See "Cautionary Statement for Purposes of the 'Safe Harbor' Provisions of the Private Securities Litigation Reform Act of 1995," on page 60 in connection with "forward-looking" statements included in this report.

RESULTS OF OPERATIONS

Critical Accounting Policies

The accounting and reporting policies of the Company conform with U.S. generally accepted accounting principles. The Company's accounting policies are fundamental to understanding management's discussion and analysis of results of operations and financial condition. The Company has identified seven policies as being critical because they require management to make estimates, assumptions and judgments that affect the reported amount of assets and liabilities, contingent assets and liabilities, and revenues and expenses included in the consolidated financial statements. The judgments and assumptions used by management are based on historical experience and other factors, which are believed to be reasonable under the circumstances. Circumstances and events that differ significantly from those underlying the Company's estimates, assumptions and judgments could cause the actual amounts reported to differ significantly from these estimates.

The Company's critical accounting policies include those that address the accounting for financial assets and liabilities reported at fair value, securities, allowance for loan and lease losses and reserve for off-balance sheet credit commitments, share-based compensation plans, goodwill and other intangible assets, derivatives and hedging activities and income taxes. The Company has not made any significant changes in its critical accounting policies or its estimates and assumptions from those disclosed in its 2008 Annual Report.

The Company, with the concurrence of the Audit & Risk Committee, has reviewed and approved these critical accounting policies, which are further described in Management's Discussion and Analysis and in Note 1, Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements in the Company's Form 10-K as of December 31, 2008. Management has applied its critical accounting policies and estimation methods consistently in all periods presented in these financial statements.

Several new accounting pronouncements became effective for the Company on January 1, 2009. See Note 1 of the Notes to the Unaudited Consolidated Financial Statements in this Form 10-Q for a summary of the pronouncements and discussion of the impact of their adoption on the Company's consolidated financial statements.

References to net income and earnings per share in the discussion that follows are based on net income attributable to the Company after deducting net income attributable to noncontrolling interest.

RECENT DEVELOPMENTS

Economic conditions continued to weaken in the first quarter of 2009-nationally and in the markets the Company serves. California and Nevada, in particular, experienced significant declines in real estate values and substantially higher unemployment rates. The weak economy, extraordinarily low interest rates, continuing weakness in the real estate and financial markets, and the increase in FDIC insurance premiums for all banks, as well as dividends on preferred stock held by the U.S. Treasury ("Treasury"), had a negative impact on first quarter earnings. Continued market volatility and illiquid market conditions resulted in the recognition of additional impairments in the Company's available-for-sale securities portfolio in the first quarter of 2009. If these disruptions in the financial markets persist, the Company may take additional impairment charges. Refer to "Item 1A-Risk Factors" for further discussion of business and economic conditions.

HIGHLIGHTS

† For the quarter ended March 31, 2009, consolidated net income was $7.5 million and consolidated net income available to common shareholders was $2.0 million, or $0.04 per diluted common share. For the year-earlier quarter, consolidated net income and consolidated net income available to common shareholders was $44.0 million, or $0.91 per diluted common share. Net income available to common shareholders reflects net income less dividends on preferred stock related to the Company's participation in the Treasury's Capital Purchase Program. The decrease in net income available to common shareholders is largely due to a $50.0 million, or $29.1 million after tax, provision for credit losses and a $15.0 million, or $10.8 million after tax, loss on available-for-sale securities recorded during the first quarter of 2009.

† Revenue, which consists of net interest income and noninterest income, decreased to $192.2 million for the first quarter of 2009, a decrease of 16 percent from $228.0 million for the first quarter of 2008.

† Fully taxable-equivalent net interest income amounted to $148.4 million for the first quarter of 2009, down 3 percent from $152.3 million for the first quarter of 2008. The Company's prime lending rate averaged 3.25 percent for the quarter ended March 31, 2009, compared with 4.06 percent for the year-earlier quarter.

† Noninterest income was $47.3 million for the first quarter of 2009, a decrease of 41 percent from $79.8 million for the year-earlier quarter. The decrease was due primarily to lower wealth management fees resulting from declines in the equity market, and lower revenues from managing mutual funds, as well as a $15.0 million charge for securities losses related to bank income notes, equity securities and mutual funds. The Company's remaining exposure to these three categories now totals $13.5 million, about 0.5 percent of its $3.0 billion securities portfolio at March 31, 2009. Excluding securities losses, noninterest income totaled $62.3 million, a decrease of 22 percent from the first quarter of 2008. Management believes that it is useful for investors to understand the impact of the securities losses on the Company's results of operations.

† In light of current business and economic conditions, the Company continued to take steps to limit and lower expenses. Noninterest expense decreased 6 percent from the first quarter of 2008 and 17 percent from the fourth quarter of 2008, notwithstanding the fact that first quarter FDIC premiums increased $2.7 million, or 775 percent, from the same period last year. Excluding these higher premiums, first quarter 2009, noninterest expense was down 8 percent from the first quarter of 2008 and 19 percent from the fourth quarter of 2008. Management believes that it is useful for investors to understand the impact of these higher FDIC premiums on the Company's results of operations.

† The Company's net interest margin averaged 4.00 percent in the first quarter of 2009, compared to 4.09 percent in the fourth quarter of 2008. This decline was due to the substantial reduction of short-term interest rates.

† The Company's effective tax rate for the first quarter of 2009 was 17.7 percent compared with 32.3 percent rate for the first quarter of 2008. The decrease in effective tax rate is due to lower pre-tax income in the current year.

† Total assets increased to $16.93 billion at March 31, 2009, up 3 percent from $16.46 billion at December 31, 2008 and up 6 percent from $15.93 billion at March 31, 2008, due to growth in loans and the securities portfolio.

† Total average assets increased to $16.41 billion for the first quarter of 2009 from $16.19 billion for the fourth quarter of 2008 and $15.72 billion for the first quarter of 2008.

† Average loan and lease balances were $12.39 billion for the first quarter of 2009, a slight increase from $12.37 billion for the fourth quarter of 2008, and an increase of 6 percent from $11.69 billion for the year-earlier quarter. In the first quarter of 2009, the Company renewed approximately $754 million of loans, made approximately $649 million in new loan commitments and funded $376 million of new loans to new and existing clients, including consumers, homeowners, entrepreneurs, and small and mid-size businesses.

† The allowance for loan and lease losses increased to $241.6 million at March 31, 2009, from $224.0 million at December 31, 2008 and $168.3 million at March 31, 2008. The Company's allowance equals 1.96 percent of total loans and leases at March 31, 2009, compared with 1.80 percent at December 31, 2008 and 1.43 percent at March 31, 2008.

† Nonaccrual loans totaled $313.6 million at March 31, 2009, up from $211.1 million as of December 31, 2008, and $113.6 million at March 31, 2008. Net loan charge-offs were $33.6 million, or 1.10 percent of average total loans and leases on an annualized basis, for the first quarter of 2009, up from $24.7 million, or 0.79 percent, in the fourth quarter of last year and $12.1 million, or 0.42 percent, in the year-earlier quarter. The increase in nonaccruals and net charge-offs occurred primarily in the Company's real estate construction and commercial loan portfolios.

† Average securities for the first quarter of 2009 totaled $2.42 billion, an increase of 6 percent from $2.26 billion for the fourth quarter of 2008 and a decrease of 4 percent from $2.52 billion for the first quarter of 2008. The average duration of the total available-for-sale securities portfolio at March 31, 2009 was 2.5 years, compared to 2.7 years at December 31, 2008 and 3.5 years at March 31, 2008.

† Average deposit balances grew to a record $12.84 billion for the first quarter of 2009, up 11 percent from $11.52 billion for the first quarter of 2008 and 2 percent from $12.64 billion for the fourth quarter of 2008 Total deposits also reached a new record of $13.69 billion at March 31, 2009, up 16 percent from $11.79 billion at March 31, 2008. Average core deposits totaled $11.38 billion for the first quarter of 2009, a 2 percent increase from $11.14 billion for the fourth quarter of 2008, and a 12 percent increase from $10.19 billion for the first quarter of 2008.

† The Company remains well capitalized. Its ratio of tangible common shareholders' equity to tangible assets at March 31, 2009 was 7.10 percent, compared to 7.55 percent at March 31, 2008, and 7.21 percent at December 31, 2008. The Company views tangible common shareholders' equity to tangible assets, as a meaningful measure of capital quality. At March 31, 2009, its ratio of total equity to total assets was 12.29 percent compared to 10.70 percent at March 31, 2008, and 12.56 percent at December 31, 2008.

OUTLOOK

In spite of today's challenging business climate, management continues to expect the Company to remain profitable in 2009, and at levels above the first quarter.

RESULTS OF OPERATIONS

Net Interest Income

Net interest income is the difference between interest income (which includes yield-related loan fees) and interest expense. Net interest income on a fully taxable-equivalent basis expressed as a percentage of average total earning assets is referred to as the net interest margin, which represents the average net effective yield on earning assets.

The following table presents the components of net interest income on a fully taxable-equivalent basis for the three months ended March 31, 2009 and 2008:

                          Net Interest Income Summary




                            For the three months ended            For the three months ended
                                  March 31, 2009                        March 31, 2008
                                       Interest                              Interest
                                        income/    Average                    income/    Average
                          Average       expense    interest     Average       expense    interest
(in thousands)            Balance       (1)(4)       rate       Balance       (1)(4)       rate
Assets (2)
Interest-earning
assets
Loans and leases
Commercial              $  4,755,884   $  49,458       4.22 % $  4,455,646   $  69,544       6.28 %
Commercial real
estate mortgages           2,200,196      31,138       5.74      1,975,531      33,583       6.84
Residential mortgages      3,406,397      47,560       5.58      3,178,837      44,556       5.61
Real estate
construction               1,231,679       9,722       3.20      1,464,301      23,563       6.47
Equity lines of
credit                       629,850       5,271       3.39        438,296       6,162       5.65
Installment                  171,391       2,162       5.12        176,767       2,853       6.49
Total loans and
leases (3)                12,395,397     145,311       4.75     11,689,378     180,261       6.20
Due from banks -
interest-bearing             134,272         155       0.47         78,158         523       2.69
Federal funds sold
and securities
purchased under
resale agreements             11,046           6       0.24          7,678          63       3.33
Securities
available-for-sale         2,302,076      26,785       4.65      2,445,992      29,399       4.81
Trading securities           115,072          55       0.19         78,292         606       3.11
Other
interest-earning
assets                        75,001         643       3.48         71,830       1,026       5.75
Total
interest-earning
assets                    15,032,864     172,955       4.67     14,371,328     211,878       5.93
Allowance for loan
and lease losses            (235,723 )                            (164,720 )
Cash and due from
banks                        334,897                               379,055
Other non-earning
assets                     1,279,202                             1,137,811
Total assets            $ 16,411,240                          $ 15,723,474

Liabilities and
Equity (2)
Interest-bearing
deposits
Interest checking
accounts                $  1,098,078   $     866       0.32   $    822,890   $   1,413       0.69
Money market accounts      3,896,738       9,712       1.01      3,610,847      22,184       2.47
Savings deposits             165,572         266       0.65        134,578         122       0.36
Time deposits - under
$100,000                     234,419       1,283       2.22        220,219       1,937       3.54
Time deposits -
$100,000 and over          1,463,357       7,434       2.06      1,328,506      13,175       3.99
Total
interest-bearing
deposits                   6,858,164      19,561       1.16      6,117,040      38,831       2.55

Federal funds
purchased and
securities sold under
repurchase agreements        723,058       2,180       1.22      1,141,177       9,630       3.39
Other borrowings             526,082       2,853       2.20      1,119,027      11,126       4.00
Total
interest-bearing
liabilities                8,107,304      24,594       1.23      8,377,244      59,587       2.86
Noninterest-bearing
deposits                   5,982,944                             5,404,021
Other liabilities            236,010                               230,061
Total equity               2,084,982                             1,712,148
Total liabilities and
equity                  $ 16,411,240                          $ 15,723,474

Net interest spread                                    3.44 %                                3.07 %
Fully
taxable-equivalent
net interest and
dividend income                        $ 148,361                             $ 152,291
Net interest margin                                    4.00 %                                4.26 %
Less: Dividend income
included in other
income                                       643                                 1,026
Fully
taxable-equivalent
net interest income                    $ 147,718                             $ 151,265

Net interest income was $144.9 million for the first quarter of 2009, compared to $148.2 million for the same quarter last year and $148.8 million for the fourth quarter of 2008. Fully taxable-equivalent net interest and dividend income totaled $148.4 million for the first quarter of 2009, compared to $152.3 million for the same quarter last year and $152.6 million for the fourth quarter of 2008.

                                 For the three months ended                      For the three
                                         March 31,                   %           months ended           %
(in millions)                      2009              2008          Change      December 31, 2008      Change
Average Loans and Leases      $     12,395.4    $     11,689.4           6    $          12,371.4           -
Average Total Securities             2,417.1           2,524.3          (4 )              2,258.7           7
Average Earning Assets              15,032.9          14,371.3           5               14,843.9           1
Average Deposits                    12,841.1          11,521.1          11               12,639.3           2
Average Core Deposits               11,377.8          10,192.6          12               11,137.0           2
Fully Taxable-Equivalent
Net Interest Income                    148.4             152.3          (3 )                152.6          (3 )
Net Interest Margin                     4.00 %            4.26 %        (6 )                 4.09 %        (2 )

The Company's yield on earning assets for the first quarter of 2009 was 4.67 percent, down from 5.93 percent for the first quarter of 2008 and 5.13 percent for the fourth quarter of 2008. The bank's average prime rate declined 297 basis points to 3.25 percent in the first quarter of 2009 from 6.22 percent for the year-earlier quarter, and declined 81 basis points from 4.06 percent for the fourth quarter of 2008. The net interest margin for the first quarter of 2009 was 4.00 percent, compared with 4.26 percent and 4.09 percent for the quarters ended March 31, 2008 and December 31, 2008, respectively. Lower funding costs and growth in noninterest-bearing deposits reduced the impact of the 126 basis point decrease in the yield on earning assets compared with the year-earlier quarter.

Average loan and lease balances grew to $12.39 billion for the first quarter of 2009, an increase of 6 percent over $11.69 billion for the year-earlier quarter and a slight increase from the fourth quarter of 2008. The following table provides information on average loan balances by type:

                                 For the three months ended                      For the Three
                                         March 31,                   %           Months Ended           %
Average Loans (in millions)        2009              2008          Change      December 31, 2008     Change

Commercial                    $      4,755.9    $      4,455.7           7 %  $           4,790.5          1 %
Commercial Real Estate               2,200.2           1,975.5          11                2,148.8          2
Residential Mortgages                3,406.4           3,178.8           7                3,386.0          1
Real Estate Construction             1,231.7           1,464.3         (16 )              1,288.6         (4 )
Equity Lines of Credit                 629.8             438.3          44                  590.9          7
Other Loans                            171.4             176.8           3                  166.6          3
Total Loans                   $     12,395.4    $     11,689.4           6    $          12,371.4          -

Average commercial loans grew 1 percent over the year-earlier quarter and 7 percent from the fourth quarter of 2008. Average commercial real estate loans grew 11 percent from the first quarter of 2008 and 2 percent fom the fourth quarter of 2008. Average single family residential mortgage loans to the Company's private banking clients increased 7 percent from the first quarter of last year and 1 percent from the fourth quarter of 2008. The residential mortgage loan portfolio has an average loan-to-value ratio of 50 percent at origination and continues to perform well. Average construction loans decreased 16 percent from the same period a year ago and 4 percent from the fourth quarter of 2008. The construction loan portolio which includes loans to developers of residential and non-residential properties, continued to show signs of weakness due to the economic slowdown. The construction portfolio is diverse in terms of geography and product type. It consists primarily of recourse loans to well-established real estate developers and are generally located in established urban markets. Most of these developers are clients with whom the Bank has significant long-term relationships. See "Balance Sheet Analysis-Loan and Lease Portfolio" for further discussion of the loan portfolio.

Average deposits totaled $12.84 billion for the first quarter of 2009, an 11 percent increase from $11.52 billion for the first quarter of 2008 and a 2 percent increase from average deposits of $12.64 billion for the fourth quarter of 2008. Average core deposits totaled $11.38 billion for the first quarter of 2009, a 12 percent increase from $10.19 billion for the first quarter of 2008 and a 2 percent increase from $11.14 billion for the fourth quarter of 2008.

As part of its long-standing asset and liability management strategies, the Company uses interest-rate swaps to mitigate interest-rate risk associated with changes to: 1) the fair value of certain fixed-rate deposits and borrowings (fair value hedges) and 2) certain cash flows related to future interest payments on variable-rate loans (cash flow hedges). The notional amount of interest-rate swaps designated as hedging instruments at March 31, 2009 was $712.5 million, of which $387.5 million were designated as fair value hedges and $325.0 million were designated as cash flow hedges. At March 31, 2008, the Company had $745.0 million notional amount of interest-rate swaps, of which $395.0 million were designated as fair value hedges and $350.0 million were designated as cash flow hedges. At of December 31, 2008, the Company had $715.9 million notional amount of interest-rate swaps, of which $390.9 million were designated as fair value hedges and $325.0 million were designated as cash flow hedges.

The periodic net settlement of interest-rate swaps is recorded as an adjustment to interest income or interest expense. The impact of interest-rate swaps on interest income and interest expense for the three months ended March 31, 2009 and 2008 is presented in the table below: