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)
June 30, 2023
Securities of U.S. government-sponsored enterprises:
MBS pass-through securities issued by FHLMC, FNMA and GNMA	$	316,968	$	—	$	316,968	$	—	$	(48,904)	$	268,064
CMOs issued by FHLMC	231,217		—		231,217		177		(27,759)		203,635
CMOs issued by FNMA	106,894		—		106,894		113		(6,436)		100,571
CMOs issued by GNMA	51,511		—		51,511		216		(3,271)		48,456
SBA-backed securities	1,977		—		1,977		—		(130)		1,847
Debentures of government-sponsored agencies	145,973		—		145,973		—		(24,087)		121,886
Obligations of state and political subdivisions	62,268		—		62,268		6		(9,029)		53,245
Corporate bonds	30,000		—		30,000		—		(1,637)		28,363
Total held-to-maturity	$	946,808	$	—	$	946,808	$	512	$	(121,253)	$	826,067
December 31, 2022

Securities of U.S. government-sponsored enterprises:
MBS pass-through securities issued by FHLMC, FNMA and GNMA	$	331,281	$	—	$	331,281	$	—	$	(50,147)	$	281,134
CMOs issued by FHLMC	235,971		—		235,971		59		(29,503)		206,527
CMOs issued by FNMA	111,904		—		111,904		—		(5,419)		106,485
CMOs issued by GNMA	52,356		—		52,356		11		(3,076)		49,291
SBA-backed securities	2,372		—		2,372		—		(133)		2,239
Debentures of government-sponsored agencies	145,823		—		145,823		—		(26,467)		119,356
Obligations of state and political subdivisions	62,500		—		62,500		—		(10,741)		51,759
Corporate bonds	30,000		—		30,000		—		(1,552)		28,448
Total held-to-maturity	$	972,207	$	—	$	972,207	$	70	$	(127,038)	$	845,239
1 Amortized cost and fair values exclude accrued interest receivable of $3.6 million and $3.7 million at June 30, 2023 and December 31, 2022, 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 our 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)
June 30, 2023
Securities of U.S. government-sponsored enterprises:
MBS pass-through securities issued by FHLMC, FNMA and GNMA	$	102,420	$	2	$	(11,758)	$	—	$	90,664
CMOs issued by FHLMC	333,374		—		(32,162)		—		301,212
CMOs issued by FNMA	32,916		—		(3,816)		—		29,100
CMOs issued by GNMA	32,193		31		(3,377)		—		28,847
SBA-backed securities	39,824		—		(3,175)		—		36,649
Debentures of government- sponsored agencies	149,129		—		(13,261)		—		135,868

U.S. Treasury securities	11,914		—		(1,580)		—		10,334
Obligations of state and political subdivisions	116,040		36		(13,160)		—		102,916
Corporate bonds	36,991		—		(2,948)		—		34,043
Asset-backed securities	1,365		—		(56)		—		1,309
Total available-for-sale	$	856,166	$	69	$	(85,293)	$	—	$	770,942
December 31, 2022
Securities of U.S. government-sponsored enterprises:
MBS pass-through securities issued by FHLMC, FNMA and GNMA	$	109,736	$	3	$	(12,133)	$	—	$	97,606
CMOs issued by FHLMC	347,437		—		(33,682)		—		313,755
CMOs issued by FNMA	36,172		—		(3,852)		—		32,320
CMOs issued by GNMA	35,120		—		(3,296)		—		31,824
SBA-backed securities	47,724		2		(3,371)		—		44,355
Debentures of government- sponsored agencies	149,114		—		(14,008)		—		135,106

U.S. Treasury securities	11,904		—		(1,635)				10,269
Obligations of state and political subdivisions	116,855		29		(14,761)		—		102,123
Corporate bonds	36,990		—		(3,714)		—		33,276
Asset-backed securities	1,553		—		(91)		—		1,462
Total available-for-sale	$	892,605	$	34	$	(90,543)	$	—	$	802,096
1 Amortized cost and fair value exclude accrued interest receivable of $3.1 million and $3.2 million at June 30, 2023 and December 31, 2022, 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 was no impact to net income.


	June 30, 2023								December 31, 2022
	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	$	—	$	—	$	26,665	$	25,344	$	450	$	446	$	1,254	$	1,239
After one but within five years	89,625		85,060		354,735		324,368		87,418		83,663		335,813		307,843
After five years through ten years	266,785		227,818		130,738		117,530		262,072		222,280		185,997		166,273
After ten years	590,398		513,189		344,028		303,700		622,267		538,850		369,541		326,741
Total	$	946,808	$	826,067	$	856,166	$	770,942	$	972,207	$	845,239	$	892,605	$	802,096

There were no sales of investment securities in either the first half of 2023 or 2022. However, in July 2023, the Bank sold $82.7 million of available-for-sale securities for a net loss of $2.8 million. In addition, on July 13, 2023, the Bank sold its remaining investment in Visa Inc. Class B restricted common stock, which had a zero carrying value, for a $2.8 million gain.


(in thousands)	June 30, 2023		December 31, 2022
Pledged to the State of California:
Secure public deposits in compliance with the Local Agency Security Program	$	199,327	$	235,587
Collateral for trust deposits	672		677
Collateral for Wealth Management and Trust Services checking account	565		569
Total investment securities pledged to the State of California	200,564		236,833
Bankruptcy trustee deposits pledged with Federal Reserve Bank	1,594		1,737
Pledged to FHLB Securities-Backed Credit Program	391,668		—
Pledged to the Federal Reserve Bank Term Funding Program ("BTFP")	274,215		—
Total pledged investment securities	$	868,041	$	238,570


June 30, 2023	< 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	$	4,178	$	(132)	$	263,886	$	(48,772)	$	268,064	$	(48,904)
CMOs issued by FHLMC	31,915		(1,171)		162,369		(26,588)		194,284		(27,759)
CMOs issued by FNMA	43,167		(2,064)		39,161		(4,372)		82,328		(6,436)
CMOs issued by GNMA	27,024		(1,895)		9,902		(1,376)		36,926		(3,271)
SBA-backed securities	—		—		1,847		(130)		1,847		(130)
Debentures of government-sponsored agencies	29,245		(749)		92,642		(23,338)		121,887		(24,087)
Obligations of state and political subdivisions	—		—		50,154		(9,029)		50,154		(9,029)
Corporate bonds	—		—		28,363		(1,637)		28,363		(1,637)
Total held-to-maturity	135,529		(6,011)		648,324		(115,242)		783,853		(121,253)
Available-for-sale:
MBS pass-through securities issued by FHLMC, FNMA and GNMA	4,422		(177)		85,498		(11,581)		89,920		(11,758)
CMOs issued by FHLMC	12		—		301,200		(32,162)		301,212		(32,162)
CMOs issued by FNMA	37		(1)		29,063		(3,815)		29,100		(3,816)
CMOs issued by GNMA	—		—		25,070		(3,377)		25,070		(3,377)
SBA-backed securities	29		—		36,309		(3,175)		36,338		(3,175)
Debentures of government- sponsored agencies	—		—		135,868		(13,261)		135,868		(13,261)
U.S. Treasury securities	—		—		10,334		(1,580)		10,334		(1,580)

Obligations of state and political subdivisions	4,799		(54)		90,869		(13,106)		95,668		(13,160)
Corporate bonds	—		—		34,043		(2,948)		34,043		(2,948)
Asset-backed securities	—		—		1,309		(56)		1,309		(56)
Total available-for-sale	9,299		(232)		749,563		(85,061)		758,862		(85,293)
Total securities at loss position	$	144,828	$	(6,243)	$	1,397,887	$	(200,303)	$	1,542,715	$	(206,546)


December 31, 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	$	62,627	$	(5,960)	$	218,507	$	(44,187)	$	281,134	$	(50,147)
CMOs issued by FHLMC	78,144		(5,874)		113,796		(23,629)		191,940		(29,503)
CMOs issued by FNMA	106,485		(5,419)		—		—		106,485		(5,419)
CMOs issued by GNMA	27,570		(1,676)		10,331		(1,400)		37,901		(3,076)
SBA-backed securities	2,239		(133)		—		—		2,239		(133)
Debentures of government- sponsored agencies	38,645		(2,530)		80,711		(23,937)		119,356		(26,467)
Obligations of state and political subdivisions	15,155		(589)		36,603		(10,152)		51,758		(10,741)
Corporate Bonds	28,448		(1,552)		—		—		28,448		(1,552)
Total held-to-maturity	359,313		(23,733)		459,948		(103,305)		819,261		(127,038)
Available-for-sale:
MBS pass-through securities issued by FHLMC, FNMA and GNMA	44,630		(4,501)		52,235		(7,632)		96,865		(12,133)
CMOs issued by FHLMC	169,760		(15,144)		143,995		(18,538)		313,755		(33,682)
CMOs issued by FNMA	4,790		(235)		27,529		(3,617)		32,319		(3,852)
CMOs issued by GNMA	8,214		(374)		23,612		(2,922)		31,826		(3,296)
SBA-backed securities	37,845		(3,228)		6,133		(143)		43,978		(3,371)
Debentures of government- sponsored agencies	19,054		(946)		116,052		(13,062)		135,106		(14,008)
U.S. Treasury securities	—		—		10,269		(1,635)		10,269		(1,635)
Obligations of state and political subdivisions	70,402		(9,459)		28,711		(5,302)		99,113		(14,761)
Corporate Bonds	—		—		33,276		(3,714)		33,276		(3,714)

Asset-backed securities	—		—		1,462		(91)		1,462		(91)
Total available-for-sale	354,695		(33,887)		443,274		(56,656)		797,969		(90,543)
Total securities at loss position	$	714,008	$	(57,620)	$	903,222	$	(159,961)	$	1,617,230	$	(217,581)

Securities issued by government-sponsored enterprises, 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.

On July 7, 2023, the Bank entered into various interest rate swap agreements with notional values totaling $101.8 million to hedge balance sheet interest rate sensitivity and protect selected securities in its available-for-sale portfolio against changes in fair value related to changes in the benchmark interest rate. For additional details, refer to Note 9, Derivative Financial Instruments and Hedging Activities.

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 June 30, 2023 and December 31, 2022. 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 June 30, 2023 and December 31, 2022. On July 27, 2023, FHLB announced a cash dividend for the second quarter of 2023 at an annualized dividend rate of 7.75% to be distributed on August 10, 2023. 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 June 30, 2023 and December 31, 2022. These shares had a carrying value of zero and were 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 lacked a readily determinable fair value. On July 13, 2023, the Bank sold the entirety of its remaining investment in Visa Inc. Class B restricted common stock for a $2.8 million gain.

We invest in low-income housing tax credit funds as a limited partner, which totaled $2.3 million and $2.5 million recorded in other assets as of June 30, 2023 and December 31, 2022, respectively. In the first six months of 2023, we recognized $300 thousand of low-income housing tax credits and other tax benefits, offset by $252 thousand of amortization expense of low-income housing tax credit investment, as a component of income tax expense. As of June 30, 2023, our unfunded commitments for these low-income housing tax credit funds totaled $346 thousand. We did not recognize any impairment losses on these low-income housing tax credit investments during the first six months of 2023 or 2022, as the value of the future tax benefits exceeds the carrying value of the investments.