Investment Securities

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



	September 30, 2016
	Amortized Cost		Unrealized Gain		Unrealized Loss			Estimated Fair Value
	(in thousands)
Available-for-sale:
Corporate	$	23,255	$	75	$	—		$	23,330
Municipal bonds	114,954		1,923		(39		)	116,838
Collateralized mortgage obligation	33,644		228		(6		)	33,866
Mortgage-backed securities	139,032		525		(391		)	139,166
Total available-for-sale	310,885		2,751		(436		)	313,200
Held-to-maturity:
Mortgage-backed securities	7,697		104		—			7,801
Other	1,203		—		—			1,203
Total held-to-maturity	8,900		104		—			9,004
Total securities	$	319,785	$	2,855	$	(436	)	$	322,204



	December 31, 2015
	Amortized Cost		Unrealized Gain		Unrealized Loss			Estimated Fair Value
	(in thousands)
Available-for-sale:
Municipal bonds	$	128,546	$	1,796	$	(97	)	$	130,245
Collateralized mortgage obligation	24,722		4		(183		)	24,543
Mortgage-backed securities	126,443		153		(1,111		)	125,485
Total available-for-sale	279,711		1,953		(1,391		)	$	280,273
Held-to-maturity:
Mortgage-backed securities	8,400		—		(70		)	8,330
Other	1,242		—		—			1,242
Total held-to-maturity	9,642		—		(70		)	9,572
Total securities	$	289,353	$	1,953	$	(1,461	)	$	289,845

At September 30, 2016, mortgage-backed securities (“MBS”) with an estimated par value of $61.1 million and a fair value of $63.8 million were pledged as collateral for the Bank’s three reverse repurchase agreements which totaled $28.5 million and homeowner’s association (“HOA”) reverse repurchase agreements which totaled $17.7 million.

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 realized OTTI recovery of $2,000 for the three months ended September 30, 2016, which relates to investment income from previously charged-off investments. The Company did not realize any OTTI recoveries or losses for the three months ended June 30, 2016 and September 30, 2015.

During the nine months ended September 30, 2016, the Company realized OTTI losses net of recoveries of $205,000. A $207,000 OTTI was taken in the first quarter of 2016, related to a CRA investment purchased in June of 2014 with a par value of $50, and a book value of $500,000. In March of 2016 the shareholders of the investment voted to approve a sale of the institution at a per share acquisition price less the Bank's book value, with an expected closing by mid-2016. As a result, the Bank's current holdings were written down and the loss recognized. The Company did not realize any OTTI losses for the nine months ended September 30, 2015.

During the three months ended September 30, 2016, June 30, 2016 and September 30, 2015, the Company recognized gross gains on sales of available-for-sale securities in the amount of $512,000, $532,000 and $52,000, respectively. During the three months ended September 30, 2016 and June 30, 2016, the Company did not recognize any gross losses on the sales of available-for sale securities. During the three months ended September 30, 2015, the Company recognized gross losses on sales of available-for-sale securities in the amount of$14,000. The Company had net proceeds from the sale of available-for-sale securities of $16.6 million, $21 million and $10.4 million during the three months ended September 30, 2016, June 30, 2016 and September 30, 2015, respectively.

During the nine months ended September 30, 2016 and September 30, 2015, the Company recognized gross gains on sales of available-for-sale securities in the amount of $1.8 million and $316,000. During the nine months ended September 30, 2016 and September 30, 2015, the Company recognized gross losses on sales of available-for-sale securities in the amount of $9,000 and $23,000. The Company had net proceeds from the sale of available-for-sale securities of $223 million and $26.5 million during the nine months ended September 30, 2016 and September 30, 2015, respectively.

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.



	September 30, 2016
	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)
Available-for-sale:
Municipal bonds	17	$	8,376	$	(39	)	—	$	—	$	—		17	$	8,376	$	(39	)
Collateralized mortgage obligation	1	4,863		(6		)	—	—		—			1	4,863		(6		)
Mortgage-backed securities	19	51,088		(216		)	5	15,117		(175		)	24	66,205		(391		)
Total securities available-for-sale	37	$	64,327	$	(261	)	5	$	15,117	$	(175	)	42	$	79,444	$	(436	)



	December 31, 2015
	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)
Available-for-sale:
Municipal bonds	32	$	15,516	$	(61	)	6	$	3,349	$	(36	)	38	$	18,865	$	(97	)
Collateralized mortgage obligation	5	22,771		(183		)	—	—		—			5	22,771		(183		)
Mortgage-backed securities	34	83,488		(679		)	3	12,935		(432		)	37	96,423		(1,111		)
Total securities available-for-sale	71	121,775		(923		)	9	16,284		(468		)	80	138,059		(1,391		)
Held-to-maturity:
Mortgage-backed securities	1	8,330		(70		)	—	—		—			1	8,330		(70		)
Total securities held-to-maturity	1	8,330		(70		)	—	—		—			1	8,330		(70		)
Total securities	72	$	130,105	$	(993	)	9	$	16,284	$	(468	)	81	$	146,389	$	(1,461	)

The amortized cost and estimated fair value of investment securities at September 30, 2016, 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
	(in thousands)
Available-for-sale:
Corporate	$	—	$	—	$	—	$	—	$	17,255	$	17,330	$	6,000	$	6,000	$	23,255	$	23,330
Municipal bonds	1,023		1,024		29,030		29,338		37,980		38,870		46,921		47,606		114,954		116,838
Collateralized mortgage obligation	—		—		—		—		1,493		1,497		32,151		32,369		33,644		33,866
Mortgage-backed securities	—		—		—		—		19,366		19,464		119,666		119,702		139,032		139,166
Total securities available-for-sale	1,023		1,024		29,030		29,338		76,094		77,161		204,738		205,677		310,885		313,200
Held-to-maturity:
Mortgage-backed securities	—		—		—		—		—		—		7,697		7,801		7,697		7,801
Other	—		—		—		—		—		—		1,203		1,203		1,203		1,203
Total securities held-to-maturity	—		—		—		—		—		—		8,900		9,004		8,900		9,004
Total securities	$	1,023	$	1,024	$	29,030	$	29,338	$	76,094	$	77,161	$	213,638	$	214,681	$	319,785	$	322,204

Unrealized gains and losses on investment securities available for sale are recognized in stockholders’ equity as accumulated other comprehensive income or loss. At September 30, 2016, the Company had accumulated other comprehensive income of $2.3 million, or $1.4 million net of tax, compared to accumulated other comprehensive income of $562,000, or $332,000 net of tax, at December 31, 2015.

FHLB, FRB and other stock

At September 30, 2016, the Company had $14.4 million in Federal Home Loan Bank (“FHLB”) stock, $10.9 million in Federal Reserve Bank of San Francisco (“FRB”) stock, and $4.7 million in other stock, all carried at cost. During the three months ended September 30, 2016 and December 31, 2015, FHLB did not repurchase any of the Company’s excess FHLB stock through their stock repurchase program. The Company evaluates its investments in FHLB and other stock for impairment periodically, including their capital adequacy and overall financial condition. No impairment losses have been recorded through September 30, 2016.