FAIR VALUE

12 Months Ended

Dec. 31, 2011

FAIR VALUE

FAIR VALUE

3.           FAIR VALUE

              Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the Company uses various methods including market and income approaches. Based on these approaches, the Company utilizes certain assumptions that market participants would use in pricing the asset or liability. These inputs can be readily observable, market corroborated, or generally unobservable inputs. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Based on the observability of the inputs used in the valuation techniques, the Company is required to provide the following information according to the fair value hierarchy noted below. The hierarchy is based on the quality and reliability of the information used to determine fair values. The hierarchy gives the highest priority to quoted prices available in active markets and the lowest priority to data lacking transparency. Financial assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:

• •

  Level 1—Quoted prices for identical instruments that are highly liquid, observable and actively traded in over-the-counter markets. Level 1 financial instruments typically include U.S. Treasury securities.

  •

  Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable and can be corroborated by market data. Level 2 financial instruments typically include U.S. Government debt and agency mortgage-backed securities, corporate debt securities, municipal securities, single issue trust preferred securities, equity swap agreements, foreign exchange options, interest rate swaps and OREO.

  •

  Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. This category typically includes mortgage servicing assets, impaired loans, private-label mortgage-backed securities, pooled trust preferred securities and derivatives payable.

              The Company records investment securities available-for-sale, equity swap agreements, derivatives payable, foreign exchange options and interest rate swaps at fair value on a recurring basis. Certain other assets such as mortgage servicing assets, impaired loans, other real estate owned, goodwill, premiums on acquired deposits and private equity investments are recorded at fair value on a nonrecurring basis. Nonrecurring fair value measurements typically involve assets that are periodically evaluated for impairment and for which any impairment is recorded in the period in which the remeasurement is performed.

              In determining the appropriate hierarchy levels, the Company performs a detailed analysis of assets and liabilities that are subject to fair value disclosure. The following tables present both financial and nonfinancial assets and liabilities that are measured at fair value on a recurring and nonrecurring basis. These assets and liabilities are reported on the consolidated balance sheets at their fair values as of December 31, 2011 and December 31, 2010. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to their fair value measurement. There were no transfers in an out of Levels 1 and 2 during 2011. There were also no transfers in and out of Level 1 and 3 or Levels 2 and 3.

	Assets (Liabilities) Measured at Fair Value on a Recurring Basis as of December 31, 2011
	Fair Value Measurements December 31, 2011			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
	(In thousands)
Investment securities available-for-sale:
U.S. Treasury securities	$	20,725		$	20,725	$	—		$	—
U.S. Government agency and U.S. Government sponsored enterprise debt securities		576,578			—		576,578			—
U.S. Government agency and U.S. Government sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities		49,315			—		49,315			—
Residential mortgage-backed securities		993,770			—		993,770			—
Municipal securities		79,946			—		79,946			—
Other residential mortgage-backed securities:
Investment grade		—			—		—			—
Non-investment grade		—			—		—			—
Corporate debt securities:
Investment grade		1,322,561			—		1,322,561			—
Non-investment grade		19,615			—		17,380			2,235
Other securities		10,068			—		10,068			—
Total investment securities available-for-sale	$	3,072,578		$	20,725	$	3,049,618		$	2,235
Equity swap agreements	$	202		$	—	$	202		$	—
Foreign exchange options		3,899			—		3,899			—
Interest rate swaps		20,474			—		20,474			—
Short-term foreign exchange contracts		1,403			—		1,403			—
Derivatives liabilities		(24,164	)		—		(21,530	)		(2,634	)

	Assets (Liabilities) Measured at Fair Value on a Recurring Basis as of December 31, 2010
	Fair Value Measurements December 31, 2010			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
	(In thousands)
Investment securities available-for-sale:
U.S. Treasury securities	$	20,454		$	20,454	$	—		$	—
U.S. Government agency and U.S. Government sponsored enterprise debt securities		1,333,465			—		1,333,465			—
U.S. Government agency and U.S. Government sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities		19,132			—		19,132			—
Residential mortgage-backed securities		306,714			—		306,714			—
Municipal securities		—			—		—			—
Other residential mortgage-backed securities:
Investment grade		—			—		—			—
Non-investment grade		6,254			—		—			6,254
Corporate debt securities:
Investment grade		1,056,867			—		1,056,867			—
Non-investment grade		38,730			—		35,957			2,773
Other securities		94,325			—		94,325			—
Total investment securities available-for-sale	$	2,875,941		$	20,454	$	2,846,460		$	9,027
Equity swap agreements	$	206		$	—	$	206		$	—
Foreign exchange options		5,084			—		5,084			—
Interest rate swaps		13			—		13			—
Short-term foreign exchange contracts		1,220			—		1,220			—
Derivatives liabilities		(4,498	)		—		(1,049	)		(3,449	)

	Assets Measured at Fair Value on a Non-Recurring Basis for the Twelve Months Ended December 31, 2011
	Fair Value Measurements December 31, 2011		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Gains (Losses) for the Twelve Months Ended December 31, 2011
	(In thousands)
Non-covered impaired loans:
Total residential	$	16,626	$	—	$	16,626	$	—	$	(7,380	)
Total commercial real estate		45,679		—		45,679		—		(39,839	)
Total commercial and industrial		12,516		—		—		12,516		(14,330	)
Total consumer		—		—		—		—		—
Total non-covered impaired loans	$	74,821	$	—	$	62,305	$	12,516	$	(61,549	)
Mortgage servicing assets
(single-family, multifamily and commercial)	$	11,252	$	—	$	—	$	11,252	$	(927	)
Non-covered OREO	$	8,491	$	—	$	8,491	$	—	$	(3,015	)
Covered OREO(1)	$	35,926	$	—	$	35,926	$	—	$	(26,251	)
Loans held for sale	$	14,527	$	—	$	—	$	14,527	$	(12,867	)
Investment in affordable housing partnerships	$	7,726	$	—	$	—	$	7,726	$	(1,296	)

	Assets Measured at Fair Value on a Non-Recurring Basis for the Twelve Months Ended December 31, 2010
	Fair Value Measurements December 31, 2010		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Gains (Losses) for the Twelve Months Ended December 31, 2010
	(In thousands)
Non-covered impaired loans:
Total residential	$	7,486	$	—	$	7,486	$	—	$	(2,955	)
Total commercial real estate		39,325		—		39,325		—		(25,229	)
Total commercial and industrial		6,405		—		—		6,405		(6,427	)
Total consumer		538		—		538		—		(641	)
Total non-covered impaired loans	$	53,754	$	—	$	47,349	$	6,405	$	(35,252	)
Mortgage servicing assets
(single-family, multifamily and commercial)	$	14,509	$	—	$	—	$	14,509	$	(808	)
Non-covered OREO	$	12,940	$	—	$	12,940	$	—	$	(7,054	)
Covered OREO(1)	$	54,919	$	—	$	54,919	$	—	$	(44,002	)
Loans held for sale	$	14,559	$	—	$	—	$	14,559	$	(4,104	)
Investment in affordable housing partnerships	$	—	$	—	$	—	$	—	$	—

⁽¹⁾

Covered OREO results from the WFIB and UCB FDIC-assisted acquisitions for which the Company entered into shared-loss agreements with the FDIC whereby the FDIC will reimburse the Company for 80% of eligible losses. As such, the Company's liability for losses is 20% of the $26.3 million in losses, or $5.3 million, and 20% of the $44.0 million in losses, or $8.8 million, for the year ended December 31, 2011 and 2010, respectively.

              At each reporting period, all assets and liabilities for which the fair value measurement is based on significant unobservable inputs are classified as Level 3. The following tables provide a reconciliation of the beginning and ending balances for major asset and liability categories measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the years ended December 31, 2011 and December 31, 2010:

	Investment Securities Available-for-Sale
				Other Residential Mortgage-Backed Securities			Corporate Debt Securities
	Total			Non-Investment Grade			Investment Grade		Non-Investment Grade			Derivatives Payable
	(In thousands)
Beginning balance, January 1, 2011	$	9,027		$	6,254		$	—	$	2,773		$	(3,449	)
Total gains or (losses):(1)
Included in earnings		(6,293	)		(5,660	)		—		(633	)		815
Included in other comprehensive loss (unrealized)(2)		8,567			8,763			—		(196	)		—
Purchases, issuances, sales, settlements(3)
Purchases		—			—			—		—			—
Issuances		—			—			—		—			—
Sales		(9,357	)		(9,357	)		—		—			—
Settlements		291			—			—		291			—
Transfer from investment grade to non-investment grade		—			—			—		—			—
Transfers in and/or out of Level 3(4)		—			—			—		—			—
Ending balance, December 31, 2011	$	2,235		$	—		$	—	$	2,235		$	(2,634	)
Changes in unrealized losses included in earnings relating to assets and liabilities still held at December 31, 2011	$	633		$	—		$	—	$	633		$	(815	)

	Investment Securities Available-for-Sale
				Other Residential Mortgage-Backed Securities			Corporate Debt Securities
	Total			Non-Investment Grade			Investment Grade			Non-Investment Grade			Derivatives Payable
	(In thousands)
Beginning balance, January 1, 2010	$	15,671		$	12,738		$	978		$	1,955		$	(14,185	)
Total gains or (losses):(1)
Included in earnings		(13,996	)		(5,903	)		5			(8,098	)		152
Included in other comprehensive loss (unrealized)(2)		7,363			(152	)		308			7,207			—
Purchases, issuances, sales, settlements(3)		(11	)		(429	)		(9	)		427			10,584
Transfer from investment grade to non-investment grade		—			—			(1,282	)		1,282			—
Transfers in and/or out of Level 3(4)		—			—			—			—			—
Ending balance, December 31, 2010	$	9,027		$	6,254		$	—		$	2,773		$	(3,449	)
Changes in unrealized losses included in earnings relating to assets and liabilities still held at December 31, 2010	$	(14,447	)	$	(6,340	)	$	—		$	(8,107	)	$	(152	)

⁽¹⁾

Total gains or losses represent the total realized and unrealized gains and losses recorded for Level 3 assets and liabilities. Realized gains or losses are reported in the consolidated statements of income.

⁽²⁾

Unrealized gains or losses on investment securities are reported in accumulated other comprehensive loss, net of tax in the consolidated statements of changes in stockholders' equity and comprehensive income.

⁽³⁾

Purchases, issuances, sales and settlements represent Level 3 assets and liabilities that were either purchased, issued, sold, or settled during the period. The amounts are recorded at their end of period fair values.

⁽⁴⁾

Transfers in and/or out represent existing assets and liabilities that were either previously categorized as a higher level and the inputs to the model became unobservable or assets and liabilities that were previously classified as Level 3 and the lowest significant input became observable during the period. These assets and liabilities are recorded at their end of period fair values.

Valuation Methodologies

              Investment Securities Available-for-Sale—The fair values of available-for-sale investment securities are generally determined by prices obtained from independent external pricing service providers who have experience in valuing these securities or by comparison to and/or average of at least two quoted market prices obtained from independent external brokers. In obtaining such valuation information from third parties, the Company has reviewed the methodologies used to develop the resulting fair values.

              The Company's Level 3 available-for-sale securities include four pooled trust preferred securities. The fair values of these investment securities represent less than 1% of the total available-for-sale investment securities. The fair values of the pooled trust preferred securities have traditionally been based on the average of at least two quoted market prices obtained from independent external brokers since broker quotes in an active market are given the highest priority. However, as a result of the continued illiquidity in the pool trust preferred securities market, the market for these securities has been inactive since mid-2007. It is the Company's view that current broker prices (which are typically non-binding) on certain pooled trust preferred securities are based on forced liquidation or distressed sale values in very inactive markets that are not representative of the fair value of these securities. As such, the Company considered what weight, if any, to place on transactions that are not orderly when estimating fair value.

              For the pooled trust preferred securities, the fair value was derived based on discounted cash flow analyses (the income method) prepared by management. In order to determine the appropriate discount rate used in calculating fair values derived from the income method for the pooled trust preferred securities, the Company has made assumptions using an exit price approach related to the implied rate of return which have been adjusted for general changes in market rates, estimated changes in credit quality and liquidity risk premium, specific nonperformance, and default experience in the collateral underlying the securities. The losses recorded in the period are recognized in noninterest income.

              Equity Swap Agreements—The Company has entered into equity swap agreements to hedge against market fluctuations in a promotional equity index certificate of deposit product offered to bank customers. This deposit product, which has a term of 5 years, pays interest based on the performance of the Hang Seng China Enterprises Index ("HSCEI"). The fair value of these equity swap agreements is based on the income approach. The fair value is based on the change in the value of the HSCEI and the volatility of the call option over the life of the individual swap agreement. The option value is derived based on the volatility, the interest rate and the time remaining to maturity of the call option. The Company's consideration of its counterparty's credit risk resulted in a nominal adjustment to the valuation of the equity swap agreements for the year ended December 31, 2011. The valuation of equity swap agreements falls within Level 2 of the fair value hierarchy due to the observable nature of the inputs used in deriving the fair value of these derivative contracts. The fair value of the derivative contracts is provided by a third party that the Company places reliance on.

              Derivatives Liabilities—The Company's derivatives liabilities include derivatives payable that falls within Level 3 and all other derivative liabilities which fall within Level 2. The derivatives payable are recorded in conjunction with certain certificates of deposit ("host instrument"). These CD's pay interest based on changes in either the HSCEI or based on changes in the Chinese currency Renminbi ("RMB"), as designated, and are included in interest-bearing deposits on the condensed consolidated balance sheets. The fair value of these embedded derivatives is based on the income approach. The Company's consideration of its own credit risk resulted in a nominal adjustment to the valuation of the derivative liabilities for the year ended December 31, 2011. The valuation of the derivatives payable falls within Level 3 of the fair value hierarchy since the significant inputs used in deriving the fair value of these derivative contracts are not directly observable. The Level 2 derivative liabilities are mostly comprised of the off-setting interest rate swaps. Refer to "Interest Rate Swaps" within this footnote for complete discussion.

              Foreign Exchange Options—The Company has entered into foreign exchange option contracts with major investment firms. The settlement amount is determined based upon the performance of the Chinese currency RMB relative to the U.S. Dollar ("USD") over the 5-year term of the contract. The performance amount is computed based on the average quarterly value of the RMB per the USD as compared to the initial value. The fair value of the derivative contract is provided by third parties and is determined based on the change in the RMB and the volatility of the option over the life of the agreement. The option value is derived based on the volatility of the option, interest rate, currency rate and time remaining to maturity. The Company's consideration of the counterparty's credit risk resulted in a $0.3 million adjustment to the valuation of the foreign exchange options for the year ended December 31, 2011. The valuation of the option contract falls within Level 2 of the fair value hierarchy due to the observable nature of the inputs used in deriving the fair value of this derivative contract.

              Interest Rate Swaps—The Company has entered into a pay-fixed, receive-variable swap contracts with institutional counterparties to hedge against interest rate swap products offered to bank customers. This product allows borrowers to lock in attractive intermediate and long-term interest rates by entering into a pay-fixed, receive-variable swap contract with the Company, resulting in the customer obtaining a synthetic fixed rate loan. The Company has also entered into pay-variable, receive-fixed swap contracts with institutional counterparties to hedge against certificates of deposit issued. This product allows the Company to lock in attractive floating rate funding. The fair value of the interest rate swap contracts is based on a discounted cash flow approach. The Company's consideration of the counterparty's credit resulted in a $0.5 million adjustment as of December 31, 2011. The valuation of the interest rate swap falls within Level 2 of the fair value hierarchy due to the observable nature of the inputs used in deriving the fair value of this derivative contract.

              Short-term Foreign Exchange Contracts—The Company entered into short-term foreign exchange contracts to purchase/sell foreign currencies at set rates in the future. These contracts economically hedge against foreign exchange rate fluctuations. The Company enters into contracts with institutional counterparties to hedge against foreign exchange products offered to bank customers. These products allow customers to hedge the foreign exchange risk of their deposits and loans denominated in foreign currencies. The Company does not assume any foreign exchange rate risk as the contract with the customer and the contract with the institutional party mirror each other. The value is mark to market at each reporting period based on the change in the foreign exchange rate. Given the short term nature of the contracts, the counterparties' credit risks are considered nominal and resulted in no adjustments to the valuation of the short-term foreign exchange contracts for the year ended December 31, 2011. The valuation of the contract falls within Level 2 of the fair value hierarchy due to the observable nature of the inputs used in deriving the fair value of this derivative contract.

              Mortgage Servicing Assets ("MSAs")—The Company records MSAs in conjunction with its loan sale and securitization activities since the servicing of the underlying loans is retained by the Bank. MSAs are initially measured at fair value using an income approach. The initial fair value of MSAs is determined based on the present value of estimated net future cash flows related to contractually-specified servicing fees. The valuation for MSAs falls within Level 3 of the fair value hierarchy since there are no quoted prices for MSAs and the significant inputs used to determine fair value are not directly observable. The valuation of MSAs is determined using a discounted cash flow approach utilizing the appropriate yield curve and several market-derived assumptions including prepayment speeds, servicing cost, delinquency and foreclosure costs and behavior, and float earnings rate. Net cash flows are present valued using a market-derived discount rate. The resulting fair value is then compared to recently observed bulk market transactions with similar characteristics.

              Impaired Loans—The Company's impaired loans are generally measured using the fair value of the underlying collateral, which is determined based on the most recent valuation information received. The fair values may be adjusted as needed based on factors such as the Company's historical knowledge and changes in market conditions from the time of valuation. Impaired loans fall within Level 2 or Level 3 of the fair value hierarchy as appropriate. Level 2 values are measured at fair value based on the most recent valuation information received on the underlying collateral. Level 3 values, additionally include adjustments by the Company for historical knowledge and for changes in market conditions.

              Other Real Estate Owned—The Company's OREO represents properties acquired through foreclosure or through full or partial satisfaction of loans and are recorded at estimated fair value less cost to sell at the time of foreclosure and at the lower of cost or estimated fair value less cost to sell subsequent to acquisition. The fair values of OREO properties are based on third party appraisals, broker price opinions or accepted written offers. These valuations are reviewed and approved by the Company's appraisal department, credit review department, or OREO department. OREO properties are classified as Level 2 assets in the fair value hierarchy. The non-covered OREO balance of $29.3 million and the covered OREO balance of $63.6 million are included in the consolidated balance sheets as of December 31, 2011.

              Loans Held for Sale—The Company's loans held for sale are carried at the lower of cost or market value. These loans are currently comprised of mostly student loans. For those loans, the fair value of loans held for sale is derived from current market prices and comparative current sales. For the remainder of the loans held for sale, which fall within Level 3, the fair value is derived from third party sale analysis, existing sale agreements, or appraisal reports on the loans' underlying collateral. As such, the Company records any fair value adjustments on a nonrecurring basis.

Fair Value of Financial Instruments

              The carrying amounts and fair values of the Company's financial instruments at December 31, 2011 and 2010 were as follows:

	December 31,
	2011				2010
	Carrying Amount or Notional Amount		Estimated Fair Value		Carrying Amount or Notional Amount		Estimated Fair Value
	(In thousands)
Financial Assets:
Cash and cash equivalents	$	1,431,185	$	1,431,185	$	1,333,949	$	1,333,949
Short-term investments		61,834		61,834		143,560		143,560
Securities purchased under resale agreements		786,434		791,745		500,000		505,826
Investment securities available-for-sale		3,072,578		3,072,578		2,875,941		2,875,941
Loans held for sale		278,603		285,181		220,055		225,221
Loans receivable, net		13,984,930		13,520,712		13,231,075		13,043,932
Investment in Federal Home Loan Bank stock		136,897		136,897		162,805		162,805
Investment in Federal Reserve Bank stock		47,512		47,512		47,285		47,285
Accrued interest receivable		89,686		89,686		82,090		82,090
Equity swap agreements		22,709		202		22,884		206
Foreign exchange options		85,614		3,899		85,614		5,084
Interest rate swaps		585,196		20,474		4,098		13
Short-term foreign exchange contracts		210,295		1,403		92,625		1,220
Financial Liabilities:
Customer deposit accounts:
Demand, savings and money market deposits		10,307,001		10,307,001		8,875,806		8,875,806
Time deposits		7,146,001		7,194,125		6,765,453		6,762,892
Federal funds purchased		—		—		22		22
Federal Home Loan Bank advances		455,251		479,029		1,214,148		1,199,151
Securities sold under repurchase agreements		1,020,208		1,177,331		1,083,545		1,296,522
Notes payable		85,987		85,987		49,690		49,690
Accrued interest payable		15,447		15,447		13,797		13,797
Long-term debt		212,178		144,392		235,570		125,633
Derivatives liabilities		835,913		24,164		130,752		4,498

              The methods and assumptions used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value are explained below:

              Cash and Cash Equivalents—The carrying amounts approximate fair values due to the short-term nature of these instruments.

              Short-Term Investments—The fair values of short-term investments generally approximate their book values due to their short maturities.

              Securities Purchased Under Resale Agreements—Securities purchased under resale agreements with original maturities of 90 days or less are included in cash and cash equivalents. The fair value of securities purchased under resale agreements with original maturities of more than 90 days is estimated by discounting the cash flows based on expected maturities or repricing dates utilizing estimated market discount rates.

              Investment Securities Available-For-Sale—The fair values of the investment securities available-for-sale are generally determined by reference to the average of at least two quoted market prices obtained from independent external brokers or independent external pricing service providers who have experience in valuing these securities. In obtaining such valuation information from third parties, the Company has reviewed the methodologies used to develop the resulting fair values. For pooled trust preferred securities, fair values are based on discounted cash flow analyses.

              Loans Held for Sale—The fair value of loans held for sale is derived from current market prices and comparative current sales. For loans held for sale, which fall within Level 3, the fair value is derived from third party sale analysis, existing sale agreements, or appraisal reports.

Loans Receivable, net (includes covered and non-covered loans)—The fair value of loans is determined based on the discounted cash flow approach. The discount rate is derived from the associated yield curve plus spreads, and reflects the offering rates in the market for loans with similar financial characteristics. No adjustments have been made for changes in credit within the loan portfolio. It is management's opinion that the allowance for loan losses pertaining to performing and nonperforming loans results in a fair valuation of credit for such loans.

              Investment in Federal Home Loan Bank Stock and Federal Reserve Bank Stock—The carrying amount approximates fair value, as the stock may be sold back to the Federal Home Loan Bank and the Federal Reserve Bank at carrying value.

              Accrued Interest Receivable—The carrying amount of accrued interest receivable approximates fair value due to its short-term nature.

              Equity Swap Agreements—The fair value of the derivative contracts is provided by a third party and is determined based on the change in value of the HSCEI and the volatility of the call option over the life of the individual swap agreement. The option value is derived based on the volatility of the option, interest rate and time remaining to maturity. We also considered the counterparty's credit risk in determining the fair value.

              Foreign Exchange Options—The fair value of the derivative contracts is provided by third parties and is determined based on the change in the RMB and the volatility of the option over the life of the agreement. The option value is derived based on the volatility of the option, interest rate and time remaining to the maturity. We also considered the counterparty's credit risk in determining the fair value.

              Interest Rate Swaps—The fair value of the interest rate swap contracts is provided by a third party and is determined based on a discounted cash flow approach. We also considered the counterparty's credit risk in determining the fair value.

              Short-term Foreign Exchange Contracts—The fair value of short-term foreign exchange contracts is determined based on the change in foreign exchange rate. We also considered the counterparty's credit risk in determining the fair value.

              Customer Deposit Accounts—The carrying amounts approximate fair value for demand and interest checking deposits, savings deposits, and certain money market accounts as the amounts are payable on demand at the reporting date. For time deposits, the cash flows are based on the contractual runoff and are discounted by the Bank's current offering rates, plus spread.

              Federal Funds Purchased—The carrying amounts approximate fair values due to the short-term nature of these instruments.

              Federal Home Loan Bank Advances—The fair value of FHLB advances is estimated based on the discounted value of contractual cash flows, using rates currently offered by the FHLB of San Francisco for fixed-rate credit advances with similar remaining maturities at each reporting date.

              Securities Sold Under Repurchase Agreements—For securities sold under repurchase agreements with original maturities of 90 days or less, the carrying amounts approximate fair values due to the short-term nature of these instruments. At December 31, 2011 and 2010, most of the securities sold under repurchase agreements are long-term in nature and the fair values of securities sold under repurchase agreements are calculated by discounting future cash flows based on expected maturities or repricing dates, utilizing estimated market discount rates and taking into consideration the call features of each instrument.

              Notes Payable—The carrying amount of notes payable approximates fair value as these notes are payable on demand.

              Accrued Interest Payable—The carrying amount of accrued interest payable approximates fair value due to its short-term nature.

              Long-Term Debt—The fair values of long-term debt are estimated by discounting the cash flows through maturity based on current market rates the Bank would pay for new issuances.

              Derivatives Liabilities—The Company's derivatives liabilities include "derivatives payable" and all other derivative liabilities. The Company's derivatives payable are recorded in conjunction with certain certificates of deposit ("host instrument"). These CD's pay interest based on changes in either the HSCEI or based on changes in the RMB, as designated. The fair value of derivatives payable is estimated using the income approach. Additionally, we considered our own credit risk in determining the valuation. The other derivative liabilities are mostly comprised of the off-setting interest rate swaps. The fair value of the interest rate swap contracts is provided by a third party and is determined based on a discounted cash flow approach. The Company also considered the counterparty's credit risk in determining the fair value.

              The fair value estimates presented herein are based on pertinent information available to management as of each reporting date. Although we are not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since that date, and therefore, current estimates of fair value may differ significantly from the amounts presented herein.