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Note 4 - Securities
 12 Months Ended
Dec. 31, 2017
Notes to Financial Statements  
Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]
NOTE
4.
SECURITIES
 
The following table presents the amortized costs, unrealized gains, unrealized losses and estimated fair values of our investment securities as of
December 31, 2017,
and
December 31, 2016.
 
   
As of December 31, 2017
  
   
 
 
 
  
Gross
    
Gross
    
 
 
 
   
Amortized
    
Unrealized
    
Unrealized
    
Estimated
  
(Amounts in thousands)
  
Costs
    
Gains
    
Losses
    
Fair Value
  
Available-for-sale securities:
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
U.S. government & agencies
   $
40,319
     $
196
     $
(146
 )   $
40,369
  
Obligations of state and political subdivisions
    
77,412
      
1,910
      
(478
 )    
78,844
  
Residential mortgage-backed securities and collateralized mortgage obligations
    
116,061
      
69
      
(1,538
 )    
114,592
  
Corporate securities
    
5,079
      
18
      
(105
 )    
4,992
  
Commercial mortgage-backed securities
    
26,995
      
24
      
(378
 )    
26,641
  
Other asset-backed securities
    
2,540
      
4
      
(28
 )    
2,516
  
Total
   $
268,406
     $
2,221
     $
(2,673
 )   $
267,954
  
 
 
 
   
As of December 31, 2016
  
   
 
 
 
  
Gross
    
Gross
    
 
 
 
   
Amortized
    
Unrealized
    
Unrealized
    
Estimated
  
(Amounts in thousands)
  
Costs
    
Gains
    
Losses
    
Fair Value
  
Available-for-sale securities:
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
U.S. government & agencies
   $
10,427
     $
10
     $
(83
 )   $
10,354
  
Obligations of state and political subdivisions
    
58,847
      
1,001
      
(420
 )    
59,428
  
Residential mortgage-backed securities and collateralized mortgage obligations
    
71,068
      
33
      
(1,497
 )    
69,604
  
Corporate securities
    
16,153
      
103
      
(140
 )    
16,116
  
Commercial mortgage-backed securities
    
15,786
      
9
      
(281
 )    
15,514
  
Other asset-backed securities
    
4,237
      
8
      
(87
 )    
4,158
  
Total
   $
176,518
     $
1,164
     $
(2,508
 )   $
175,174
  
Held-to-maturity securities:
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Obligations of state and political subdivisions
   $
31,187
     $
710
     $
(523
 )   $
31,374
  
 
 
During the
fourth
quarter, we reclassified the entire HTM securities portfolio to AFS. At the date of the reclassification the HTM securities portfolio was carried at an amortized cost of
$30.3
million. The reclassification of securities between categorie
s was accounted for at fair value. At the date of the reclassification, the securities had a fair value of
$31.4
million and unrealized holding gains of
$1.2
million which were recorded net of tax in other comprehensive income. The remaining net unrealized gain of
$167
thousand which was recorded in other comprehensive income (OCI) net of tax was included in the amortized cost of the securities when transferred.
 
We reclassified the held-to-maturity securities portfolio to available-for-sale to provide increased flexibility to support the loan pipeline and take advantage of opportunities to improve the overall structure and yield of the investment portfolio. As a result of this transfer
we have are precluded from classifying any investment securities as held-to-maturity for
two
years from the date of the transfer. Management does
not
expect to designate acquired securities as held-to-maturity in the near future.
 
 
 
The following table presents the expected maturities of investment securities at
December 31, 2017.
 
   
Available-For-Sale
  
(Amounts in thousands)
  
Amortized Cost
    
Fair Value
  
Amounts maturing in:
  
 
 
 
  
 
 
 
One year or less
   $
1,425
     $
1,430
  
One year through five years
    
87,888
      
87,424
  
Five years through ten years
    
83,450
      
83,430
  
After ten years
    
95,643
      
95,670
  
Total
   $
268,406
     $
267,954
  
 
 
The amortized cost and fair value of residential mortgage-backed securities, collateralized mortgage obligations and commercial mortgage securities are presented by their expected average life, rather than contractual maturity, because the underlying loans
may
be repaid without prepayment penalties.
 
At
December 31, 2017
and
2016
, securities with a fair value of
$62.6
million and
$39.2
million, respectively, were pledged as collateral to secure public fund deposits, Federal Home Loan Bank of San Francisco borrowings and for other purposes as required by law.
 
 
The following table presents the cash proceeds from sales of securities and the associated gross realized gains and gross realized losses that have been included in earnings for the years ended
December 31, 2017,
2016
and
2015.
 
   
For Years Ended December 31,
  
(Amounts in thousands)
  
2017
    
2016
    
2015
  
Proceeds from sales of securities
   $
64,349
     $
51,025
     $
71,277
  
                         
Gross realized gains on sales of securities:
                        
U.S. government & agencies
   $
—
     $
25
     $
16
  
Obligations of state and political subdivisions
    
161
      
188
      
97
  
Residential mortgage-backed securities and collateralized mortgage obligations
    
52
      
17
      
142
  
Corporate securities
    
79
      
105
      
161
  
Commercial mortgage-backed securities
    
3
      
4
      
14
  
Other asset-backed securities
    
20
      
13
      
126
  
Total gross realized gains on sales of securities
    
315
      
352
      
556
  
                         
Gross realized losses on sales of securities
                        
U.S. government & agencies
    
—
      
(13
 )    
(33
 )
Obligations of state and political subdivisions
    
(102
 )    
(3
 )    
(29
 )
Residential mortgage-backed securities and collateralized mortgage obligations
    
(56
 )    
(64
 )    
(12
 )
Corporate securities
    
(3
 )    
(27
 )    
(14
 )
Commercial mortgage-backed securities
    
(17
 )    
(1
 )    
—
  
Other asset-backed securities
    
—
      
—
      
(25
 )
Total gross realized losses on sales of securities
    
(178
 )    
(108
 )    
(113
 )
Gain on investment securities, net
   $
137
     $
244
     $
443
  
 
Investment securities that were in an unrealized loss position as of
December 31, 2017
and
December 31, 2016
are presented in the following tables, based on the length of time individual securities have been in an unrealized loss position.
 
   
As of December 31, 2017
  
   
Less Than 12 Months
    
12 Months or More
    
Total
  
   
Fair
    
Unrealized
    
Fair
    
Unrealized
    
Fair
    
Unrealized
  
(Amounts in thousands)
  
Value
    
Losses
    
Value
    
Losses
    
Value
    
Losses
  
Available-for-sale securities:
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
U.S. government & agencies
   $
18,140
     $
(102
 )   $
2,131
     $
(44
 )   $
20,271
     $
(146
 )
Obligations of states and political subdivisions
    
15,030
      
(255
 )    
8,368
      
(223
 )    
23,398
      
(478
 )
Residential mortgage-backed securities and collateralized mortgage obligations
    
75,323
      
(827
 )    
31,036
      
(711
 )    
106,359
      
(1,538
 )
Corporate securities
    
—
      
—
      
2,934
      
(105
 )    
2,934
      
(105
 )
Commercial mortgage-backed securities
    
11,162
      
(151
 )    
10,026
      
(227
 )    
21,188
      
(378
 )
Other asset-backed securities
    
2,167
      
(28
 )    
—
      
—
      
2,167
      
(28
 )
Total temporarily impaired securities
   $
121,822
     $
(1,363
 )   $
54,495
     $
(1,310
 )   $
176,317
     $
(2,673
 )
 
 
 
   
As of December 31, 2016
  
   
Less Than 12 Months
    
12 Months or More
    
Total
  
   
Fair
    
Unrealized
    
Fair
    
Unrealized
    
Fair
    
Unrealized
  
(Amounts in thousands)
  
Value
    
Losses
    
Value
    
Losses
    
Value
    
Losses
  
Available-for-sale securities:
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
U.S. government & agencies
   $
9,139
     $
(83
 )   $
—
     $
—
     $
9,139
     $
(83
 )
Obligations of states and political subdivisions
    
20,329
      
(420
 )    
—
      
—
      
20,329
      
(420
 )
Residential mortgage-backed securities and collateralized mortgage obligations
    
52,345
      
(1,396
 )    
4,108
      
(101
 )    
56,453
      
(1,497
 )
Corporate securities
    
8,908
      
(140
 )    
—
      
—
      
8,908
      
(140
 )
Commercial mortgage-backed securities
    
12,041
      
(191
 )    
2,849
      
(90
 )    
14,890
      
(281
 )
Other asset-backed securities
    
2,280
      
(28
 )    
1,346
      
(59
 )    
3,626
      
(87
 )
Total temporarily impaired securities
   $
105,042
     $
(2,258
 )   $
8,303
     $
(250
 )   $
113,345
     $
(2,508
 )
Held-to-maturity securities:
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Obligations of states and political subdivisions
   $
11,639
     $
(425
 )   $
933
     $
(98
 )   $
12,572
     $
(523
 )
 
 
At
December 31, 2017
and
December 31, 2016,
the number of securities
that were in unrealized loss position was
138
and
119,
respectively. In the opinion of management, these securities are considered only temporarily impaired due to changes in market interest rates or widening of market spreads subsequent to the initial purchase of the securities, and
not
due to concerns regarding the underlying credit of the issuers or the underlying collateral. Management monitors the published credit ratings of our available-for-sale investment portfolio for material rating or outlook changes. For all private-label securities collateralized by mortgages, management also monitors the credit characteristics of the underlying mortgages to identify potential credit losses, if any, in the portfolio. Because the decline in fair value is
not
due to credit quality concerns, and because we have
no
plans to sell the securities before the recovery of their amortized cost, and we believe the bank has the ability to hold the securities to maturity these investments are
not
considered other-than-temporarily impaired.
 
Our Investment Policy requires that at the time of purchase, securities purchased to be rated
A3/A
- or higher by Moody
’s, S&P and Fitch rating agencies.
 
The following table presents the characteristics of our securities that are in unrealized loss positions at
December 31, 2017
and
December 31, 2016.
 
     
     
   
Characteristics of securities in unrealized loss positions at
Available-for-sale securities:
  
December 31, 2017
and
December 31, 2016
U.S. government & agencies
  
Direct obligations of the U.S. Government or obligations guaranteed by U.S. Government agencies.
Obligations of states and political subdivisions
  
General obligation issuances or revenue securities secured by revenues from specific sources issued by municipalities and political subdivisions located within the U.S.
Residential mortgage-backed securities and collateralized mortgage obligations
  
Obligations of U.S. government sponsored entities or non-governmental entities collateralized by high quality mortgages on residential properties. Issuances by non-governmental entities usually include good credit enhancements. Of the residential mortgage-backed securities and collateralized mortgage obligations that we owned at
December 31, 2017
and
December 31, 2016,
56%
and
49%
were issued or guaranteed by U.S. government sponsored entities, respectively.
Corporate securities
  
Debt obligations generally issued or guaranteed by large U.S. corporate institutions.
Commercial mortgage-backed securities
  
Obligations of U.S. government sponsored entities or non-governmental entities collateralized by high quality mortgages on commercial properties. Issuances by non-governmental entities usually include good credit enhancements.
 Of the commercial mortgage-backed securities that we owned at
December 31, 2017
and
December 31, 2016,
90%
and
91%
were issued or guaranteed by U.S. government sponsored entities, respectively.
Other asset-backed securities
  
Obligations secured by high quality loans with good credit enhancements issued by non-governmental issuers.
 
 
Other-Than-Temporary Impairment
 
For the year ended
December 31, 2017,
we did
not
recognize any other-than-temporary impairment losses. We recognized
one
impairment loss of
$546
thousand during the
second
quarter of
2016
related to our investment in AgriBank and there were
no
other impairment losses recognized during the year ended
December 31, 2016.