Investment Securities

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



	June 30, 2018
	Amortized Cost		Unrealized Gain		Unrealized Loss			Estimated Fair Value
	(dollars in thousands)
Investment securities available-for-sale:
Agency	$	41,567	$	—	$	(490	)	$	41,077
Corporate	93,126		433		(1,057		)	92,502
Municipal bonds	221,806		1,281		(3,186		)	219,901
Collateralized mortgage obligation: residential	29,747		81		(670		)	29,158
Mortgage-backed securities: residential	505,817		58		(13,813		)	492,062
Total investment securities available-for-sale	892,063		1,853		(19,216		)	874,700
Investment securities held-to-maturity:
Mortgage-backed securities: residential	30,854		—		(838		)	30,016
Other	1,111		—		—			1,111
Total investment securities held-to-maturity	31,965		—		(838		)	31,127
Total investment securities	$	924,028	$	1,853	$	(20,054	)	$	905,827



	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 June 30, 2018, the Company had an accumulated other comprehensive loss of $17.4 million, or $12.2 million net of tax, compared to an accumulated other comprehensive loss of $646,000, or $415,000 net of tax, at December 31, 2017.

At June 30, 2018, mortgage-backed securities ("MBS") with an estimated par value of $46.3 million and a fair value of $47.1 million were pledged as collateral for the Bank’s two repurchase agreements, which totaled $18.5 million, and homeowner’s association (“HOA”) reverse repurchase agreements, which totaled $23.0 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 June 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 June 30, 2018, March 31, 2018 or June 30, 2017, or the six months ended June 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.



	June 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:
Agency	19	$	39,828	$	(471	)	1	$	1,249	$	(19	)	20	$	41,077	$	(490	)
Corporate	16	48,326		(880		)	2	6,014		(177		)	18	54,340		(1,057		)
Municipal bonds	163	116,648		(2,070		)	32	16,019		(1,116		)	195	132,667		(3,186		)
Collateralized mortgage obligation: residential	7	14,762		(400		)	3	7,658		(270		)	10	22,420		(670		)
Mortgage-backed securities: residential	100	348,704		(8,550		)	49	113,184		(5,263		)	149	461,888		(13,813		)
Total investment securities available-for-sale	305	568,268		(12,371		)	87	144,124		(6,845		)	392	712,392		(19,216		)
Investment securities held-to-maturity:
Mortgage-backed securities: residential	2	1,111		—			—	—		—			2	1,111		—
Other	6	24,063		(585		)	1	5,953		(253		)	7	30,016		(838		)
Total investment securities held-to-maturity	8	25,174		(585		)	1	5,953		(253		)	9	31,127		(838		)
Total investment securities	313	$	593,442	$	(12,956	)	88	$	150,077	$	(7,098	)	401	$	743,519	$	(20,054	)



	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 June 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:
Agency	$	—	$	—	$	—	$	—	$	18,560	$	18,371	$	23,007	$	22,706	$	41,567	$	41,077
Corporate	—		—		—		—		93,126		92,502		—		—		93,126		92,502
Municipal bonds	3,806		3,807		36,076		36,038		68,094		66,741		113,830		113,315		221,806		219,901
Collateralized mortgage obligation: residential	—		—		—		—		934		936		28,813		28,222		29,747		29,158
Mortgage-backed securities: residential	—		—		2,066		2,002		119,439		117,063		384,312		372,997		505,817		492,062
Total investment securities available-for-sale	3,806		3,807		38,142		38,040		300,153		295,613		549,962		537,240		892,063		874,700
Investment securities held-to-maturity:
Mortgage-backed securities: residential	—		—		—		—		—		—		30,854		30,016		30,854		30,016
Other	—		—		—		—		—		—		1,111		1,111		1,111		1,111
Total investment securities held-to-maturity	—		—		—		—		—		—		31,965		31,127		31,965		31,127
Total investment securities	$	3,806	$	3,807	$	38,142	$	38,040	$	300,153	$	295,613	$	581,927	$	568,367	$	924,028	$	905,827

During the three months ended June 30, 2018 and June 30, 2017, the Company recognized gross gains on sales of available-for-sale securities in the amount of $330,000 and $2.1 million, respectively. During the three months ended March 31, 2018, the Company recognized gross gains on sales of available-for-sale securities in the amount of $6,000, which represents adjustments to 2017 year end investment sales that settled in January 2018. The Company did not recognize any gross losses on the sales of available-for sale securities during the three months ended June 30, 2018 and March 31, 2018. The Company recognized gross losses on the sales of available-for-sale securities in the amount of $50,000 during the three months ended June 30, 2017. The Company had net proceeds from the sale of available-for-sale securities of $16.2 million, $6,000 and $215 million during the the three months ended June 30, 2018, March 31, 2018 and June 30, 2017.

During the six months ended June 30, 2018 and June 30, 2017, the Company recognized gross gains on sales of available-for-sale securities in the amount of $336,000 and $2.1 million, respectively. During the six months ended June 30, 2018, the Company did not recognize any gross losses on the sales of available-for sale securities. During the six months ended June 30, 2017, the Company recognized gross losses on sales of available-for-sale securities in the amount of $50,000. The Company had net proceeds from the sale of available-for-sale securities of $16.21 million during the six months ended June 30, 2018 and $215 million during the six months ended June 30, 2017.

FHLB, FRB and other stock

At June 30, 2018, the Company had $17.3 million in Federal Home Loan Bank of San Francisco (“FHLB”) stock, $33.2 million in Federal Reserve Bank of San Francisco (“FRB”) stock, and $32.2 million in other stock, all carried at cost. During the three months ended June 30, 2018 and December 31, 2017, the FHLB did not repurchase any of the Company’s excess FHLB stock through their stock repurchase program. The Company evaluates its investments in FHLB, FRB and other stock for impairment periodically, including their capital adequacy and overall financial condition. No impairment losses have been recorded through June 30, 2018.