Edgar Filing: CITY NATIONAL CORP

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2012

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER: 1-10521

CITY NATIONAL CORPORATION

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

Delaware		95-2568550
(State of Incorporation)		(I.R.S. Employer Identification No.)

City National Plaza

555 South Flower Street, Los Angeles, California, 90071

(Address of principal executive offices)(Zip Code)

(213) 673-7700

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for at least the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act). (Check one):

Large accelerated filer x

Accelerated filer o

Non-accelerated filer o

(Do not check if a smaller
reporting company)

Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes x No

As of July 31, 2012, there were 53,570,205 shares of Common Stock outstanding (including unvested restricted shares).

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TABLE OF CONTENTS

PART I
Item 1.	Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	53
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	86
Item 4.	Controls and Procedures	90

PART II
Item 1A.	Risk Factors	91
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	91
Item 6.	Exhibits	91

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PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CITY NATIONAL CORPORATION

CONSOLIDATED BALANCE SHEETS

	June 30,			December 31,
(in thousands, except share amounts)	2012			2011
	(Unaudited)
Assets
Cash and due from banks	$	162,893		$	168,376
Due from banks - interest-bearing	106,109			76,438
Federal funds sold	162,000			—
Securities available-for-sale - cost $6,723,761 and $7,445,999 at June 30, 2012 and December 31, 2011, respectively:
Securities pledged as collateral	42,789			37,861
Held in portfolio	6,823,092			7,534,040
Securities held-to-maturity - fair value $1,127,053 and $473,903 at June 30, 2012 and December 31, 2011, respectively	1,100,229			467,680
Trading securities	62,585			61,975
Loans and leases, excluding covered loans	13,507,209			12,309,385
Less: Allowance for loan and lease losses	269,534			262,557
Loans and leases, excluding covered loans, net	13,237,675			12,046,828
Covered loans, net of allowance for loan losses	1,216,988			1,417,289
Net loans and leases	14,454,663			13,464,117
Premises and equipment, net	147,245			143,641
Deferred tax asset	147,503			155,529
Goodwill	556,149			486,383
Customer-relationship intangibles, net	32,965			36,370
Affordable housing investments	145,582			121,039
Customers’ acceptance liability	1,746			1,702
Other real estate owned ($82,834 and $98,550 covered by FDIC loss share at June 30, 2012 and December 31, 2011, respectively)	117,501			129,340
FDIC indemnification asset	170,654			204,259
Other assets	568,268			577,541
Total assets	$	24,801,973		$	23,666,291
Liabilities
Demand deposits	$	12,187,075		$	11,146,627
Interest checking deposits	1,849,588			2,034,815
Money market deposits	5,714,258			5,954,886
Savings deposits	368,544			339,858
Time deposits-under $100,000	222,368			251,782
Time deposits-$100,000 and over	767,219			659,614
Total deposits	21,109,052			20,387,582
Short-term borrowings	322,077			50,000
Long-term debt	712,280			697,778
Reserve for off-balance sheet credit commitments	24,351			23,097
Acceptances outstanding	1,746			1,702
Other liabilities	335,203			316,640
Total liabilities	22,504,709			21,476,799
Redeemable noncontrolling interest	41,899			44,643
Commitments and contingencies
Shareholders’ Equity
Common stock, par value $1.00 per share; 75,000,000 shares authorized; 53,885,886 shares issued at June 30, 2012 and December 31, 2011	53,886			53,886
Additional paid-in capital	491,439			489,200
Accumulated other comprehensive income	82,807			72,372
Retained earnings	1,686,163			1,611,969
Treasury shares, at cost - 1,063,534 and 1,386,705 shares at June 30, 2012 and December 31, 2011, respectively	(58,930		)	(82,578		)
Total shareholders’ equity	2,255,365			2,144,849
Total liabilities and shareholders’ equity	$	24,801,973		$	23,666,291

See accompanying Notes to the Unaudited Consolidated Financial Statements.

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CITY NATIONAL CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

	For the three months ended						For the six months ended
	June 30,						June 30,
(in thousands, except per share amounts)	2012			2011			2012			2011
Interest income
Loans and leases	$	186,071		$	169,992		$	354,173		$	332,931
Securities	43,549			39,639			88,935			77,058
Due from banks - interest-bearing	173			407			266			705
Federal funds sold and securities purchased under resale agreements	96			98			107			252
Total interest income	229,889			210,136			443,481			410,946
Interest expense
Deposits	3,566			10,016			7,599			20,206
Federal funds purchased and securities sold under repurchase agreements	1			2			32			2
Subordinated debt	4,308			4,635			8,369			9,283
Other long-term debt	5,535			4,656			10,289			9,338
Total interest expense	13,410			19,309			26,289			38,829
Net interest income	216,479			190,827			417,192			372,117
Provision for credit losses on loans and leases, excluding covered loans	1,000			—			1,000			—
Provision for losses on covered loans	13,293			1,716			20,759			20,832
Net interest income after provision	202,186			189,111			395,433			351,285
Noninterest income
Trust and investment fees	34,067			36,687			67,721			72,325
Brokerage and mutual fund fees	5,293			4,864			10,321			10,525
Cash management and deposit transaction charges	11,475			10,905			22,643			22,630
International services	10,017			9,015			18,802			17,331
FDIC loss sharing expense, net	(6,026		)	(10,684		)	(5,160		)	(2,079		)
Gain on disposal of assets	3,011			8,422			5,202			10,846
(Loss) gain on sale of securities	(279		)	1,689			170			1,819
Gain on acquisition	—			8,164			—			8,164
Other	17,388			23,169			30,947			44,727
Impairment loss on securities:
Total other-than-temporary impairment loss on securities	(4,129		)	(4,132		)	(4,129		)	(4,296		)
Less: Portion of loss recognized in other comprehensive income	3,951			3,838			3,951			3,838
Net impairment loss recognized in earnings	(178		)	(294		)	(178		)	(458		)
Total noninterest income	74,768			91,937			150,468			185,830
Noninterest expense
Salaries and employee benefits	115,035			112,139			235,280			223,151
Net occupancy of premises	14,056			13,665			27,742			27,011
Legal and professional fees	11,359			14,790			23,239			24,867
Information services	8,539			8,335			16,688			15,832
Depreciation and amortization	8,013			6,904			15,441			13,652
Amortization of intangibles	1,518			2,104			3,404			4,272
Marketing and advertising	7,597			7,626			14,413			14,144
Office services and equipment	4,492			4,672			8,440			9,278
Other real estate owned	7,541			22,162			19,635			36,651
FDIC assessments	4,523			8,524			9,002			18,330
Other operating	11,843			10,911			21,952			22,041
Total noninterest expense	194,516			211,832			395,236			409,229
Income before income taxes	82,438			69,216			150,665			127,886
Income taxes	27,271			20,650			48,990			38,536
Net income	$	55,167		$	48,566		$	101,675		$	89,350
Less: Net income attributable to noncontrolling interest	409			1,095			652			2,187
Net income attributable to City National Corporation	$	54,758		$	47,471		$	101,023		$	87,163
Net income per share, basic	$	1.02		$	0.89		$	1.88		$	1.64
Net income per share, diluted	$	1.01		$	0.88		$	1.87		$	1.62
Shares used to compute net income per share, basic	53,105			52,462			52,923			52,392
Shares used to compute net income per share, diluted	53,373			52,977			53,217			52,931
Dividends per share	$	0.25		$	0.20		$	0.50		$	0.40

See accompanying Notes to the Unaudited Consolidated Financial Statements.

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CITY NATIONAL CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

	For the three months ended						For the six months ended
	June 30,						June 30,
(in thousands)	2012			2011			2012			2011
Net income	$	55,167		$	48,566		$	101,675		$	89,350
Other comprehensive income, net of tax:
Securities available for sale:
Net unrealized gains arising during the period	3,815			33,254			11,971			23,541
Reclassification adjustment for net gains included in net income	(10		)	(1,048		)	(239		)	(1,099		)
Non-credit related impairment loss	(2,299		)	(2,233		)	(2,299		)	(2,233		)
Net change on cash flow hedges (1)	(41		)	(248		)	(83		)	(834		)
Pension liability adjustment	—			33			1,085			65
Total other comprehensive income	1,465			29,758			10,435			19,440
Comprehensive income	$	56,632		$	78,324		$	112,110		$	108,790
Less: Comprehensive income attributable to noncontrolling interest	409			1,095			652			2,187
Comprehensive income attributable to City National Corporation	$	56,223		$	77,229		$	111,458		$	106,603

(1) See Note 12 for additional information on other comprehensive income related to cash flow hedges.

See accompanying Notes to the Unaudited Consolidated Financial Statements.

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CITY NATIONAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the six months ended
	June 30,
(in thousands)	2012			2011
Cash Flows From Operating Activities
Net income	$	101,675		$	89,350
Adjustments to net income:
Provision for credit losses on loans and leases, excluding covered loans	1,000			—
Provision for losses on covered loans	20,759			20,832
Amortization of intangibles	3,404			4,272
Depreciation and amortization	15,441			13,652
Share-based employee compensation expense	8,968			9,468
Deferred income tax benefit	1,276			2,686
Gain on disposal of assets	(5,202		)	(10,846		)
Gain on sale of securities	(170		)	(1,819		)
Gain on acquisition	—			(8,164		)
Impairment loss on securities	178			458
Other, net	(19,467		)	(9,418		)
Net change in:
Trading securities	(851		)	129,818
Other assets and other liabilities, net	40,111			51,709
Net cash provided by operating activities	167,122			291,998
Cash Flows From Investing Activities
Purchase of securities available-for-sale	(1,331,692		)	(2,017,983		)
Sales of securities available-for-sale	5,189			53,304
Maturities and paydowns of securities available-for-sale	2,031,596			1,367,512
Purchase of securities held-to-maturity	(638,006		)	—
Maturities and paydowns of securities held-to-maturity	4,617			—
Loan originations, net of principal collections	(671,623		)	(108,530		)
Net payments for premises and equipment	(14,703		)	(19,637		)
Net cash (paid) acquired in acquisitions	(69,987		)	28,066
Other investing activities, net	28,527			59,628
Net cash used in investing activities	(656,082		)	(637,640		)
Cash Flows From Financing Activities
Net increase in deposits	721,470			961,463
Net increase in federal funds purchased and securities sold under repurchase agreements	60,000			—
Net decrease in short-term borrowings, net of transfers from long-term debt	(95,691		)	(3,105		)
Net increase (decrease) in long-term debt	7,707			(757		)
Proceeds from exercise of stock options	9,044			4,507
Tax benefit from exercise of stock options	1,180			992
Cash dividends paid	(26,632		)	(21,211		)
Other financing activities, net	(1,930		)	(1,429		)
Net cash provided by financing activities	675,148			940,460
Net increase in cash and cash equivalents	186,188			594,818
Cash and cash equivalents at beginning of year	244,814			434,689
Cash and cash equivalents at end of period	$	431,002		$	1,029,507
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest	$	25,674		$	40,129
Income taxes	30,373			26,072
Non-cash investing activities:
Transfer of loans to other real estate owned	$	41,728		$	64,191
Transfer of SERP liability to equity	8,348			—
Assets acquired (liabilities assumed) in acquisitions:
Securities available-for-sale	$	—		$	10,441
Loans and leases	318,301			—
Covered loans	—			55,313
Covered other real estate owned	—			7,463
Deposits	—			(126,795		)
Other borrowings	(320,856		)	(3,165		)

See accompanying Notes to the Unaudited Consolidated Financial Statements.

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CITY NATIONAL CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Unaudited)

	City National Corporation Shareholders’ Equity
							Accumulated
	Common			Additional			other								Non-
	shares	Common		paid-in			comprehensive		Retained			Treasury			controlling			Total
(in thousands, except share amounts)	issued	stock		capital			income (loss)		earnings			shares			interest			equity

Balance, January 1, 2011	53,885,886	$	53,886	$	487,868		$	36,853	$	1,482,037		$	(101,065	)	$	25,139		$	1,984,718
Net income (1)	—	—		—			—		87,163			—			1,067			88,230
Other comprehensive income, net of tax	—	—		—			19,440		—			—			—			19,440
Dividends and distributions to noncontrolling interest	—	—		—			—		—			—			(1,067		)	(1,067		)
Issuance of shares under share-based compensation plans	—	—		(14,229		)	—		—			16,754			—			2,525
Share-based employee compensation expense	—	—		9,363			—		—			—			—			9,363
Tax benefit from share-based compensation plans	—	—		1,037			—		—			—			—			1,037
Common stock dividends	—	—		—			—		(21,211		)	—			—			(21,211		)
Net change in deferred compensation plans	—	—		600			—		—			—			—			600
Change in redeemable noncontrolling interest	—	—		349			—		—			—			—			349
Other	—	—		76			—		—			—			(50		)	26
Balance, June 30, 2011	53,885,886	$	53,886	$	485,064		$	56,293	$	1,547,989		$	(84,311	)	$	25,089		$	2,084,010

Balance, January 1, 2012	53,885,886	$	53,886	$	489,200		$	72,372	$	1,611,969		$	(82,578	)	$	—		$	2,144,849
Net income (1)	—	—		—			—		101,023			—			—			101,023
Other comprehensive income, net of tax	—	—		—			10,435		—			—			—			10,435
Issuance of shares under share-based compensation plans	—	—		(16,506		)	—		—			23,646			—			7,140
Share-based employee compensation expense	—	—		8,502			—		—			—			—			8,502
Tax benefit from share-based compensation plans	—	—		400			—		—			—			—			400
Common stock dividends	—	—		—			—		(26,829		)	—			—			(26,829		)
Net change in deferred compensation plans	—	—		703			—		—			2			—			705
Change in redeemable noncontrolling interest	—	—		792			—		—			—			—			792
Other (2)	—	—		8,348			—		—			—			—			8,348
Balance, June 30, 2012	53,885,886	$	53,886	$	491,439		$	82,807	$	1,686,163		$	(58,930	)	$	—		$	2,255,365

(1) Net income excludes net income attributable to redeemable noncontrolling interest of $652 and $1,120 for the six month periods ended June 30, 2012 and 2011, respectively. Redeemable noncontrolling interest is reflected in the mezzanine section of the consolidated balance sheets. See Note 17 of the Notes to the Unaudited Consolidated Financial Statements.

(2) Conversion of pension liability to equity due to SERP amendment. See Note 14 for additional information.

See accompanying Notes to the Unaudited Consolidated Financial Statements.

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CITY NATIONAL CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Summary of Significant Accounting Policies

Organization

City National Corporation (the “Corporation”) is the holding company for City National Bank (the “Bank”). The Bank delivers banking, trust and investment services through 78 offices in Southern California, the San Francisco Bay area, Nevada, New York City, Nashville, Tennessee and Atlanta, Georgia. As of June 30, 2012, the Corporation had five consolidated investment advisory affiliates and one unconsolidated subsidiary, Business Bancorp Capital Trust I. Because the Bank comprises substantially all of the business of the Corporation, references to the “Company” mean the Corporation and the Bank together. The Corporation is approved as a financial holding company pursuant to the Gramm-Leach-Bliley Act of 1999.

Consolidation

The consolidated financial statements of the Company include the accounts of the Corporation, its non-bank subsidiaries, the Bank and the Bank’s wholly owned subsidiaries, after the elimination of all material intercompany transactions. It also includes noncontrolling interest, which is the portion of equity in a subsidiary not attributable to a parent. Preferred stock of consolidated bank affiliates that is owned by third parties is reflected as Noncontrolling interest in the equity section of the consolidated balance sheets. This preferred stock was liquidated or redeemed in full by the Bank in the third quarter of 2011. Redeemable noncontrolling interest includes noncontrolling ownership interests that are redeemable at the option of the holder or outside the control of the issuer. The redeemable equity ownership interests of third parties in the Corporation’s investment advisory affiliates are not considered to be permanent equity and are reflected as Redeemable noncontrolling interest in the mezzanine section between liabilities and equity in the consolidated balance sheets. Noncontrolling interests’ share of subsidiary earnings is reflected as Net income attributable to noncontrolling interest in the consolidated statements of income.

The Company’s investment management and wealth advisory affiliates are organized as limited liability companies. The Corporation generally owns a majority position in each affiliate and certain management members of each affiliate own the remaining shares. The Corporation has contractual arrangements with its affiliates whereby a percentage of revenue is allocable to fund affiliate operating expenses (“operating share”) while the remaining portion of revenue (“distributable revenue”) is allocable to the Corporation and the noncontrolling owners. All majority-owned affiliates that meet the prescribed criteria for consolidation are consolidated. The Corporation’s interests in investment management affiliates in which it holds a noncontrolling share are accounted for using the equity method. Additionally, the Company has various interests in variable interest entities (“VIEs”) that are not required to be consolidated. See Note 16 for a more detailed discussion on VIEs.

Use of Estimates

The Company’s accounting and reporting policies conform to generally accepted accounting principles (“GAAP”) and practices in the financial services industry. To prepare the financial statements in conformity with GAAP, management must make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, and income and expenses during the reporting period. Circumstances and events that differ significantly from those underlying the Company’s estimates and assumptions could cause actual financial results to differ from those estimates. The material estimates included in the financial statements relate to the allowance for loan and lease losses, the reserve for off-balance sheet credit commitments, valuation of stock options and restricted stock, income taxes, goodwill and intangible asset impairment, securities impairment, private equity and alternative investment impairment, valuation of assets and liabilities acquired in business combinations, subsequent valuations of acquired impaired loans, Federal Deposit Insurance Corporation (“FDIC”) indemnification assets, valuation of noncontrolling interest and the valuation of financial assets and liabilities reported at fair value.

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Note 1. Summary of Significant Accounting Policies (Continued)

The Company has applied its critical accounting policies and estimation methods consistently in all periods presented in these financial statements. The Company’s estimates and assumptions are expected to change as changes in market conditions and the Company’s portfolio occur in subsequent periods.

Basis of Presentation

The Company is on the accrual basis of accounting for income and expenses. The results of operations reflect any adjustments, all of which are of a normal recurring nature, unless otherwise disclosed in this Form 10-Q, and which, in the opinion of management, are necessary for a fair presentation of the results for the periods presented. In accordance with the usual practice of banks, assets and liabilities of individual trust, agency and fiduciary funds have not been included in the financial statements. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.

The results for the 2012 interim period are not necessarily indicative of the results expected for the full year. The Company has not made any significant changes in its critical accounting policies or in its estimates and assumptions from those disclosed in its 2011 Annual Report other than the adoption of new accounting pronouncements and other authoritative guidance that became effective for the Company on or after January 1, 2012. Refer to Accounting Pronouncements for discussion of accounting pronouncements adopted in 2012.

Certain prior period amounts have been reclassified to conform to the current period presentation.

Accounting Pronouncements

During the six months ended June 30, 2012, the following accounting pronouncements applicable to the Company were issued or became effective:

· In April 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2011-03, Transfers and Servicing (Topic 860): Reconsideration of Effective Control for Repurchase Agreements (“ASU 2011-03”). Accounting Standards Codification (“ASC”) Topic 860, Transfers and Servicing, provides the criteria for determining whether a transfer of financial assets under a repurchase agreement is accounted for as a secured borrowing or as a sale. In a typical repurchase transaction, an entity transfers financial assets to a counterparty in exchange for cash with an agreement for the counterparty to return the same or equivalent financial assets for a fixed price in the future. Under the guidance, an entity that maintains effective control over transferred assets must account for the transfer as a secured borrowing. ASU 2011-03 eliminates the requirement for entities to consider whether a transferor has the ability to repurchase the financial assets in a repurchase agreement for purposes of determining whether the transferor has maintained effective control. The ASU does not change the other criteria applicable to the assessment of effective control. Adoption of ASU 2011-03 on January 1, 2012 did not have a material effect on the Company’s consolidated financial statements.

· In May 2011, the FASB issued ASU 2011-04, Fair Value Measurements (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU 2011-04”). ASU 2011-04 represents the converged guidance of the FASB and International Accounting Standards Board on fair value. The new guidance establishes a common framework for measuring fair value and for disclosing information about fair value measurements. While ASU 2011-04 is largely consistent with existing fair value measurement principles, it does expand disclosure requirements and amends certain guidance. Under the revised guidance, the highest and best use and valuation premise concepts only apply to measuring the fair value of nonfinancial assets. The highest and best use of a nonfinancial asset is one that is physically possible, legally permissible and financially feasible. The valuation premise guidance provides that the highest and best use of a nonfinancial asset is either on a stand-alone basis or in combination with other assets as a group. The ASU provides a framework for considering whether a premium or discount can be applied in a fair value measurement and provides a model for measuring the fair value of an instrument classified in shareholders’ equity. ASU 2011-04 requires entities to make an accounting policy election regarding fair value measurements of financial assets and liabilities, such as derivatives, for which the exposure to market or counterparty credit risks is managed on a net or portfolio basis.

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Note 1. Summary of Significant Accounting Policies (Continued)

The Company elected to continue measuring derivative instruments that are subject to master netting agreements on the net risk exposure at the measurement date.

The expanded disclosure requirements include more detailed disclosures about the valuation processes used in fair value measurements within Level 3 of the fair value hierarchy, and categorization by level of the fair value hierarchy for items that are not measured at fair value in the statement of financial position but for which fair value is required to be disclosed in accordance with ASC Topic 825, Financial Instruments. The Company adopted ASU 2011-04 and expanded its disclosures starting with its first quarter 2012 reporting. Adoption of the new guidance did not have a significant impact on the Company’s consolidated financial statements.

· In June 2011, the FASB issued ASU 2011-05, Comprehensive Income (Topic 220), Presentation of Comprehensive Income (“ASU 2011-05”). ASU 2011-05 revises the manner in which entities present comprehensive income in their financial statements. The new guidance requires entities to report components of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements. Under the two-statement approach, the first statement would include components of net income, which is consistent with the income statement format used today, and the second statement would include components of other comprehensive income. In December 2011, the FASB issued ASU 2011-12, Comprehensive Income (Topic 220), Deferral of the Effective Date for Amendments to the Presentation of Reclassification of Items out of Accumulated Other Comprehensive Income in ASU 2011-05 (“ASU 2011-12”). ASU 2011-12 indefinitely defers the provision of ASU 2011-05 that would have required entities to present reclassification adjustments out of accumulated other comprehensive income (“AOCI”) by component in both the statement in which net income is presented and the statement in which other comprehensive income is presented. ASU 2011-05 and ASU 2011-12 became effective for the Company for first quarter 2012 reporting. The Company elected to report components of comprehensive income in two separate but consecutive statements. The new guidances were applied retrospectively for all periods presented.

Note 2. Business Combinations

First American Equipment Finance

The Company acquired First American Equipment Finance (“FAEF”), a privately owned equipment leasing company, in an all-cash transaction on April 30, 2012. Headquartered in Rochester, New York, FAEF leases technology and office equipment nationwide. Its clients include educational institutions, hospitals and health systems, large law firms, insurance underwriters, enterprise businesses, professional service businesses and nonprofit organizations. FAEF operates as a wholly owned subsidiary of the Bank.

Excluding the effects of acquisition accounting adjustments, the Company acquired approximately $343.0 million in assets and assumed $325.0 million in liabilities. The Company acquired lease receivables with a fair value of $318.3 million and assumed borrowings and nonrecourse debt with a fair value of $320.9 million. The Company recognized goodwill of approximately $68.4 million and acquisition-related expense of $0.6 million. This expense is included in Legal and professional fees in the consolidated statements of income.

The consolidated statement of income for 2012 includes the operating results produced by the acquired assets and assumed liabilities of FAEF from its acquisition date through June 30, 2012, which are not material to total operating results for the three and six month periods ended June 30, 2012. Further, the historical results of the acquired entity are not material to the Company’s results, and consequently, no pro forma information is presented.

Nevada Commerce Bank

On April 8, 2011, the Bank acquired the banking operations of Nevada Commerce Bank (“NCB”), based in Las Vegas, Nevada, in a purchase and assumption agreement with the FDIC. Excluding the effects of acquisition accounting adjustments, the Bank acquired approximately $138.9 million in assets and assumed $121.9 million in liabilities. The Bank acquired most of NCB’s assets, including loans and other real estate owned (“OREO”) with a fair value of $56.4 million and $7.5 million, respectively, and assumed deposits with a fair value of $118.4 million. The Bank received approximately $2.7 million in cash from the FDIC at acquisition and recognized a gain of $8.2 million on the acquisition of NCB in the second quarter of 2011.

In connection with the acquisition of NCB, the Bank entered into loss-sharing agreements with the FDIC under which the FDIC will reimburse the Bank for 80 percent of eligible losses with respect to covered assets. Covered assets include acquired loans (“covered loans”) and OREO (“covered OREO”) that are covered under loss-sharing agreements with the FDIC.

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Note 2. Business Combinations (Continued)

The term of the loss-sharing agreements is 10 years for single-family residential loans and eight years for all other loans. The expected reimbursements under the loss-sharing agreements were recorded as an indemnification asset at their estimated fair value of $33.8 million. The difference between the fair value of the FDIC indemnification asset and the undiscounted cash flow the Bank expects to collect from the FDIC is accreted into noninterest income.

Note 3. Fair Value Measurements

The following tables summarize assets and liabilities measured at fair value as of June 30, 2012 and December 31, 2011 by level in the fair value hierarchy:

			Fair Value Measurements at Reporting Date Using
(in thousands)	Balance as of June 30, 2012		Quoted Prices in Active Markets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3
Measured on a Recurring Basis
Assets
Securities available-for-sale:
U.S. Treasury	$	17,208	$	17,208	$	—	$	—
Federal agency - Debt	999,207		—		999,207		—
Federal agency - MBS	691,672		—		691,672		—
CMOs - Federal agency	4,477,264		—		4,477,264		—
CMOs - Non-agency	65,466		—		65,466		—
State and municipal	383,650		—		336,483		47,167
Other debt securities	229,908		—		210,724		19,184
Equity securities and mutual funds	1,506		1,506		—		—
Trading securities	62,585		55,034		7,551		—
Mark-to-market derivatives (1)	66,659		3,177		63,482		—
Total assets at fair value	$	6,995,125	$	76,925	$	6,851,849	$	66,351

Liabilities
Mark-to-market derivatives (2)	$	61,400	$	1,690	$	59,710	$	—
Other liabilities	417		—		417		—
Total liabilities at fair value	$	61,817	$	1,690	$	60,127	$	—

Measured on a Nonrecurring Basis
Assets
Collateral dependent impaired loans (3):
Commercial (4)	$	1,671	$	—	$	—	$	1,671
Commercial real estate mortgages	13,238		—		12,565		673
Residential mortgages	7,899		—		7,435		464
Real estate construction	7,499		—		—		7,499
Equity lines of credit	790		—		—		790
Installment	550		—		550		—
Other real estate owned (5)	48,550		—		37,865		10,685
Private equity and alternative investments	3,455		—		—		3,455
Total assets at fair value	$	83,652	$	—	$	58,415	$	25,237

(1) Reported in Other assets in the consolidated balance sheets.

(2) Reported in Other liabilities in the consolidated balance sheets.

(3) Impaired loans for which fair value was calculated using the collateral valuation method.

(4) Includes lease financing.

(5) Other real estate owned balance of $117.5 million in the consolidated balance sheets includes $82.8 million of covered OREO and is net of estimated disposal costs.

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Note 3. Fair Value Measurements (Continued)

			Fair Value Measurements at Reporting Date Using
(in thousands)	Balance as of December 31, 2011		Quoted Prices in Active Markets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3
Measured on a Recurring Basis
Assets
Securities available-for-sale:
U.S. Treasury	$	19,182	$	19,182	$	—	$	—
Federal agency - Debt	1,973,862		—		1,973,862		—
Federal agency - MBS	681,044		—		681,044		—
CMOs - Federal agency	4,326,907		—		4,326,907		—
CMOs - Non-agency	69,001		—		69,001		—
State and municipal	401,604		—		401,604		—
Other debt securities	99,074		—		79,491		19,583
Equity securities and mutual funds	1,227		1,227		—		—
Trading securities	61,975		61,922		53		—
Mark-to-market derivatives (1)	62,230		2,552		59,678		—
Total assets at fair value	$	7,696,106	$	84,883	$	7,591,640	$	19,583

Liabilities
Mark-to-market derivatives (2)	$	52,881	$	1,542	$	51,339	$	—
Other liabilities	263		—		263		—
Total liabilities at fair value	$	53,144	$	1,542	$	51,602	$	—

Measured on a Nonrecurring Basis
Assets
Collateral dependent impaired loans (3):
Commercial (4)	$	2,484	$	—	$	—	$	2,484
Commercial real estate mortgages	6,830		—		6,830		—
Residential mortgages	5,555		—		5,084		471
Real estate construction	18,528		—		9,680		8,848
Equity lines of credit	3,471		—		2,588		883
Installment	675		—		675		—
Collateral dependent impaired covered loans (3):
Commercial	422		—		—		422
Other real estate owned (5)	66,837		—		56,898		9,939
Private equity and alternative investments	6,558		—		—		6,558
Total assets at fair value	$	111,360	$	—	$	81,755	$	29,605

(1) Reported in Other assets in the consolidated balance sheets.

(2) Reported in Other liabilities in the consolidated balance sheets.

(3) Impaired loans for which fair value was calculated using the collateral valuation method.

(4) Includes lease financing.

(5) Other real estate owned balance of $129.3 million in the consolidated balance sheets includes $98.6 million of covered OREO and is net of estimated disposal costs.

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Note 3. Fair Value Measurements (Continued)

At June 30, 2012, $7.00 billion, or approximately 28 percent, of the Company’s total assets were recorded at fair value on a recurring basis, compared with $7.70 billion, or 33 percent, at December 31, 2011. The majority of these financial assets were valued using Level 1 or Level 2 inputs. Less than 1 percent of total assets were measured using Level 3 inputs. At June 30, 2012, $61.8 million of the Company’s total liabilities were recorded at fair value using Level 1 or Level 2 inputs, compared with $53.1 million at December 31, 2011. There were no transfers between Level 1 and Level 2 of the fair value hierarchy for assets or liabilities measured on a recurring basis during the six months ended June 30, 2012. At June 30, 2012, $83.7 million, or approximately 0.3 percent, of the Company’s total assets, were recorded at fair value on a nonrecurring basis, compared with $111.4 million, or approximately 0.5 percent, at December 31, 2011. These assets were measured using Level 2 and Level 3 inputs.

Recurring Fair Value Measurements

Assets and liabilities for which fair value measurement is based on significant unobservable inputs are classified as Level 3 in the fair value hierarchy. The following table provides a reconciliation of the beginning and ending balances for Level 3 assets measured at fair value on a recurring basis for the six months ended June 30, 2012 and 2011.

Level 3 Assets Measured on a Recurring Basis

	For the six months ended
	June 30, 2012			June 30, 2011
(in thousands)	Securities Available-for-Sale			Securities Available-for-Sale
Balance, beginning of period	$	19,583		$	20,982
Total realized/unrealized gains (losses):
Included in other comprehensive income	1,221			1,585
Settlements	(1,664		)	(1,728		)
Transfers into Level 3	47,165			—
Other (1)	46			(33		)
Balance, end of period	$	66,351		$	20,806

(1) Other rollforward activity consists of amortization of premiums and accretion of discounts recognized on the initial purchase of the securities available-for-sale.

Level 3 assets measured at fair value on a recurring basis consist of municipal auction rate securities and collateralized debt obligation senior notes that are included in securities available-for-sale. During the six months ended June 30, 2012, municipal auction rate securities totaling $47.2 million were transferred from Level 2 to Level 3 of the fair value hierarchy as a result of a change in the method used to value these securities. The valuation methodology was revised due to the prolonged period of inactivity in the market for auction rate securities. At June 30, 2012, these securities were valued using an average yield on California variable rate notes that were comparable in credit rating and maturity to the securities held, plus a liquidity premium. Senior notes totaling $19.2 million at June 30, 2012 were valued using the discounted cash flow method with the following unobservable inputs: (1) risk-adjusted discount rate consistent with similarly-rated securities, (2) prepayment rate of 2 percent, (3) default rate of 0.75 percent of performing collateral, and (4) 15 percent recovery rate with a 2-year lag. The Company had no liabilities with fair value measurements categorized as Level 3 at June 30, 2012 or 2011.

There were no purchases, sales, or transfers out of Level 3 assets measured on a recurring basis during the six months ended June 30, 2012 and 2011. Paydowns of $1.7 million were received on Level 3 assets measured on a recurring basis for the six months ended June 30, 2012 and 2011, respectively. There were no gains or losses for the six months ended June 30, 2012 and 2011 included in earnings that were attributable to the change in unrealized gains or losses relating to Level 3 assets still held as of June 30, 2012 and 2011.

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Note 3. Fair Value Measurements (Continued)

Nonrecurring Fair Value Measurements

Assets measured at fair value on a nonrecurring basis using significant unobservable inputs include certain collateral dependent impaired loans, OREO for which fair value is not solely based on market observable inputs, and certain private equity and alternative investments. Private equity and alternative investments do not have readily determinable fair values. These investments are carried at cost and evaluated for impairment on a quarterly basis. Due to the lack of readily determinable fair values for these investments, the impairment assessment is based primarily on a review of investment performance and the likelihood that the capital invested would be recovered.

The table below provides information about valuation method, inputs and assumptions for nonrecurring Level 3 fair value measurements. The weight assigned to each input is based on the facts and circumstances that exist at the date of measurement.

Information About Nonrecurring Level 3 Fair Value Measurements

(in thousands)	Fair Value at June 30, 2012		Valuation Method	Unobservable Inputs
Collateral dependent impaired loans	$	11,097	Market	- Adjustments to external or internal appraised values - Probability weighting of broker price opinions - Management assumptions regarding market trends or other relevant factors
Other real estate owned	$	10,685	Market	- Adjustments to external or internal appraised values - Probability weighting of broker price opinions - Management assumptions regarding market trends or other relevant factors
Private equity and alternative investments	$	3,455	Cost Recovery	- Management’s assumptions regarding recoverability of investment based on fund financial performance, market conditions and other relevant factors

Market-based valuation methods use prices and other relevant information generated by market transactions involving identical or comparable assets. Under the cost recovery approach, fair value represents an estimate of the amount of an asset expected to be recovered. The Company only employs the cost recovery approach for assets that are not readily marketable and for which minimal market-based information exists.

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Note 3. Fair Value Measurements (Continued)

For assets measured at fair value on a nonrecurring basis, the following table presents the total net (losses) gains, which include charge-offs, recoveries, specific reserves, OREO valuation write-downs and write-ups, gains and losses on sales of OREO, and impairment write-downs on private equity investments, recognized in the three and six months ended June 30, 2012 and 2011:

	For the three months ended June 30,						For the six months ended June 30,
(in thousands)	2012			2011			2012			2011
Collateral dependent impaired loans:
Commercial	$	—		$	—		$	(367	)	$	(606	)
Commercial real estate mortgages	(1,572		)	340			(1,937		)	7,454
Residential mortgages	(540		)	(47		)	(1,122		)	(189		)
Real estate construction	(281		)	(3,417		)	(6,753		)	(1,199		)
Equity lines of credit	(115		)	(546		)	(62		)	(510		)
Installment	—			197			(107		)	(4,317		)
Other real estate owned (1)	(3,700		)	(16,869		)	(12,165		)	(25,991		)
Private equity and alternative investments	(333		)	(200		)	(460		)	(200		)
Total net losses recognized	$	(6,541	)	$	(20,542	)	$	(22,973	)	$	(25,558	)

(1) Net losses on OREO includes $3.5 million and $11.0 million of net losses related to covered OREO for the three and six months ended June 30, 2012, respectively, and $14.6 million and $22.8 million of net losses for the three and six months ended June 30, 2011, respectively. A significant portion of net losses on covered OREO is reimbursable by the FDIC.

Fair Value of Financial Instruments

A financial instrument is broadly defined as cash, evidence of an ownership interest in another entity, or a contract that imposes a contractual obligation on one entity and conveys a corresponding right to a second entity to require delivery or exchange of a financial instrument. The table below summarizes the estimated fair values for the Company’s financial instruments as of June 30, 2012 and December 31, 2011. The table also provides information on the level in the fair value hierarchy for inputs used in the fair value of financial assets and financial liabilities. Refer to Note 1, Summary of Significant Accounting Policies, in the Company’s 2011 Form 10-K for additional information on fair value measurements. Most financial assets and financial liabilities for which carrying amount equals fair value are considered by the Company to be Level 1 measurements in the fair value hierarchy. Additional detail on assets and liabilities that are categorized in multiple levels of the fair value hierarchy is provided in the above tables of this Note.

The disclosure does not include estimated fair value amounts for assets and liabilities which are not defined as financial instruments but which have significant value. These assets and liabilities include the value of customer-relationship intangibles, goodwill, affordable housing investments carried at cost, other assets, deferred taxes and other liabilities. Accordingly, the total of the fair values presented does not represent the underlying value of the Company.

Following is a description of the methods and assumptions used in estimating the fair values for each class of financial instrument:

Cash and due from banks, Due from banks—interest bearing and Federal funds sold — For these short-term instruments, the carrying amount is a reasonable estimate of fair value.

Securities available-for-sale, Securities held-to-maturity and Trading securities — For securities held as available-for-sale and held-to-maturity, the fair value is determined by quoted market prices, where available, or on observable market inputs appropriate for the type of security. If quoted market prices or observable market inputs are not available, discounted cash flows or market valuations of comparable securities with similar credit risk and maturities may be used to determine an appropriate fair value. Fair values for trading securities are based on quoted market prices or dealer quotes. The fair value of trading securities for which quoted prices are not available is based on observable market inputs.

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Note 3. Fair Value Measurements (Continued)

Loans and leases — Loans and leases, excluding covered loans, are not recorded at fair value on a recurring basis. Nonrecurring fair value adjustments are periodically recorded on impaired loans that are measured for impairment based on the fair value of collateral. Due to the lack of activity in the secondary market for the types of loans in the Company’s portfolio, a model-based approach is used for determining the fair value of loans for purposes of the disclosures in the following table. The fair value of loans is estimated by discounting future cash flows using discount rates that incorporate the Company’s assumptions concerning current market yields, credit risk and liquidity premiums. Loan cash flow projections are based on contractual loan terms adjusted for the impact of current interest rate levels on borrower behavior, including prepayments. Loan prepayment assumptions are based on industry standards for the type of loans being valued. Projected cash flows are discounted using yield curves based on current market conditions. Yield curves are constructed by product type using the Bank’s loan pricing model for like-quality credits. The discount rates used in the Company’s model represent the rates the Bank would offer to current borrowers for like-quality credits. These rates could be different from what other financial institutions could offer for these loans.

Covered loans — The fair value of covered loans is based on estimates of future loan cash flows and appropriate discount rates, which incorporate the Company’s assumptions about market funding cost and liquidity premium. The estimates of future loan cash flows are determined using the Company’s assumptions concerning the amount and timing of principal and interest payments, prepayments and credit losses.

FDIC indemnification asset — The fair value of the FDIC indemnification asset is estimated by discounting estimated future cash flows based on estimated current market rates.

Investment in FHLB and FRB stock — Investments in government agency stock are recorded at cost. Ownership of these securities is restricted to member banks and the securities do not have a readily determinable market value. Purchases and sales of these securities are at par value with the issuer. The fair value of investments in FRB and FHLB stock is equal to the carrying amount.

Derivative contracts — The fair value of non-exchange traded (over-the-counter) derivatives is obtained from third party market sources. The Company provides client data to the third party source for purposes of calculating the credit valuation component of the fair value measurement of client derivative contracts. The fair values of interest rate contracts include interest receivable and payable and cash collateral, if any.

Deposits — The fair value of demand and interest checking deposits, savings deposits, and certain money market accounts is the amount payable on demand at the reporting date. The fair value of fixed-maturity certificates of deposit (“CD”) is determined by discounting expected future cash flows using the rates offered by the Bank for deposits of similar type and remaining maturity at the measurement date. This value is compared to the termination value of each CD given the Bank’s standard early withdrawal penalties. The fair value reported is the higher of the discounted present value of each CD and the termination value after the recovery of prepayment penalties. The Bank reviews pricing for its CD products weekly. This review gives consideration to market pricing for products of similar type and maturity offered by other financial institutions.

Federal funds purchased and Securities sold under repurchase agreements — The carrying amount is a reasonable estimate of fair value.

Other short-term borrowings — The fair value of the current portion of long-term debt classified in short-term borrowings is obtained through third-party pricing sources. The fair value of nonrecourse debt is determined by discounting estimated future cash flows based on estimated current market rates. The carrying amount of the remaining other short-term borrowings is a reasonable estimate of fair value.

Long-term debt — The fair value of long-term debt, excluding nonrecourse debt, is obtained through third-party pricing sources. The fair value of nonrecourse debt is determined by discounting estimated future cash flows based on estimated current market rates.

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Note 3. Fair Value Measurements (Continued)

FDIC clawback liability — The FDIC clawback liability represents an estimated payment by the Company to the FDIC if actual cumulative losses on acquired covered assets are lower than the cumulative losses originally estimated by the FDIC at the time of acquisition. The fair value of the FDIC clawback liability is estimated by discounting estimated future cash flows based on estimated current market rates.

Off-balance sheet commitments, which include commitments to extend credit, are excluded from the table below. A reasonable estimate of fair value for these instruments is the carrying amount of deferred fees and the reserve for any credit losses related to these off-balance sheet instruments. This estimate is not material to the Company’s financial position.

		June 30, 2012				December 31, 2011
	Fair Value	Carrying		Fair		Carrying		Fair
(in millions)	Level	Amount		Value		Amount		Value
Financial Assets:
Cash and due from banks	1	$	162.9	$	162.9	$	168.4	$	168.4
Due from banks - interest bearing	1	106.1		106.1		76.4		76.4
Federal funds sold	1	162.0		162.0		—		—
Securities available-for-sale	1, 2, 3	6,865.9		6,865.9		7,571.9		7,571.9
Securities held-to-maturity	2	1,100.2		1,127.1		467.7		473.9
Trading securities	1, 2	62.6		62.6		62.0		62.0
Loans and leases, net of allowance	3	13,237.7		13,694.6		12,046.8		12,400.5
Covered loans, net of allowance	3	1,217.0		1,282.2		1,417.3		1,472.6
FDIC indemnification asset	3	170.7		149.4		204.3		184.3
Investment in FHLB and FRB stock	2	99.7		99.7		107.4		107.4
Derivative assets	1, 2	66.7		66.7		62.2		62.2

Financial Liabilities:
Deposits	2, 3	$	21,109.1	$	21,112.9	$	20,387.6	$	20,392.3
Federal funds purchased and securities sold under repurchase agreements	1	110.0		110.0		50.0		50.0
Other short-term borrowings	2, 3	212.1		216.0		—		—
Long-term debt	2, 3	712.3		758.2		697.8		718.7
Derivative liabilities	1, 2	61.4		61.4		52.9		52.9
FDIC clawback liability	3	9.2		9.2		8.1		8.1

Note 4. Securities

At June 30, 2012, the Company had total securities of $8.03 billion, comprised of securities available-for-sale at fair value of $6.87 billion, securities held-to-maturity at amortized cost of $1.10 billion and trading securities at fair value of $62.6 million. At December 31, 2011, the Company had total securities of $8.10 billion, comprised of securities available-for-sale at fair value of $7.57 billion, securities held-to-maturity at amortized cost of $467.7 million and trading securities at fair value of $62.0 million.

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Note 4. Securities (Continued)

The following is a summary of amortized cost and estimated fair value for the major categories of securities available-for-sale and securities held-to-maturity at June 30, 2012 and December 31, 2011:

			Gross		Gross
	Amortized		Unrealized		Unrealized
(in thousands)	Cost		Gains		Losses			Fair Value
June 30, 2012
Securities available-for-sale:
U.S. Treasury	$	17,223	$	1	$	(16	)	$	17,208
Federal agency - Debt	994,268		4,954		(15		)	999,207
Federal agency - MBS	655,384		36,288		—			691,672
CMOs - Federal agency	4,388,817		89,297		(850		)	4,477,264
CMOs - Non-agency	70,702		839		(6,075		)	65,466
State and municipal	365,236		18,515		(101		)	383,650
Other debt securities	231,795		5,291		(7,178		)	229,908
Total debt securities	6,723,425		155,185		(14,235		)	6,864,375
Equity securities and mutual funds	336		1,170		—			1,506
Total securities available-for-sale	$	6,723,761	$	156,355	$	(14,235	)	$	6,865,881

Securities held-to-maturity (1):
Federal agency - Debt	$	103,439	$	2,002	$	—		$	105,441
Federal agency - MBS	200,763		5,520		(99		)	206,184
CMOs - Federal agency	642,102		18,384		(22		)	660,464
State and municipal	153,925		2,248		(1,209		)	154,964
Total securities held-to-maturity	$	1,100,229	$	28,154	$	(1,330	)	$	1,127,053

December 31, 2011
Securities available-for-sale:
U.S. Treasury	$	19,163	$	24	$	(5	)	$	19,182
Federal agency - Debt	1,967,928		6,230		(296		)	1,973,862
Federal agency - MBS	650,091		31,040		(87		)	681,044
CMOs - Federal agency	4,239,205		89,926		(2,224		)	4,326,907
CMOs - Non-agency	79,999		322		(11,320		)	69,001
State and municipal	383,210		18,767		(373		)	401,604
Other debt securities	106,051		1,896		(8,873		)	99,074
Total debt securities	7,445,647		148,205		(23,178		)	7,570,674
Equity securities and mutual funds	352		875		—			1,227
Total securities available-for-sale	$	7,445,999	$	149,080	$	(23,178	)	$	7,571,901

Securities held-to-maturity (1):
Federal agency - Debt	$	40,423	$	780	$	—		$	41,203
Federal agency - MBS	75,231		1,632		—			76,863
CMOs - Federal agency	292,547		2,580		(195		)	294,932
State and municipal	59,479		1,463		(37		)	60,905
Total securities held-to-maturity	$	467,680	$	6,455	$	(232	)	$	473,903

(1) Securities held-to-maturity are presented in the consolidated balance sheets at amortized cost.

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Note 4. Securities (Continued)

Proceeds from sales of securities available-for-sale were $5.2 million for the three and six months ended June 30, 2012, respectively, compared with $47.2 million and $53.3 million for the three and six months ended June 30, 2011, respectively. There were no sales of securities held-to-maturity during the three and six months ended June 30, 2012 and June 30, 2011. The following table provides the gross realized gains and losses on the sales and calls of securities (including trading securities):

For the three months ended

For the six months ended