NOTE 5—INVESTMENT SECURITIES

Securities Available-for-Sale

The following tables present amortized cost, gross unrealized gains and losses, and carrying value of securities available-for-sale as of the dates indicated:

	September 30, 2013

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	$	695,768	$	19,853	$	(1,659	)	$	713,962
Government agency and government-sponsored enterprise collateralized mortgage obligations		201,531		730		(2,901	)		199,360
Covered private label collateralized mortgage obligations		31,503		7,983		(108	)		39,378
Municipal securities		460,754		2,150		(23,269	)		439,635
Corporate debt securities		84,028		61		(1,983	)		82,106
Other securities		37,999		1		(294	)		37,706

Total securities available-for-sale	$	1,511,583	$	30,778	$	(30,214	)	$	1,512,147

	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

The covered private label collateralized mortgage obligations ("CMO's") were acquired in the FDIC-assisted acquisition of Affinity Bank in August 2009 and are covered by an FDIC loss sharing agreement. The loss sharing provisions of this agreement expire in the third quarter of 2014 for non-single family covered assets such as these private label CMO's. Other securities consist primarily of asset backed securities and collateralized loan obligations. See Note 11, Fair Value Measurements, for information on fair value measurements and methodology.

The following table presents the contractual maturity distribution of our available-for-sale securities portfolio based on amortized cost and carrying value as of the date indicated:

	September 30, 2013

Maturity	Amortized Cost		Carrying Value
	(In thousands)
Due in one year or less	$	3,774	$	3,775
Due after one year through five years		24,449		24,707
Due after five years through ten years		124,905		124,317
Due after ten years		1,358,455		1,359,348

Total securities available-for-sale	$	1,511,583	$	1,512,147

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.

At September 30, 2013, the estimated fair value of residential mortgage-backed debt 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 $774.8 million. We do not own any equity securities issued by Fannie Mae or Freddie Mac.

As of September 30, 2013, securities available-for-sale with a carrying value of $201.9 million were pledged as collateral for borrowings, public deposits and other purposes as required by various statutes and agreements.

There were no securities sold during the three months ended September 30, 2013. However, we recorded a $5.2 million non-taxable gain to recognize our previously-held equity interest in FCAL common stock at its fair value as of the acquisition date rather than at its historical cost. During the three months ended March 31, 2013, we sold $12.4 million in corporate debt securities for which we realized a $409,000 gross gain. These securities were sold as part of our investment portfolio risk management activities to reduce price volatility and duration.

The following tables present, for those securities that were in a gross unrealized loss position, the carrying 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:

	September 30, 2013

	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	$	124,088	$	(1,658	)	$	43	$	(1	)	$	124,131	$	(1,659	)
Government agency and government-sponsored enterprise collateralized mortgage obligations		139,846		(2,856	)		4,610		(45	)		144,456		(2,901	)
Covered private label collateralized mortgage obligations		543		(19	)		636		(89	)		1,179		(108	)
Municipal securities		323,419		(23,269	)		—		—			323,419		(23,269	)
Corporate debt securities		61,831		(1,983	)		—		—			61,831		(1,983	)
Other securities		33,942		(294	)		—		—			33,942		(294	)

Total	$	683,669	$	(30,079	)	$	5,289	$	(135	)	$	688,958	$	(30,214	)

	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	)

We reviewed the securities that were in a continuous loss position less than 12 months and longer than 12 months at September 30, 2013, 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 condensed 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.

The following table presents the composition of our interest income on investment securities:

	Three Months Ended						Nine Months Ended September 30,

	September 30, 2013		June 30, 2013		September 30, 2012		Nine Months Ended September 30,
Securities Interest by Type:	September 30, 2013		June 30, 2013		September 30, 2012		2013		2012
	(In thousands)
Taxable interest	$	6,028	$	5,388	$	6,832	$	16,979	$	23,716
Nontaxable interest		3,302		2,716		1,458		8,443		3,572
Dividend income		541		310		56		1,079		196

Total interest income on investment securities	$	9,871	$	8,414	$	8,346	$	26,501	$	27,484

FHLB Stock

At September 30, 2013, the Company had a $34.1 million investment in Federal Home Loan Bank of San Francisco ("FHLB") stock carried at cost. During the third quarter of 2013, FHLB stock decreased $5.0 million due to redemptions by the FHLB. We evaluated the carrying value of our FHLB stock investment at September 30, 2013, 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, repurchase activity of excess stock by the FHLB at its carrying value, the return on the investment, and our intent and ability to hold this investment for a period of time sufficient to recover our recorded investment.