Pacific Capital Bancorp Reports Third Quarter 2009 Financial Results

Pacific Capital Bancorp (Nasdaq:PCBC), a community bank holding company, today announced financial results for the third quarter ended September 30, 2009. As discussed in the Non-GAAP Financial Information section later in the press release, “Core Bank” represents all activities of the Company other than the Refund Anticipation Loan (RAL) and Refund Transfer (RT) programs.

The Company’s net loss for the third quarter of 2009 was $40.7 million, or ($0.87) per common share, compared to a net loss of $47.5 million, or ($1.03) per common share, in the same period of the prior year.

For the third quarter of 2009, the Company generated $1.0 million in pre-tax, pre-provision income, compared to a loss of $4.6 million in the same period of the prior year.

Commenting on the third quarter of 2009, George Leis, President and Chief Executive Officer of Pacific Capital Bancorp, said, “The aggressive approach we took earlier in 2009 towards resolving our problem loans helped drive a substantial decline in our credit costs, particularly in the construction and land portfolio. While our credit costs still remain elevated above historical levels, we are encouraged by the moderation we experienced in the third quarter.

“We also saw improvement in the underlying earnings power of the Bank, which generated a pre-tax, pre-provision profit of $1.0 million in the third quarter of 2009. Our liquidity remains strong and we continue to see solid deposit growth. During the third quarter, our total deposits increased $279 million, including an increase of $85 million in non-interest bearing deposits,” said Leis.

Capital Ratios

At September 30, 2009, the Company’s wholly-owned subsidiary, Pacific Capital Bank, N.A. had a Tier 1 leverage ratio of 5.6%, a Tier 1 capital ratio of 7.9% and a Total Risk-Based capital ratio of 10.8%. These ratios exceed the levels to be considered “well capitalized” under generally applicable regulatory guidelines. However, the Tier 1 leverage ratio and Total Risk-Based capital ratio were not sufficient to meet the higher levels that the Bank has agreed with the Office of the Comptroller of the Currency (the “OCC”) to maintain.

“Our capital ratios remained relatively stable during the third quarter, and with the help of our outside financial advisors, we continue to actively explore possibilities for further strengthening our capital position going forward,” said Leis.

Statement of Operations

The Company’s net interest income for the third quarter of 2009 was $50.7 million, compared with $60.8 million in the same quarter of 2008. Net interest income for the Core Bank was $51.9 million in the third quarter of 2009, compared with $61.5 million in the same period last year. The decrease in Core Bank net interest income is primarily attributable to a decline in net interest margin.

The Company’s net interest margin for the third quarter of 2009 was 2.68%, which compares with 3.46% in the third quarter of 2008. Net interest margin for the Core Bank was 2.93% in the third quarter of 2009, compared to a net interest margin of 2.99% for the Core Bank in the second quarter of 2009. The sequential quarter decline in net interest margin was due to increased investments in low-yielding assets that provide greater liquidity.

The Company’s non-interest income was $12.7 million in the third quarter of 2009, compared with $16.7 million in the third quarter of 2008. Non-interest income for the Core Bank was $12.2 million in the third quarter of 2009, compared with $16.3 million in the third quarter of 2008. The decline is due primarily to lower dividends from FHLB stock, lower trust and investment advisory fees attributable to a decline in asset valuations, and a $1.3 million loss recorded on the sale of commercial real estate loans.

Non-interest expense was $62.4 million in the third quarter of 2009, compared with $82.1 million in the third quarter of 2008. Non-interest expense for the Core Bank was $59.1 million in the third quarter of 2009, compared with $76.2 million in the third quarter of 2008. The decline in non-interest expense for the Core Bank is primarily due to a $22.1 million charge to reflect the impairment of goodwill that was recorded in the third quarter of 2008.

Balance Sheet

The Company’s total gross loans held for investment were $5.37 billion at September 30, 2009, compared with $5.65 billion at June 30, 2009, and $5.72 billion at September 30, 2008. The sequential quarter decline in total gross loans is primarily attributable to the sale of approximately $86 million in commercial real estate loans and approximately $116 million in residential real estate loans. During the third quarter, the Bank renewed $257 million in loans, made approximately $122 million in new loan commitments, and funded $76 million of new loans.

The Company’s total deposits were $5.53 billion at September 30, 2009, compared to $5.25 billion at June 30, 2009, and $4.94 billion at September 30, 2008. Excluding RAL-related deposits, total deposits were $5.39 billion at September 30, 2009, compared to $4.98 billion at June 30, 2009. The increase in Core Bank total deposits is attributable to higher balances of non-interest-bearing demand deposits and CDs.

Asset Quality

The Company recorded a provision for loan losses in the Core Bank of $47.1 million for the third quarter of 2009. The provision for loan losses included the following components:

• $35.1 million to cover net charge-offs in the Core Bank, of which approximately $13.3 million related to the Construction and Land portfolio, $12.4 million related to the Commercial and Industrial portfolio, and $4.1 million related to the Residential Real Estate portfolio
• $11.4 million added to the allowance for loan losses in the Core Bank to reflect an increase in qualitative factors and higher loss rates in recent quarters

The Company also recorded a negative provision of $4.8 million in the third quarter of 2009 to reflect recoveries on RALs that had previously been charged-off.

Total non-performing assets (NPAs) were $384.8 million at September 30, 2009, compared to $348.3 million at June 30, 2009. The increase was primarily attributable to higher NPAs in the Commercial Real Estate and Residential Real Estate portfolios.

Approximately 21% of the Bank’s total non-performing assets at September 30, 2009 were still current on interest and principal payments. These credits have been placed on non-performing status due to the identification of some form of impairment, such as a decline in collateral value. If these borrowers continue to demonstrate the ability to service their debt according to the agreed upon terms, the loans could be moved back to performing status in future quarters.

The following tables provide comparative asset quality data for the comparable three-month periods of the Core Bank (dollars in millions):

			September 30,					June 30,
			2009					2009
Allowance for loan losses			$	269.4				$	258.0
Allowance for loan losses/total loans				5.02	%				4.57	%
Total non-performing assets			$	384.8				$	348.3
Total non-performing assets/total assets				5.14	%				5.00	%
Allowance to non-performing loans				78	%				80	%
Net charge-offs			$	35.1				$	77.1
Annualized net charge-offs/total average loans				2.50	%				5.40	%
			September 30,					September 30,
			2009					2008
Allowance for loan losses			$	269.4				$	122.1
Allowance for loan losses/total loans				5.02	%				2.13	%
Total non-performing assets			$	384.8				$	171.6
Total non-performing assets/total assets				5.14	%				2.23	%
Allowance to non-performing loans				78	%				73	%
Net charge-offs			$	35.1				$	18.1
Annualized net charge-offs/total average loans				2.50	%				1.25	%

Conference Call and Webcast

The Company will hold a conference call today at 11:00 a.m. Eastern time / 8:00 a.m. Pacific time to discuss its third quarter 2009 results. To access a live webcast of the conference call, log on at the Investor Relations page of the Company’s website at www.pcbancorp.com. For those who cannot listen to the live broadcast, a replay of the conference call will be available shortly after the call at the same location.

About Pacific Capital Bancorp

Pacific Capital Bancorp is the parent company of Pacific Capital Bank, N.A., a nationally chartered bank that operates 46 branches under the local brand names of Santa Barbara Bank & Trust, First National Bank of Central California, South Valley National Bank, San Benito Bank and First Bank of San Luis Obispo.

Forward Looking Statements

Certain matters contained in this press release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including forward-looking statements relating to the Company’s financial condition, results of operations, plans, objectives, future performance and business. Such forward-looking statements are typically preceded by, followed by or include words or phrases such as “believes,” “expects,” “anticipates,” “plans,” “trend,” “objective,” “continue,” “remain” or similar expressions or future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” “can,” “may” or similar expressions. These forward-looking statements involve certain risks and uncertainties, many of which are beyond the Company’s control. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, among others, the following possibilities: (1) increased competitive pressure among financial services companies; (2) changes in the interest rate environment reducing interest margins or increasing interest rate risk; (3) deterioration in general economic conditions, internationally, nationally or in California, including without limitation unemployment trends, weakening or continued weak demand for products or services of the Company or of its customers or declines in asset values; (4) the occurrence of terrorist acts; (5) reduced demand for or earnings derived from the Company’s income tax refund loan and refund transfer programs; (6) legislative or regulatory changes or litigation adversely affecting the businesses in which the Company engages; (7) unfavorable conditions in the capital markets; (8) challenges in opening additional branches or integrating acquisitions; (9) the possibility that the Company may not be able to achieve the higher minimum capital ratios that it has agreed to maintain with the OCC; and (10) other risks detailed in reports filed by the Company with the Securities and Exchange Commission. Forward-looking statements speak only as of the date they are made, and the Company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made. Comparisons of results or balances between historical periods or dates do not mean or imply that the same or similar trends will continue or be evident in any future period. For more information about factors that could cause actual results to differ from the Company’s expectations, refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008 and the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2009, including the discussion under “Risk Factors,” as filed with the Securities and Exchange Commission and available on the SEC’s website at www.sec.gov.

Non-GAAP Amounts and Measures

This press release contains amounts and ratios that are computed excluding the results of operations of the RAL and RT programs and/or exclude asset and liability balances related to those programs. Because they relate to the filing of individual tax returns, these programs are activities conducted primarily during the first and second quarters of each year. These programs comprise one of the Company's operating segments for purposes of segment reporting in the Company's quarterly and annual reports to the SEC. The Company's Management believes analysts and investors find this information useful for the same reason that Management uses it internally, namely, it provides more comparability with virtually all of the rest of the Company's peers that do not operate such programs.

The information that excludes balances and results of the RAL and RT programs is reconciled to the consolidated information prepared in accordance with Generally Accepted Accounting Principles in several tables at the end of this release.

In addition to the non-GAAP measures computed related to the Company's balances and results exclusive of its RAL and RT programs, this release contains other financial information determined by methods other than in accordance with GAAP. Management uses these non-GAAP measures in their analysis of the business and its performance.

Consolidated Balance Sheets
(dollars in thousands)
																								% Change
			As of																					9/30/2009 vs.			9/30/2009 vs.
			9/30/2009				6/30/2009				3/31/2009				12/31/2008				9/30/2008					6/30/2009			9/30/2008
			(unaudited)				(unaudited)				(unaudited)								(unaudited)					(annualized)
Assets:
Cash and due from banks			$	38,374			$	53,043			$	57,665			$	79,367			$	120,482				(110.6	%)		(68.1	%)
Interest-bearing demand deposits in other financial institutions				965,894				343,654				1,236,220				1,859,154				1,500				724.3	%		—
Federal funds sold				—				—				—				—				55,000				—			(100.0	%)
Trading securities				5,990				78,135				205,450				213,939				202,557				(369.3	%)		(97.0	%)
Available-for-sale securities				1,298,340				956,309				1,465,105				1,178,743				990,083				143.1	%		31.1	%
Loans held for sale				20,128				20,650				20,638				11,137				145,350				(10.1	%)		(86.2	%)
Loans held for investment				5,373,940				5,647,798				5,754,107				5,764,856				5,722,464				(19.4	%)		(6.1	%)
Allowance for loan losses				(269,389	)			(258,032	)			(144,307	)			(140,908	)			(122,097	)			(17.6	%)		(120.6	%)
Total loans held for investment, net				5,104,551				5,389,766				5,609,800				5,623,948				5,600,367				(21.2	%)		(8.9	%)
Premises and equipment, net				77,644				80,146				83,091				78,608				79,409				(12.5	%)		(2.2	%)
Goodwill				—				—				128,710				128,710				128,710				—			(100.0	%)
Other intangible assets				9,106				8,711				9,109				9,818				11,189				18.1	%		(18.6	%)
Other assets				384,259				383,018				406,066				389,596				353,349				1.3	%		8.7	%
Total assets			$	7,904,286			$	7,313,432			$	9,221,854			$	9,573,020			$	7,687,996				32.3	%		2.8	%
Liabilities:
Deposits:
Non-interest-bearing demand deposits			$	1,185,903			$	1,101,375			$	1,156,919			$	981,944			$	989,025				30.7	%		19.9	%
Interest-bearing deposits:
NOW accounts				947,894				985,954				1,116,008				1,044,301				995,181				(15.4	%)		(4.8	%)
Money market deposit accounts				310,972				405,531				582,717				612,710				561,297				(93.3	%)		(44.6	%)
Other savings deposits				370,688				389,116				363,758				320,842				261,085				(18.9	%)		42.0	%
Time certificates of $100,000 or more				1,469,562				1,275,420				1,626,878				1,682,974				1,234,196				60.9	%		19.1	%
Other time deposits				1,240,134				1,089,071				1,591,155				1,945,931				899,868				55.5	%		37.8	%
Total interest-bearing deposits				4,339,250				4,145,092				5,280,516				5,606,758				3,951,627				18.7	%		9.8	%
Total deposits				5,525,153				5,246,467				6,437,435				6,588,702				4,940,652				21.2	%		11.8	%
Securities sold under agreements to repurchase and Federal funds purchased				328,692				333,884				342,284				342,157				358,124				(6.2	%)		(8.2	%)
Long-term debt and other borrowings				1,539,211				1,195,173				1,524,783				1,740,240				1,660,986				115.1	%		(7.3	%)
Other liabilities				113,469				123,499				140,610				113,484				85,885				(32.5	%)		32.1	%
Total liabilities				7,506,525				6,899,023				8,445,112				8,784,583				7,045,647				35.2	%		6.5	%
Shareholders' equity				397,761				414,409				776,742				788,437				642,349				(16.1	%)		(38.1	%)
Total liabilities and shareholders' equity			$	7,904,286			$	7,313,432			$	9,221,854			$	9,573,020			$	7,687,996				32.3	%		2.8	%

Consolidated Statements of Operations (unaudited)
(dollars in thousands, except per share amounts)
		For the Three-Months Ended September 30,
		2009												2008
		Consolidated				Core Bank				RAL and RT				Consolidated				Core Bank				RAL and RT				Consolidated % Change
Interest income:
Loans		$	75,691			$	75,691			$	—			$	88,109			$	88,109			$	—			(14.1	%)
Trading securities			374				374				—				2,484				2,484				—			(84.9	%)
Available-for-sale securities			9,909				9,909				—				12,021				12,021				—			(17.6	%)
Other			542				542				—				119				119				—			355.5	%
Total interest income			86,516				86,516				—				102,733				102,733				—			(15.8	%)
Interest expense:
Deposits			19,874				19,356				518				18,565				18,547				18			7.1	%
Securities sold under agreements to repurchase and Federal funds purchased			2,156				2,156				—				3,444				3,444				—			(37.4	%)
Long-term debt and other borrowings			13,832				13,139				693				19,902				19,209				693			(30.5	%)
Total interest expense			35,862				34,651				1,211				41,911				41,200				711			(14.4	%)
Net interest income/(loss)			50,654				51,865				(1,211	)			60,822				61,533				(711	)		(16.7	%)
Provision for loan losses:
Provision for loan losses - Core Bank			47,141				47,141				—				67,659				67,659				—			(30.3	%)
Provision for loan losses - RALs			(4,778	)			—				(4,778	)			(3,697	)			—				(3,697	)		(29.2	%)
Total provision for loan losses			42,363				47,141				(4,778	)			63,962				67,659				(3,697	)		(33.8	%)
Net interest income/(loss) after provision for loan losses			8,291				4,724				3,567				(3,140	)			(6,126	)			2,986			364.0	%
Non-interest income:
Service charges and fees			6,473				6,423				50				6,926				6,890				36			(6.5	%)
Trust and investment advisory fees			4,999				4,999				—				6,308				6,308				—			(20.8	%)
Refund transfer fees			525				—				525				385				—				385			36.4	%
Loss on securities, net			(23	)			(23	)			—				(487	)			(487	)			—			95.3	%
Other			773				773				—				3,569				3,569				—			(78.3	%)
Total non-interest income			12,747				12,172				575				16,701				16,280				421			(23.7	%)
Non-interest expense:
Salaries and employee benefits			27,839				25,975				1,864				29,118				27,734				1,384			(4.4	%)
Occupancy expense, net			6,626				6,220				406				6,462				6,177				285			2.5	%
Goodwill impairment			—				—				—				22,068				22,068				—			(100.0	%)
Other			27,921				26,934				987				24,484				20,200				4,284			14.0	%
Total non-interest expense			62,386				59,129				3,257				82,132				76,179				5,953			(24.0	%)
(Loss)/income before income taxes			(41,348	)		$	(42,233	)		$	885				(68,571	)		$	(66,025	)		$	(2,546	)
Benefit for income taxes			(3,111	)											(21,070	)
Net loss			(38,237	)											(47,501	)
Dividends and accretion on preferred stock			2,511												—
Net loss available to common shareholders		$	(40,748	)										$	(47,501	)
Loss per common share - basic		$	(0.87	)										$	(1.03	)
Loss per common share - diluted *		$	(0.87	)										$	(1.03	)
Average number of common shares - basic			46,723												46,197
Average number of common shares - diluted			47,234												46,624
The Company's management utilizes the above "Core Bank" financial information in the evaluation of its banking operations and believes that the investment community also finds this information valuable to understand the key drivers of the business.
* Loss per diluted common share for the three-months ended September 30, 2009 and 2008 is calculated using basic weighted average shares outstanding.

Consolidated Statements of Operations (unaudited)
(dollars in thousands, except per share amounts)
		For the Nine-Months Ended September 30,
		2009											2008
		Consolidated				Core Bank				RAL and RT			Consolidated				Core Bank				RAL and RT			Consolidated % Change
Interest income:
Loans		$	383,753			$	232,142			$	151,611		$	371,358			$	262,596			$	108,762		3.3	%
Trading securities			5,061				5,061				—			4,121				4,121				—		22.8	%
Available-for-sale securities			32,838				32,838				—			39,366				39,366				—		(16.6	%)
Other			2,339				543				1,796			2,281				578				1,703		2.5	%
Total interest income			423,991				270,584				153,407			417,126				306,661				110,465		1.6	%
Interest expense:
Deposits			76,481				65,139				11,342			65,377				61,648				3,729		17.0	%
Securities sold under agreements to repurchase and Federal funds purchased			8,019				8,011				8			9,859				9,522				337		(18.7	%)
Long-term debt and other borrowings			47,286				45,024				2,262			55,516				52,536				2,980		(14.8	%)
Total interest expense			131,786				118,174				13,612			130,752				123,706				7,046		0.8	%
Net interest income			292,205				152,410				139,795			286,374				182,955				103,419		2.0	%
Provision for loan losses:
Provision for loan losses - Core Bank			314,759				314,759				—			126,806				126,806				—		148.2	%
Provision for loan losses - RALs			75,809				—				75,809			22,717				—				22,717		233.7	%
Total provision for loan losses			390,568				314,759				75,809			149,523				126,806				22,717		161.2	%
Net interest (loss)/income after provision for loan losses			(98,363	)			(162,349	)			63,986			136,851				56,149				80,702		(171.9	%)
Non-interest income:
Refund transfer fees			68,076				—				68,076			68,576				—				68,576		(0.7	%)
Service charges and fees			21,125				18,572				2,553			24,075				20,995				3,080		(12.3	%)
Trust and investment advisory fees			15,856				15,856				—			19,477				19,477				—		(18.6	%)
Gain/(loss) on securities, net			241				241				—			(422	)			(422	)			—		157.1	%
Gain on sale of RALs, net			—				—				—			44,580				—				44,580		(100.0	%)
Other			4,440				4,440				—			7,888				7,888				—		(43.7	%)
Total non-interest income			109,738				39,109				70,629			164,174				47,938				116,236		(33.2	%)
Non-interest expense:
Goodwill impairment			128,710				128,710				—			22,068				22,068				—		483.2	%
Salaries and employee benefits			93,456				81,981				11,475			96,108				86,149				9,959		(2.8	%)
Refund program fees			47,428				—				47,428			58,439				—				58,439		(18.8	%)
Occupancy expense, net			19,894				18,793				1,101			20,198				19,331				867		(1.5	%)
Other			112,453				100,014				12,439			71,812				59,533				12,279		56.6	%
Total non-interest expense			401,941				329,498				72,443			268,625				187,081				81,544		49.6	%
(Loss)/income before income taxes			(390,566	)		$	(452,738	)		$	62,172			32,400			$	(82,994	)		$	115,394
Provision for income taxes			13,237											13,311
Net (loss)/income			(403,803	)										19,089
Dividends and accretion on preferred stock			7,452											—
Net (loss)/income available to common shareholders		$	(411,255	)									$	19,089
(Loss)/income per common share - basic		$	(8.81	)									$	0.41
(Loss)/income per common share - diluted *		$	(8.81	)									$	0.41
Average number of common shares - basic			46,680											46,169
Average number of common shares - diluted			47,189											46,526
The Company's management utilizes the above "Core Bank" financial information in the evaluation of its banking operations and believes that the investment community also finds this information valuable to understand the key drivers of the business.
* (Loss)/income per diluted common share for the nine-months ended September 30, 2009 is calculated using basic weighted average shares outstanding.

Consolidated Average Balances and Annualized Yields (unaudited)
		For the Three-Months Ended September 30,
		2009									2008
		Average Balance			Income			Rate			Average Balance			Income			Rate
		(dollars in thousands)
Assets:
Commercial paper		$	—		$	—		—			$	6,408		$	37		2.30	%
Interest-bearing demand deposits in other financial institutions			844,503			542		0.25	%			—			—		—
Federal funds sold			—			—		—				19,287			82		1.69	%
Securities: (1)
Taxable			769,415			6,528		3.37	%			917,702			11,077		4.80	%
Non-taxable			296,668			3,755		5.06	%			265,132			3,428		5.17	%
Total securities			1,066,083			10,283		3.84	%			1,182,834			14,505		4.88	%
Loans: (2)
Commercial			1,074,709			12,376		4.57	%			1,207,890			18,792		6.19	%
Real estate - multi family & nonresidential			2,781,170			39,600		5.70	%			2,752,603			41,567		6.04	%
Real estate - residential 1 - 4 family			1,095,890			15,712		5.73	%			1,203,771			17,889		5.94	%
Consumer			626,097			7,987		5.06	%			613,796			9,831		6.37	%
Other			2,185			16		2.91	%			2,251			30		5.30	%
Total loans, net			5,580,051			75,691		5.42	%			5,780,311			88,109		6.09	%
Total interest-earning assets			7,490,637			86,516		4.61	%			6,988,840			102,733		5.87	%
Market value adjustment (1)			28,008									18,580
Non-interest-earning assets			285,038									593,612
Total assets		$	7,803,683								$	7,601,032
Liabilities and shareholders' equity:
Interest-bearing deposits:
Savings and interest-bearing transaction accounts		$	1,723,386			2,420		0.56	%		$	1,891,370			4,660		0.98	%
Time certificates of deposit			2,563,570			17,454		2.70	%			1,849,236			13,905		2.99	%
Total interest-bearing deposits			4,286,956			19,874		1.84	%			3,740,606			18,565		1.97	%
Borrowed funds:
Securities sold under agreements to repurchase and Federal funds purchased			332,986			2,156		2.57	%			436,123			3,444		3.14	%
Other borrowings			1,481,399			13,832		3.70	%			1,656,597			19,902		4.78	%
Total borrowed funds			1,814,385			15,988		3.49	%			2,092,720			23,346		4.44	%
Total interest-bearing liabilities			6,101,341			35,862		2.33	%			5,833,326			41,911		2.86	%
Non-interest-bearing demand deposits			1,143,928									987,336
Other liabilities			140,616									80,479
Shareholders' equity			417,798									699,891
Total liabilities and shareholders' equity		$	7,803,683								$	7,601,032
Net interest income/margin					$	50,654		2.68	%					$	60,822		3.46	%
Loan information Core Bank:
Consumer loans, Core Bank			625,556			7,987		5.07	%			613,453			9,831		6.38	%
Loans, Core Bank			5,579,499			75,691		5.38	%			5,779,968			88,109		6.06	%

(1)		Average securities balances are based on amortized historical cost. The adjustments for fair values are reported as market value adjustment in the table above.
(2)		Nonaccrual loans are included in loan balances. Interest income includes related fee income.

Consolidated Average Balances and Annualized Yields (unaudited)
		For the Nine-Months Ended September 30,
		2009									2008
		Average Balance			Income			Rate			Average Balance			Income			Rate
		(dollars in thousands)
Assets:
Commercial paper		$	—		$	—		—			$	25,947		$	560		2.88	%
Interest-bearing demand deposits in other financial institutions			1,128,915			2,338		0.28	%			—			—		—
Federal funds sold			440			1		0.30	%			85,179			1,721		2.70	%
Securities: (1)
Taxable			948,152			26,634		3.76	%			927,040			33,935		4.89	%
Non-taxable			297,867			11,265		5.04	%			244,567			9,552		5.21	%
Total securities			1,246,019			37,899		4.07	%			1,171,607			43,487		4.96	%
Loans: (2)
Commercial			1,115,192			38,179		4.58	%			1,198,260			58,016		6.47	%
Real estate - multi family & nonresidential			2,829,946			121,704		5.73	%			2,646,493			122,913		6.19	%
Real estate - residential 1 - 4 family			1,102,308			48,068		5.81	%			1,140,836			51,124		5.98	%
Consumer			897,698			175,743		26.17	%			738,478			139,156		25.17	%
Other			3,326			59		2.37	%			3,338			149		5.96	%
Total loans, net			5,948,470			383,753		8.61	%			5,727,405			371,358		8.65	%
Total interest-earning assets			8,323,844			423,991		6.80	%			7,010,138			417,126		7.94	%
Market value adjustment (1)			31,861									25,957
Non-interest-earning assets			537,889									589,773
Total assets		$	8,893,594								$	7,625,868
Liabilities and shareholders' equity:
Interest-bearing deposits:
Savings and interest-bearing transaction accounts		$	1,929,165			11,798		0.82	%		$	2,005,641			19,085		1.27	%
Time certificates of deposit			3,085,516			64,683		2.80	%			1,818,462			46,292		3.40	%
Total interest-bearing deposits			5,014,681			76,481		2.04	%			3,824,103			65,377		2.28	%
Borrowed funds:
Securities sold under agreements to repurchase and Federal funds purchased			340,393			8,019		3.15	%			406,597			9,859		3.24	%
Other borrowings			1,520,391			47,286		4.16	%			1,504,382			55,516		4.93	%
Total borrowed funds			1,860,784			55,305		3.98	%			1,910,979			65,375		4.57	%
Total interest-bearing liabilities			6,875,465			131,786		2.57	%			5,735,082			130,752		3.05	%
Non-interest-bearing demand deposits			1,228,700									1,126,123
Other liabilities			117,057									55,219
Shareholders' equity			672,372									709,444
Total liabilities and shareholders' equity		$	8,893,594								$	7,625,868
Net interest income/margin					$	292,205		4.69	%					$	286,374		5.46	%
Loan information Core Bank:
Consumer loans, Core Bank			638,324			24,132		5.05	%			603,266			30,394		6.73	%
Loans, Core Bank			5,786,728			232,142		5.36	%			5,592,193			262,596		6.27	%

(1)		Average securities balances are based on amortized historical cost. The adjustments for fair values are reported as market value adjustment in the table above.
(2)		Nonaccrual loans are included in loan balances. Interest income includes related fee income.

Key Financial Ratios (unaudited)
(dollars in thousands, except per share amounts)
		For the Three-Months Ended September 30,								For the Nine-Months Ended September 30,
		2009				2008				2009				2008
Financial Ratios:
Operating efficiency ratio Consolidated			98.36	%			105.28	%			100.06	%			59.57	%
Operating efficiency ratio Core Bank			92.30	%			97.29	%			172.26	%			80.88	%
Operating efficiency ratio RAL and RT			—				—				34.43	%			37.12	%
Return on average equity Consolidated			—				—				—				3.59	%
Return on average equity RAL and RT			0.99	%			—				43.97	%			47.28	%
Return on average assets Consolidated			—				—				—				0.33	%
Return on average assets RAL and RT			0.49	%			—				4.73	%			39.50	%
Capital Ratios, PCBNA:		2009				2008
Tier 1 capital to Average Tangible Assets ratio			5.6	%			7.7	%
Tier 1 capital to Risk Weighted Assets ratio			7.9	%			9.4	%
Total Tier 1 & Tier 2 Capital to Risk Weighted Assets ratio			10.8	%			12.3	%
Credit Quality Ratios:
Allowance for loan losses Core Bank		$	269,389			$	122,097
Allowance for loan losses RALs		$	—			$	—
Net charge-offs Consolidated		$	30,327			$	14,388			$	261,408			$	71,504
Net charge-offs Core Bank		$	35,105			$	18,085			$	185,599			$	48,787
Net charge-offs RALs		$	(4,778	)		$	(3,697	)		$	75,809			$	22,717
Annualized Consolidated net charge-offs to Consolidated average loans			2.16	%			0.99	%			5.88	%			1.67	%
Annualized Core Bank net charge-offs to Core Bank average loans			2.50	%			1.25	%			4.29	%			1.17	%
Annualized RAL net charge-offs to RAL average loans			—				—				62.67	%			22.44	%
Non-performing assets:
Nonaccrual loans		$	301,442			$	136,940
Loans past due 90 days or more on accrual status			14,002				445
Troubled debt restructured loans			31,181				29,022
Total non-performing loans *			346,625				166,407
Other real estate owned and other foreclosed assets			38,128				5,181
Total non-performing assets *		$	384,753			$	171,588
* There were no non-performing RALs as of September 30, 2009 and 2008.
Non-performing loans to Core Bank total loans held for investment			6.45	%			2.91	%
Non-performing assets to Core Bank total assets			5.14	%			2.23	%
Core Bank allowance for loan losses to non-performing loans			78	%			73	%
Core Bank allowance for loan losses to Core Bank total loans held for investment			5.02	%			2.13	%
Book value per common share:
Actual shares outstanding at end of period			46,725				46,206
Book value per common share		$	4.73			$	13.90
Tangible book value per common share		$	4.54			$	10.88

Reconciliation of GAAP to Non-GAAP Measures (unaudited)
Page 1, 2 and 3 of Release for 3rd Quarter Results of Operations
(dollars in thousands)
Net Interest Margin		For the Three-Months Ended September 30,
		2009												2008
		Consolidated				Core Bank				RAL and RT				Consolidated				Core Bank				RAL and RT
Net interest margin			2.68	%			2.93	%			—				3.46	%			3.50	%			—
Interest income		$	86,516			$	86,516			$	—			$	102,733			$	102,733			$	—
Interest expense			35,862				34,651				1,211				41,911				41,200				711
Net interest income		$	50,654			$	51,865			$	(1,211	)		$	60,822			$	61,533			$	(711	)
Average earning assets		$	7,490,637			$	7,023,411			$	467,226			$	6,988,840			$	6,988,497			$	343
Net Interest Margin		For the Three-Month Period Ended June 30,
		2009
		Consolidated				Core Bank				RAL and RT
Net interest margin			2.68	%			2.99	%			—
Interest income		$	96,089			$	91,856			$	4,233
Interest expense			42,651				39,313				3,338
Net interest income		$	53,438			$	52,543			$	895
Average earning assets		$	7,990,787			$	7,042,610			$	948,177
Deposits, Core Bank		September 30, 2009				June 30, 2009				September 30, 2008
Total deposits		$	5,525,153			$	5,246,467			$	4,940,652
Less:
Non-interest-bearing demand deposits - RAL			80,811				95,047				53,659
RAL brokered CDs			51,195				168,598				—
Total deposits, Core Bank		$	5,393,147			$	4,982,822			$	4,886,993
Non-GAAP Net income/(loss) excluding provision for loan losses, tax provision and dividends and accretion of preferred stock
		For the Three-Months Ended September 30,
		2009				2008
Net loss available to common shareholders		$	(40,748	)		$	(47,501	)
Adjustments:
Provision for loan losses			42,363				63,962
Benefit for income taxes			(3,111	)			(21,070	)
Dividends and accretion on preferred stock			2,511				—
Subtotal for adjustments			41,763				42,892
Non-GAAP, net income/(loss)		$	1,015			$	(4,609	)

Summarized Credit Quality Tables (unaudited)
Page 3 of Release for 3rd Quarter Earnings
(dollars in thousands)
Non-Performing Assets:
		2009									2008
		September 30,			June 30,			March 31,			December 31,			September 30,			June 30,			March 31,
Real estate
Residential - 1 to 4 family		$	51,282		$	40,088		$	33,914		$	19,750		$	13,641		$	6,929		$	8,183
Commercial (1)			87,471			71,563			27,569			23,302			9,022			7,560			9,168
Construction			119,775			132,914			121,788			136,602			109,828			105,207			103,252
Commercial loans			81,234			72,473			70,348			49,761			29,295			34,292			35,472
Home equity loans			6,401			6,424			6,800			4,261			4,062			3,720			4,216
Consumer loans (2)			462			587			730			716			559			391			457
Total Non-performing loans			346,625			324,049			261,149			234,392			166,407			158,099			160,748
Other real estate owned			38,128			24,298			9,911			7,100			5,181			3,695		$	2,910
Total non-performing assets		$	384,753		$	348,347		$	271,060		$	241,492		$	171,588		$	161,794		$	163,658

(1)		Commercial real estate loans includes multi-family residential real estate loans
(2)		Consumer loans include other loans

Delinquencies (31 days or more past due):
		2009									2008
		September 30,			June 30,			March 31,			December 31,			September 30,			June 30,			March 31,
Real estate
Residential - 1 to 4 family		$	53,482		$	46,948		$	40,386		$	27,540		$	20,409		$	7,924		$	11,829
Commercial (1)			100,323			83,705			44,985			34,229			14,547			23,780			17,500
Construction			169,878			168,107			145,461			153,394			161,648			132,627			130,228
Commercial loans			129,367			127,958			100,689			90,914			55,239			59,172			49,429
Home equity loans			8,211			9,073			10,849			7,929			6,169			4,917			6,693
Consumer loans (2)			1,595			2,154			1,887			2,403			2,286			1,859			1,520
Tax refund loans (RALs)			—			—			—			—			1,600			1,000			—
Total delinquent loans		$	462,856		$	437,945		$	344,257		$	316,409		$	261,898		$	231,279		$	217,199

(1)		Commercial real estate loans includes multi-family residential real estate loans
(2)		Consumer loans include other loans

Net Charge-offs/(recoveries):
		2009										2008
		September 30,				June 30,			March 31,			December 31,				September 30,				June 30,			March 31,
Real estate
Residential - 1 to 4 family		$	4,115			$	4,915		$	1,046		$	1,104			$	1,106			$	4,831		$	—
Commercial (1)			(304	)			8,312			1,714			828				344				294			—
Construction			13,345				30,125			38,066			30,847				8,228				8,158			119
Commercial loans			12,405				26,987			28,117			14,896				4,789				12,202			2,415
Home equity loans			3,821				5,664			4,178			1,915				2,568				2,334			605
Consumer loans (2)			1,723				1,052			318			1,305				1,050				714			(970	)
Tax refund loans (RALs)			(4,778	)			1,701			78,886			(949	)			(3,697	)			837			25,577
Net charge-offs		$	30,327			$	78,756		$	152,325		$	49,946			$	14,388			$	29,370		$	27,746

(1)		Commercial real estate loans includes multi-family residential real estate loans
(2)		Consumer loans include other loans