Note 3 - Securities

9 Months Ended

Sep. 30, 2020

Notes to Financial Statements

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

NOTE 3. SECURITIES

The following tables present the amortized costs, unrealized gains, unrealized losses and estimated fair values of our investment securities as of September 30, 2020, and December 31, 2019.

	As of September 30, 2020
			Gross		Gross
	Amortized		Unrealized		Unrealized			Estimated
(Amounts in thousands)	Costs		Gains		Losses			Fair Values
Available-for-sale securities:
U.S. government & agencies	$	30,942	$	879	$	(10	)	$	31,811
Obligations of state and political subdivisions		87,628		4,281		(46	)		91,863
Residential mortgage-backed securities and collateralized mortgage obligations		161,345		4,512		(165	)		165,692
Commercial mortgage-backed securities		18,920		665		(8	)		19,577
Other asset-backed securities		27,799		327		(37	)		28,089
Total	$	326,634	$	10,664	$	(266	)	$	337,032

	As of December 31, 2019
			Gross		Gross
	Amortized		Unrealized		Unrealized			Estimated
(Amounts in thousands)	Costs		Gains		Losses			Fair Values
Available-for-sale securities:
U.S. government & agencies	$	38,291	$	469	$	(27	)	$	38,733
Obligations of state and political subdivisions		40,702		1,422		(26	)		42,098
Residential mortgage-backed securities and collateralized mortgage obligations		179,114		2,163		(442	)		180,835
Corporate securities		3,005		6		(45	)		2,966
Commercial mortgage-backed securities		19,126		221		(40	)		19,307
Other asset-backed securities		3,019		—		(8	)		3,011
Total	$	283,257	$	4,281	$	(588	)	$	286,950

The following table presents the contractual maturities of investment securities at September 30, 2020.

	Available-For-Sale
(Amounts in thousands)	Amortized Costs		Fair Values
Amounts maturing in:
One year or less	$	22,257	$	22,731
After one year through five years		110,662		115,225
After five years through ten years		50,087		51,569
After ten years		143,628		147,507
Total	$	326,634	$	337,032

The amortized costs and fair values 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 September 30, 2020 and December 31, 2019, securities with a fair value of $82.7 million and $81.4 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 investment securities, and the associated gross realized gains and gross realized losses that have been included in earnings for the three and nine months ended September 30, 2020 and 2019.

	Three Months Ended September 30,						Nine Months Ended September 30,
(Amounts in thousands)	2020			2019			2020			2019
Investment Securities:
Proceeds from sales of investment securities	$	6,257		$	13,895		$	56,017		$	99,635
Gross realized gains on sales of investment securities:
U.S. government & agencies	$	—		$	10		$	—		$	48
Obligations of state and political subdivisions		249			10			339			305
Residential mortgage-backed securities and collateralized mortgage obligations		—			22			226			86
Corporate securities		12			—			12			—
Commercial mortgage-backed securities		—			5			38			7
Total gross realized gains on sales of investment securities		261			47			615			446
Gross realized losses on sales of investment securities:
U.S. government & agencies		—			(9	)		(14	)		(13	)
Obligations of state and political subdivisions		(3	)		(6	)		(7	)		(96	)
Residential mortgage-backed securities and collateralized mortgage obligations		—			(9	)		(112	)		(157	)
Commercial mortgage-backed securities		—			(11	)		—			(43	)
Total gross realized losses on sales of investment securities		(3	)		(35	)		(133	)		(309	)
Gain on sales of investment securities, net	$	258		$	12		$	482		$	137

Investment securities that were in an unrealized loss position as of September 30, 2020 and December 31, 2019 are presented in the following tables, based on the length of time individual securities have been in an unrealized loss position.

	As of September 30, 2020
	Less Than 12 Months					12 Months or More					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(Amounts in thousands)	Values		Losses			Values		Losses			Values		Losses
Available-for-sale securities:
U.S. government & agencies	$	—	$	—		$	2,836	$	(10	)	$	2,836	$	(10	)
Obligations of state and political subdivisions		5,915		(46	)		—		—			5,915		(46	)
Residential mortgage-backed securities and collateralized mortgage obligations		17,671		(159	)		285		(6	)		17,956		(165	)
Commercial mortgage-backed securities		2,057		(8	)		—		—			2,057		(8	)
Other asset-backed securities		3,001		(37	)		—		—			3,001		(37	)
Total temporarily impaired securities	$	28,644	$	(250	)	$	3,121	$	(16	)	$	31,765	$	(266	)

	As of December 31, 2019
	Less Than 12 Months					12 Months or More					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(Amounts in thousands)	Values		Losses			Values		Losses			Values		Losses
Available-for-sale securities:
U.S. government & agencies	$	6,473	$	(25	)	$	380	$	(2	)	$	6,853	$	(27	)
Obligations of state and political subdivisions		2,249		(26	)		—		—			2,249		(26	)
Residential mortgage-backed securities and collateralized mortgage obligations		31,817		(207	)		22,166		(235	)		53,983		(442	)
Corporate securities		—		—			955		(45	)		955		(45	)
Commercial mortgage-backed securities		1,464		(1	)		4,549		(39	)		6,013		(40	)
Other asset-backed securities		3,011		(8	)		—		—			3,011		(8	)
Total temporarily impaired securities	$	45,014	$	(267	)	$	28,050	$	(321	)	$	73,064	$	(588	)

At September 30, 2020 and December 31, 2019, the number of securities that were in an unrealized loss position was 31 and 63, 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. Our investment policy requires securities at the time of purchase to be rated A3/A- or higher by Moody’s, S&P and Fitch rating agencies. Management monitors the published credit ratings of our 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, because we have no plans to sell the securities before the recovery of their amortized cost, and because the Bank has the ability to hold the securities to maturity, these investments are not considered other-than-temporarily impaired.

The following table presents the characteristics of our securities that are in unrealized loss positions at September 30, 2020 and December 31, 2019.

	Characteristics of securities in unrealized loss positions at
Available-for-sale securities:	September 30, 2020 and December 31, 2019
U.S. government & agencies	Direct obligations of the U.S. Government or obligations guaranteed by U.S. Government agencies.
Obligations of state and political subdivisions	General obligation issuances or revenue securities issued by municipalities and political subdivisions located within the U.S. secured by revenues from specific sources.
Residential mortgage-backed securities and collateralized mortgage obligations	Obligations issued by 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 September 30, 2020 and December 31, 2019, 83% and 79% 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 issued by 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 September 30, 2020 and December 31, 2019, 100% were issued or guaranteed by U.S. government sponsored entities.
Other asset-backed securities	Obligations issued by non-governmental issuers secured by high quality loans with good credit enhancements.