

(Dollars in thousands)	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss		Estimated Fair Value
AFS investment securities:
September 30, 2022
U.S. Treasury	$	48,926	$	—	$	(2,152)	$	46,774
Agency	486,111		—		(55,248)		430,863
Corporate debt	602,058		—		(46,308)		555,750

Collateralized mortgage obligations	856,867		24		(65,776)		791,115
Mortgage-backed securities	991,429		—		(154,852)		836,577
Total AFS investment securities	$	2,985,391	$	24	$	(324,336)	$	2,661,079





December 31, 2021
U.S. Treasury	$	57,708	$	614	$	(456)	$	57,866
Agency	440,183		2,081		(10,129)		432,135
Corporate debt	451,621		6,096		(3,856)		453,861
Municipal bonds	1,061,985		32,209		(4,281)		1,089,913
Collateralized mortgage obligations	680,686		2,012		(6,055)		676,643
Mortgage-backed securities	1,586,406		3,220		(26,180)		1,563,446
Total AFS investment securities	$	4,278,589	$	46,232	$	(50,957)	$	4,273,864



(Dollars in thousands)	Amortized Cost		Allowance for Credit Losses		Net Carrying Amount		Gross Unrecognized Gain		Gross Unrecognized Loss		Estimated Fair Value
HTM investment securities:
September 30, 2022
Municipal bonds	$	1,148,234	$	(91)	$	1,148,143	$	—	$	(294,439)	$	853,704
Mortgage-backed securities	235,937		—		235,937		—		(35,876)		200,061
Other	1,422		—		1,422		—		—		1,422
Total HTM investment securities	$	1,385,593	$	(91)	$	1,385,502	$	—	$	(330,315)	$	1,055,187

The Company reassesses classification of certain investments as part of the ongoing review of the investment securities portfolio. During the first half of 2022, the Company transferred all of the AFS municipal bond portfolio of $831.4 million as well as mortgage-backed securities of $255.0 million, both of which the Company intends and has the ability to hold to maturity, to HTM securities. The transfer of these securities was accounted for at fair value on the transfer date. In total, the municipal bonds had a net carrying amount of $780.7 million with a pre-tax unrealized loss of $50.8 million, and the mortgage-backed securities had a net carrying amount of $238.8 million with a pre-tax unrealized loss of $16.2 million, and both realized losses were reflected as discounts on the date of transfer. These discounts are accreted into interest income as yield adjustments over the remaining term of the securities. The amortization of the unrealized losses reported in accumulated other comprehensive income largely offsets the effect on interest income of the accretion of the discounts. No gains or losses were recorded at the time of transfer. During the third quarter of 2022, there was no investment securities transfer from AFS to HTM.

Unrealized gains and losses on AFS investment securities are recognized in stockholders’ equity as accumulated other comprehensive income or loss. At September 30, 2022, the Company had a net unrealized loss on AFS investment securities of $324.3 million, or $231.7 million net of tax in accumulated other comprehensive loss, compared to a net unrealized loss of $4.7 million, or $3.3 million net of tax in accumulated other comprehensive loss, at December 31, 2021.

For investment securities transferred from AFS to HTM, the unrealized gains and losses at the date of transfer continue to be reported in stockholders’ equity as accumulated other comprehensive income or loss and are amortized over the remaining lives of the securities with an offsetting entry to interest income as an adjustment of yield. At September 30, 2022, the unrealized loss on investment securities transferred from AFS to HTM was $69.2 million, or $49.4 million net of tax in accumulated other comprehensive loss.

The table below summarizes the number, fair value, and gross unrealized holding losses of the Company’s AFS investment securities in an unrealized loss position for which an allowance for credit losses has not been recorded as of the dates indicated, aggregated by investment category and length of time in a continuous loss position.


	September 30, 2022
	Less than 12 Months					12 Months or Longer					Total
(Dollars in thousands)	Number	Fair Value		Gross Unrealized Losses		Number	Fair Value		Gross Unrealized Losses		Number	Fair Value		Gross Unrealized Losses
AFS investment securities:
U.S. Treasury	5	$	33,865	$	(125)	1	$	12,909	$	(2,027)	6	$	46,774	$	(2,152)
Agency	8	80,049		(1,118)		35	350,814		(54,130)		43	430,863		(55,248)
Corporate debt	49	468,523		(28,413)		8	87,227		(17,895)		57	555,750		(46,308)

Collateralized mortgage obligations	44	543,696		(35,355)		36	239,916		(30,421)		80	783,612		(65,776)
Mortgage-backed securities.	16	103,048		(8,957)		66	733,529		(145,895)		82	836,577		(154,852)
Total AFS investment securities	122	$	1,229,181	$	(73,968)	146	$	1,424,395	$	(250,368)	268	$	2,653,576	$	(324,336)


	December 31, 2021
	Less than 12 Months					12 Months or Longer					Total
(Dollars in thousands)	Number	Fair Value		Gross Unrealized Losses		Number	Fair Value		Gross Unrealized Losses		Number	Fair Value		Gross Unrealized Losses
AFS investment securities:
U.S. Treasury	3	$	47,235	$	(456)	—	$	—	$	—	3	$	47,235	$	(456)
Agency	19	278,078		(5,634)		16	119,750		(4,495)		35	397,828		(10,129)
Corporate debt	17	166,563		(849)		3	57,274		(3,007)		20	223,837		(3,856)
Municipal bonds	36	277,564		(4,079)		2	6,596		(202)		38	284,160		(4,281)
Collateralized mortgage obligations	26	226,763		(3,738)		15	121,185		(2,317)		41	347,948		(6,055)
Mortgage-backed securities	103	1,306,455		(20,417)		15	173,121		(5,763)		118	1,479,576		(26,180)
Total AFS investment securities	204	$	2,302,658	$	(35,173)	51	$	477,926	$	(15,784)	255	$	2,780,584	$	(50,957)

The Company reviews individual securities classified as AFS to determine whether a decline in fair value below the amortized cost basis is deemed credit related or due to other factors such as changes in interest rates and general market conditions. An ACL on AFS investment securities is recorded when the fair value of the investment is below its amortized cost and the decline in fair value has been deemed, through the Company’s qualitative assessment, to be credit related. Non-credit related declines in fair value of AFS investment securities, which may be attributed to changes in interest rates and other market-related factors, are not recorded through an ACL. Such declines are recorded as an adjustment to accumulated other comprehensive income, net of tax. In the event the Company is required to sell or has the intent to sell an AFS security that has experienced a decline in fair value below its amortized cost, the Company writes the amortized cost of the security down to fair value in the current period.

Credit losses on HTM investment securities are recorded at the time of purchase or acquisition and when the Company has designated securities as HTM. Credit losses on HTM investment securities are representative of current expected credit losses that may be incurred over the life of the investment.

The Company determines credit losses on both AFS and HTM investment securities through the use of a discounted cash flow approach using the security’s effective interest rate. The ACL is measured as the amount by which an investment security’s amortized cost exceeds the net present value of expected future cash flows. However, the amount of credit losses for AFS investment securities is limited to the amount of a security’s unrealized loss. The ACL is established through a charge to provision for credit losses in current period earnings.

At September 30, 2022 and December 31, 2021, the Company had an ACL of $91,000 and $22,000, respectively, for HTM investment securities classified as municipal bonds. The following table presents a rollforward by major security type of the allowance for credit losses on the Company's HTM debt securities as of and for the periods indicated:

The Company had no ACL for AFS investment securities at September 30, 2022 and December 31, 2021. The Company performed a qualitative assessment of these investments as of September 30, 2022 and determined that the increase in unrealized losses was the result of changes in interest rates driven by the Federal Reserve’s policy to fight against inflation, and does not believe the declines in fair value were credit related. As of September 30, 2022, the Company had not recorded credit losses on certain AFS securities that were in an unrealized loss position due to the high quality of the investments, with investment grade ratings, and many of them issued by U.S. government agencies. No issuers of these securities have, to the Company’s knowledge, experienced credit downgrades. Additionally, the Company continues to receive contractual principal and interest payments in a timely manner. The Company does not intend to sell these securities, and it is more likely than not that the Company will not be required to sell the securities prior to their anticipated recoveries. There was no provision for credit losses recognized for AFS investment securities during the three months ended September 30, 2022, June 30, 2022, or September 30, 2021, or the nine months ended September 30, 2022 and September 30, 2021.

At September 30, 2022 and December 31, 2021, there were no AFS or HTM securities in nonaccrual status. All securities in the portfolio were current with their contractual principal and interest payments. At September 30, 2022 and December 31, 2021, there were no securities purchased with deterioration in credit quality since their origination. At September 30, 2022 and December 31, 2021, there were no collateral dependent AFS or HTM securities.


	Three Months Ended						Nine Months Ended
	September 30,		June 30,		September 30,		September 30,		September 30,
(Dollars in thousands)	2022		2022		2021		2022		2021
Amortized cost of AFS investment securities sold	$	231,076	$	45,121	$	161,597	$	934,703	$	617,116

Gross realized gains	$	—	$	7	$	4,190	$	13,645	$	18,462
Gross realized (losses)	(393)		(38)		—		(11,935)		(5,141)
Net realized (losses) gains on sales of AFS investment securities	$	(393)	$	(31)	$	4,190	$	1,710	$	13,321


	Due in One Year or Less				Due after One Year through Five Years				Due after Five Years through Ten Years				Due after Ten Years				Total
(Dollars in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
AFS investment securities:
U.S. Treasury	$	9,648	$	9,639	$	24,342	$	24,226	$	14,936	$	12,909	$	—	$	—	$	48,926	$	46,774
Agency	25,583		25,329		326,627		298,271		96,469		79,143		37,432		28,120		486,111		430,863
Corporate debt	—		—		298,578		289,014		303,480		266,736		—		—		602,058		555,750

Collateralized mortgage obligations	34,661		34,426		70,542		68,834		213,821		192,325		537,843		495,530		856,867		791,115
Mortgage-backed securities	—		—		35,049		34,770		549,549		468,798		406,831		333,009		991,429		836,577
Total AFS investment securities	69,892		69,394		755,138		715,115		1,178,255		1,019,911		982,106		856,659		2,985,391		2,661,079
HTM investment securities:
Municipal bonds	—		—		10,484		9,749		50,556		43,410		1,087,194		800,545		1,148,234		853,704
Mortgage-backed securities	—		—		—		—		—		—		235,937		200,061		235,937		200,061
Other	—		—		—		—		—		—		1,422		1,422		1,422		1,422
Total HTM investment securities	—		—		10,484		9,749		50,556		43,410		1,324,553		1,002,028		1,385,593		1,055,187
Total investment securities	$	69,892	$	69,394	$	765,622	$	724,864	$	1,228,811	$	1,063,321	$	2,306,659	$	1,858,687	$	4,370,984	$	3,716,266

The Company’s equity securities primarily consist of Federal Home Loan Bank of San Francisco (“FHLB”) and Federal Reserve Bank of San Francisco (“FRB”) stock, which are considered restricted securities and held as a condition of membership of the FHLB and the Board of Governors of the Federal Reserve System. These equity securities without readily determinable fair values are carried at cost less impairment. At September 30, 2022, the Company had $19.4 million in FHLB stock, $74.7 million in FRB stock, and $24.7 million in other stock. At December 31, 2021, the Company had $17.3 million in FHLB stock, $74.5 million in FRB stock, and $25.7 million in other stock.