Investment Securities

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



	March 31, 2017
	Amortized Cost		Unrealized Gain		Unrealized Loss			Estimated Fair Value
	(dollars in thousands)
Investment securities available-for-sale:
Corporate	$	53,523	$	838	$	(173	)	$	54,188
Municipal bonds	129,366		605		(1,189		)	128,782
Collateralized mortgage obligation: residential	30,145		45		(187		)	30,003
Mortgage-backed securities: residential	225,346		126		(3,037		)	222,435
Total investment securities available-for-sale	438,380		1,614		(4,586		)	435,408
Investment securities held-to-maturity:
Mortgage-backed securities: residential	7,095		—		(125		)	6,970
Other	1,177		—		—			1,177
Total investment securities held-to-maturity	8,272		—		(125		)	8,147
Total investment securities	$	446,652	$	1,614	$	(4,711	)	$	443,555



	December 31, 2016
	Amortized Cost		Unrealized Gain		Unrealized Loss			Estimated Fair Value
	(dollars in thousands)
Investment securities available-for-sale:
Corporate	$	37,475	$	372	$	(205	)	$	37,642
Municipal bonds	120,155		338		(1,690		)	118,803
Collateralized mortgage obligation: residential	31,536		25		(173		)	31,388
Mortgage-backed securities: residential	196,496		69		(3,435		)	193,130
Total investment securities available-for-sale	385,662		804		(5,503		)	380,963
Investment securities held-to-maturity:
Mortgage-backed securities: residential	7,375		—		(104		)	7,271
Other	1,190		—		—			1,190
Total investment securities held-to-maturity	8,565		—		(104		)	8,461
Total investment securities	$	394,227	$	804	$	(5,607	)	$	389,424

At March 31, 2017, mortgage-backed securities (“MBS”) with an estimated par value of $66 million and a fair value of $67.8 million were pledged as collateral for the Bank’s three repurchase agreements which totaled $28.5 million and homeowner’s association (“HOA”) reverse repurchase agreements which totaled $22.9 million.

At December 31, 2016, mortgage-backed securities (“MBS”) with an estimated par value of $63.6

million and a fair value of $65.3 million were pledged as collateral for the Bank’s three repurchase agreements which totaled $28.5 million and Homeowner's Association ("HOA") reverse repurchase agreements which totaled $21.5 million.

At March 31, 2017 and December 31, 2016, there were not holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of shareholders' equity.

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 $1,000 for the three months ended March 31, 2017, 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 December 31, 2016. 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, and the sale closed in July 2016. The Company is currently waiting to receive the proceeds for its outstanding shares. As a result, the Bank's current holdings were written down and the loss recognized.

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.



	March 31, 2017
	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)
Investment securities available-for-sale:
Corporate	3	$	7,629	$	(173	)	—	$	—	$	—		3	$	7,629	$	(173	)
Municipal bonds	90	53,419		(1,189		)	—	—		—			90	53,419		(1,189		)
Collateralized mortgage obligation: residential	5	17,032		(187		)	—	—		—			5	17,032		(187		)
Mortgage-backed securities: residential	57	168,484		(2,648		)	6	20,105		(389		)	63	188,589		(3,037		)
Total investment securities available-for-sale	155	246,564		(4,197		)	6	20,105		(389		)	161	266,669		(4,586		)
Investment securities held-to-maturity:
Mortgage-backed securities: residential	1	6,970		(125		)	—	—		—			1	6,970		(125		)
Total investment securities held-to-maturity	1	6,970		(125		)	—	—		—			1	6,970		(125		)
Total investment securities	156	$	253,534	$	(4,322	)	6	$	20,105	$	(389	)	162	$	273,639	$	(4,711	)



	December 31, 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)
Investment securities available-for-sale:
Corporate	3	$	7,609	$	(205	)	—	$	—	$	—		3	$	7,609	$	(205	)
Municipal bonds	152	85,750		(1,690		)	—	—		—			152	85,750		(1,690		)
Collateralized mortgage obligation: residential	5	19,092		(173		)	—	—		—			5	19,092		(173		)
Mortgage-backed securities: residential	55	149,740		(2,916		)	4	16,039		(519		)	59	165,779		(3,435		)
Total investment securities available-for-sale	215	262,191		(4,984		)	4	16,039		(519		)	219	278,230		(5,503		)
Investment securities held-to-maturity:
Mortgage-backed securities: residential	1	7,271		(104		)	—	—		—			1	7,271		(104		)
Total investment securities held-to-maturity	1	7,271		(104		)	—	—		—			1	7,271		(104		)
Total investment securities	216	$	269,462	$	(5,088	)	4	$	16,039	$	(519	)	220	$	285,501	$	(5,607	)

The amortized cost and estimated fair value of investment securities at March 31, 2017, 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
	(dollars in thousands)
Investment securities available-for-sale:
Corporate	$	—	$	—	$	—	$	—	$	45,523	$	46,188	$	8,000	$	8,000	$	53,523	$	54,188
Municipal bonds	1,841		1,841		26,585		26,672		48,823		48,411		52,117		51,858		129,366		128,782
Collateralized mortgage obligation: residential	—		—		—		—		1,308		1,310		28,837		28,693		30,145		30,003
Mortgage-backed securities: residential	—		—		2,400		2,385		32,117		31,998		190,829		188,052		225,346		222,435
Total investment securities available-for-sale	1,841		1,841		28,985		29,057		127,771		127,907		279,783		276,603		438,380		435,408
Investment securities held-to-maturity:
Mortgage-backed securities: residential	—		—		—		—		—		—		7,095		6,970		7,095		6,970
Other	—		—		—		—		—		—		1,177		1,177		1,177		1,177
Total investment securities held-to-maturity	—		—		—		—		—		—		8,272		8,147		8,272		8,147
Total investment securities	$	1,841	$	1,841	$	28,985	$	29,057	$	127,771	$	127,907	$	288,055	$	284,750	$	446,652	$	443,555

Unrealized gains and losses on investment securities available-for-sale are recognized in stockholders’ equity as accumulated other comprehensive income or loss. At March 31, 2017, the Company had an accumulated other comprehensive loss of $3.0 million, or $1.7 million net of tax, compared to an accumulated other comprehensive loss of $4.7 million, or $2.7 million net of tax, at December 31, 2016.

During the three months ended March 31, 2017 and December 31, 2016, the Company did not recognize any gross gains on sales of available-for-sale securities. For the three months ended March 31, 2016, the Company recognized gross gain on sales of available-for-sale securities in the amount of $762,000. During the three months ended March 31, 2017 and December 31, 2016, the Company did not recognize any gross losses on the sales of available-for sale securities. During the three months ended March 31, 2016, the Company recognized gross losses on sales of available-for-sale securities in the amount of $9,000. The Company had zero net proceeds from the sale of available-for-sale securities during the three months ended March 31, 2017 and December 31, 2016, and $186 million during the three months ended March 31, 2016, respectively.

FHLB, FRB and other stock

At March 31, 2017, 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 $12.5 million in other stock, all carried at cost. During the three months ended March 31, 2017 and December 31, 2016, FHLB did not repurchase any of the Company’s excess FHLB stock through their stock repurchase program. The Company evaluates its investments in FHLB, FRB and other stock for impairment periodically, including their capital adequacy and overall financial condition. No impairment losses have been recorded through March 31, 2017.