Investment Securities

9 Months Ended

Sep. 30, 2020

Investments, Debt and Equity Securities [Abstract]

Debt securities have been classified as available-for-sale or held-to-maturity in the consolidated balance sheets according to management’s intent. During the three months ended June 30, 2020, the Company transferred securities held-to-maturity to securities available-for-sale as a part of the Company’s liquidity management plan in response to the COVID-19 pandemic. Management determined that its securities held-to-maturity no longer adhere to the Company’s current liquidity management plan and could be sold to potentially improve liquidity position. Accordingly, the Company was no longer able to assert that it had the intent to hold these securities until maturity and the Company’s ability to assert that it has the intent and ability to hold to maturity debt securities will be limited for up to two years. The Company transferred all securities held-to-maturity of $18.8 million to securities available-for-sale, which resulted in a pre-tax increase to accumulated other comprehensive income of $787 thousand.

The following table presents the amortized cost and fair value of the investment securities as of the dates indicated:


($ in thousands)	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss		Fair Value
September 30, 2020
Securities available-for-sale:
U.S. government agency and U.S. government sponsored enterprise securities:
Residential mortgage-backed securities	$	78,289	$	1,504	$	(22)	$	79,771
Residential collateralized mortgage obligations	30,430		312		(69)		30,673
SBA loan pool securities	12,335		395		(23)		12,707
Municipal bonds	5,381		450		—		5,831
Total securities available-for-sale	$	126,435	$	2,661	$	(114)	$	128,982




December 31, 2019
Securities available-for-sale:
U.S. government agency and U.S. government sponsored enterprise securities:
Residential mortgage-backed securities	$	38,793	$	96	$	(151)	$	38,738
Residential collateralized mortgage obligations	44,115		36		(257)		43,894
SBA loan pool securities	14,179		34		(61)		14,152
Municipal bonds	764		18		—		782
Total securities available-for-sale	$	97,851	$	184	$	(469)	$	97,566
Securities held-to-maturity:
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	$	15,215	$	70	$	(81)	$	15,204
Municipal bonds	4,939		337		—		5,276
Total securities held-to-maturity	$	20,154	$	407	$	(81)	$	20,480

As of September 30, 2020 and December 31, 2019, pledged securities were $100.3 million and $99.3 million, respectively. These securities were pledged for the State Deposit from the California State Treasurer.

The following table presents the amortized cost and fair value of the investment securities by contractual maturity as of September 30, 2020. Expected maturities may differ from contractual maturities, if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately.


	Securities Available-For-Sale
($ in thousands)	Amortized Cost		Fair Value
Within one year	$	—	$	—
One to five years	2,200		2,303
Five to ten years	849		887
Greater than ten years	2,332		2,641
Residential mortgage-backed securities, residential collateralized mortgage obligations and SBA loan pool securities	121,054		123,151
Total	$	126,435	$	128,982

The following table summarizes the investment securities with unrealized losses by security type and length of time in a continuous unrealized loss position as of the dates indicated:


	Length of Time that Individual Securities Have Been In a Continuous Unrealized Loss Position
	Less Than 12 Months					12 Months or Longer					Total
($ in thousands)	Fair Value		Gross Unrealized Losses		Number of Securities	Fair Value		Gross Unrealized Losses		Number of Securities	Fair Value		Gross Unrealized Losses		Number of Securities
September 30, 2020
Securities available-for-sale:
U.S. government agency and U.S. government sponsored enterprise securities:
Residential mortgage-backed securities	$	9,610	$	(22)	4	$	—	$	—	—	$	9,610	$	(22)	4
Residential collateralized mortgage obligations	5,100		(7)		5	7,691		(62)		7	12,791		(69)		12
SBA loan pool securities	2,107		(6)		3	1,718		(17)		3	3,825		(23)		6

Total securities available-for-sale	$	16,817	$	(35)	12	$	9,409	$	(79)	10	$	26,226	$	(114)	22




December 31, 2019
Securities available-for-sale:
U.S. government agency and U.S. government sponsored enterprise securities:
Residential mortgage-backed securities	$	5,401	$	(28)	5	$	15,772	$	(123)	23	$	21,173	$	(151)	28
Residential collateralized mortgage obligations	15,392		(52)		13	19,834		(205)		23	35,226		(257)		36
SBA loan pool securities	4,787		(38)		5	2,308		(23)		4	7,095		(61)		9

Total securities available-for-sale	$	25,580	$	(118)	23	$	37,914	$	(351)	50	$	63,494	$	(469)	73
Securities held-to-maturity:
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	$	—	$	—	—	$	6,842	$	(81)	7	$	6,842	$	(81)	7

Total securities held-to-maturity	$	—	$	—	—	$	6,842	$	(81)	7	$	6,842	$	(81)	7

The Company performs an other-than-temporary impairment (“OTTI”) assessment at least on a quarterly basis. OTTI is recognized when fair value is below the amortized cost where: (i) an entity has the intent to sell the security; (ii) it is more likely than not that an entity will be required to sell the security before recovery of its amortized cost basis; or (iii) an entity does not expect to recover the entire amortized cost basis of the security.

All individual securities in a continuous unrealized loss position for 12 months or more as of September 30, 2020 and December 31, 2019 had an investment grade rating upon purchase. The issuers of these securities have not established any cause for default on these securities and various rating agencies have reaffirmed their long-term investment grade status as of September 30, 2020 and December 31, 2019. These securities have fluctuated in value since their purchase dates as market interest rates fluctuated. 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 before the recovery of its amortized cost basis. The Company determined that the investment securities with unrealized losses for twelve months or more are not other-than-temporary impaired, and, therefore, no impairment was recognized during the nine months ended September 30, 2020 and 2019.