Investment Securities

The amortized cost and estimated fair value of securities were as follows:



	September 30, 2018
	Amortized Cost		Unrealized Gain		Unrealized Loss			Estimated Fair Value
	(dollars in thousands)
Investment securities available-for-sale:
U.S. Treasury	$	59,659	$	13	$	(329	)	$	59,343
Agency	113,628		20		(877		)	112,771
Corporate	102,761		235		(1,402		)	101,594
Municipal bonds	234,910		584		(4,293		)	231,201
Collateralized mortgage obligation: residential	25,897		50		(741		)	25,206
Mortgage-backed securities: residential	541,660		33		(16,931		)	524,762
Total investment securities available-for-sale	1,078,515		935		(24,573		)	1,054,877
Investment securities held-to-maturity:
Mortgage-backed securities: residential	45,287		22		(1,269		)	44,040
Other	1,098		—		—			1,098
Total investment securities held-to-maturity	46,385		22		(1,269		)	45,138
Total investment securities	$	1,124,900	$	957	$	(25,842	)	$	1,100,015



	December 31, 2017
	Amortized Cost		Unrealized Gain		Unrealized Loss			Estimated Fair Value
	(dollars in thousands)
Investment securities available-for-sale:
Agency	$	47,051	$	236	$	(78	)	$	47,209
Corporate	78,155		1,585		(194		)	79,546
Municipal bonds	228,929		3,942		(743		)	232,128
Collateralized mortgage obligation: residential	33,984		132		(335		)	33,781
Mortgage-backed securities: residential	398,664		266		(4,165		)	394,765
Total investment securities available-for-sale	786,783		6,161		(5,515		)	787,429
Investment securities held-to-maturity:
Mortgage-backed securities: residential	17,153		—		(209		)	16,944
Other	1,138		—		—			1,138
Total investment securities held-to-maturity	18,291		—		(209		)	18,082
Total investment securities	$	805,074	$	6,161	$	(5,724	)	$	805,511

Unrealized gains and losses on investment securities available-for-sale are recognized in stockholders’ equity as accumulated other comprehensive income or loss. At September 30, 2018, the Company had an accumulated other comprehensive loss of $23.6 million, or $16.7 million net of tax, compared to an accumulated other comprehensive income of $646,000, or $415,000 net of tax, at December 31, 2017.

At September 30, 2018, mortgage-backed securities ("MBS") with an estimated par value of $21.7 million and a fair value of $22.2 million were pledged as collateral for the Bank’s homeowner’s association (“HOA”) reverse repurchase agreements, which totaled $2.3 million.

At December 31, 2017, MBS with an estimated par value of $55.6 million and a fair value of $57.0 million were pledged as collateral for the Bank’s three repurchase agreements, which totaled $28.5 million, and HOA reverse repurchase agreements, which totaled $17.6 million.

At September 30, 2018 and December 31, 2017, there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of stockholders' equity.

The Company reviews individual securities classified as available-for-sale to determine whether a decline in fair value below the amortized cost basis is temporary because (i) those declines were due to interest rate changes and not to a deterioration in the creditworthiness of the issuers of those investment securities, and (ii) we have the ability to hold those securities until there is a recovery in their values or until their maturity.

If it is probable that the Company will be unable to collect all amounts due according to contractual terms of the debt security not impaired at acquisition, an other-than-temporary impairment ("OTTI") shall be considered to have occurred. If an OTTI occurs, the cost basis of the security will be written down to its fair value as the new cost basis and the write down accounted for as a realized loss.

The Company did not realize any OTTI losses for the three months ended September 30, 2018, June 30, 2018 or September 30, 2017, or the nine months ended September 30, 2018 and 2017.

The table below shows the number, fair value and gross unrealized holding losses of the Company’s investment securities by investment category and length of time that the securities have been in a continuous loss position.



	September 30, 2018
	Less than 12 Months						12 Months or Longer						Total
	Number	Fair Value		Gross Unrealized Holding Losses			Number	Fair Value		Gross Unrealized Holding Losses			Number	Fair Value		Gross Unrealized Holding Losses
	(dollars in thousands)
Investment securities available-for-sale:
U.S. Treasury	5	$	39,925	$	(329	)	—	$	—	$	—		5	$	39,925	$	(329	)
Agency	28	90,499		(859		)	1	1,121		(18		)	29	91,620		(877		)
Corporate	17	61,221		(1,076		)	4	8,942		(326		)	21	70,163		(1,402		)
Municipal bonds	173	150,294		(2,817		)	42	22,161		(1,476		)	215	172,455		(4,293		)
Collateralized mortgage obligation: residential	2	3,023		(54		)	7	16,537		(687		)	9	19,560		(741		)
Mortgage-backed securities: residential	85	323,466		(7,531		)	79	195,039		(9,400		)	164	518,505		(16,931		)
Total investment securities available-for-sale	310	668,428		(12,666		)	133	243,800		(11,907		)	443	912,228		(24,573		)
Investment securities held-to-maturity:
Mortgage-backed securities: residential	13	33,318		(949		)	1	5,849		(320		)	14	39,167		(1,269		)
Total investment securities held-to-maturity	13	33,318		(949		)	1	5,849		(320		)	14	39,167		(1,269		)
Total investment securities	323	$	701,746	$	(13,615	)	134	$	249,649	$	(12,227	)	457	$	951,395	$	(25,842	)



	December 31, 2017
	Less than 12 Months						12 Months or Longer						Total
	Number	Fair Value		Gross Unrealized Holding Losses			Number	Fair Value		Gross Unrealized Holding Losses			Number	Fair Value		Gross Unrealized Holding Losses
	(dollars in thousands)
Investment securities available-for-sale:
Agency	6	$	13,754	$	(78	)	—	$	—	$	—		6	$	13,754	$	(78	)
Corporate	4	10,079		(64		)	2	6,076		(130		)	6	16,155		(194		)
Municipal bonds	103	61,313		(268		)	30	15,658		(475		)	133	76,971		(743		)
Collateralized mortgage obligation: residential	5	13,971		(149		)	3	8,943		(186		)	8	22,914		(335		)
Mortgage-backed securities: residential	66	220,951		(1,600		)	41	110,062		(2,565		)	107	331,013		(4,165		)
Total investment securities available-for-sale	184	320,068		(2,159		)	76	140,739		(3,356		)	260	460,807		(5,515		)
Investment securities held-to-maturity:
Mortgage-backed securities: residential	2	10,745		(133		)	1	6,198		(76		)	3	16,943		(209		)
Total investment securities held-to-maturity	2	10,745		(133		)	1	6,198		(76		)	3	16,943		(209		)
Total investment securities	186	$	330,813	$	(2,292	)	77	$	146,937	$	(3,432	)	263	$	477,750	$	(5,724	)

The amortized cost and estimated fair value of investment securities at September 30, 2018, by contractual maturity are shown in the table below.



	One Year or Less				More than One Year to Five Years				More than Five Years to Ten Years				More than Ten Years				Total
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(dollars in thousands)
Investment securities available-for-sale:
U.S. Treasury	$	—	$	—	$	10,401	$	10,403	$	49,258	$	48,940	$	—	$	—	$	59,659	$	59,343
Agency	10,977		10,977		12,111		12,125		68,902		68,379		21,638		21,290		113,628		112,771
Corporate	—		—		—		—		102,761		101,594		—		—		102,761		101,594
Municipal bonds	3,017		3,013		31,511		31,334		70,926		69,156		129,456		127,698		234,910		231,201
Collateralized mortgage obligation: residential	—		—		—		—		872		871		25,025		24,335		25,897		25,206
Mortgage-backed securities: residential	—		—		1,793		1,727		141,006		137,770		398,861		385,265		541,660		524,762
Total investment securities available-for-sale	13,994		13,990		55,816		55,589		433,725		426,710		574,980		558,588		1,078,515		1,054,877
Investment securities held-to-maturity:
Mortgage-backed securities: residential	—		—		—		—		933		932		44,354		43,108		45,287		44,040
Other	—		—		—		—		—		—		1,098		1,098		1,098		1,098
Total investment securities held-to-maturity	—		—		—		—		933		932		45,452		44,206		46,385		45,138
Total investment securities	$	13,994	$	13,990	$	55,816	$	55,589	$	434,658	$	427,642	$	620,432	$	602,794	$	1,124,900	$	1,100,015

During the three months ended September 30, 2018, June 30, 2018 and September 30, 2017, the Company recognized gross gains on sales of available-for-sale securities in the amount of $1.3 million, $330,000 and $897,000, respectively. During the three months ended September 30, 2018 and September 30, 2017, the Company recognized gross losses on sales of available-for-sale securities in the amount of $208,000 and $1,000, respectively. The Company did not recognize any gross losses on the sales of available-for sale securities during the three months ended June 30, 2018. The Company had net proceeds from the sale of available-for-sale securities of $379 million, $16.2 million and $28.4 million during the the three months ended September 30, 2018, June 30, 2018 and September 30, 2017.

During the nine months ended September 30, 2018 and September 30, 2017, the Company recognized gross gains on sales of available-for-sale securities in the amount of $1.6 million and $3.0 million, respectively. During the nine months ended September 30, 2018 and September 30, 2017, the Company recognized gross losses on the sales of available-for sale securities in the amount of $208,000 and $51,000, respectively. The Company had net proceeds from the sale of available-for-sale securities of $395 million during the nine months ended September 30, 2018 and $243 million during the nine months ended September 30, 2017.

FHLB, FRB and other stock

At September 30, 2018, the Company had $23.2 million in Federal Home Loan Bank of San Francisco (“FHLB”) stock, $51.4 million in Federal Reserve Bank of San Francisco (“FRB”) stock, and $38.0 million in other stock, all carried at cost. During the three months ended September 30, 2018, the FHLB repurchased $15.0 million of the Company’s excess FHLB stock through their stock repurchase program. During the three months ended December 31, 2017, the FHLB did not repurchase any of the Company’s excess FHLB stock through their stock repurchase program.

During the nine months ended September 30, 2018 and September 30, 2017, the FHLB repurchased $15.0 million and $5.0 million respectively.

The Company evaluates its investments in FHLB, FRB and other stock for impairment periodically, including their capital adequacy and overall financial condition. The Company recorded a net loss on Community Reinvestment Act ("CRA") equity investments of $600,000 during the three months ended September 30, 2018.