Edgar Filing: CATHAY GENERAL BANCORP

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Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2011

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

For the transition period from to

Commission file number 0-18630

CATHAY GENERAL BANCORP

(Exact name of registrant as specified in its charter)


Delaware		95-4274680
(State of other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

777 North Broadway, Los Angeles, California		90012
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (213) 625-4700

(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 ¨

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

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

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common stock, $.01 par value, 78,634,462 shares outstanding as of April 29, 2011.

CATHAY GENERAL BANCORP AND SUBSIDIARIES

1ST QUARTER 2011 REPORT ON FORM 10-Q

TABLE OF CONTENTS


PART I – FINANCIAL INFORMATION		5

Item 1.	FINANCIAL STATEMENTS (Unaudited)	5
	NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)	8
Item 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	32
Item 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	65
Item 4.	CONTROLS AND PROCEDURES	67

PART II – OTHER INFORMATION		67

Item 1.	LEGAL PROCEEDINGS	67
Item 1A.	RISK FACTORS	67
Item 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	67
Item 3.	DEFAULTS UPON SENIOR SECURITIES	68
Item 4.	(REMOVED AND RESERVED.)	68
Item 5.	OTHER INFORMATION	68
Item 6.	EXHIBITS	68

SIGNATURES		70

Forward-Looking Statements

In this quarterly Report on Form 10-Q, the term “Bancorp” refers to Cathay General Bancorp and the term “Bank” refers to Cathay Bank. The terms “Company,” “we,” “us,” and “our” refer to Bancorp and the Bank collectively. The statements in this report include forward-looking statements within the meaning of the applicable provisions of the Private Securities Litigation Reform Act of 1995 regarding management’s beliefs, projections, and assumptions concerning future results and events. We intend such forward-looking statements to be covered by the safe harbor provision for forward-looking statements in these provisions. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including statements about anticipated future operating and financial performance, financial position and liquidity, growth opportunities and growth rates, growth plans, acquisition and divestiture opportunities, business prospects, strategic alternatives, business strategies, financial expectations, regulatory and competitive outlook, investment and expenditure plans, financing needs and availability and other similar forecasts and statements of expectation and statements of assumptions underlying any of the foregoing. Words such as “aims,” “anticipates,” “believes,” “could,” “estimates,” “expects,” “hopes,” “intends,” “may,” “plans,” “projects,” “seeks,” “shall,” “should,” “will,” “predicts,” “potential,” “continue,” and variations of these words and similar expressions are intended to identify these forward-looking statements. Forward-looking statements by us are based on estimates, beliefs, projections, and assumptions of management and are not guarantees of future performance. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience and our present expectations or projections. Such risks and uncertainties and other factors include, but are not limited to, adverse developments or conditions related to or arising from:

•

U.S. and international economic and market conditions;

•

market disruption and volatility;

•

current and potential future supervisory action by bank supervisory authorities and changes in laws and regulations, or their interpretations;

•

restrictions on dividends and other distributions by laws and regulations and by our regulators and our capital structure;

•

credit losses and deterioration in asset or credit quality;

•

availability of capital;

•

potential goodwill impairment;

•

liquidity risk;

•

fluctuations in interest rates;

•

past and future acquisitions;

•

inflation and deflation;

•

success of expansion, if any, of our business in new markets;

•

the soundness of other financial institutions;

•

real estate market conditions;

•

our ability to compete with competitors;

•

increased costs of compliance and other risks associated with changes in regulation and the current regulatory environment, including the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), and the potential for substantial changes in the legal, regulatory, and enforcement framework and oversight applicable to financial institutions in reaction to recent adverse financial market events, including changes pursuant to the Dodd-Frank Act;

•

the short term and long term impact of the Basel II and the proposed Basel III capital standards of the Basel Committee;

•

our ability to retain key personnel;

•

successful management of reputational risk;

•

natural disasters and geopolitical events;

•

general economic or business conditions in California, Asia, and other regions where the Bank has operations;

•

restrictions on compensation paid to our executives as a result of our participation in the TARP Capital Purchase Program;

•

our ability to adapt our information technology systems; and

•

changes in accounting standards or tax laws and regulations.

These and other factors are further described in Cathay General Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2010 (Item 1A in particular), other reports and registration statements filed with the Securities and Exchange Commission (“SEC”), and other filings it makes with the SEC from time to time. Actual results in any future period may also vary from the past results discussed in this report. Given these risks and uncertainties, readers are cautioned not to place undue reliance on any forward-looking statements, which speak to the date of this report. Cathay General Bancorp has no intention and undertakes no obligation to update any forward-looking statement or to publicly announce any revision of any forward-looking statement to reflect future developments or events, except as required by law.

Cathay General Bancorp’s filings with the SEC are available at the website maintained by the SEC at http://www.sec.gov, or by request directed to Cathay General Bancorp, 9650 Flair Drive, El Monte, California 91731, Attention: Investor Relations (626) 279-3286.

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

CATHAY GENERAL BANCORP AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


	March 31, 2011			December 31, 2010
	(In thousands, except share and per share data)
ASSETS
Cash and due from banks	$	87,111		$	87,347
Short-term investments and interest bearing deposits		169,963			206,321
Securities purchased under agreements to resell		0			110,000
Securities held-to-maturity (market value of $1,228,109 in 2011 and $837,359 in 2010)		1,231,955			840,102
Securities available-for-sale (amortized cost of $1,545,034 in 2011 and $2,005,330 in 2010)		1,537,111			2,003,567
Trading securities		3,824			3,818
Loans held for sale		2,388			2,873
Loans		6,894,311			6,868,621
Less: Allowance for loan losses		(241,030	)		(245,231	)
Unamortized deferred loan fees		(7,827	)		(7,621	)

Loans, net		6,645,454			6,615,769
Federal Home Loan Bank stock		61,364			63,873
Other real estate owned, net		75,585			77,740
Investments in affordable housing partnerships, net		86,896			88,472
Premises and equipment, net		108,790			109,456
Customers’ liability on acceptances		22,623			14,014
Accrued interest receivable		33,524			35,382
Goodwill		316,340			316,340
Other intangible assets		15,520			17,044
Other assets		215,961			209,868

Total assets	$	10,614,409		$	10,801,986


LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits
Non-interest-bearing demand deposits	$	960,677		$	930,300
Interest-bearing accounts:
NOW accounts		415,986			418,703
Money market accounts		1,012,324			982,617
Saving accounts		390,679			385,245
Time deposits under $100,000		1,018,000			1,081,266
Time deposits of $100,000 or more		3,281,641			3,193,715

Total deposits		7,079,307			6,991,846


Securities sold under agreements to repurchase		1,459,000			1,561,000
Advances from the Federal Home Loan Bank		350,000			550,000
Other borrowings from financial institutions		10,991			8,465
Other borrowings for affordable housing investments		19,075			19,111
Long-term debt		171,136			171,136
Acceptances outstanding		22,623			14,014
Other liabilities		50,101			50,309

Total liabilities		9,162,233			9,365,881

Commitments and contingencies		0			0

Stockholders’ equity
Preferred stock, 10,000,000 shares authorized, 258,000 issued and outstanding in 2011 and in 2010		248,334			247,455
Common stock, $0.01 par value; 100,000,000 shares authorized, 82,842,027 issued and 78,634,462 outstanding at March 31, 2011, and 82,739,348 issued and 78,531,783 outstanding at December 31, 2010		828			827
Additional paid-in-capital		764,098			762,509
Accumulated other comprehensive loss, net		(4,592	)		(1,022	)
Retained earnings		560,797			543,625
Treasury stock, at cost (4,207,565 shares at March 31, 2011, and at December 31, 2010)		(125,736	)		(125,736	)

Total Cathay General Bancorp stockholders’ equity		1,443,729			1,427,658
Noncontrolling Interest		8,447			8,447

Total equity		1,452,176			1,436,105

Total liabilities and equity	$	10,614,409		$	10,801,986

See accompanying notes to unaudited condensed consolidated financial statements

CATHAY GENERAL BANCORP AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME/(LOSS)

(Unaudited)


	Three months ended March 31,
	2011			2010
	(In thousands, except share and per share data)
INTEREST AND DIVIDEND INCOME
Loan receivable, including loan fees	$	90,558		$	95,739
Investment securities- taxable		21,854			30,288
Investment securities- nontaxable		1,056			77
Federal Home Loan Bank stock		47			48
Federal funds sold and securities purchased under agreements to resell		41			0
Deposits with banks		221			317

Total interest and dividend income		113,777			126,469


INTEREST EXPENSE
Time deposits of $100,000 or more		10,725			15,383
Other deposits		5,720			9,101
Securities sold under agreements to repurchase		16,171			16,312
Advances from Federal Home Loan Bank		4,849			10,039
Long-term debt		1,206			913
Short-term borrowings		1			0

Total interest expense		38,672			51,748

Net interest income before provision for credit losses		75,105			74,721
Provision for credit losses		6,000			84,000

Net interest income/(loss) after provision for credit losses		69,105			(9,279	)


NON-INTEREST INCOME
Securities gains, net		6,232			3,439
Letters of credit commissions		1,278			959
Depository service fees		1,361			1,357
Other operating income/(loss)		3,755			(971	)

Total non-interest income		12,626			4,784


NON-INTEREST EXPENSE
Salaries and employee benefits		18,271			15,226
Occupancy expense		3,538			3,838
Computer and equipment expense		2,183			2,013
Professional services expense		3,729			4,639
FDIC and State assessments		4,317			5,144
Marketing expense		695			899
Other real estate owned expense, net		221			3,295
Operations of affordable housing investments , net		1,976			2,113
Amortization of core deposit intangibles		1,481			1,507
Cost associated with debt redemption		8,811			909
Other operating expense		2,561			4,580

Total non-interest expense		47,783			44,163

Income/(loss) before income tax expense/(benefit)		33,948			(48,658	)
Income tax expense/(benefit)		11,734			(23,068	)

Net income/(loss)		22,214			(25,590	)
Less: net income attributable to noncontrolling interest		(151	)		(151	)

Net income/(loss) attributable to Cathay General Bancorp		22,063			(25,741	)
Dividends on preferred stock		(4,105	)		(4,092	)

Net income/(loss) available to common stockholders		17,958			(29,833	)


Other comprehensive income (loss) , net of tax
Unrealized holding gain/(loss) arising during the period		(950	)		9,495
Less: reclassification adjustments included in net income		2,620			1,446

Total other comprehensive gain/(loss), net of tax		(3,570	)		8,049

Total comprehensive income/(loss) attributable to Cathay General Bancorp	$	18,493		$	(17,692	)


Net income/(loss) per common share:
Basic	$	0.23		$	(0.41	)
Diluted	$	0.23		$	(0.41	)

Cash dividends paid per common share	$	0.010		$	0.010
Basic average common shares outstanding		78,609,460			72,653,755
Diluted average common shares outstanding		78,635,620			72,653,755

See accompanying notes to unaudited condensed consolidated financial statements.

CATHAY GENERAL BANCORP AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Three Months Ended March 31
	2011			2010
	(In thousands)
Cash Flows from Operating Activities
Net Income /(loss)	$	22,214		$	(25,590	)
Adjustments to reconcile net income to net cash provided by/(used in) operating activities:
Provision for loan losses		6,000			84,000
Provision for losses on other real estate owned		1,979			2,855
Deferred tax liability (benefit)		5,425			(17,131	)
Depreciation		1,521			2,071
Net gains on sale and transfer of other real estate owned		(3,605	)		(1,368	)
Write-downs on venture capital investments		57			199
Gain on sales and calls of securities		(6,232	)		(3,439	)
(Decrease)/increase in unrealized loss from interest rate swaps		(874	)		3,679
Other non-cash interest		(181	)		61
Amortization/accretion of security premiums/discounts, net		1,236			1,177
Amortization of intangibles		1,498			1,527
Excess tax short-fall from share-based payment arrangements		234			87
Stock based compensation expense		463			1,137
Decrease in deferred loan fees, net		207			(322	)
Decrease in accrued interest receivable		1,858			2,021
(Increase)/decrease in other assets, net		(6,967	)		15,806
Increase/(decrease) in other liabilities		298			(2,112	)

Net cash provided by operating activities		25,131			64,658
Cash Flows from Investing Activities
Decrease/(increase) in short-term investments		36,360			(73,047	)
Decrease in securities purchased under agreements to resell		110,000			0
Purchase of investment securities available-for-sale		(7,768	)		(1,267,803	)
Proceeds from maturity and calls of investment securities available-for-sale		0			493,170
Proceeds from sale of investment securities available-for-sale		217,261			45,077
Purchase of mortgage-backed securities available-for-sale		(100,496	)		0
Proceeds from repayment and sale of mortgage-backed securities available-for-sale		356,931			438,445
Purchase of investment securities held-to-maturity		(419,460	)		(10,000	)
Proceeds from maturity, call and prepayment of investment securities held-to-maturity		26,971			9,465
Purchase of trading securities		0			(12,981	)
Redemption of Federal Home Loan Bank stock		2,509			0
Net increase in loans		(47,686	)		(34,254	)
Purchase of premises and equipment		(1,069	)		(883	)
Proceeds from sale of other real estate owned		16,064			9,739
Net increase in investment in affordable housing		(265	)		(1,999	)

Net cash provided by/(used in) investing activities		189,352			(405,071	)

Cash Flows from Financing Activities
Net increase/(decrease) in demand deposits, NOW accounts, money market and saving deposits		62,800			(21,856	)
Net increase in time deposits		24,839			263,022
Net increase/(decrease) in federal funds purchased and securities sold under agreement to repurchase		(102,000	)		2,000
Advances from Federal Home Loan Bank		286,000			78,000
Repayment of Federal Home Loan Bank borrowings		(486,000	)		(143,000	)
Cash dividends		(786	)		(785	)
Issuance of common stock		0			124,924
Cash dividend paid on preferred stock		(3,225	)		(3,225	)
Proceeds from other borrowings		2,526			6,139
Proceeds from shares issued through Dividend Reinvestment Plan		54			83
Proceeds from exercise of stock options		1,307			0
Excess tax short-fall from share-based payment arrangements		(234	)		(87	)

Net cash (used in)/ provided by financing activities		(214,719	)		305,215

(Decrease)/increase in cash and cash equivalents		(236	)		(35,198	)
Cash and cash equivalents, beginning of the period		87,347			100,124

Cash and cash equivalents, end of the period	$	87,111		$	64,926


Supplemental disclosure of cash flow information
Cash paid during the period:
Interest	$	40,765		$	51,903
Income taxes paid/(refunded)	$	21,600		$	(7,142	)
Non-cash investing and financing activities:
Net change in unrealized holding (loss)/gain on securities available-for-sale, net of tax	$	(3,571	)	$	8,049
Loans to facilitate sale of loans	$	0		$	23,500
Transfers to other real estate owned	$	14,035		$	51,972
Transfers to other real estate owned from loans held for sale	$	2,874		$	5,851
Loans transfers from investment to held for sale	$	2,388		$	0
Loans to facilitate the sale of other real estate owned	$	4,625		$	0

See accompanying notes to unaudited condensed consolidated financial statements.

CATHAY GENERAL BANCORP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1. Business

Cathay General Bancorp (the “Bancorp”) is the holding company for Cathay Bank (the “Bank” and, together, the “Company”), six limited partnerships investing in affordable housing investments in which the Bank is the sole limited partner, and GBC Venture Capital, Inc. The Bancorp also owns 100% of the common stock of five statutory business trusts created for the purpose of issuing capital securities. The Bank was founded in 1962 and offers a wide range of financial services. As of March 31, 2011, the Bank operated twenty branches in Southern California, eleven branches in Northern California, eight branches in New York State, three branches in Illinois, three branches in Washington State, two branches in Texas, one branch in Massachusetts, one branch in New Jersey, one branch in Hong Kong, and a representative office in Shanghai and in Taipei. Deposit accounts at the Hong Kong branch are not insured by the Federal Deposit Insurance Corporation (the “FDIC”).

2. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2011. For further information, refer to the audited consolidated financial statements and footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.

The preparation of the condensed consolidated financial statements in accordance with GAAP requires management of the Company to make a number of estimates and assumptions relating to the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. The most significant estimates subject to change are the allowance for loan losses, goodwill impairment, and other-than-temporary impairment.

3. Recent Accounting Pronouncements

The FASB issued ASU 2010-06 “Improving Disclosures about Fair Value Measurements” in January 2010 to improve disclosure requirements related to ASC Topic 820. ASU 2010-06 requires an entity to report separately significant transfers in and out of Level 1 and Level 2 fair value measurements and to explain the transfers. It also requires an entity to present separately information about purchases, sales, issuances, and settlements for Level 3 fair value measurements. ASU 2010-06 is effective for fiscal years beginning after December 15, 2010. Adoption of ASU 2010-06 did not have a significant impact on the Company’s consolidated financial statements.

The FASB issued ASU 2010-20 “Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses” in July 2010 to provide disclosures that facilitate financial statement users’ evaluation of (i) the nature of credit risk inherent in the entity’s portfolio of financing receivables, (ii) how that risk is analyzed and assessed in arriving at the allowance for credit losses, and (iii) the changes and reasons for those changes in the allowance for credit losses. An entity should provide disclosures on two levels of disaggregation– portfolio segment and class of financing receivable. The disclosure requirements include, among other things, a roll-forward schedule of the allowance for credit losses as well as information about modified, impaired, non-accrual and past due loans and credit quality indicators. ASU 2010-20 was effective for the entity’s financial statements as of December 31, 2010, as related to end of a reporting period disclosure requirement. Disclosures that relate to activity during a reporting period is required for the entity’s financial statements that include periods beginning on or after January 1, 2011. See Note 7 to these condensed consolidated financial statements for the required disclosures at March 31, 2011.

The FASB issued ASU 2010-28 “When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts.” in December 2010. ASU 2010-28 modifies Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. In determining whether it is more likely than not that a goodwill impairment exists, an entity should consider whether there are any adverse qualitative factors indicating that an impairment may exist such as if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. ASU 2010-28 was effective on December 15, 2010. Adoption of ASU 2010-28 did not have a significant impact on the Company’s consolidated financial statements.

In April 2011, the FASB issued ASU 2011-02 “A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring.” ASU 2011-02 clarifies the guidance on creditor’s evaluation of whether a restructuring constitutes a troubled debt restructuring. A restructuring constitutes a troubled debt restructuring if it meets both of the following criteria: (a) the restructuring constitutes a concession; and (b) the debtor is experiencing financial difficulties. ASU 2011-02 will be effective for interim and annual periods after June 15, 2011, and will be applied retrospectively to restructurings occurring on or after January 1, 2011. Adoption of ASU 2011-02 is not expected to have a significant impact on the Company’s consolidated financial statements.

4. Earnings/Loss per Share

Basic earnings per share exclude dilution and is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock and resulted in the issuance of common stock that then shared in earnings. Potential dilution is excluded from computation of diluted per-share amounts when a net loss from operation exists.

Outstanding stock options with anti-dilutive effect were not included in the computation of diluted earnings per share. The following table sets forth loss per common stock share calculations:


	For the three months ended March 31,
(Dollars in thousands, except share and per share data)	2011			2010
Net income/(loss) attributable to Cathay General Bancorp	$	22,063		($	25,741	)
Dividends on preferred stock		(4,105	)		(4,092	)

Net income/(loss) available to common stockholders	$	17,958		($	29,833	)

Weighted-average number of common shares outstanding:
Basic		78,609,460			72,653,755
Diluted effect of weighted-average outstanding common shares equivalents
Stock Options		26,160			0

Diluted weighted-average number of common shares outstanding		78,635,620			72,653,755


Average shares of stock options, restricted stock units, and warrants with anti-dilutive effect		6,198,286			6,988,181
Earnings/(loss) per common stock share:
Basic	$	0.23		($	0.41	)
Diluted	$	0.23		($	0.41	)

5. Stock-Based Compensation

Under the Company’s equity incentive plans, directors and eligible employees may be granted incentive or non-statutory stock options and/or restricted stock units, or awarded non-vested stock. As of March 31, 2011, the only options granted by the Company were non-statutory stock options to selected Bank officers and non-employee directors at exercise prices equal to the fair market value of a share of the Company’s common stock on the date of grant. Such options have a maximum ten-year term and vest in 20% annual increments (subject to early termination in certain events) except certain options granted to the Chief Executive Officer of the Company in 2005 and 2008. If such options expire or terminate without having been exercised, any shares not purchased will again be available for future grants or awards. There were no options granted during 2010 and during the first quarter of 2011.

Option compensation expense totaled $366,000 for the three months ended March 31, 2011, and $1.1 million for the three months ended March 31, 2010. Stock-based compensation is recognized ratably over the requisite service period for all awards. Unrecognized stock-based compensation expense related to stock options totaled $1.5 million at March 31, 2011, and is expected to be recognized over the next 1.9 years.

Stock options covering 86,860 shares were exercised during the first quarter of 2011 compared to none in the year of 2010. Cash received totaled $1.3 million and the aggregate intrinsic value totaled $172,000 from the exercise of stock options during the first quarter ended March 31, 2011. Fair value of stock options vested was $2.6 million during the first quarter of 2011 and $4.8 million during the first quarter of 2010. The table below summarizes stock option activity for the periods indicated:


	Shares			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value (in thousands)
Balance, December 31, 2010		4,947,348			27.93		3.7	$	334
Exercised		(86,860	)		15.05
Forfeited		(481,588	)		20.75

Balance, March 31, 2011		4,378,900		$	28.86		3.9	$	178

Exercisable, March 31, 2011		4,151,244		$	29.15		3.7	$	178

In addition to stock options, the Company also grants restricted stock units to eligible employees. On February 21, 2008, restricted stock units for 82,291 shares were granted to eligible employees. Upon vesting of restricted stock units, the Company issued 15,006 shares of common stock at the closing price of $9.64 per share on February 21, 2010, and 12,633 shares of common stock at the closing price of $18.79 per share on February 21, 2011. Restricted stock units granted in 2008 have a maximum term of five years and vest in approximately 20% annual increments subject to continued employment with the Company.

In March 2011, the Company again granted restricted stock units of 65,243 shares to eligible employees. The closing price of the Company’s common stock on the date of the grant was $16.14 for the 15,069 restricted stock units granted on March 15, 2011 and $16.15 for the 50,174 restricted stock units granted on March 23, 2011. These restricted stock units granted in March 2011 are scheduled to vest in March 2013.

The following table presents information relating to the restricted stock units as of March 31, 2011:


	Units
Balance at December 31, 2010		38,960
Granted		65,243
Forfeited		(1,168	)
Vested		(12,633	)

Balance at March 31, 2011		90,402

The compensation expense recorded related to the restricted stock units above was $96,000 for the three months ended March 31, 2011, and $82,000 for the three months ended March 31, 2010. Unrecognized stock-based compensation expense related to restricted stock units was $1.7 million at March 31, 2011, and is expected to be recognized over the next 2.0 years.

The following table summarizes the tax benefit (short-fall) from share-based payment arrangements:


	For the three months ended March 31,
(Dollars in thousands)	2011			2010
Benefit/(short-fall) of tax deductions in excess of grant-date fair value	$	(234	)	$	(87	)
Benefit of tax deductions on grant-date fair value		306			87

Total benefit of tax deductions	$	72		$	0

6. Investment Securities

The following table reflects the amortized cost, gross unrealized gains, gross unrealized losses, and fair values of investment securities as of March 31, 2011, and December 31, 2010:


	March 31, 2011
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(In thousands)
Securities Held-to-Maturity
U.S. government sponsored entities	$	99,932	$	2,272	$	0	$	102,204
State and municipal securities		129,978		24		5,755		124,247
Mortgage-backed securities		992,077		4,317		4,734		991,660
Other foreign debt securities		9,968		30		0		9,998

Total securities held-to-maturity	$	1,231,955	$	6,643	$	10,489	$	1,228,109


Securities Available-for-Sale
U.S. treasury securities	$	125,554	$	0	$	7,497	$	118,057
U.S. government sponsored entities		635,018		187		9,169		626,036
State and municipal securities		1,873		0		143		1,730
Mortgage-backed securities		377,822		10,550		63		388,309
Collateralized mortgage obligations		21,641		630		135		22,136
Asset-backed securities		215		0		4		211
Corporate bonds		316,553		311		5,998		310,866
Mutual funds		4,000		0		88		3,912
Preferred stock of government sponsored entities		569		1,917		0		2,486
Trust preferred securities		22,317		204		12		22,509
Other foreign debt securities		38,004		64		308		37,760
Other equity securities		1,468		1,631		0		3,099

Total securities available-for-sale	$	1,545,034	$	15,494	$	23,417	$	1,537,111

Total investment securities	$	2,776,989	$	22,137	$	33,906	$	2,765,220


	December 31, 2010
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(In thousands)
Securities Held-to-Maturity
U.S. government sponsored entities	$	99,921	$	2,639	$	0	$	102,560
State and municipal securities		130,107		0		8,946		121,161
Mortgage-backed securities		600,107		5,230		1,653		603,684
Other foreign debt securities		9,967		0		13		9,954

Total securities held-to-maturity	$	840,102	$	7,869	$	10,612	$	837,359


Securities Available-for-Sale
U.S. treasury securities	$	125,573	$	0	$	6,745	$	118,828
U.S. government sponsored entities		830,269		1,653		6,840		825,082
State and municipal securities		1,875		0		157		1,718
Mortgage-backed securities		627,574		14,854		123		642,305
Collateralized mortgage obligations		24,719		590		115		25,194
Asset-backed securities		245		0		5		240
Corporate bonds		336,476		1,307		5,792		331,991
Mutual funds		4,000		0		73		3,927
Preferred stock of government sponsored entities		569		150		0		719
Trust preferred securities		14,549		58		170		14,437
Other foreign debt securities		38,013		67		646		37,434
Other equity securities		1,468		224		0		1,692

Total securities available-for-sale	$	2,005,330	$	18,903	$	20,666	$	2,003,567


Total investment securities	$	2,845,432	$	26,772	$	31,278	$	2,840,926

The amortized cost and fair value of investment securities at March 31, 2011, by contractual maturities are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or repay obligations with or without call or repayment penalties.


	Securities Available-for-Sale				Securities Held-to-Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In thousands)
Due in one year or less	$	59,348	$	59,480	$	0	$	0
Due after one year through five years		418,601		411,005		99,932		102,204
Due after five years through ten years		754,123		744,948		17,628		17,462
Due after ten years (1)		312,962		321,678		1,114,395		1,108,443

Total	$	1,545,034	$	1,537,111	$	1,231,955	$	1,228,109

(1)	Equity securities are reported in this category

Proceeds from sales and repayments of mortgage-backed securities were $356.9 million during the first quarter of 2011 compared to $438.4 million during the same quarter a year ago. Proceeds from sales and repayments of other investment securities were $217.3 million during the first quarter of 2011 compared to $45.1 million during the first quarter of 2010. Proceeds from maturity and calls of investment securities were $27.0 million during the first quarter of 2011 compared to $502.6 million during the same quarter a year ago. Gains of $6.2 million and no losses were realized on sales and calls of investment securities during the first quarter of 2011 compared to $3.4 million in gains and no losses realized for the same quarter a year ago.

The temporarily impaired securities represent 56.9% of the fair value of investment securities as of March 31, 2011. Unrealized losses for securities with unrealized losses for less than twelve months represent 2.1%, and securities with unrealized losses for twelve months or more represent 5.9%, of the historical cost of these securities. Unrealized losses on these securities generally resulted from increases in interest rate spreads subsequent to the date that these securities were purchased. All of these securities were investment grade as of March 31, 2011, except two whole loan securities with a par amount at March 31, 2011 of $9.5 million that were rated B and B2 and one corporate note with a principal balance of $5.0 million was rated BB. At March 31, 2011, 11 issues of securities had unrealized losses for 12 months or longer and 180 issues of securities had unrealized losses of less than 12 months.

At March 31, 2011, management believed the impairment was temporary and, accordingly, no impairment loss has been recognized in our condensed consolidated statements of operations. The Company expects to recover the amortized cost basis of its debt securities, and has no intent to sell and will not be required to sell available-for-sale debt securities that have declined below their cost before their anticipated recovery.

The table below shows the fair value, unrealized losses, and number of issuances of the temporarily impaired securities in our investment securities portfolio as of March 31, 2011, and December 31, 2010:


	As of March 31, 2011
	Temporarily Impaired Securities
	Less than 12 months						12 months or longer						Total
	Fair Value		Unrealized Losses		No. of Issuances		Fair Value		Unrealized Losses		No. of Issuances		Fair Value		Unrealized Losses		No. of Issuances
	(Dollars in thousands)
Securities Held-to-Maturity
State and municipal securities	$	118,178	$	5,755		117	$	0	$	0		0	$	118,178	$	5,755		117
Mortgage-backed securities		427,835		4,734		12		0		0		0		427,835		4,734		12

Total securities held-to-maturity	$	546,013	$	10,489		129	$	0	$	0		0	$	546,013	$	10,489		129

Securities Available-for-Sale
U.S. treasury securities	$	118,057	$	7,497		1	$	0	$	0		0	$	118,057	$	7,497		1
U.S. government sponsored entities		575,790		9,169		12		0		0		0		575,790		9,169		12
State and municipal securities		1,730		143		2		0		0		0		1,730		143		2
Mortgage-backed securities		576		5		5		80		1		3		656		6		8
Mortgage-backed securities-Non-agency		3,030		18		1		6,163		39		2		9,193		57		3
Collateralized mortgage obligations		0		0		0		838		135		4		838		135		4
Asset-backed securities		0		0		0		211		4		1		211		4		1
Corporate bonds		254,211		5,138		25		9,140		860		1		263,351		5,998		26
Mutual funds		3,912		88		1		0		0		0		3,912		88		1
Trust preferred securities		2,818		12		2		0		0		0		2,818		12		2
Other foreign debt securities		19,692		308		2		0		0		0		19,692		308		2

Total securities available-for-sale	$	979,816	$	22,378		51	$	16,432	$	1,039		11	$	996,248	$	23,417		62

Total investment securities	$	1,525,829	$	32,867		180	$	16,432	$	1,039		11	$	1,542,261	$	33,906		191


	As of December 31, 2010
	Temporarily Impaired Securities
	Less than 12 months						12 months or longer						Total
	Fair Value		Unrealized Losses		No. of Issuances		Fair Value		Unrealized Losses		No. of Issuances		Fair Value		Unrealized Losses		No. of Issuances
	(Dollars in thousands)
Securities Held-to-Maturity
State and municipal securities	$	121,161	$	8,946		122	$	0	$	0		0	$	121,161	$	8,946		122
Mortgage-backed securities		89,439		1,653		2		0		0		0		89,439		1,653		2
Other foreign debt securities		9,954		13		1		0		0		0		9,954		13		1

Total securities held-to-maturity	$	220,554	$	10,612		125	$	0	$	0		0	$	220,554	$	10,612		125

Securities Available-for-Sale
U.S. Treasury securities	$	118,828	$	6,745		5	$	0	$	0		0	$	118,828	$	6,745		5
U.S. government sponsored entities		578,118		6,840		12		0		0		0		578,118		6,840		12
State and municipal securities		1,718		157		2		0		0		0		1,718		157		2
Mortgage-backed securities		354		4		7		32		1		1		386		5		8
Mortgage-backed securities-Non-agency		0		0		0		10,127		118		3		10,127		118		3
Collateralized mortgage obligations		0		0		0		887		115		4		887		115		4
Asset-backed securities		0		0		0		240		5		1		240		5		1
Corporate bonds		283,376		5,792		27		0		0		0		283,376		5,792		27
Mutual funds		3,927		73		1		0		0		0		3,927		73		1
Trust preferred securities		10,384		170		2		0		0		0		10,384		170		2
Other foreign debt securities		27,254		646		3		0		0		0		27,254		646		3

Total securities available-for-sale	$	1,023,959	$	20,427		59	$	11,286	$	239		9	$	1,035,245	$	20,666		68

Total investment securities	$	1,244,513	$	31,039		184	$	11,286	$	239		9	$	1,255,799	$	31,278		193

Investment securities having a carrying value of $1.79 billion at March 31, 2011, and $1.80 billion at December 31, 2010, were pledged to secure public deposits, other borrowings, treasury tax and loan, Federal Home Loan Bank advances, securities sold under agreements to repurchase, interest rate swaps, and foreign exchange transactions.

7. Loans

Most of the Company’s business activity is predominately with Asian customers located in Southern and Northern California; New York City; Houston and Dallas, Texas; Seattle, Washington; Boston, Massachusetts; Chicago, Illinois; and Edison, New Jersey. The Company has no specific industry concentration, and generally its loans are collateralized with real property or other pledged collateral of the borrowers. Loans are generally expected to be paid off from the operating profits of the borrowers, refinancing by another lender, or through sale by the borrowers of the secured collateral.

The components of loans in the consolidated balance sheets as of March 31, 2011, and December 31, 2010, were as follows:


	March 31, 2011			December 31, 2010
	(In thousands)
Type of Loans:
Commercial loans	$	1,531,593		$	1,441,167
Real estate construction loans		342,453			409,986
Commercial mortgage loans		3,893,904			3,940,061
Residential mortgage loans		897,108			852,454
Equity lines		210,569			208,876
Installment and other loans		18,684			16,077

Gross loans		6,894,311			6,868,621
Less:
Allowance for loan losses		(241,030	)		(245,231	)
Unamortized deferred loan fees		(7,827	)		(7,621	)

Total loans, net	$	6,645,454		$	6,615,769

Loans held for sale	$	2,388		$	2,873

The Company transferred the only held for sale loan of $2.9 million at December 31, 2010, to other real estate owned (“OREO”) in January 2011 and transferred two loans of $2.4 million to held for sale status in March 2011.

The Company identified impaired loans with a recorded investment of $412.2 million at March 31, 2011, compared to $382.0 million at December 31, 2010. We considered all non-accrual loans to be impaired. For impaired loans, the amounts previously charged off represent 21.8% at March 31, 2011, and 23.3% at December 31, 2010, of the contractual balances for impaired loans.

The following table presents the average balance and interest income recognized related to impaired loans for the period indicated:


	Impaired Loans
	For the Three Months Ended
	March 31, 2011				March 31, 2010
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Commercial loans	$	41,982	$	272	$	41,020	$	12
Real estate construction loans		86,024		330		94,466		352
Commercial mortgage loans		253,130		1,066		238,016		776
Residential mortgage and equity lines		16,519		25		11,870		6

Subtotal	$	397,655	$	1,693	$	385,372	$	1,146

The following table presents impaired loans and the related allowance and charge-off as of the dates indicated:


	Impaired Loans
	At March 31, 2011						At December 31, 2010
	Unpaid Principal Balance		Recorded Investment		Allowance		Unpaid Principal Balance		Recorded Investment		Allowance
	(Dollars in thousands)
With no allocated allowance
Commercial loans	$	43,377	$	29,454	$	0	$	41,233	$	27,775	$	0
Real estate construction loans		101,848		68,139		0		102,186		64,274		0
Commercial mortgage loans		217,258		167,693		0		211,717		156,305		0
Residential mortgage and equity lines		6,773		6,569		0		7,823		7,436		0

Subtotal	$	369,256	$	271,855	$	0	$	362,959	$	255,790	$	0

With allocated allowance
Commercial loans	$	29,539	$	25,335	$	2,953	$	13,930	$	7,748	$	2,925
Real estate construction loans		21,565		14,411		7,569		15,429		13,416		7,470
Commercial mortgage loans		94,635		89,942		3,664		98,593		96,449		3,812
Residential mortgage and equity lines		11,810		10,662		1,106		9,811		8,589		978

Subtotal	$	157,549	$	140,350	$	15,292	$	137,763	$	126,202	$	15,185

Total impaired loans	$	526,805	$	412,205	$	15,292	$	500,722	$	381,992	$	15,185

The following table presents the aging of the loan portfolio by type as of March 31, 2011 and as of December 31, 2010:


	As of March 31, 2011
	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due		Non-accrual Loans		Total Past Due		Loans Not Past Due		Total
	(In thousands)
Type of Loans:
Commercial loans	$	2,834	$	319	$	0	$	32,306	$	35,459	$	1,496,134	$	1,531,593
Real estate construction loans		31,582		1,439		0	$	56,538		89,559		252,894		342,453
Commercial mortgage loans		20,717		5,029		8		169,993		195,747		3,698,157		3,893,904
Residential mortgage loans		7,328		460		0		15,653		23,441		1,084,236		1,107,677
Installment and other loans		150		0		0		0		150		18,534		18,684

Total loans	$	62,611	$	7,247	$	8	$	274,490	$	344,356	$	6,549,955	$	6,894,311


	As of December 31, 2010
	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due		Non-accrual Loans		Total Past Due		Loans Not Past Due		Total
	(In thousands)
Type of Loans:
Commercial loans	$	7,037	$	2,990	$	0	$	31,498	$	41,525	$	1,399,642	$	1,441,167
Real estate construction loans		14,634		15,425		4,175		53,937		88,171		321,815		409,986
Commercial mortgage loans		12,569		9,430		831		144,596		167,426		3,772,635		3,940,061
Residential mortgage loans		9,934		2,581		0		12,288		24,803		1,036,527		1,061,330
Installment and other loans		0		0		0		0		0		16,077		16,077

Total loans	$	44,174	$	30,426	$	5,006	$	242,319	$	321,925	$	6,546,696	$	6,868,621

A troubled debt restructuring (“TDR”) is a formal modification of the terms of a loan when the lender, for economic or legal reasons related to the borrower’s financial difficulties, grants a concession to the borrower. The concessions may be granted in various forms, including reduction in the stated interest rate, reduction in the loan balance or accrued interest, or extension of the maturity date. Although these loan modifications are considered troubled debt restructurings, accruing TDR loans have, pursuant to the Bank’s policy, performed under the restructured terms and have demonstrated sustained performance under the modified terms for six months before being returned to accrual status. The

sustained performance considered by management pursuant to its policy includes the periods prior to the modification if the prior performance met or exceeded the modified terms. This would include cash paid by the borrower prior to the restructure to set up interest reserves. A summary of TDRs by type of concession and by type of loans is shown below:


	As of March 31, 2011
Accruing TDRs	Principal Deferral		Rate Reduction		Rate Reduction and Forgiveness of Principal		Rate Reduction and Payment Deferral		Total
	(In thousands)
Commercial loans	$	14,366	$	1,780	$	0	$	1,102	$	17,248
Real estate construction loans		752		17,375		0		5,776		23,903
Commercial mortgage loans		5,047		70,038		2,462		15,052		92,599
Residential mortgage loans		0		597		0		980		1,577

Total accruing TDRs	$	20,165	$	89,790	$	2,462	$	22,910	$	135,327


	As of March 31, 2011
Non-accrual TDRs	Interest Deferral		Principal Deferral		Rate Reduction		Rate Reduction and Payment Deferral		Total
	(In thousands)
Commercial loans	$	0	$	42	$	2,208	$	2,111	$	4,361
Real estate construction loans		0		7,044		0		0		7,044
Commercial mortgage loans		1,239		23,083		0		2,440		26,762
Residential mortgage loans		334		3,691		0		938		4,963

Total non-accrual TDRs	$	1,573	$	33,860	$	2,208	$	5,489	$	43,130


	As of December 31, 2010
Accruing TDRs	Principal Deferral		Rate Reduction		Rate Reduction and Forgiveness of Principal		Rate Reduction and Payment Deferral		Total
	(In thousands)
Commercial loans	$	1,131	$	1,780	$	0	$	1,114	$	4,025
Real estate construction loans		752		17,226		0		5,776		23,754
Commercial mortgage loans		16,586		70,185		3,459		15,055		105,285
Residential mortgage loans		2,658		599		0		479		3,736

Total accruing TDRs	$	21,127	$	89,790	$	3,459	$	22,424	$	136,800


	As of December 31, 2010
Non-accrual TDRs	Interest Deferral		Principal Deferral		Rate Reduction		Rate Reduction and Payment Deferral		Total
	(In thousands)
Commercial loans	$	0	$	0	$	2,310	$	0	$	2,310
Real estate construction loans		0		7,044		0		0		7,044
Commercial mortgage loans		1,239		14,112		0		1,113		16,464
Residential mortgage loans		340		1,037		0		951		2,328

Total non-accrual TDRs	$	1,579	$	22,193	$	2,310	$	2,064	$	28,146

As of March 31, 2011, there were no commitments to lend additional funds to those borrowers whose loans have been restructured, were considered impaired, or were on non-accrual status.

As part of the on-going monitoring of the credit quality of our loan portfolio, the Company utilizes a risk grading matrix to assign a risk grade to each loan. The risk rating categories can be generally described by the following grouping for non-homogeneous loans:

•

Pass/Watch – These loans range from minimal credit risk to lower than average, but still acceptable, credit risk.

•

Special Mention – Borrower is fundamentally sound and loan is currently protected but adverse trends are apparent that, if not corrected, may affect ability to repay. Primary source of loan repayment remains viable but there is increasing reliance on collateral or guarantor support.

•

Substandard – These loans are inadequately protected by current sound net worth, paying capacity or pledged collateral. Well-defined weaknesses exist that could jeopardize repayment of debt. Loss may not be imminent, but if weaknesses are not corrected, there is a good possibility of some loss.

•

Doubtful – The possibility of loss is extremely high, but due to identifiable and important pending events (which may strengthen the loan) a loss classification is deferred until the situation is better defined.

•

Loss – These loans are considered uncollectible and of such little value that to continue to carry the loan as an active asset is no longer warranted.

The following table presents loan portfolio by risk rating as of March 31, 2011, and as of December 31, 2010:


	As of March 31, 2011
	Pass/Watch		Special Mention		Substandard		Doubtful		Total
	(In thousands)
Commercial loans	$	1,356,227	$	52,235	$	119,347	$	3,784	$	1,531,593
Real estate construction loans		166,921		31,535		136,357		7,640		342,453
Commercial mortgage loans		3,336,437		119,004		438,463		0		3,893,904
Residential mortgage and equity lines		1,072,836		2,486		32,197		158		1,107,677
Installment and other loans		18,135		549		0		0		18,684

Total gross loans	$	5,950,556	$	205,809	$	726,364	$	11,582		6,894,311


Loans held for sale	$	0	$	0	$	2,388	$	0	$	2,388


	As of December 31, 2010
	Pass/Watch		Special Mention		Substandard		Doubtful		Total
	(In thousands)
Commercial loans	$	1,258,537	$	58,189	$	118,670	$	5,771	$	1,441,167
Real estate construction loans		191,455		53,172		153,857		11,502		409,986
Commercial mortgage loans		3,365,040		143,974		431,047		0		3,940,061
Residential mortgage and equity lines		1,026,216		6,109		28,846		159		1,061,330
Installment and other loans		15,535		542		0		0		16,077

Total gross loans		5,856,783	$	261,986	$	732,420	$	17,432		6,868,621


Loans held for sale	$	0	$	0	$	2,873	$	0	$	2,873

The allowance for loan losses and the reserve for off-balance sheet credit commitments are significant estimates that can and do change based on management’s process in analyzing the loan portfolio and on management’s assumptions about specific borrowers, underlying collateral, and applicable economic and environmental conditions, among other factors.

The following table presents the balance in the allowance for loan losses by portfolio segment and based on impairment method as of March 31, 2011, and as of December 31, 2010.


	Commercial Loans		Real Estate Construction Loans		Commercial Mortgage Loans		Residential mortgage and equity line		Consumer and Other		Total
	(In thousands)

March 31, 2011
Loans individually evaluated for impairment
Allowance	$	2,953	$	7,569	$	3,664	$	1,106	$	0	$	15,292
Balance	$	54,790	$	82,550	$	257,635	$	17,230	$	0	$	412,205

Loans collectively evaluated for impairment
Allowance	$	60,241	$	34,985	$	121,631	$	8,843	$	38	$	225,738
Balance	$	1,476,803	$	259,903	$	3,636,269	$	1,090,447	$	18,684	$	6,482,106

Total allowance	$	63,194	$	42,554	$	125,295	$	9,949	$	38	$	241,030
Total balance	$	1,531,593	$	342,453	$	3,893,904	$	1,107,677	$	18,684	$	6,894,311

December 31, 2010
Loans individually evaluated for impairment
Allowance	$	2,540	$	7,470	$	3,106	$	0	$	0	$	13,116
Balance	$	33,555	$	77,691	$	248,059	$	7,435	$	0	$	366,740

Loans collectively evaluated for impairment
Allowance	$	61,379	$	35,791	$	125,241	$	9,668	$	36	$	232,115
Balance	$	1,407,612	$	332,295	$	3,692,002	$	1,053,895	$	16,077	$	6,501,881

Total allowance	$	63,919	$	43,261	$	128,347	$	9,668	$	36	$	245,231
Total balance	$	1,441,167	$	409,986	$	3,940,061	$	1,061,330	$	16,077	$	6,868,621

The following table details activity in the allowance for loan losses by portfolio segment for the quarters ended March 31, 2011, and March 31, 2010, and for the year ended December 31, 2010.

Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.


	Commercial Loans			Real Estate Construction Loans			Commercial Mortgage Loans			Residential mortgage and equity line			Installment and Other Loans			Total
	(In thousands)
2010 Beginning Balance	$	57,815		$	45,086		$	100,494		$	8,480		$	14		$	211,889

Provision for possible credit losses		8,698			26,976			49,815			(1,230	)		29			84,288
Charge-offs		(9,646	)		(25,463	)		(28,908	)		0			0			(64,017	)
Recoveries		578			148			232			0			2			960

Net Charge-offs		(9,068	)		(25,315	)		(28,676	)		0			2			(63,057	)


March 31, 2010 Ending Balance	$	57,445		$	46,747		$	121,633		$	7,250		$	45		$	233,120

Reserve to impaired loans	$	1,885		$	3,649		$	13,166		$	323		$	0		$	19,023
Reserve to non-impaired loans	$	55,560		$	43,098		$	108,467		$	6,927		$	45		$	214,097
Reserve for off-balance sheet credit commitments	$	1,495		$	3,277		$	106		$	38		$	2		$	4,918

2011 Beginning Balance	$	63,919		$	43,261		$	128,347		$	9,668		$	36		$	245,231


Provision for possible credit losses		(122	)		4,654			1,218			423			(10	)		6,163

Charge-offs		(1,378	)		(6,248	)		(5,123	)		(226	)		0			(12,975	)
Recoveries		775			887			853			84			12			2,611

Net Charge-offs		(603	)		(5,361	)		(4,270	)		(142	)		12			(10,364	)


March 31, 2011 Ending Balance	$	63,194		$	42,554		$	125,295		$	9,949		$	38		$	241,030

Reserve to impaired loans	$	2,953		$	7,569		$	3,664		$	1,106		$	0		$	15,292
Reserve to non-impaired loans	$	60,241		$	34,985		$	121,631		$	8,843		$	38		$	225,738
Reserve for off-balance sheet credit commitments	$	689		$	1,353		$	93		$	35		$	2		$	2,172

8. Investments in Affordable Housing

The Company has invested in certain limited partnerships that were formed to develop and operate housing for lower-income tenants throughout the United States. The Company’s investments in these partnerships were $86.9 million at March 31, 2011, and $88.5 million at December 31, 2010. At March 31, 2011, and December 31, 2010, six of the limited partnerships in which the Company has an equity interest were determined to be variable interest entities for which the Company is the primary beneficiary. The consolidation of these limited partnerships in the Company’s consolidated financial statements increased total assets and liabilities by $23.2 million at March 31, 2011, and by $22.8 million at December 31, 2010. Other borrowings for affordable housing limited partnerships were $19.1 million at March 31, 2011, and $19.1 million at December 31, 2010; recourse is limited to the assets of the limited partnerships. Unfunded commitments for affordable housing limited partnerships of $4.0 million as of March 31, 2011, and $4.3 million as of December 31, 2010, were recorded under other liabilities.

9. Commitments and Contingencies

In the normal course of business, the Company becomes a party to financial instruments with off-balance sheet risk to meet the financing needs of its customers. These financial instruments include commitments to extend credit in the form of loans, or through commercial or standby letters of credit, and financial guarantees. These instruments represent varying degrees of exposure to risk in excess of the amounts included in the accompanying condensed consolidated balance sheets. The contractual or notional amount of these instruments indicates a level of activity associated with a particular class of financial instrument and is not a reflection of the level of expected losses, if any.

The Company’s exposure to credit loss in the event of non-performance by the other party to the financial instrument for commitments to extend credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. The following table summarizes the outstanding commitments as of the dates indicated:


(In thousands)	At March 31, 2011		At December 31, 2010
Commitments to extend credit	$	1,433,298	$	1,360,266
Standby letters of credit		58,336		59,876
Other letters of credit		86,755		62,722
Bill of lading guarantees		448		245

Total	$	1,578,837	$	1,483,109

Commitments to extend credit are agreements to lend to a customer provided there is no violation of any condition established in the commitment agreement. These commitments generally have fixed expiration dates and the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the borrower. Letters of credit, including standby letters of credit and bill of lading guarantees, are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. The credit risk involved in issuing these types of instruments is essentially the same as that involved in making loans to customers.

10. Securities Sold Under Agreements to Repurchase

Securities sold under agreements to repurchase were $1.5 billion with a weighted average rate of 4.14% at March 31, 2011, compared to $1.6 billion with a weighted average rate of 4.18% at December 31, 2010. Two long-term securities sold under agreements to repurchase totaling $100.0 million with weighted average rate of 4.77% matured in March 2011. Fifteen floating-to-fixed rate agreements totaling $800.0 million have initial floating rates for a period of time ranging from six months to one year, with floating rates ranging from the three-month LIBOR minus 100 basis points to three-month LIBOR minus 340 basis points. Thereafter, the rates are fixed for the remainder of the term, with interest rates ranging from 4.29% to 5.07%. After the initial floating rate term, the counter parties have the right to terminate the transaction at par at the fixed rate reset date and quarterly thereafter. Thirteen fixed-to-floating rate agreements totaling $650.0 million have initial fixed rates ranging from 1.00% to 3.50% with initial fixed rate terms ranging from six months to 18 months. For the remainder of the

seven year term, the rates float at 8% minus the three-month LIBOR rate with a maximum rate ranging from 3.25% to 3.75% and minimum rate of 0.0%. After the initial fixed rate term, the counter parties have the right to terminate the transaction at par at the floating rate reset date and quarterly thereafter. At March 31, 2011, there was one short-term security sold under an agreement to repurchase of $9.0 million at the rate of 0.90% which matured on April 1, 2011. The table below provides summary data for long-term securities sold under agreements to repurchase as of March 31, 2011:


(Dollars in millions)	Fixed-to-floating												Floating-to-fixed									Total
Callable	All callable at March 31, 2011												All callable at March 31, 2011
Rate type	Float Rate												Fixed Rate
Rate index	8% minus 3 month LIBOR
Maximum rate		3.75	%		3.50	%		3.50	%		3.25	%
Minimum rate		0.0	%		0.0	%		0.0	%		0.0	%
No. of agreements		3			5			4			1			1			10			4			28
Amount	$	150.0		$	250.0		$	200.0		$	50.0		$	50.0		$	550.0		$	200.0		$	1,450.0
Weighted average rate		3.75	%		3.50	%		3.50	%		3.25	%		4.83	%		4.54	%		5.00	%		4.16	%
Final maturity		2014			2014			2015			2015			2012			2014			2017

These transactions are accounted for as collateralized financing transactions and recorded at the amounts at which the securities were sold. The Company may have to provide additional collateral for the repurchase agreements, as necessary. The underlying collateral pledged for the repurchase agreements consists of U.S. Treasury securities, U.S. government agency security debt, and mortgage-backed securities with a fair value of $1.7 billion as of March 31, 2011, and $1.7 billion as of December 31, 2010.

11. Advances from the Federal Home Loan Bank (“FHLB”)

Total advances from the FHLB decreased $200.0 million to $350.0 million at March 31, 2011, from $550.0 million at December 31, 2010. During the first quarter of 2011, the Company prepaid advances totaling $200.0 million from the FHLB with a weighted rate of 4.29% and incurred a prepayment penalty totaling $8.8 million. In the first quarter of 2010, the Company prepaid advances totaling $65.0 million from the FHLB with a rate of 3.49% and incurred prepayment penalties totaling $909,000. As of March 31, 2011, all $350.0 million FHLB advances with weighted average rate of 4.51% were puttable, but the FHLB had not exercised its right to terminate any of the puttable transactions, compared to $550.0 million FHLB advances with weighted average rate of 4.43% at December 31, 2010. The FHLB has the right to terminate the puttable transactions at par at each three-month anniversary after the first puttable date.

12. Subordinated Note and Junior Subordinated Note

On September 29, 2006, the Bank issued $50.0 million in subordinated debt in a private placement transaction. The debt had an original maturity term of 10 years, was unsecured and bore interest at a rate of three-month LIBOR plus 110 basis points, payable on a quarterly basis. In March 2011, the Company extended the debt for an additional year. As part of the extension agreement, the rate has been increased from LIBOR plus 110 basis points to LIBOR plus 330 basis points for 2011 and 2012, after which time it reverts back to LIBOR plus 110 basis points. At March 31, 2011, the per annum

interest rate on the subordinated debt was 3.61% compared to 1.40% at December 31, 2010. The subordinated debt was issued through the Bank and qualifies as Tier 2 capital for regulatory reporting purposes and is included in long-term debt in the accompanying condensed consolidated balance sheets.

The Bancorp established three special purpose trusts in 2003 and two in 2007 for the purpose of issuing trust preferred securities to outside investors (“Capital Securities”). These trusts exist for the purpose of issuing the Capital Securities and investing the proceeds thereof, together with proceeds from the purchase of the common stock of the trusts by the Bancorp in Junior Subordinated Notes issued by the Bancorp (“Junior Subordinated Notes”). The five special purpose trusts are considered variable interest entities under FIN 46R. Because the Bancorp is not the primary beneficiary of the trusts, the financial statements of the trusts are not included in the consolidated financial statements of the Company. At March 31, 2011, Junior Subordinated Notes totaled $121.1 million with a weighted average interest rate of 2.47% compared to $121.1 million with a weighted average rate of 2.46% at December 31, 2010. The Junior Subordinated Notes have a stated maturity term of 30 years and are currently included in the Tier 1 capital of the Bancorp for regulatory capital purposes.

13. Income Taxes

Income tax expense totaled $11.7 million, or an effective tax rate of 34.7% for the first quarter of 2011 compared to an income tax benefit of $23.1 million, or an effective tax benefit rate of 47.3%, for the same quarter a year ago.

As of December 31, 2010, the Company had income tax receivables of approximately $23.5 million, of which $10.6 million relates to the carryback of the Company’s net operating loss for 2009 to the 2007 tax year and $10.3 million relates to the carryback of the Company’s low income housing tax credits for 2009 to the 2008 tax year. These income tax receivables are included in other assets in the accompanying consolidated balance sheets.

The Company’s tax returns are open for audits by the Internal Revenue Service back to 2007 and by the FTB of the State of California back to 2003. The Company is currently under audit by the Internal Revenue Service for the years 2007 to 2009 and by the California Franchise Tax Board for the years 2003 to 2004. As the Company is presently under audit by a number of tax authorities, it is reasonably possible that unrecognized tax benefits could change significantly over the next twelve months. The

Company does not expect that any such changes would have a material impact on its annual effective tax rate.

14. Fair Value Measurements

The Company adopted ASC Topic 820 on January 1, 2008, and determined the fair values of our financial instruments based on the following:

•

Level 1 - Quoted prices in active markets for identical assets or liabilities.

•

Level 2 - Observable prices in active markets for similar assets or liabilities; prices for identical or similar assets or liabilities in markets that are not active; directly observable market inputs for substantially the full term of the asset and liability; market inputs that are not directly observable but are derived from or corroborated by observable market data.

•

Level 3 - Unobservable inputs based on the Company’s own judgments about the assumptions that a market participant would use.

The Company uses the following methodologies to measure the fair value of its financial assets and liabilities on a recurring basis:

Securities Available for Sale. For certain actively traded agency preferred stocks and U.S. Treasury securities, the Company measures the fair value based on quoted market prices in active exchange markets at the reporting date, a Level 1 measurement. The Company also measures securities by using quoted market prices for similar securities or dealer quotes, a Level 2 measurement. This category generally includes U.S. Government agency securities, state and municipal securities, mortgage-backed securities (“MBS”), commercial MBS, collateralized mortgage obligations, asset-backed securities, and corporate bonds.

Trading Securities. The Company measures the fair value of trading securities based on quoted market prices in active exchange markets at the reporting date, a Level 1 measurement.

Warrants. The Company measures the fair value of warrants based on unobservable inputs based on assumption and management judgment, a Level 3 measurement.

Currency Option Contracts and Foreign Exchange Contracts. The Company measures the fair value of currency option and foreign exchange contracts based on dealer quotes on a recurring basis, a Level 2 measurement.

Interest Rate Swaps. Fair value of interest rate swaps is derived from observable market prices for similar assets on a recurring basis, a Level 2 measurement.

The valuation techniques for the assets and liabilities valued on a nonrecurring basis are as follows:

Impaired Loans. The Company does not record loans at fair value on a recurring basis. However, from time to time, nonrecurring fair value adjustments to collateral dependent impaired loans are recorded based on either the current appraised value of the collateral, a Level 2 measurement, or management’s judgment and estimation of value reported on old appraisals which are then adjusted based on recent market trends, a Level 3 measurement.

Loans Held for Sale. The Company records loans held for sale at fair value based on quoted prices from third party sale analysis, existing sale agreements or appraisal reports adjusted by sales commission assumption, a Level 3 measurement.

Goodwill. The Company completes “step one” of the impairment test by comparing the fair value of each reporting unit (as determined based on the discussion below) with the recorded book value (or “carrying amount”) of its net assets, with goodwill included in the computation of the carrying amount. If the fair value of a reporting unit exceeds its carrying amount, goodwill of that reporting unit is not considered impaired, and “step two” of the impairment test is not necessary. If the carrying amount of a reporting unit exceeds its fair value, step two of the impairment test is performed to determine the amount of impairment. Step two of the impairment test compares the carrying amount of the reporting unit’s goodwill to the “implied fair value” of that goodwill. The implied fair value of goodwill is computed by assuming all assets and liabilities of the reporting unit would be adjusted to the current fair value, with the offset as an adjustment to goodwill. This adjusted goodwill balance is the implied fair value used in step two. An impairment charge is then recognized for the amount by which the carrying amount of goodwill exceeds its implied fair value. In connection with the determination of fair value, certain data and information is utilized, including earnings forecast at the reporting unit level for the next four years. Other key assumptions include terminal values based on future growth rates and discount rates for valuing the cash flows, which have inputs for the risk-free rate, market risk premium and adjustments to reflect inherent risk and required market returns. Because of the significance of unobservable inputs in the valuation of goodwill impairment, goodwill subject to nonrecurring fair value adjustments is classified as Level 3 measurement.

Core Deposit Intangibles. Core deposit intangibles is initially recorded at fair value based on a valuation of the core deposits acquired and is amortized over its estimated useful life to its residual value in proportion to the economic benefits consumed. The Company assesses the recoverability of this intangible asset on a nonrecurring basis using the core deposits remaining at the assessment date and the fair value of cash flows expected to be generated from the core deposits, a Level 3 measurement.

Other Real Estate Owned. Real estate acquired in the settlement of loans is initially recorded at fair value based on the appraised value of the property on the date of transfer, less estimated costs to sell, a Level 2 measurement. From time to time, nonrecurring fair value adjustments are made to other real estate owned based on the current updated appraised value of the property, also a Level 2 measurement, or management’s judgment and estimation of value reported on old appraisals which are then adjusted based on recent market trends, a Level 3 measurement.

Investments in Venture Capital. The Company periodically reviews for other-than-temporary impairment (“OTTI”) on a nonrecurring basis. Investments in venture capital were written down to their fair value based on available financial reports from venture capital partnerships and management’s judgment and estimation, a Level 3 measurement.

Equity Investments. The Company records equity investments at fair value on a nonrecurring basis based on quoted market prices in active exchange market at the reporting date, a Level 1 measurement.

The following table presents the Company’s hierarchy for its assets and liabilities measured at fair value on a recurring basis at March 31, 2011, and at December 31, 2010:


As of March 31, 2011	Fair Value Measurements Using						Total at Fair Value
	Level 1		Level 2		Level 3		Total at Fair Value
	(In thousands)
Assets

Securities available-for-sale
U.S. Treasury securities	$	118,057	$	0	$	0	$	118,057
U.S. government sponsored entities		0		626,036		0		626,036
State and municipal securities		0		1,730		0		1,730
Mortgage-backed securities		0		388,309		0		388,309
Collateralized mortgage obligations		0		22,136		0		22,136
Asset-backed securities		0		211		0		211
Corporate bonds		0		310,866		0		310,866
Mutual funds		3,912		0		0		3,912
Preferred stock of government sponsored entities		0		2,486		0		2,486
Trust preferred securities		22,509		0		0		22,509
Other foreign debt securities		0		37,760		0		37,760
Other equity securities		3,099		0		0		3,099

Total securities available-for-sale		147,577		1,389,534		0		1,537,111
Trading securities		12		3,812		0		3,824
Warrants		0		0		64		64
Option contracts		0		163		0		163
Foreign exchange contracts		0		2,276		0		2,276

Total assets	$	147,589	$	1,395,785	$	64	$	1,543,438


Liabilities

Interest rate swaps	$	0	$	5,634	$	0	$	5,634
Option contracts		0		109		0		109
Foreign exchange contracts		0		936		0		936

Total liabilities	$	0	$	6,679	$	0	$	6,679


As of December 31, 2010	Fair Value Measurements Using						Total at Fair Value
	Level 1		Level 2		Level 3		Total at Fair Value
	(In thousands)
Assets

Securities available-for-sale
U.S. Treasury securities	$	118,828	$	0	$	0	$	118,828
U.S. government sponsored entities		0		825,082		0		825,082
State and municipal securities		0		1,718		0		1,718
Mortgage-backed securities		0		642,305		0		642,305
Collateralized mortgage obligations		0		25,194		0		25,194
Asset-backed securities		0		240		0		240
Corporate bonds		0		331,991		0		331,991
Mutual funds		3,927		0		0		3,927
Preferred stock of government sponsored entities		0		719		0		719
Trust preferred securities		14,437		0		0		14,437
Other foreign debt securities		0		37,434		0		37,434
Other equity securities		1,692		0		0		1,692

Total securities available-for-sale	$	138,884	$	1,864,683	$	0	$	2,003,567
Trading securities		23		3,795		0		3,818
Warrants		0		0		40		40
Option contracts		0		106		0		106
Foreign exchange contracts		0		4,629		0		4,629

Total assets	$	138,907	$	1,873,213	$	40	$	2,012,160


Liabilities

Interest rate swaps	$	0	$	6,508	$	0	$	6,508
Option contracts		0		72		0		72
Foreign exchange contracts		0		1,873		0		1,873

Total liabilities	$	0	$	8,453	$	0	$	8,453

The Company measured the fair value of its warrants on a recurring basis using significant unobservable inputs. The fair value of warrants was $64,000 at March 31, 2011, compared to $40,000 at December 31, 2010. The fair value adjustment of warrants was included in other operating income in the first quarter of 2011.

For financial assets measured at fair value on a nonrecurring basis that were still reflected in the balance sheet at March 31, 2011, the following table provides the level of valuation assumptions used to determine each adjustment and the carrying value of the related individual assets at March 31, 2011, and at December 31, 2010, and the total losses for the periods indicated:


	As of March 31, 2011								Total Losses
	Fair Value Measurements Using						Total at Fair Value		For the Three Months Ended
	Level 1		Level 2		Level 3		Total at Fair Value		March 31, 2011		March 31, 2010
	(In thousands)
Assets

Impaired loans by type:
Commercial loans	$	0	$	0	$	22,382	$	22,382	$	675	$	10,926
Construction- residential		0		0		1,270		1,270		0		3,455
Construction- other		0		0		5,573		5,573		0		16,335
Real estate loans		0		0		86,191		86,191		1,191		11,171
Land loans		0		0		777		777		84		2,906
Residential mortgage loans		0		0		9,555		9,555		142		0

Total impaired loans		0		0		125,748		125,748		2,092		44,793
Loans held-for-sale		0		0		2,388		2,388		0		2,285
Other real estate owned (1)		0		70,673		8,683		79,356		294		1,289
Investments in venture capital		0		0		8,290		8,290		273		245
Equity investments		522		0		0		522		0		0

Total assets	$	522	$	70,673	$	145,109	$	216,304	$	2,659	$	48,612

(1)	Other real estate owned balance of $75.6 million in the consolidated balance sheet is net of estimated disposal costs.


	As of December 31, 2010								Total Losses
	Fair Value Measurements Using						Total at Fair Value		For the Twelve Months Ended
	Level 1		Level 2		Level 3		Total at Fair Value		December 31, 2010		December 31, 2009
	(In thousands)
Assets

Impaired loans by type:
Commercial loans	$	0	$	0	$	4,824	$	4,824	$	3,411	$	16,293
Construction- residential		0		0		500		500		1,295		23,234
Construction- other		0		0		5,659		5,659		0		12,493
Real estate loans		0		0		99,309		99,309		1,407		27,350
Land loans		0		0		730		730		1,003		11,639

Total impaired loans		0		0		111,022		111,022		7,116		91,009
Loans held-for-sale		0		0		2,873		2,873		3,160		19,252
Other real estate owned (1)		0		72,159		11,105		83,264		20,139		28,216
Investments in venture capital		0		0		8,410		8,410		760		1,982
Equity investments		522		0		0		522		304		0

Total assets	$	522	$	72,159	$	133,410	$	206,091	$	31,479	$	140,459

(1)	Other real estate owned balance of $77.7 million in the consolidated balance sheet is net of estimated disposal costs.

15. Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the fair value of each class of financial instruments.

Cash and Cash Equivalents. For cash and cash equivalents, the carrying amount was assumed to be a reasonable estimate of fair value.

Short-term Investments. For short-term investments, the carrying amount was assumed to be a reasonable estimate of fair value.

Securities Purchased under Agreements to Resell. The fair value of the agreements to resell is based on dealer quotes.

Securities. For securities including securities held-to-maturity, available-for-sale and for trading, fair values were based on quoted market prices at the reporting date. If a quoted market price was not available, fair value was estimated using quoted market prices for similar securities or dealer quotes.

Loans Held for Sale. The Company records loans held for sale at fair value based on quoted prices from third party sources, or appraisal reports adjusted by sales commission assumptions.

Loans. Fair values were estimated for portfolios of loans with similar financial characteristics. Each loan category was further segmented into fixed and adjustable rate interest terms and by performing and non-performing categories.

The fair value of performing loans was calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate risk inherent in the loan.

The fair value of impaired loans was calculated based on the net realized fair value of the collateral or the observable market price of the most recent sale or quoted price from loans held for sale.

Deposit Liabilities. The fair value of demand deposits, savings accounts, and certain money market deposits was assumed to be the amount payable on demand at the reporting date. The fair value of fixed-maturity certificates of deposit was estimated using the rates currently offered for deposits with similar remaining maturities.

Securities Sold under Agreements to Repurchase. The fair value of repurchase agreements is based on dealer quotes.

Advances from Federal Home Loan Bank. The fair value of the advances is based on quotes from the FHLB to settle the advances.

Other Borrowings. This category includes federal funds purchased, revolving line of credit, and other short-term borrowings. The fair value of other borrowings is based on current market rates for borrowings with similar remaining maturities.

Long-term Debt. The fair value of long-term debt is estimated based on the current spreads to LIBOR for long-term debt.

Currency Option Contracts and Foreign Exchange Contracts. The Company measures the fair value of currency option and foreign exchange contracts based on dealer quotes.

Interest Rate Swaps. Fair value of interest rate swaps was derived from observable market prices for similar assets.

Off-Balance-Sheet Financial Instruments. The fair value of commitments to extend credit, standby letters of credit, and financial guarantees written were estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counter parties. The fair value of guarantees and letters of credit was based on fees currently charged for similar agreements or on the estimated cost to terminate them or otherwise settle the obligations with the counter parties at the reporting date.

Fair value was estimated in accordance with ASC Topic 825, formerly SFAS 107. Fair value estimates were made at specific points in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Bank’s entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Bank’s financial instruments, fair value estimates were based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates were subjective in nature and involved uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Fair Value of Financial Instruments


	As of March 31, 2011				As of December 31, 2010
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(In thousands)
Financial Assets
Cash and due from banks	$	87,111	$	87,111	$	87,347	$	87,347
Short-term investments		169,963		169,963		206,321		206,321
Securities purchased under agreements to resell		0		0		110,000		110,000
Securities held-to-maturity		1,231,955		1,228,109		840,102		837,359
Securities available-for-sale		1,537,111		1,537,111		2,003,567		2,003,567
Trading securities		3,824		3,824		3,818		3,818
Loans held-for-sale		2,388		2,388		2,873		2,873
Loans, net		6,645,454		6,622,726		6,615,769		6,596,501
Investment in Federal Home Loan Bank stock		61,364		61,364		63,873

Large accelerated filer

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Non-accelerated filer

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Smaller reporting company