NOTE 5—INVESTMENT SECURITIES

Securities Available-for-Sale

The following tables present the amortized cost, gross unrealized gains and losses, and carrying value (i.e. the estimated fair value), of securities available-for-sale as of the dates indicated. The private label collateralized mortgage obligations ("CMOs") were acquired in the FDIC-assisted acquisition of Affinity in August 2009 and are covered by a FDIC loss sharing agreement. Other securities primarily consist of equity securities and an investment in overnight money market funds at a financial institution.

	December 31, 2012

Security Type	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Carrying Value
	(In thousands)
Residential mortgage-backed securities:
Government agency and government-sponsored enterprise pass through securities	$	774,677	$	33,618	$	(453	)	$	807,842
Government agency and government-sponsored enterprise collateralized mortgage obligations		99,956		1,870		(132	)		101,694
Covered private label collateralized mortgage obligations		36,078		8,729		(123	)		44,684
Municipal securities		339,547		10,445		(1,951	)		348,041
Corporate debt securities		42,014		432		(81	)		42,365
Other securities		6,389		4,370		—			10,759

Total securities available-for-sale	$	1,298,661	$	59,464	$	(2,740	)	$	1,355,385

	December 31, 2011

Security Type	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Carrying Value
	(In thousands)
Residential mortgage-backed securities:
Government agency and government-sponsored enterprise pass through securities	$	1,011,222	$	31,350	$	(65	)	$	1,042,507
Government agency and government-sponsored enterprise 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

During 2012, 2011, and 2010, we made market purchases of $485.9 million, $658.3 million, and $627.9 million, of investment securities available-for-sale, respectively, utilizing our excess liquidity. Of the $48.9 million of investment securities obtained in the APB acquisition, $45.6 million of such securities were sold for no gain or loss. We retained APB's municipal securities portfolio. During 2010, through the Los Padres acquisition, we obtained $33.6 million of securities available-for-sale, which were comprised primarily of government agency and GSE pass through securities. None of the acquired Los Padres investment securities are covered by an FDIC loss sharing agreement.

In addition to the sale of securities obtained in the APB acquisition, we sold $43.9 million of GSE pass through securities for which we realized a $1.2 million gross gain in 2012. These securities were identified as generally having higher volatility than the broader investment securities portfolio and were sold as part of our portfolio management. There were no sales of securities in 2011 and 2010.

At December 31, 2012, the fair value of residential mortgage-backed securities issued by the Federal National Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage Corporation ("Freddie Mac") that were held in our portfolio was approximately $829.8 million. We do not own any equity securities issued by Fannie Mae or Freddie Mac. As of December 31, 2012 and 2011, securities available-for-sale with a carrying value of $157.3 million and $69.6 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 as of the dates indicated:

	December 31, 2012

	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 agency and government-sponsored enterprise pass through securities	$	67,299	$	(452	)	$	60	$	(1	)	$	67,359	$	(453	)
Government agency and government-sponsored enterprise collateralized mortgage obligations		18,317		(132	)		—		—			18,317		(132	)
Covered private label collateralized mortgage obligations		—		—			1,692		(123	)		1,692		(123	)
Municipal securities		90,303		(1,951	)		—		—			90,303		(1,951	)
Corporate debt securities		16,819		(81	)		—		—			16,819		(81	)

Total	$	192,738	$	(2,616	)	$	1,752	$	(124	)	$	194,490	$	(2,740	)

	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 agency and government-sponsored enterprise pass through securities	$	34,682	$	(64	)	$	22	$	(1	)	$	34,704	$	(65	)
Government agency and government-sponsored enterprise 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	)

We reviewed the securities that were in a continuous loss position less than 12 months and longer than 12 months at December 31, 2012, 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' ability to repay. Accordingly, we determined that the securities were temporarily impaired and we did not recognize such impairment in the consolidated statements of earnings. 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.

In 2012 and 2010, we recognized an other-than-temporary impairment loss on two different covered private label CMO securities. In each circumstance, the covered security was impaired due to deteriorating cash flows and the depletion of the credit support from the subordinated classes of the securitization. In 2012 and 2010, the OTTI charges of $1.1 million and $874,000, which were due to credit and recognized in the consolidated statements of earnings (loss), were offset by FDIC loss sharing income of $892,000 and $699,000 for the respective periods. There were no such impairments or impairment-related loss sharing income in 2011.

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, 2012

Maturity	Amortized Cost		Carrying Value
	(In thousands)
Due in one year or less	$	11,687	$	16,185
Due after one year through five years		3,180		3,311
Due after five years through ten years		31,013		33,008
Due after ten years		1,252,781		1,302,881

Total securities available-for-sale	$	1,298,661	$	1,355,385

FHLB Stock

At December 31, 2012, the Company had a $37.1 million investment in FHLB stock carried at cost. We evaluated the carrying value of our FHLB stock investment at December 31, 2012, 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 at its carrying value, and our intent and ability to hold this investment for a period of time sufficient to recover our recorded investment.