

(Dollars in thousands)	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss		Estimated Fair Value
AFS investment securities:
March 31, 2023
U.S. Treasury	$	14,941	$	—	$	(1,586)	$	13,355
Agency	464,491		—		(46,760)		417,731
Corporate	561,380		—		(53,191)		508,189

Collateralized mortgage obligations	401,105		—		(28,473)		372,632
Mortgage-backed securities	923,956		—		(123,011)		800,945
Total AFS investment securities	$	2,365,873	$	—	$	(253,021)	$	2,112,852





December 31, 2022
U.S. Treasury	$	49,156	$	—	$	(2,139)	$	47,017
Agency	485,331		—		(53,893)		431,438
Corporate	586,652		—		(44,104)		542,548

Collateralized mortgage obligations	829,928		—		(65,699)		764,229
Mortgage-backed securities	953,678		—		(137,897)		815,781
Total AFS investment securities	$	2,904,745	$	—	$	(303,732)	$	2,601,013



(Dollars in thousands)	Amortized Cost		Allowance for Credit Losses		Net Carrying Amount		Gross Unrecognized Gain		Gross Unrecognized Loss		Estimated Fair Value
HTM investment securities:
March 31, 2023
Municipal bonds	$	1,147,822	$	(227)	$	1,147,595	$	398	$	(223,030)	$	924,963
Collateralized mortgage obligations	356,435		—		356,435		1,198		(481)		357,152
Mortgage-backed securities	228,624		—		228,624		—		(30,621)		198,003
Other	16,376		—		16,376		—		—		16,376
Total HTM investment securities	$	1,749,257	$	(227)	$	1,749,030	$	1,596	$	(254,132)	$	1,496,494

The Company reassesses classification of certain investments as part of the ongoing review of the investment securities portfolio. During the first quarter of 2023, the Company transferred $410.7 million of AFS collateralized mortgage obligations to HTM securities. The Company intends and has the ability to hold the securities transferred to maturity. The transfer of these securities was accounted for at fair value on the transfer date. These collateralized mortgage obligations securities had a net carrying amount of $360.3 million with a pre-tax unrealized loss of $50.4 million, which are accreted into interest income as yield adjustments over the remaining term of the securities. The amortization of the related net after-tax unrealized losses reported in accumulated other comprehensive loss 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 first quarter of 2022, the Company transferred approximately $386.8 million of municipal bonds and $255.0 million of mortgage-backed securities with longer durations to HTM securities. The Company intends and has the ability to hold the securities transferred to maturity. The municipal bonds had a net carrying amount of $379.9 million with a pre-tax unrealized loss of $6.9 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, both of which are accreted into interest income as yield adjustments over the remaining term of the securities. No gains or losses were recorded at the time of transfer.

Investment securities with carrying values of $3.61 billion and $195.6 million as of March 31, 2023 and December 31, 2022, respectively, were pledged to other borrowings, secure public deposits, and for other purposes as required or permitted by law. The increase in the investment securities pledged during the first quarter of 2023 was primarily due to the additional investment securities with carrying values of $1.53 billion pledged to the Federal Reserve's discount window and $1.89 billion pledged to the Federal Reserve's new Bank Term Funding Program launched in March 2023 to increase the Company’s access to funding and provide liquidity.

Unrealized gains and losses on AFS investment securities are recognized in stockholders’ equity as accumulated other comprehensive income or loss. At March 31, 2023, the Company had a net unrealized loss on AFS investment securities of $253.0 million, or $181.1 million net of tax in accumulated other comprehensive loss, compared to a net unrealized loss of $303.7 million, or $217.4 million net of tax in accumulated other comprehensive loss, at December 31, 2022.

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 March 31, 2023, the unrealized loss on investment securities transferred from AFS to HTM was $114.1 million, or $81.6 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.


	March 31, 2023
	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	14	$	13,355	$	(1,586)	—	$	—	$	—	14	$	13,355	$	(1,586)
Agency	13	142,489		(12,151)		30	275,242		(34,609)		43	417,731		(46,760)
Corporate	19	158,469		(14,917)		37	349,720		(38,274)		56	508,189		(53,191)

Collateralized mortgage obligations	20	185,232		(9,004)		34	187,400		(19,469)		54	372,632		(28,473)
Mortgage-backed securities.	17	141,007		(12,813)		64	659,938		(110,198)		81	800,945		(123,011)
Total AFS investment securities	83	$	640,552	$	(50,471)	165	$	1,472,300	$	(202,550)	248	$	2,112,852	$	(253,021)


	December 31, 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	$	33,982	$	(237)	1	$	13,036	$	(1,902)	6	$	47,018	$	(2,139)
Agency	8	79,895		(1,265)		35	351,543		(52,628)		43	431,438		(53,893)
Corporate	35	327,984		(20,840)		21	214,565		(23,264)		56	542,549		(44,104)

Collateralized mortgage obligations	41	522,955		(33,318)		40	241,229		(32,381)		81	764,184		(65,699)
Mortgage-backed securities	13	91,762		(6,987)		68	724,019		(130,910)		81	815,781		(137,897)
Total AFS investment securities	102	$	1,056,578	$	(62,647)	165	$	1,544,392	$	(241,085)	267	$	2,600,970	$	(303,732)

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.

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 March 31, 2023 and December 31, 2022, the Company had an ACL of $227,000 and $43,000, 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 March 31, 2023 and December 31, 2022. The Company performed a qualitative assessment of these investments as of March 31, 2023 and determined that the decrease in unrealized losses was the result of general market conditions, including 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 March 31, 2023, 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. As of March 31, 2023, 50% of our AFS securities are U.S. Treasury, U.S. government agency, and U.S. government-sponsored enterprise securities. 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 March 31, 2023, December 31, 2022, or March 31, 2022.

At March 31, 2023 and December 31, 2022, 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 March 31, 2023 and December 31, 2022, there were no securities purchased with deterioration in credit quality since their origination. At March 31, 2023 and December 31, 2022, there were no collateral dependent AFS or HTM securities.


	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	$	—	$	—	$	—	$	—	$	14,941	$	13,355	$	—	$	—	$	14,941	$	13,355
Agency	17,140		16,966		314,788		292,224		107,278		89,306		25,285		19,235		464,491		417,731
Corporate	—		—		288,259		280,121		273,121		228,068		—		—		561,380		508,189

Collateralized mortgage obligations	31,382		31,174		71,997		70,731		199,472		178,056		98,254		92,671		401,105		372,632
Mortgage-backed securities	19,902		19,617		14,886		14,656		512,674		452,677		376,494		313,995		923,956		800,945
Total AFS investment securities	68,424		67,757		689,930		657,732		1,107,486		961,462		500,033		425,901		2,365,873		2,112,852
HTM investment securities:
Municipal bonds	—		—		10,589		10,224		53,233		47,646		1,084,000		867,093		1,147,822		924,963
Collateralized mortgage obligations	—		—		151		151		—		—		356,284		357,001		356,435		357,152
Mortgage-backed securities	—		—		—		—		—		—		228,624		198,003		228,624		198,003
Other	—		—		—		—		—		—		16,376		16,376		16,376		16,376
Total HTM investment securities	—		—		10,740		10,375		53,233		47,646		1,685,284		1,438,473		1,749,257		1,496,494
Total investment securities	$	68,424	$	67,757	$	700,670	$	668,107	$	1,160,719	$	1,009,108	$	2,185,317	$	1,864,374	$	4,115,130	$	3,609,346

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 March 31, 2023, the Company had $25.7 million in FHLB stock, $74.9 million in FRB stock, and $4.9 million in other stock. At December 31, 2022, the Company had $27.7 million in FHLB stock, $74.8 million in FRB stock, and $17.4 million in other stock.