Our investment securities portfolio consists of U.S. Treasury securities, obligations of state and political subdivisions, U.S. federal government agencies such as Government National Mortgage Association ("GNMA") and Small Business Administration ("SBA"), U.S. government-sponsored enterprises ("GSEs"), such as Federal National Mortgage Association ("FNMA"), Federal Home Loan Mortgage Corporation ("FHLMC"), Federal Farm Credit Banks Funding Corporation and FHLB, U.S. Corporations and one asset-backed security collateralized by student loan pools. We also invest in residential and commercial mortgage-backed securities (“MBS”/"CMBS") and collateralized mortgage obligations (“CMOs”) issued or guaranteed by the GSEs, as reflected in the following table.


Held-to-maturity:	Amortized Cost 1		Allowance for Credit Losses		Net Carrying Amount		Gross Unrealized				Fair Value
(in thousands)							Gains		(Losses)
September 30, 2022
Securities of U.S. government-sponsored enterprises:
MBS pass-through securities issued by FHLMC, FNMA and GNMA	$	335,959	$	—	$	335,959	$	—	$	(53,659)	$	282,300
CMOs issued by FHLMC	236,061		—		236,061		—		(30,272)		205,789
CMOs issued by FNMA	115,043		—		115,043		—		(6,066)		108,977
CMOs issued by GNMA	32,070		—		32,070		—		(2,204)		29,866
SBA-backed securities	2,373		—		2,373		—		(143)		2,230
Debentures of government-sponsored agencies	145,747		—		145,747		—		(25,193)		120,554
Obligations of state and political subdivisions	62,614		—		62,614		—		(11,697)		50,917
Corporate bonds	30,000		—		30,000		—		(1,585)		28,415
Total held-to-maturity	$	959,867	$	—	$	959,867	$	—	$	(130,819)	$	829,048
December 31, 2021

Securities of U.S. government-sponsored enterprises:
MBS pass-through securities issued by FHLMC, FNMA and GNMA	$	126,990	$	—	$	126,990	$	2,110	$	(712)	$	128,388
CMOs issued by FHLMC	106,851		—		106,851		668		(1,045)		106,474
CMOs issued by FNMA	4,866		—		4,866		128		—		4,994

SBA-backed securities	4,840		—		4,840		198		—		5,038
Debentures of government-sponsored agencies	51,472		—		51,472		—		(901)		50,571
Obligations of state and political subdivisions	47,203		—		47,203		296		(209)		47,290
Total held-to-maturity	$	342,222	$	—	$	342,222	$	3,400	$	(2,867)	$	342,755
1 Amortized cost and fair values exclude accrued interest receivable of $2.6 million and $1.1 million at September 30, 2022 and December 31, 2021, respectively, which is included in interest receivable and other assets in the consolidated statements of condition.

Management measures expected credit losses on held-to-maturity securities collectively by major security type with each type sharing similar risk characteristics, and considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. With regard to MBSs and CMOs issued or guaranteed by the GSEs, and SBA-backed securities, we expect to receive all the contractual principal and interest on these securities as such securities are backed by the full faith and credit of and/or guaranteed by the U.S. government. Accordingly, no allowance for credit losses has been recorded for these securities. With regard to securities issued by states and political subdivisions and corporate bonds, management considers: (i) issuer and/or guarantor credit ratings, (ii) historical probability of default and loss given default rates for given bond ratings and remaining maturity, (iii) whether issuers continue to make timely principal and interest payments under the contractual terms of the securities, (iv) internal credit review of the financial information, and (v) whether or not such securities have credit enhancements such as guarantees, contain a defeasance clause, or are pre-refunded by the issuers. Based on the comprehensive analysis, no credit losses are expected.


Available-for-sale:	Amortized Cost 1		Gross Unrealized				Allowance for Credit Losses		Fair Value
(in thousands)			Gains		(Losses)
September 30, 2022
Securities of U.S. government-sponsored enterprises:
MBS pass-through securities issued by FHLMC, FNMA and GNMA	$	113,941	$	3	$	(13,702)	$	—	$	100,242
CMOs issued by FHLMC	357,486		—		(35,575)		—		321,911
CMOs issued by FNMA	38,125		—		(4,177)		—		33,948
CMOs issued by GNMA	36,747		—		(3,459)		—		33,288
SBA-backed securities	48,372		4		(3,585)		—		44,791
Debentures of government- sponsored agencies	149,106		—		(14,185)		—		134,921

U.S. Treasury securities	11,899		—		(1,741)		—		10,158
Obligations of state and political subdivisions	117,161		—		(18,734)		—		98,427
Corporate bonds	36,989		—		(3,787)		—		33,202
Asset-backed securities	1,650		—		(45)		—		1,605
Total available-for-sale	$	911,476	$	7	$	(98,990)	$	—	$	812,493
December 31, 2021
Securities of U.S. government-sponsored enterprises:
MBS pass-through securities issued by FHLMC, FNMA and GNMA	$	316,090	$	1,224	$	(2,784)	$	—	$	314,530
CMOs issued by FHLMC	343,047		3,209		(4,829)		—		341,427
CMOs issued by FNMA	48,187		152		(611)		—		47,728
CMOs issued by GNMA	56,345		99		(553)		—		55,891
SBA-backed securities	32,640		993		(155)		—		33,478
Debentures of government- sponsored agencies	191,449		25		(2,947)		—		188,527

U.S. Treasury securities	11,886		—		(256)				11,630
Obligations of state and political subdivisions	129,009		5,372		(381)		—		134,000
Corporate bonds	39,001		—		(506)		—		38,495
Asset-backed securities	1,866		—		(4)		—		1,862
Total available-for-sale	$	1,169,520	$	11,074	$	(13,026)	$	—	$	1,167,568
1 Amortized cost and fair value exclude accrued interest receivable of $3.1 million and $3.7 million at September 30, 2022 and December 31, 2021, respectively, which is included in interest receivable and other assets in the consolidated statements of condition.

As part of our ongoing review of our investment securities portfolio, we reassessed the classification of certain securities issued by government sponsored agencies. In March 2022, we transferred $357.5 million of these securities from available-for-sale to held-to-maturity at fair value. We intend and have the ability to hold these securities to maturity. The net unrealized pre-tax loss of $14.8 million that remained and the related accumulated other comprehensive loss are accreted to interest income over the remaining lives of the securities. Because these entries offset each other, there is no impact to net income.


	September 30, 2022								December 31, 2021
	Held-to-Maturity				Available-for-Sale				Held-to-Maturity				Available-for-Sale
(in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
Within one year	$	453	$	450	$	1,831	$	1,813	$	101	$	103	$	10,785	$	10,841
After one but within five years	90,541		86,684		273,040		251,164		25,666		26,559		219,474		219,957
After five years through ten years	260,148		220,313		256,608		228,766		182,604		182,303		299,937		300,187
After ten years	608,725		521,601		379,997		330,750		133,851		133,790		639,324		636,583
Total	$	959,867	$	829,048	$	911,476	$	812,493	$	342,222	$	342,755	$	1,169,520	$	1,167,568


(in thousands)	September 30, 2022		December 31, 2021
Pledged to the State of California:
Secure public deposits in compliance with the Local Agency Security Program	$	193,479	$	213,861
Collateral for trust deposits	656		729
Collateral for Wealth Management and Trust Services checking account	554		614
Total investment securities pledged to the State of California	194,689		215,204
Bankruptcy trustee deposits pledged with Federal Reserve Bank	1,844		2,645
Total pledged investment securities	$	196,533	$	217,849


September 30, 2022	< 12 continuous months				≥ 12 continuous months				Total securities in a loss position
(in thousands)	Fair value		Unrealized loss		Fair value		Unrealized loss		Fair value		Unrealized loss
Held-to-maturity:
MBS pass-through securities issued by FHLMC, FNMA and GNMA	$	203,739	$	(36,140)	$	78,562	$	(17,519)	$	282,301	$	(53,659)
CMOs issued by FHLMC	144,517		(18,126)		51,272		(12,146)		195,789		(30,272)
CMOs issued by FNMA	108,978		(6,066)		—		—		108,978		(6,066)
CMOs issued by GNMA	19,059		(735)		10,807		(1,469)		29,866		(2,204)
SBA-backed securities	2,230		(143)		—		—		2,230		(143)
Debentures of government-sponsored agencies	54,445		(6,704)		66,109		(18,489)		120,554		(25,193)
Obligations of state and political subdivisions	35,899		(7,399)		15,018		(4,298)		50,917		(11,697)
Corporate bonds	28,415		(1,585)		—		—		28,415		(1,585)
Total held-to-maturity	597,282		(76,898)		221,768		(53,921)		819,050		(130,819)
Available-for-sale:
MBS pass-through securities issued by FHLMC, FNMA and GNMA	54,639		(6,702)		44,711		(7,000)		99,350		(13,702)
CMOs issued by FHLMC	192,988		(17,898)		128,923		(17,677)		321,911		(35,575)
CMOs issued by FNMA	7,310		(514)		26,638		(3,663)		33,948		(4,177)
CMOs issued by GNMA	11,248		(399)		22,039		(3,060)		33,287		(3,459)
SBA-backed securities	37,629		(3,443)		6,649		(142)		44,278		(3,585)
Debentures of government- sponsored agencies	128,077		(12,060)		6,844		(2,125)		134,921		(14,185)
U.S. Treasury securities	—		—		10,159		(1,741)		10,159		(1,741)

Obligations of state and political subdivisions	84,021		(15,366)		14,406		(3,368)		98,427		(18,734)
Corporate bonds	23,221		(1,779)		9,981		(2,008)		33,202		(3,787)
Asset-backed securities	1,606		(45)		—		—		1,606		(45)
Total available-for-sale	540,739		(58,206)		270,350		(40,784)		811,089		(98,990)
Total securities at loss position	$	1,138,021	$	(135,104)	$	492,118	$	(94,705)	$	1,630,139	$	(229,809)


December 31, 2021	< 12 continuous months				≥ 12 continuous months				Total securities in a loss position
(in thousands)	Fair value		Unrealized loss		Fair value		Unrealized loss		Fair value		Unrealized loss
Held-to-maturity:
MBS pass-through securities issued by FHLMC and FNMA	$	76,619	$	(712)	$	—	$	—	$	76,619	$	(712)

CMOs issued by FHLMC	54,811		(1,045)		—		—		54,811		(1,045)
Obligations of state and political subdivisions	19,203		(209)		—		—		19,203		(209)
Debentures of government-sponsored agencies	50,571		(901)		—		—		50,571		(901)
Total held-to-maturity	201,204		(2,867)		—		—		201,204		(2,867)
Available-for-sale:
MBS pass-through securities issued by FHLMC and FNMA	263,474		(2,784)		—		—		263,474		(2,784)
SBA-backed securities	7,478		(112)		1,209		(43)		8,687		(155)
CMOs issued by FHLMC	226,175		(4,677)		4,415		(152)		230,590		(4,829)
CMOs issued by GNMA	44,790		(553)		—		—		44,790		(553)
CMOs issued by FNMA	37,348		(611)		—		—		37,348		(611)
Debentures of government- sponsored agencies	148,979		(2,527)		8,549		(420)		157,528		(2,947)
U.S. Treasury securities	11,629		(256)		—		—		11,629		(256)
Obligations of state and political subdivisions	17,552		(381)		—		—		17,552		(381)
Corporate Bonds	38,495		(506)		—		—		38,495		(506)

Asset-backed securities	1,861		(4)		—		—		1,861		(4)
Total available-for-sale	797,781		(12,411)		14,173		(615)		811,954		(13,026)
Total securities at loss position	$	998,985	$	(15,278)	$	14,173	$	(615)	$	1,013,158	$	(15,893)

Securities issued by government-sponsored agencies, such as FNMA and FHLMC, usually have implicit credit support by the U.S. federal government. However, since 2008, FNMA and FHLMC have been under government conservatorship and, therefore, contractual cash flows for these investments carry explicit guarantees by the U.S. federal government. Securities issued by the SBA and GNMA have explicit credit guarantees by the U.S. federal government, which protects us from credit losses on the contractual cash flows of the securities.

At September 30, 2022, management determined that it did not intend to sell any investment securities with unrealized losses, and it is more likely than not that we will not be required to sell securities with unrealized losses before recovery of their amortized cost. No allowances for credit losses have been recognized on available-for-sale securities in an unrealized loss position, as management does not believe any of the securities are impaired due to reasons of credit quality at September 30, 2022.

As a member of the FHLB, we are required to maintain a minimum investment in FHLB capital stock determined by the Board of Directors of the FHLB. The minimum investment requirements can increase in the event we increase our total asset size or borrowings with the FHLB. Shares cannot be purchased or sold except between the FHLB and its members at the $100 per share par value. We held $16.7 million of FHLB stock included in other assets on the consolidated statements of condition at both September 30, 2022 and December 31, 2021. The carrying

amounts of these investments are reasonable estimates of fair value because the securities are restricted to member banks and they do not have a readily determinable market value. Based on our analysis of FHLB's financial condition and certain qualitative factors, we determined that the FHLB stock was not impaired at September 30, 2022 and December 31, 2021. On October 27, 2022, FHLB announced a cash dividend for the third quarter of 2022 at an annualized dividend rate of 7.00% to be distributed in mid-November 2022. Cash dividends paid on FHLB capital stock are recorded as non-interest income.

As a member bank of Visa U.S.A., we held 10,439 shares of Visa Inc. Class B common stock at September 30, 2022 and December 31, 2021. These shares have a carrying value of zero and are restricted from resale to non-member banks of Visa U.S.A. until their conversion into Class A (voting) shares upon the termination of Visa Inc.'s Covered Litigation escrow account. Because of the restriction and the uncertainty on the conversion rate to Class A shares, these shares lack a readily determinable fair value. When converting this Class B common stock to Class A common stock based on the estimated conversion rate of 1.6059 and 1.6181 at September 30, 2022 and December 31, 2021, and the closing stock price of Class A shares at those respective dates, the converted value of our shares of Class B common stock would have been $3.0 million and $3.7 million at September 30, 2022 and December 31, 2021, respectively. The conversion rate is subject to further adjustment upon the final settlement of the covered litigation against Visa Inc. and its member banks. As such, the fair value of these Class B shares can differ significantly from their converted values. For further information, refer to Note 8, Commitments and Contingencies.

We invest in low-income housing tax credit funds as a limited partner, which totaled $2.6 million and $3.0 million recorded in other assets as of September 30, 2022 and December 31, 2021, respectively. In the first nine months of 2022, we recognized $475 thousand of low-income housing tax credits and other tax benefits, offset by $400 thousand of amortization expense of low-income housing tax credit investment, as a component of income tax expense. As of September 30, 2022, our unfunded commitments for these low-income housing tax credit funds totaled $392 thousand. We did not recognize any impairment losses on these low-income housing tax credit investments during the first nine months of 2022 or 2021, as the value of the future tax benefits exceeds the carrying value of the investments.