Note 4 - Investment Securities

9 Months Ended

Sep. 30, 2023

Notes to Financial Statements

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

NOTE 4 - INVESTMENT SECURITIES

The following table summarizes the amortized cost and fair value of available for sale (“AFS”) debt securities and HTM debt securities as of September 30, 2023 and December 31, 2022, and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income:

			Gross		Gross
(dollars in thousands)	Amortized		Unrealized		Unrealized			Fair
September 30, 2023	Cost		Gains		Losses			Value
Available for sale
Government agency securities	$	8,694	$	—	$	(800	)	$	7,894
SBA agency securities		7,533		—		(272	)		7,261
Mortgage-backed securities: residential		41,501		—		(8,064	)		33,437
Collateralized mortgage obligations: residential		86,343		—		(15,144	)		71,199
Collateralized mortgage obligations: commercial		70,837		1		(3,343	)		67,495
Commercial paper		129,105		—		(32	)		129,073
Corporate debt securities		34,817		—		(5,011	)		29,806
Municipal securities		12,644		—		(4,431	)		8,213
Total	$	391,474	$	1	$	(37,097	)	$	354,378
Held to maturity
Municipal taxable securities	$	502	$	—	$	(3	)	$	499
Municipal securities		4,712		—		(461	)		4,251
Total	$	5,214	$	—	$	(464	)	$	4,750

			Gross		Gross
(dollars in thousands)	Amortized		Unrealized		Unrealized			Fair
December 31, 2022	Cost		Gains		Losses			Value
Available for sale
Government agency securities	$	5,012	$	—	$	(517	)	$	4,495
SBA agency securities		2,634		—		(223	)		2,411
Mortgage-backed securities: residential		44,809		—		(6,752	)		38,057
Mortgage-backed securities: commercial		4,887		—		(16	)		4,871
Collateralized mortgage obligations: residential		82,759		—		(12,856	)		69,903
Collateralized mortgage obligations: commercial		44,591		—		(2,901	)		41,690
Commercial paper		49,551		2		(16	)		49,537
Corporate debt securities		41,176		1		(4,165	)		37,012
Municipal securities		12,669		—		(3,815	)		8,854
Total	$	288,088	$	3	$	(31,261	)	$	256,830
Held to maturity
Municipal taxable securities	$	1,003	$	7	$	(3	)	$	1,007
Municipal securities		4,726		—		(170	)		4,556
Total	$	5,729	$	7	$	(173	)	$	5,563

At September 30, 2023, we pledged investment securities with a fair value of $93.1 million for certificates of deposit from the state of California. One security with a fair value of $63,000 and $76,000 at September 30, 2023 and December 31, 2022, respectively, was pledged to secure a local agency deposit.

There were no sales of investment securities during the three and nine months ended September 30, 2023 and 2022, respectively.

Accrued interest receivable for investment debt securities at September 30, 2023 and December 31, 2022 totaled $839,000 and $810,000, respectively.

The amortized cost and fair value of the investment securities portfolio at September 30, 2023 and December 31, 2022 are shown by expected maturity below. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

	Less than One Year				More than One Year to Five Years				More than Five Years to Ten Years				More than Ten Years				Total
	Amortized				Amortized				Amortized				Amortized				Amortized
(dollars in thousands)	Cost		Fair Value		Cost		Fair Value		Cost		Fair Value		Cost		Fair Value		Cost		Fair Value
September 30, 2023
Government agency securities	$	—	$	—	$	8,694	$	7,894	$	—	$	—	$	—	$	—	$	8,694	$	7,894
SBA agency securities		—		—		2,387		2,115		5,146		5,146		—		—		7,533		7,261
Mortgage-backed securities: residential		—		—		11,546		10,028		20,114		16,164		9,841		7,245		41,501		33,437
Collateralized mortgage obligations: residential		—		—		23,737		22,217		58,783		46,416		3,823		2,566		86,343		71,199
Collateralized mortgage obligations: commercial		3,173		3,163		22,470		20,230		45,194		44,102		—		—		70,837		67,495
Commercial paper		129,105		129,073		—		—		—		—		—		—		129,105		129,073
Corporate debt securities		—		—		12,919		12,225		19,253		15,822		2,645		1,759		34,817		29,806
Municipal securities		—		—		—		—		—		—		12,644		8,213		12,644		8,213
Total available for sale	$	132,278	$	132,236	$	81,753	$	74,709	$	148,490	$	127,650	$	28,953	$	19,783	$	391,474	$	354,378
Municipal taxable securities	$	—	$	—	$	502	$	499	$	—	$	—	$	—	$	—	$	502	$	499
Municipal securities		—		—		—		—		2,338		2,085		2,374		2,166		4,712		4,251
Total held to maturity	$	—	$	—	$	502	$	499	$	2,338	$	2,085	$	2,374	$	2,166	$	5,214	$	4,750
(dollars in thousands)
December 31, 2022
Government agency securities	$	—	$	—	$	5,012	$	4,495	$	—	$	—	$	—	$	—	$	5,012	$	4,495
SBA agency securities		—		—		2,634		2,411		—		—		—		—		2,634		2,411
Mortgage-backed securities: residential		—		—		13,013		11,598		29,114		24,361		2,682		2,098		44,809		38,057
Mortgage-backed securities: commercial		—		—		4,887		4,871		—		—		—		—		4,887		4,871
Collateralized mortgage obligations: residential		—		—		20,687		19,646		62,072		50,257		—		—		82,759		69,903
Collateralized mortgage obligations: commercial		—		—		16,382		14,644		28,209		27,046		—		—		44,591		41,690
Commercial paper		49,551		49,537		—		—		—		—		—		—		49,551		49,537
Corporate debt securities		3,705		3,706		11,355		10,806		23,454		20,662		2,662		1,838		41,176		37,012
Municipal securities		—		—		—		—		—		—		12,669		8,854		12,669		8,854
Total available for sale	$	53,256	$	53,243	$	73,970	$	68,471	$	142,849	$	122,326	$	18,013	$	12,790	$	288,088	$	256,830
Municipal taxable securities	$	501	$	498	$	502	$	509	$	—	$	—	$	—	$	—	$	1,003	$	1,007
Municipal securities		—		—		—		—		1,739		1,692		2,987		2,864		4,726		4,556
Total held to maturity	$	501	$	498	$	502	$	509	$	1,739	$	1,692	$	2,987	$	2,864	$	5,729	$	5,563

The following tables show the related fair value and the gross unrealized losses of the Company's investment securities, aggregated by investment category and the length of time that individual securities have been in a continuous unrealized loss position as of September 30, 2023, and December 31, 2022:

	Less than Twelve Months					Twelve Months or More					Total
(dollars in thousands)	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
September 30, 2023
Government agency securities	$	4,119	$	(174	)	$	3,775	$	(626	)	$	7,894	$	(800	)
SBA securities		—		—			2,115		(272	)		2,115		(272	)
Mortgage-backed securities: residential		—		—			33,437		(8,064	)		33,437		(8,064	)
Collateralized mortgage obligations: residential		11,956		(310	)		59,243		(14,834	)		71,199		(15,144	)
Collateralized mortgage obligations: commercial		23,696		(121	)		38,800		(3,222	)		62,496		(3,343	)
Commercial paper		114,185		(32	)		—		—			114,185		(32	)
Corporate debt securities		—		—			29,806		(5,011	)		29,806		(5,011	)
Municipal securities		—		—			8,213		(4,431	)		8,213		(4,431	)
Total available for sale	$	153,956	$	(637	)	$	175,389	$	(36,460	)	$	329,345	$	(37,097	)
Municipal taxable securities	$	499	$	(3	)	$	—	$	—		$	499	$	(3	)
Municipal securities		1,281		(134	)		2,970		(327	)		4,251		(461	)
Total held to maturity	$	1,780	$	(137	)	$	2,970	$	(327	)	$	4,750	$	(464	)

	Less than Twelve Months					Twelve Months or More					Total
(dollars in thousands)	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
December 31, 2022
Government agency securities	$	354	$	(24	)	$	4,141	$	(493	)	$	4,495	$	(517	)
SBA securities		2,411		(223	)		—		—			2,411		(223	)
Mortgage-backed securities: residential		5,535		(362	)		32,522		(6,390	)		38,057		(6,752	)
Mortgage-backed securities: commercial		4,871		(16	)		—		—			4,871		(16	)
Collateralized mortgage obligations: residential		27,050		(1,842	)		39,815		(11,014	)		66,865		(12,856	)
Collateralized mortgage obligations: commercial		18,741		(790	)		22,949		(2,111	)		41,690		(2,901	)
Commercial paper		39,624		(16	)		—		—			39,624		(16	)
Corporate debt securities		22,977		(1,843	)		10,330		(2,322	)		33,307		(4,165	)
Municipal securities		—		—			8,854		(3,815	)		8,854		(3,815	)
Total available for sale	$	121,563	$	(5,116	)	$	118,611	$	(26,145	)	$	240,174	$	(31,261	)
Municipal taxable securities	$	498	$	(3	)	$	—	$	—		$	498	$	(3	)
Municipal securities		4,556		(170	)		—		—			4,556		(170	)
Total held to maturity	$	5,054	$	(173	)	$	—	$	—		$	5,054	$	(173	)

The securities that were in an unrealized loss position at September 30, 2023 and December 31, 2022, were evaluated to determine whether the decline in fair value below the amortized cost basis resulted from a credit loss or other factors. The ACL on HTM securities was immaterial at September 30, 2023 and  December 31, 2022.

The Company concluded that the unrealized losses were primarily attributed to yield curve movement, together with widened liquidity spreads and credit spreads. The issuers have not, to the Company's knowledge, established any cause for default on these securities. The Company expects to recover the amortized cost basis of its securities and has no present intent to sell and will not be required to sell securities that have declined below their cost before their anticipated recovery. Accordingly, no ACL was recorded as of September 30, 2023 and December 31, 2022, against AFS securities, and there was no provision for credit losses recognized for the nine months ended September 30, 2023 and the year ended December 31, 2022.

Equity Securities - The Company has several Community Reinvestment Act ("CRA") equity investments. The Company recorded no gain nor loss for the three and nine months ended September 30, 2023 and September 30, 2022. CRA equity securities were $22.2 million and $22.2 million as of September 30, 2023 and  December 31, 2022, respectively.