%98,895
 2% 98,507
 2%
Total loans outstanding4,900,762
 100% 4,298,338
 100%5,192,557
 100% 5,076,343
 100%
Less: deferred loan fees(1,823)   (2,086)  (1,763)   (2,167)  
Gross loans receivable4,898,939
   4,296,252
  
Loans receivable5,190,794
   5,074,176
  
Less: allowance for loan losses(65,715)   (66,941)  (65,699)   (67,320)  
Loans receivable, net$4,833,224
   $4,229,311
  
Loans receivable, net of allowance for loan losses$5,125,095
   $5,006,856
  

SBA loans are included in commercial business loans and commercial and industrial real estate loans. SBA loans included in commercial business loans were $61.2$64.3 million at September 30, 2013March 31, 2014 and $69.8$66.7 million at December 31, 2012.2013. SBA loans included in commercial and industrial real estate loans were $199.5$185.5 million at September 30, 2013March 31, 2014 and $148.0$181.8 million at December 31, 2012.2013.

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We normally do not extend lines of credit or make loan commitments to business customers for periods in excess of one year. We use the same credit policies in making commitments and conditional obligations as we do for providing loan facilities to our customers. We perform annual reviews of such commitments prior to renewal.

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The following table shows our loan commitments and letters of credit outstanding at the dates indicated:
 
September 30, 2013 December 31, 2012March 31, 2014 December 31, 2013
(Dollars in thousands)(Dollars in thousands)
Loan commitments$669,248
 $690,917
$661,178
 $668,306
Standby letters of credit36,744
 39,176
45,114
 44,190
Other commercial letters of credit55,055
 51,257
53,739
 56,380
$761,047
 $781,350
$760,031
 $768,876

Nonperforming Assets
Nonperforming assets, which includeconsist of nonaccrual loans, loans 90 days or more past due and on accrual status, restructured loans and OREO, were $139.3$104.8 million at September 30, 2013March 31, 2014, compared to $79.9$97.4 million at December 31, 2012.2013. The ratio of nonperforming assets to gross loans plusreceivable and OREO was 1.63% and 1.44% at 2.83%March 31, 2014 and 1.86% at September 30,December 31, 2013 and December 31, 2012,, respectively.
The following table summarizes the composition of our nonperforming assets as of the dates indicated.
 
September 30, 2013 December 31, 2012March 31, 2014 December 31, 2013
(Dollars in thousands)(Dollars in thousands)
Nonaccrual loans (1)
$36,129
 $29,653
$47,314
 $39,154
Loans 90 days or more days past due on accrual status (2)
39,560
 17,742

 5
Accruing restructured loans36,018
 29,849
37,527
 33,904
Total Nonperforming Loans111,707
 77,244
Total nonperforming loans84,841
 73,063
OREO27,582
 2,698
20,001
 24,288
Total Nonperforming Assets$139,289
 $79,942
Nonperforming loans to total gross loans, excluding loans held for sale2.28% 1.80%
Nonperforming assets to gross loans plus OREO2.83% 1.86%
Total nonperforming assets$104,842
 $97,351
Nonperforming loans to loans receivable1.63% 1.44%
Nonperforming assets to loans receivable and OREO2.01% 1.91%
Nonperforming assets to total assets2.20% 1.42%1.57% 1.50%
Allowance for loan losses to nonperforming loans (excludes delinquent loans 90 days or more on accrual status)91.08% 112.50%
Allowance for loan losses to nonperforming loans77.44% 92.14%
Allowance for loan losses to nonperforming assets47.18% 83.74%62.66% 69.15%
(1) 
Nonaccrual loans exclude the guaranteed portion of delinquent SBA loans that are in liquidation totaling $25.2$31.3 million and $17.6$27.5 million as of September 30, 2013March 31, 2014 and December 31, 2012,2013, respectively.
(2)

Loans 90 days or more past due on accrual status are acquired loans accounted for under ASC 310-30.
Allowance for Loan Losses
The allowance for loan losses was $65.7$65.7 million at September 30, 2013March 31, 2014, compared to $66.967.3 million at December 31, 2012.2013. We recorded a provision for loan losses of $9.1$3.0 million during the ninethree months ended September 30, 2013March 31, 2014, compared to $16.7$7.5 million for the same period of 2012.2013. The allowance for loan losses was 1.34%1.27% of gross loans receivable at September 30, 2013March 31, 2014 and 1.56%1.63% of gross loans receivable at December 31, 2012.2013. Impaired loans as defined by FASB ASC 310-10-35, “Accounting by Creditors for Impairment of a Loan,” totaled $99.2121.8 million and $90.2$116.3 million as of September 30, 2013March 31, 2014 and December 31, 2012,2013, respectively, with specific allowances of $11.010.2 million and $9.2$12.7 million, respectively.

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The following table reflects our allocation of the allowance for loan and lease losses ("ALLL") by loan type and the ratio of each loan category to total loans as of the dates indicated:
 
Allocation of Allowance for Loan LossesAllocation of Allowance for Loan Losses
September 30, 2013 December 31, 2012March 31, 2014 December 31, 2013
Amount of Allowance for Loan Losses Percent of ALLL to Total ALLL Amount of Allowance for Loan Losses Percent of ALLL to Total ALLLAmount of Allowance for Loan Losses Percent of ALLL to Total ALLL Amount of Allowance for Loan Losses Percent of ALLL to Total ALLL
(Dollars in thousands)(Dollars in thousands)
Loan Type              
Real estate - Residential$68
 0.10% $74
 0.11%
Real estate - Commercial46,293
 70.45% 45,162
 67.47%
Real estate - Construction840
 1.28% 986
 1.47%
Real estate - residential$25
 0.04% $25
 0.04%
Real estate - commercial44,833
 68.24% 45,897
 68.18%
Real estate - construction566
 0.86% 628
 0.93%
Commercial business15,300
 23.28% 17,606
 26.30%16,801
 25.57% 17,592
 26.13%
Trade finance2,513
 3.82% 2,352
 3.51%2,944
 4.48% 2,653
 3.94%
Consumer and other701
 1.07% 761
 1.14%530
 0.81% 525
 0.78%
Total$65,715
 100% $66,941
 100%$65,699
 100% $67,320
 100%

For a better understanding of the changes in the ALLL, the loan portfolio has been segmented for disclosures purposes between loans which are accounted for under the amortized cost method (Legacy Loans) and loans acquired from acquisitions (Acquired Loans). The Acquired Loans were further segregated between Acquired Credit Impaired Loans (loans with credit deterioration at the time they were acquired and accounted for under ASC 310-30, or "ACILs") and performing loans (loans that were pass graded at the time they were acquired, or "APLs"). The activity in the ALLL for the three and nine months ended September 30, 2013March 31, 2014 is as follows:



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Acquired Loans(2)
     
Acquired Loans(2)
  
Three Months Ended September, 2013 
Legacy Loans(1)
 ACILs APLs Total
Three Months Ended March 31, 2014 
Legacy Loans(1)
 ACILs APLs Total
 (Dollars in thousands) (Dollars in thousands)
Balance, beginning of period $61,315
 $4,535
 $5,825
 $71,675
 $59,978
 $4,778
 $2,564
 $67,320
Provision for loan losses (1,310) 
 2,054
 744
 1,488
 782
 756
 3,026
Loan charge offs (1,302) (557) (5,931) (7,790) (3,870) 
 (1,393) (5,263)
Recoveries of loan charge offs 1,070
 
 16
 1,086
 609
 
 7
 616
Balance, end of period $59,773
 $3,978
 $1,964
 $65,715
 $58,205
 $5,560
 $1,934
 $65,699
                
Gross loans, net of deferred loan fees and costs $3,857,469
 227,412
 815,881
 $4,900,762
Total loans outstanding $4,284,773
 216,861
 690,923
 $5,192,557
Loss coverage ratio 1.55% 1.75% 0.24% 1.34% 1.36% 2.56% 0.28% 1.27%
                
        
   
Acquired Loans (2)
  
Nine Months Ended September 30, 2013 
Legacy Loans (1)
 ACILs APLs Total
 (Dollars in thousands)
Balance, beginning of period $61,002
 $4,535
 $1,404
 $66,941
Provision for loan losses 1,647
 
 7,403
 9,050
Loans charged off (4,614) (557) (6,948) (12,119)
Recoveries of charged offs 1,738
 
 105
 1,843
Balance, end of period $59,773
 $3,978
 $1,964
 $65,715
        
(1) Legacy Loans includes acquired loans that have been renewed or refinanced after the merger.
(2) Acquired loans were marked to fair value at the acquisition date and provisions for loan losses reflect credit deterioration since the acquisition date.
(1) Legacy Loans includes Acquired Loans that have been renewed or refinanced subsequent to the acquisition date.
(1) Legacy Loans includes Acquired Loans that have been renewed or refinanced subsequent to the acquisition date.
(2) Acquired Loans were marked to fair value at the acquisition date and provisions for loan losses reflect credit deterioration subsequent to the acquisition date.
(2) Acquired Loans were marked to fair value at the acquisition date and provisions for loan losses reflect credit deterioration subsequent to the acquisition date.




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The following table shows the provisions made for loan losses, the amount of loans charged off and the recoveries on loans previously charged off, together with the balance in the allowance for loan losses at the beginning and end of each period, the amount of average and gross loans receivable outstanding, and certain other ratios as of the dates and for the periods indicated:
 
At or for the Nine Months Ended September 30,At or for the Three Months Ended March 31,
2013 20122013 2013
(Dollars in thousands)(Dollars in thousands)
LOANS      
Average gross loans receivable, including loans held for sale (net of deferred fees)$4,588,464
 $3,878,080
Total gross loans receivables, excluding loans held for sale (net of deferred fees)$4,898,939
 $4,069,494
Average loans receivable, including loans held for sale$4,588,464
 $4,444,320
Loans receivable$5,190,794
 $4,500,046
ALLOWANCE:      
Balance, beginning of period$66,941
 $65,505
$67,320
 $66,941
Less: Loan charge offs:   
Less loan charge offs:   
Commercial & industrial real estate(8,052) (2,074)(182) (1,056)
Commercial business loans(3,991) (5,692)(4,945) (307)
Trade finance(26) 
(57) (26)
Consumer and other loans(50) (3)(79) (40)
Total loan charge offs(12,119) (7,769)(5,263) (1,429)
Plus: Loan recoveries   
Plus loan recoveries:   
Commercial & industrial real estate165
 973
19
 42
Commercial business loans1,564
 290
596
 183
Trade Finance
 

 
Consumer and other loans114
 53
1
 25
Total loans recoveries1,843
 1,316
616
 250
Net loan charge offs(10,276) (6,453)(4,647) (1,179)
Provision for loan losses9,050
 6,900
3,026
 7,506
Balance, end of period$65,715
 $65,952
$65,699
 $73,268
Net loan charge offs to average gross loans, including loans held for sale (net of deferred fees) *0.30% 0.22%
Allowance for loan losses to gross loans at end of period1.34% 1.62%
Net loan charge offs to average loans receivable, including loans held for sale*0.41% 0.11%
Allowance for loan losses to loans receivable at end of period1.27% 1.63%
Net loan charge offs to beginning allowance *20.47% 13.13%27.61% 7.05%
Net loan charge offs to provision for loan losses113.55% 93.52%153.57% 15.71%
* Annualized      
We believe the allowance for loan losses as of September 30, 2013March 31, 2014 is adequate to absorb probable incurred losses in the loan portfolio. However, no assurance can be given that actual losses will not exceed the estimated amounts.
Deposits and Other Borrowings
Deposits. Deposits are our primary source of funds used in our lending and investment activities. At September 30, 2013March 31, 2014, deposits increased $637.1$186.5 million, or 14.5%3.6%, to $5.02$5.33 billion from $4.385.15 billion at December 31, 20122013. The net increase in deposits is primarily due to increases in retail deposits due to the PIBimpact of recent deposit campaigns and Foster acquisitions in which we assumed $143.7 million and $321.6 million inpromotions. In addition, wholesale deposits respectively.were increased to help fund loan growth. Interest bearing demand deposits, including money market and Super Now accounts, totaled $1.50$1.60 billion at September 30,March 31, 2014and $1.60 billion at December 31, 2013, an increase of $66.2 million from $1.43 billion at December 31, 2012..
At September 30,March 31, 2014, 27% of total deposits were noninterest bearing demand deposits, 43% were time deposits and 30% were interest bearing demand and savings deposits. At December 31, 2013, 27% of total deposits were noninterest bearing demand deposits, 43% were time deposits, and 30% were interest bearing demand and savings deposits. By comparison, at December 31, 2012, 27% of total deposits were noninterest bearing demand deposits, 40% were time deposits, and 33% were interest bearing demand and savings deposits.
At September 30, 2013March 31, 2014, we had $290.1$324.7 million in brokered deposits and $300.0 million in California State Treasurer deposits, compared to $307.2$243.9 million and $300.0 million of such deposits at December 31, 2012,2013, respectively. The California State Treasurer deposits had three-month maturities with a weighted average interest rate of 0.09%0.08% at September 30, 2013March 31, 2014 and were collateralized with securities with a carrying value of $345.7$332.6 million. The weighted average interest rate for wholesale deposits was 0.33%0.29% at September 30, 2013March 31, 2014.

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The following is a schedule of certificates of deposit maturities as of September 30, 2013March 31, 2014 which do not include the certificates of deposits totaling $141,093 as of September 30, 2013 from the acquisition of Foster::
   
Balance %Balance %
(Dollars in thousands)(Dollars in thousands)
Three months or less722,960
 35.75%707,457
 30.90%
Over three months through six months368,962
 18.25%426,716
 18.64%
Over six months through nine months314,340
 15.54%504,629
 22.04%
Over nine months through twelve months335,169
 16.57%420,674
 18.37%
Over twelve months280,717
 13.88%230,222
 10.05%
Total time deposits2,022,148
 100.00%2,289,698
 100.00%

Other Borrowings. Advances may be obtained from the FHLB as an alternative source of funds. FHLB advances are typically secured by a pledge of commercial real estate loans and/or securities with a market value at least equal to the outstanding advances plus our investment in FHLB stock.
At September 30, 2013March 31, 2014, we had $421.4421.3 million of FHLB advances with average remaining maturities of 3.02.8 years, compared to $420.7421.4 million with average remaining maturities of 2.63.1 years at December 31, 2012.2013. The weighted average rate including acquisition accounting adjustments, was 1.18%1.16% and 1.31%1.16% at September 30, 2013March 31, 2014 and at December 31, 2012,2013, respectively.
At September 30, 2013March 31, 2014, five wholly-owned subsidiary grantor trusts ("Trusts") established by us had issued $46 million of pooled trust preferred securities (“Trust Preferred Securities”). Upon the acquisition of Foster Bankshares, we assumed one grantor trust established by former Foster Bank, which issued $15.0 million of trust preferred securities, which we plan to redeem by the first quarter ofredeemed on March 14, 2014. The Trust Preferred Securities accrue and pay distributions periodically at specified annual rates as provided in the related indentures for the securities. The Trusts used the net proceeds from their respective offerings to purchase a like amount of subordinated debentures (the “Debentures”) issued by us. The Debentures are the sole assets of the trusts. Our obligations under the Debentures and related documents, taken together, constitute a full and unconditional guarantee by us of the obligations of the trusts. The Trust Preferred Securities are mandatorily redeemable upon the maturity of the Debentures, or upon earlier redemption as provided in the indentures. We have the right to redeem the Debentures in whole (but not in part) on or after specific dates, at redemption prices specified in the indentures plus any accrued but unpaid interest to the redemption date.
Off-Balance-Sheet Activities and Contractual Obligations
We routinely engage in activities that involve, to varying degrees, elements of risk that are not reflected, in whole or in part, in the consolidated financial statements. These activities are part of our normal course of business and include traditional off-balance-sheet credit-related financial instruments, interest rate swap contracts, operating leases and long-term debt.
Traditional off-balance-sheet credit-related financial instruments are primarily commitments to extend credit and standby letters of credit. These activities could require us to make cash payments to third parties if certain specified future events occur. The contractual amounts represent the extent of our exposure in these off-balance-sheet activities. However, since certain off-balance-sheet commitments, particularly standby letters of credit, are expected to expire or be only partially used, the total amount of commitments does not necessarily represent future cash requirements. These activities are necessary to meet the financing needs of our customers.
We enter into interest rate swap contracts under which we are required to either receive cash from or pay cash to counterparties depending on changes in interest rates. We also purchase interest rate caps to protect against increases in market interest rates. We utilize interest rate swap contracts and interest rate caps to help manage the risk of changing interest rates.
We do not anticipate that our current off-balance-sheet activities will have a material impact on our future results of operations or our financial condition. Further information regarding our financial instruments with off-balance-sheet risk can be found in Item 3 “Quantitative and Qualitative Disclosures about Market Risk”.Risk.”
Our leased banking facilities and equipment are leased under non-cancelable operating leases under which we must make monthly payments over periods up to 15 years.
Stockholders’ Equity and Regulatory Capital

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Historically, our primary source of capital has been the retention of earnings, net of dividend payments to shareholders. We seek to maintain capital at a level sufficient to assure our stockholders, our customers and our regulators that our Company and our bank subsidiary are financially sound. For this purpose, we perform ongoing assessments of our components of capital, as well as projected sources and uses of capital in conjunction with projected increases in assets and levels of risks.

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Total stockholders’ equity was $801.2832.2 million at September 30, 2013March 31, 2014, compared to $751.1809.4 million at December 31, 2012.2013.
The federal banking agencies generally require a minimum ratio of qualifying total capital to risk-weighted assets of 8% and a minimum ratio of Tier I capital to risk-weighted assets of 4%. In addition to the risk-based guidelines, federal banking regulators require banking organizations to maintain a minimum amount of Tier I capital to average total assets of 4%, referred to as the leverage ratio. Capital requirements apply to the Company and the Bank separately. In addition to these uniform risk-based capital guidelines and leverage ratios that apply across the industry, the regulators have the discretion to set individual minimum capital requirements for specific institutions at rates significantly above the minimum guidelines and ratios.
At September 30, 2013March 31, 2014, our Tier I capital, defined as stockholders’ equity less intangible assets plus proceeds from the trust preferred securities (subject to limitations), was $727.1764.2 million, compared to $688.4751.2 million at December 31, 2012,2013, representing an increase of $38.6$13.0 million, or 5.6%1.7%. The increase was primarily due to the increase in additional paid-in capital from the net income during the ninethree months ended September 30, 2013March 31, 2014 of $63.7$22.2 million,. which was partially offset by the declaration of $6.0 million of cash dividends. At September 30, 2013March 31, 2014, the total capital to risk-weighted assets ratio was 14.89% and the Tier I capital to risk-weighted assets ratio was 13.64%13.70%. The Tier I leverage capital ratio was 12.06%11.88%.
As of September 30, 2013March 31, 2014 and December 31, 2012,2013, the most recent regulatory notification categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be generally categorized as well capitalized,"well-capitalized", the Bank must maintain minimum total risk-based, Tier I risk-based and Tier I leverage capital ratios as set forth in the table below.
 
As of September 30, 2013 (Dollars in thousands)As of March 31, 2014 (Dollars in thousands)
Actual To Be Well-Capitalized ExcessActual To Be Well-Capitalized Excess
Amount Ratio Amount Ratio Amount RatioAmount Ratio Amount Ratio Amount Ratio
BBCN Bancorp, Inc                      
Total risk-based capital ratio$793,569
 14.89% N/A
 N/A
    $830,822
 14.89% N/A
 N/A
    
Tier 1 risk-based capital ratio$727,053
 13.64% N/A
 N/A
    $764,197
 13.70% N/A
 N/A
    
Tier 1 capital to total assets$727,053
 12.06% N/A
 N/A
 

 

$764,197
 11.88% N/A
 N/A
 

 

BBCN Bank                      
Total risk-based capital ratio$784,601
 14.73% $532,686
 10.00% $251,915
 4.73%$815,512
 14.63% $557,528
 10.00% $257,984
 4.63%
Tier 1 risk-based capital ratio$718,084
 13.48% $319,612
 6.00% $398,472
 7.48%$748,887
 13.43% $334,517
 6.00% $414,370
 7.43%
Tier I capital to total assets$718,084
 11.90% $301,740
 5.00% $416,344
 6.90%$748,887
 11.66% $321,168
 5.00% $427,719
 6.66%
As of December 31, 2012 (Dollars in thousands)           
Actual To Be Well-Capitalized ExcessAs of December 31, 2013 (Dollars in thousands)
Amount Ratio Amount Ratio Amount RatioActual To Be Well-Capitalized Excess
Amount Ratio Amount Ratio Amount Ratio
BBCN Bancorp, Inc                      
Total risk-based capital ratio$746,396
 16.16% N/A
 N/A
    $819,408
 14.90% N/A
 N/A
    
Tier 1 risk-based capital ratio$688,422
 14.91% N/A
 N/A
    $751,204
 13.66% N/A
 N/A
    
Tier 1 capital to total assets$688,422
 12.76% N/A
 N/A
 

 

$751,204
 11.97% N/A
 N/A
 

 

BBCN Bank                      
Total risk-based capital ratio$725,655
 15.73% $461,417
 10.00% $264,238
 5.73%$807,620
 14.70% $549,471
 10.00% $258,149
 4.70%
Tier 1 risk-based capital ratio$667,725
 14.47% $276,850
 6.00% $390,875
 8.47%$739,416
 13.46% $329,683
 6.00% $409,733
 7.46%
Tier I capital to total assets$667,725
 12.38% $269,767
 5.00% $397,958
 7.38%$739,416
 11.79% $313,687
 5.00% $425,729
 6.79%

Liquidity Management
Liquidity risk is the risk of reduction in our earnings or capital that would result if we were not able to meet our obligations when they come due without incurring unacceptable losses.  Liquidity risk includes the risk of unplanned decreases or changes in funding sources and changes in market conditions that affect our ability to liquidate assets quickly and with minimum loss of value.  Factors considered in liquidity risk management are the stability of the deposit base; the marketability, maturity, and pledging of our investments; the availability of alternative sources of funds; and our demand for credit. The objective of our liquidity management is to have funds available to meet cash flow requirements arising from fluctuations in deposit levels and the demands of daily operations, which include funding of securities purchases, providing for customers' credit needs, and ongoing repayment of borrowings.

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Our primary sources of liquidity are derived from financing activities, which include customer and broker deposits, federal funds facilities, and borrowings from the FHLB and the FRB Discount Window.  These funding sources are augmented by

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payments of principal and interest on loans and securities, proceeds from sale of loans and the liquidation or sale of securities from our available for sale portfolio.  Primary uses of funds include withdrawal of and interest payments on deposits, originations of loans, purchases of investment securities, and payment of operating expenses.
At September 30, 2013March 31, 2014, our total borrowing capacity from the FHLB was $1.581.85 billion, of which $1.181.44 billion was unused and available to borrow. At September 30, 2013March 31, 2014, our total borrowing capacity from the FRB was $465.9$530.6 million, of which $465.9$530.6 million was unused and available to borrow. In addition to these lines, our liquid assets, consisting of cash and cash equivalent, interest bearing cash deposits with other banks, overnight federal funds sold to other banks, liquid investment securities available for sale, and loan repayments within 30 days, were $653.8$738.7 million at September 30, 2013March 31, 2014, compared to $661.3$647.4 million at December 31, 2012.2013. Cash and cash equivalents, including federal funds sold, were $345.4403.1 million at September 30, 2013March 31, 2014, compared to $312.9316.7 million at December 31, 2012.2013. We believe our liquidity sources to be stable and adequate to meet our day-to-day cash flow requirements.


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Item 3.Quantitative and Qualitative Disclosures About Market Risk
The objective of our asset and liability management activities is to improvemaximize our earnings by adjusting the type and mix of assets and liabilities to effectively address changing conditions and risks. Through overall management of our balance sheet and by controlling various risks, we seek to optimize our financial returns within safe and sound parameters. Our operating strategies for attaining this objective include managing net interest margin through appropriate risk/return pricing of assets and liabilities and emphasizing growth in retail deposits, as a percentage of interest bearing liabilities, to reduce our cost of funds. We also seek to improve earnings by controlling noninterest expense, and enhancing noninterest income. We also use risk management instruments to modify interest rate characteristics of certain assets and liabilities to hedge against our exposure to interest rate fluctuations with the objective of, reducing the effects these fluctuations might have on associated cash flows or values. Finally, we perform internal analysis to measure, evaluate and monitor risk.
Interest Rate Risk
Interest rate risk is the most significant market risk impacting us. Interest rate risk occurs when interest rate sensitive assets and liabilities do not reprice simultaneously and in equal volume. A key objective of asset and liability management is to manage interest rate risk associated with changing asset and liability cash flows and values of our assets and liabilities and market interest rate movements. The management of interest rate risk is governed by policies reviewed and approved annually by the Board of Directors. Our Board delegates responsibility for interest rate risk management to the Asset Liability Committee of the Board ("ALCO") and to the Asset and Liability Management Committee (“ALM”), which is composed of the Bank’s senior executives and other designated officers.
Market risk is the risk of adverse impacts on our future earnings, the fair values of our assets and liabilities, or our future cash flows that may result from changes in the price of a financial instrument. The fundamental objective of our ALM is to manage our exposure to interest rate fluctuations while maintaining adequate levels of liquidity and capital. Our ALM meets regularly to monitor interest rate risk, the sensitivity of our assets and liabilities to interest rate changes, the book and market values of our assets and liabilities, and our investment activities. It also directs changes in the composition of our assets and liabilities. Our strategy has been to reduce the sensitivity of our earnings to interest rate fluctuations by more closely matching the effective maturities or repricing characteristics of our assets and liabilities. Certain assets and liabilities, however, may react in different degrees to changes in market interest rates. Furthermore, interest rates on certain types of assets and liabilities may fluctuate prior to changes in market interest rates, while interest rates on other types may lag behind. We consider the anticipated effects of these factors when implementing our interest rate risk management objectives.
Interest Rate Sensitivity
We monitor interest rate risk through the use of a simulation model that provides us with the ability to simulate our net interest income. In order to measure, at September 30, 2013March 31, 2014, the sensitivity of our forecasted net interest income to changing interest rates, both rising and falling interest rate scenarios were projected and compared to base market interest rate forecasts. One application of our simulation model measures the impact of market interest rate changes on the net present value of estimated cash flows from our assets and liabilities, defined as our market value of equity. This analysis assesses the changes in market values of interest rate sensitive financial instruments that would occur in response to immediate and parallel changes in market interest rates.
The impacts on our net interest income and market value of equity exposed to immediate and parallel hypothetical changes in market interest rates as projected by the model we use for this purpose are illustrated in the following table.
 
September 30, 2013 December 31, 2012March 31, 2014 December 31, 2013
Simulated
Estimated Net
Interest Income
Sensitivity
 
Market Value
Of Equity
Volatility
 
Estimated Net
Interest Income
Sensitivity
 
Market Value
Of Equity
Volatility
Estimated Net
Interest Income
Sensitivity
 
Market Value
Of Equity
Volatility
 
Estimated Net
Interest Income
Sensitivity
 
Market Value
Of Equity
Volatility
Rate Changes  
+ 200 basis points7.13 % (2.90)% 5.31 % (2.24)%7.20 % (3.91)% 6.95 % (3.89)%
+ 100 basis points3.17 % (1.05)% 2.51 % 1.01 %3.20 % (1.70)% 3.04 % (1.62)%
- 100 basis points(1.28)% 0.63 % (3.78)% 3.06 %(1.96)% 1.08 % (1.31)% 1.24 %
- 200 basis points(1.87)% 0.50 % (4.52)% 4.68 %(2.27)% 0.84 % (1.99)% 1.20 %

The results obtained from using the simulation model are somewhat uncertain as the model does not take into account other impacts or changes and the effect they could have on the Company’s business or changes in business strategy the Company might make in reaction to changes in the interest rate environment.
 

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Item 4.Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We conducted an evaluationThe Company maintains disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the supervisionExchange Act), designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to management, including the Principal Executive Officer and the Principal Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
The Company’s management, with the participation of our management, including our ChiefPrincipal Executive Officer and ChiefPrincipal Financial Officer, ofhas evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) underas of the Securities Exchange Actend of 1934) for the period ended September 30, 2013.covered by this Quarterly Report on Form 10-Q. Based upon thaton such evaluation, our ChiefPrincipal Executive Officer and ChiefPrincipal Financial Officer determinedhave concluded that, as of the end of such period, our disclosure controls and procedures were effective.are effective in ensuring that information required to be disclosed by the Company in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms, and is accumulated and communicated to management, including the Principal Executive Officer and the Principal Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during the quarter ended September 30, 2013March 31, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


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PART II
OTHER INFORMATION

Item 1.Legal Proceedings
    
We are involved in routine litigation incidental to our business, none of which is expected to have a material adverse effect on us. There were no material developments in legal proceedings which were previously disclosed in our 20122013 Annual Report on Form 10-K.
Item 1A.Risk Factors
There were noManagement is not aware of any material changes fromto the risk factors previously discloseddiscussed in our 2012Part 1, Item 1A of the Annual Report on Form 10-K.10-K for the year ended December 31, 2013. In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors discussed in Part I, Item 1A of the Annual Report on Form 10-K for the year ended December 31, 2013, which could materially and adversely affect the Company’s business, financial condition and results of operations. The risks described in the Annual Report on Form 10-K are not the only risks facing the Company. Additional risks and uncertainties not presently known to management or that management


Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
None
 
Item 3.Defaults Upon Senior Securities
None
 
Item 4.Mine Safety Disclosures
 
None

Item 5.Other Information
None
(a)           Additional Disclosures.None.
 
(b)           Stockholder Nominations. There have been no material changes in the procedures by which shareholders may recommend nominees to the Board of Directors during the three months ended March 31, 2014. Please see the discussion of these procedures in the most recent proxy statement on Schedule 14A filed with the SEC.

Item 6.Exhibits
See “Index to Exhibits”.Exhibits.”


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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
  BBCN BANCORP, INC. 
    
Date:NovemberMay 8, 20132014/s/ Kevin S. Kim 
  Kevin S. Kim 
  Chairman, President and Chief Executive Officer 
    
Date:NovemberMay 8, 20132014  
    
  /s/ Douglas J. Goddard 
  Douglas J. Goddard 
  Executive Vice President and Chief Financial Officer 

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INDEX TO EXHIBITS
 
Exhibit Number Description
   
3.110.1 Certificate of Incorporation of the Company, filed with the Delaware Secretary of State on June 5, 2000 (incorporated hereinAmendment to Separation and Release Agreement dated January 22, 2014, by reference to the Registration Statement on Form S-4 filed with the Securities and Exchange Commission (“SEC”) on November 16, 2000)
3.2Certificate of Amendment of Certificate of Incorporation of the Company, filed with the Delaware Secretary of State on May 31, 2002 (incorporated herein by reference to Exhibit 3.3 of the Registration Statement on Form S-8 filed with the SEC on February 5, 2003)
3.3Certificate of Amendment of Certificate of Incorporation of the Company, filed with the Delaware Secretary of State on June 1, 2004 (incorporated herein by reference to Exhibit 3.1.1 of the Quarterly Report on Form 10-Q filed with the SEC on November 8, 2004)
3.4Certificate of Amendment of Certificate of Incorporation of the Company, filed with the Delaware Secretary of State on November 2, 2005 (incorporated herein by reference to Appendix B of the Proxy Statement on DEF14 A, filed with the SEC on September 6, 2005)
3.5Certificate of Amendment of Certificate of Incorporation of the Company, filed with the Delaware Secretary of State on July 20, 2007 (incorporated herein by reference to Appendix C of the Proxy Statement on DEF14 A, Appendix C filed with the SEC on April 19, 2007)
3.6Certificate of Merger, filed with the Delaware Secretary of State on November 30, 2011 (incorporated herein by reference to Exhibit 3.6 of the Quarterly Report on Form 10-Q filed with SEC on May 10, 2012)
3.7Amended and Restated Bylaws ofamong BBCN Bancorp, Inc. (incorporated herein by reference to Exhibit 3.7 of the Quarterly Report on Form 10-Q filed with the SEC on May 8, 2013)
4.1Amended and Restated Declaration of Trust, Foster Capital Trust I, dated as of July 8, 2005, by and among Christiana Bank and Trust as Delaware Trustee, LaSalle Bank National Association as Institutional Trustee, Foster Bankshares, Inc. as Sponsor and the Administrators named therein*
4.2Indenture, Junior Subordinated Debt Securities, dated as of July 8, 2005, between Foster Bankshares, Inc. as Issuer and LaSalle Bank National Association as Trustee*
4.3Guarantee Agreement, dated as of July 8, 2005, by and between Foster Bankshares, Inc. and LaSalle Bank National Association as Trustee*
10.1CCO Employment Agreement between BBCN Bank and Mark Lee, dated August 20, 2013*Soo Bong Min*
   
31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
   
31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
   
32.1 Certification of Chief Executive Officer pursuant to Section 906 of the Public Company Accounting Reform and Investor Protection Act of 2002*
   
32.2 Certification of Chief Financial Officer pursuant to section 906 of the Public Company Accounting Reform and Investor Protection Act of 2002*
   
101.INS XBRL Instance Document**
   
101.SCH XBRL Taxonomy Extension Schema Document**
   
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document**
   
101.DEF XBRL Taxonomy Extension Definition Linkbase Document**
   
101.LAB XBRL Taxonomy Extension Label Linkbase Document**
   
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document**

*Filed herewith
**Furnished herewith

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