Net charge-offs during the fourth quarter of 2012 declined to $4.9 million from $5.3 million in the third quarter of 2012, a decline of 7%. On an annualized basis, net charge-offs were 0.16% of total average loans and leases held for investment, compared to 0.25% for the third quarter of 2012 and 1.03% for the fourth quarter of 2011.

Originated Loan Repurchase Activity

During the fourth quarter of 2012, we experienced net realized losses on loan repurchases of $7.3 million and recorded a provision of $3.3 million on repurchase obligations for loans sold or securitized. Our reserve declined from $31.0 million in the third quarter of 2012 to $27.0 million in the fourth quarter of 2012. We continue to be well reserved with approximately 6 quarters of coverage based on the average quarterly loss rate over the trailing four quarters. Trends continue to be stable with severities declining over the last twelve months to 45% in fourth quarter 2012, compared to 48% in the fourth quarter 2011. We continue to believe that our 0.10% total loss rate is indicative of our disciplined underwriting guidelines and risk management culture.

Capital Strength

Total shareholders' equity was $1.5 billion at December 31, 2012, compared to $1.3 billion at September 30, 2012. The bank’s Tier 1 leverage ratio was 8.0% and total risk-based capital ratio was 13.5% at December 31, 2012. As a result, the bank is considered "well-capitalized" under all applicable regulatory guidelines.

During the fourth quarter, we issued 6.0 million depositary shares, each representing 1/1,000th of a share of Series A Preferred Stock, for gross proceeds of $150.0 million with a dividend rate of 6.75% per annum.

Income Statement Highlights

Strong Revenue Growth

Revenue for the fourth quarter was $272.2 million, an increase of $48.7 million, or 22%, from $223.5 million in the third quarter 2012. Compared to the fourth quarter 2011, revenue increased $96.4 million, or 55%. The linked quarter increase was driven by the positive contribution to net interest income by the acquired BPL portfolio as well as a $6.3 million increase in loan production revenue and a $19.4 million increase in net loan servicing income. Adjusted for the impact of the non-cash mortgage servicing rights ("MSR") valuation allowance in the third quarter, net loan servicing income increased $1.2 million linked quarter and total revenue increased by $30.4 million, or 13%, compared to the third quarter 2012. Compared to the fourth quarter 2011, revenue increased $78 million, or 40%, adjusted for the MSR valuation allowance incurred in the prior year quarter.

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