INVESTMENT SECURITIES

12 Months Ended

Dec. 31, 2011

INVESTMENT SECURITIES

INVESTMENT SECURITIES

NOTE 5—INVESTMENT SECURITIES

• Securities Available-for-Sale

        The following tables present the amortized cost, gross unrealized gains and losses, and carrying value, which is the estimated fair value, of securities available-for-sale as of the dates indicated. Other securities primarily consist of equity securities and an investment in overnight money market funds at a financial institution.

	December 31, 2011
Security Type	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Carrying Value
	(In thousands)
Residential mortgage-backed securities:
Government and government-sponsored entity pass through securities	$	1,011,222	$	31,350	$	(65	)	$	1,042,507
Government and government-sponsored entity collateralized mortgage obligations		80,353		1,710		(36	)		82,027
Covered private label collateralized mortgage obligations		41,426		5,878		(2,155	)		45,149
Municipal securities		124,079		2,774		(56	)		126,797
Corporate debt securities		25,077		77		(26	)		25,128
Other securities		4,885		—		(135	)		4,750
Total securities available-for-sale	$	1,287,042	$	41,789	$	(2,473	)	$	1,326,358

	December 31, 2010
Security Type	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Carrying Value
	(In thousands)
Residential mortgage-backed securities:
Government and government-sponsored entity pass through securities	$	754,149	$	9,282	$	(7,366	)	$	756,065
Government and government-sponsored entity collateralized mortgage obligations		47,416		565		(352	)		47,629
Covered private label collateralized mortgage obligations		45,867		6,653		(2,083	)		50,437
Government-sponsored entity debt securities		10,014		15		—			10,029
Municipal securities		7,437		129		—			7,566
Other securities		2,290		—		—			2,290
Total securities available-for-sale	$	867,173	$	16,644	$	(9,801	)	$	874,016

        During 2011, 2010, and 2009, we made market purchases of $658.3 million, $627.9 million, and $227.5 million of investment securities available-for-sale, respectively, utilizing our excess liquidity. During 2010, through the Los Padres acquisition, we obtained $44.3 million of investment securities, including $10.7 million of FHLB stock and $33.6 million of securities available-for-sale, consisting primarily of government and government-sponsored entity pass through securities and none of which are covered by an FDIC loss sharing agreement. During 2009, through the Affinity acquisition, we obtained $175.4 million of investment securities, including $16.6 million of FHLB stock and $158.8 million of securities available-for-sale. The acquired Affinity securities included $55.3 million of "private-label" collateralized mortgage obligations ("CMOs") which are covered by an FDIC loss sharing agreement; the remaining securities were predominantly government and government-sponsored entity CMOs.

        At December 31, 2011, the fair value of debt securities and mortgage-backed securities issued by the Federal National Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage Corporation ("Freddie Mac") was approximately $1.1 billion. We do not own any equity securities issued by Fannie Mae or Freddie Mac. There were no sales of securities in 2011, 2010 and 2009. As of December 31, 2011 and 2010, securities available-for-sale with a carrying value of $69.6 million and $140.7 million, respectively, were pledged as security for borrowings, public deposits and other purposes as required by various statutes and agreements.

        Market valuations of our investment securities are provided by an independent third party. The fair values are determined by using several sources for valuing fixed income securities. Their techniques include pricing models that vary based on the type of asset being valued and incorporate available trade, bid and other market information. In accordance with the hierarchy established in ASC Topic 820, "Fair Value Measurement," the market valuation sources include observable market inputs for the majority of our securities and are therefore considered Level 2 inputs for purposes of determining the fair values. The valuation techniques for the covered private label CMOs are considered Level 3. See Note 13, Fair Value Measurements, for information on fair value measurements and methodology.

        The following tables present, for those securities that were in a gross unrealized loss position, the carrying values, which are the estimated fair values, and the gross unrealized losses on securities by length of time the securities were in an unrealized loss position at the dates indicated:

	December 31, 2011
	Less than 12 months					12 months or longer					Total
Security Type	Carrying Value		Gross Unrealized Losses			Carrying Value		Gross Unrealized Losses			Carrying Value		Gross Unrealized Losses
	(In thousands)
Residential mortgage-backed securities:
Government and government-sponsored entity pass through securities	$	34,682	$	(64	)	$	22	$	(1	)	$	34,704	$	(65	)
Government and government-sponsored entity collateralized mortgage obligations		10,790		(21	)		1,530		(15	)		12,320		(36	)
Covered private label collateralized mortgage obligations		5,228		(595	)		4,427		(1,560	)		9,655		(2,155	)
Municipal securities		7,755		(56	)		—		—			7,755		(56	)
Corporate debt securities		10,758		(26	)		—		—			10,758		(26	)
Other securities		2,445		(135	)		—		—			2,445		(135	)
Total	$	71,658	$	(897	)	$	5,979	$	(1,576	)	$	77,637	$	(2,473	)

	December 31, 2010
	Less than 12 months					12 months or longer					Total
Security Type	Carrying Value		Gross Unrealized Losses			Carrying Value		Gross Unrealized Losses			Carrying Value		Gross Unrealized Losses
	(In thousands)
Residential mortgage-backed securities:
Government and government-sponsored entity pass through securities	$	321,537	$	(7,366	)	$	—	$	—		$	321,537	$	(7,366	)
Government and government-sponsored entity collateralized mortgage obligations		15,690		(327	)		1,553		(25	)		17,243		(352	)
Covered private label collateralized mortgage obligations		1,579		(472	)		4,980		(1,611	)		6,559		(2,083	)
Total	$	338,806	$	(8,165	)	$	6,533	$	(1,636	)	$	345,339	$	(9,801	)

        We reviewed the securities that were in a continuous loss position less than 12 months and longer than 12 months at December 31, 2011, and concluded that their losses were a result of the level of market interest rates relative to the types of securities and not a result of the underlying issuers' abilities to repay. Accordingly, we determined that the securities were temporarily impaired. Additionally, we have no plans to sell these securities and believe that it is more likely than not we would not be required to sell these securities before recovery of their amortized cost. Therefore, we did not recognize the temporary impairment in the consolidated statements of earnings.

        During 2010, we determined that one covered private label collateralized mortgage obligation security was impaired due to deteriorating cash flows and significant delinquency of the underlying loan collateral and recorded an other-than-temporary impairment loss of $874,000 in the consolidated statement of loss. This loss was offset by FDIC loss sharing income of $699,000, which represented the FDIC's 80% share of the loss.

        Mortgage-backed securities have contractual terms to maturity, but require periodic payments to reduce principal. In addition, expected maturities may differ from contractual maturities because obligors and/or issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

        The contractual maturity distribution of our securities available-for-sale portfolio based on amortized cost and carrying value is shown as of the date below:

	December 31, 2011
Maturity	Amortized Cost		Carrying Value
	(In thousands)
Due in one year or less	$	4,885	$	4,750
Due after one year through five years		8,592		8,807
Due after five years through ten years		35,452		36,973
Due after ten years		1,238,113		1,275,828
Total securities available-for-sale	$	1,287,042	$	1,326,358

• FHLB Stock

        At December 31, 2011, the Company had a $46.1 million investment in Federal Home Loan Bank of San Francisco ("FHLB") stock carried at cost. In January 2009, the FHLB announced that it suspended excess FHLB stock redemptions and dividend payments. Since this announcement, the FHLB has declared and paid cash dividends in 2010 and 2011, though at rates less than those paid in the past, and repurchased certain amounts of our excess stock at the carrying value. We evaluated the carrying value of our FHLB stock investment at December 31, 2011, and determined that it was not impaired. Our evaluation considered the long-term nature of the investment, the current financial and liquidity position of the FHLB, the actions being taken by the FHLB to address its regulatory situation, repurchase activity of excess stock by the FHLB, and our intent and ability to hold this investment for a period of time sufficient to recover our recorded investment.