Agenda - Council - 11/13/2012 - Laserfiche WebLink

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The Bank did not enter into any sale -leaseback transactions in 2011 or 2010. The Bank amortized $5.8 million of deferred gains relating to its prior sale -leaseback transactions into earnings for both 2011 and 2010. The Bank has no obligations or circumstances which require our continuing involvement with any of these properties. 7. Credit Guarantee Derivative On March 31, 2010 (the "transaction date"), the Bank entered into a Collateralized Credit Guarantee Derivative Agreement (the "Guarantee") with its parent. Under the Guarantee, BancWest agreed to reimburse the Bank for principal charge -offs, write -downs on foreclosed assets and foregone interest for a specific portfolio of commercial loans and foreclosed properties (the "covered assets") for a period of seven years. BancWest makes payments to the Bank under the Guarantee on a quarterly basis, but is not entitled to claim any recoveries on or gains on sale of the covered assets by the Bank. At the transaction date, the fair value of the Guarantee was estimated at $393.5 million and was based upon the expected future claims to be made under the Guarantee. The transaction was accounted for as a capital contribution to the Bank, and the fair value is reported in other assets within the Consolidated Balance Sheet. To secure payments under the Guarantee, BancWest sent to the Bank collateral in the form of a non -interest bearing cash deposit of $1.1 billion. The Guarantee is recognized as a derivative, measured at fair value with changes in fair value recorded through earnings. At December 31, 2011, the estimated fair value of the Guarantee asset was $23.9 million; the notional amount of the derivative agreement was $460.8 million and the value of the cash collateral was $0.9 billion. At December 31, 2010, the estimated fair value of the Guarantee asset was $150.7 million; the notional amount of the derivative agreement was $796.6 million and the value of the cash collateral was $1.0 billion. The decline in the fair value of the Guarantee asset since inception was primarily driven by changes in credit forecasts, and decreases in the covered asset principal balances due to charge -offs and paydowns. The net impact of the Guarantee on earnings as of December 31, 2011, was a loss of $6.3 million (reported within noninterest income) due to a $126.8 million decrease in the fair value of the Guarantee significantly offset by payments for claims made under the Guarantee for $120.5 million. The net impact of the Guarantee on earnings as of December 31, 2010, was a loss of $73.2 million due to a $242.7 million decrease in the fair value of the Guarantee significantly offset by payments for claims made under the Guarantee for $169.5 million. 8. Goodwill and Other Intangible Assets We perfot7ned impairment testing of goodwill in the fourth quarter of 2011 and the fourth quarter of 2010 and no impairment of goodwill was found. Our estimates of fair value were based upon factors such as projected future cash flows, discount rates, and other uncertain elements that require significant judgments. While we use available information to prepare our estimates and perfortn impairment evaluations, actual results in the future could differ significantly. Impairment tests in future periods may result in impairment charges which could materially impact our future reported results. The table below provides the breakdown of goodwill by reportable segment. Regional Commercial National Wealth (dollars in millions) Banking Banking Finance Management Total Balance as ofJanuary 1, 2010: $2,921 $840 $421 $17 $4,199 Purchase accounting adjustments: Wachovia branch purchase) 1 1 Insurance agency acquisitions - 1 1 Balance as of December 31, 2010: $2,922 $840 $421 $18 $4,201 Purchase accounting adjustments: Insurance agency acquisitions 1 1 Other 1 (1) - Balance as of December 31, 2011: $2,922 $840 $423 $17 $4,202 (`) In January 2010, the Bank acquired deposits of approximately $265 million of two former Wachovia branches from Wells Fargo located in Northern California. -31- 2011 Bank of the West Annual Report